Record Price Drives Search For Gold – And Opposition – In Black Hills

Oct 16, 2020

Members of the Clean Water Alliance demonstrate alongside Rapid Creek in Rapid City against gold exploration and exploratory drilling in the Rapid Creek watershed.
Credit Seth Tupper / SDPB

Soaring gold prices are fueling a rush for the next big discovery in the Black Hills, but gold miners and prospectors are encountering opposition.

One reason for the surging prices is the down economy. Some people see gold as a safe investment, so they scramble to buy it in times of economic uncertainty. That sends the price higher.

In August, the price hit $2,000 an ounce for the first time ever.

That’s motivated some investors to do more than just buy gold. Some are also investing in the search for places to mine it.

And that search is bringing prospectors back to an old mining haven: the Black Hills. Why? A promotional video from Dakota Territory Resource Corporation explains: “There is a saying in the exploration business that the odds are best in the shadow of the headframe.”

In other words, where there’s been a successful mine, there could be more gold. And South Dakota has the gold standard of gold mines: The Homestake in Lead. It produced more than 41 million ounces before it closed about 20 years ago. The nearby Wharf Mine is still active and generated 84,000 ounces last year.

Opposition arises

Now the search is on for the next Homestake or Wharf. Dakota Territory is one of at least seven companies or entities that are planning to drill, are already drilling, or are trying to open a new gold mine in the Black Hills.

Many of them consider the region a mining-friendly area. After all, said Rob Bergmann of F3 Gold in Minneapolis, the mining history is long.

“We’ve been using the Black Hills as recreation lands and co-existing with mineral exploration and mining for over 140 years,” Bergmann said.

F3 wants to do exploratory drilling near Pactola Reservoir. But the company faces opposition, primarily from the Black Hills Clean Water Alliance. The alliance says exploration could lead to a mine, and a mine could pollute Pactola and Rapid Creek. Rapid City gets water from both.

So, members of the alliance are supporting an effort called Rapid Creek Watershed Action, to seek congressional designation of a national recreation area in the watershed. Supporters of the action, including Carla Marshall, of Rapid City, say it would prevent mining.

“The mining companies come in and they just pollute and get up and leave – contaminate the water, and then they just leave,” Marshall said.

Two decades ago, the company that owned the Gilt Edge Mine near Lead did exactly that. It went bankrupt and left millions of gallons of polluted water in pits. The state and federal government are stuck with a cleanup that has cost more than $120 million so far.

But that was a full-scale mining operation, which is different than exploratory drilling. Retired U.S. Geological Survey hydrologist Dan Driscoll spent decades studying water in the Black Hills. He said there are risks with drilling, but they’re small in comparison with mining.

“You basically drill the well, and the rock cuttings are removed from the well, and whether or not there’s any particular quantities of water that could be produced from one of these test holes, they’re basically just closed,” Driscoll said of exploratory drilling. “And the potential effect on groundwater is really quite minimal, in my opinion.”

Bergmann, of F3 Gold, said a small percentage of drilling projects end up leading to a mine. That often takes years. And the company does not have permission to drill yet. It’s waiting for an environmental assessment of a proposal to drill on national forest land near Pactola.

Several companies are active

Another company, Dakota Territory Resource Corporation, has spent several years buying up mineral rights in the Lead area. Company leaders formerly worked for Homestake. The company's public financial filings say it has been flying aerial surveys and planning for a drilling program.

Other companies have exploration projects already underway. A Canadian company called Mineral Mountain Resources has been drilling on private land near Rochford since 2018. According to the state Department of Environment and Natural Resources, the company has drilled 14 holes and has approved plans to drill as many as 210.

Mineral Mountain recently announced that it raised about $1.5 million ($2 million Canadian) from investors to pay for lease renewals and acquisitions for its Rochford project, and for a radiometric airborne survey and drill permitting.

A Canadian mining company, Agnico Eagle, has been drilling at the old Gilt Edge Mine, which is an EPA Superfund site near Lead. If the company likes what it finds, it might seek a permit to re-mine the site. And if that happens, Agnico would become responsible for the cleanup of the entire site, according to state and federal regulators.

Additional exploratory drilling has been happening near the Wharf Mine, where Wharf Resources hopes to extend the life of its existing mine.

And the U.S. Forest Service recently approved a plan of operations for gold exploration on a small mining claim near Rockerville. One of the men involved in the project called himself and his partner “pick and shovel miners” who will work on weekends and holidays. He said they might also use a backhoe as they dig test holes searching for gold in gravel. They’ll have two holes open at a time, he said, and will fill and reclaim them before digging more holes.

Spearfish Canyon proposal

Meanwhile, at least one company has already finished its exploration phase and is hoping to open a new commercial mine. That's VMC LLC. Its mine would be called the Deadwood Standard and would be located near the rim of Spearfish Canyon, above Savoy.

The Spearfish Canyon Owners Association opposes it, said Cindi Knapp, the group’s president.

“We are extremely concerned about the fallout in the canyon with the water contamination,” Knapp said.

So, the group did its own homework.

"We put our money behind it and hired an expert so that we could make informed comments and take an informed stand,” Knapp said.

That paid off earlier this month when the Lawrence County Planning and Zoning Board recommended denying a conditional-use permit application for the mine.

Beyond concerns about potential water pollution and damage to the canyon – which VMC tried to assuage with its own experts and studies – members of the board were also concerned that the company lacked a plan for processing ore. Board members said they want to know where and how the ore will be processed.

The board’s recommendation to deny the permit now goes to the Lawrence County Commission, which will conduct a hearing Nov. 10.

-Seth Tupper is SDPB's business and economic development reporter.