Development Planning and Research Associates, Inc.
200 Research Drive, P.O. Box 727
Manhattan, KS 66502
ECONOMIC IMPACT ANALYSIS OF PROPOSED
EFFLUENT LIMITATIONS AND STANDARDS
FOR THE GOLD PLACER MINING INDUSTRY
Prepared for
U.S. Environmental Protection Agency
Office of Analysis and Evaluation
Washington, D.C. 20460
Contract Number
68-01-6744
Work Assignment No. 10
P. ;607
August 1985
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CONTENTS
Page
PREFACE AND ACKNOWLEDGEMENTS - 1v
EXECUTIVE SUMMARY l
I. INTRODUCTION I"1
A. Background ; I~1
B. Purpose
C. Industry Coverage l~2
D. Regulatory Options Considered !-2
E. Organization of the Study *-3
II. METHODOLOGY II'1
A. Overview ',
B. Information Sources ; n"2
C. Profitability Assessment : II-3
D. Decision to Operate ' II-9
E. Employment and Community Impacts n-10
F. Balance of Trade Impact ll-lQ
III. PLACER MINING METHODS | III~1
A. General ; III~1
B. Description of Mining Methods III-2
IV. INDUSTRY DESCRIPTION AND PROFILE', IV-1
A. Gold Recovery Rate ' Iv'1
B. Production Profile IV~3
C. State Profile IV~5
V, MARKET PROFILE V'1
A. Market Description V'1
B. Factors Affecting the Gold Supply V-l
C. Factors Affecting Gold Demand V-5
D. Price Pass-Through v~7
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Contents (continued)
VI. COST OF COMPLIANCE VI-1
A. Control Treatment Options VI-1
B. Treatment Process Costs VI~2
C. Estimated Compliance Costs VI-8
Vxl. REPRESENTATIVE FINANCIAL MODELS
A. Sizes of Model Mines VII-1
B. Operational Characteristics VII-2
C. Financial Characteristics VII-7
VIII. ECONOMIC IMPACTS
A. Price Effects VIII-1
B. Financial and Economic Effects VIII-3
C. Production Effects V.III-6
D. Employment and Community Effects VIII-11
E. Balance of Trade Effects VI11-11
F. New Source Impacts VIII-11
IX. SMALL BUSINESS ANALYSIS IX-1
X. LIMITS OF THE ANALYSIS X-l
A. General Accuracy . X-l
B. Data Availability X-2
C. Sensitivity Analysis X-3
REFERENCES
APPENDIX A PLACER MINING MODELS
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PREFACE AND ACKNOWLEDGEMENTS
EPA provided critical technical input and advice.
-n u ,iQHno<; Mark Kohorst EPA, who served as the Project
DPRA especially acknowledges Mark l't'r':* auidance in carrying
Officer for this study and who provided the necessary guiaam.e m i-a.../ y
out all aspects of the project.
Thomas R. Eyestone
Project Leader
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The gold supply is primarily influenced by three factors: new discoveries,
technological changes, and the price of gold. Fluctuating gold prices have
been a major influence on gold supply since deregulation of gold prices in
1971. However, gold production does not respond immediately to price
changes since many miners will simply retain their gold until the market is
more favorable.
The gold price also affects demand for gold by the four groups which
consume most of the gold produced: jewelry and arts, industrial, dental,
and investors. For investors, demand for gold may also be influenced by
inflation, high interest rates and political instability.
Gold is an internationally traded commodity and as such the price is not
influenced by any single producer. Due to the small quantity of gold
produced by gold placer mines, it is doubtful that miners could pass on
increased production costs to the market or consumers.
F. Cost of Compliance
The wastewater treatment processes, options, costs, and effluent
limitations for the gold placer mining industry are provided in the EPA
Development Document for the Placer Gold Mining Segment of the Ore Mining
and Dressing Point Source Category (Development Document 1985). This
document identifies various characteristics of the industry including the
type of mining, ore processed, gold production, water usage, and sources
and constituents of wastewater. This information serves as the basis for
establishing the effluent limitations, the recommended treatment systems,
and their costs.
Four wastewater treatment processes were studied as the basis for
establishing the BPT, BAT and BCT effluent guidelines:
Primary settling
Secondary settling
Flocculant (polyelectrolytej addition
Recycle
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These processes were used to develop four treatment options.
Capital and annual costs for wastewater treatment processes were developed
for four Alaskan and one continental U.S. model placer mining facilities.
The model sizes were established as follows:
Model
No. of Mines
Alaskan mines
A '
B
C
D
Continental U.S.
E
110
68
59
67
264
Model size
yd3/hr
25
50
100
180
50
3 - 34*
35 - 74
75 - 149
>150
All sizes
* Mines processing 0-2 cubic yards per hour (i.e., 0-20 cubic yards per
day) are considered recreational/assessment mines. No limitations are
developed for these mines for reasons presented in the Development
Document.
Annual compliance costs ranged from $8,000 for model mine A and E, option
one, to $70,000 for Alaskan model mine D, option four as shown below.
Compliance cost per cubic 'yard ranged from $0.21 for Alaskan model mine D,
option one, to $1.24 for Alaskan model mine A, option four.
Annual compliance cost
Option
Model mine
Alaskan mines
A
B
C
D
Continental U.S.
E
2 3
(thousand dollars)-
8
10
18
32
8
18
23
35
53
21
20
24
37
57
22
20
25
42
70
23
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The aggregate annual cost of implementing the various treatment options was
estimated for each relevant state. Naturally, the state incurring the
highest costs was Alaska. The total annual cost for all U.S. placer mines
is summarized below:
No. of
mines
1
2
Options
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A summary of selected operational characteristics for each model mine is
shown as follows:
Alaskan Models
B
Continental
U.S. Model
.022
.022
.022
.022
.022
Gold oz/cubic yard*
Cubic yards of gravel
washed/hour
Total sluice time hours
Gold production, ounces
Number of miners
Total operating hours
* See Chapter VIII wherein various gold recovery rates are reviewed.
Selected financial characteristics for each model mine in the baseline
(i.e.: prior to the imposition of wastewater controls) are shown below:
25
650
357.5
2
1,000
50
650
715
3
1,000
100
750
1,650
4
1,100
180
850
3,366
6
1,100
50
700
770
3
1,040
Alaskan Models
BCD
(thousand dollars)-
Continental
U.S. Model
Total revenues 103
Net profit before taxes (35)
Opportunity cost of capital 8
Economic profit (loss) (43)
206
(41)
20
(61)
475
104
25
79
969
229
52
177
222
(39)
18
(57)
H. Economic Impacts
The economic impacts were measured in terms of the effects on
prices, production, and employment as well as the financial and economic
effects on the balance of trade and new sources. An implicit indicator of
expected cost effects attributable to the imposition of wastewater controls
is the amount of revenue increase required to maintain a mine's
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8
5
4
3
18
11
7
5
19
12
8
6
-. 20
12
9
7
profitability. As shown below, using the 1984 average gold price of $360
per troy ounce minus 20% for impurity produces cost as a percent of
revenues ranging from 3 to 20 percent, depending on the model and the
option.
Cost as a percent of revenues
Options
Mine
Models size 1234
(yd 3/nr) (percent)
Alaskan Mines
A 25
B 50
C 100
D 180
Continental U.S. Mine
E 50 4 9 10 10
However, it is unlikely that miners would be able to recover pollution
control costs in the form of higher prices passed on to consumers since
gold placer production comprises such a small portion of the market.
Financial profiles which were developed for the model mines revealed that
accounting profit before taxes was negative for models A, B and E under all
options, given a recovery rate of .022 troy oz/yd3. The accounting profit
margin before taxes ranged from negative (48.5) percent for model mine A,
option 4 to 23.0 percent for model mine D, option 1. This profit margin,
as illustrated by the economic analysis described below (wherein the
miners' opportunity costs are accounted for) is not sufficient for the
operation to be deemed viable.
Economic effects were determined by establishing a cost of capital
benchmark to represent miners' opportunity costs for each model mine. An
economic loss was experienced by model mines A, B and E in the baseline,
and therefore pollution control options for this model also produced an
economic loss. For models C and D, however, an economic profit was
realized under each option as shown in the following table.
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Economic profit margin
Models
Alaskan
A
B
C
D '
Mine
size
(yd 3/hr) -
Mines
25
50
100
180
Options
Baseline
(41.93)
(29.57)
16.56
18.24
1
(44.98)
(31.25)
15.33
17.65
2
(54.91)
(37.31)
11.81
15.56
3
(56.39)
(38.21)
11.23
15.12
4
(56.75)
(38.42)
10.33
13.82
Continental U.S. Mine
E
50
(25.92)
(26.97)
(32.72)
(33.53)
(33.64)
Of the 568 mines in the U.S., EPA's analysis suggests 178 mines or 31
percent will be unprofitable and shut-down under baseline conditions, given
the average 1984 gold price and a gold recovery rate of .022 troy oz/yd3.
Baseline shut-downs will occur in the size groups represented by models A,
B and E. Mines in these size groups that are atypical, for example, have a
higher gold recovery rate than modeled may remain in operation. Also mines
that can reduce wages to family members or delay equipment maintenance may
operate until gold prices increase. The closure projections presented
above, in other words, are meant to be general, worst-case estimates. The
inherent variability among mine sites and miners will allow some mines of
the size projected as unprofitable to operate successfully this season.
Implementing effluent guidelines at the same gold price did not produce
additional projected production or employment losses beyond those projected
in the baseline.
I. Small Business Impacts
After conferring with the U.S. Small Business Administration, EPA developed
a definition of small mines that accords with the structure of the ;
industry. Small mines were defined as all small-scale
recreational/assessment mines, plus operations represented by model mine A,
and to some extent B and E.
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An analysis was done to compare the annual cost of compliance for "small"
mines to all other mine sizes. The results on a model basis indicate the
compliance cost to revenues for small operations is approximately twice
that of other mines.
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I. INTRODUCTION
A. Background
The Environmental Protection Agency is charged with the responsibility for
restoring and maintaining the chemical;, physical, and biological integrity
of the Nation's waterways. This authority is granted under the Clean Water
Act (the Federal Water Pollution.Control Act Amendments of 1972 as, amended
by the Clean Water Act of 1977). Section 301(b)(l)(A) of the act requires
that all industries discharging wastewater into navigable waterways achieve
the best practicable control technology (BPT) for conventional pollutants,
and meet effluent limitations achievable by the application of best
available technology economically achievable (BAT) for toxic pollutants.
BCT, or Best Conventional Technology for the control of conventional
pollutants, may also be required as a level of control beyond BPT.
Additionally, new industrial dischargers are required to comply with the
New Source Performance Standards (NSPS) under section 306 of the act.
!
The Agency is now proposing these effluent limitations and standards under
the Clean Water Act to limit the effluent discharges from the gold placer
mining industry. In developing the effluent limitations and standards for
this industry, the Agency has extensively examined the technical and
economic characteristics of several alternative pollution control
technologies. This report evaluates the economic impact of the alternative
pollution control technologies on the placer mining industry in the United
States. The technical analysis that describes the pollution control
technologies and their associated costs are presented by EPA in a separate-
document.
B. Purpose
The purpose of this study is to analyze the economic impacts that are
likely to result from promulgation of the proposed BPT, BAT and BCT
effluent limitations and standards on placer mining in the United States.
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The results of this economic impact analysis will help establish pollution
control regulations that are economically achievable. This analysis
examines how each of four alternative pollution control technologies
affects the financial viability of placer mines in the United States. The
impacts examined include reduced profitability, production cutbacks, mine
closures, and employment and earning losses, as well as impacts to the
local economies.
C. Industry Coverage
This analysis covers gold placer mining operations in the United States
that recover gold from placer deposits. Placer mining in the U.S.
generally occurs in Alaska, Idaho, Montana, California, Wyoming, Colorado,
Oregon, South Dakota, Washington, Utah, Nevada and New Mexico. Pit or lode
gold mining operations are not considered,in this analysis.
D. Regulatory Options Considered
The wastewater treatment processes studied were:
Primary settling
Secondary settling
Flocculant addition
Recycling.
Four treatment options associated with these wastewater treatment processes
are considered in this analysis. Capital costs as well as operating and
maintenance costs are provided by EPA's Industrial Technology Division
(ITD) for these effluent treatment options. These costs are used as the
basis for the economic impact analysis.
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E. Organization of the Study
The remainder of this report is organized .into nine chapters. The
analytical methodology of the study is provided in Chapter II. Chapter III
describes the gold placer mining methods. Chapter IV describes the
industry structure by state. Chapter V presents the market for gold
including supply and demand factors. Chapter VI discusses costs of
effluent guidelines. Chapter VII presents representative financial models
for.gold placer mines. Chapter VIII describes the economic impacts on the
industry of each of the effluent guidelines treatment options. Chapter IX
presents the small business impacts due to the regulations. Lastly,
Chapter X discusses some of the limitations of the analysis and a
sensitivity analysis with gold price as the critical variable.
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II. METHODOLOGY
A. Overview
This chapter describes the methodology and assumptions used to analyze the
economic impacts of proposed effluent limitations on the placer mining
industry. The economic impacts examined result from the added costs that
are required to meet these limitations. The added costs include capital
and construction expenditures for pollution control (fixed costs) plus
operating and maintenance expenses (variable costs) that are associated
with the alternative pollution control technologies recommended by the
Industrial Technology Division (ITD) and presented in Chapter VI. To the
extent that these added pollution control costs raise the production costs
of a placer mine, the mine owner will respond in one of the following ways:
Raise the price of his output and pass through some or all of the
increased costs to the purchaser of his product
-Absorb the increase in costs
t Close down the operation and go out of business.
The first hypothetical response to the added pollution control costs is the
least likely. A placer miner is unlikely to raise the price of the product
(gold) to recover the increase in his operating cost because the price of
gold is not set by an individual miner. Gold is an internationally traded
commodity, and as such, the price of gold is not influenced by any single
producer. It is, in fact, set by demand and supply conditions worldwide, t
decision by U.S. placer miners to increase the price of gold would not be
feasible because other producers are not likely to follow suit, and
consumers (or purchasers) would be able to purchase gold elsewhere at a
lower price.
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The miners would have to absorb the additional pollution control costs
since they cannot pass them on to their customers. These added costs would
cause an increase in the production costs and a reduction in the earnings
and profitability of the placer mining operations. The baseline
profitability of the mines adjusted for the cost of pollution control will
determine the number that would close down as a result of the regulation.
A financial model that estimates baseline and post compliance profitability
of placer mines is used to examine the profitability impacts. It's
important to note these models are based on a single season time horizon,
since it is believed that miners weigh many relevant factors each year
before making a decision on whether to operate.
The proposed effluent limitations could also result in mine closures. If
mining operations close, or more precisely, fail to open for the season,
workers would lose their jobs and production and community revenues would
decrease. The data and specific analytical techniques used to analyze
these impacts on the placer mining industry are described in the following
subsections.
B. Information Sources
The main sources of information for this study were economic surveys of
placer mining operations in Alaska and the continental U.S. that were
completed during the summers of 1983 and 1984 by the EPA. The 1983
economic survey covered a sample of 65 mining operations that were selected
from 304 placer mines listed in Placer Mining Applications report
(Tri-Agency Report) prepared by three state agencies in Alaska. If The
selected mines were visited during the 1983 mining season, and economic and
financial information was requested during an interview with the miners.
The interviews followed an outline that was prepared by EPA's Region X
Office. The operational status of 44 of the 65 mines in the
I/The three Alaska state agencies are the Alaskan Department of Natural
Resources, the Department of Environmental Conservation and the
Department of Fish and Game.
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sample were identified by the EPA survey team. Of the 44 mining
operations, 35 provided some economic and financial information and the
remaining 9 mines were identified as inactive.
In 1984 20 mines were visited in Alaska and 6 mines were visited in the
continental U.S. Information was again collected on economic and financial
characteristics of the mines. From this data, coupled with information and
insight gained from industry publications and other sources, representative
or model mine profiles were developed for various size mines. Because of
the voluntary nature of the survey data and the sensitivity of some of the
questions, many of the miners did not respond to all the questions. As a
result, the 1983 survey data and other alternative sources of information
on placer mines were used to estimate the values of missing variables.
Alternative data sources included information from the Tri-Agency form,
plus an extensive review and evaluation of government and private
publications. The literature review provided the background information on
placer mining, the gold mining industry description, and trends in the
demand, production, and prices of gold. Contact was also made with
industry representatives, and their contributions were used in this
analysis.
The representative financial models developed from these information
sources are presented in Chapter VII. Appendix A shows the calculation of
each component of the models and specific data sources.
C. Profitability Assessment
The profitability assessment is based on a series of financial models that
evaluate the profitability of model placer mines before and after
compliance with the proposed regulation. The models provide estimates of
revenues, variable costs and fixed costs. They then compute the financial
(i.e: accounting) and economic profit or loss and profit margins for
representative model mines before and after the regulation. Generally, the
financial models incorporate the following variables:
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Revenues
t Operating and maintenance costs
Wages
Nonwage labor costs
Fuel
Maintenance
Smelting fees
Fixed costs
Lease payment .
Debt service
Capital equipment expense-
Auxiliary equipment expense
t Financial analysis
Net profit before taxes
Profit margin (net pretax profits/revenues).
Economic analysis
Opportunity cost of capital
Economic profit
Adjusted profit margin
Financial (i.e., accounting) profits are determined by adding the total
operating and maintenance (O&M) costs and the total annualized fixed costs
and then subtracting these costs from the value of the total production
(revenues) for each model placer mine. The resulting value is a net profit
before taxes for the placer mining operation. The net profit is then
divided by the total revenues to calculate the baseline accounting profit
margin of the mining operation. This profitability measure is used as a
screening analysis to identify mines that are financially weak in the
baseline.
Economic profits for the model mines are then determined by subtracting the
model miner's estimated opportunity cost of capital from the net profit
before taxes. An adjusted profit margin is then calculated. Generally, a
mine with a negative adjusted profit margin is considered unprofitable in
the baseline.
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The models are used to assess the impacts of the additional costs for each
of the proposed pollution control options (both investment and O&M) on the
baseline profit margins. Profit reductions from the added pollution
control costs represent the impacts of the proposed effluent standards on
the profitability of the model placer mining operations.
Brief descriptions of model variables are presented below. See Appendix A
for more detail of calculations.
1. Revenues
Most placer miners interviewed were unwilling to provide information on the
actual or expected earnings of their operations. This was due mainly to a
large number of factors and uncertainties that could alter the earnings
potential of a mining operation. Consequently, it was necessary to
estimate total revenues for each of the model mines by employing reasonably
representative values for the parameters that determine revenue.
Total revenues of a placer mining operation are the product of the prices
received for fine gold and nuggets recovered and the level of gold
production over the mining season. The price of gold is set by demand and
supply factors. While this price is a useful indicator of prices actually
received by miners, the sale of nuggets at substantial premiums above the
price often occurs. Unfortunately, information on gold nugget transfers is
unavailable. For this study therefore, the price of gold was set at $360
per ounce, which was the average annual price for 1984. (See further
discussion of Price of Gold in Chapters V and X.) The variables
determining the mine's level of gold production include:
t
Gold recovery rate
Number of sluicing hours per season.
Gold production was estimated by multiplying the gold recovery rate times
the sluicing hours per season. Revenues are then estimated by multiplying
the gold production in ounces times $360 per ounce, minus 20 percent as a
penalty for impurity. This penalty for impurity takes into account that
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all gold recovered and sold is 80 percent pure (or referred to as 800 fine
gold on a scale of 1000) and thus commands 80 percent of the market price
for gold. In addition, it is assumed that all gold recovered and sold is
"fine" gold rather than nugget gold.
2. Operating and Maintenance Costs
The costs of operating and maintaining a placer mining operation include:
t Direct labor costs
e Indirect labor costs (i.e., food and housing costs)
Fuel costs
t Equipment maintenance costs
Smelting fees.
The sum of these costs is the estimated total O&M (or variable costs) of a
placer mining operation.
a. Direct Labor Costs
The estimates of direct labor costs for the model placer mining operations
are based on established wage rates for various types of workers and the
estimated number of each employed by the mines. (This information was
derived from the Alaska Department of Labor as well as the EPA economic
surveys.) Although information on the number of persons employed at actual
mine sites was provided in the field survey, information on the labor mix
among categories of workers (e.g., foremen, equipment operators, laborers)
was not. Therefore, assumptions regarding the labor mix were developed
based on typical operating practices. _!/
b. Indirect Labor Costs
Indirect labor costs include food and lodging over the mining season.
These costs vary among the mines depending on location and transportation
\J The actual labor mix for each mine is shown in the financial model
presented in Appendix A.
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costs. Most of the mines are located a long distance from housing and
service facilities, and high transportation costs make daily commuting
impossible. As a result, a campsite has to be established, and food and
other amenities have to be transported and stored at the mine site. The
sources of information on these nonwage labor costs are limited.
Discussions with industry personnel indicate a reasonable estimate of
indirect labor costs to be $5 per direct labor hour per worker; this
estimate is used in our study.
c. Fuel and Maintenance Costs
Fuel and maintenance costs are based on an evaluation of performance
characteristics of the various types of capital equipment that are used in
placer mining. The key types of equipment include bulldozers, loaders,
tractors, pumps, and sluice boxes.
Fuel costs generally depend on the type of equipment used and its fuel
consumption, the total number of hours the equipment is operated during the
day, and the price of fuel. A list of the fuel consumption and maintenance
cost for placer mining equipment assumed to be in use at model mines was
assembled for use in the analysis.
The cost of maintenance generally includes the costs for repair services,
replacement parts, lubrication, and other activities necessary to keep the
equipment running. Information on maintenance cost was collected from
Caterpillar dealers in Alaska and the continental U.S.
d. Smelting Fees
The smelting fees are the costs for refining raw gold. The listing of
smelting fees published by one of the principle smelter/refiners of Alaskan
gold was used as a basis for computing smelting fees for this study.
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3. Fixed Costs
The fixed costs of a placer mining operation include the cost of leasing
the mining site and the costs associated with owning or leasing capital
equipment used for mining.
a. Costs of Leasing
For this analysis, the lease payment is estimated at 15 percent of the
value of production of the mine. This is based on an analysis of the value
of leases tnat was conducted by the EPA Region X Office. It is further
assumed that the lease payment has a fixed minimum charge based upon an
estimate of output of the operation and that a lease exists for a period of
one season. For these reasons, the lease payment is considered to be a
fixed cost. This is a highly variable parameter, since many types of lease
arrangements exist in the industry. In some cases there are no lease
payments per se since the operator of the mine owns the land. For purpose
of a model mine analysis however, the assumption of 15 percent of the value
of gold recovered was employed.
b. Debt Service
Debt service is set at ten percent of total revenues. While information on
this parameter is scarce and often considered proprietary, EPA does
recognize that miners often borrow heavily to finance their operations.
The Agency requests comments or suggestions regarding measurement of debt
service cost.
c. Equipment Costs
The types of capital equipment that are necessary for placer mining include
earthmoving machinery (generally, a bulldozer or backhoe), a sluice box,
water pumps, classification equipment, and electric generators. An
estimation of the book value or salvage value of the equipment was not
possible because information on the age, depreciation, transportation
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costs, the stock of spare parts, or the status of ownership of equipment at
specific sites is scarce and unreliable. Because of these deficiencies,
this study uses the rental value of new capital equipment as a proxy for
the annualized cost of owned, depreciated or rebuilt equipment actually in
use at many sites. The Agency realizes that heavy machinery costs may be
somewhat overstated due to this assumption.
d. Auxiliary Equipment
Auxiliary equipment includes costs for equipment which are not included
elsewhere and were estimated at 25 percent of heavy equipment cost.
Examples of equipment included in this section are: generators, hand
tools, spare parts, wires and explosives.
D. Decision to Operate
The analysis of a miner's decision to operate in the forthcoming season is
based on the economic principle that a facility's revenues must cover all
costs of production. Mine shut-downs therefore, are likely when the
facility cannot earn sufficient revenues to cover its operating expenses
and opportunity costs. For purposes of this analysis, if the facility's
adjusted economic profit is less than zero the mine is not expected to
operate. The economic profit accounts; for the miner's opportunity cost of
capital in addition to direct operating costs. The model mines financial
(i.e., accounting) profit as measured by net profit before taxes and profit
margin before taxes is an indication of whether or not the mine is
marginal. The difference between the number of shut-downs from the
baseline and after the regulation will provide the number of shut-downs
that are attributed to the proposed effluent guidelines.
A fairly straightforward technique was used to analyze the decision to
operate because it captures some of the more relevant characteristics that
are observed in the industry. For instance, the placer mining industry is
highly speculative and unstable, and miners enter and leave the industry at
a high rate. The high turnover rate is common in this industry because of
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the uncertainties involved in mining for gold and the wide fluctuations in
the price of gold over short periods of time. The majority of the
participants operate only when the price of gold is high enough for them to.
cover their operating costs. Others work intermittently, depending on
their working capital and their luck in finding gravel that has a high gold
content.
Because of these destabilizing factors and the uncertainties inherent in
mining for gold, miners experience wide variations in their annual revenues
and profit. These circumstances make forecasting the expected revenues for
individual mines over a long period very difficult. These factor.; limit
the time horizon for which miners expect to cover costs and generate
profits. The decision rule above captures this characteristic.
E. Employment and Community Impacts
This analysis was concerned with estimating likely employment losses due to
curtailed production or mine shut-downs as a result of pollution controls.
If the actual mines which are expected to curtail production or to forego
operations could be identified, their employment impacts could be estimated
directly. When, however, they cannot be identified, the employment impact
analysis must involve the application of estimates of employment changes by
model mines. Employment changes in model mines would then be generalized
according to the number of actual mines represented by the model and
aggregated to derive an estimate of total employment effects for the
industry. Employment dislocations are noted as appropriate.
Community impacts result primarily from employment and earning losses. The
critical variables are the ratios of employment and earning losses in the
industry to the total employment and earnings in the community.
F. Balance of Trade Impact
Balance of trade impact analysis dealt with those products that have
competitive import and export positions. Since placer gold does not
account for a significant proportion of gold output these impacts are
negligible.
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III. PLACER MINING METHODS
This chapter discusses the-mining methods which are used to obtain placer
gold in the U.S. These methods range from those used in very small scale
mines (for example panning) to very large scale placer mining methods (such
as ladder bucket dredge-;).
A. General
Placer mining generally involves three steps: extraction, classification
and cleanup. Soil and barren rock, referred to as overburden, must be
stripped away to expose pay gravels. Overburden, may be stripped
mechanically using excavation equipment such as draglines and bucket wheel
excavators, or by hydraulic means. Hydraulic removal involves using
powerful jets of water to break up and wash away overburden. Once the pay
gravel is uncovered, it must be removed from the stream bed for
classification. Classification involves separation of large rocks from
smaller materials such as gravel, sand, and silt or clay for easier
handling. Finally, the gold is recovered from the pay gravel using
clean-up methods.
Gold placer mining operations in Alaska differ somewhat from those mines
operated in the continental U.S. This is primarily due to the differences
in weather and soil conditions.
1. Alaska
Operating practices at Alaskan gold placer mines are affected by four
natural weather and soil conditions.
III-l
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1. Mining cannot begin until the spring thaw occurs.
2. The fall freeze closes the mining season. (Although floating dredges
at Nome extend the mining season somewhat by utilizing water
injection.)
3. To prevent scarring, miners may only move equipment across the tundra
when the ground is frozen.
4 Adequate natural water supplies are not always available.
These restrictions result in Alaskan mines generally operating six to seven
days each week and more hours per day than continental U.S. mines in order
to make the most of the limited mining season. Open-cut methods are used
in most Alaskan mines, although dredging and draglines are also used.
(Region X Report). Those mines using open-cut methods tend to have larger
and more pieces of heavy equipment then do mines in the continental U.S.
2. Continental U.S.
Gold placer mines in the continental U.S. utilize mining methods and
equipment similar to Alaskan mines. However, a longer mining season allows
mines in the continental U.S. to operate shorter working weeks. In
addition, employment costs are lower in the continental U.S.
B. Description of Mining Methods
There are three major steps in the placer mining process: extraction,
classification, and clean up. This section of the report briefly describei
the equipment used by placer miners to perform each step. Unless
otherwise referenced, the material in this section is drawn from the EPA
Development Document (1985). A more detailed and descriptive analysis of
gold placer mining methods and technologies is contained in the Development
Document.
III-2
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1. Extraction Methods
Extraction of ore materials is achieved by two different methods: dredging
systems and open cut procedures.
a. Dredging systems
A placer dredge assists in the removal of materials from a pond or stream
bed for further processing. Four dredging methods which are used in the
extraction of gold are described below. The first two methods, panning and
suction, are employed by small scale recreational placer miners.
(1) Panning. Some gold placer mining operations may still employ one of
the oldest and simplest methods of dredging, panning. This mining
practice involves immersing a pan containing mineral-bearing gravel in
water and then shaking or swirling the water until only the heavy
concentrates remain at the bottom of the pan. Although this method is
time consuming, it is suitable for very small operations since there
are few equipment costs.
(2) Suction. Suction dredging involves employing a pump, which is floated
above the area being worked. A pipe is used to remove gravel by
suction from the stream bed for further processing. The pipe size
varies from one to four inches for small operations.
(3) Hydraulic dredging systems. Hydraulic dredging systems employ
hydrojet, suction with hydrojet assistance, or only suction to provide
lifting fprce to remove pond or stream bottom material. Due to its
limitations, hydraulic dredging has been used less frequently than
mechanical dredging for gold placer mining operations. It is best
suited for operations dredging relatively small-size loose material,
in which the dredged'material must be transported some distance to the
point of processing. In addition, gold recovery with an hydraulic
III-3
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system can be difficult if the gold occurs as small nuggets or very
fine flakes. The development of underwater cutting heads has
increased the digging power of hydraulic systems; however, because the
cutterhead must be designed with either right or left-hand cutting
rotation, the dredge is not efficient.
(4) Mechanical dredging systems. Bucket-ladder (or bucket line),
rotary-cutter, and bucket-wheel excavator dredging equipment are
classified as mechanical methods. The bucket-ladder dredge has
traditionally been used most often in placer mining and consists of a
chain of tandem digging buckets that circulate around a truss or
plate-girder ladder. Each bucket scoops a load as it comes into
contact with the mining face, then pivots around the lower tumbler,
dumping its load when it pivots around the upper tumbler. The
advantages of the bucket-line dredge as compared to the hydraulic
dredge are as follows:
1. It lifts only payload material, whereas a hydraulic system expends
considerable energy lifting water;
2. It loses fewer fines, which contain most of the fine or small fraction
gold;
3. It can dig more compact materials;
4. It can clean bedrock more efficiently;
5. It allows more positive control of the mining pattern;
6. It has a simpler waste disposal system compared to a hydraulic system"
with an onshore treatment plant;
7. It requires less horsepower.
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The disadvantages of the mechanical system as compared to the hydraulic
system include:
1. It requires more initial capital investment per unit of capacity.
2. It requires a secondary pumping system if the excavated materials must
be transferred to a beneficiation, plant which is distant from the
dredge.
Presently, there are at least four dredges in operation in the continental
U.S. There are approximately 3 dredges operating in Alaska. Most of the
dredges which were in operation in the U.S. have been moved to other parts
of the world (e.g., South America, Indonesia).
b. Open cut methods
Open cut methods are often used to excavate mine deposits when dredging
cannot be performed profitably due to the size, depth, or characteristics
of the deposit. An inadequate water supply may also rule out dredging as
an appropriate excavation method. Open cut methods are presently the most
commonly used mining methods due to the costs of operating large scale
dredges.
Some of the equipment which is used for open cut mining is described below.
Most open cut placer operations will have one or more bulldozers. The next
most common equipment type is the front-end loader. The backhoe, while
used for many operations, i.e., is not as common as the other two equipment
types.
(1) Bulldozers. Bulldozers are employed in all phases of open-cut placer-
mining, including stripping muck and barren gravel overburden, pushing
pay dirt to sluice boxes, stacking tailings, construction of ditches,
ponds and roads, and excavating bedrock where gold has penetrated
fractures and joints or frozen ground. The bulldozer used at a site
depends on the size of the operation and what type of used equipment
is available; however, the most commonly used bulldozer seems to be
the Caterpillar D-8.
III-5
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(2) Loaders. Loaders are used to transport material on site and to load
placer material into the classification equipment. They may have
rubber tired wheels or tracks. Front-end loaders have the following
advantages.
1. The economic load and carry distance may be as far as 700 feet.
2. Classification equipment such as grizzlies can be more easily
utilized than with bulldozers.
3. Wheel loaders have greater flexibility in moving material (e.g.,
out of pits, around tailing piles).
Common loader models used at placer sites include the Cat 930, the Cat
950 and the Cat 960.
(3) Backhoes. Backhoes are used to excavate and move placer materials.
The backhoes similar to the Cat 225, 235 or 245 are often used for
this purpose.
(4) Draglines. Draglines are primarily used at placer mining operations
which have large reserves due to their high investment cost. At these
operations, draglines can move materials at a lower cost per unit than
a bulldozer. Draglines can be used at small operations, particuarly
if the owner can find an old dragline that is in good condition or can
be overhauled. Such a dragline can.be purchased for one-tenth the
cost of a new one. :
2. Classification Methods
Classification methods are used by placer miners to separate extracted
materials for easier handling.
(1) Grizzlies. A grizzly is a large screen of fixed opening size that
prevents oversize coarse material, unlikely to contain gold, from entering
the sluice for processing. This results in a shallower depth of flow over
the sluice riffles enhancing fine gold recovery and reducing water use.
III-6
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(2) Trommels. A trommel is a wet-washed, revolving screen that washes
gravel clean and helps to disintegrate gold-bearing clay material by impact
with oversize material and strong jets of water. A trommel screens and
distributes slimes, sand and fine gravel to the processing section and
discards the oversize material.
(3) Ross boxes. A ross box is a fixed punchplate screen-high pressure
wash with hole sizes generally ranging from 1/2 to 3/4 inches. Pay gravel
is placed in a box and then washed against a punchplate. Undersized
material is washed through the .punchplate and then diverted to outside
channels fitted with riffle sections. Side channel sluices handle the
minus 3/4 inch material, while the center channel collects oversize
material.
(4) Vibrating screens. A vibrating screen uses a 1/2 to 3/4 inch screen
that vibrates in order to improve the rate of classification. A front-end
loader or a backhoe is normally used to load material into the screen, and
one to four cubic yards are screened at a time.
(5) Sluices
To separate gold from other material, wash water is directed over ore
slurry that is contained in a long, sloped trough, or sluice. Heavy
minerals in the ore, including gold, are trapped in riffles along the
sluice. The type of riffle which is used depends upon the size of the
operation and its geographical location.
Sluice boxes are generally constructed of steel, but the length and width
of the sluice varies depending on the condition of the ore. A sluice is
generally 20 to 40 feet long, and 2 to 4 feet wide. When ore is not broken
up prior to sluicing, a longer sluice is used for gold recovery. During
clean-up and prospecting operations, a shorter, narrower sluice is
utilized.
III-7
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IV. INDUSTRY DESCRIPTION AND PROFILE
This chapter describes and profiles placer mining in the United States.
The first two sections of this chapter discuss gold recovery rates and
production. The third section presents information on number of mines,
their location, employment, size and production levels for those twelve
states (Alaska, Idaho, Oregon, Montana, California, Colorado, Wyoming,
South Dakota, Washington, Utah, Nevada and New Mexico) -,'hen, most placer
mines are located.
A. Gold Recovery Rate
Gold recovery rates are difficult to obtain because mine operators are
hesitant to release this information. EPA conducted a survey of
approximately 20 mines in 1984. The gold recovery rates for the sampled
mines was .022 troy ounces per cubic yard of gravel washed (hereafter
abbreviated as t oz/yd3). Information from industry representatives
indicates that placer gold recovery rates often range from .01 to .1 t
oz/yd3.
Overall gold recovery rates for the United States can be estimated from the
data in the U.S. Bureau of Mines Minerals Yearbook by dividing the amount
of U.S. placer gold recovered by the total amount of gravel washed.
Recovery rates calculated in this fashion for the years 1975 to 1982 are
shown in Table IV-1. As can be seen, estimates range from .0065 t oz/yd3
in 1975 to .0171 in 1980, if the placer method used is ignored (i.e.,
"Total Placers," Table IV-1). If the placer method ,is taken into account,
the recovery rate ranges from .0052 t oz/yd3 for bucket line dredging in
1975 to .2000 e.g./yd3 for dragline dredging in 1977.
IV-1
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Table IV-1. Gold recovery rate for U.S. placers
Bucket!ine Dredging
1975
1976
1977
1978
.0052
.0060
1979
1980
1981
1982
1983
Recovery rate
.troy oz/yd3 of
material washed)
.0063
'.0068
Dragline Dredging 2/
1975
1976
1977
1978
.0204
1979
1980
.1091
01TZ
1979
1980
1981
1982
1983
Nonfloating washing
2/
1975
1976
1977
1978
1980
1981
1982
1983
.0238
.0127
.0115
Underground placer,
small-scale mechanical
and hand methods and
suction dredge 3/
1975
l|/6
1977
I978
'hi ha
.010
"'ซ
>Q69*
1979
iggo
19gl
1933
.0041
>0204
<0081
>Q156
.0180
i
ill!
All placers except drag-
line dredging and non-
floating washing plants I/
1975
1976
1977
1978
ซuu/a
-uii/
"
1979
iga2
1983
.0086
-Q117
>QQ79
_QQ73
.0067
Mines, Minerals Yearbook.
recovery figures.
under the direction of a U.S. Bureau of Mines representative.
4/ Added' to remove potential overestimates (see Footnote 3) caused by including the information for dragline
~ dredging and non-floating washing plants.
Source: DPRA calculations made from data obtained ff
Buttema, , W C
Sior!
-------
Some of the numbers in Table IV-1 may be overestimates because, for the
dragline dredge and nonfloating washing "plant methods, the U.S. Bureau of
Mines information did not include the material washed at sand and gravel
operations, but did include the gold recovered at these operations. This
perhaps explains why the recovery rates (e.g., .2000 oz/yd3) are so high
for these methods. If the recovery rates for these methods are removed and
overall recovery rates are calculated for the other methods, the rates
range from .0059 troy oz/yd3 in 1975 to .0136 troy oz/yd3 in 1978 (see
Table IV-1). j
B. Production Profile
This section profiles placer mine production. Three aspects of production
are discussed in separate sections below production levels, production
value and capacity/utilization.
1. Production Levels
Table IV-2 presents estimated production of placer gold for the U.S. from
1979 to 1983. Total U.S. production ranged from 68 thousand troy ounces in
1979 to 183 thousand troy ounces in 1982. We used estimates of placer gold
production in Alaska from EPA (1984) and U.S. Bureau of Mines data for all
other states to develop these total U.S. production figures. U.S. Bureau
of Mines production data are generally believed to be underestimated
significantly. To illustrate, Bureau of Mines total U.S. placer production
in 1979 is 9,500 troy ounces. However our estimate for 1979 Alaska
production alone is 65,000 troy ounces (see Table IV-7). These national
figures may still be underestimated since similar detailed production data
were not available for other states.
The U.S. Bureau of Mines Minerals Yearbook estimates that placer production
accounted for only 2.5 percent of total U.S. gold production and for only
0.1 percent of world gold production in 1983.
IV-3
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Table IV-2. Production and value of U.S. placer gold
Year
1979
1980
1981
1982
1983
U.S. placer I/
production
000 troy ounces
67.9
83.7
137.7
183.2
181,4
Average 2J
gold
price
$
308
613
460
376
424
Estimated
value 3_/
($000)
20,913
51,308
63,342
68,883
76,914
II U.S. production levels were estimated using EPA (1984) estimate of
~ Alaskan placer gold production (see Table IV-7) and U.S. Bureau of
Mines estimates for all other states.
2/ The average gold price (Table V.I, Englehard Industries) for the year,
3/ Production volume x average price.
IV-4
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2. Value
Although usually not reported, value can be estimated for placer gold
production by multiplying annual placer production by the average annual
price of gold. These values are shown in Table IV-2 for the years 1979
through 1983. (U.S. gold prices from Engelhard Industries were used for
valuation). In 1979, the value of placer gold production was $21 million.
Since that time, the value of placer gold production has primarily
increased and has risen to a high of $77 million in 1983. The increase for
this period reflects both an increase in gold price and gold production.
3. Capacity and Utilization
Very little information is available on:the capacity and utilization of
placer mines. Equipment breakdowns, injuries and weather conditions can
cause slow downs and even shut downs. Thus, mine production levels do not
really accurately reflect a mine's full ability to wash gravel.
EPA's Region X study of placer mining examined the utilization rate of
mines in Alaska. Information was obtained for only 32 mines, and it was
found that on the average, these mines operated at 67 percent of capacity.
The range for those mines sampled was 49 percent to 73 percent utilization.
C. State Profile
Alaska is well known for its placer gold and produces more of this gold
type than any other state. To determine those continental U.S. states
which should be included in this study, we relied on claim information
(shown in Table IV-3) obtained from the; Bureau of Land Management (BLM).
Eleven statesArizona, California, Colorado, Idaho, Montana, Nevada, New
Mexico, Oregon, Utah, Washington and Wyomingaccount for more than 99
percent of the placer claims filed with the BLM from continental U.S.
states since 1976 and, thus, were chosen for closer study.
IV-5
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Table IV-3. Placer mine claims,' by state, filed with the Bureau
of Land Management since 1976 I/
State
Arizona
California
Colorado
Eastern States
Idaho
Montana
Nevada
New Mexico
Oregon
Utah
Wyoming
TOTAL
Number of claims
22,889
45,101
10,675
386
8,406
8,025
25,116
6,680
11,604
16,033
15,008
169,923
Percent
13
27
6
<1
5
5
15
4
7
9
9
100
I/ Alaskan claims data is on a different system and must be obtained from
~ that state.
Source: Information Service Center, Bureau of Land Management, Denver,
Colorado.
IV-6
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In the subsections which follow, each of the above mentioned states are
examined. Each subsection discusses the number of placer mines in the
state, their location, employment, size and production levels.
Before talking specifically about the states, a matter concerning the
number of placer mines in each state must be discussed. It is difficult to
accurately estimate the number of placer mines because many operations are
transient and they are located in remote areas. Often placer miners do not
always notify all the government "agencies that they should, when a mine
becnns operating. Consequently, state and federal agencies, which collect
information on placers, often do not have a complete placer mine listing,
and different agencies within the same state may have a different set of
placer mines on their list. Depending on which agencies are contacted,
several different estimates for the same state often result. The analyst
is, therefore, left with the dilemma of either choosing one of the lists or
combining the information from several different agencies, if the listed
mine's name and location are specified. Given the uncertainty surrounding
the number of mines, we will present a range for each state with the lower
end of the range usually representing the estimate made through the use of
state discharge permits and site visits by the technical contractor. The
upper end of the range * results from combining mine information from
several sources which provide the mine's name and location.
One additional difficulty with.estimating the' number of placer mines is
that a placer mine's stage of operation is not always known. This state
can range from the early stages of development (exploration for deposits
with no sluicing or just starting operations with many shut downs) to full
operation. A mine may shut down temporarily due to equipment failure or
indefinitely due to claim litigation. Sometimes a mine will be in full
.operation for a number of weeks, but then the owners find that the gold is
not as plentiful as was hoped and the mine is shut down. As an example,
the Montana Directory of Mining Enterprises has placer mines listed
according to whether they're producing, developing, inactive or their
status is unknown. Of the 38 mines listed in 1983 directory, 55% were in
IV-7
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the developmental stages, 13% were producing, 18% were inactive, 11% were
both producing and developing the claim and 3% were of unknown status. The
directory listed each mine's status at the time the information for the
directory was gathered; unfortunately, the state of operation for each mine
likely did not stay the same throughout the season.
The Agency plans additional effort to acquire more reliable sources and to
further identify operating mines between proposal and promulgation of this
regulation.
1. Alaska
a. Number and location of mines
Alaska has the largest number of placer mines in the United States. EPA's
Region X office estimated that there were approximately 304 active placers
in this state in 1984. The estimated range was 249 mines (the number of
actual discharge permits issued) to 700 mines (Table IV-4), the actual
number of mines is hard to estimate due to the state's size and to the
remote location of many of these mines. Additionally, the number of
operating mines fluctuates greatly depending on the price of gold and
operating conditions. We used the EPA Region X estimate (304 mines) in
this report's analysis since current economic conditions would indicate the
number of mines operating is not likely to increase appreciably since last
season.
According to information obtained from the U.S. Bureau of Mines in Juneau,
Alaska, most of Alaska's placer mines are located in the central part of
the state between Fairbanks and Anchorage and a large number are located
along the Yukon River and its tributaries. The placer producing areas of'
Alaska are shaded in the map shown in Figure IV-1.
Most Alaskan placer mines use open-cut methods; however, there are at least
three known dredges currently operating in this state.
IV-8
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Table IV-4. Number of mines by state
Estimated I/
number of
Estimated range of
number of mines
State
Alaska
Idaho
Oregon
Montana
California
Colorado
South Dakota
Wyoming
Washington
Utah
Nevada
New Mexico
Total
mines
304
69
49
57
26
13
18
8
16
5
3
0
568
Low
249
29
25
46
NA
4
NA
NA
1
NA
0
NA
411 2/
High
700
109
72
68
NA
21
NA
NA
31
NA
6
NA
1,064 y
NA = Not available.
_!/ See text for discussion.
2/ Includes average number of mines for California, South Dakota, Utah
and Wyoming.
IV-9
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Arctic^ Ocean
REGIONS
I Northarfi
II Wvtam
III Eattora Imanor
IV Southwestern
V South-centre)
wi AluKa Peninutia
A Kodiak
VII Soutttwncm
Figure IV-1. Location of placer mining areas (shaded) in Alaska
-------
b. Employment
The U.S. Environmental Protection Agency Region X study (1983) estimates
that the 304 active mines in Alaska employ approximately 1,153 persons.
Based on employment and production information found in EPA (1984) and in
the Region X study, we developed the employee number distribution shown in
Table IV-5. As can be seen, the smallest mine size grouping (typically
mines with two employees) has the largest number (110) of mines and
represents a total of approximately 240 employees. The largest mine size
grouping (typically mines with six employees) represent 67 mines with a
tota"; of over 436 employees.
I :
c. Mine size
The size of a placer mine can be difficult to define. For other
industries, revenues are often used as a proxy for size; however, because
gold recovery rates can differ significantly from one placer mine to
another, revenues often are not a true indicator of size. Consequently,
number of employees or volume of gravel washed per year or day are often
used. Both can be misleading as well, depending on the efficiency of the
crew working at the site, the water flow rate through the sluice, the
configuration of the site itself, the type of placer material found there,
the types of classification equipment used and the sluice size.
A size distribution by number of employees was already presented in the
preceding section. A distribution by amount of gravel washed is difficult
to obtain because-miners guard this information closely. However, Louis
Berger & Associates (1983), in its survey of 127 mines, was able to obtain
this type of information. Many (46%) of the mines in the survey processed^
less than 500 yd3 of gravel/day. Only 11 percent were able to process more
than 2,000 yd3/day.
Based on the Louis Berger Associates (1983) information we developed the
mine size information, shown in Table IV-6, which corresponds to the models
used in the economic impacts section of this report. An estimated 110
mines make up;the smallest size grouping (21-349 yd3 of gravel/day), 68
IV-11
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Table IV-5. Number of mines and employees by mine size for Alaska
Typical
number of
empl oyees
2
3
4
6
Total
Number of
mines
110
68
59
' 67
304
Total number of
employees per size group I/
240
221
256
436
1,153
I/ Adjusted to equal 1,153 employees.
Source: EPA estimates based on information found in EPA (1984) and EPA,
Region X (1983) reports.
IV-12
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Table IV-6. Mine size distribution for Alaskan placer mines
Gravel processed/day Number
(yd3/day) of mines
21 - 349
350 - 749 68
750 - 1,499 59
>1,500 67
304
Source: EPA estimates based on information from Louis Berger Associates
(1984).
IV-13
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mines are in the next smallest size grouping (350-749 yd3/day), 59 mines
make up the medium category (750-1499 yd3/day) and 67 mines are in the
largest size group (>1500 yd3/day). Operations processing 0-20 yd3/day are
considered recreational/assessment mines and are not covered by this
analysis, since they are not in the scope of the proposed regulation.
d. Production
Since the early 1970's, there has been a resurgence of placer' mining in
Alaska due to rapid increase in gold prices during this period. Completion
of the Alaskan pipeline, during this sairie time, provided individuals with
access to a wide variety of used earth moving equipment, skilled operators,
and sources of funds that could be easily used to start a placer operation.
New operations were started and abandoned mines were reopened (EPA, 1984).
Table IV-7 shows the placer mining growth in Alaska from 1979 to 1983.
Gold production during this period increased by 157 percent. The high
(174,900 t oz) for this period occurred in 1982. Production decreased
somewhat in 1983 to 167,000 t oz. We valued production levels by
multiplying them by the average gold price for the appropriate year. These
valuations are also shown in Table IV-7. Since 1979, the value of Alaskan
placer gold production has increased by 250% going from $20 million in 1979
to $70.8 million in 1983.
2. Idaho
a. Number of mines and their location
EPA (1985) found 29 active placer mines in Idaho based on water permits.
Information, obtained from the Idaho Office of Lands and Mine Safety and
from the Denver Office of the Mine, Safety and Health Administration
(MSHA), shows 80 additional mines. We do not know which of these mines are
actually operating. Thus, Idaho likely has between 29 and 109 mines. It
is possible that Idaho monitors the number of mines better than other
states and there are 109 mines. However for this study, we chose the mid
point (69 mines) of the range as the number of mines in this state.
IV-14
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Table IV-7. Amount and value of Alaska's placer
gold production
Average Estimated
Year
1979
1980
1981
1982
1983
Production 11 gold price 2/ value 3/
(troy ounces) ($/
65,000
75,000
134,000
174,900
167;,000
troy ounce) I -Mm i . ;
308 20.0
613 46.0
460 61.6
376 65.8
424 70.8
I/ EPA, 1984 (from data provided by Alaska Department of Commerce and
Frnnnmir Dovel eminent . Review of Alaska Minerals Resources, 1981 and
Alaska Minerals Industry, 1982 Specia
Report 31).
2/ The average gold price (Table V-l, Engelhard, Industries) for the
year.
3/ Production volume x average price.
IV-15
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Those Idaho counties with placer mines are shown in Figure IV-2. Three of
these counties - Idaho, Lemhi and Boise - each have ten or more placer
mines located in them. Research conducted by EPA (1985) indicates that
over 50 percent of Idaho's active placer mines are located in Idaho county.
b. Employment
Due to information included on state mine permit applications, we were able
to obtain employee data for 55 of the mines obtained from the Idaho
Department of Lands and Mine Safety and the MSHA. Table IV-8 shows the
distribution developed from this information. As can be seen, most (56%)
of these mines have 1 to 2 employees. None have more than 12 employees.
The average for the 55 mines is 3.3 employees.
c. Mine size
Mine permit information can be used to get an idea of size distribution for
the Idaho mines. Only 39 mines had information on the amount of gravel
washed per hour. A distribution based on this information is shown in
Table IV-9. As -can be seen, for those mines providing this information, 51
percent washed between 0 and 20 yd3/hr. The average for this distribution
is 30.3 yd3/hr owing to a number of very large mines at the other end of
the distribution.
For 25 of the Idaho mines, we have information on the amount of gravel
washed per day. Table IV-10 presents this information. Twenty percent of
these mines washed more than 800 yd3 of gravel per day; however, 36 percent
of the mines process 200 yd3 or less per day. Sluicing levels ranged from
36 yd3 to 4,800 yd3 of gravel per day. According to research by EPA (1985)
on these 25 mines, most use open-cut methods employing bulldozers,
front-end loaders, backhoes and draglines. Three of these mines are
large-scale dredging operations. One uses a dragline to feed a floating
wash plant and processes between 800 and 1,000 yd3 of gravel per day. The
other two dredges (one of which is a suction dredge) process 800 yd3 of
material per day.
IV-16
-------
Figure IV-2.
Map of counties located in Western states that
contain gold placer mines
Counties-with 1 to 9 gold placer mines.
X
Counties with 10 or more gold placer mines,
IV-17
-------
Table IV-8. Distribution of number of employees
for Idaho mines
Number of
employees
1-2
3-4
5-6
>6
Total
Number of
mines
31
15
5
4
55
Percent of
total
56
27
9
8
100
Source- This distribution is based on information from the Mine Safety
and Health Administration and from the Idaho Department of Lands
and Mine Safety.
IV-18
-------
Table IV-9. Size distribution of Idaho mines based on cubic yards
of material washed per hour
Gravel washed
(yd'/nr)
0-20
21-50
51-80
>80
Total
Number of
mines
20
13
5
_1
39
Percent
51
33
13
_3
100
Source: EPA developed this distribution based on permit information
obtained from the Idaho Department of Lands and Mine Safety.
IV-19
-------
Table IV-10. Distribution of gravel washed per day for 25 Idaho
mines obtained from water effluent permits
Gravel washed
(ydVday)
0-200
201-500
501-800
>800
Total
Number of
mines
9
7
4
_5
25
Percent
36
28
16
20
100
Source: EPA Development Document, 1985.
IV-20
-------
d. Production levels
Presently, there is not any information available on the amount of placer
gold produced in Idaho. However, data are available on overall gold
production (i.e., production including both lode and placer gold) for the
state. Gold has been produced in this state since at least 1863 when
records start. Figure IV-3 shows Idaho gold production from 1863 through
1977. As can be seen, production levels (approximately 325 to 400 thousa.nd
t oz) were the highest from the mid 1860's to the mid 1870's. From this
time to approximately 1915, gold production ranged from about 50 to 125
thousand t oz. From 1915 to 1930, production levels were below 50 thousand
t oz. Production levels peaked again in the late thirties and in the late
forties. Since the early fifties, gold production levels for Idaho have
been primarily below 15 thousand t oz.
3. Oregon
EPA (1985) estimates there were 25-50 mines' in Oregon irv 1984. However
based on information obtained from Oregon Geology and from the Oregon
Department of Environmental Quality, we obtained an estimate of 72 placer
mines in Oregon. Thus, the number of mines in this state is likely between
25 and 72. For this report, we chose this range's mid-point, 49 mines, as
the number of mines in this state.
Figure IV-2 (page IV-17) shows those Oregon counties which contain placer
mines. Three counties Jackson, Baker and Josephine -- each contain ten
or more placer mines.
No information is presently available on the size of Oregon mines.
Employment and production information are unavailable as well.
IV-21
-------
Figure IV-3. Annual gold production in Idaho 1963 through 1977.
400
350
Is ||1
it I! I
s **
1ป70
iua ino laoa
1920 1930 19*0 1930 1980 1970 1980
Source:
EPA Development Document, 1985. The sources listed on this
figure are as follows: Data for 1863-1942 from Staley (1946)
and for 1943-1977 from the U.S. Bureau of Mines, Minerals
Yearbook 1943-1977.
IV-22
-------
4. Montana
a. Number and location of mines
Based on water discharge permits, EPA (1985) estimated that there were 46.
mines in Montana during 1984. We found additional information on 32 mines
from the MSHA. Comparing the two listings of placer mines, we found that
only 10 of the mines were common to both lists. Thus, because of the
reliability of permit data, we know there are at least 46 mines in this
state. By adding to this number the 22 mines from MSHA data which did not
have a water discharge permit, we obtained the upper limit, 68 mines, for
the range shown in Table IV-4 (page IV-9). We chose this ranges' midpoint,
57 mines, as the estimate of the number of mines in this state. The
counties these mines are located in are shown in Figure IV-2 (page IV-17).
b. Employment
Employment information was available from the MSHA for 32 of the placer
mines known to presently exist in Montana. The size distribution developed
from this information is shown in Table IV-11. Sixty-eight percent of the
mines have 4 or less employees and none have more than 10 employees. The
average number of employees for these mines is 3.7.
c. Mine size
Size information on the amount of gravel processed per day was available
for 42 of the mines obtained from water discharge permits. This
information is shown in Table IV-12. As can be seen, the majority of these
mines (55%) wash 100 yd3 per day or less.
IV-23
-------
Table IV-11. Distribution of number of employees for
Montana placer mines
Number of
employees
1-2
3-4
5-6
>6
Total
Number of
mines
11
11
6
4
32
Percent
34
34
19
13
100
Source- This distribution is based on information provided by the Denver
office of the Mine, Safety and Health Administration.
IV-24
-------
Table IV-12. Distribution of the gravel washed per hour
from Montana water discharge permits
Mine size Number.of pprcent
(ydVday) mines Percent
0 - 100 23 55
101 - 200 5 12
201 - 300 7 ' 17
301 - 800 7 16
>801 _0 $
Total 42 1QO
Source: EPA Development Document, 1985.
IV-25
-------
d.
Published information available on placer gold production in Montana is
contained in the 1982 edition of the U.S. Bureau of Mines publication which
says that 8 t oz of placer gold were produced in this state. We know this
is a vast understatement because we have survey information on three
Montana placers and these mines together produced 5,460 t oz of gold in
1984. According to the Montana Bureau of Mines and Geology there were at
least as many mines operating in 1982 as there were in 1984.
5. California
a. Number and location of mines
The information we have on placer mines in California in 1984 comes from
MSHA, which indicates there were 26 known placer mines in California in
that year. California Publication 167 indicated that there were 32 mines
in 1983. We suspect both are underestimates because California has had
more placer claims (45,101), than any other continental U.S. state, filed
with BLM since 1976. Additionally, according to U.S. Bureau of Mine
Information, this state is second only to Alaska in placer gold
production. I/ We used the more current number of 26 mines for this
analysis.
The location of placer mines by county is shown in Figure IV-2 (page
IV- 17).
b. Employment
Employment information was available for only 14 of the 26 mines reported "
in California. A distribution for this information is shown in Table
IV-13. As can be seen, the 3-4 and 5-6 employee size categories account
I/ This production information dates prior to the opening of the Yuba
Dredge. Thus, the large amount of gold produced by this operation
would not account for the reported large production for placer mines,
IV-26
-------
Table IV-13. Distribution of number of employees per
mine for 14 California placer mines
Number of employees
1-2
3-4
5-6
>6
Total
Number of mines
2
4
. 4
4
14
Percent
13
29
29
29
100
Source: Mine, Safety and Health Administration, 1984.
IV-27
-------
for almost 60 percent of the mines. One placer operation, the Yuba dredge,
has 75 employees and is the largest mine presently operating in the United
States.
c. Mine size
No information is currently available on the sizes of placer mines in
California except for the Yuba dredge. The estimated annual capacity for
this dredge is 4.5 million cubic yards, with actual production, for 1984,
of about 2.6 million cubic yards.
d. Production
Information on overall placer gold production in California is available
from the U.S. Bureau of Mines publication the Minerals Yearbook. Although,
an underestimate, it is presently the best information available.
Year Amount
(t oz)
1978 3,559
1981 2,225
1982 7,798
Data for 1983 and 1984 are currently unavailable, but it is known that the
Yuba Dredge produced 16,000 troy ounces of gold in 1984.
6. Colorado
According to permit information presented in EPA (1985), there are 4
Colorado placers with discharge permits. Based on information obtained
from the MSHA and the Colorado Division of Mines, we estimated that there
were 18 mines in Colorado. Only one mine was common to both the permit
list and our list. Thus, there are likely between 4 and 21 (i.e., 4 plus
IV-28
-------
17) placer mines in Colorado. For this 'study, 13 mines, the mid-point of
this range, will be used as the estimate of the number of mines in this
state. The location of these mines by county is shown in Figure IV-2 (page
IV-17).
Employment information was available for 14 Colorado placer mines. Table
IV-14 shows the distribution developed from this information. Forty-four
percent of these mines have 3-4 employees and 21 percent have 1-2
employees. This agrees with information obtained for other states, in that
the majority of mines appear to have 4 or less employees. The mean for
this distribution is 5.3 employees.
There is very little data available on the size of placer mines in
Colorado. Such information, from the Colorado Division of Mines, was
available only on the amount of gravel processed for two of the mines. One
processes 500 tons of gravel per hour and the other processes 300 tons per
hour.
The permit information provided production information on three of the
mines.
Mine Production (Yd3/day)
1 100-150
2 150
3 >135
No information is available on the production level of Colorado placer
mines. '
7. South Dakota
Based on information from MSHA and from the South Dakota Explorational
Mining program combined, there were 18 placer mines in South Dakota in
1984.
IV-29
-------
Table IV-14. Distribution of the number of employees
per mine for 13 Colorado mines
Number of employees
Number of mines
Percent
1-2
3-4
5-6
>6
Total
3
6
2
_3
14
21
44
14
21
100
Source: Mine Safety and Health Administration.
IV-30
-------
The location of these mines by county is shown in Figure IV-2 (page IV-17).
No information was available on the employment and size of these mines. No
placer gold production information is available for South Dakota.
8. Wyoming
Based on mine permit information from Wyoming, there are approximately 8
known placer mines in this state. The location of these mines by county is
shown in Figure IV-2 (page IV-17).
The only size information available for the eight Wyoming placers, on the
mines' operating permits, was the area occupied by the mines. The sizes
are shown below:
Size : Number of mines
(acres)
: l 1
.40 2
: 60 2
925 1
480 1
640 1
Neither employment nor production information was available for these
mines.
9. Washington
The MSHA reported only one mine for Washington in 1984. It is located in
Kittitas County and has one employee. No size information is available for
this mine. EPA (1985) reported that there were 30 placer mines in this
state in 1983. No additional size information was available for these
mines. Placer gold production information is not available for this state.
We chose the mid-point, 16 mines., of the range as the estimate of the
number of mines in this state.
IV-31
-------
10. Utah
According to information obtained from the MSHA there are at least 5 placer
mines in Utah. The location of these mines by county is shown in Figure
IV-2 (page IV-17). These mines have 2 to 9 employees, with an average of 5
employees. No additional information is available for these mines.
11. Nevada and New Mexico
Both Nevada and New Mexico have had placer mines in .the past. However, no
placer mines were in operation during 1984 according to both state mining
agencies, their state geologists and the MSHA. EPA (1985), estimates six
placer mines for Nevada, so we chose the mid-point (3 mines) between zero
and six mines as the estimate of the number of mines in this state. Past
production information was not available for either state.
IV-32
-------
V. MARKET PROFILE
This chapter gives an overview of the placer gold market and the factors
affecting gold supply and demand. Then the ability of gold placer miners
to pass-through the costs of effluent regulations to the market in the form
of price increases is discussed.
A. Market Description
Placer miners generally have two options for selling their gold. Most
Alaskan placer gold is sold for further processing primarily to one buyer.
It .is generally purchased at the spot price, minus the smelting fee.
Nuggets may also be sold directly for jewelry-making at a higher price than
can be obtained for gold which will be processed. Naturally, price
variations occur depending on gold quality and nugget size. About 5 to 10
percent of the placer gold mined in Alaska is sold in this unprocessed
form. The market for nuggets sold directly to jewelers in the continental
U.S. is thought to be somewhat smaller.
B. Factors Affecting the Gold Supply
Sold production is primarily influenced by three factors: new discoveries,
technological changes, and the price of gold.
1. New Discoveries
Gold production has historically been most affected by new discoveries of
gold. While new gold discoveries continue to occur, the gold supply has
recently been more affected by technological advances and the price of
gold.
V-l
-------
2. Technological Changes
Gold recovery methods have improved during the last fifty years, making it
possible to work gold-bearing mineral deposits which could not be mined
earlier. The introduction of lighter diesel engines during the 1930's made
it possible to utilize diesel-powered bulldozers, draglines and pumps in
open-cut placer mining operations. In addition, portable steel sluices
which replaced wooden sluices also increased gold-recovery efficiency.
3. Price of Gold
The price of gold has always been an influential factor in gold production.
Prior to deregulation in 1971, the price of gold remained steady at $35.00
per troy ounce. Since that time, gold prices have been set by the market,
resulting in daily fluctuations and renewed interest in gold placer mining.
Fluctuating gold prices are the result of'many factors, including inflation
and changing world events. As inflation stabilizes or decreases, gold
prices trend downward since many investors use gold as an inflationary
hedge. Likewise, other indicators of decreasing inflation, such as
stabilized oil prices or a strong U.S. dollar, can reduce the price of
gold.
As noted on Table V-l, gold prices have varied greatly from 1971 through
1984, with the highest prices occurring in 1980, and the lowest prices
occurring in 1971. The average 1984 price was $360.10 per troy ounce.
Monthly gold spot prices during 1984 are shown on Table V-2. EPA
used a rounded off spot price of $360.00 per troy ounce for 1984 for the
financial and economic analysis presented in Chapters VII and VIII. In
Chapter X however, the analysis was performed at other gold prices to
analyze the effect of such fluctuations on the study's result.
The actual price paid to miners selling placer gold for fabrication
purposes is the spot price minus the smelting fee. The smelting fee in
1984 was three percent of the total revenue generated from multiplying the
. V-2
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V-3
-------
Table V-2. 1984 Monthly gold spot prices
Month
January
February
March
Apri 1
May
June
July
August
September
October
November
December
(Dollars per troy ounce)
370.60
387.00
394.80
381.40
377.70
374.80
345.90
348.80
341.10
339.80
341.00
329.80
Source: Comex, Inc., New York.
V-4
-------
spot price times the amount of gold produced. Gold nuggets which are sold
directly to jewelers usually bring a much higher price, depending on nugget
size and quality. Nugget prices range from $10 - $150 per troy ounce plus
the spot price, according to the Alaskan Mining Bureau. As mentioned
earlier, the market for gold nuggets sold directly to jewelers is fairly
small in Alaska, comprising only 5 to 10 percent of total production. This
market is even smaller in the continental U.S.
Gold production does not respond immediately to price changes. It is
estimated that price changes do not significantly affect gold production
for three to five years. Production decisions are not altered immediately
after continual price drops because many miners will simply retain their
gold until the price rises again.
C. Factors Affecting Gold Demand
The gold market is also affected by the demand for gold. There are four
groups which consume most of the gold produced: jewelry and arts,
industrial (including space and defense), dental, and investors. Table V-3
shows U.S. gold consumption by end use for the period 1975-1983, and the
first three quarters of 1984.
The largest use for gold is in jewelry and arts. Some placer gold goes
directly to this industry in an unprocessed form, depending on the size and
artistic quality of the nugget.
The industrial sector is the second largest consumer of gold. This sector
uses gold extensively since it satisfies specific requirements which cannot
be achieved by substitute metals. High gold prices have restricted
applications in recent years, and the largest industrial consumer, the
electronics industry, has been forced to use gold alloys to economize gold
consumption.
V-5
-------
Table V-3. U.S. gold consumption, by end use (thousand troy ounces) If
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
Jewelry
and arts
2,080
2,562
2,658
2,651
2,688
1,505
1,730
1,954
1,668
3/ 1,291
Industrial
1,059
1,233
1,209
1,313
1,406
1,287
1,210
1,102
1,028
817
I/ Gold consumed in fabricated
bullion.
y
3/
Fabricated
First three
bars, medallions
Smal 1
items for Total
Dental investment 2/ consumption
595
694
728
706
646
341
314
358
360
274
products only.
, coins, etc.
258
159
268
68
45
82
22
9
4
2
Does not
3,993
4,648
4,863
4,738
4,785
3,215
3,276
3,423
3,060
2,384
include monetary
quarters of 1984.
Source: U.S. Department of the Interior, U.S. Bureau of Mines. Various
Years. Minerals Yearbook. Washington, D.C.: U.S. Government
Printing Office.
V-6
-------
Dentistry is the third industry which consumes gold. Gold is utilized in
this profession for restorative and decorative purposes. As noted on Table
V-3, consumption in this industry declined significantly in 1980-1983
perhaps as a result of the worldwide recession.
Because gold appreciates during certain periods of time, it is held by some
individuals and institutions for investment purposes. Periods of high
inflation, political instability, and high interest rates increase the
demand for gold for investment purposes, since the value of gold does not
depreciate as quickly as the value of money. This is reflected in Table
V-3, iv;,ich shows that consumption for investment purposes fluctuates more
than consumption for other end uses.
D. Price Pass-Through
Gold is an internationally traded commodity and as such the price is not
influenced by any single producer. Due to the small amount of gold
produced by gold placer mines it is doubtful that miners would be able to
pass on increased production costs to the market or consumers. Therefore,
increased mining costs for treatment control would cause a reduction in the
earnings and profitability of the mines and possibly the shut-down of
mines.
V-7
-------
-------
VI. COST OF COMPLIANCE
The wastewater treatment processes, options, costs, and effluent
limitations for the gold placer mining industry are provided in the EPA,
Development Document for Proposed Effluent Limitation Guidelines and
Standards of Performance for the Gold Placer Mining Point Source Category
(1985). This document identifies various characteristics of the industry
including the type of mining, ore processed, gold production, water usage,
and sources and constituents of wastewater. This information serves as the
basis for establishing the effluent limitations, the recommended treatment
systems, and their costs. This chapter provides a summary description of
the wastewater treatment processes, the recommended pollution control
technologies, and their associated costs.
A. Control Treatment Options
EPA considered four wastewater treatment processes as the basis for
establishing the BPT, BCT and BAT effluent guidelines. The wastewater
treatment processes studied were:
Primary settling
Secondary settling
Flocculant (polyelectrolyte) addition
Recycle.
These processes were used in the following four treatment options:
Option 1 - Six (6) hours primary settling,
VI-1
-------
Option 2 - One (1) hour primary settling, 80 percent recycle followed by
six (6) hours secondary settling for remaining 20 percent of
flow,
Option 3 - One (1) hour primary settling, 80 percent recycle followed by
flocculant addition and secondary settling of remaining 20
percent of flow, and
Option 4 - Six (6) hours primary settling and 100 percent flow recycle.
Table VI-1 provides a summary of the four treatment options.
Treatment options for the few large mechanical dredges operating in the
U-.S. were not developed since those dredges tested were at zero discharge.
Also small recreational or assessment mines processing less than 20 cubic
yards per day of gravel are exempted from the regulation.
Currently, most placer mines have some type of settling pond in place and
are subject to state regulations and wastewater permits. In 1983,
approximately 82 percent of the Alaskan placer mines applied for wastewater
permits. Although mines may have ponds in place, this analysis considers
the total costs of the four treatment options since ponds must be rebuilt
every mining season and data on the characteristics and effectiveness of
existing ponds are limited.
B. Treatment Process Costs
The EPA has estimated capital and annual costs for wastewater treatment
processes at four Alaskan model placer mining facilities. The model sizes
are as follows:
VI-2
-------
Table VI-1. Wastewater treatment options
Option
1
2
3
4
Source:
Primary
settling
X
X
X
X
EPA, Development
Recycle Flocculant Seco
80% 100% addition sett
X
X X
X
Document for Proposed Effluent Limitation
Guidelines and Standards of Performance for the Gold Placer
ndary
;ling
X
X
Mining
Point Source Category, 1985.
VI-3
-------
Model size Range
Model yd3/hr sluiced yd3/hr sluiced
A 25 3- 34*
B 50 35- 74
C 100 75-149
D 180 >150
* Mines processing 0-2 cubic yards per hour (i.e., 0-20 cubic yards per
day) are considered recreational/assessment mines. No limitations are
developed for these mines for reasons presented in the Development
Document.
These model sizes are not to be perceived as absolute, but instead as
representative of a range of mine production levels. The compliance costs
for model mine A, for instance, are assumed to be reasonably representative
of mines processing up to 35 cubic yards per hour. Actual on-site
compliance costs will vary with the characteristics of the specific mine.
In addition, the following assumptions were applied:
1. Water application to the sluice was assumed at 2,000 gallons per
cubic yard.
2. Mines A and B sluiced 65 days per year 10 hours per day.
Mine C sluiced 75 days per year 10 hours per day.
Mine D sluiced 85 days per year 10 hours per day.
(See further discussion in Chapter VII.)
3. A 50 percent concentration of solids content in pond sludge.
Details of the assumptions regarding the costs, cost factors, and methods
used to derive the capital and annual costs are provided in the Development
Document. All costs are expressed in 1984 dollars.
The estimates were based on assumptions pertaining to system loading and
hydraulics, treatment process design criteria, and material, equipment,
manpower, and energy costs for the mining facilities.
VI-4
-------
For mines located in the continental U.S., one model size (Model E) of 50
cubic yards per hour was used to estimate capital and annual costs for
wastewater treatment options. Data authored by EPA engineers were used to
produce these costs, and the following assumptions were used.
1. Water application to the. sluice was assumed at 2,000 gallons per
cubic yard
2. Mines sluiced 88 days per year 8 hours per day.
(See further discussion in Chapter VII.)
3. A 50 percent concentration of solids content in pond sludge.
1. Primary Settling
Capital Costs. The required sizes of primary settling ponds were
determined by hydraulic loading and design data obtained during field
settling tests. Primary settling ponds were sized for each option based on
one hour and six hour detention times. All pond volumes include volume for
flow including 20 percent for freeboard and volume for sediment storage.
In all cases the depth of ponds was assumed at 12 feet. It is assumed that
a new pond would be built when the water depth above the sediment reached a
minimum of 3 feet.
The wastewater was assumed to flow to and from the ponds by gravity. In
all options having primary and secondary .ponds, it was assumed the four
primary ponds would be constructed each mining season at different
locations and that the spent ponds would not be refilled. Ponds having
three-hour detention time were considered since this detention time would
produce an effluent close to that of a six-hour detention pond.
The six-hour settling ponds were utilized when preparing the cost estimates
since the difference in cost for the six-hour and three-hour ponds is very
small and is within the cost estimating accuracy.
VI-5
-------
Annual Costs. Since the ponds will only be constructed for one mining
season the annual amortized cost was assumed to be the construction cost
for each pond.
2. Secondary Settling
Capital Costs. The required sizes of secondary settling ponds was
determined by hydraulic loadings and data obtained during field settling
tests. -Secondary settling ponds were sized for six hours detention time
based'on 100 percent and 20 percent of the total flow. The 20 percent
values reflect the amount of water that would be discharged under the 80
percent recycle options.
All pond volumes allow for a safety factor and sediment storage. In all
cases, the water depth was assumed at 12 feet plus 20 percent of flow
volume for freeboard, which includes the volume required for sludge
storage.
The wastewater was assumed to flow to and from the ponds by gravity. One
secondary pond would be constructed during the mining season.
Annual Costs. Since the ponds will only be constructed for one mining
season the annual amortized cost was assumed to be the total construction
cost for each pond.
3. Flocculant Addition
Capital Costs. Capital costs were estimated for flocculation systems
consisting of a metering pump mounted on a drum of diluted polyelectrolyte.
A single sized system was used for all mine sites which includes the
flocculant supply system and generator to run the systems. This system has
an installed cost of $3000. A flocculant dosage of 2 parts per million was
used.
VI-6
-------
Local electrical and piping connections were included in the cost
estimates.
Annual Costs. Amortization of capital cost for flocculation systems
assumed a 15 percent annual interest rate with life expectancies of five
years for construction (CRF = 0.29832).
Additional costs were estimated as follows: annual maintenance as three
percent of capital costs; chemicals at a price of $2.50 per pound for
polymer.
4. Recycle
Capital Costs. Cost estimates were prepared for installation of systems to
provide for 80 and 100 percent recycle of wastewater. Recycle is
accomplished by pumping the primary pond effluent wastewater to the
sluicing operations for reuse. Any quantity greater than the recycle rate
would overflow the primary pond and flow to a secondary pond. In preparing
the cost estimates 50 percent recycle was considered. Due to the accuracy
of the cost estimating the difference in cost for the equipment to recycle
50 percent of the low or more is minimal, therefore the costing for 80 or
100 percent recycle can be utilized for any recycle percentage above 50.
Recycle pumps are horizontal centrifugal type complete with diesel engines.
The pumps are normally supplied as a package which include the pump, engine
and drive and are skid-mounted. The estimated cost included pump piping
and valves.
Pumping equipment costs were based on vendor quotations. Local piping,
valves, and fittings were costed based on vendor definition and costing
methodology.
Pumping equipment selection was based on hydraulic flow requirements
assuming a 75 feet total dynamic head requirement.
VI-7
-------
Total Capital cost estimates induced pumps, diesel engines, drives,
piping, valves, fittings, installation, and engineering and contingencies
(at 20 percent).
Annual Costs. Annual costs for wastewater recycle systems were assumed to
~T^h7f ol lowing: (1) amortization calculated at 15 percent annual
interest over five years for equipment (CRF = 0.29832), (2) annual
roaintenance at 3 percent of total capital costs, and (3) fuel computed at
$1.75 per gallon.
C. Estimated Compliance Costs
1. Annual Costs
Table VI-2 shows the annual compliance cost and the compliance cost per
cubic yard for each of the wastewater treatment options and model mines.
These compliance costs show a wide variation among the proposed treatment
options. Annual compliance costs ranged from $8,000 for model mines A and
E option one, to $70,000 for Alaskan model mine D, option four.
Compliance cost per cubic yard ranged from $0.21 for Alaskan model mine D,
option one, to $1.24 for the Alaskan model mine A, option four.
2. Aggregate Industry Costs
The aggregate annual cost of implementing effluent guidelines by option
are summarized for each relevant state in Table VI-3. The aggregate annual
cost for the state of Alaska, was calulated by multipling the annual
compliance cost for each option and each model mine size by the number of
corresponding Alaskan mines. The total annual cost for each model size was
then added, to produce an aggregate cost for each option. The aggregate
annual cost for each state in the continental U.S., was determined by
multipling the annual compliance cost for model mine E under each option by
the respective number of mines in each state. The total annual cost for
all U.S. placer mines ranges from $6.9 million under option 1 to $17
million for option 4.
VI-8
-------
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VI-9
-------
fable VI-3, Aggregate effluent guidelines annual cost by
option and state in 1984 dollars
Aggregate annual cost I/
Options
State
Alaska
California
Colorado
Montana
Idaho
Nevada & New Mexico
Oregon
South Dakota
Utah
Washington
Wyoming
Total
No. of mines
304
26
13
57
69
3
49
18
5
16
8
568
1
4,808
206
103
452
548
24
389
143
40
127
63
6,903
2
9,131
538
269
1,179
1,427
62
1,013
372
103
331
165
14,590
3
$000
9,869
584
292
1,281
1,551
67
1,101
404
112
360
180
15,801
.
4
11,035
590
295
1,295
1,567
68
1,113
409
114
363
182
17,031
I/ Aggregate costs were derived by multiplying the number of mines in
~ each state by the compliance costs for each model.
VI-10
-------
VII. REPRESENTATIVE FINANCIAL MODELS
According to EPA estimates, the U.S. gold placer mining industry, as
pertains to the proposed regulation, was comprised of approximately 568
mines in 1984. Slightly over half (304) of the mines were located in
Alaska. These totals do not include the large number of recreational or
small-scale operations which occur in many states. No effluent limitations
are proposed for these mines. This section is concerned with the
presentation of financial models representative of the mines for which
effluent limitations are proposed and which differ according to ownership,
size and location. The use of models is necessary due to the large number
of mines and the lack of mine-specific financial data. These models have
been developed from data collected on EPA site visits in 1983 and 1984,
industry contacts and published sources.
The models developed are for the 1985 mining season. Development of the
models is presented in Chapter II Methodology and the data sources and
calculations used are shown in Appendix A. This section presents a summary
of the operational and financial characteristics of the models. The model
mines described are considered to "baseline"; that is, reflecting industry
conditions before compliance with the regulations.
A. Sizes of Model Mines
Placer mines vary by operational and financial characteristics. Thus, the
models will not accurately depict the characteristics of each existing
mine. However, since various existing mines can be grouped into general
i
categories which reflect their processes and discharge methods, fairly
accurate models can be developed.
EPA ranked the placer mines by cubic yards of gravel washed per year and
per hour, by operating hours per year, water flow, number of employees,
types of equipment and revenues. From this ranking the most homogenous
VII-1
-------
group was determined to be cubic yards washed per year. The mine size in
cubic yards per hour was then calculated for the model mines based on a ten
hour day for Alaskan mines and an eight hour day for continental U.S.
mines. As with most other mine characteristics described in this chapter,
many mines operate more or less hours per day. The model sizes are as
follows:
No. of
Model Nines Yd3/hr sluiced yd3/hr sluiced
Alaskan mines
A 110 25 3 - 34*
B 68 50 35 - 74
C 59 100 75 - 149
D 67 180 >150
Continental U.S.
E 264 50 All sizes
* Mines processing 0-2 cubic yards per hour (i.e., 0-20 cubic yards per
day) are considered recreational/assessment mines. No limitations are
developed for these mines for reasons presented in the Development
Document.
There are diverse sizes of mines located in the continental U.S. but the
lack of detailed information allowed only one model size to be developed.
A relatively small operation was modeled since sources indicate that mines
in the lower states tend on average to be smaller than Alaskan mines. In
terms of other operational characteristics, the continental U.S. mines are
very similar to Alaskan mines.
B. Operational Characteristics
The operating characteristics for the model mines are presented in Table
VII-1 for Alaskan mines and Table VII-2 for the continental U.S. mine.
These characteristics were determined from the industry survey and
discussions with industry members.
VII-2
-------
Table VII-1. Financial profiles of Alaskan gold placer mines by size
(1984 dollars)
Revenue variables
Gold $/cubic yard
Gold oz/cubic yard
Gravel washed/day
Gravel washed/hour
Total sluice time hours
Gold production, ounces
Total revenues @ $360/oz,
800 fine = $288/oz
Operating & maintenance costs
Number of miners
Number of foremen
Alaska
Model A
$6.34
0.022
250
25
650
357.5
$102,960
2
0
Number of equipment operators 2
Number of laborers
Operating hours/day
Operating days/year
Total operating hours
Wages by type of miner
Foremen
Equipment operator
Laborer
Total wages
Non-wage labor cost
Equipment 0 & M cost
Fuel
Maintenance
Smelting fees
Total 0 & M cost
Net revenues from operation
Due to leasee @15% of Revenues
Debt Service @10% of Revenues
Equipment cost
Auxiliary Equipment @25%
Equipment cost
Net profit before taxes
Profit margin before taxes (%)
Economic analysis, baseline
Opportunity cost of capital
Economic profit (loss)
Adjusted profit margin
0
10
100
1,000
$0
$30,000
$0
$30,000
$10,000
$20,581
$6,720
$13,861
$3,089
$63,670
$39,290
$15,444
$10,296
$38,577
$ 9,644
($34,671)
(33.67)
$8,500
($43,171)
(41.93)
Alaska
Model B
$6.34
0.022
500
50
650
715
,$205,920
3
0
2
1
10
100
1,000
$0
$30,000
$10,000
$40,000
$15,000
$37,407
$17,368
$20,039
$6,178
$98,585
$107,335
$30,888
$20,592
$77,394
$19,349
($40,887)
(19.86)
$20,000
($60,887)
(29.57)
Alaska
Model C
$6.34
0.022
1,000
100
750
1,650
$475,200
0
2
2
10
110
1,100
$0
$33,000
$22,000
$55,000
$22,000
$47,081
$21,984
$25,097
$9,504
$133,585
$341,615
$71,280
$47,520
$95,297
$23,824
$103,694
21.82
$25,000
$78,694
16.56
Alaska
Model D
$6.34
0.022
1,800
180
850
3,366
$969,408
1
3
2
10
110
1,100
$22,000
$49,500
$22,000
$93,500
$33,000
$91,752
$46,480
$45,272
$19,388
$237,640
$731,768
$145,411
$ 96,941
$208,515_
$ 52,129
$228,772
23.60
$52,000
$176,772
18.24
VII-3
-------
Table VII-2. Financial profile of Continental U.S. gold placer mine
(1984 dollars)
Continental U.S,
Model E
Revenue variables
Gold $/cubic yard $6-34
Gold oz/cubic yard 0.022
Gravel washed/day 4ฐ0
Gravel washed/hour 50
Total .sluice time hours 700
Gold production, ounces 770
Total revenues @ $360/oz $221,/oO
Operating & maintenance costs
Number of miners 3
Number of foremen ฐ
Number of equipment operators 2
Number of laborers 1
Operating hours/day ฐ
Operating days/year 130
Total operating hours 1,040
Wages by type of miner
Foremen $0
Equipment operator $14,560
Laborer $6,240
Total wages $20,800
Non-wage labor cost $15,600
Equipment 0 & M cost $39,102
Fuel $14,880
Maintenance $24,222
Smelting fees $6,653
Total 0 & M cost $82,155
Net revenues from operation $139,605
Due to leasee 015% of revenues $33,264
Debt service @10% of revenues $22,176
Equipment cost $98,916
Auxiliary equipment 025% equipment cost $24,729
Net profit before taxes ($39,480)
Profit margin before taxes (%) (17.80)
Economic analysis, baseline
Opportunity cost of capital $18,000
Economic profit (loss) ($57,480)
Adjusted profit margin (25.92)
VII-4
-------
As shown on Tables VII-1 and VII-2, most Alaskan mines operate 100 to 110
days per year while continental U.S. mines may operate 130 days per year.
The number of operating days varies significantly depending on weather
conditions, equipment breakdowns and stage of mine development. The length
of the workday also varies greatly, and is assumed in this study to be 10
hours long. This number is intended to portray an average over the length
of the season.
At the beginning of the season mining equipment is brought in by road,
water or air. Actual mining begins as <->oon as the equipment and campsite
are set up. If sufficient pieces of earuhmoving equipment are available,
the overburden removal, gravel production, transportation of gravel to the
sluice box, the sluicing operations and disposal of tailings occur
simultaneously throughout the season. If not, the various stages in the
mining operations may have to be conducted sequentially.
The most important activity in placer mining is loading and feeding the
gravel through the sluice box (the sluicing time). This activity separates
the gold from the gold bearing gravel. For this analysis total sluice time
ranges from 650 hours per year for models A and B to 850 hours per year for
model D. It's important to note here that, while the models ostensibly
allow for 650, 700, 750, or 850 hours of sluicing, the equipment assumed to
be on hand has the capability to process far more material during these
hours than the size of the model would indicate. For instance, consider
model A, intended to portray an operation processing no more than 35 cubic
yards per hour. Specifications for a caterpillar D-6 bulldozer, the
earthmoving apparatus assumed to be employed at the mine, indicate it has
the potential to move as much as 100 cubic yards of material per hour, or
far more than the dimensions of the model. Obviously therefore, not all of
the 650 hours designated for "sluicing" is used to feed gravel through the"
washplant. It is assumed instead that the miner will be attempting at this
time to sluice as much as possible, but will also be occupied with
maintaining settling ponds and culverts, removing tailings, piles, etc.
The more important presumption 5s that he will be operating his D-6 Cat
VII-5
-------
continuously during this 650 hours, leaving a remainder of 150 equipment
hours from the total of 800 implied by the four month rental period
(monthly rental costs assume 200 hours of operation per month, and include
a guarantee protecting against extraordinary repairs for that period). The
remaining 150 hours (or approximately 15 days) is the period allotted for
stripping and clearing land, as well as initial pond construction.
Since the model accounts for only 800 hours of heavy equipment usage, yet
assumed a 1,000 hour (or 100 10-hr days) as the operating season, there is
^n additional 200 hours to be explained. This "downtime" is included to
represent days needed for transporting equipment to the site, repairing and
maintaining heavy machinery and shutting down operations during inclement
weather. The Agency realizes this "operating profile" varies tremendously
throughout the industry. Site-specific conditions and circumstances will
determine the time needed to perform the separate tasks involved with
developing a claim and running a mining venture. The profile described
here is meant to be "representative" and is open to comment.
A variety of methods are used to classify the gravel entering the sluice
to improve its efficiency. The types of classification equipment are
discussed in Chapter III. For the model mines we assumed the use of
grizzlies for model A and B and added screens for models C, D and E.
Gold recovery rates, assumed for the models to range from .015 to .025 troy
ounces per cubic yard of gravel washed, ranged widely in the survey data.
Miners are very sensitive about the disclosure of their gold recovery.
Gold nuggets are usually not taken to smelters and the miner can hold on to
the gold until prices improve or until money is needed. Thus this rate
will vary for actual mines from the values used in the analysis.
The number and types of equipment assumed to be employed at the model mines
are presented in Appendix A, Table A-4. Although similar equipment is used
at all actual mines, the types, age and physical condition vary
significantly. Many mines have numerous pieces of unused equipment on site
or use this equipment for parts. New equipment leasing costs were used in
VII-6
-------
the model mines which may, as noted earlier overstate costs. However many
equipment suppliers and operators reported most equipment, regardless of
age, required similar annual operating costs.
The number of employees per model mine ranges from two employees in model A
to six employees in model D. The number of miners per mine was determined
from the survey data and the judgement of EPA engineers.
C. Financial Characteristics
The model financial characteristics are also shown in Tables VII-1 and
VII-2 for Alaskan and continental U.S. mines, respectively. Revenues are
based on the gold production in ounces and the price of gold. The average
1984 gold price of $360 per ounce was used minus 20 percent penalty for
impurity. The gold recovery rate was set at .022 t oz/yd3 for the model
mines, as this rate was considered to be most representative of the
industry. Revenues range from $103 thousand for model A to $969 thousand
for model D with a recovery rate of .022 t oz/yd3.
Given a gold recovery rate of .022 t oz/yd3 financial (accounting) net
profits before taxes range from negative ($40,887) for model B to $229
thousand for model D. The profit margin before taxes for model B is
negative (19.9) percent and 23.6 percent for model D. The effects on
profits of a range of recovery rates (.015 + oz/yd3 to .025 + oz/yd3) is
presented in Chapter VIII. In comparison to model mine profitability
estimates using a .022 + oz/yd3 recovery rate, lode mines which are more
labor and capital intensive have averaged 25 percent on revenues for the
past five years and a 45 percent margin for one year has been reported.
Placer miners generally reported break-even with operating costs from $1.50
per cubic yard to $5 per cubic yard. Model D's cost per cubic yard is
approximately $3.87 per cubic yard which is within this range. The range
of gold recovery rates illustrates how profits depend on gold content in
payout. Most employees work on shares versus wages, as estimated for the
models. Thus wages may be understated.
VII-7
-------
One cost unaccounted for in the financial analysis is the cost or return on
the mine owner's capital. A proxy for the owner's opportunity cost was
estimated as shown in Table A-3. When this opportunity cost of capital is
subtracted from net profit, model A becomes unprofitable with a loss of
($43 thousand). The adjusted profit margin is reduced to negative (41.9)
percent. Models B and E also show a significant reduction in profits with
adjusted profit margins of negative (29.6) percent and negative (25.9)
percent, respectively. The effects of this adjustment on Model C and D are
not as significant.
Capital availability may be a problem for smaller mines which continue to
operate if owners have depreciated out original investment costs. These
owners consider their investment as sunk capital and believe the utility
value of continued mine operation is greater than the market or salvage
value of the equipment. For such mines the increased investment required
for effluent limitations may be difficult to obtain. However, to a great
extent the treatment options selected use the equipment already on site.'
Also, the attempt to obtain additional capital may be based on the owner's
desire to maintain the business for personal employment reasons rather than
on the expectation of a return on capital.
VII-8
-------
VIII. ECONOMIC IMPACTS
The purpose of this chapter is to describe the .various economic impacts on
the placer gold mining industry associated with the costs of the treatment
options described in Chapter VI. The economic impacts are discussed in
terms of the effects on prices, production, and employment as well as the
financial and economic effects and impacts on the balance of trade and new
sources. These impacts were projected using the methodology discussed in
Chapter II. The specific calculation of impacts are presented in Appendix
A. ,
A. Price Effects
An implicit indicator of expected cost effects attributable to the
imposition of wastewater controls is the amount of revenue increase
required to maintain a mine's profitability. Assuming production remains
constant, there is, in other words, a required price increase that must
occur if the mine is to remain at the same profit level after incurring the
expense of each treatment option. The Agency has calculated these price
increases based on a gold price of $360 per troy ounce (minus 20% due to
impurity). The figures are presented in percentage terms as treatment cost
as a percentage of revenues.
1. Required Price Increases
Table VIII-1 shows the effluent guidelines cost as a percent of model
placer mine revenues. Table VIII-1 reflects a. gold price of $360 per troy
ounce, the average for 1984. Thus, for example, an 8 percent increase in
price above the benchmark price of $360 per troy ounce is required to
maintain the same profit level of model mine A under option 1. The cost as
a percent of revenues ranges from a low of 3 percent for model D given
option 1-to a high of 20 percent for option 4, model A.
VIII-1
-------
Table VIII-1. Summary of effluent guidelines cost as a percent
of model placer mine revenues at a gold price of $360/troy ounce
(i.e., required price increases)
Cost as
a percent of revenues
Options
Models
Alaskan Mines
A
B
C
D
Continental U.S. Mine
E
Mine
size
(yd 3/hr)
25
50
100
180
50
1
8
5
4
3
4
2
(per
18
11
7
5
9
3
cent)
19
12
8
6
10
4
'20
12
9
7
10
VIII-2
-------
2. Expected Price Increases
Due to the small quantity of gold produced by placer mines, it is unlikely
that miners would be able to pass on increased production costs to the
market. Therefore, miners would not be able to recover pollution control
costs in the form of higher prices, but would be forced to accept reduced
earnings and profitability.
B. Financial and Economic Effects
Both financial and economic effects of implementing pollution controls were
analyzed to gain a greater understanding of affected gold placer mines.
The term "financial" effects is used here to mean simple accounting
impacts, or the profit/loss situation without accounting for opportunity
costs of capital employed at the mines.
1. Financial Effects
The financial profiles for the various'model gold placer mines are
presented in Chapter VII. The net profit before taxes and the profit
margin before taxes were calculated for each model mine under baseline
conditions and then for the four treatment options under four different
recovery rates. A review of the financial effects under baseline
conditions reveals a positive net profit and profit margin for mine D under
all recovery rates whereas model mine C has positive baseline figures for
those'recovery rates .010 or greater. However, model mines A, B, and E
show a negative net profit and profit margin for all recovery rates under
baseline conditions.
As indicated in Table VIII-2, accounting profit before taxes ranged from a
low of negative ($106,927) for model mine B under option 4 (with a recovery
rate of .015 t oz/yd3), to a high of $319,618 for model mine D under option
1, (with a recovery rate of .025 t oz/yd3). Table VIII-3 presents the
profit margin before taxes for model mines under baseline conditions and as
a result of applying pollution control options 1 through 4. The lowest
accounting profit margin before taxes, negative (104.73) percent, was
experienced by model mine A when employing option 4 (with a recovery rate
VIII-3
-------
Table VIII-2.
Net accounting profit before taxes for model mines
due to effluent guidelines
Recovery
rate
It oz/yd3)
Alaskan Mine
.015
.020
.022
.025
Alaskan Mine
.015
.020
.022
.025
Alaskan Mine
.015
.020
.022
.025
Alaskan Mine
.015
.020
.022
.025
Continnental
.015
.020
.022
.025
Baseline
A (25 yd3/hr)
(58,258)
(41,410)
(34,671)
(24,562)
B (50 yd3/hr)
(88,062)
(54,366)
(40,887)
(20,670)
C (100 yd3/nr)
(6,682)
72,158
103,694
150,998
D (180 ydVhr]
3,605
164,439
228,772
325,272
1
(61,401)
(44,553)
(37,814)
(27,705)
(91,520)
(57,824)
(44,345)
(24,128)
(12,507)
66,333
97,869
145,173
1
(2,049)
158,785
223,118
319,618
U.S. Mine E (50 yd3/hr)
(90,283)
(53,995)
(39,480)
(17,707)
(92,617)
(56,329)
(41,814)
(20,041)
Net profi
2
(71,624)
(54,766)
(48,037)
(37,928)
(104,001)
(70,305)
(56,826)
(36,609)
(29,278)
49,562
81,098
128,402
(22,344)
138,490
202,823
299,323
(105,362)
(69,074)
(54,559)
(32,786)
t before taxes
Options
3
($)
(73,149)
(56,301)
(49,562)
(39,453)
(105,856)
(72,160)
(58,681)
(38,464)
(32,013)
46,827
78,363
125,667
(26,569)
134,265
198,598
295,098
(107,153)
(70,865)
(56,350)
(34,577)
4
(73,521)
(56,673)
(49,934)
(39,825)
(106,927)
(72,601)
(59,122)
(38,905)
(36,264)
42,576
74,112
121,416
(39,174)
121,660
185,993
282,493
(107,394)
(71,106)
(56,591)
(34,818)
VIII-4
-------
Table VIII-3.
Accounting profit margin before taxes for model
mines due to effluent guidelines
Profit margin before taxes
Recovery
rate
(t oz/yd3)
Alaskan Mine
.015
.020
.022
.025
Alaskan Mine
.015
.020
.022
.025
Alaskan Mine
.015
.020
.022
.025
Alaskan Mine
.015
.020
.022
.025
Continental
.015
.020
.022
.025
Baseline
A (25 yd3/hr)
(82.99)
(44.24)
(33.67)
(20.99)
B (50 ydVhr)
(62.72)
(29.04)
(19.86) .
(8.83)
C (100 ydVhr)
(2.06)
16.70
21.82
27.96
D (180 ydVhr)
0,55
18.66 .
23.60
29.53
U.S. Mine E (5C
(59.71)
(26.78)
(17.80)
(7.03)
1
(87.47)
(47.60)
(36.73)
(23.68)
(65.18)
(30.89)
(21.54)
(10.31)
(3.86)
15.35
20.60
26.88
(0.31)
18.02
23.02
29.01
) yd3/hr)
(61.25)
(27.94)
(18.86)
(7.95)
2
(102.03)
(58.52)
(46.66)
(32.42)
(74.07)
(37.56)
(27.60)
(15.64)
(9.04)
11.47
17.07
23.78
(3.38)
15.71
20.92
27.17
(69.68)
(34.26)
(24.60)
, (13.01)
Options
^1
($) -
(104.20)
(60.15)
(48.14)
(33.72)
(75.40)
(38.55)
(28.50)
(16.44)
(9.88)
10.84
16.49
23.27
(4.02)
15.24
20.49
26.79
(70.87)
(35.15)
(25.41)
(13.72)
4
(104.73)
(60.55)
(48.50)
(34.04)
(75.71)
(38.78)
(28.71)
(16.63)
(11.19)
9.86
15.60
22.18
(5.93)
13.80
19.19
25.64 .
(71.03)
(35.27)
(25.52)
(13.82)
VIII-5
-------
of .015 t oz/yd3), while model mine D showed the highest profit margin
under option 1 conditions at 29.01 percent (with a recovery rate of .025 t
oz/yd3).
2. Economic Effects
By establishing a cost of capital benchmark to represent miners'
opportunity costs for each model mine, an economic analysis was produced
for each option consisting of the projected economic profit (loss) and an
sdju$uปd profit margin. Table VIII-4 shows the economic profit or loss for
model placer mines in the baseline case as well as under each effluent
treatment option for four different gold recovery rates. A loss was
experienced by model mines A and B in the baseline for each recovery rate,
and therefore pollution control options for these models also produced a
loss. For models C and D, however, an economic profit was realized under
all baseline conditions and all options with the exception of those
projections resulting from a recovery rate of .015 t oz/yd3. Projections
ranged from a low of negative ($91,174) for model D, option 4 (recovery
rate of .015 t oz/yd3) to a high of $267,618 for model D, option 1
(recovery rate of .025 t oz/yd3).
A review of the economic profit margin for each model under each option
reveals the same results in percentage terms. Model mines A and B had a
negative economic profit margin for the baseline case and all four options.
Model mines C and D basically showed positive profit margins, excepting
those projections based on a .015 recovery rate, ranging from negative
(18.91) percent for model mine C, option 4 (recovery rate of .015 t oz/yd3)
to 24.29 percent for model mine D, option 1 (recovery rate of .025 t
oz/yd3) (Table VIII-5).
C. Production Effects
This section discusses production under baseline conditions as well as the
effect on model mine production of the various treatment options.
VIII-6
-------
Table VIII-4.
Economic profit or loss for model placer mines
due to effluent guidelines
Economic profit (loss)
Recovery
rate
(t oz/yd*)
Alaska Mine
.015
.020
.022
.025
Alaska Mine
.015
.020
.022
.025
Alaska Mine
.015
.020
.022
.025
Alaska Mine
.015
.020
.022
.025
Continental
.015
.020
.022
.025
Baseline
A (25 ydVnr)
(66,758)
(49,910)
(43,171)
(33,062)
B (50 yd3/hr)
(108,062) (
(74,366)
(60,887)
(40,670)
C (100 yd3/hr)
(31,682)
47,158
78,694
125,998
D (180 yd3/hr)
(48,395)
112,439
176,772
273,272
U.S. Mine E (5
(108,283)
(71,995)
(57,480)
(35,707)
1
(69,901)
(53,053)
(46,314)
(36,205)
111,520)
(77,824)
(64,345)
(44,128)
(37,507)
41,333
72,869
120,173
(54,049)
106,785
171,118
267,618
0 yd3/nr)
(110,617)
(74,329)
(59,814)
(38,041)
2
(80,124)
(63,276)
(56,537)
(46,428)
(124,001)
(90,305)
(76,826)
(56,609)
(54,278)
24,562
56,098
103,402
(74,344)
86,490
150,823
247,323
(123,362)
(87,074)
(72,559)
. (50,786)
Options
3
($)
(81,649)
(64,801)
(58,062)
(47,953)
(125,856)
(92,160)
(78,681)
(58,464)
(57,013)
21,827
53,363
100,667
(78,569)
82,265
146,598
243,098
(125,153)
(88,865)
(74,350)
(52,577)
4
(82,021)
(65,173)
(58,434)
(48,325)
(126,287)
(92,601)
(79,122)
(58,905)
(61,264)
17,576
49,112
96,416
(91,174)
69,660
133,993
230,493
(125,394)
(89,106)
(74,591)
(52,818)
VIII-7
-------
Table VIII-5.
Economic profit margins for model placer mines
due to effluent guidelines
Recovery
rate
(t oz/yd*)
Alaska Mine
.015
.020
.022
.025
Alaska Mine
.015
.020
.022
.025
Alaska Mine
.015
.020
.022
.025
Alaska Mine
.015
.020
.022
.025
Continental
.015
.020
.022
.025
Baseline
A (25 yd3/hr)
(95.10)
(53.32)
(41.93)
(28.62)
B (50 yd3/nr)
(76.97)
(39.73)
(29.57)
(17.38)
C (100 yd3/hr)
(9.78)
10.92
16.56
23.33
D (180 yd3/hr)
(7.32)
12.76
18.24
24.81
U.S. Mine E (5
(71.62)
(35.71)
(25.92)
(14.17)
1
(99.57)
(56.68)
(44.98)
(30.94)
(79.43)
(41.57)
(31.25)
(18.86)
(11.58)
9.57
15.33
22.25
(8.18)
12.12
17.65
24.29
0 yd3/hr)
(73.16)
(36.87)
(26.97)
(15.10)
Economic
2
profit margin
Options
3
(percent)
(114.14) (116.31)
(67.60) (69.23)
(54.91) (56.39)
(39.68) (40.99)
(88.32) (89.64)
(48.24) (49.23)
(37.31) (38.21)
(24.19) (24.98)
(16.75) (17.60)
5.69 5.05
11.81 11.23
19.15 18.64
(11.25) (11.89)
9.81 9.33
15.56 15.12
22.45 22.07
(81.59) (82.77)
(43.19) (44.08)
(32.72) (33.53)
(20.15) (20.86)
4
(116.84)
(69.63)
(56.75)
(a so)
(89.95)
(49.47)
(38.42)
(25.17)
(18.91)
4.07
10.33
17.85
(13.79)
7.90
13.82
20.92
(82.93)
(44.20)
(33.64)
(20.96)
VIII-8
-------
1. Baseline Mine Profitability
Table VIII-6 summarizes placer mines projected to shut-down under baseline
conditions and as a result of effluent guidelines. Of the 568 mines in the
U.S., EPA estimates 178 mines or 31 percent would operate at a loss and
probably close in the baseline, given the average 1984 price of gold and a
gold recovery rate of .022 t oz/yd3. However this projection of shut-downs
is based on the assumptions and parameters employed in the model mine
analyses, and is intended as a generalized, worst-case assumption. Mines
owned by families which can reduce wages to members or mines that can delay
.equipment maintenance until gold prices increase are a few examples of
mines in this group that may continue to operate. A myraid of factors
exist which determine the profitability or unprofitability of a mining
venture. Many are site-specific or subjective in nature and are difficult
to capture in a model analysis. EPA is therefore not attempting to
"predict" profitability and shut-down, but indicate the likelihood or
probability of these conditions. Note also that shut-downs and
owner/leasee turnover among small operations such as these are a normal
result of low gold prices, given the nature of the industry.
Shut-downs in the baseline models would continue to be affected by
fluctuations in gold prices. A continued decline in gold prices could
produce closures in other mine sizes as well. New mine openings could also
be halted by declining gold prices.
' 2. Projected Mine Shut-downs
As noted on Table VIII-6, there are no estimated shut-downs resulting from
implementation of effluent guidelines, given the model mine structures and^
that the average gold price remains at $360 per troy ounce. Alaskan model
mines A and B were projected to close before the four pollution control
option costs were applied. Mines located in the continental U.S. were also
projected to close in the baseline. Again, variations in mine operating
characteristics and fluctuating gold prices would produce different
results.
VIII-9
-------
Table VII1-6. Summary of projected placer mine shut-downs due
to effluent guidelines
Number of
+
shut-downs
Options
Models
Alaskan
A
B
C
D
Mine
size
(yd Vhr)
Mines
25
50
100
180
Total
Number of
mi nes
110
68
59
67
304
Baseline
110
68
0
0
178
1
0
0
0
0
0
2
0
0
0
0
0
3
0
0
0
0
0
4
0
0
0
0
0
Continental U.S. Mines
E
Total U
50
.S. 568
264
568
*
178*
0
0
0
0
0
0
0
0
* Unknown percentage of these mines are closures in the baseline.
ฑ See text discussion. These projections are based on objective,
model-mine analysis. On-site characteristics of mines and miners may
cause actual number of shut-downs to differ.-
VIII-10
-------
3. Production Loss
Alaskan placer gold production would decrease an estimated ten percent as a
result of baseline model closures. Production loss resulting from
enforcement of effluent guidelines is measured in terms of days lost, on
Table VIII-7.
The number of production days lost ranged from 9.4 days for model mines A,
B or E given option 1, to 21.3 days for model mine D, option 2.
D. Employment and Community Effects
Direct and indirect employment losses due to mine shut-downs can result in
adverse community affects. As mentioned earlier, mine closures and
owner/leasee turnover occur naturally in this industry as a result of low
gold prices. The projected baseline closure of Alaskan model mines A and B
results in the loss of an estimated 461 jobs in Alaska. Job losses are
also likely to occur in the continental U.S. for mines in the same size
category. However, since data were not available for this size group, an
accurate estimate of the employment effects cannot be made.
E. Balance of Trade Effects
Implementation of pollution controls should likewise have no effect on the
U.S. balance of trade, since fluctuations in U.S. gold placer mine
production result in minimal changes in U.S. gold production.
F. New Source Impacts
The proposed effluent guidelines and associated technologies for new
sources are similar to those for existing sources. Since the new source
limitations would not create an additional cost for prospective new sites
or major modifications, the proposed regulations would not cause barriers
to entry.
VIII-11
-------
Table VIII-7. Production loss (days) for model placer mines
due to effluent guidelines
Models
Mine
size
Production loss
2
Options
Alaskan Mines
A
B
C
D
(yd 3/hr)
25
50
100
180
Continental U.S. Mine
E 50
9.4
9.4
13.3
15.7
9.4
-Number of day;
12.1
12.0
15.3
21.3
12.0
12.8
12.7
16.1
17.5
12.7
11.1
1 ' 1
16.0
18.9
11.1
VIII-12
-------
IX. SMALL BUSINESS ANALYSIS
Public Law 96-354, known as the Regulatory Flexibility Act, requires EPA to
determine if a significant impact on a substantial number of small
businesses occurs as a result of proposed regulations. If there is a
significant impact, the act requires that alternative regulatory approaches
that mitigate or eliminate economic impacts on small businesses must be
examined.
The Agency has chosen to define "small mines" as mines which process 50
cubic yards or less of sediment per hour. This would include all
recreational/assessment mining operations as well as mines represented by
models A, and to some extent B and E. The number of operations in scope of
this definition is unknown since no reliable estimate of the number of
recreational mines, either in Alaska or elsewhere, is available. The
number of mines represented by models A, B and E have been estimated to be
442 (see Chapter VII). Most of these, primarily those processing less than
500 cubic yards per day, are projected to be unprofitable in the baseline.
To assess the relative affect of the proposed regulation on this segment of
the industry, EPA computed the ratio of compliance cost to revenues for
"small" mines and compared it with the same ratio computed for larger
operations. Estimated revenues and compliance costs for all model mines
are presented in Chapters VII and VI, respectively. This small business
analysis employs these estimates developed for the models. Since EPA is
not proposing limitations for recreational/assessment mines (see
Development Document), compliance cost for these operations is zero.
Estimated revenues for a "representative" recreational/assessment mining
operation were calculated as follows:
IX-1
-------
Revenue variables Estimated value
Gold $/cubic yard $7.92
Gold oz/cubic yard ฐ-022
Gravel washed/day 15
Gravel washed/hour I-5
Total sluice time hours 30ฐ
Gold production, ounces 9-9
Total revenues @ $360/oz less 20% $2,851
The sum of uhis figure ($2,851) and the estimated revenues for models A, B
and E operations ($102,960 + $205,920 + $221,760) provides the denominator
for the annual compliance cost to revenues ratio for "small" mining
operations. The numerator is simply the annual compliance cost for the
models under each option, as presented in Chapter VI. Similarly the
denominator of the ratio computed for larger operations is the sum of
projected revenues for model mines C and D, while the numerator is the sum
of their compliance costs under each option. The results of this analysis
are presented in Table IX-1.
Cost of compliance as a percentage of revenues for small mines ranges from
5 percent for Option 1 to 13 percent for Options 3 and 4. The cost as a
percent of revenues for other mines ranges from 3 percent to 8 percent for
Options 1 and 4, respectively.
IX-2
-------
Table IX-1. Small business analysis-comparison of cost of compliance
to revenues for "small" mines versus other mines
Models
Small mines
Other mines
I/
y
t
1
5
3
2
12
6
Options
3
(percent)
13
7
4
13
8
I/ Small mines include recreational/assessment mines and model mines A, B
and E as discussed in the text. The total cost of compliance for this
segment is divided by total revenues as also presented in the text.
Revenues
Compliance
Options:
1
2
3
4
A
102,960
Costs
8,039
18,262
19,787
20,159
Mine
B
205,920
10,140
22,621
24,476
24,917
E
221,760
7,936
20,681
22,472
22,713
Recreational
2,851
0
0
0
0
Total
533,491
26,115
61,564
66,735
67,789
21 Other mines include model mines C and D. The total cost of compliance
for mines C and D is divided by the total revenues for this segment as
presented in the text.
Revenues
Compliance Costs
Options: 1
2
3
4
475,200
17,970
34,741
37,476
41,727
Mine
D
969,408
32,450
52,745
56,970
69,575
Total
1,444,608
50,420
87,486
94,446-
111,302
IX-3
-------
-------
X. LIMITS OF THE ANALYSIS
This chapter discusses the general accuracy of the study research and data
sources and presents the sensitivity analyses performed on critical
assumptions.
' A. General Accuracy
The U.S. gold placer mining industry is complex in terms of number of
mines, ownership, location, type and size of mines. Variations in climate,
length of season, types of overburden and gold bearing gravels contribute
to this complexity. Open cut operations are fairly similar in equipment
used (bulldozers, front-end loaders, sluices) and operating methods.
Data used in this report was collected from a wide variety of sources
including individual miners, mining service businesses, universities, state
and federal agencies. A substantial effort was made to collect
supplemental data to improve the accuracy of the analysis. Nevertheless, a
great deal of unexplained variations from mine to mine exist.
Efforts were made to evaluate the data available and to update these
materials wherever possible. Checks were made with informed sources in
both industry and government 1,0 help insure that data were reliable and
representative.
An example of the accuracy problems encountered is the U.S. Bureau of Mines
estimated annual placer gold production. Informed sources report that
actual placer production is four to ten times what is reported.
Although mining costs, investment and profitability data are approximate,
the general information for these measures was obtained from a reasonable
number of miners in Alaska. The specific mine data related to the
continental U.S. was more limited.
X-l
-------
The accuracy of this report has been enhanced by cooperation and data
availability. However the complexity of the problem is such that
qualitative judgements were involved. Thus the possibility of errors
exists. Such errors stemmed from a variety of sources and collectively may
have been additive or offsetting. Possible errors due to data availability
and critical assumptions are discussed below.
B. Data Availability
Although the study was enhanced by substantial efforts ".owards data
collection and analysis, significant data discrepancies exist. After
declining in the 1940's, placer mining only revived again appreciably in
the U.S. in 1980 as gold prices peaked. Many of the data collection
efforts by state and federal government had stopped in the 1950's and have
not recovered. Sources of data problems are discussed below.
1. Production Volumes
As discussed in the example above, placer gold production estimates are not
believed to be accurate. Miners are secretive about their gold production
and may not sell the gold in the year it is produced.
2. Financial Characteristics
Basic investment operating costs and profitability for the placer mining
industry in general are unpublished and unavailable. Similar data on a
mine basis are also unavailable. A reasonable amount of data was collected
from individual miners but this data base could be improved. In addition,
some miners are far more skilled than others at rebuilding and maintaining"
heavy equipment, and are -thus able to reduce operating costs accordingly.
We are forced in the model-mine analyses to assume uniformity among miners
as to actual expenses, since individual talents cannot be accounted for.
X-2
-------
3. Gold Prices
Current prices for gold are available but forecasted prices vary
significantly. Better forecasts would improve the analysis since impacts
are influenced by the price of gold.
C. Sensitivity Analysis
To account for changes in one critical parameter of the models, gold price,
a sensitivity analysis was conducted to determine the net accounting profit
before taxes of each model mine at various gold prices.
The economic analysis assumed a gold price of $360 per troy ounce, the
average gold price for 1984 minus 20% as a penalty for impurity.
Utilization of this price produced a negative economic profit margin for
model mines A, B and E under baseline conditions.
The first sensitivity analysis which was conducted, assumed a lower gold
price, $300 per troy ounce, which is about the current 1985 price. The
results of the analysis are shown in Table X-l. Net accounting profits
before taxes ranged from negative ($83,833) for Alaskan mine B, option 4 to
$105,173 for Alaskan mine D under option 1. Three model mines experienced
negative economic profit margins under baseline conditions, resulting in
shut-downs for the mines represented by these models. Altering the gold
price to $400 per troy ounce, which is more representative of 1982 and 1983
prices, again only model mines C and D have positive net accounting profit
before taxes under baseline conditions (Table X-2). In addition, net
accounting profit before taxes continued to be positive for model mines C
and D under effluent guidelines options 1 through 4. Therefore,
sensitivity analysis shows that a 17 percent decrease in the price of gold
results in baseline shut-downs for three model mines as does an 11 percent
gold price increase.
X-3
-------
Table X-l. Sensitivity analysis assuming a gold price
of $300 per troy ounce
Models
Mine
size
I \re\ 3/hvO
Net profit before taxes
Options
Baseline 123
m
4
Alaska Mines
A 25
B 50
C 100
D 180
Continental U.S. Mine
E 50
(47,026) (50,169) (60,392) (61,917) (62,289)
(65,598) (69,056) (81,537) (83,392) (83,833)
45,878 40,053 23,282 20,547 16,296
110,827 105,173 84,878 80,653 68,048
(66,091) (68,425) (81,170) (82,961) (83,202)
X-4
-------
Table X-2. Sensitivity analysis assuming a gold price
of $400 per troy ounce
Models
Alaska Mines
A
B
C
D
Mine
size
(yd 3/hr)
25
50
100
180
Baseline
(26
(24
142
307
,434)
,414)
,238
,402
Net
1
(29
(27
136
301
profit before
,577)
,872)
,413
,748
taxes
Options
.-($)
(39,800)
(40,353)
119,642
281,453
3
(41
(42
116
277
,325)
,208)
,907
,228
4
(41
(42
112
264
,697)
,6*9)
,656
,623
Continental U.S. Mine
E 5
(21,739) (24,073) (36,818) (38,609) (38,850)
X-5
-------
-------
REFERENCES
Alaska Office of Mineral Development. 1983. Alaska Mineral Industry 1982.
Special Report 31.
American Bureau of Metal Statistics, Inc. Various Years. Non-Ferrous
Metal Data. New York: American Bureau of Metal Statistics, Inc.
American Metal Market. Various Years. Metal Statistics. New York:
Fairchild Publishers.
Arizona Bureau of Land Management. 1984 (July). Mine Ckirns for Arizona.
Averill, Charles Volney. 1946 (October). Placer Mining for Gold in
California. (Bulletin 135.) Division of Mines, Department of Natural
Resources, State of California.
Bundtzen, T. K., G. R. Eakins, and C. N. Conwell. 1982. Review of
Alaska's Mineral Resources. Division of Geological and Geophysical
Surveys, Department of Natural Resources.
Bunning, Bonnie B. 1984 (January). Washington's Mineral Industry, 1983.
Washington Geologic Newsletter 12:1-13.
Caterpillar Tractor Co. 1981 (October). Caterpillar Performance Handbook.
(Edition 12.)
Colorado Division of Mines. Various Years. A Summary of Mineral Industry
Activities in Colorado. Colorado Department of Natural Resources.
Department of Geological and Mineral Industries. Various issues. Oregon
Geology. Portland, Oregon.
Division of Mine Inspection. 1983 (December). Directory of Nevada Mine
Operations Active During Calendar Year 1983. Department of Industrial
Relations, State of Nevada.
Engineering and Mining Journal. Various issues. McGraw-Hill publication.
New York, NY.
Harty, D. M. 1984 (November 30). Letter sent to B. Matthew Jarrett of the
U.S. Environmental Protection Agency from Frontier Technical
Associates, Inc. concerning placer mines in Idaho.
Johnson, Edward E. and Harold J. Bennett. An Engineering and Economic
Study of a Gold Mining Operation. (Information Circular 8374.)
Bureau of Mines, U.S. Department of the Interior.
-------
Lawson, D. C. Various Years. .Directory of Montana Mining Enterprises.
Montana Bureau of Mines and Geology, Department of Montana College of
Mineral Science and Technology.
Louis Berger & Associates. 1983 (March). The Role of Placer Mining in the
Alaska Economy. State of Alaska Department of Commerce and Economic
Development, Office of Mineral Development.
Lyden, C. J. 1948. The Gold Placers of Montana. Bureau of Mines and
Geology, Montana School of Mines, Memoir No. 26.
North, Robert M. and Virginia T. McLemore. 1984. Silver and Gold
Occurrences in New Mexico. New Mexico Bureau of Mines and Mineral
Resources.
Romanowitz, C. M., H. J. Bennett and W. L. Dare. Gold Placer Mining -
Placer Evaluation and Dredge Selection. (Information Circular 8462.)
Bureau of Mines, U.S. Department of the Interior.
Smith, Martha R. 1981 (April). Utah Mineral Industry Operator Directory,
1981. Utah Geological and Mineral Survey, Utah Department of Natural
Resources.
Staley, W. W. 1946. Gold in Idaho. Idaho Bureau of Mines and Geology.
Pamphlet 68.
U.S. Department of the Interior, U.S. Bureau of Mines. Various issues.
Mineral Industry Surveys. Washington, D.C.: U.S. Government Printing
Office.
U.S. Department of the Interior, U.S. Bureau of Mines. Various Years.
Minerals Yearbook. Washington, D.C.: U.S. Government Printing Office.
U.S. Environmental Protection Agency, Region X. 1983. Survey and Study of
Alaskan Placer Mines. U.S. Environmental Protection Agency.
U.S. Environmental Protection Agency. 1984 (March). Economic Impact
Analysis of Proposed Effluent Limitations and Standards for Gold
Placer Mining in Alaska (Draft).JRB Associates.
U.S. Environmental Protection Agency. 1985. Draft Development Document:
Placer Gold Mining Segment of the Ore Mining and Dressing Point Source
Category"U.S. Environmental Protection Agency, Effluent Guidelines
Division. Kohlmann Ruggiero Engineers and Frontier Technical
Associates, Inc.
Utah Geological and Mineralogical Survey. 1966. Gold Placers in Utah - A
Compilation.- College of Mines and Mineral Industries.
-------
Walsh, Timothy J., Henry W. Schasse and William M. Phillips. 1982.
Directory of Washington Mining Operations. 1980-81. Washington
Division of Geology and Earth Resources, Department of Natural
Resources.
West, J. M. How to Mine and Prospect for Placer Gold. (Information
Circular 8517.)Bureau of Mines, U.S. Department of the Interior.
1984 Western Mining Directory. 1984. Howell Publishing Company, Denver,
Colorado.
-------
-------
APPENDIX A
PLACER MINING MODELS
-------
-------
APPENDIX A
PLACER MINING MODELS
Introduction
The placer mining models developed for this project represent attempts to
simulate the financial structure of U.S. gold placer mines under baseline
conditions. The models basically consist of revenue variables and
operating and maintenance costs which are then used to calculate net
revenues from operation, net profit before taxes and the financial profit
margin before taxes. The economic profit of the mines are also calculated.
The baseline models were then adjusted to reflect to various wastewater
treatment options and costs. This resulted in the computation of the
annual cost of compliance, the compliance cost per cubic yard mined as well
as profitability measures for each of the model mines with 50 percent
concentration of solids in pond sludge.
Baseline Models
In order to understand the financial structure and operation of U.S. gold
placer mines, models were developed separately for placer'mines in Alaska
and the lower 48 states. Because of the large number of differences in
mines, it was difficult to develop homogenous size groups. Therefore, the
surveyed mines were ranked by total cubic yards washed per year, cubic
yards washed per hour, operating hours per year, flow, number of employees,
pieces of equipment and revenues. In the final analysis, it was determined
that grouping the mines by the total cubic yards washed per year produced
the best results. The cubic yards washed per hour were calculated for each
mine based on a ten hour day for Alaskan mines and an eight hour day for
continental U.S. mines. At that point, the cubic yards washed per hour
were averaged for each group and a baseline mine was then developed for
four different sizes of Alaskan placer mines, and one size for placer mines
located in the continental U.S.
Table A-l shows the five baseline models which were developed. As noted
earlier, the data used in the baseline models are organized as revenue
variables, operating and maintenance costs and finally, financial
profitability measures (such as net revenues and net profit before taxes) .
and economic profitability. Table A-2 explains the sources of the data as
well as the computations used to develop Table A-l. The remaining tables
give a more detailed explanation of the revenue and cost variables.
Table A-3 describes the method used for estimating the economic profit of
the mine. In this step, the opportunity cost of capital benchmark for
model placer mines is subtracted from the net profit before taxes to
determine the economic profit or loss. An adjusted profit margin is then
calculated.. Opportunity cost is calculated by determining the percent
return on a value equal to 40 percent of the new equipment cost. This
method accounts for. the use of used equipment in most placer mines.
' A-l '
-------
Table A-l. Baseline gold placer mines
MINE CODE NUMBER
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
REVENUE VflRIflBUES
SOLD $/CUBIC YflRD
60UJ QZ/CUBIC YflRD
GRAVEL HASHED/DAY
BRflVEL ซflSHED/HQUR
TOTflL SLUICE TIME HOURS
BOLD PRODUCTION, OUNCES
TOTfiL REVENUES 8$363/QZ 800FINE = $288/01
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
OPERRTIN6 4 HfllNT. COSTS
NUMBER OF MINERS
NUMBER OF FOREMEN
NUMBER OF EQUIPMENT OP.
NUMBER OF LABORERS
OPERATING HRS/DflY
OPERATING DflYS/YR
TOTAL OPERATING HOURS
WAGES BY TYPE OF MINER
FOREMEN
EQUIPMENT OPERATOR
LABORER
TOTAL MAGES
NGN-WAGE LABOR COST
EQUIPMENT 0 I M COST
FUEL
MAINTENANCE
SMELTING FEES
TOTAL 0 * M COST
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
NET REVENUES FROM OPERATION
DUE TO LEASEE 815* OF REVENUES
DEBT SERVICE 818* OF REVENUES
EQUIPMENT COST
AUXILIARY EQUIPMENT 825% EQUIPMENT COSTS
NET PROFIT BEFORE TAXES
PROFIT MARGIN BEFORE TAXES (X)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ECONOMIC ANALYSIS, BASELINE
OPPORTUNITY COST OF CAPITAL
ECONOMIC PROFIT (LOSS)
ADJUSTED PROFIT MARGIN
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ALASKA ALASKA ALASKA ALASKA CONTINENTAL U.S.
MODEL A MODEL B MODEL C MODEL D MODEL E
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxmxxxx
$6.34
0.822
259
25
650
357.5
$102,960
$6.34
9.822
see
58
650
715
$205,328
$6.34
8.022
19ฎ@
100
750
1650
$475,280
*oซ w*
0.022
1800
180
850
3366
$969,488
$6.34
8.322
408
50
700
770
$221,753
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
2
0
2
0
18
189
1000
2
2
19
110
6
1
3
2
18
110
1100
3
0
2
1
8
130
1040
$e
$30,000
$3
$30,080
$10,000
$20,581
$6,720
$13,861
$3,089
$63,678
$8
$30,600
$10,000
$40,009
$15,000
$37,407
$17,363
$20,039
$6, 178
$98,585
$0
$33,000
$22,080
$55,000
$22,000
$47,081
$21,984
$25,097
$9,504
$133,585
$22,000
$49,500
$22,000
$93,500
$33,000
$91,752
$46,480
$45,272
$19,388
$237,640
$0
$14,560
$6,240
$20,800
$15,608
$39, 102
$14,880
$24,222
$6,553
$82, 155
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxmxxxxxxxxxx
$39,290 $107,335 $341,615 $731,768 $139,505
$71,280 $145,411 $33,264
$47,520 $96,941 $22,176
$95,297 $208,515 $98,916
$23,824 $52,129 $24,729
$103,694 $228,772 ($39,480)
21.82 23.60 -17.80
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
$8,500 $20,009 $25,300 $52,300 $18,300
($43,171) ($60,887) $78,694 $176,772 ($57,480)
-41.93 -29.57 16.56 18.24 -25.92
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
$15,444
$10,296
$38,577
$9,644
($34,671)
-33.67
$3@,886
$20,592
$77,394
$19,349
($40,887)
-19.86
A-2
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A-5
-------
Table A-3. Method for estimating opportunity cost of capital
for model placer mines
Size
Equipment
New price
1 )
ALASKAN MINES
A
B
C
D
CONTINENTAL
E
1 D-6
1 D-7
1 950 PEL
Total
1 D-8
1 950 PEL
Total
1 D-8
1 D-9
1 960 PEL
Total
U.S. MINES
1 D-7
1 950 PEL
Total
155,000
225,000
140,000
365,000
300,000
140,000
440,000
300,000
450,000
180,000
930,000
185,000
130,000
315,000
40% of Caf
new price
(5)
62,000
146,000
176,000
372,000
126,000
Capital cost
8,500
20,000
25,000
52,000
18,000
A-6
-------
Table A-4 lists the equipment included in each of the models. The
assumptions regarding equipment usage for each mine were based on
information gathered from questionnaires as well as the discussion with
industry personnel and EPA engineers. This table was then used to develop
equipment costs for the models. The hourly cost of operating heavy
equipment at gold placer mines is shown in Table A-5. The hourly cost is
the result of combining leasing, maintenance, fuel and insurance costs for
each piece of heavy equipment. Leasing costs for Alaskan mines were
obtained from an Anchorage Caterpillar dealer, assuming four months of
equipment rental. For continental U.S. mines, six months of rental were
assumed and leasing costs were obtained from a continental U.S. Caterpillar
dealer. Maintenance costs were also provided by Caterpillar dealers. Fuel
cost computations are discussed in Table A-2, while insurance costs were
assumed to be 1.5 percent of equipment lease payment. The total hourly
cost for operating heavy equipment ranged from $38.84 for a 950B front end
loader at continental U.S. mines, to $162.45 for a D-9L bulldozer at
Alaskan mines.
Model mine owning costs as well as operating and maintenance costs for the
sluice, auxiliary, pipes and pumps are broken down in Table A-6. Owning
costs are calculated as a percentage of capital costs for each piece of
equipment. The Capital Recovery Factor (CRF) which was used in this
calculation assumes a 14 percent interest rate with amoritization over a
period of fifteen years. The operating and maintenance costs were then
calculated as 25 percent (ITD engineering estimate) of the owning cost of
each piece of equipment.
Table A-7 combines the operating and maintenance costs developed in Table
A-6 with operating and maintenance costs for heavy equipment to produce
total annual equipment operating costs for each model mine.
The annual equipment owning costs for each mine are developed in Table A-8
for the heavy equipment used at placer mines. These costs are then
combined with owning costs for other equipment (sluice, auxiliary, pipes,
and pumps) shown in Table A-6 to produce total annual equipment owning
costs for each mine.
Saseline Models With Wastewater Treatment Options
After the baseline models were developed, four wastewater treatment, options
and their associated costs were applied to each of the models. The four
treatment options are listed below:
Option 1 - Six (6) hours hours primary settling,
Option 2 - One (1) hour primary settling, 80 percent recycle followed by
six (6) hours secondary settling for remaining 20 percent of
f 1 ow,
A-7
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A-8
-------
Table A-5. Hourly cost for operating heavy equipment for placer mines
D-6
D-7
0-8K
D-9L
950B
966D
D-7
950B
Lease
cost
36.00
49.50
66.85
120.00
32.90 :
43.50 :
41.50
29.00
Maintenance
ALASKA!*
6.50
7.00
a. oo
13.00
6.00
7.00
CONTINENTAL
5.00
4.50
Fuel
($/hr)
< MINES
8.40
13.13
18.90
27.65
8.58
11.55
U.S. MINES
7.50
4.90
Insurance
.54
.74
1.00
1.80
.49
.65
.62
.44
Total
0+M
51.44
70.37
94.75
162.45
47.97
62.70
54.62
38.84
A-9
-------
Table A-6. Calculation of the sluice, classification equipment, pipe and
pump costs for the model mines
Cost
Model type
ALASKAN MINES
A Sluice
Classification
Pipes
Pumps
TOTAL
B Sluice
Classification
Pipes
Pumps
TOTAL
C Sluice
Classification
Pipes
u p
TOTAL
D Sluice
Classification
Pipes
Pumps
TOTAL
CONTINENTAL
U.S. MINES
E Sluice
Classification
Pipes
Pumps
TOTAL
Capital cost Capital Owning
calculation cost CRF 3_/ ,
30 ft x 2 ft x S100/ft2 11
Grizzly
440 ft x $2,600/1,000 ft
Development Document,
Figure IX-12
30 ft x 2 ft x $100/ft2 I/
Grizzly
440 ft x 54,900/1,000 ft
Osvel opmsnt Document,
Figure IX-12
30 ft x 3 ft x 5100/ft2 I/
Grizzly and single screen
440 ft x 57,700/1,000 ft
Development Document,
Figure IX-12
(5)
6,000
1,500 21
1,144
26,000
6,000
1,500 21
2,156 ~
28,900
9,000
10,000 21
3,388
33,200
(40 ft x 4 ft x S100/ft2) j./32,000
x 2 sluices
Grizzly and double screen
440 ft x 57,700/1,000 ft
Development Document,
Figure IX-12
30 ft x 3 ft x S100/ft2 \l
Grizzly and single screen
440 ft x 57,700/1,000 ft
Development Document,
Figure IX-12
20,000 21
3,388
36,100
9,000
10,000 21
3,388
28,900
.1917
.1917
.2913
.2913
.1917
.1917
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.2913
.1917
.1917
.2913
.2913
.1917
.1917
.2913
.2913
.1917
.1917
.2913
.2913
O&M
Owning percentage of O&M
costs capital costs 2J costs
1,151
288
333
7.573
9,345
1,151
288
628
8,418
10,485
1,725
1,917
987
9,671
14,300
6,135
3,834
987
10,515
21,471
1,725
1,917
987
8,418
13,047
25
25
' 25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
1,500
375
286
6,500
8,661
1,500
375
539
7,225
9,639
2,250
2,500
847
8,300
13,897
8,000
5,000
847
9,025
22,872
2,250
2,500
847
7,225
12,822
I/ Capital cost of 5100/ft2 of sluice is an Effluent Guidelines engineering estimate.
?/ Effluent Guidelines engineering estimate.
37 Amortized over 15 years, assuming a 14 percent interest rate.
CRF = Capital Recovery Factor.
A-10
-------
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A-12
-------
Option 3 - One (1) hour primary settling, 80 percent recycle followed by
flocculant addition and secondary settling of remaining 20
percent of flow, and
Option 4 - Six (6) hours primary settling and 100 percent flow recycle.
The treatment costs for each Alaskan mine assuming a solids content
concentration of 50 percent were obtained from the EPA Development Document
(1985). Table A-9 shows the treatment costs and profitability associated
with options 1 through 4 for each of the. model mines. The total cost of
each option, as discussed and presented in Chapter VI, includes the cost of
owning and operating the heavy equipment for the number of hours necessary
to install the treatment facility. Therefore, to avoid double-counting of
equipment costs, this study begins the examination of the impact of^
wastewater controls by first subtracting the heavy equipment cost
associated with the options from the total heavy equipment cost included in
the baseline profile. This has the added effect of properly assigning to
the regulation all costs implied by it. To illustrate, consider model C. -
To evaluate the effect of the four options on the baseline profitability of
this model operation, the Agency first reduces the total equipment cost
included in the baseline profile by $12,145. This figure is the cost
associated with securing a D8-K bulldozer for the (average) 179 hours
required to build settling ponds and install recycle capability. It
includes lease cost plus insurance charge. This expense is already
included in the cost estimates provided by EPA's Industrial Technology
Division. Reducing baseline operating costs by this amount indicates the
expense of employing heavy equipment to install wastewater treatment
facilities should be recognized as a cost of the regulation. Furthermore,
it avoids double-counting of equipment costs. See Table A-10 for a
breakdown of the costs deducted from the baseline for the various models.
The cost per cubic yard mined is developed by dividing the total annual
option cost by the total cubic yards mined (gravel washed per hour
multiplied by total sluice time). Pollution control costs as a percentage
of sales are calculated by dividing the total annual option cost by total
revenues. Total operation costs as a percentage of sales are the result of
dividing total operation costs (total 0 & M cost + due to leasee + rental
value of equipment + total annual option cost) by total revenues. Net
profit before taxes for each option is the result of subtracting the total
annual option cost from the net profit before taxes in the appropriate
baseline model. The profit margin before taxes for each option is the
result of dividing net profit before taxes for each option by total
revenues.
A-13
-------
Table A-9. Gold placer model mines with wastewater treatment options
MINE CODE NUMBER
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
REVENUE VflRIflELES
BOO $/CUBIC YARD
GOLD OZ/CUBIC YflRD
BRfiVa WASHED/DAY
GRAVEL HASHED/HOUR
TOTflL SLUICE TIME HOURS
GOLD PRODUCTION, OUNCES
TQTftL REVENUES 8$36fl/QZ S80FINE = $288/OZ
xxxxxxmxxnxxxxxxxxxxxxxxxxxxxxxxxxxxxx
OPERATING i HAINT. COSTS
NUMBER OF MINERS
NUMBER OF FOREMEN'
NUMBER OF EQUIPSCNT OP.
NUMBER OF LABORERS
OPERATING HRS/DflY
OPERflTINS BflYS/YR
TOTAL OPERATIN6 HOURS
WAGES BY TYPE OF MINER
FOREMEN
EQUIPMENT OPERATOR
LABORER
TOTAL WAGES
NGN-WAGE LABOR COST
EQUIPMENT 0 i ซ COST
FUEL
MAINTENANCE
SMELTING FEES
TOTAL 0 4 M COST
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
NET REVENUES FROM OPERATION
WE TO LEASEE (15*)
DEBT SERVICE 810* OF REVENUES
EQUIPMENT COST
AUXILIARY EQUIPMENT 825% EQUIPMENT COSTS
NET PROFIT BEFORE TAXES
PROFIT MARGIN BEFORE TAXES (ป)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ECONOMIC ANALYSIS, BASELINE
OPPORTUNITY COST OF CAPITAL
ECONOMIC PROFIT (LOSS)
ADJUSTED PROFIT MARGIN
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
OPTION 1
PRODUCTION LOSS (DAYS)
TOTAL ANNUAL COST
COST/CUBIC YARD MINED
POLLUTION CONTROL COSTS/SALES (*)
TOTAL OPERATION COSTS/SALES (*)
NET PROFIT BEFORE TAXES
PROFIT MARGIN BEFORE TAXES (*)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ECONOMIC ANALYSIS, OPTION 1
OPPORTUNITY COST OF CAPITAL
ECONOMIC PROFIT (LOSS)
ALASKA ALASKA ALASKA ALASKA CONTINENTAL U-S.
MODEL A MODEL B MODEL C MODEL D MODEL E
mxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxmxxxxxmxxxx
$5.34
9.1322
258
25
658
357.5
$6.34
0.022
580
59
659
715
$5.3*
8.822
1080
108
759
1653
$6.3*
8.822
1883
18ฎ
850
3366
$6.34
9.822
400
58
788
770
$102,969 $285,320 $475,298 $969,488 $221,753
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
2
8
2
0
19
2
2
IS
118
118ฎ
6
1
3
2
18
118
3
8
1
a
138
1840
$9
$14,568
$6,240
$28,308
$15,688
$39,102
$14,888
$24,222
$6,653
482 155
$W,b/tf ป3Q,aOiJ ปiปw,uuw **.ซ?ซ-~ *oc-1 iuw
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
$39,299 $187,335 $341,615 $731,768 $139,685
$15,444 $38,883 $71,288
$18,2% $20,592 $47,528
$33,631 $78,712 $33,152
$9,644 $19,349 $23,824
($29,775) ($34,285) $115,839
-28.92 -16.61 24.33
$t
$38,889
$9
$38,888
$18,889
$ฃ8,531
$6,728
$13,861
$3,889
$63,678
$8
$38,888
$18,888
$48,888
$15,008
$37,487
$17,363
$28,839
$6,173
$98,585
$9
$33,880
$22,088
$55,008
$22,009
$47,881
$21,984
$25,897
$9,584
$133,585
$22,0i0
$49,508
$22,000
$93,500
$33,808
$91,752
$46,488
$45,272
$19,388
$237,648
$145,411
$96,941
$181,719
$52,129
$255,568
26.36
$33,264
$22,176
$93,314
$24,729
($33,878)
-15.28
-CO.7C -1D.OI C.T.WU ww.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
$8, See $28,888 $25,808 $52,809 $18,008
($38,275) ($54,285) $98,839 $203,568 ($51,878)
-37.17 -26.32 19.12 21.08 -23.39
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
9.4
tt,@39
$9.49
7.81
136.73
($37,814)
-36.73
9.4
$10,149
$9.31
4.92
121.54
($44,345)
-21.54
13.3
$17,978
$9.24
3.78
79.48
$97,869
28.68
15.7
$32,450
$8.21
3.35
76.98
$223,118
23.92
9.4
$7,936
$8.23
3.58
118.86
($41,814)
-18.86
xxxxxxxxxxxxxxxxxx'xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
A-14
$8,509
($46,314)
$28,988
($64,345)
$25,000
$72,869
$52,800
$171,118
$18,008
($59,814)
-------
Table A-9. (Continued)
NINE CODE NUMBER
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ADJUSTED PROFIT HARBIN
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
OPTION 2
PRODUCTION LOSS (DflYS)
TOTflL ANNUAL COST
COST/CUBIC YARD 8INED
POLLUTION CONTROL COSTS/SflLES (*>
TQTflL OPERflTIQN COSTS/SALES (?)
NET PROFIT BEFORE TAXES
PROFIT HARBIN BEFORE TAXES (tt
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ECONOMIC ftNfiLYSIS, OPTION 2
OPPORTUNITY COST OF CAPITAL
ECONOHIC PROFIT (LOSS)
flDJUSTED PROFIT MAR6IN
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
OPTION 3
PRODUCTION LOSS (DflYS)
TOTflL ANNUAL COST
COST/CUBIC YRRD MINED
POLLUTION CONTROL COSTS/SflLES (%)
TOTflL OPERflTION COSTS/SflLES (ซ
NET PROFIT BEFORE TflXES
PROFIT HARSIN BEFORE TAXES (*)
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ECONOMIC ANALYSIS, OPTION 3
OPPORTUNITY COST OF CAPITAL
ECONOMIC PROFIT (LOSS)
flDJUSTED PROFIT MARGIN
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
OPTION 4
PRODUCTION LOSS (DflYS)
TOTflL ANNUAL COST
COST/CUBIC YARD MINED
POLLUTION CONTROL COSTS/SflLES (*)
TOTflL OPERflTION COSTS/SALES (*>
NET PROFIT BEFORE TAXES
PROFIT MAR6IN BEFORE TAXES (%)
xxxmxmxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ECONOMIC ANALYSIS, OPTION 4
OPPORTUNITY COST OF CAPITAL
ECONOMIC PROFIT (LOSS)
ADJUSTED PROFIT HARBIN
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
ALASKA AlASKfl ALASKA ALASKA CONTINENTAL U.S.
MODEL A MEL B MODEL C HODEL 0 MODEL E
xxxxxxxxxxxxmxxxxxxxxxxxxxxxxxxxxxxxxxxxxmxxxxxxx
-44.38 -31.25 15.33 17.65 -ฃ6.97
xxxxxxxxxmxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx <
12.1.
$ia,2&2
ปi.i2
17.74
14&.&S
($48,837)
-46. SS
iฃ
*-S2,5ci
$@.7@
10.99
127.60
(555,835)
-27.68
15.3
$34,741
$@.46
7.31
82.93
$81,898
7.97
21.3
$52,745
$8.34
5.44
79.88
$282,823
29.92
12
$29,681
$3.59
9,33
124.60
($54,559)
-24.68
xxxxxxxxxxxxxxxmxmxx-uxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
$8,588 ' $28,888 $25,89ฎ $52,008 $18,888
($55,537) ($76,825) $56.098 $158,823 ($72,559)
-54.91 -37.31 11.81 15.55 -32.72
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
12. a
$19,787
$1.22
19.22
148. 14
($49,562)
-48.14
i 12.7
$ฃ4,476
$S.75
11.89
128.58
($58,681)
-28.5ฎ
15.1
$37,475
$@.sa
7.89
83.51
$78,363
16,49
17.5
$56,97ฎ
$8.37
5.88
79.51
1198,598
28.49
12.7
$22,472
$0.64
18.13
125.41
($56,35ฎ)
-25.41
xxxxxxxxxmxxmxxxxxxxxxxxxxxxxxxxxxxxxxxraxxxxxxxxx
$8,5@9 $2@,M $25,@8@ $52,880 $18, M8
(158,8625 ($78,681) $53,363 $145,598 ($74,353)
-5S.39 -38.21 11.23 15.12 -33.53
xxxxxxxxxxxxxxxxxxxxxxxxxxxmxxxxxxxxxxnxxxxxxxxxxxxx
11.1
$20, 159
$1.24
19.58
148.59
11.1
$24,917
$9.77
12,1ฎ
128.71
15
$41,727
$0.56
8.78
84. 48
18.9
169,575
$8.45
7.18
88.81
11.1
122,713
$@.65
13.24
125.52
(149,934) ($59,122) ซ74,112 $185,993 ($56,591)
-28.71
15. &@
19. 19
-25.52 -
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$8,5Si $28,888 $25,988 $52,308 $18,280
($58,434) ($79,122) $49,112 . $133,993 (174,591)
-56.75 -38.42 10,33 13.82 -33.64
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