Black Hills gold production dips

South Dakota State Roundup

Published April 1, 1992  | April 1992 issue

"Black" typically describes the hue of the mountains in western South Dakota, but these days it may be more descriptive of the mood that hangs over the state's gold industry.

Production figures for 1991 indicate South Dakota gold production dropped about 8 percent, from 570,648 ounces produced in 1990 to 525,479 ounces in 1991. Added to the decline in production was a decrease in the gross value of mined gold.

According to Thomas V. Durkin of the state Department of Environment and Natural Resources, the drop in production, coupled with a decline in the yearly average price of gold, amounted to a 12 percent decrease in the estimated gross value of the gold produced in the state. In 1991, an estimated $190 million was produced compared to the $215 million produced in 1990.

"The decline places South Dakota fourth among the gold producing states behind Nevada, California and Utah," Durkin says. Last year South Dakota ranked third, and at one time was the nation's leading producer of gold. All the state's gold mines are located in the Black Hills.

The effort needed to extract the gold ore has increased dramatically over the years for Black Hills miners. In the late 1800s, miners were able to pull over 170,000 ounces of gold from the Hills using only shovels and picks. Even in the 1960s, the grade of the ore remained relatively high. But today, finding the lower-grade ore demands more costly mining methods.

And world gold prices have not aided Black Hills gold miners. From a recent high average of $446.45 per ounce in 1987, prices dropped to $360.69 in 1991. For most companies, a gold price of $400 per ounce is the target on which plans and estimates are predicated. Pete Goodwin, personnel and governmental affairs director for Brohm Mining Corp. in Lead, says, "Since gold is a commodity that can widely fluctuate, we will have to adjust our mining programs. Mining companies will have to learn to live at about $350 [per ounce] and make do."

In order to survive, mining operations are tightening their belts. Homestake Mining Co., the area's largest operation, will continue expansion of existing mines but is waiting to proceed on an operation to reprocess old tailings. Goodwin indicates that Brohm Mining has put its expansion plans on hold. "We'll give greater attention to maintenance of existing machinery rather than purchasing new equipment, and we'll tighten our belt, consolidate our position and watch expenditures to get by."

Nevertheless, gold mining in the Black Hills will not remain at a standstill. Durkin's report indicates that in 1991, 2,236 test holes were permitted to be drilled, a 16 percent increase over the previous year.

Dean Davis