Thursday, April 18, 2013 | 2 a.m.
When considering increasing state revenues from mining, it is crucial to understand certain realities of the mining business. Mining is very good for Nevada but could leave if efforts to turn it into a cash cow go too far.
Nevada has favorable geology and new discoveries will surely be made to replace existing mines as they are worked out — provided we do not remove the financial incentives for continuing the high-risk business of mineral exploration and development. Mining is truly international, going wherever in the world that offers favorable geology and political-economic environment. There are many places to choose from, and countries with great geology are ignored for decades because of the other factors.
Mining is cyclical — it has always been boom or bust. When metal prices are good, lower-grade ores are mined, extending mine life and helping profitability. As prices tank, profits drop and operations restrict or go out of business.
It is crucial that the tax structure be based on net profits rather than gross income, to allow the industry to ride out the bust years, and to continue to attract new exploration for the next generation of mines.