With the price of gold as it is, penny share miners cannot believe their luck. Previous cycles have gone something like this: the gold price rises; opportunists take the chance to raise cash to go gold prospecting; they spend the cash on geological surveys, rock sampling and some exploratory drilling. Then, by the time they have found some gold, its price has subsided. Nobody is interested, and they cannot raise the money to get any further.
This time it is different. Not only is the gold price high, but many of the world’s biggest gold miners have given up on the struggle of finding new reserves. Instead they are relying on buying into the discoveries made by small adventurers.
Mine construction needs finance, but today the chances of attracting a rich big brother have never been better. In addition, the financial forecasts look rosy. Most gold projects launched two to four years ago assumed a gold price of $650-$850 per oz. At that level, all things being equal, they would be a commercial proposition and yield a decent profit.
But changes to the gold price make little difference to the cost of developing a mine. Every dollar on the gold price adds to the forecast profit. No wonder the gold sector is hot! And no wonder gold mining companies are beating a path to my door – literally!