Companion Article: Key Factors for Successful Mining Redevelopment

Key Factors for Successful Mining Redevelopment

By: Carolyn McIntosh

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I.               Introduction

Based on extensive experience working on a variety of mining redevelopment projects throughout the western United States, the authors selected three case studies to identify the primary factors that affected the redevelopment success for those three mining projects.[1] This paper, developed in conjunction with the First Annual Brownfields Mine Development Symposium at the Global Mining Law Center of the University of Arizona, James E. Rogers College of Law, identifies and defines those primary factors and evaluates the importance of each factor in the context of the success or failure of the three mining case studies.

Every successful mining project starts with the presence of a valuable resource that can be mined using available technology, at a profit. For example, for resources located within federally managed land, to obtain development rights under the General Mining Law of 1872, a claimant must demonstrate discovery of a valuable mineral deposit.[2]  A valuable mineral deposit is not defined in the federal mining laws, but is determined based on two tests: (1) the “prudent man rule”[3] and the “marketability test.”[4] As a supplement to the prudent man rule, under the marketability test a claimant must show a reasonable prospect of making a profit from the sale of minerals from a claim or a group of contiguous claims. A comprehensive definition of “valuable mineral deposit” is beyond the scope of this paper and is assumed as a prerequisite for a successful project. That said, we do identify the specific resource (e.g., gold, silver, etc.) at each case study mine.

Each of the selected three case studies involves a different mining company and different state or federal regulators. These differences enabled a more robust analysis of the importance of company strategy and approach, as well as the impact of pro-mining, anti-mining and neutral regulatory regimes. Community antagonists and protagonists can also play a significant role. A community’s roots as a historic “mining town” do not necessarily mean that the current community is supportive of continued mining activities or mining redevelopment. Project success may turn on effective responses to community opposition. Approaches vary from community to community, but the three cases studies indicate that success requires identifying community concerns early, developing a response strategy, managing expectations, and following through to gain community trust.

Here, we introduce the three case study mines and devote Section III to a detailed discussion of the history of each mine and the redevelopment effort that our case study comprises. The first case study evaluates the CR Kendall mine, located in the North Moccasin Mountains about eight miles west of Hilger, Montana and twenty-five miles north of Lewistown, Montana. It is believed to be the first gold mine in the United States to successfully use cyanide heap leaching for gold extraction. The second case study mine is the Robinson Nevada Mining Company (Robinson) copper mine near Ely, in White Pine County, Nevada. The third case study mine focuses on the area known as “The Comstock,” located on the eastern slope of Mount Davidson, in the Virginia Range, between the towns of Virginia City, Gold Hill, Silver City, and Dayton, Nevada. The Comstock is famous for being the location of the first major discovery of silver in United States history. The discovery in 1859 created a silver rush, provided early wealth to Nevada and San Francisco, was the impetus for Nevada statehood, and fostered mining innovations still in use today.  Starting in the late 1990s, what is now Comstock Mining Inc. initiated new mining operations that are the focus of our third case study.

Now, we briefly list the primary factors that affect mine redevelopment success. As noted, the first factor is Valuable Resource Presence, without which no mine is feasible. The second factor is the Mining Company Strength.  Within this factor, we have identified a number of strength characteristics that tend to be present in the context of successful ventures: leadership, vision, skilled community engagement, fiscal capability, continuity, and commitment. The Regulatory Environment is the third primary factor. The fourth factor, Land Use Constraints and considerations can drive mine redevelopment economics, hobbling mining activities and locations to such an extent that redevelopment becomes infeasible. The fifth primary factor, Environmental Issues, can have impacts similar to those presented by the fourth factor. It is a truism that natural resources must be developed, or at least extracted, from where they are located. For example, a mine’s proximity to pristine waters, an important drinking water supply, or habitat of an endangered species require creativity and innovative development approaches, but sometimes present prohibitive costs. The sixth and final primary factor our analysis identified is Community Attitude toward the mine redevelopment project.  Each of these factors is discussed in detail in Section IV.

Of course, mining redevelopment is more likely to be possible and more likely to be successful when a majority of these primary factors are positive. However, our analysis also shows that even when fifty percent of the factors are positive, one negative factor can overwhelm the effort, as was the case with our first case study mine, CR Kendall. Conversely, our examination also reveals that despite long odds, projects can be successful where Mining Company Strength enables the necessary time commitment to engage the community effectively.

II.              The Legal Framework

This section is designed to provide a general overview of legal requirements associated with exploring for minerals, commencing construction, and operating a mine.  Generally, the same requirements will apply to mine redevelopment, except that the presence of the valuable resource is likely already known, reducing the need for exploration. This legal framework discussion is neither exhaustive nor sufficiently detailed to be used as a “road map”.  Its purpose is to illustrate the magnitude of the undertaking of redeveloping a mine.

The developer of a mine or a mine owner is subject to all federal, state, and local right-of-way (ROW), land use, environmental, and operational permits triggered by that type of mining operation at that location. Even where the mine is located wholly on private property, it is subject to area land use restrictions, state environmental permitting, and to a variety of federal laws.[5] State law requirements will likely include permitting under the delegated states laws implementing the Clean Air Act (CAA),[6] the Clean Water Act (CWA),[7] the Solid Waste Disposal Act (SWDA),[8] and the Resource Conservation and Recovery Act (RCRA).[9]  The state may also have specific mining laws, including requirements to post bond for reclamation at the end of a mine’s life.

If the minerals are on federal land—as is often the case in the western United States—the resource may be locatable under the General Mining Laws[10]  or it may be leasable under Mineral Leasing Acts, including the Mineral Leasing Act of 1920,[11] the Geothermal Steam Act of 1970,[12] the Mineral Leasing Act for Acquired Lands of 1947,[13] and the Acts referenced in 30 U.S.C. § 505. Or the resource might be salable under the Materials Act of 1947.[14] Depending upon the type of mineral resource, it may be a load claim or a placer claim.[15] Any proposed mine development or redevelopment will be subject to the National Environmental Policy Act (NEPA).[16] If the proposal is a “major federal action that may significantly affect the quality of the human environment,” it will trigger Environmental Impact Statement (EIS) requirements.[17] To the extent that there are known or likely to be cultural resources present, the proposed mine redevelopment may be subject to the Archaeological and Historic Preservation Act (AHPA) and the National Historic Preservation Act (NHPA).[18] Under these laws, a cultural resources survey and associated reporting may be required and relocation of mine components (such as access roads, mills, etc.) may be necessary, if feasible. Historic release of hazardous substances at the site (including heavy metals or mining processing materials) may land the mine site on the National Priorities List (NPL).[19]

The owner of an unpatented mining claim on federally managed land has the right to extract minerals from the ground, but the United States maintains fee simple title to the land.[20] The owner’s “possessory right” is limited to activities that are “reasonably incident to prospecting, mining and processing operations” and is subject to the right of the United States to manage surface resources.[21]

With regard to the mineral estate, the owner of a patented or unpatented mining claim possesses the exclusive right to minerals within the vertical plane of the claim location.[22] Owners of lode claims may also have extra-lateral rights to the entire depth and length of veins, lodes, and ledges even outside the vertical plane of the lode claim location. Placer claims do not include such extra-lateral rights.[23]

An owner of a patented or unpatented mining claim generally does not owe a duty to adjacent property or mining claims, except the duty to provide subjacent support for the neighboring surface estate.[24] The administrative and judicial procedures for resolving conflicts between mining claims are generally limited to situations in which claims physically overlap.[25]  Where two locations conflict or overlap, priority is generally given to the senior locator, regardless of whether the claim is patented or unpatented.[26]

Further, because the owner of an unpatented claim lacks title, unpatented mining claims remain subject to the government’s broad authority to manage public lands.[27] This includes compliance with the General Mining Laws, the Federal Land Policy and Management Act (FLPMA).[28] But once a valuable mineral has been identified, subject to permitting, bonding for reclamation, and related requirements, the owner has the right to continue the mining operation until it has exhausted the valuable mineral.

Our analysis shows that one significant differentiator among our case studies was the quality, competence, and attitude of the relevant regulatory agencies. That is not surprising; even this brief summary of the legal framework demonstrates the complexity of the regulatory environment that any mine redevelopment must meet.

III.            The Three Case Studies

A.              CR Kendall Mine

1.               Background and History

The CR Kendall mine is a gold mine located in the North Moccasin Mountains about eight miles west of Hilger, twenty-five miles north of Lewistown, Montana. Mining began in the area in about 1880 and continued until 1942. The historic mining and milling activities resulted in tailings disposal in Mason Canyon, Barnes-King Gulch, and Little Dog Creek. Tailings were transported as far as 2 miles downstream of the mine.[29] Mining operations recommenced around 1981 by then owner, Triad Investments, Inc. Its operating permit was transferred to Greyhall Resources in approximately 1984, but management was assumed by Canyon Resources Corporation in 1987, while Greyhall’s bankruptcy was pending. Canyon Resources Corporation took over sole management of the property in 1990, under the name CR Kendall Corporation. CR Kendall Corporation continued mining until February 1995, with gold recovery continuing through late 1997.[30] A substantial, untapped gold deposit is still present within the operating permit boundaries. Its development would require enlargement and/or construction of a new tailings impoundment, which was never completed. The mine is now in the final stages of reclamation and closure. CR Kendall has filed for voluntary bankruptcy protection, but will fund completion of closure.

In 1995, the United States Bureau of Land Management (BLM) and CR Kendall completed a land exchange that made all lands within the permit boundary privately owned.[31]  Accordingly, the regulatory regime of primary interest is the State of Montana, including the Metal Mine Reclamation Act and the Montana Water Quality Act.  During the operating permit amendment Final EIS period, the Montana Department of Environmental Quality (MDEQ) required installation of in-drainage pump-back systems to contain water on-site. This resulted in accusations by local ranchers that the mine was diverting water that was historically theirs as senior water rights owners—a concern that has lingered. Others claimed that open pit reclamation by filling with mine waste could contaminate the water supply for Lewiston, Montana.  Another commenter accused the MDEQ of showing favoritism to CR Kendall over specific landowners.[32]

The CR Kendall mine is believed to be the first gold mine in the United States to successfully use cyanide heap leaching for gold extraction. Modern mining by cyanide heap leaching started in 1981 at the CR Kendall mine under a Small Miner Exclusion (disturbance of less than five acres). But by 1984, under its operating permit, Canyon Resources Corporation had a permit area of 119 acres that ultimately grew to 1,040 acres. During Greyhall’s bankruptcy circa 1987, there were uncontrolled discharges of cyanide process solution.[33]

Contemporaneously, an unrelated, large mine, the McDonald Gold Project, was proposed on the other side of the State of Montana, on the banks of the Blackfoot River. The proposal included open pit cyanide heap leach processing. This set off a citizen’s initiative, Initiative 137, to ban open pit cyanide heap leach mining that was adopted on November 6, 1998.[34] The effort was fueled by large ranch landowners from Hollywood and actor/director Robert Redford’s production of the 1992 movie A River Runs Through It, set in Missoula, Montana.[35] Despite the state cyanide ban, its use at CR Kendall was grandfathered. However, the die was cast; no new cyanide heap leach mining is allowed and CR Kendall expansion would not be approved.

In 2003, CR Kendall proposed a partial closure and reclamation plan, amending its operating permit. MDEQ initiated and scoped the EIS on the CR Kendall closure plan in 2003, but after two years it was never published. Work on the EIS was suspended in 2005 in response to CR Kendall’s proposal to submit a closure, long­-term water treatment, and reclamation plan. The Company and the MDEQ came to an agreement in 2012 on a plan to recommence the EIS closure plan. In the interim, the company conducted reclamation and closure activity under a “no-regrets” closure concept, where every phase of closure activity was individually approved and bonded, significantly extending timelines and costs. Implementation of that plan is now being completed by a custodial trust funded in the CR Kendall bankruptcy. Mining at Kendall stopped in 1996, but reclamation efforts are still ongoing at a cost that is exponentially higher than earlier estimates due to extensive and prolonged regulatory avoidance actions.

2.               Redevelopment Opportunity

The CR Kendall mine had a history of redevelopment, having closed in 1942 and reopened in 1981. After the 1981 reopening, the mine successfully produced gold for another sixteen years. The opportunity to develop the additional known gold resources is likely lost forever since the mine site has been reclaimed and is in final stages of closure.

3.               Factors Relevant to Redevelopment Outcome

First Factor: Valuable Resource Presence—the presence of a valuable resource is confirmed.[36]

Second Factor: Mining Company Strength—while the CR Kendall mine changed hands a number of times since 1981 and the second modern era owner went bankrupt, Canyon Resources Corporation operated and then owned the mine for a decade and had the financial capability to develop the additional gold deposit. Additionally, the company, under the leadership of its immediate past president, performed reclamation and closure actions concurrently with mining completion, did not have any unpermitted cyanide releases, reduced the overall disturbed acreage, implemented an effective long-term water treatment plan, and posted a cash reclamation bond with MDEQ. However, CR Kendall’s ownership was pragmatic about the cyanide ban and changing community dynamic. It did not pursue mine expansion, but ensured effective reclamation and closure. Thus, in our tally, we award a positive point to the Mining Company Strength Factor.

Third Factor: Regulatory Environment—the CR Kendall mine was operating in a negative regulatory environment, not of its own making. One of the consequences was that MDEQ failed to devote sufficient resources to approve plans timely—thus taking more than two years for a closure plan EIS—a process that was then terminated by CR Kendall and led to complete mine closure. Moreover, Initiative 137 was partly driven by citizen concerns about MDEQ’s failure to adequately regulate mines using cyanide heap leach processes. Ultimately, with the ban adopted, it likely would not have been possible for CR Kendall to expand its operations to mine the additional gold present at the mine. We give this factor a negative point.

Fourth Factor: Land Use Constraints—there were no physical land use constraints for mine expansion; in fact, that 1995 land exchange with the BLM reduced land use constraints.

Fifth Factor: Environmental Issues—the cyanide ban would preclude cyanide heap leach processing for mine expansion, and concerns were periodically raised (albeit without merit) about its impact to drinking water supplies.

Sixth Factor: Community Attitude—lastly, immediate neighbors were increasingly hostile to continued mining and, more importantly, the Hollywood invasion of Montana took a critical toll, that a single company, regardless of how well it was funded, could not combat.

Our final tally for CR Kendall is:  negative three; positive three; but the result prevented mine redevelopment. Here, the Regulatory Environment and Community Attitude that drove Initiative 137 overwhelmed the remaining factors.

B.              Robinson Nevada Mining Company Mine

1.               Background and History

The Robinson copper mine’s beginnings can be traced back to 1876. Since then, it has produced copper, gold, silver, and, more recently, molybdenum.[37] The mine operated from circa 1905 to 1978. In late 1906, Guggenheim interests acquired the Nevada Consolidated Copper Corporation and its Veteran Mine. Kennecott Copper Corporation was formed in 1915 as the holding company for the Guggenheim’s global copper holdings.[38] In 1932, Nevada Consolidated became a wholly owned subsidiary of Kennecott Copper, which continued mining operations at Robinson until 1978, when it closed the mine. Magma Copper bought Robinson in 1991, began reopening efforts in 1994, and in 1996 was acquired by the Broken Hill Proprietary Company Limited, now known as BHP Billiton (BHP). BHP operated Robinson from 1996 to 1999. The mine was placed in temporary closure in 1999 due to low copper prices. In 2004, as copper prices rebounded, Quadra purchased Robinson and reopened the mine.[39] KGHMI acquired Quadra in 2012 and has continued Robinson’s operations to the present.

Robinson operations were continuous for 73 years, from 1905 to 1978, through Nevada Consolidated and Kennecott. Kennecott was one of the largest copper companies in the world and devoted the necessary resources to develop Robinson; it had both open pit and underground mining operations, and at its peak up to 1,200 employees.[40] Recorded production from 1908 to 1978 was more than 4 billion pounds of copper and 2.7 million ounces of gold.[41] Nevada Consolidated established the company town of Ruth, Nevada, reportedly named after the daughter of the miner who discovered and staked the first claims at Robinson. The town of Ruth still exists today, though a shadow of its heyday. The main shaft to the underground workings was named the Deep Ruth Shaft. The underground portion of the mine was closed in 1942 when mining shifted exclusively to open-pit operations, but the headframe was preserved at the mine until the early 2000s. The town of Ruth, Nevada and the Deep Ruth mine shaft inspired the Steven King horror novel Desperation.

When BHP acquired Magma and Robinson in 1996, it had at least five major waste rock dumps—portions of each of which were acid generating—and associated pit lakes. The tailings impoundment was not functioning properly and the most recent regulatory inspection revealed heap leach pad liner integrity issues. Given the magnitude of this combination of issues, BHP elected to negotiate a consent decree with the Nevada Division of Environmental Protection (NDEP) pursuant to which it proceeded—over the next eight years—to correct, address, close, or reclaim many of these issues by mining redevelopment.

During the period from 1991 to 1996, Magma and BHP invested an estimated $480 million in the mine and plant, including the environmental efforts.[42] Under the consent decree, the investments included a new crusher, mill, and a complete reworking of the tailings impoundment operations. The tailings impoundment is located on BLM managed federal land, so its initial construction was subject to NEPA and required an EIS. The tailings impoundment reworking was within the scope of the preferred alternative and did not trigger additional NEPA review. However, it did trigger a re-evaluation and increase of the BLM reclamation bond.

2.               Redevelopment Opportunity

The redevelopment opportunity that is the focus of our analysis is the mine reopening in 1994. Robinson went into temporary closure under Nevada’s mining laws in 1999, but was reopened in 2004. Though its ownership changed hands again after 2004, it has remained in continuous operation from that time to the present and has continued to rely on the mining methods, infrastructure and investments made in 1991. In 2015, Robinson produced 57,000 tons of copper, 56,700 ounces of gold, and a small, unquantified, amount of molybdenum concentrate.[43]

3.               Factors Relevant to Redevelopment Outcome

First Factor: Valuable Resource Presence—the presence of a valuable resource is confirmed by the continued production of copper, gold, and molybdenum.

Second Factor: Mining Company Strength—this factor has been a positive factor for Robinson throughout its history. Focusing strictly on the era of redevelopment by BHP, the company had the leadership, vision, fiscal capability, and commitment to take the necessary steps, including the multiple year EIS process, to reopen and expand Robinson’s operations. Neither skilled community engagement nor continuity was a factor, but neither was necessary. The value of the resource was a driving factor and was significantly improved for the long-term by a change in mining approach and technology.  Specifically, BHP had the vision to install a new crusher, mill, and flotation processing plant that enabled recovery of all metal values, not just copper. Consequently, some historic tailings could be reprocessed, but, more importantly, the gold, molybdenum and other metal values are now captured. The change in processing method required the new tailings impoundment and construction of a long slurry pipeline for delivery. BHP had the Mining Company Strength to see the potential and make it a reality.

Third Factor: Regulatory Environment—Nevada has historically been and remains a favorable regulatory environment for the mining industry. Nevada became a state on the back of the mining industry.[44]  “Nevada leads the Nation in gold production and ranks second in silver production, providing 84% and 24% of the Nation’s gold and silver, respectively…. Nevada is the only state to produce lithium carbonate minerals and magnesite.”[45] The mining industry is vital to Nevada’s economy. Nevada has one of the more sophisticated and well-developed legal structures for mining. Its regulators are among the highest paid and most educated. Though the NDEP was vigilant about compliance and environmental protection at Robinson, its willingness to negotiate a consent decree—and the content of the consent decree—set a favorable regulatory tone for a decade of operations at Robinson.

Fourth Factor: Land Use Constraints—the land use constraints applicable to the 1991 Robinson redevelopment opportunities stemmed from the need to expand onto public land and the presence of cultural resources. These two issues required time and, hence, devotion of certain resources, but in this context were relatively minor hurdles. BHP complied with NEPA and underwent EIS review which required a little over two years. That approval set the stage for the next twenty-five years of operations. Robinson complied with the National Historic Preservation Act by consultation with the State Historic Preservation Officer and documentation of the cultural resources within the mine footprint. This latter land use constraint was not significant, as the regulatory authorities allowed expansion of the tailings impoundment, even though it resulted in one cultural resource site (a small camp that exhibited signs of hunting tool manufacture and where arrowheads were found) being buried. We gave this factor one-half negative point.

Fifth Factor: Environmental Issues—this factor could have proven to be the Achilles heel for the entire redevelopment effort. However, the leadership, vision and innovation of BHP management, together with a favorable regulatory environment, were able to overcome these hurdles. Specifically, portions of five major waste rock dumps were acid generating, creating stormwater and long-term acidic drainage issues. The heap leach pad liners also had integrity issues causing cyanide release concerns. This latter issue was addressed by comprehensive repairs, systematic inspections, and effective closure. The response to nearly 100 years of mining required more “outside of the box” thinking. BHP first tested all of the dumps, pits, and groundwater hydrologic blocks in full compliance with Nevada mining laws to identify the acid generating sources. It then developed a mine plan to neutralize and cover—by ongoing mining—all such acid sources. For example, base (alkaline) rock within the Ruth and Veteran-Tripp pits was segregated for placement on acid waste rock. In the regrading of both Veteran and Ruth waste rock dumps, the alkaline material was mixed in as needed for neutralization. BHP implemented reclamation of the historic waste rock dumps early—during operations—rather than at end of mine life or end of a mining phase, in order to cover and prevent acidification. BHP also successfully employed an experimental technique by deploying a small herd of cattle on the reclamation area to speed the process of seeding and enhance plant growth. This win-win approach achieved reclamation and reduced environmental impacts in historically mined areas (that were not BHP’s responsibility), while BHP obtained the needed approvals from NDEP to operate the mine. We awarded this factor one negative point because of these extensive environmental hurdles.

Sixth Factor: Community Attitude—this final factor was neutral to positive at Robinson. The town of Ruth was impacted by the mining restart, but its population had dwindled between 1978 and 1991. Many in Ruth obtained employment, directly or indirectly, from Robinson’s reopening.  And several safeguards, such as a particulate monitor, were provided by BHP to the community to ensure that mining would not adversely impact the residents.

For Robinson’s redevelopment, our point tally is:  negative one and a half; positive four and a half.  We allocated one-half negative point to the NEPA review requirement and one negative point for legacy environmental contamination.  The result was successful mine redevelopment.

C.              Comstock Mine

1.               Background and History

a)               The Comstock Bonanzas

The Comstock is located between the towns of Virginia City, Gold Hill, Silver City, and Dayton, Nevada. The gold and silver resources in the Comstock represent one of the largest precious metal deposits in the world. Mining on the Comstock was instrumental in financing the Civil War effort of the Lincoln Administration. It created the wealth of many western “industrialists” and funded at least two San Francisco real estate booms. Mining on the Comstock resulted in the development of numerous new mining and milling techniques that—more than 150 years later—are still in use. Silver production from the Comstock is commemorated by Nevada’s moniker as the “Silver State” and served as the impetus for Nevada to become a separate state, carved out of the Utah Territory. Perhaps most easily recognized, at least for American Baby Boomers, is that the Comstock mineral discoveries became legendary when memorialized in the television series “Bonanza.”

Gold was first discovered in the area along the Carson River in Gold Canyon in 1850 by John Orr and Nick Kelly, whose party was traveling from Salt Lake City to California, swept up in the California gold rush. They panned for gold and found a nugget, but thought greater riches awaited them in California and did not stay or stake claims.[46] In 1853, the brothers Hosea and Ethan Allen Grosh discovered silver, south of Gold Canyon and Silver City, in the Dayton area.[47]  But it was not until January 1859 that the area made history, when James Finney, nicknamed “Old Virginny” (for the state of his birth) and three friends explored uphill from Johntown, at the top of Gold Canyon, on an outcropping in the area now known as Gold Hill.  The story goes that they panned the dirt at the mouth of a ground squirrel hole, discovering a reported “fifteen cents to the pan.”[48]  Overnight the area was completely staked out in 50-foot placer claims and within months, miners hit the gold vein that came to be known as the Comstock Lode.[49]  In June of 1859, just north of Gold Hill, Patrick McLaughlin, Peter O’Riley, Henry T. “Pancake” Comstock, and Manny Penrod discovered a huge ore body—the Ophir Lode[50]—that returned a value of $876 per ton in gold and $3,000 per ton in silver. The bluish quartz sand, later found to be silver sulphide, was at first discarded in favor of the gold, until a sample was assayed later that month and discovered to have three-fourths of its value in silver.[51] Over the years, after the Ophir, bonanzas at the Gould & Curry, Savage, Chollar-Potosi, Yellow Jacket, Kentuck, Hale & Norcross, Crown Point, Belcher, and Consolidated Virginia mines followed from 1859 to 1882. The total production value from the Comstock during that period is estimated at $320 million, of which fifty-six percent was silver and forty-four percent was gold by value.[52]

b)               Comstock Innovations

Mining on the Comstock was also the mother of numerous inventions. The ores were complex and required different types of processing for gold recoveries versus silver. Stamp mills were perfected, crushing the ore to fine particles. By 1861, over 76 mills had been constructed in the region with the capability of processing 1,200 tons of ore daily.[53] The finer size material was combined with steam chamber heat and the use of revolving cast iron pans for amalgamation, thus was borne the Washoe process. It was less expensive and quicker than the alternative Freiberg process and more effectively captured the gold, though it lost some of the silver.[54] The process used mercury, also known as quicksilver, to create an amalgam by wet-crushing the ore with stamps, the crushed ore was separated from the slurry in a settling tank, charged with mercury in the amalgamation pan, and finally the amalgam was separated from the slurry and the silver and gold was separated from the amalgam with a retort.[55] At the turn of the last century, as the ore bodies played out, cyanide processing came into use to process low-grade ores and the tailings of previously treated ores. Flotation processing was also used, but by the 1940s many of the Comstock’s mills had either incorporated or were strictly cyanide mills.[56]

Given the instability of various underground mineralized formations on the Comstock, square-set timbering was invented by Philip Deidesheimer, a German engineer and graduate of Freiberg. Specifically, Deidesheimer invented the technique for the Ophir to provide stability. The Ophir had a large deposit of soft ore and the square-set timbering allowed the miners to remove it all, despite the large underground opening left by the excavation.[57] Ventilation throughout the Comstock’s deep mines was aided, in part, by the introduction of compressed air drills. A.S. Hallidie invented flat woven-wire rope in 1864 to use in hoists in place of hemp rope.[58] This flat woven-wire had much greater strength and durability, so much so that it was later used in San Francisco’s cable cars. Dynamite replaced black powder for mine blasting by 1868.[59] These innovations developed on the Comstock are still in use today, and not just in the mining industry.

c)               Historic Preservation Designations

Under the National Historic Preservation Act of 1966 and implementing regulations at 36 C.F.R. Part 800, in 1961, the National Park Service designated Virginia City as a National Historic Landmark based on information collected by the Historic American Building Survey in the early 1940s. Virginia City is also listed in the National Register of Historic Places, both the National Register and the National Landmark programs are administered by the National Park Service (NPS). The Virginia City Historic District was added to the National Register of Historic Places on October, 15, 1966, following the establishment of the Register by the passage of the NHPA.[60] Virginia City is also on the State Register of Historic Places, a program of the State Historic Preservation Office.

Redevelopment may be subject to the AHPA and the NHPA.[61] Specifically, Section 106 of the NHPA obligates Federal agencies with jurisdiction over a federally assisted “undertaking” to take into account the effects of such an undertaking on historic properties in consultation with the Advisory Council for Historic Preservation.[62] “Undertakings” are broadly defined to include any project, activity or program funded by a Federal agency, including projects subject to federal agency permit or approval.[63] Action on private property requiring only state or local permits or approvals will generally not constitute an “undertaking” and will not trigger the Section 106 process. The Section 106 evaluation process focuses on historically and culturally “significant” resources and, for those resources, may impose limitations or restrictions on federal agency undertakings to mitigate adverse impacts.

In addition, to preserve remaining historic buildings, seen as vital to the tourism industry, the Virginia City National Landmark Historic District, now known as the Comstock Historic District, and its implementing Commission (CHDC), were created by Nevada statute.[64] The CHDC encourages the preservation and promotion of historic resources with the Virginia City National Landmark District, but its authority is limited to standing buildings within the Historic District boundaries and it has no authority to consider impacts to the broader landscape, per a September 2011 opinion issued by the Nevada Attorney General. To further complicate the preservation equation, none of the three area boundaries—National Historic Landmark, National and State Registers of Historic Places, and the Comstock Historic District—are the same.  See the attached map.

d)               The Superfund Site Designation

The historic use of mercury to create amalgam, and thereby capture gold and silver, also released mercury into the atmosphere. It was not in a mill’s interest to lose mercury, since it was a material input to the Washoe process that had to be purchased. However, mercury was discharged in the mill tailings and some losses occurred through the steam heating and ventilation systems. The result was mercury contamination at former mill sites from the top of Gold Creek Canyon, down various draws to the east of Virginia City, and as far down the Carson River as the “Carson Sink.” Mercury contamination was first identified in the early 1970s during a river sediment sampling survey conducted by the United States Geologic Survey (USGS).[65] The United States Environmental Protection Agency listed the Carson River Mercury Site (CRMS) on the NPL in August 1990, under Superfund. It remains the only listed Superfund site in Nevada. Given the number of historic mills and resultant widespread nature of the mercury contamination, NDEP has developed a Long Term Sampling and Response Plan (LTSRP) and requires all landowners within the potential mercury impact area to conduct soil sampling to identify elevated mercury levels before disturbing more than a specified acreage.[66]

2.               Redevelopment Opportunity

The Plum Mining Company, LLC (Plum) acquired mineral interests, rights-of-way, and patented land in the late 1990s that consisted of a forty-acre parcel and several previously mined open-pit areas known as the Billy the Kid, Lucerne, and Hartford Pit areas. Under the General Mining Act of 1872 and its amendments, and in compliance with NEPA, Plum patented the pit areas and commenced gold and silver mining operations after obtaining all necessary permits in 2004. Plum began production in September 2004 and continued through 2007, when operations went into temporary closure. Comstock Mining Inc. (Comstock Mining) acquired Plum in 2003. The redevelopment opportunity we evaluated as our third case study was Comstock Mining’s project to emerge from temporary closure and restart mining operations.  The plan was to resume mining in the Billy the Kid pit but eventually to move to underground mining.

Comstock Mining had been compiling historic mine data, identifying promising claims, and acquiring those claims. Comstock Mining has an unprecedented library of historical and current data on the Comstock Lode. Its claim acquisitions include claims of some of the most historic bonanza discoveries on the Comstock, including the Savage, Hale & Norcross and Gould-Curry Bonanzas. Portions of the Comstock Mining holdings are in or adjacent to the CRMS or were within the potential area of mercury impact in which LTSRP sampling requirements applied. Many of the holdings are in the Virginia City National Landmark, the Virginia City National Register District, and the Comstock Historic District. Additionally, the patented and privately owned property of Comstock Mining is surrounded by federal lands managed by the BLM.

3.               Factors Relevant to Redevelopment Outcome

First Factor: Valuable Resource Presence—in addition to its growing library of historic mine data, Comstock Mining conducted several exploration drilling programs as far north as the former Chollar-Potosi mine, near the Yellow Jacket, in Gold Hill, and as far south as the Dayton area. From Plum’s 2007 mining, Comstock Mining also knew that the Billy the Kid pit had economic values of gold and silver.

Second Factor: Mining Company Strength—this factor is overwhelmingly positive for Comstock Mining. Comstock Mining’s President and Chief Executive Officer, Corrado de Gasperis, is a leader and strong manager. Working with the company’s board, he has developed a long-term vision for Comstock Mining that honors the history of the Comstock while deriving current value. Comstock Mining has engaged the community at every level. Though a junior miner, Comstock Mining is traded on the NYSE and, in view of the Comstock-area history, the mineral resource, and its developments, Comstock Mining has successfully raised money when necessary. Comstock Mining has demonstrated continuity, commitment, and determination— successfully working its way through redevelopment obstacles for more than a decade.

Despite facing significant adversity, described in later factors, Comstock Mining’s skill and persistence in community engagement is a differentiator not only for the company, but for the success of the redevelopment effort. For a number of years, Comstock Mining engaged a government relations team. At times that team was led by an in-house public relations manager, but was most successfully guided by Comstock Mining’s President and CEO. Comstock Mining’s community engagement focused first on education and transparency—about the mining process, the company’s plans, and its community value. Comstock Mining has a local hiring preference and has employed hundreds from the area. To accommodate visitors and new hires to the small community of Gold Hill, in 2011, Comstock Mining acquired the Gold Hill Hotel, the oldest continuously running hotel in Nevada—since 1861—and rumored to be haunted. Comstock Mining preserved and upgraded the Gold Hill Hotel operations. Comstock Mining hosts periodic mining education meetings at the Gold Hill Hotel. Comstock Mining bucked the trend of establishing its corporate office in Reno or Carson City, acquiring a number of houses in Gold Hill and converting several to office space, ultimately establishing its main office at the top of American Flat Road in a renovated 1931 Consolidated Chollar mine building. Comstock Mining has a “buy local” preference and works with local area contractors, consultants, and suppliers. Comstock Mining visited regularly with the Storey County and Lyons County Commissions and Planning Commissions. Comstock Mining formed a foundation to promote historic preservation and has restored and moved a headframe to the entrance to Virginia City, helped preserve the Yellow Jacket hoist and headframe, shored up timbering at the entrance of the Dayton mine, and created a public viewing area and history story boards. Comstock Mining hired retiring Nevada State Historic Preservation Officer, Ron James, to lead the Comstock Foundation.

Third Factor: Regulatory Environment—as noted in the Robinson discussion, given the importance of the mining industry to Nevada, the NDEP and other state regulatory agencies have been generally supportive of Comstock Mining’s redevelopment efforts. That said, the Bureau of Air Pollution Control had a several-year period of mixed leadership during which many mining companies were hit unfairly with slow permitting or unwarranted enforcement actions. Comstock Mining was not spared that difficulty, but through persistence, resolved its air permitting challenges. Similarly, the BLM has not always been informed, cooperative, or competent in its interactions with Comstock Mining. Many have assumed that BLM simply reflects the current administration’s antagonism toward mining. In any case, BLM applied a conservative interpretation of its authority to approve ROW assignments, initially rejecting Plum’s assignment of access road ROW to Comstock Mining and imposing a very expensive and inconvenient “work around” on Comstock Mining during a nearly year-long review process. Consequently, we assign a negative point for the Third Factor.

Fourth Factor: Land Use Constraints—we assign a negative point for this factor, as well. The land use constraint was the need for access across and use of BLM-managed federal land for various aspects of Comstock Mining’s operations. First, as noted in the discussion of the Third Factor, despite prior Plum Mining operations on a main mining haul road between the Billy the Kid pit and the processing area, the BLM field office denied assignment of the ROW and, instead issued a notice of trespass and cease and desist order. BLM also refused to acknowledge the private, patented ownership of a parcel, “Lot 51,” at the end of the ROW, proximate to the pit. At times, BLM’s demands seemed extortionate, but Comstock Mining accommodated, engaged in regular dialogue, worked with the BLM state office, worked with Congressional leadership, and over the course of three years, resolved those issues with BLM. On July 13, 2016, BLM conveyed a patent to Lot 51 to Comstock Mining and two weeks later granted a ROW amendment.

As a further complicating factor, given the mine properties’ location within the districts of a National Historic Landmark, National and State Registers of Historic Places, and the Comstock Historic District, every significant federal action, including permits and approvals, must be evaluated to determine whether it is an “undertaking” that triggers the Section 106 process under the NHPA. Modifications of standing structures also require the local approval of the CHDC. Some in the community have argued that being within the three historic preservation boundaries also triggers preservation of “vistas” or views that conform to the purposes for which the Landmark and district designations were made. It is unclear what such preservation would entail, but is presumed to be a push for no changes to the landscape whatsoever. Nearly every view from hill or valley within the Virginia City and Gold Hill area includes waste rock dumps, tailings piles, hoists, headframes, and related historic mining features. Preservation of these historic features preserves the area’s character. Moreover, the NHPA does not preclude landscape-scale land use changes. Consequently, the anti-mining contingent has not prevailed in its “no change within District boundaries” stance. Moreover, through the Comstock Foundation, Comstock Mining has engaged in meaningful historic preservation work that has contributed to maintaining the historic community character.

Fifth Factor: Environmental Issues—this factor is also negative. As noted, much of Comstock Mining’s leases, patented claims, process area, and mining targets were within the potential area of mercury impact of the Carson River Mercury Superfund Site. Consequently, NDEP required that Comstock Mining develop a detailed soil sampling and analysis plan (SAP), consistent with the State’s draft Long Term Sampling and Response Plan (LTSRP). Thousands of soil samples later, Comstock Mining provided NDEP the data and information necessary for NDEP to make a determination of whether the sampled material was waste derived from Comstock Lode era mining operations (i.e., historic mill site or tailings waste that is considered CRMS waste-impacted material) or was derived from primary mineralization in the bedrock. Several limited areas of historic mercury deposits were identified. Comstock Mining removed the largest deposit, along Gold Canyon Creek, in connection with Comstock Mining’s multi-million dollar relocation and major renovation of a portion of state highway that, unfortunately, ran over a historic mine shaft and through Comstock Mining’s patented mineral holdings. Aside from the usual compliance with federal, state, and local permitting requirements, the Superfund issues are now apparently resolved.

Sixth Factor: Community Attitude—from the inception of Comstock Mining’s redevelopment effort, there has been a persistent undercurrent of negative community attitude. But, the opposition has lost nearly all its ground and is waning. Despite the Comstock area’s rich mining history, many residents in Gold Hill and Silver City moved to those communities for their small town charm. Several residents are historians of state reputation. With limited mining in the area since the 1970s, some residents enjoyed the nostalgia of the Comstock mining era more than the thought of actual modern day mining. A group vehemently opposed to Comstock Mining’s mining redevelopment efforts formed the Comstock Residents Association (CRA). CRA has opposed every significant approval Comstock Mining required. CRA challenged county special use approvals in Storey and Lyon Counties. They challenged NDEP’s issuance of an air permit and, separately, a reclamation permit, before the State Environmental Commission. CRA is generally thought to be responsible for the BLM’s initial antagonism and resultant cease and desist order. CRA has mounted over a dozen challenges and objections to Comstock Mining’s normal conduct of its mining business. Though CRA has not been successful in stopping Comstock Mining, it has greatly multiplied its cost of doing business. Were it not for Comstock Mining’s persistent community outreach, CRA likely would have succeeded.

Our final tally for the Comstock Mining redevelopment is: negative four; positive two and a half. Negative points came from Factors 3, 4, 5, and 6. We allocated one positive point for Factor 1, and 1.5 points to Company Strength. Despite these odds, Comstock Mining has achieved a successful mine redevelopment.

IV.            Analysis and Comparison of the Factors

As we evaluated each case study to determine how to allocate Factor points, we applied the following definitions to each factor.  First, for Factor 1, Valuable Resource, we applied our notion of the “prudent man rule,” assuming the presence of a valuable resource and the opportunity to have a valuable mine based on the continued expenditure of labor and financial resources in each case study. The success at Robinson and Comstock confirm our assumption. We cannot be sure at CR Kendall, but deem the history of gold production sufficient to support our conclusion there.

Mining Company Strength is necessarily a subject analysis. It is dependent upon at least the multiple sub-factors we have identified. Even at a “strong” company, the depth and staying power can fluctuate with metals prices and other market factors. Consequently, in addition to considering financial capability, we also looked at innovative thinking, long-term vision, and willingness to take a certain degree of risk as evidenced by making major investments with assurance of pay-off. We also determined that understanding the importance of community engagement and being able to effectively engage with the community were important aspects of company strength.

Our evaluation of the regulatory environment was fairly straightforward based upon the case studies we selected. Slow-rolling permit evaluations, understaffing, and similar regulatory responses are a clear indication of a negative regulatory environment. Conversely, the willingness of a regulatory agency to innovate with an applicant and to consider an approach that has not been tried before are attributes of a positive regulatory environment. Of course, mine redevelopment projects must generally work with multiple regulatory agencies and some may be positive while others are antagonistic. The Comstock case study presents an example of two quite different regulatory environments, each of which evolved as Comstock Mining persisted.

Our assessment of land use constraints considered both actual land use restrictions and potential regulatory schemes resulting in land use restrictions. In our case studies, federal land management and NEPA requirements, Historic District and National Historic Preservation Act constraints apply. Endangered Species Act limitations would also fit within this factor, though none of our case studies present this constraint.

Though customary environmental permitting for a mining project can be quite daunting, we did not consider normal permitting to be an environmental issue for purposes of the Fifth Factor. Rather, to garner a negative point in this category, the project must present Superfund listing, presence in a Superfund site, significant legacy issues, or—as was the case with CR Kendall—an environmentally driven ban. Each of our case studies presents an environmental issue of this type. Most mining redevelopment projects do involve environmental issues; as redevelopment projects, they likely include some legacy environmental considerations.

Our last factor, Community Attitude, can also be subjective. However, if a project is facing negative community attitude, it generally becomes painfully apparent. Picketing, regulatory challenges, hostility at public meetings, “No Mining” and “Stop Mining” signs prominently placed in the community are all examples of negative community attitude. Two of our three case studies were faced with negative community attitude. The source and magnitude of the Montana cyanide ban could not be overcome by a single mining company. The contrast at Comstock was instructive. There, the opposition was from a diverse group of individuals, not celebrities. The manner in which Comstock Mining responded to the opposition is a textbook example of effective engagement—and it has gradually improved the Community Attitude. The following table presents our Factor comparison for each of the case studies.





Factor Number & Description CR Kendall Robinson Comstock
1 Valuable Resource Yes-Gold Yes-Copper, Gold, Silver, Molybdenum Yes-Gold, Silver


Mining Company Strength      
  ·       Leadership ü ü ü  +
  ·       Vision ü ü ü  +
  ·       Community Engagement ü   ü  +
  ·       Fiscal Capability ü  – ü  + ü
  ·       Continuity   ü ü
  ·       Commitment   ü  + ü  +
3 Regulatory Environment Negative Positive Mixed, Negative
4 Land Use Constraints None specifically NEPA BLM, NHPA
5 Environmental Issues Cyanide Ban Historic Releases Superfund Site
6 Community Attitude Negative Positive Negative
  TOTAL POINTS Positive:  3

Negative: 3

Positive:  4.5

Negative: 1.5

Positive:  2.5

Negative: 4


V.              Conclusions

Successful redevelopment of a mine requires that a number of factors line up favorably. First and foremost, the presence of a valuable resource is necessary for a mine redevelopment project’s success. Success also requires sustained dedication of a lot of resources. And, as a preliminary step to committing the necessary resources, mining companies must first confirm the quality of the resource through exploration. Early project assessment should also include gathering necessary resource data, evaluating area environmental sensitivities, and gauging the regulatory environment and community attitude.

We found that the Mining Company Strength factor can frequently overcome other unfavorable factors. Effective leadership can improve the regulatory environment, win the support of the community, and even mitigate the effects of environmental issues. Our analysis suggests that a company’s leadership and vision to develop a positive Community Attitude factor by engaging directly with the community, educating, and getting ahead of negative perceptions is the second strongest determining factor—positive Community Attitude can maintain or create positives for the Regulatory Environment, Land Use Constraints, and Environmental Issues factors.

In conclusion, the success of a project is not strictly about the resource and the regulatory climate, it is also dependent upon a strategic approach to project development that embraces the community, both regulatory and residential, as partners in the redevelopment process.


[1] The views and analysis expressed in this paper are the authors’ alone and do not reflect the views, legal opinions, or analyses of Squire Patton Boggs, Canyon Resources Corporation, BHP Billiton, Comstock Mining, or any other entity.

[2] 43 C.F.R. §§ 3830.11-3830.12 (2017).

[3] First articulated by the Department of the Interior (DOI) in Castle v. Womble, 19 L.D. 455 (1894); see also Chrisman v. Miller, 197 U.S. 313, 322-23 (1905) (setting out the standard as follows: “where minerals have been found and the evidence is of such a character that a person of ordinary prudence would be justified in the further expenditure of his labor and means, with a reasonable prospect of success in developing a valuable mine, the requirements of the statute have been met.”).

[4] U.S. v. Coleman, 390 U.S. 599, 602 (1968).

[5] E.g., Endangered Species Act (ESA), 16 U.S.C. §§ 1531-1544; The Migratory Bird Treaty Act of 1918, 16 U.S.C. §§ 703-712; The Bald and Golden Eagle Protection Act, 16 U.S.C. §§ 668-668(c).

[6] 42 U.S.C. §§ 7401- (2012).

[7] 33 U.S.C. §§ 1251-1388 (2012).

[8] 42 U.S.C. §§ 6901-  (2012).

[9] 42 U.S.C. §§ 6921-6939(g) (2012).

[10] See 43 C.F.R. §§ 3830.11-3830.12 (2003).

[11] 30 U.S.C. §§ 181- (1920) (amended 1981).

[12] 30 U.S.C. §§ 1001- (1970) (amended 2005).

[13] 30 U.S.C. §§ 351- (1947) (amended 1981).

[14] 30 U.S.C. §§ 601-604 (1947) (amended 1955).

[15] See 43 C.F.R. § 3832.21(a)-(b) (2003).

[16] 42 U.S.C. §§ 4321- (1970).

[17] National Environmental Policy Act § 102(c), 42 U.S.C. § 4332(c) (2012).

[18] 16 U.S.C. § 469 (1960) (omitted 2014); 16 U.S.C. §§ 470- (1966) (omitted 2014).

[19] Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601- (2002).

[20] See Best v. Humboldt Placer Min. Co., 371 U.S. 334, 335-36 (1963).

[21] 30 U.S.C. § 612(a) (2012); 43 C.F.R. § 3712.1 (2003); United States v. Backlund, 689 F.3d 986, 991 (9th Cir. 2012).

[22] 30 U.S.C. § 26 (2012).

[23] Id.; 43 C.F.R. § 3832.21 (2003).

[24] See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 412 (1922).

[25] See, e.g., BLM Handbook H-3870-1;The Rocky Mountain Mineral Found., American Law of Mining § 36.05 (2nd ed. 1984).

[26] See St. Louis Mining & Milling Co. v. Mont. Mining Co., 104 F. 664, 668 (9th Cir. 1900).

[27] McMaster v. United States, 731 F.3d 881, 895 (9th Cir. 2013).

[28] 43 U.S.C. §§ 1701-1787, 30 U.S.C. §§ 611-615 (2012).

[29]  Montana Dep’t of Envt. Quality, FINAL CR Kendall Mine Closure Environmental Impact Statement, 1-2 (Apr. 15, 2016),

[30] Id.

[31] Id. at 1-16.

[32] Id. at1-18.

[33] Id. at 1-2.

[34] See Mont. Code Ann. § 82-4-390 (1980). With the success in Montana, similar legislation to ban cyanide was proposed in Colorado, but was defeated.  It may have been proposed in other western states as well, but the ban was only adopted in Montana.

[35] September 12, 2016 personal communication between author, Ms. McIntosh, and the former president of CR Kendall.

[36] Id. 

[37]Robinson, KGHM Corporate, (last visited Sept. 4, 2016).

[38] Our History, Rio Tinto Kennecott, (last visited Sept. 5, 2016).

[39] Robinson Mining District, Great Basin National Heritage Area, (last visited Sept. 4, 2016).

[40] Contemporaneously with its sale of Robinson, through a series of transactions, Kennecott was acquired by Rio Tinto Zinc.  It is now known as Kennecott Utah Copper Corporation, a subsidiary of Rio Tinto Kennecott, and owns and operates the Bingham Canyon Mine, the largest man-made excavation on earth.  See Rio Tinto Kennecott supra note 38.

[41] Robinson Mine at Mining Record, 2009.

[42] Id.

[43] KGHM Corporate supra note 37.

[44] See infra Section III.C.

[45] See National Mining Association,, (last viewed Sept. 5, 2016) (statistics derived from state information).

[46] Grant H. Smith, The History of the Comstock Lode, 1850-1920 1 (9th prtg. 1980). The author is grateful to have received a loaned copy from Steve Alfers, President and Chief Executive Officer of Nevada gold producer, Pershing Gold Corporation.

[47] Id. at 2, 4.

[48] Id. at 5.

[49] Id. at 4.

[50] Id. at 7.

[51] Id. at 9.

[52] Id., at app.

[53] Ronald M. James, The Roar and Silence: A History of Virginia City and the Comstock Lode (1980).

[54] Id. at 43-45.

[55] Nev. Dept. Envtl. Protection, Carson River Mercury Site – Overview, (last updated Oct. 3, 2016).

[56] Carl Stoddard & Jay A. Carpenter, Mineral Resources of Storey and Lyon Counties, Nevada (Bulletin 49, 1950).

[57] Id. at 23-24.

[58] Id. at 47.

[59] Id.

[60] 16 U.S.C. §§ 470- (1966).

[61] Id., 16 U.S.C. §469 (2012).

[62] 16 U.S.C. § 470 (1966).

[63] See 36 C.F.R. § 800.16(y).

[64] Nev. Rev. Stat. § 384.020 (1969).

[65] Nev. Div. of Env’t Protection Carson River Mercury Site – Overview, (last updated Oct. 3, 2016).

[66] Id.


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