Mining lives on outside Cripple Creek

Filed under: News,Print | Tags:, , , , ,

The SUV visiting the Cresson Mine is regular size, but one of Cripple Creek & Victor Gold Mining Company’s haul trucks dwarfs it.

James Grafton, a prominent Colorado attorney, poet and historian once grouped the state’s settlements into four classes.

  • Cities based on the valley routes into the mountains, such as Denver and Pueblo.
  • Mineral settlements, such as Leadville and Telluride.
  • Agricultural settlements, such as Greeley and Fort Collins.
  • Settlements based on health or aesthetic factors.

Colorado Springs, Rogers concluded, was the most important city of that fourth class.

That’s always been our city’s favorite myth. Not for us the vulgar tumult of commerce, the drunken clamor of mining towns or the noisome stench of agriculture. Ours was a city of culture, temperance and gracious living. Ours was, as Mayor John Robinson wrote in 1902, “a model city.”

Thanks to gold, Colorado Springs also became a rip-roaring boom town. Following the discovery of gold near Cripple Creek in 1891, Gen. William Palmer’s quiet resort changed overnight. But it wasn’t overrun by major companies or sophisticated capitalists.

“(Cripple Creek) was discovered and prospected by poor men,” wrote George Rex Buckman in the 1900 Official Manual of Cripple Creek. “The foundations of all the great mining companies were laid by men whose only capital was their muscle.”

Much of the money flowed to Colorado Springs, the financial center of America’s gold-mining industry. In 1900, more than 400 mining companies were headquartered here, and business boomed, with bank deposits increasing by 500 percent from 1894 to 1900.

There’s still plenty of gold being taken out of the Cripple Creek-Victor area’s only producing mine, but the revenue no longer flows to Colorado Springs. The Cripple Creek & Victor Gold Mining Company, which operates the Cresson Mine, is an entirely owned subsidiary of South Africa-based AngloGold Ashanti Ltd.

Although none of the mine’s profits flow to local investors, CC& V is a major regional employer, providing 581 full-time jobs with an average compensation of $70,000.

Profitable, then and now

During 2011, the Cresson mine produced 267,000 ounces of gold, extracted from ore with a gold content averaging slightly more than .01 oz/ton. This year, the company forecasts production of 240,000 ounces, to be achieved by mining 24 million tons of ore and 45 million tons of waste.

It’s a profitable business, although a minor contributor to the parent company’s bottom line.

For 2012, AngloGold Ashanti forecasts total production of 4.4 million ounces from mines in Africa, South America and Australia. CC&V is the lowest-cost producer in the company’s portfolio, with cash production costs of $633 per troy ounce. At this week’s spot price of $1,600 an ounce, the mine would earn $232 million.

The industry has evolved tremendously during the past century. Jimmy Burns, W.S. Stratton and Jimmy Doyle were laborers from Colorado Springs who staked early claims in Cripple Creek. Burns was a pipefitter, Doyle a ditch-digger and Stratton a carpenter. All became spectacularly wealthy.

So rich were the mines that dreamers, speculators and promoters launched hundreds of publicly traded companies, many with few assets other than fractional mining claims.

Shares of such companies were traded on the Colorado Springs Mining Stock Exchange, which in 1899 became the world’s busiest exchange of its kind. In 1899, 236 million shares valued at $34.5 million traded hands, and a seat on the exchange cost $3,000 (or, in the currency of the time, 150 $20 gold pieces). In the peak year of 1901, the mines produced 1.3 million ounces of gold, worth approximately $25 million at the then-current price of $19 an ounce.

Today, the mine sprawls over nearly 6,000 acres, and includes almost all the historic mining district. While many of the site’s original mining structures have been preserved or moved, a vast open-pit mine now dominates the reshaped landscape.

For a first-time observer, the scale is difficult to comprehend. Standing on the edge of the pit, a thousand feet above the working floor, the eye seeks a point of reference. What first seem to be six pickups making their way up a series of sculptured switchbacks resolve into gigantic three-story tall ore trucks, each loaded with 360 tons of rock. The mine walls, descending terraces of solid rock, could be the walls of the Grand Canyon.

Ore is blasted from the mine wall, loaded into trucks and transported to an immense crusher that reduces it to coarse sand. The sand is then trucked to the leach pad, a zero-discharge plastic-lined facility, where a cyanide-based solution delivered through a network of perforated piping trickles through the ore, dissolving the gold. The gold-bearing pregnant solution is captured at the bottom of the leach pad, the gold is extracted, and the barren solution is recycled.

It’s a simple process, but once again the scale is astonishing. The valley leach facility has a surface area of 900 acres, or 1.5 square miles.

Another limited resource

When the mine opened in 1994, proven and probable reserves were projected to last until 2015. Subsequent drilling and exploration may extend mine life for another 10 years, depending upon the availability of a resource that is, like gold, increasingly scarce and increasingly expensive.

“Unless the drought ends,” said CC&V community affairs manager Jane Mannon, “we may experience problems with water.”

CC&V, which operates around the clock, uses 500 gallons of water per minute. That translates into 1,800 acre-feet annually, all of which is currently supplied through water rights belonging to the town of Victor. The company has backup agreements with Cripple Creek and Colorado Springs, but the Pikes Peak watershed’s prolonged drought may reduce their ability to deliver water to the mine.

“We’re hoping to work out exchange deals for water that other users store in Pueblo Reservoir,” said Mannon, “but our opportunities to use more (locally sourced) water are pretty limited.”

AngloGold Ashanti’s 2011 annual report notes that “water scarcity” may negatively affect CC&V’s future operations.

Assuming that the company’s deep pockets will reaffirm the old Western maxim that water flows uphill toward money, the company might still be mining after 2025.

Eventual step: Look deeper

Engineering factors will foreclose any further deepening of the pit, Mannon explains, forcing the company to adopt a new operating strategy.

“We may go back underground,” she said. “Historic data from the deep mines of the district — the Cresson, the Ajax and the Independence — suggests that (mineralization) continues below the 3,000 foot level.”

The company has spent many years digitizing thousands of historic maps of mine workings into a proprietary three-dimensional data base.

The six-mile 1941 Carlton Tunnel drains the district above 3,000 feet, but mining below that level has long been impractical. Geologists dismiss the notion that the richly mineralized “Cresson pipe” might re-emerge below 3,000 feet underground, but their 19th-century predecessors dismissed the notion that gold could be found in Cripple Creek.

Modern-day dreamers might imagine a second Cresson Vug. The original, a natural cavity measuring 20’ x 40’ x 15’, was found in 1914 at the Cresson mine’s 1,200-foot level. Thickly lined with flakes of pure gold and crystals of gold telluride, the vug yielded more than 40,000 ounces of gold in six weeks.

No trace of the vug remains, except for a few fragments in historic mineral collections. But if you’re looking for a pricey doorstop, an eBay seller is advertising a 103-pound rock richly laced with gold telluride.

The “buy it now” price: $200,000.

Cresson Mine, by the numbers

Year opened: 1994

Number of employees: 517

Average compensation: $70,000

Surface area: 5,600 acres

Current depth, open pit: 1,000 feet

Total production 1994-2011: 4 million oz.

Projected ore processed 2012: 24 million tons

Projected gold production 2012: 240,000 oz.

Projected cash cost of production: $633-663 per oz.

Gold price range, 2012: $1,544-1,777 per oz.

U.S. annual gold consumption: 4.1 million oz.

India annual gold consumption: 23. 9 million oz.

Total gold ever produced: 5.8 billion oz.

Total value at $1,600 per oz: $8.468 trillion

U.S. national debt: $15.97 trillion