NNBW Elko Economic Overview 2014

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ELKO Economic Overview

2014

A s the price of gold retreated in 2013, so too did the gold min-ing companies with hard rock mining operations in Nevada.

Barrick Gold Corp. and Newmont Mining Corp., the state’s largest gold-mining com-panies, both stated their renewed focus on maximizing returns from core producing assets in Nevada rather than continuing the frenzied pace of exploration activity that preceded gold’s tumble from its record high of $1,900 an ounce.

But a team from Newmont Mining Corp. still is working hard to advance the Long Canyon project in the Pequop Mountains roughly 30 miles east of Wells into New-mont’s production portfolio. Newmont acquired the multi-million-ounce site from Fronteer Gold in 2011 for $2.3 billion and has spent the past few years working through the state and federal regulatory permitting processes, as well as conducting additional exploration drilling to further define the scope of resources.

However, there’s still no guarantee the mining will begin anytime soon.

Gordon Mountford, Long Canyon project director, says the Long Canyon executive team currently is working through the en-vironmental impact statement and expects to have a record of decision by the end of 2014. Once the EIS is in place, Mountford says, the team can assemble many addition-al state-level permits necessary to conduct mining operations at the site. More impor-tantly, though, the team won’t put forth its request for full funding from Newmont’s executive investment council and board of directors until that crucial federal permit is in place.

By Rob [email protected]

Long Canyonteam stays on track

Northern Nevada Business Weekly • 3

Newmont still is debating on whether to use contract mining or its own crews, and wheth-er to buy or lease mining equipment. On-site facilities include a truck shop, administrative building, core-logging facility, carbon-in-col-umn processing plant, heap-leach pads, waste dump and the open pit.

Long Canyon has a capital price tag of $100 million and $120 million for mine-site infra-structure and total potential investment of $250 million to $400 million depending on which mining scenario is employed.

“We are competing for capital within all projects in the portfolio,” Mountford says. “If the record of decision comes by the end of the year, we would probably go to the board and ask for full funds in the first quarter of 2015. We will have the design, and with full fund-ing will be able to go and issue contracts for construction.”

The Long Canyon team currently is about 30 percent of the way through the engineer-ing work for the mine and expects to have that process about 90 percent completed by the end of the year.

Mary Korpi, director of external relations for Newmont’s sustainability and external relations department in Elko, says that just like any other large company there is a finite amount of funding available for capital proj-ects, and Newmont’s investment committee will consider the company’s best projects with which to proceed.

Several factors work in Long Canyon’s favor to trump other projects in the company’s de-velopment portfolio, however.

Foremost, perhaps, is the fact that the mine is located in Nevada. Gold mining in the state accounts for 40 percent of Newmont’s overall revenue and doesn’t have the geo-political risks of other major mining jurisdictions. For instance, Newmont was forced to virtually abandon a multi-billion-dollar operation in Peru due to anti-mining sentiment, and in June the company halted production at its Batu Hijau copper mine in Indonesia and placed 3,200 workers on leave following a dispute on export taxes wit the Indonesian government. Newmont had mined at the site since 2000.

“Nevada is a core asset to the corporation,” Korpi says.

Although exploration work has yet to iden-tify the scope of resources at Long Canyon — the deposit remains open in all directions and depth, Mountford says — early-stage mining focuses on near-surface ore deposits. The first phase of the Long Canyon mine will be a low-cost run-of-mine heap leach operation, which allows for quicker returns.

“You can get gold out of the ground and start paying back all that capital,” Korpi says. “The exploration has continued aggressively this year and will continue going forward.”

Adds Mountford: “We can get the project going, start producing revenue, and fund our own growth as well. The phased approach helps the overall project economics by getting it up sooner and getting ounces into revenue quicker.”

Despite the decline in the price of gold and the broader cooling of mining and commod-ities stocks in the financial sector, the Long Canyon team is moving forward at full steam. Mountford says that even at current gold pric-es, mining at Long Canyon provides sufficient returns to the company.

“We are trying to get to the finish line as quickly as possible and trying to get the infor-mation to our executive council and board of directors,” he says.

“Market conditions will play a big factor, as will other projects that are in the pipeline that may be ready for full funding as well. We know it is going to be a low-cost producer, and the fact is, based on the drilling, it is going to be a very long-lived asset.”

If all the pieces fall in place, mining is scheduled to begin at Long Canyon in 2017.

COURTESY NEWMONT MINING CORP.

Exploration drilling is expected to continue throughout the year at Long Canyon.

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ELKO Economic Overview

2014

4 • Elko Economic Overview 2014

Elko housing market slows — finally

T he housing market in Elko County hasn’t exact-ly cooled off through the first half of 2014 — sales through mid July were up 16 percent, but as more new product hits the market, builders of new sin-

gle-family homes have begun offering buyer incentives for the first time in years.

In 2013 there were 113 sales in Elko and 165 in Spring Creek, compared to 131 in Elko and 119 in Spring Creek

halfway through 2014, the Elko County Association of Realtors Multiple Listing Service reports. Year-over-year sales volume is down 6 percent for both communi-ties combined, and average sale price has decreased 7 percent to $244,362. The number of days on market increased slightly as well to 142.

Sales figures include home sales in communi-ties throughout greater northeastern Nevada: Elko, Carlin, Wells, Orinda,

Osino, Pleasant Valley, Lamoille, Jiggs.Jim Winer, broker/owner of Coldwell Banker Algerio/

Q-Team Realty, says 2013 was one of the best years on record for total sales and sales price. This year, though, new construc-tion is not selling as quickly as it did a year ago as developers finally begin catching up on long-standing demand for new housing in Elko County.

The influx of new homes by local and regional builders has developers sweetening sales offers with concessions typically offered to prospective buyers in larger metropolitan markets.

“There have been all sorts of price adjustments and/or build-ers offering incentives,” Winer says. “They will pay a certain amount of closing costs, or they will pay a bonus at closing. Last year, builders didn’t have to offer any concessions.”

Despite homes sitting on the market for more than four-and-a-half months before being sold, there’s isn’t a risk of oversupply in the marketplace as builders continue developing new subdivisions such as Copper Trails, Eight Mile Estates, Brookwood Estates and Hamilton Stage in Elko City limits. That’s because the fundamental industries that drive the econ-omy of Elko County — hard rock mining and mining-supply firms — remain sound. In Elko there is a 4.5-month supply of housing inventory and an 8.7-month supply in Spring Creek.

“We went from having an extreme shortage to getting back in balance where a normal market should be,” Winer says.

Sales volume and price are expected to remain strong through the second half of the year and could end slightly higher than 2013, Winer adds. Sales have been especially brisk


“There have been all sorts

of price adjustments and/or builders offering incentives.”— Jim Winer, broker/owner of Coldwell Banker

Algerio/Q-Team Realty

ROB SABO/[email protected]

High-end custom homes, especially at The Pointe at Ruby View, continue to sell in Elko and Spring Creek.


on the north side of town off Moun-tain City Highway, where much of the new retail in Elko also has evolved over the past few years.

High-end residential also contin-ues to sell well, led by development at The Pointe at Ruby View, which tops the market in both price and scope of product. Elko Summit Es-tates, which features 10-acre parcels off the Lamoille Highway before Spring Creek, also continues to sell well.

Home prices at The Pointe at Ruby View range from $600,000 and higher, and lot prices are among the highest in Elko County at roughly $90,000 to $185,000. New custom homes typically are built for successful local business owners or executive managers for mining companies, Winer notes, while the resale market is dominated by buy-ers moving up from older product. Prices in the resale market typically fall between the high $300,000s up to $500,000.

Residential developments beef up East Jennings Way corridor

T wo new apartment/town-home projects are slated to come online in Elko near Ruby View Golf Course,

further beefing up the East Jennings Way area.

Braemar Construction expects to break ground sometime in Septem-ber on 30 Tuscany-themed townho-mes on Khoury Lane, and Tanamera Construction is moving dirt for a large apartment complex just off East Jennings.

Dusty Shipp, managing member for Braemar Construction, expects to have the first 10 townhome units available in March or April, with the other 20 following over the course of the summer.

Built on a hillside overlooking

Ruby View Golf Course, each of the five townhome floorplans includes a basement. Townhome sizes range from 1,293 to 1,774 square feet, and basement sizes range from 590 to 1,262 square feet. Prices start in the $250,000 range, Shipp says.

Braemar, the developer and build-er of the Tuscany Townhomes proj-ect, will sell the residences through Century 21 Gold West Realty of Elko. It’s the first townhome project for Braemar.

“There are a lot of people who are here for work purposes,” Shipp says. “They come in and work executive jobs or hospital jobs, and a lot of them have a home or spend a lot of time in other places. The thought was to create a place where people have a nice place to live but do not have a lot of the maintenance that goes with home ownership.”


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Convention center expansion set

T he Elko Convention and Visitors Authority expects to break ground in April on a long-awaited expansion that

will provide an additional 28,000 square feet of meeting and convention space.

Currently, the ECVA has about 24,000 square feet of space under roof — and it’s almost constantly in use.

The new facility would provide two rooms of meeting space that can be fur-ther subdivided or combined. There also will be foyer space and four smaller meet-ing rooms for a total of roughly 17,000 square feet of additional meeting space for community and corporate events.

Studies done over the past few years by outside consulting firms determined that the Elko Convention and Visitors Authority had enough meetings and special events on its books that it could support a 54,000-square-foot expansion. The ECVA proceeded last year with some preliminary architectural renderings, but once the construction costs of building a facility that size were tallied the ECVA decided to pare down its plans.

“Bottom line, when you start adding up the bricks and mortar and building costs, we can’t afford it,” says Don Newman, ex-ecutive director of the ECVA. “The analy-sis said revenue and additional functions would do it, but the board wasn’t com-fortable taking on that big of a building. It would be a financial burden.”

Development costs of the smaller facil-ity, though, are affordable under current income being generated from existing facilities.

Construction of the facility will be a public-private partnership between the ECVA and Educational Facilities Devel-opment Services of Phoenix. The compa-ny foots the bill for all construction and development costs, and the ECVA leases the building from EFDS. At the end of the 25-year lease the ECVA owns the building outright.

Core Construction is the preferred contractor for EFDS. Work will be spear-headed from Core’s Reno offices. Lom-bard Conrad Architects Nevada of Elko is the architect of record on the project.

Executives with Educational Facil-ities Development Services had been in Elko to discuss funding options for various Elko public facilities, and the ECVA board had been looking at numer-ous funding options for the expansion project, including issuing medium-term bonds. Going with EFDS made the most sense after weighing options for square footage of the new facility and develop-ment costs, Newman says.

“They assume all the risk,” Newman says. “We have narrowed it down to (a payment) we are comfortable we can meet on a month-to-month basis and still give us the size and scope of a project that will accommodate our objectives.

The existing convention center facility is in almost constant use and often can’t accommodate new business or meet-ings. Barrick Gold Corp. is one of the largest users of the convention center, both with its safety training mandated by the Mine Health and Health Admin-istration and with holiday parties for its thousands-strong workforce that begin around November.

Newmont Mining Corp. also would

like to use the facility, Newman says, but there simply aren’t enough open days to accommodate the company. Newmont has been conducting similar safety and training meetings at the Wildland Fire Science Academy west of town and at the Western Folklife Center, Newman says.

“Within the community, we have no space for weddings, receptions, parties or family reunions,” Newman notes. “The facility is booked three years out for weekends.

“If you take into account the events that happen over the course of the year with high school graduation, the drama club, choraliers, band, the junior high and also bring in Spring Creek, that takes up a lot of dates. Then you move to the college and its graduation, and the Ruby Mountain Symphony … with all the an-nual business we have it leaves very little flexibility. The need is there for the new building.”

The new facility allows the ECVA sales team to bring in new convention business as well as better accommodate various local groups and events. It also allows the ECVA to avoid “stacking” dissimilar events concurrently in the same space.

“It allows us to reach more into the as-sociations that meet annually in Las Ve-gas and Reno,” Newman says. “It allows us to go after those types of business. Most of those bookings are three to five years down the road, and we didn’t have they dates they need. This will allow us to pursue that a little heavier.”

Elko’s often wicked weather presents certain construction challenges, Newman adds. The team has about five months to complete all design work prior to the projected April groundbreaking.

A rendering of the proposed Elko Convention Center expansion that’s expected to break ground in April.


COURTESY LOMBARD CONRAD ARCHITECTS


Northern Nevada Business Weekly: Tell us about J.M. Capriola Company and the duties of your position.

Doug Wright: J.M. Capriola Company was started 85 years ago by Joe Martin Capriola. We make custom leather goods, saddles, wallets — anything in leather we can do. In 1978 we brought back to Elko a company that moved here over 100 years ago, Garcia Bit and Spur Company, the most sought-after name in the industry. We make the original Garcia bits and spurs in the vaquero tradition. On an everyday basis I don’t do much right now; I am turn-ing it over to my son. My wife, Paula Wright, was the anchor of this store. As a little girl she was in the shop making purses and spurs; she grew up here and was a historian for the bits and spurs. She was killed in a terrible horse acci-dent on June 20, 2012, and that’s when I had to come in and really start work-ing a full-time job here. My duties are to oversee and get orders for the shop, payroll, and work as a regular hands-on businessman.

NNBW: How did you get into this profession?

Wright: My in-laws bought the store in ’58, and they continued until 1971, when they sold the business to their three kids. Through the years my wife and I bought the partners out and we became sole owners in 1993.

NNBW: What are some of the main challenges you face as a small business owner in Elko?

Wright: The biggest problem in this business is that everyone wants to make a saddle, and there are people who don’t have businesses who are compet-ing against me at a lower price.

NNBW: Elko is mining country, but it’s also cowboy country — what are the store’s main avenues of revenue?

Wright: Mining is very important, and we have been serving the ranching community since 1929.

NNBW: The store has many loyal cus-tomers, but quality saddles and leather goods are built to last. How do you get repeat business?

Wright: A saddle is an investment for

a lifetime, and you probably won’t lose your investment; it doesn’t depreciate. A saddlemaker is no different from a brain surgeon; it is a craft.

NNBW: What do you make at J.M. Capriola that you are most proud of?

Wright: Our leather goods, and car-rying on the tradition of the Garcia Bit and Spur Company.

NNBW: Your shop is making a saddle for Nevada’s sesquicentennial anniver-sary in the tradition of G.S. Garcia’s “Beauty Saddle” that won a gold medal at the 1904 World’s Fair. Does it come with some trepidation to live up to those expectations?

Wright: It sure does; our saddle better be the best. It is such an honor to be picked as a saddle company from the state of Nevada to do the governor’s saddle.

NNBW: Did the recession hurt your business?

Wright: We rely on a lot of orders over the phone or on the Internet, and the recession stopped that for a while.

NNBW: As you prepare to turn day-to-day operations of the store over to your son, what do you envision for your future?

Wright: Work here part time and go fishing and hunting.

NNBW: What’s the most fun you have had on the job?

Wright: The people I get to meet as

customers.NNBW: What was your

first job?Wright: Working for

my uncle in the hay fields in Clover Valley.

NNBW: What did you dream of becoming when you were a kid?

Wright: A pro baseball player.

NNBW: Is this the ca-reer you had envisioned for yourself?

Wright: No. I thought I would run a business for somebody or be a business manager. I didn’t think I’d be in the Western industry be-

cause I really wasn’t a Western person until I met my wife.

NNBW: You lost your wife a few years back. How has that impacted your life?

Wright: It has impacted my life tremendously. I went through a lot of depression and wasn’t thinking right. Now, my life is almost back to normal and I am enjoying it more. When you lose something you don’t really realize what you’ve lost until it happens.

NNBW: How do you like to spend your time away from work?

Wright: With my grandkids and my son and his wife. I enjoy being with the family and watching them ride horses. I quit riding when my wife died, but now I am starting to ride again.

NNBW: What’s your idea of the per-fect vacation?

Wright: Taking the whole family to Cabo and just relaxing on the beach and not have cellphones and iPods. It would just be us five.

NNBW: What do you like most about working and living in Elko?

Wright: I just love Nevada. It is the best state in the union. We have four good seasons, and we have a great climate. It is a great place to live with open space — you can drive out north and go up in the hills and not see a house of a person for miles and miles. It is a tremendous state to live in.

IN HIS OWN WORDSDoug Wright, owner of J.M.Capriola Company


RAM Enterprise’s expan-sion of its repair and man-ufacturing facility on West Main Street, completed in 2012, allowed it to move its corporate offices and Imtech rubber manufacturing oper-ations from Portland, Ore. to Elko.

Since then, RAM has become less dependent on revenue drawn from field service work at northeastern Nevada mine sites due to its increased manufacturing capabilities. Imtech produces a variety of molded rubber products, such as pulley lag-ging, transfer-point products and rubber skirting used in conveyor systems.

Sharon Horn, RAM’s di-rector of customer service, says the 50,000-square-foot

expansion allowed RAM to consolidate vital business functions under one roof. More importantly, it allowed RAM to grow sales of Imtech products and to better serve its largest customer base.

“That is really a great part of our business,” Horn says. “It is manufacturing, not field service, and it’s an item we export so it helps us diversify. While the mining industry is a focus for us, we strive to find diversification so we aren’t so dependent on heavy metal pricing.”

RAM also operates service centers in Salt Lake City and Peyson and Tuscon, Ariz. Those centers focus primar-ily on the mining and power generation industries, while the Elko operation is cen-tered on service and repair of the conveyor systems used to transport ore at northeastern

Nevada mine sites.RAM’s expansion was years

in the making. The company finalized plans for its expan-sion in 2006 and purchased a pre-engineered steel building in 2008 — just before the na-tional economy hit the skids. The building sat unassem-bled in RAM’s yard for years before finally being erected in 2012. RAM self-performed most of the construction.

When the building was completed, it quickly became apparent that due to the com-pany’s yearly growth there wasn’t enough office space to accommodate administrative and support personnel. It also added services such as engineering and fabrication, further straining office ca-pacity at the new facility. Last year RAM acquired Triple-J Manufacturing of Beowawe to increase its presence in

structural fabrication work at underground mines.

The declining price of gold and subsequent reduction of new capital projects at mine sites brought some cost-cut-ting measures for the com-pany, but at the same time, Horn says, mining companies reinvested in equipment to keep operations operating at maximum efficiency.

“They still need to buy conveyor belt, pulleys and idlers,” she says. “We have an increased focus on that part of our business.”

RAM also added a new vice president of product sales, Rick Bammesberger, to over-see product sales. Bammes-berger formerly worked for Valley Rubber and Gasket Company. RAM employs about 200 between its three service centers, with the bulk of its employees in Elko.


Expansion allows RAM to consolidate operations

NNBW Elko Economic Overview 2014

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