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Nevada miners seek gold, silver in Yavapai County

NEAR BAGDAD — Robert Dultz doesn’t have gold fever. Not yet, at least.

“As an investor, I have seen a number of people get gold fever, and they get really crazy,” says Dultz, a 66-year-old retired financial consultant and current CEO of USCorp, a newly minted mining corporation based in Las Vegas. “Once we start piling up bars of gold, I don’t know, maybe I’ll get it. I’ve seen it in the ground, but seeing those bars all polished up, who knows?”

As the principal owner of USCorp, Dultz controls the mineral rights to claims in Arizona and California, which he hopes to soon turn into operational gold mines. The company’s claims just south of Bagdad in Yavapai County may hold as much as 600,000 ounces of gold and 2.2 million ounces of silver, according to a company geologist’s preliminary report filed in January. Subsequent press releases from the company suggest there may be more.

“It’s a terrific property, and it’s a shame it isn’t already in production,” Dultz says. “It really is a treasure chest.”

Dultz belongs to a growing number of independent operators flocking to Arizona with dreams of turning promising mining claims into lucrative working mines. With everything from gold and silver to uranium and copper making major price jumps in recent years, mining claims in Arizona are on the rise, many of them staked by small firms and outsiders to the state’s increasingly consolidated mining industry.

The U.S. Bureau of Land Management does not track mining claims by commodity, but BLM geologist Ralph Costa says that “without a doubt” the price of gold – which spiked from $250 an ounce in 1999 to a high of $1,020 an ounce in March 2008 – has played a role in the rise.

“We have seen a marked increase in the number of mining claims filed, and I’m sure that the price of gold is in part responsible for that increase,” says Costa, who works out of the BLM’s state office in Phoenix. “It’s bringing in all kinds of people, small people, first timers, small companies, freelance mining engineers, geologists. I think you can see why.”

While fresh faces may be moving in, the boom in mining claims has yet to translate into a large number of new operating mines. A complex and time-consuming government permitting process represents one hurdle. Today’s industrial mining techniques, like the cyanide heap-leach process USCorp envisions using at its Yavapai County claims, present another. Both require large investments for even relatively small operations.

USCorp, for instance, is seeking $20 million in financing to “unlock the treasure in the ground,” and begin mining their Arizona claim, as the company’s 2007 annual report tells prospective investors.

But before the company can solicit U.S. investors in earnest, it must complete an ambitious drilling program to meet strict federal securities guidelines. With permits now in hand, USCorp has plans for about 13,000 feet of test drilling at its Yavapai County claims, starting in early August. At present, the company is traded on the more loosely regulated U.S. Over The Counter Bulletin Board (USCS) and Berlin stock exchange.

“We’re going to have microscopic information on every foot of dirt or rock that comes out of there,” Dultz says. “We’re going to have so much detail that nobody can deny what we have.”

Hard geological data is critical in sorting out a legitimate operation from a potential scam, according to Paul Misiaszek, a geologist with the BLM’s Kingman field office. “Resource and reserve estimates take a lot of work, and they have to be performed in a certain manner accepted by securities regulators,” he says. “There are a lot of companies who would rather mine the investor than the earth. We see a lot of that.”

Consumers should be wary of companies touting mining investments that appear too good to be true, says Nyal Niemuth, an analyst with the Arizona Department of Mines and Mineral Resources.

“Why aren’t the sophisticated investors seeing that overlooked value and scooping them up?” Niemuth says of these ventures. “There’s often a good reason for that.”

Unlike more unscrupulous firms, US Corp appears to be doing the hard work of verifying its claims.

“US Corp is doing everything by the book, in my eyes,” Misiaszek says. “They have approval for their drilling program, and that seems like what they’re going to do.”

Once US Corp completes its test drilling – and if its preliminary gold and silver reserve estimates hold up – it still must complete a final mining plan of operations and an engineering plan. Only then will its claims of “buried treasure” hold up to the scrutiny of federal regulators.

At that point, the company’s holdings may finally prove attractive to one of the major corporations that dominate the state’s mining industry, a prospect Dultz welcomes. “I’m open to being acquired, or being a joint venture,” he says.

Until that happens, US Corp will continue working toward opening the mine on its own terms.
“If this were football, I’d say we were on the five-yard line,” Dultz says. “I am confident that we will get financed and go into production, if we’re not acquired before then.”

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>>Email the editor at aklaw@zoniereport.com.

Confessions of an Arizona meth addict

[Editor's note: TZR correspondent Cyndy Hardy wanted to share her personal experiences in reporting this story to help put it into context. Some of the content includes foul language.]

VERDE VALLEY — Not content to write another standard piece on methamphetamine abuse, I walked into a Verde Valley bar and announced I wanted to dispel any meth myths propagated by users, law enforcement and the media.

I perched myself at an outdoor table and waited. I knew most of the faces that eyed me suspiciously but, I don’t know their private lives. They know I’m a journalist – and a fairly aggressive one, at that. I wasn’t sure what would happen.

Over the course of two weeks, I did this exercise several times. Each time, people sat to talk with varying degrees of honesty and credibility. All demanded anonymity – a death trap for journalistic credibility. But, this story can’t happen if sources think the law will trace it back to them.

One man – a quiet man who generally keeps to himself – sat next to me. “I’ll talk if you swear not to use my name,” he said.

Nick is a 43-year-old recovering meth addict who has used the drug for nearly 25 years. Nick’s teeth often clenched and his jaw ground from side to side as he spoke. His soft voice and chiseled features nearly escaped my observation because I was searching for dramatic signs of meth use, like open wounds on his face or arms.

Nick rolled a cigarette from a can of Bugler tobacco and allowed me to take several photographs – inexplicably unconcerned that his image would accompany the article in which he didn’t want his name exposed.

“You want the truth,” he said. “I’ll give it to you.” What follows is the truth as Nick sees it. His story, corroborated by others who spoke to me, seemed credible enough and representative of a side of meth the public rarely hears.

LIFE ON THE DARK SIDE

As a teen, cocaine was Nick’s drug of choice. He would sell anything to get it – CDs, cars, tools and stereos. “I once sold a $5,000 stereo for $1,000,” he said.

Like many in the drug culture, Nick used what he wanted and shared some with his friends and associates. Still, he had so much left over that he began selling the surplus. Dealing cocaine became Nick’s occupation.

But after literally blowing through $67,000 in six months, he switched from cocaine to methamphetamine. It was 1985 and Nick was 20 years old.

“Speed [a street name for meth] was cheaper than cocaine,” Nick said. He priced it at about $30 per gram 20 years ago compared to $80 to $100 per gram today.

Meth was a “cleaner” high, too. He could get by on four hours of sleep, wake up with no hangover and “be fine.” Meth gave him a productive high at first. “You can’t sit for a movie – you want to do things,” Nick says.

Meth can be ingested many ways including pills and injections. Nick preferred to smoke it.

A mechanic by trade, Nick first used about a quarter of a gram per day. “All I wanted was to tweak in the garage and play with nuts and bolts.” As he got older, he would use about nearly two grams per day, usually shared with one or two people.

The drug changed Nick. It changes the way the brain works, he said. “All I could think about was sex,” he says. By age 23, Nick’s mother forced him into rehab for the first time.

“I guess I wasn’t looking too good,” he says. Nick had entered the U.S. Army weighing 167 pounds. Within three years of using meth, he had dropped to 117 pounds.

Nick walked out of rehab after a few days and was soon using again. The California court system forced him into rehab again at age 27. He walked out again after a week.

Nick’s third and final stint in rehab to date was at age 30. Nick and his girlfriend, Beth, used meth together while living in California. Her father had committed suicide, and she drank large amounts of tequila to numb the pain. Nick said the alcohol contributed to frequent fights that ruined their relationship.

Nick was charged with internal possession of methamphetamine during one of the couple’s fights. The court sent him to rehab again. This time Nick stayed for the three-week duration.

“My lovely girlfriend met me at the door with a gram of meth,” Nick says. “There’s no saying no when somebody’s got it in their hand.”

Nick had had enough and tried to leave his past to start a new life. He took a $500 loan on a $10,000 tool box and bought a one-way train ticket to Flagstaff. He moved into a trailer park in the Verde Valley and went back to “wrenching.”

Someone, friend or family, eventually gave Beth Nick’s telephone number. Nick refused her calls for a long time, but eventually gave in and told her where he was. Beth said she had gotten into legal trouble in California and was running to Texas. All she wanted was to stop by and see him on her way through.

Once again, Beth showed up with a bag of meth. Once again, they fought. This time Nick spent two years in an Arizona prison for aggravated assault.

Today, tired of feeling nervous, jittery and “not being able to talk,” Nick says he wants to be clean. “I’m tired of the bullshit,” he says.

And he was clean for about six months. A stranger approached Nick two days before the interview and offered to share a “teener,” which is one-sixteenth of a gram – a fraction of the amount that originally hooked Nick. He indulged.

“The addiction is still there. I don’t ask for it; I don’t look for it; but I can’t say I wouldn’t do it if it was in my face. I can’t say ‘no,” he says, a tinge of remorse peeking through many layers of denial and defiance.

METH MYTH NO. 1: TREATMENT

Nick will not seek professional help to overcome his addiction. “Twelve thousand dollars
for fucking help?” he asks, saying that is what treatment costs.

Nick says he feels caught in a paradox where the only way he could afford treatment is to get arrested again. “They make it easy if you get busted.”

Local authorities generally disagreed, but when questioned without reference to Nick’s claims, their responses painted a confusing picture.

MATForce leads the war against meth in the Verde Valley through advocacy and education. It is an organization comprised of representatives from regional civic and public agencies in Yavapai County, and in 2006, a MATForce subcommittee found that “a substantial and rapidly expanding network of programs and facilities” exists in the Verde Valley to adequately meet current demands for treatment.

That means there are enough private places to help users kick the habit. But there are more and more meth users in rural central Arizona, the committee found.

“Treatment availability, waiting lists and funding always have been issues in rural Yavapai County,” says Brian Gray, deputy chief of Yavapai County’s adult probation department. “There are less than 30 residential treatment bed spaces shared by Yavapai and Mohave Counties for publicly funded clients.”

The MATForce report also found that community-based outpatient services provide the best chance of success, especially when children are part of the user’s big picture

But, getting help often means a person must be wealthy enough to afford treatment or destitute enough to qualify for state financial aid. Sedona City Councilman Rob Adams, who is a MATForce committee member, agrees many addicts are probably caught in the gap.

METH MYTH NO. 2: ADDICTION

Nick criticized the way media and law enforcement focus on the most dramatic images of meth abuse without telling the public how prolific the use really is. Most users can function fine if they use the drug in moderation, he said.

“It’s like anything: You take a couple of bad seeds out of hundreds of thousands using meth and the media is all over it,” he says.

A person cannot overdose on meth, he said. Too much of the drug causes the body to reject it and “nullifies” the effects, he says.

“I’ve known lots of people who have died from cocaine, but never meth,” Nick says. “The medical profession would probably never tell you that.”

In the worst cases, Nick said too much meth causes a person to lose eyesight for a short time while they are high. “Their eyes roll rapidly in their head – it’s not a pretty sight – but I’ve never seen it kill anybody,” he says.

Still, meth is a bigger social problem than most people realize, Nick says. Most of the public is not aware that they may know many people who are users. But, in Nick’s opinion, they are not all bad people.

“I never ripped anyone off. Maybe I was just a good drug addict,” he says sarcastically.

Those who use meth frequently – about one in 10, according to Nick – spiral out of control quickly. “It catches up to you. You can use for six months and be OK. Then your tolerance goes up and you need three times as much to get high,” he said.

And even though he preferred high-end buyers, Nick’s drug clientele crossed every imaginable social demographic. “Everybody uses,” he generalized. “I sold to people who made $100,000 per year and to people who made $1,000 per month.”

METH MYTH NO. 3: “STREET VALUE”

Nick says law enforcement over-inflates the value of meth taken off the streets to make a better impression on the public. “They’ll say a pound is worth $500,000.”

TZR found published accounts of meth seizures with varying reported street values. In February 2007, the Arizona Department of Public Safety reported 16 pounds of meth was seized with a street value of $120,000 – or $7,500 per pound. A report in the July 2002 issue of U.S. Customs Today priced meth at about $11,200 per pound in Phoenix and about $16,000 in Nogales. In 2006, federal officials seized 187 pounds of meth near Atlanta, Ga., worth at least $133,690 per pound, according to an Associated Press report.

There are about 453.6 grams in a pound. Using Nick’s highest estimate, a pound of meth would hypothetically retail for about $45,000. But the calculation omits basic drug dealer economics, Nick says.
“A pound is really worth about $16,000 to a dealer,” he says.

Meth is rarely sold by the gram; most people buy an ounce or half ounce, Nick says. The price a dealer gets depends on the transaction. Even the drug-dealer world has frequent-flyer miles.

A first-time meth buyer pays street value, he said, but regular clients can get a better deal. A significant amount of ‘product’ is given away – some to attract new clients, most to keep low-end users from snitching the dealer out to police.

Less affluent users may buy every week or every day – increasing the risk to both the buyer and the dealer, Nick says. It might seem a dealer could get a better price for the higher risk, but frequent buyers are usually the ones who get arrested, he says. “They know how to work it. You end up giving a lot of meth away just to stay out of trouble,” Nick says.

The law gets informants from the pool of low-end users, Nick says. Agencies put public funds in their hands to buy drugs. “About 90 percent of the drug busts come from these snitches,” he says. Informants often blackmail dealers for free drugs and the ones who cross the informants get busted.

Rich users buy larger quantities for personal consumption to reduce their risk of being caught. Those buyers can get a wholesale price because they are buying in bulk, which cuts the dealer’s profit margin.

Nick said he stuck to these “high class” clients and was never arrested for selling drugs. “First of all, the cops don’t look at them (rich clients). Second, they buy in bulk; and a guy who shows up every night is seven times the risk,” he says.

METH MYTH NO. 4: “WINNING THE WAR”

Whether local data contradicts Nick’s beliefs is hard to establish. Authorities did not provide, and TZR could not find, a common thread in the data to accurately portray meth trends in Arizona’s Verde Valley.

Essentially, there are three main fronts by which communities fight meth: education, enforcement and treatment. Agencies collect data with various criteria that can’t easily be compared side-by-side.

Clinic officials count the number of patient contacts and categorize substance abuse, but they do not specifically track methamphetamine.

At a Verde Valley Guidance Clinic, for example, patients treated for all drug addictions increased from 120 in 2000 to 320 in 2005. About 107 patients were treated for amphetamine abuse, which includes meth. Although data for 2006 and 2007 was not immediately available, a snap shot of clinic activity in February 2008 showed 288 of 1,106 patient contacts were meth-related.

TASC is an agency that monitors and drug-tests offenders in Yavapai County for several agencies, including Yavapai Drug Treatment Diversion Program, Yavapai County Adult Drug Court and Yavapai County Adult Probation.

In 2006, a leading screening center for Verde Valley clinics collected 7,071 samples from new clients, of which 381 tested positive for drugs or alcohol. In that group, 165 tested positive for amphetamines.

In 2007, the same sampling showed a higher ratio of meth use. About 301 samples tested positive for drugs, of which 160 samples contained amphetamines, according to the Treatment Assessment Screening Center.

Three years ago, meth was a serious problem in the Verde Valley, but it is improving, says Cottonwood City manager Doug Bartosh, a MATForce committee member and former Scottsdale police chief.

“We are seeing a decrease in the number of [meth-related] contacts. Some of that is due to diligent enforcement. Some is because of tighter borders,” Bartosh says.

Verde Valley communities passed psuedoephedrine ordinances after the state lawmakers failed to enact similar legislation. Bartosh says controlling psuedoephedrine at the drugstores works because most of it was being stolen from the shelves – not purchased.

“Since our communities enacted ordinances, we hardly ever see a lab anymore,” he says.

Sedona police Chief Joe Vernier says meth-related incidents in Sedona declined after the city enacted its psuedoephedrine ordinance in 2005. Since then, the state and the federal government have enacted stricter laws to curb meth production.

But Nick, who says he once cooked meth for a Mexican cartel, disputes their rosy outlook. He says putting psuedoephedrine behind the counter did little to curb meth production in Arizona.

“You can’t cook meth and expect to get it over the border,” Nick says. But its main ingredient is coming across the border abundantly in 50-gallon drums because drug-sniffing dogs can’t detect it, he says.

Bartosh disagrees. He says police dogs can be trained to detect nearly anything.

Even though authorities say they are winning the war on meth, several pointed out a disturbing fact: Meth, and other homemade drugs, aren’t going away soon. According to client surveys and other data from Verde Valley clinics, drug users are shifting to other drugs more readily available.

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>>Email the editor at aklaw@zoniereport.com .

New pipeline key to Arizona’s energy future

NEAR PRESCOTT — A 284-mile-long pipeline that soon could be delivering 500 million cubic feet of natural gas energy throughout Arizona and parts of New Mexico may be partially operational by this summer and fully functional by the end of the year.

The pipeline will deliver energy to users throughout central and southern Arizona. A large portion will run through ranch lands in Yavapai County and snake southward around Phoenix toward Gila Bend before turning east toward Coolidge.

The pipeline will deliver energy to a number of smaller additional users but also to nine primary providers, including the Redhawk and Sundance power plants, which are operated by Arizona Public Service Co.

“It’s strategically designed to meet capacity needs for some time in the future and to add to Arizona’s mix of resources some features like gas storage that weren’t there in the past,” says Arizona Corporation Commission member Jeff Hatch-Miller, a Scottsdale Republican.

Heavy use of natural gas has been part of the nation’s recent energy evolution, Hatch-Miller says. Congress once frowned upon the use of natural gas, a cleaner-burning yet non-renewable form of energy, because of concerns about the supply.

But after less government regulations came to the energy industry, Congress changed its stance. Hatch-Miller, who has worked on several pipeline issues as a commissioner, says natural gas is practically endorsed as a source of electricity these days.

This month, construction on the pipeline expansion project is scheduled to begin, even as the company building it finishes acquiring the necessary land. Transwestern has acquired all but six acres needed for the project, company spokesman John Ambler says.

Those two remaining parcels will be acquired by eminent domain – the process by which land is condemned for a public use and a fair price is negotiated, sometimes in court.

“In this particular case, they weren’t able to obtain an easement from the landowners. The strong preference is to do this amicably, rather than trying to use any kind of eminent domain,” Ambler says. “There are other tracks along the pipeline route that may make eminent domains filings necessary, but it’s handfuls of tracks. It’s not a huge number. We’re still trying to resolve most of them. I don’t know how many filings are likely.”

Since November, Houston-based Transwestern has been multiple legal actions in federal court in Tucson seeking permanent easements on 132 parcels from Yavapai County to points south. Four more cases were filed in January. Yavapai County supervisor Carol Springer declined to comment.

Pipeline helps peaking needs

Arizona residents’ increasing energy demands and concerns over global warming are the two factors driving development of the pipeline, Hatch-Miller says.

Over the past decade, Arizona’s overall consumption of natural gas has tripled, according to figures from the Energy Information Administration, which tracks energy consumption throughout the U.S. Most of the natural gas consumed in Arizona goes toward producing electricity. And in the Valley, it represents more than half of the electricity produced by APS, which also operates Palo Verde Nuclear Generating Station.

The pipeline will add more capacity for Arizona’s future needs instead of those in California, who have traditionally been the largest consumers of the gas line crossing northern Arizona. The new line will give Arizonans a competitive advantage, a state corporation commission spokeswoman says.
The environmental effects are also a consideration, Hatch-Miller says. Natural gas burns cleaner than coal, so it helps Arizona address global warming concerns.

“Everyone who’s using electricity seems to be increasing their usage per person,” Hatch-Miller says. “If we want to have a robust electric grid and have the energy necessary for modern society, natural gas is pretty much the dominant player right now.”

Hatch-Miller adds that extending building setbacks from the new pipeline will help the public answer concerns about safety in case of a rupture or explosion.

“Most communities and most neighborhoods are not focused on the benefit to themselves and the state that they derive (from the pipeline’s electricity), but it usually doesn’t interfere too much with the community, and they’re accepting of it,” Hatch-Miller says.

“They’re always concerned with a gas pipeline explosion or some kind of a gas leak. These are going to be built with the highest, new, state-of-the-art standard and be plenty deep under the Earth. While no man-made machine is 100 percent foolproof, these are going to be inspected dozens of times before they’re even allowed to have natural gas in them.”

Bonus points for pipeline

The pipeline has a few other benefits. The pipeline will also deliver natural gas to a facility near Palo Verde Nuclear Generating Station west of Phoenix. The storage facility can be tapped during peak demands and help avoid power outages, Hatch-Miller says.

The expansion project also provides a second pipeline company for the heart of Arizona as an alternative to El Paso Natural Gas Co., which has had a relative monopoly on pipeline service through Arizona for years, Arizona Corporation Commission spokeswoman Rebecca Wilder said in an email. She said this could help lower costs for Arizona consumers.

And finally, the new pipeline’s added capacity could help Arizona consumers cushion themselves in case California demand surges again and natural gas supplies from other sources, such as Canada, start dwindling.

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>>Email the editor at aklaw@zoniereport.com. [Read more]