The document summarizes the closure of the Homestake Gold Mine in Lead, South Dakota in 2001 after 125 years of operation. Falling gold prices in the late 1990s were the primary factor leading to closure, as production costs rose above market gold prices. Gold prices fell dramatically due to decreased demand from the Asian financial crisis and increased supply from sales of national gold reserves by Western nations. Rising production costs from deep mining, environmental regulations, and declining ore quality also contributed to Homestake's closure. Despite diversification efforts, Homestake was no longer economically viable and closed in 2001.

1. The Closure of Homestake:
An Analysis of the Events Surrounding the Closure of the Homestake Gold Mine
Matthew Laidlaw
South Dakota History
David Wolff
4/15/2011

2. Laidlaw 2
On September 11, 2001 the Homestake Mining Company announced that by December
31 of that year the Homestake Gold Mine based in Lead would close all operations1. The gold
mine closed after 125 years of service.2 The mine survived a multitude of changes dealing with
the gold standard, the Great Depression, a multitude of wars, as well as many other challenges
over the past century; yet toward the declining years of the millennium Homestake was poised to
close. The late 90‟s were a different chapter for the aging gold mine and a multitude of events
including falling gold prices, depletion of quality ore, rising costs, and growing competition
caused the mine to close.
Falling Gold Prices
A combination of factors caused the mine to close, however the strongest blow dealt to
the mine was dealt through the falling gold prices towards the mid to late 90‟s. Following
Richard Nixon‟s adoption of a floating currency in the 70‟s, gold prices were set by market
values rather than government control.3 As a result gold prices quickly rose in order to match the
available market demands.
Between 1968 and 1974 gold prices changes from $39.31 an ounce to $154.00 an ounce4.
Gold mines were able to expand as new prices allowed for increased sales and therefore more
production and exploration of gold veins. Gold reached its peak price in the early 1980‟s at
which time gold reached $615.00 an ounce in 1980. This expanse of the mine continued and
fluctuated into the early 90‟s staying near $400 an ounce5. Despite the high prices of the 1980‟s
1
“Homestake: A Special Tribute from the Black Hills Pioneer The Homestake Tribune/ Black
Hills Pioneer.” 2001.
2
Homestake has the record for the longest running gold mine in the U.S.
3
Prior to President Richard Nixon‟s decision to switch to a floating gold price based on market
value, gold prices were set by the government.
4
Homestake Mining Museum. “Historic Gold Prices 1833-2001” Homestake Mining Company
2001.
5
Ibid. 2001

3. Laidlaw 3
things changed drastically in 1997-1998, where gold reached $331 an ounce in 1997 and $294 an
ounce in 1998.6
Gold prices fell dramatically in 1997 as Asian markets faced a severe financial
depression.7 As a result of this depression Asian market‟s demand for gold dropped by around
7%.8 As these markets diminished, demands for the metal dropped dramatically. Traditionally
when gold prices dropped, industrial components in Indonesia, Thailand, and South Korea had
purchased enough of the metal to allow for a “propping up” of the price.9
This expectation of the Asian market did not occur. The financial situation in the Asian
markets, escalated into a phase in which Japanese investors10 began to invest and save in Japan.
This caused many of these gold based industries to cut back on production and sales, and thus on
gold consumption.
Gold was further hurt as Asian currencies began to devalue due to the Asian financial
crisis. As the currencies became devalued, it cost gold investors more of their “home” currency
to purchase the metal. In order to pay back loans and other investments, many gold hoarders in
Asian markets began to sell off their personal reserves. This selling of gold further saturated the
already heavily sale based gold market of the late 90„s.11 Furthermore speculation existed that
6
Ibid.
7
Asian markets experienced a period of over borrowing and speculation due to the “dot.com
bubble”, that led to increased saving and domestic investment form Japan at the expense
of foreign investment in other Asian nations. As a result of this decreased spending and
investment, many east Asian nations experienced an economic collapse that eventually
also encompassed Japan. (Dang, V. “Japan‟s Saving, Financial Linkages, and Capital
Mobility in East Asia before the 1997-98 Currency Crisis: An Empiricle Investigation.”
International Journal of Economics and Finance 2, no. 4 (November 1, 2010): 221-232.)
8
Aaron Luccetti. “Asian Woes Cut Gold’s Prospects--Prices Decline Again, Hit a 12 ½ Year
Low” Wall Street Journal. (New York, NY December 2, 1997)
9
Ibid 1997
10
Japan is one of the strongest economic powers in East Asia and accounts for much of the
foreign investment in other East Asian nations.
11
Ibid 1997

4. Laidlaw 4
many nations central banks, especially in Europe would begin to sell or lease out their gold
reserves, further dropping the demand for gold.12
As a result of these falling gold prices Homestake was forced to lay off 400 employees of
their near 850 person workforce.13 Gold prices began to dip below production costs, so in order
to alleviate the losses the company faced Homestake hoped to diminish its production costs.
Homestake hoped that with its remaining, “lean and mean14” crew, that production costs could
remain below established gold prices and that the mine would survive long enough that gold
prices would rebound. The new crew was able to keep production costs at or below gold prices
until 1999, when gold prices fell again to the price of $278.76 an ounce.
Gold prices hit a twenty year low on July 6, 1999 as Gordon Brown, Britain‟s Finance
Minister, announced the sale of 415 metric tons15 of Britain‟s gold reserves.16 In a market in
which inflation in the West had begun to diminish, gold was not seen as a valuable market.
Brown hoped to sell the nations reserves, despite the “rock bottom” prices that gold had hit in
order to sell and diversify the nation‟s investments before other nations could. Brown feared that
Britain‟s investments in gold would continue to lose value as time went on. Brown intended to
cut the nation‟s loses before the prices fell even further.17
12
Ibid 1997
13
“On Jan.26, the Homestake layoff results in a loss of more than 400 jobs.” “Homestake: A
Special Tribute from the Black Hills Pioneer The Homestake Tribune/ Black Hills
Pioneer.” 2001. Pg 29
14
The informal name of the remaining group employees following the lay offs in 1998. These
new expansions and developments of the mine employed multiple workers. As these
layoffs in 1998 occurred, these workers were the first to go as these expansions were
diminished. Homestake also cut back on exploration of new gold veins as well as many
less than necessary employees.
15
One metric ton or 1000 kilograms. One ton equals roughly 2200 lbs, unlike the American
system in which one ton is 2000 lbs.
16
"Finance and economics: Losing its glitter. The Economist” (1999): ABI/INFORM Global,
ProQuest. (Accessed March 29, 2011.)
17
Ibid 1999.

5. Laidlaw 5
Britain‟s announcement was only a reflection of the atmosphere that had developed in
1999. Other nations had already begun to sell off their gold reserves. Canada, the Netherlands,
and Belgium also began to sell. Furthermore Switzerland had intentions to sell off as much as
1300 tons of gold.18 Furthermore on October 30, 1999 Kuwait announced that it would lease out
its entire gold reserve of 79 metric tons through the Bank of England.19
The combination of the worldwide announcements as well as the speculation and sales of
other nations sparked worldwide gold sales that greatly decreased demand for gold. As a result of
this decreased demand, gold prices slumped even lower and by the time Homestake closed in
2001, gold prices fell to a mere $277.90 an ounce.
Gold prices faced the worst of both worlds. The Asian markets crisis decreased capital
and investments in industrial factories that utilized the precious metal, whereas Western markets
remained secure. Western markets rely more upon gold more as a financial backing rather than
an industrial usage, therefore in a still prosperous west; gold was not needed as much in order to
secure inflation. Asian markets had amassed a relatively high inflation level prior to the financial
collapse, contributing to high gold prices. As these Asian markets fell so too did gold prices.
Western markets had controlled for this inflation relatively well and instead began to flood the
market with gold sales, further decreasing the value of gold.
Production Costs
While gold prices dropped in the mid to late 90‟s, the problem was also compounded by
the rising production costs Homestake began to face. By the end of 1980 gold reached the price
of $615.20 The early 80‟s brought about a market in which mining facilities expanded in order to
18
Ibid 1999.
19
El-Gabry, Walid. "Banks get blame for fall in gold :[London edition]. Financial Times.”
(1999) ABI/INFORM Global, ProQuest (Accessed April 15, 2011).
20
Homestake Mining Museum. “Historic Gold Prices 1833-2001.”

6. Laidlaw 6
increase production and sell at these higher prices. In 1984 Homestake began operations on a
state of the art biological water treatment facility. By 1985 the company also approved
expansions of the Open Cut.21 These projects among many others were viable if the mine
continued to sell its ore at these increased prices. However in the late 90‟s the environment
changed. These projects and the maintenance to maintain them took a toll on the production costs
of the mine.22
Homestake‟s production costs also struggled with the depletion of the Main Ledge gold
lode.23 The Main Ledge had slowly depleted since the early 1970‟s, but the expansion of the
Open Cut further exacerbated the problem.24 The Main Ledge allowed for cheap and easy
surface mining. As this lode began to diminish, the mine was forced to adapt to the more
expansive and difficult to reach deep mining ore. By 1998 all surface mining in the open cut had
ended and the mine consisted of predominately deep mine production.25 This type of mining
required more extensive safety procedures, infrastructure, training, and equipment. Deep ore
mining requires extensive tunnels and transportation in order to secure miners, equipment, and
safety processes into the mine.
Extraction costs for this type of mining required miles of loaded rail cars and trains. It
also required tramways, ore dumps, “skips”26, and hosts to haul the ore up to the Yates and Ross
shafts to mill. The extraction at the open cut was much simpler and consisted of front end loaders
21
Roman, Chris. “End of an Era. Black Hills Pioneer.” Lead:, September 11, 2001
22
Mitchell, Steven. Nuggets to Neutrinos. The Library of Congress, 2009. p563
23
Ibid. 2009. p572. The Main Ledge gold lode accounted for 53.6% of all production based in
the mine and consisted of above average quality ore. Over 89.8 Million tons of ore production
were based out of the Main Ledge.
24
Ibid 2001. From 1962-1971 the ore quality was .306 ounces per ton of rock removal. and from
1982-2001 the ore quality in the Main Ledge was .156 ounces of gold per ton.
25
Roman, Chris. “End of an Era. Black Hills Pioneer.” Lead:, September 11, 2001
26
This equipment functioned like a giants bucket and was used to haul ore and rock out of the
mine and onto tramways.

7. Laidlaw 7
and crushers that hauled the ore and rock to a conveyor belt that led to the mills.27
Deep mining also requires extensive ventilation and cooling processes as the depth of the
mine causes an uncomfortable hot and sometimes dangerous work environment. Former
Homestake employee Terri Allerdings noted, “It felt like a sauna.”28 This depth required
extensive cooling systems for machines as well as ways to “hydrate” and cool the miners as they
traversed this extreme job environment.
Environmental Costs
Homestake prided itself as a steward of the land and worked to maintain a balance
between production and environmental impact. This commitment was not a cheap expenditure
however, as some projects costs millions of dollars. In 1972 Homestake began to “regulate” its
impact on the environment more heavily and invested $70 million dollars into the Grizzly Gulch
Trailings Dam in order to impound solid waste and reduce impacts on the land.
In 1981 it opted to “clean up,” the damage it had caused around Whitewood Creek and
29
spent millions on reclamation of the creek and the surrounding lands. By 1984 Homestake
had developed a water treatment facility as well as viable fish hatchery.30
In 1982 Homestake became responsible for dust monitoring reports in the vicinity of the
Open Cut. These reports were required to be presented quarterly and presented to the South
Dakota Department of Water and Natural Resources. By 1983 Open Cut operating and
reclamation plans had been presented to the state of South Dakota. Furthermore Homestake
began to conduct blast monitoring in order to minimize damage to the surrounding residents and
27
Allerdings, Terri. Interview by Matthew Laidlaw. The Closing of Homestake.
28
Ibid. Allerdings
29
Smith, Duane. Staking a Claim in History: The Evolution of Homestake Mining Company.
Walnut Creek California, 2001. p170
30
“Homestake: A Special Tribute from the Black Hills Pioneer The Homestake Tribune/ Black
Hills Pioneer.” 2001.

8. Laidlaw 8
environment near the mine.31
Between 1983 and 1985 Homestake initiated the Terriville Test Pit Phase operations
around Lead. During the operations Homestake became responsible for the removal of over 4.4
million tons of rock and waste around the open cut in order to commence further ore extraction
in the area. In order to better facilitate this removal or rock and waste Homestake developed an
innovative conveyor system, known as the Japan Pipe Conveyor System. The system was far
safer and cleaner than the previous use of truck haulage.32 The system aided in the removal of
waste during cleanup and also greatly reduced the environmental impact that trucks would have
on the surrounding area.
Despite Homestake‟s attempts to reduce environmental impact it became entangled in
multiple lawsuits. In 1997 Homestake Mining Company had to pay $3 million dollars to the EPA
and the State of New Mexico for damage incurred in its New Mexican mine, Grants Mill.33
In fact Homestake had become so entangled through the years in reclamation projects,
that by 1997 one-tenth of all expenses the Homestake Mining Company claimed came as a result
of reclamation and environmental costs.34
Opportunities Elsewhere
The Homestake Board of Directors realized that vast amounts of capital were necessary
over the next decade in order to update existing infrastructure. They also realized that vast
amounts of sustained capital were necessary to maintain already established operations. Millions
of dollars had to be infused into the mine and mill facilities in order to both modernize
31
Ibid. 2001
32
Ibid. 2001
33
Smith, Duane. Staking a Claim in History: The Evolution of Homestake Mining Company.
Walnut Creek California, 2001. P171.
34
Smith, Duane. “Staking a Claim in History: The Evolution of Homestake Mining Company.”
p. 171 Walnut Creek California, 2001

9. Laidlaw 9
equipment as well as maintain safety of shafts.
Reviewing Homestake‟s Annual Reports quickly demonstrate the degree of diversity
Homestake achieved in other gold mining facilities over the past decades. In the U.S. alone, the
Homestake Mining Company operated the Homestake Mine, the Ruby Hill Mine35, and the
McLaughlin Mine36. Between 1999 to 2000 the Homestake Gold Mine was able to produce
gold at roughly $260 per ounce37, whereas Ruby Hill could do so at an average of $104 an
ounce.38 Homestake also owned a 25% interest in the Round Mountain Mine and a 33.3%
interest in Marigold Mine39.
Homestake also possessed vested interest in mines located in Western Australia. In fact
by 1999 Homestake was the second largest producer of gold in Australia. Homestake held
interests in three mining operations. Homestake held 50% ownership of the Kalgoorlie
Consolidated Gold Mines, which produced gold at $235 an ounce. Homestake held 100%
ownership of the Yilgarn mines which produced gold at an average cost of $208 per ounce. The
company also maintained 67% ownership of the de-commissioned Peak Hill Mine.40
The Homestake Gold Mining Company also maintained a successful mine in Chile. In
1996 Homestake and Corporacion Nacional Del Cobre Chile formed a new company and
reclaimed a former mine, naming it Aqua de la Falda S.A.. Homestake also controls 51% of the
company and is able to produce gold form this mine at a cost of $189 an ounce. The company
also acquired Argentine Gold Corp and controls 60% interest in a property in northern Argentina
35
Located in northern Nevada.
36
Located in California. Homestake Mining Company. “1999 Annual Report Homestake
Mining Company.” 1999, 2- 22.
37
Roman, Chris. “End of an Era. Black Hills Pioneer.” Lead:, September 11, 2001
38
In 1999, Ruby Hill was Homestake‟s lowest cost operation. Ibid. 1999.
39
Both mines are located in Nevada. Ibid. 1999.
40
Ibid. 1999.

10. Laidlaw 10
along the El Indigo gold Belt.41
Homestake was able to establish itself as the second largest producer of gold in Canada.
The company merged with a Canadian based company named International Corona Corporation
in 1992. Since then the company has become a major presence in the region. By 1999
Homestake held two active mining operations in Canada. Its most successful mine, Essay Creek
produced 558,400 ounces of gold at a production cost of $131 per ounce.42
The Homestake Mining Company had investments in the Hemlo mining operations,
which consist of the David Bell and Williams mine. This mine produced 305,200 ounces of gold
at a price of $197 an ounce.43
Homestake‟s Canadian division produced more gold than any other division in the
world. The Canadian District also did so at the lowest production costs. In 1999 alone, these two
mining division produced over 905,900 ounces of gold at an average cost of $157 an ounce.44
As a result of this diverse opportunity elsewhere, Homestake‟s Board of Directors saw
little prosperity in the aging Lead gold mine, especially in comparison to those all around the
world. The company felt that it would be more effective to take the capital necessary to update
the infrastructure in Lead and invest it in its other facilities. The Lead gold mine was well past its
prime and many of the newer mines around the world could produce better quality gold at far
cheaper prices.
Merging with Barrick
In 2000 the Homestake Mining Company merged with Barrick Gold, a Canadian based
company. Barrick had achieved great success over the past decades for its goal of low cost
41
Ibid. 1999.
42
Located North of Stewart, British Columbia.
43
Ibid. 1999.
44
Ibid. 1999.

11. Laidlaw 11
production based gold mines. With its merger of Homestake, Barrick became the second largest
gold producer in the world.45 The merging of the company meant the end of the Homestake
Gold Mining Company, but did not mean the end of its impact. Under the new merger with
Barrick many of Homestake‟s former employees and Board of Directors took on a role in the
Barrick Gold Mining Company and continue to shape the future of the newly merged company.
Conclusion
The Homestake Gold Mine closed due to a number of factors. Gold prices fell because of
failing Asian financial markets as well as the sale of gold by relatively financially secure
Western nations. Production costs increased as a result of the depletion of Homestake‟s main ore
body, the Main Ledge. Production costs were further escalated because of the conversion to deep
mining process rather than the relatively cheaper surface based mining of the Open Cut.
Homestake also faced increased costs as a result of environmental reclamation and infrastructure
upgrades that would continue to plaque the mine if it had continued to operate. Furthermore the
Board of Director‟s of the Homestake Mining Company saw a financially secure business
transaction through their merger with Barrick Gold as well as more promising profit incentives in
other areas of the world. .
The Homestake Gold Mine despite its many years of service was just like any other gold
mine. It was finite and could not survive forever. The Homestake Gold Mine had become
increasingly depleted as well as aged and the “granddaddy of gold mines” had met its end as a
result of the difficult yet opportunity filled late 90‟s. The history of mining at Lead division of
Homestake was now done, but the history of the Homestake Gold Mining Company would
continue through its other mines and through the leadership of Barrick.
45
Barrick Gold Corporation and Homestake Mining Company, “Barrick and Homestake: Built
to Last.” (Barrick Gold Corporation, 2001).

12. Laidlaw 12
Works Cited
Allerdings, Terri. Interview by Matthew Laidlaw. The Closing of Homestake
Aaron Luccetti. “Asian Woes Cut Gold’s Prospects--Prices Decline Again, Hit a 12 ½ Year
Low” Wall Street Journal. (New York, NY December 2, 1997)
Barrick Gold Corporation and Homestake Mining Company, “Barrick and Homestake: Built to
Last.” (Barrick Gold Corporation, 2001).
Bartelt, T.J. “Speaking His Mind. Black Hills Pioneer.” Lead:, September 12, 2000.
Cassell, G. “The Downfall of the Gold Standard,” Frank Cass & Co. New York, 1966.
Dang, V. “Japan‟s Saving, Financial Linkages, and Capital Mobility in East Asia before the
1997-98 Currency Crisis: An Empiricle Investigation.” International Journal of
Economics and Finance 2, no. 4 (November 1, 2010): 221-232.)
El-Gabry, Walid. "Banks get blame for fall in gold :[London edition]. Financial Times.”
(1999) ABI/INFORM Global, ProQuest (Accessed April 15, 2011).
"Finance and economics: Losing its glitter. The Economist” (1999): ABI/INFORM Global,
ProQuest. (Accessed March 29, 2011.)
Homestake Mining Museum. “Historic Gold Prices 1833-2001”.

13. Laidlaw 13
Homestake Mining Company. “Homestake Mining Company 1988 Annual Report.” 1988.
Homestake Mining Company. “1999 Annual Report Homestake Mining Company.” 1999, 2-22.
Mitchell, Steven. Nuggets to Neutrinos. The Library of Congress, 2009.
Randolph, Scott. “Shutting Down. Black Hills Pioneer.” Lead:, September 11, 2001.
Rist, Charles. The Triumph of Gold. Philosophical Library Inc, 1961.
Roman, Chris. “End of an Era. Black Hills Pioneer.” Lead:, September 11, 2001
Smith, Duane. Staking a Claim in History: The Evolution of Homestake Mining Company.
Walnut Creek California, 2001.
“Homestake: A Special Tribute from the Black Hills Pioneer The Homestake Tribune/ Black
Hills Pioneer.” 2001.
Thompson, Jack. “A Note from Homestake.” Homestake: A special tribute from the Black Hills
Pioneer, 2001.