Nevada’s economy: Silver dollars (The Economist – May 18, 2013)

http://www.economist.com/

A fast-changing state leaves its mining roots behind

LAS VEGAS AND YERINGTON, NEVADA – TIM DYHR scrambles atop a mound of land in the lonely Nevada desert. “That’s where the pit mine will be,” he says, pointing towards a bland expanse of scrub. Turning his gaze to an area of desert indistinguishable from the first, he identifies the site for waste storage.

A processing facility will occupy a third plot. It is an impressive feat of visualisation. “Of course,” he chuckles, “Las Vegas used to be like this before they screwed it up.”

Mr Dyhr’s firm, Nevada Copper, hopes to build an open-pit mine near Yerington, a depressed town in the north-west of the state, though Congress must first approve the transfer of 10,000 acres of federal land. He bears no animus towards Las Vegas, a six-hour drive away. But the transformation of Nevada, and the dizzying growth of its largest city, helps explain why mining companies are feeling the political heat.

Nevada’s north, where mining is concentrated, was eclipsed by Las Vegas and the south 50 years ago. Today mining is Nevada’s ninth-biggest industry, but it remains at the core of the silver state’s identity and has been singled out for special treatment since its 1864 founding. Nevada’s constitution enshrines a tax on the net proceeds (ie, after operating expenses) of mineral sales.

Since 1989 it has been capped at 5%. Several Republican legislators have called for the cap to be removed, and for the rate to be doubled. Democrats want to raise the payroll tax and to apply a uniquely high rate to mining. Any or all of these proposals may be put before voters in 2014. “The target is on our back,” says Tim Crowley of the Nevada Mining Association.

The 2008 crash hit Nevada hard, and recovery has been slow: unemployment, at 9.7%, is the highest in the nation, as it has been for most of the past three years. Public spending has been slashed. Yet thanks to the strength of gold, which accounts for most of the sector, mining has flourished (the price has slipped lately, but remains high). Earnings in October 2012 were almost 50% higher than in the late-2009 trough. It makes for a tempting target.

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