March 28, 2008 / 12:13 AM / in 10 years

Gold capital booms, but eyes downturn

ELKO, Nevada (Reuters) - When Elaine Barkdull Spencer’s two sons were growing up, she vowed they would never work in gold mining, because of its capricious cycles of boom and bust.

<p>An old cabin in front of the Chamber of Commerce is seen in Elko, Nevada, March 10, 2008. Long overshadowed by Nevada's famed casino capital Las Vegas and its second city Reno, the Elko region (population 40,000) has become North America's top gold producer without generating much fanfare elsewhere in the United States. REUTERS/Adam Tanner</p>

These days, both sons are in the industry and Barkdull Spencer isn’t complaining. One of her sons, who is 27, earns $100,000 a year and the other, who is 25, makes $90,000.

It is hard to outshine gold in rural northeastern Nevada. With gold at record levels on a weak dollar, inflation concerns and U.S. economic uncertainty, Elko (population 22,000) is enjoying a boom.

“We’re at the peak of our cycle,” Barkdull Spencer said.

Long overshadowed by Nevada’s famed casino capital Las Vegas and its second city Reno, the Elko region (population 40,000) has become North America’s top gold producer without generating much fanfare elsewhere in the United States.

By contrast, Las Vegas 470 miles to the south has lured hundreds of thousands of newcomers in recent years hoping to strike it rich in one of the American West’s fastest growing cities. Yet the Vegas mood has soured amid tumbling home prices a glut of “for sale” signs hitting the street.

About 60 percent of Elko people work for the mines or their subcontractors, putting good, steady money in their pockets. Houses are in short supply, although cheaper homes still sell for less than $200,000.

“We’re victims of our success right now,” Elko Mayor Michael Franzoia said in an interview. “There is not enough housing to meet demand.”

The mines are struggling to find enough qualified workers, and other firms offering lower wages, such as hotels, stores and pizzerias have had trouble finding people willing to work.

LEARNING TO LOVE ELKO

Even Elko boosters concede the remote area is not for everyone. The desert weather turns bitter cold in winter and baking hot on summer days. The town’s casinos have a faded look of yesteryear and major cities such as Salt Lake City or Reno are four hours away by car.

“It took me three years until I could say I liked it,” said Sara Nichols, who moved to Elko when her husband got a job at a mine. She now herself works at America’s largest producing mine, Barrick’s Goldstrike.

Andrea Ouchi, 28, who moved to Elko from Canada a year ago to work more than 1,000 feet underground at Goldstrike, gives Elko a better review. She enjoys skiing, hiking and riding off-road in the sparsely populated region. “The people here are the most friendly, inviting people, although a bit redneck,” she said.

Singer Bing Crosby once owned ranches in Elko County, but such celebrity is absent today in a town clustered around Route 80, the highway connecting San Francisco to the rest of the country.

Elko does host an annual National Cowboy Poetry Gathering, and, perhaps fitting for a rugged Western frontier town, it is the largest town in Nevada with a legal brothel. “Every town should have them,” Mayor Franzoia said. “It blends into the community quite well.”

BRACING AGAINST DOWNTURN

The biggest long-term fear is that gold prices will fall in the future and hurt the local economy. Gold hit a record of $1,030 a troy ounce on March 17, and has since fallen to around $950.

“Six or seven years ago when the price of gold was way down, the mines were laying off a lot of people,” said Charlie Seemann, executive director of the Western Folklife Center in Elko. “It wasn’t unusual to see empty storefronts.”

As executive director of the Elko County Economic Diversification Authority, Barkdull Spencer has been working on attracting non-mining businesses in preparation for the other side of the cycle. These include a new railport and industrial park outside the city and a large shopping plaza anchored by a Lowe’s home improvement store.

Reno-based real estate company MTK Ltd. is leading a development effort to build 3,700 new homes eight miles south of Elko over a 20-year period starting in 2009.

“There is a lot of untapped opportunity inside Elko,” said Michael Dermody, an MTK partner. “Gold, that’s a key to the Elko economy. But we think, with the community growing, there will be other economies pulling that will support it.”

Mayor Franzoia is skeptical about large housing development projects. “I’ll believe it when I see it,” he said.

Barkdull Spencer says local concern about the national economy has had some impact in Elko recently, with local housing prices falling slightly.

John Carpenter, a veteran, cowboy-hat-wearing state assemblyman and businessman who has lived in Elko for 51 years, long ago accepted the town’s uncertain fate tied to gold and is less rosy about economic diversification.

“There is no question it’s going to boom and bust,” he said. “It’s dependent on a world economy.”

“To replace the mines right now -- you can’t get any kind of other industry now to replace it.”

Reporting by Adam Tanner; Editing by Eddie Evans

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