UtahRails, Gold

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Economic Importance of Gold Mining in Utah

Utah’s relationship with gold is unique. Like California's story that started with the 1849 Gold Rush, Utah also had a gold rush in the 1860s with prospectors spreading into the canyons looking for what was known as "placer gold," or gold that was obtained by washing the gravel of creeks. Unlike the "lone prospector" narrative of the California Gold Rush, the story of gold mining in Utah is largely one of byproduct success — gold found while looking for copper, lead, and silver.

While Utah is often called the "Beehive State," it could easily be the "Copper State" with a gold lining. The gold mining industry's impact on Utah came in three ways.

Bingham Canyon (Kennecott): One of the world’s largest open-pit mines. While primarily a copper mine, it is also one of the top gold producers in the U.S. This "byproduct" gold significantly lowers the net cost of copper production.

Employment and Infrastructure: Metal mining historically built the towns of Park City, Eureka, Mercur and Bingham Canyon.

Revenue: Gold production historically contributed hundreds of millions of dollars to Utah's economy annually, fueling state tax coffers and supporting local supply chains.

The Price Of Gold, 1933

A review of general news stories of the 1931-1934 period reveals that the companies that mined gold were pressuring the government to remove an embargo on the export of gold, to allow these mining companies to benefit from the increased prices gold was receiving on world markets.

In July 1933, the Treasury Department made a formal request to President Roosevelt to lift the embargo, reporting that domestic gold production had declined from 187,694 ounces in March 1933, to 64,445 ounces in June. The Treasury Department attributed this directly to that fact that the U. S. Mint was the sole buyer of U. S. domestic gold at a price that had been fixed since 1834. The request to FDR also reported that the price being paid for domestic gold did not cover the expense of producing the gold.

In August 1933, the embargo was modified to allow gold concentrates and gold amalgams to be shipped to other countries to be refined and sold. But the export of gold bullion was still embargoed. On October 5, 1933, by executive order the embargo was lifted, and the domestic price paid began to climb above the $20.67, the price paid since June 1834, as mandated by federal law. By November 1st, the price was at $32.26, with U. S. gold production reported as 271,000 ounces in September compared to 181,000 ounces in August.

By January 1934, the price had risen to $34.06. By mid January the price was $34.45. On February 1, 1934, the price was set at $35.00, and remained there until 1971.

Wartime Gold Limitation Order, 1942

Gold Limitation Order L-208, issued on October 8, 1942, was a historic and controversial mandate. It remains the only time in U.S. history that an entire industry was ordered to shut down by the federal government.

By the fall of 1941, the United States had not yet entered the war in Europe, but the nation’s industry was already fully committed to supporting the Allies, which included Great Britain, France, and Russia. This massive production effort required a steady supply of base metals, specifically copper, zinc, and lead. Recognizing a conflict of interest, the Office of Production Management noted that gold mines were competing for the same machinery and labor needed for these essential materials. They concluded that in a war economy, resources devoted to gold production were largely wasted.

The most dramatic pivot in Utah’s gold history occurred during World War II. In October 1942, the federal government issued Gold Limitation Order L-208.

From Federal Register, Volume 7, Number 199, October 9, 1942, page 7992.

Part 3093—Gold Mining

(Limitation Order L-208)

Effective date of December 8, 1942; 60 days after the order was issued.

The fulfillment of requirements for the defense of the United States has created a shortage in the supply of critical materials for defense, for private account and for export which are used in the maintenance nad operation of gold mines; and the following order is deemed necessary and appropriate in the public interest and to promote the national defense.

3093.1 Limitation Order L-208—(a) Definitions. For the purposes of this order, "nonessential mine" means any mining enterprise in which gold is produced, whether lode or placer, located in the United States, its territories or possessions, unless the operator of such mining enterprise is the holder of a serial number for such enterprise which has been issued under Preference Rating Order P-56.

(b) Restrictions upon production. (1) On and after the issuance date of this order, each operator of a nonessential mine shall immediately take all such steps as may be necessary to close down, and shall close down, in the shortest possible time, the operations of such mine.

(2) In no event on or after 7 days from the issuance date of this order shall any operator of a nonessential mine acquire, consume, or use any material, facility, or equipment to break any new ore or to proceed with any development work or any new operations in or about such mine.

(3) In no event on or after 60 days from the issuance date of this order shall any operator of a nonessential mine acquire, consume, or use any material, facility, or equipment to remove any ore or waste from such mine, either above or below ground, or to conduct any other operations in or about such mine except to the minimum amount necessary to maintain its buildings, machinery, and equipment in repair, and its access and development workings safe and accessible.

(4) The provisions of this order shall not apply to any lode mine which produced 1200 tons or less of commercial ore in the year 1941, provided the rate of production of such mine, after the issuance date of this order, shall not exceed 100 tons per month, nor to any placer mine which treated less than 1000 cubic yards of material in the year 1941, provided that the rate of treatment of such placer mine, after the issuance date of this order, shall not exceed 100 cubic yards per month.

(The Mercur mines and mill of the Snyder organization either mined more than 1200 tons of ore during 1941, or had no production in 1941. Or they used this order as an excuse to shut down their Mercur operations to save money on an operation that was having diminishing returns due to the cost of milling the complex Mercur ores.)

(The War Production Board revoked Gold Limitation Order L-208 on June 30, 1945, but only the largest mines returned to production. Large mines that also produced silver, lead and zinc survived, such as the mines in Tintic, Park City and Bingham. Most of the marginal gold mines went bankrupt from having to spend money maintaining their mines, but without production and income to cover those expenses.)

(Link to the complete Federal Register issue at Archive.org; scroll to page 7992 and 7993)

(Download the Mining History Associations' article about Gold Limitation Order L-208; PDF; 19 pages)

The Intent

The U.S. government deemed gold "non-essential" to the war effort. They wanted to divert three specific resources to the production of "strategic metals" (like copper, zinc, and lead):

The Effect in Utah:

Closure of Gold-Primary Mines: Mines that focused strictly on gold were forced to shut down almost overnight. This included the two large, consolidated mines at Mercur. For many smaller gold-only operations at Mercur, Tintic and Park City, this was a death knell. Without the income of selling gold ore, the cost of maintaining a "dark" mine (pumping water, preventing cave-ins) was too high, and many never reopened after the war.

The "Byproduct" Loophole: Because Utah’s largest gold source was the Bingham Canyon copper mine, gold production in Utah didn't stop. Since copper was vital for shell casings and wiring, the gold continued to be extracted as a secondary result of copper mining.

In the Tintic district, gold was a by-product. While the Chief Consolidated mine in Eureka was likely best known for its gold production, it continued to ship other metals like lead, silver, copper and zinc in varying quantities. The other Tintic mines also continued to ship their own variety of the other metals.

Utah remains the only state in the U.S. where gold is found in significant quantities as a byproduct of such a massive copper operation, making its "gold industry" more resilient to market crashes than states that rely on gold alone.

Machinery or Equipment Diverted By Order L-208

During the lead-up to the 1942 closure order (Gold Limitation Order L-208), the U.S. government prioritized the production and maintenance of base metals like copper and zinc over gold. This resulted in the diversion of several categories of heavy machinery and essential supplies into what the government called "more essential mining operations."

Heavy Mobile Equipment

Much of the mobile machinery used in and around undergound mines, open pit mines and placer mining (extracting gold from gravel) was redirected to military construction projects, such as large defense plants all across the nation, and the building of the Alaska Highway.

Industrial Mining Machinery

Gold mines were resticted from buying new and used processing equipment for their underground and open pit operations.

Essential Supplies and Materials

Gold mines were restricted from purchasing new stocks of consumable supplies and materails to ensure they were available for the war effort:

Impact of the Order on the Labor Force

The government's primary goal with L-208 was to treat the gold mining workforce as a "human reservoir" for the more critical non-ferrous (copper, lead and zinc) mines.

Forced Migration: The War Production Board (WPB) assumed that closing gold mines would naturally force thousands of skilled hard-rock miners to relocate to copper, zinc, and lead mines in places like Utah, Nevada, Montana and Arizona.

The Reality of Resistance: The plan was only partially successful. Many gold miners were older men with deep roots in their communities. Instead of moving hundreds of miles to work in the lead, copper and zinc mines on other states, many chose to take jobs in local defense plants, or simply retired.

Draft Exemptions: To further nudge the workforce, the government eventually granted draft deferments to some 4,000 experienced miners, provided they worked in strategic "essential" mines rather than gold mines.

Economic Devastation: In regions like Mercur and other small gold mining operations in Tooele and Juab counties in Utah, which had seen a "gold boom" during the Depression, the order turned prosperous towns into depressed areas, and essentially made Mercur a ghost town almost overnight.

Permanent Closures and Industry Decline

While the order was revoked on June 30, 1945, the damage to the industry was, in many cases, terminal. Mercur lay dormant until exploration restarted in the early and mid 1950s, and again in the late 1960s.

The Numbers: Before the war, there were thousands of active gold mines in the U.S. By 1943, production had plummeted from millions of ounces to just 148,000 troy ounces—the lowest level in a century.

Environmental and Physical Ruin: Maintenance during the shutdown was restricted to "minimum activity." Without constant pumping, many deep-shaft mines flooded. The weight of the earth caused unsupported tunnels to collapse. For many owners, especially in Mercur and Tintic, the cost of de-watering and retimbering a mine in 1945 was higher than the value of the gold remaining inside.

The Price Squeeze: Post-war inflation caused the costs of labor and equipment to soar, but the price of gold remained fixed at $35 per ounce by law. This "fixed-price ceiling" meant that mines that were profitable in 1941 were no longer viable in 1946.

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