The historic Drumlummon Gold Mine near Marysville will close down the majority of its mining operations by the end of June due to plummeting gold prices.
In a letter given to employees on Wednesday, Bob Taylor, the chief operating officer, wrote that at this time, given current gold market conditions, “it is expected that the closing of regular operations will be permanent.”
However, in a news release, mine owner U.S. Silver & Gold Inc. backed off of the permanent closure statement, saying it would put its Drumlummon Mine on “care and maintenance” status. In recent weeks, the price of gold has dropped from a high of $1,888 per ounce in August 2011 to $1,431 per ounce at the close of the market Wednesday.
“Unfortunately, production at the Drumlummon Mine is not economically viable at current gold prices,” said Darren Blasutti, U.S. Silver & Gold president and chief executive officer. “We have been working very hard since the beginning of the year to reduce costs and increase productivity at the mine, and while we expected to see improvements over the course of 2013, current gold prices and forecast gold production do not warrant continuing our operations there.”
Drumlummon spokesman Darryl James said by June 28 they expect to have laid off about 107 people between the mine and at the milling facility in Phillipsburg.
“Until that time, we will continue to process any available broken rock in the mine, but won’t be doing any additional blasting or removal of new ore,” James said. “We will ramp down operations in the next 60 days, but intend right now to continue some small-scale exploration at the mine and surrounding areas, and across the state.”
He said employees were informed of the decision at shift change at 6 p.m. Wednesday.
Between 2009 and 2011, the price of gold almost doubled from $900 to $1,800 per ounce. The New York Times reported last week that since then, the price of gold has been “undergoing an extraordinary reversal” and that the pace has been picking up in recent days.
The Times reported that Dennis Gartman, a gold investor, wrote to clients last week that they’ve traded gold for nearly four decades and “never … ever … EVER … seen anything” like what he witnessed in recent trading sessions. With the 20 percent drop in price, gold officially is considered to be in the bear market category.
Irish immigrant Tommy Cruse discovered gold near Marysville in the 1870s, and the Drumlummon mine made him one of the richest men in Montana. Prior to the recent efforts, work stopped at the mine in 1953 and water flooded the lower levels.
With the newest mining efforts, Drumlummon Gold Corporation has pumped thousands of gallons of water from the mine’s lower reaches and removed arsenic from it, then discharged it outside the mine. They managed to lower the water level from about 400 feet down to 800 feet and explore the deeper sections, and spent more than
$10 million blasting new tunnels and reinforcing ancient ones, while chasing old and new veins they believe hold $100 million in gold and silver.
In December 2011, the company filed paperwork with the state seeking an operating permit, which is a step up from the small miner’s exclusion permit under which they were conducting mining activities. After the state responded with a lengthy list of additional questions, the forward movement on the permitting request ground to a halt.
The mine was both a blessing and a boondoggle to Lewis and Clark County and its residents. While many people appreciated the economic boost and good wages paying about $80,000 annually, others said the mine operated with blatant disregard for Marysville residents.
County Commissioner Mike Murray said he was “shocked and disappointed” at news of the impending closure.
“I’ve very surprised,” Murray said. “We were hoping to have an active mine here. They have been a good partner to work with. … I was hoping they were the golden goose, so to speak.”
But Marysville resident Billy Christensen was overjoyed. He used to live in a house that overlooked the Helena Valley — and the Drumlummon Mine — and said the continual noise and lights at what had turned into an industrial site forced him to sell his home at a loss and build a new one on other property he owned. Residents complained about heavy truck traffic and alleged illegal water discharges by the company. He said dewatering at the mine caused at least seven wells recently to go dry, including that of the Marysville Fire Department last week, and that the community was kept in the dark about mining operations.
“I’m happy, but curious as to what it really means and whether they’ll be coming back here in six months and start all over again,” Christensen said. “There were a lot of people disrupted here who had lived here all their lives and it was a tragedy in a lot of ways.
“But this is amazing news. I thought it would be there for 20 years and they would ruin everything.”
James noted that they’ve re-drilled the wells they impacted, and would be doing the same for the fire department.
“Their well wasn’t dry; we did some pump testing and sucked some mud into the pump when we were looking at whether it met our criteria for replacement,” he said, adding that during that time they made arrangements that would allow the fire department to fill their trucks from the Drumlummon guard shack. “So there’s not an immediate need, but we intend to do that (fix the fire department’s well) this spring. That will be done before we shut off the pumps” inside the mine.
Blasutti said that they appreciate the commitment and outstanding contributions made by Drumlummon employees.
“We will do our best to help ensure a smooth transition for everyone affected by this change,” he added.
Reporter Eve Byron: 447-4076 or firstname.lastname@example.org
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