Commodities

Looking for Gold in the Distant Past


The rugged terrain of Asturias in Northern Spain is dotted with remnants of aqueducts and mining pits, reminders that the region was an important supplier of gold to the Roman Empire 2,000 years ago. Now Asturias is regaining its luster. Near the village of Boins, Orvana Minerals is tunneling into a mountainside to mine a deposit that's expected to produce more than 100,000 ounces annually when fully operational in 2012.

"This will be Europe's largest gold mine," General Manager Agne Ahlenius says, shouting to be heard above the pneumatic drills as they sink reinforcing rods into a tunnel a quarter-mile underground. With gold fetching a record-high $1,528 an ounce, Toronto-based Orvana, which also owns a gold mine in Bolivia, says it expects to recover Asturias's development costs in less than three years.

Asturias isn't the only historic gold mining region getting a second look. The Sukari gold mine near the Red Sea in Egypt, mined by Romans and later by the British in the early 20th century, resumed operations in 2010 under Australian management. Also set to reopen is a South Carolina site that once supplied gold to the Confederate treasury.

Modern technology helps explain why miners are heading back to abandoned sites. Most early mines were located on particularly rich deposits to compensate for crude extraction techniques. The Romans, for example, heated up rocks containing gold ore and cracked them open by dousing them with water from aqueducts. Nowadays ore is mechanically crushed and dumped in chemical solutions that leach out gold. "It makes sense to follow where others have already found gold," says Gregory Ho Yuen, a Toronto-based mining industry lawyer. "You can recover far more than they ever did."

While the costs of labor and environmental regulations in the U.S. and Western Europe are higher than in less developed countries, those expenses are frequently offset by the availability of roads and electric power. "We're not out in the jungle somewhere," says Dan Symons, manager of investor relations at Toronto-based Romarco Minerals, which is developing the Haile mine in South Carolina.

Opened in the 1820s, Haile became the highest-producing gold mine east of the Mississippi until General Sherman's troops wrecked it. It briefly reopened during World War I and again when gold prices spiked in the 1980s, but quickly closed when prices slumped. Romarco acquired the property in 2007 and expects to start production in 2013. The company is forecasting operating costs at $379 per ounce of gold produced. Orvana says operating costs at its Asturias mine will be about $450 an ounce, while Centamin Egypt, operator of the Sukari mine, pegs costs there at $525 an ounce.

Those figures compare with a worldwide average cost of $557 per ounce, according to London-based mining consultancy GFMS. They are far below the average $776 in South Africa, as recently as 2005 the world's top gold producer, which has suffered a steep decline in output because its remaining deposits are deep underground, which drives up costs. China is now the No. 1 producer, with 11.8 percent of the global total, followed by Australia. While only a small percentage of global production comes from sites that date back to antiquity, more recent operations are getting a new lease on life as well. One, the Boddington mine in Western Australia, reopened last year after a nearly decade-long hiatus.

The GFMS consultancy predicts that gold prices will surpass $1,600 by the end of this year. That in turn will spur development of even more sites, says William Tankard, a senior analyst with the group. This gold rush is likely to bring more investment to places like Asturias. Even as Orvana prepares to pour its first gold bars in the next few weeks, another Canadian company, Astur Gold, is eyeing a Roman mining site in the region.

The bottom line: New mining technology and high prices are making it profitable to reopen old mines. Production costs are lower than in South Africa.

Matlack is a Paris correspondent for Bloomberg Businessweek.

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