Though gold mining in Arizona doesn’t hold the promise of unimagined wealth it did years ago, there still is magic in seeing tiny sparkles appear in murky water.

Arizona hasn’t had a commercial gold mine operating since the mid-1990s, but recreational mining is quite popular and two development companies are renewing exploration at previously producing mines.

Gold mining may also bring the prospect of fraud. Too many investors who dug into their savings accounts to invest in what was pitched as a golden opportunity have found that things didn’t always — pan out.

Nyal Niemuth, an engineer at the Arizona Department of Mines and Mineral Resources, says there is no commercial gold mining going on in Arizona today. There is, however, plenty of interest.

About 10,000 rockhounds, many of them members of science clubs, are panning for gold in the boondocks, hoping to come away with more than a sunburn or a scorpion bite.

Diane Bain, public information officer for the department, says, “Arizona is a wonderful state for panning gold.” She recommends the area around Lynx Lake and Lynx Creek in Yavapai County as an ideal place for panning in the summer because it’s cooler there. “It’s safe, there are no private claims up there, no permits are needed, and it’s open for panning and metal detectors,” she says.

Better yet, there’s no limit on how much gold an individual can haul away. During winter months, Ms. Bain recommends Lake Pleasant. Other panning sites Ms. Bain favors include the Hassayampa River, Patagonia, Cave Creek, the Bradshaw Mountains, Big Bug Gulch and Humbug.

In a mining department publication, Gold Panning in Arizona, Ms. Bain says the equipment needed for panning is minimal and inexpensive. She calls panning a “healthy outdoor exercise in which the whole family can participate.” But, she says in the publication, “the days of ‘striking it rich’ gold panning are over.”

Gold Prices On The Rise

Commercial gold mining is cyclical and is tied to the price, which during June was hovering in the neighborhood of $356 an ounce, making it profitable to mine. During 2000 and 2001, prices sunk below $300 an ounce, and gold mining virtually vanished. Before that, Arizona yielded 59,000 troy ounces valued at $17.4 million in 1998, but in 1999, the corresponding figures were 24,500 troy ounces valued at $6.8 million, according to figures compiled by the mining department. (Troy weight is a unit where the pound is 12 ounces, instead of 16.) Much of that gold was a byproduct of copper mining, but processing at the copper mine at Morenci switched from concentrators to leaching, which does not allow for the recovery of gold, Mr. Niemuth says.

When the price is around $335 an ounce, there is some interest in gold mining, Mr. Niemuth says, “but $400 will kick off a lot more interest.”

Gold Searches

A rise in gold prices led two mining operators to renew searches for gold in Arizona this year. They are American Bonanza Gold Mining Corp., which found high grade samples and is setting up a drill station at its Copperstone property, an open pit mine in La Paz County; and Abington Ventures, which started drilling at its Verdstone Gold Mine in the Wickenburg area on April 22. Abington Ventures says Verdstone, according to available engineering summaries, was a producer from approximately 1989 to 1994, yielding some 500,000 tons of gold and silver. “The best place to look for gold,” says Mr. Niemuth, “is where it was found before.” Despite a glimmer of hope, he says, “The status of gold mining in Arizona is horrible. There are no primary operating lode gold mines, only nonprofit clubs for panning. Gold as a byproduct of copper has fallen. We are at the lowest gold production levels in at least 20 years.”

Every once in a while, someone gets lucky. Mr. Niemuth says a man and his wife, or significant other, came into the Department of Mines and Mineral Resources recently claiming to have found a one-ounce nugget of gold north of Morristown. The couple, probably in their early ’60s, didn’t produce the nugget, but Mr. Niemuth says they were believable. “They looked like prospectors,” Mr. Niemuth says. “I don’t know what they were going to do with it, but chances are they’ll hang onto it for bragging rights and maybe have it made into a piece of jewelry. “They said they found it with a metal detector, and yes, they were going back to look for more.”

The U.S. Bureau of Land Management also reports a lack of gold activity. The BLM manages 19 per cent of the surface and 45 per cent of the subsurface of the entire state, and supervises about 72,900 acres of Indian and mineral leases. Additionally, the BLM administers mining claim records and mineral leases on lands managed by other federal agencies. There are 24,135 active mining claims recorded on Arizona’s public lands, including exploration and development of gold and other minerals, the BLM says. Ralph Costa, who heads the Arizona BLM Mining Law Program, says there are no actively producing gold mines on BLM property. “We have some small scale miners producing gold, maybe one or two people, but we have not permitted one with a plan of operations, including a payroll,” Mr. Costa says.

These small operations are taking place in a broad arc from Kingman to Wickenburg, taking in Stanton and Octave between Wickenburg and Prescott, Mr. Costa says.

In general, gold panning is allowed on BLM and Forest Service land where there are no existing claims. That means anyone can look for gold on BLM and Forest Service property if they’re just using small hand tools, Mr. Costa says. But it’s best to check with BLM to find out if there are any active claims in a particular area. If there is a claim, that can be a significant obstacle, he says, because the claim holder is likely to object. To keep a claim active, the holder must be doing some work at the site and must pay an annual maintenance fee.

It’s not uncommon to have several claims on the same site, which gets into allegations of claim-jumping and generally must be decided in court.

Scams

W. Scott Donaldson, a Phoenix attorney who has researched mining scams, says gold fever and accompanying rip-offs go back to territorial days and continue in the 21st century.

“We have seen a slight increase in mining scams, especially since [the terrorist attacks of] 9-11,” Mr. Donaldson says.

Scammers look for an event that threatens national security and leads to economic uncertainty, such as this year’s Iraq war. “They see an opportunity to promote precious metals as a good investment,” he says. “Precious metals may be a good investment, but it’s fertile ground for a scam and get-rich-quick promotions that feed on fear and anxiety. There was a big surge in scams after the stock market crash in the late 1980s.”

Among the gold mining scams Mr. Donaldson researched by culling newspaper articles and other documents, were:

Desert Gold Mining Company, which claimed the discovery of a large and easily accessible gold deposit north of Phoenix in the early 1960s. The BLM determined that the operators were doctoring samples with a sprinkling of gold. The FBI observed Dale Moran, a Phoenix contractor and principal in the mining operation, who was indicted for “gold salting.” He pleaded guilty to a charge of deception of a prospective purchaser and was sentenced to six months in jail, but the sentence was suspended and he was placed on probation.

Tracon International of Phoenix sold stock in what officials described as “a dubious gold mine” northwest of Wickenburg in the 1980s, targeting mostly religious groups around the country. The firm’
s top four officers were charged with selling unregistered securities, among other things. The defendants either pled guilty or were convicted.

Mammoth Mine at Apache Junction involved what Mr. Donaldson calls “the most far-fetched tale of mineral wealth.” A law enforcement official said the owner, Marshall Ott, claimed to have died in 1980 and spent two and a half hours in heaven with God, who mapped out the Mammoth plan. Investigators said Ott used an assay analysis from the 1920s, a time when large quantities of gold were extracted from the mine. He was indicted on charges of conspiracy, fraudulent schemes and artifices and the sale of unregistered securities.

Orex Gold Mines Corp. and the Santa Maria Mine along the Santa Maria River near Wickenburg were used by members of New York crime families as the foundation of a bogus mining operation. In April 2001, 45 individuals were indicted on numerous charges, including four in connection with what prosecutors called a “pump and dump” stock fraud involving the mine and Orex. Two of the four were considered higher-ups in the Genovese crime family.

Tom Van of A&B Prospecting Supplies, which calls itself the Southwest’s largest prospecting store, says there is plenty of gold-hunting activity going on in Arizona, mostly through clubs. “Metal detecting is real popular,” Mr. Van says. “A lot of people can’t physically dig, but they can handle a metal detector.”

Mr. Niemuth of the state agency says, “It’s easy to find gold in many Arizona streams, especially in the Bradshaw Mountains. Take a hub cap or a Frisbee out to Lynx Lake near Prescott.”

But Mr. Niemuth adds a sobering thought about mining: “Eventually, all mines end in failure.”

For More Information

A source of information on gold panning, including prospecting tips, panning instructions, and maps to public panning areas, can be found in the Department of Mines and Mineral Resources Web site, www.admmr.state.az.us. —