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SOS Makes Economic Development Recommendation to the JoCo Board of County Commissioners

August 1, 2013

Josephine County, Board of County Commissioners

Re:  Economic Development Efforts and the County’s Natural Resources

Dear Commissioners,

By now, you are well aware of the fiscal crisis we are facing and that SOS is working on many fronts for solutions that can assist the County in restoring its health.  We have understood since coming together and forming this organization over a year ago that it would take a series of solutions to restore the Criminal Justice programs and overall health back to the County.  This request focuses on efforts within your control that can make a long-term positive impact on the County and targets one of our greatest assets, our natural resources.

Economies are cyclical, and we seem to have forgotten the foundations of wealth and development in our County.  That is, mining is originally what brought development and success to our County.  Following mining was timber, and lately we’ve had no choice but to diversify away from our natural resources due to environmental and other restrictions that you know well.  Many smart people are working on the timber discussion and we need not discuss that other than to encourage you Commissioners to focus on increasing harvests on County owned lands in a sustainable manner.  As we’ve reported to you a number of times, our own County lands can produce much more revenue than they have in recent years and that should be your timber focus.  More harvesting on County land can benefit the County almost immediately.  And we will continue to support as we can additional harvesting on Federal lands but that is a bit more complicated.

From a long-term perspective, our County is also rich in other natural resources.  We want to focus on mineral development in this recommendation letter.  It is long past time to recognize the significant mineral wealth we have in our County that can be responsibly developed with little environmental impact.  The County can help these development efforts to be successful sooner rather than later in a way that could also benefit the County.  Specifically, such initiatives can generate direct revenue for the County.

We all know there are a plethora of historic gold mines in the County.  It has been proven there was, and likely remains to be significant gold mineralization in this area.  Gold may still be the mineral that is most worth developing in Josephine County.  But since most major mines were developed prior to the 1950s it should go without saying that much more can and should be done with modern technology and modern mining methods.  What we’re primarily referring to is hard rock (underground) mining, which has little environmental impact.

For example, in 2007 a company named Dutch Gold Resources did some mining in the large historic Benton mine and extracted over 5000 ounces of gold in a relatively short time period that year.  Gold was closer to $600 per ounce at the time and it’s now at a value of more than twice that per ounce.  Had the company been more focused on development rather than targeting the “low hanging fruit” (or easily accessible gold veins) they might still be producing today.  They failed to properly study and develop the mine prior to charging forward with mining activities so their success was only short lived.  This mine still has the ability to produce gold.  But there are many historic mines such as this that may have more to offer.

Thanks in part to Dutch’s efforts, Merlin now hosts what many believe is the largest permitted hard rock milling facility on the west coast.  It’s capable of processing a significant amount of ore from larger mines.  Not only that, but in the same industrial complex in Merlin there resides a permitted assay lab, which is critical to successful local mining development.  Samples must be assayed to determine the mineralization and having a local lab capable of quickly processing samples is critical to local development efforts.  Not only is it critical to the economic value creation chain if we expect to help jump start our local mining economy again, but the lab can be a profitable local business in itself.

The wealth that lies underground is just waiting for responsible development efforts.  It is possible that our County’s mineral wealth could rival or exceed our timber wealth.  It’s also possible that the mineral wealth could be developed with much less environmental impact than that of timber harvesting.  The Benton Mine that was operating back in 2007 was just downriver from Galice and directly up the mountain from the Rogue River.  Thousands floated right by it on the river without ever knowing it was in operation.  It is important to understand we’re not talking about significant surface disruption as was done by some mining methods in the early 1900’s.  In the end there are hundreds of small historic mines and many areas that have mining potential that may not have been properly studied here in Josephine County.

The idea is a potential success on two fronts:  economic development from mining industry jobs that are typically well paying, and potential revenue to the County from either developing or leasing mineral development rights on County land and/or entering into production royalty agreements with mining development companies.  The good news is the initial infrastructure to support a number of small scale mining operations has been largely built out by the private sector or will soon be available largely through private efforts.  What the industry needs is some access to a little more startup capital to achieve functional operability sooner rather than later.  Given the large amount of land owned by the County, some of which could potentially be both classified as mineral property and timber property, partnership opportunities exist that could directly benefit both the County and private efforts.

The first step in encouraging local mining developments would be to partner with a local company to reopen the assay lab in the Merlin industrial park.  This would enable easy access to a lab for mining development projects that would retain this economic activity within the County to analyze mineral samples.  A significant amount of mineral studies and/or drilling need to take place on mining properties before development efforts occur.  Even the historic mines need to be drilled to determine where the gold ore veins are located.  Without a significant amount of development prior to mining, long-term success is less likely.  In addition, there may be other minerals that could also be of significant economic interest that could be just as valuable or could be a bi-product of gold mineralization developments.  Our County has many documented minerals, some of which could be produced on a commercial scale for building or industrial use as a bi-product of precious metals development.  But again, first we must study and document what is present and having a local lab is critical to this effort.

The second step would be to locate County properties or private properties that could benefit from mining development and sample or drill those properties to better understand the subterranean mineralization.  We believe the SOS mining committee has already identified properties that could be a beneficiary of initial development efforts, some of which are on or adjacent to County owned lands.

The specific recommendation to the Commissioners is that at least 50% of the County’s available restricted economic development (lottery allocation) funds be earmarked for the development of natural resource related businesses in Josephine County.  This is where our true wealth lies and the distribution of the County’s limited economic development dollars should reflect the desire to responsibly harvest this natural endowment.  We believe just the mining development opportunities alone could responsibly and successfully use all the available economic development dollars in coming years, but we believe that in allocating these dollars the Commissioners should consider a soft target of a percentage of those funds to help develop our sizable natural resource wealth.

Through discussing this potential with local mining stakeholders, we believe you will soon see an application for the use of economic development funds in opening the assay lab.  Again, this would be vitally important to the success of other local mining development efforts.  The lab alone could generate jobs and can independently produce a profit if well managed.  We also believe that within coming months a small scale milling facility will also be available in Merlin next to the large milling facility and will be capable of processing the more typical smaller loads in an economic manner.  But the large mill is available if any major mining operations were to return to the County.

Therefore, following the lab in the coming years you are also likely to see opportunities use economic development funds to study mine development on County owned land, at historic mining properties adjacent to County owned land, or other private mining developments.  We believe the County should consider assisting with the financing via economic development funds of a series of pilot development projects that can help better define our local mining opportunities.

Through the use of economic development funds, the County may consider asking for a royalty arrangement on mineral revenues in return for using economic development funds and/or to lease mineral rights under County owned properties.  This could supply a royalty and/or revenue stream back to the County over time.  Full mining development is not required; upon either test production or mining commencement revenues can flow to the County.  Mines can be permitted to extract a significant amount of tons of valuable ore per year even while they are in development and before they are permitted to mine on a commercial scale.  Revenue can come long before what would be considered commercial production.

However, we must study the County’s mineral wealth before significant mining can responsibly occur.  Once the data shows the promise of each property with some more accuracy, external investors can also be much more confident in the potential of developing each property and more money could come into our County.  We don’t have the variety of continuous mineralization that is going to attract a large scale mining operations, but our County has a number of smaller business opportunities that together could be a pillar for restoring financial health to Josephine County.  Coupled with the infrastructure that is nearly in place (assay lab and milling facility in Merlin), we’re already on the way to re-enabling mining opportunities in the County.  Economic development funds being made available to assist in these development efforts would certainly help our local economy sooner rather than later.

Again, the Commissioners should place on the agenda an opportunity to discuss mining development as an economic development focus for Josephine County.  Securing Our Safety recommends that at least 50% of the County’s available economic development funds of nearly $300,000 per year be set aside for developing natural resource focused local business opportunities.  It should start with considering economic development funds towards a mineral assay lab.  Then in the future economic development funds could be granted for specific mining developments that could directly benefit the County in the future via leasing mineral rights on County owned lands and/or royalty agreements on mineral production.  There are a series of projects that could benefit from economic development funds and in return the County could also benefit from increased revenue.  The $300,000 annual revenue from the lottery can’t be used for any other purpose than economic development and SOS recommends a portion of that restricted resource be used to responsibly develop our greatest wealth, natural resources and specifically mineral developments.

Members of our mining sub-committee can be available to answer questions at your convenience and we look forward to your response to this important recommendation.

Sincerely,

Securing Our Safety                            

We want your input to create:

“A Citizen-voiced plan to provide for a secure, stable and sustainable Josephine County”

www.SecuringOurSafety.org

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