When I first met Shawn Ryan and Cathy Wood, in 2005, they were living with their two young children in a small cabin outside Dawson City, at the northernmost end of the paved road system in Canada’s Yukon Territory. It was a beautiful site in the summertime, with clear water lapping the banks of the Klondike River and the sky still bright at midnight. But the sun hit their roof for the last time each year in early December and didn’t show up again for six weeks. Temperatures in the dead of winter could reach 50 below zero. Wood sometimes feared that their children would freeze. Back then Ryan and Wood already knew they had found gold, but they didn’t have proof.
Recently, I went to see them again in their new home in Whitehorse, the territorial capital, and I sat with Ryan one night as he talked business over the phone. His right arm was stretched around the back of his head, holding his BlackBerry to his left ear. “Those guys were at 6 cents a share last year, now they are over a buck, and they got nothing,” he said. “When you look at it, it’s like a hundred claims.” The shares Ryan was talking about belonged to a mineral-exploration company, one of his many competitors. The claims are mining claims, a government license to extract minerals from a 50-acre patch of wilderness. To Ryan, a hundred claims is pathetic. He and Wood own more than 35,000 claims. “We just passed Luxembourg, and over the summer we’ll be the size of Samoa,” he continued, describing just one of his projects. Credible estimates of the amount of gold still buried in his properties run to the billions of dollars.
Ryan is the king of a new Yukon gold rush, the biggest since the legendary Klondike stampede a century ago. Behind this stampede is the rising price of gold, and behind this price is fear. As the Federal Reserve keeps interest rates very low to stimulate the economy, gold bugs make nightmarish predictions that loose money and a huge federal deficit will crush the value of the dollar and bring ruinous inflation. Gold holds its value when national currencies collapse and is easily imported and universally traded. It feels like the perfect investment for the apocalypse. A few weeks ago, gold passed $1,500 an ounce, an astonishing level. George Soros warned of a bubble back when gold was barely over $1,000. Glenn Beck cried that the run was just beginning: just wait until the United States is bankrupt and the real trouble starts. Gold bulls talk of $2,000 gold, $5,000 gold, even $10,000 gold. But 10 years ago, when Ryan made his first discoveries, nobody cared at all.
Ryan has been in the woods his whole life. At age 15, he was snaring foxes, martens and mink near Timmins, Ontario, where his father worked in a mine. Trapping in Canada is regulated through licenses called trap lines, and Ryan didn’t have a trap line of his own, he just went where he pleased. This is called poaching, and eventually he was caught. Instead of turning him in, the trapper he was poaching from put him to work. Ryan would skin animals until midnight, then go to school without bathing. Looking back, he understands why he was socially isolated. In his 20s, Ryan came west to work a trap line of his own in the sparsely populated expanse of the Yukon, but his plan changed when he learned about mushrooms.
Twenty years ago there was a kind of gold rush in mushrooms that enticed itinerant pickers to make a long circuit through British Columbia, Alaska and the Yukon, collecting chanterelles, matsutakes and morels. The market was driven by demand in Paris and Tokyo, and brokers built a network of little buying stations wherever mushrooms were fruiting. It was cash on the ground, and the pickers taunted one another with stories of thousand-dollar days. Ryan eventually settled near Dawson, once the roaring center of the Klondike gold fields, now a community of about 2,000 people surrounded by wilderness and close to good morel-picking territory.
Ryan met Wood in 1992 at the height of the mushroom season. He was down in Whitehorse shopping for supplies when he noticed a young woman standing outdoors in spangled tights selling bundles of sage. Wood, who was from New Brunswick, had been working for a Toronto bank, but she didn’t like it. After she quit, she took her savings and rode across the continent on a motorcycle. By the time she got to Whitehorse, her cash was gone. When Ryan walked up, she was reorganizing the last of the sage into smaller packets so she wouldn’t run out of stock before something else turned up. He was a striking person, compact and strong, with hair braided nearly to his waist. And he had a good thing going: the banks of the White River should be thick with morels. Did she want to come pick with him?
From then on they were a team. The mushroom market was extremely volatile, and they were both hard workers who liked to take risks. The biggest challenge for a picker is finding something to pick; but the second biggest problem is transport. There may be carpets of morels fruiting in the bush, but after you pick them you have to walk out again, with 70 or 80 pounds of fragile fungus on your back, through swamps foggy with mosquitoes and hillsides piled with downed trees. Ryan was known as a high roller, because he would use the accumulated cash from his latest bonanza to make bold bets on the next one: organizing a system of backwoods mushroom drying and river conveyance, for instance, or recruiting a crew to cut a trail for all-terrain vehicles. One season, he and Wood picked morels worth tens of thousands of dollars, but ended the year broke after crashing a used helicopter they purchased with all of the money they made.
It is tough to be penniless in Dawson in the winter. Wood cleaned some houses and served as court bailiff when the judge came to town, but in February 1993, they were down to their last $5. At the employment center, Wood saw a notice for a job removing the snow from the roof of Diamond Tooth Gerties, the local casino, which opened for a brief winter season coinciding with a dog-sled race. The job was usually taken on by a team of local residents for thousands of dollars. Wood bid 500. Townspeople came out to see how the low bidders were going to do it. She and Ryan cleared the edges of the roof with shovels, then Ryan climbed to the top and jumped up and down like a monkey. Gravity did the rest. The expressions of surprise on the faces of the onlookers made Wood laugh. People in Dawson had to acknowledge that for people at the bottom of the status hierarchy — and there aren’t many rungs beneath mushroom picker — they had some unmistakable gifts.
How could they not think about gold? Fortunes had been taken from the streams near Dawson City during the Klondike stampede. Little stretches of trickling water sometimes held millions of ounces of gold. What tormented the imagination was not just the breathtaking richness of the creeks but the decades of failure that followed. Generations of miners tried to find the mother lode, that hidden, hard-rock channel of mineral wealth whose eroding edges had supposedly poured its gold into the gravel. Nobody succeeded. In fact there is very little exposed rock around Dawson. A layer of dirt many feet thick is piled on top of the bedrock, and most of the ground is frozen all year long. After years of picking, Ryan knew the challenges of the terrain as well as anybody. This struck him as an advantage; it meant less competition.
To minimize their cash outlay, Wood and Ryan moved into an abandoned miner’s shack. Their new home was made of tin, and it had neither running water nor electricity. Ryan spent winter nights by the wood stove reading old mining journals. In the summer, he gathered rocks and drove them down to Whitehorse to show to Mike Burke, a government geologist. Burke enjoyed it when prospectors came by. They would stand in the parking lot, scratch at the rocks with their knives, talk. Burke asked questions about what Ryan was seeing, drew him out and set him off again full of optimism and clues.
It was part of Burke’s job to keep Ryan looking. To govern a land, population is required, and in the Yukon, in which nearly 200,000 square miles are occupied by 35,000 residents, persuading the citizens not to leave takes cash. The territorial budget is over a billion Canadian dollars, and among the line items is a program to support prospectors. Ryan would develop his ideas, and Wood would fill out grant-application forms longhand. When spring came they would have a little money to spend walking the bush, turning over rocks, collecting plastic bags full of dirt to sample the soil. The money quickly spread around town: on hardware, on fuel, on air transport. How much faith was there that the ideas contained in those prospecting grants were going to lead to a gold mine? Nobody even pretended to have much. Even the prospectors were skeptical. They could talk with conviction only about their own schemes. In regard to their rivals their realism was severe.
Burke helped Ryan get a better view of how the exploration industry worked on a global scale. A handful of companies — “majors” — run the active mines and control the worldwide market. Majors are listed on the big stock exchanges, and they have nondescript names: BHP Billiton, Vale, Barrick, Rio Tinto. Meanwhile, thousands of smaller exploration companies — “juniors” — raise funds and chase ideas. Juniors are essential to the majors because they do much of the initial work in the exploration industry: sampling the soil, digging trenches, publicizing promising geological results. Publicity is key, because juniors raise money by selling their shares on penny-stock markets, like the TSX Venture Exchange in Toronto. Every hopeful glimmer can cause shares to rise, and when shares are under $1, a jump of a few pennies is a handsome return. Juniors are free to have aggressive names: Monster Mining, Bling Capital, Northern Tiger. They are striving to be noticed.
At the very bottom of this opaque and volatile market are mining claims like the ones Ryan was staking when he walked around the bush near Dawson, pounding wooden four-by-fours into the earth, sometimes attached to a steel rod if the ground was too hard penetrate. These stakes gave him an exclusive right to extract minerals. But if he didn’t work on the claim, or pay an additional fee, his rights would expire over time. Typically, prospectors support themselves by optioning claims to juniors in exchange for yearly cash payments and thousands of shares of penny stock.
All through the 1990s, Wood and Ryan made more money picking mushrooms than optioning claims. They were still learning how to prospect, of course, but there was a bigger problem. People weren’t interested in gold. As long ago as 1924, the economist John Maynard Keynes called the gold standard “a barbarous relic,” and by the turn of the millennium central bankers everywhere agreed with him. Gold still had value as jewelry, of course, but as an investment it was purely for rubes. Stocks went up; gold went nowhere. In the Yukon, the aviation companies were struggling, and with few big mining companies around, the government geologists had time to work with small-timers. “It got down to the core people,” Burke recalls. “I have pictures of company presidents out there under a tarp, getting their hands dirty, just to keep their claims in good standing.”
To Ryan, the notion that gold wasn’t worth looking for was absurd. The market might profess disinterest, but this was cash in the ground. His closest friend, Antoine Deschenes, a rail-thin, 6-foot-4 Quebecois, had an idea. “In the winter the Yukon runs clear,” he said.
The significance of his insight is hard to appreciate without a bit of background. The gold of the Klondike rush was placer gold, found at the bottom of creeks and streams. Deschenes imagined that some of this gold had, during tens of millions of years of erosion, traveled all the way down the Klondike into the Yukon River. At Dawson, the Yukon is opaque from mixing with the water of the silt-laden White River. But in the winter the White is frozen solid. Therefore, the Yukon runs clear, and a daring prospector could dive in and find the riches he sought just lying there, in plain sight.
For the rest of this article, please go to the New York Times Magazine website: http://www.nytimes.com/2011/05/15/magazine/mag-15Gold-t.html?pagewanted=all