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Government Signs Over a Gold Mine for $5 an Acre

May 17, 1994 GMT

WASHINGTON (AP) _ Worth billions of dollars, the Goldstrike mine in Nevada is among the richest in North America, but it also may one day be remembered as the gold mine that got away - from the government.

Interior Secretary Bruce Babbitt formally transferred title to the 1,791- acre mine to American Barrick Resources Inc., a Canadian company that has held a claim there since 1987 under a 122-year-old U.S. mining law.

While calling it ″the biggest gold heist since the days of (outlaw) Butch Cassidy,″ Babbitt said Monday that the law required him to give up the land and its mineral riches for a scant $5 an acre. The government received a check for $8,955.

The mining company estimates that Goldstrike contains between $8 billion and $10 billion worth of gold, but under the Mining Act of 1872 - which was designed to promote the West and help develop its resources - the Treasury will not collect a dime in royalties, losing perhaps as much as $640 million.

Last year, 1.4 million ounces of gold worth roughly $600 million was taken from the surface mine.

Legislation being considered by Congress would require royalty payments, perhaps as much as 8 percent, in future cases.

American Barrick Resources, while acknowledging that it will make a hefty profit from the mine, says the numbers cited by Babbitt are misleading. They don’t take into account the more than $1 billion the company has spent on mine operations and on developing technology used to separate the microscopic traces of gold from thousands of tons of rock, it says.

″Through the use of innovative new technology and risk of our own capital (we) created value where previously it didn’t exist,″ Pat Garber, Barrick’s general counsel, said in a recent interview.

Critics, nevertheless, call the Goldstrike mine in the ore-rich hills of central Nevada a prime example of what’s wrong with how the government deals with the vast mineral riches on federal land across much of the West.

Babbitt said it demonstrates why Congress should press ahead with changing to 1872 law and require mining companies to pay fair market prices for the land, excluding mineral rights, and then pay a royalty on any minerals that are extracted.

The 1872 law allows anyone to stake out a claim and mine federal land. If economically recoverable minerals are found, the Interior Department must grant a ″patent″ that turns the land over to the claim holder.

Barrick did just that, filing for a patent in the spring of 1992. Using a ″fast track″ regulatory approach introduced at the Interior Department late in the Bush administration, Barrick obtained a critical interim certificate of title from the Bureau of Land Management within five months, assuring ownership. Certificates previously have taken, on average, nearly a year to obtain.

When Babbitt moved to block the final patent shortly after becoming secretary, Barrick hired politically connected Washington attorney Lloyd Cutler - now the White House counsel - and went to court.

The company sued Babbitt and won. In March, a federal court directed the Interior Department to issue a final patent for Goldstrike by June 20.

Barrick, considered a model in the mining industry both in its use of technology and environmental protection, maintains it is not getting an unfair windfall, considering the risk and its own investment in the mining operation.

Nevertheless, critics contend that’s no reason the government shouldn’t start sharing in some of the riches derived from minerals on federally owned land.

According to Interior officials, there are 616 pending patent applications, including 212 for gold, before the department. About 20 of them are awaiting Babbitt’s review.