Why have prospect generators lagged in share price during the recent precious metals rally?
They’re not at new highs like the gold producers are. – A.M. A: The short answer is: because they’re not gold producers. The companies that actually produce gold and silver are soaring because their profit margins are rising with the metals’ prices. Here’s what I wrote a few weeks back: Let’s say a gold miner spends $400 per ounce of gold to get it out of the ground. So when the price of gold is $500 per ounce, it makes $100 per ounce in profit. If our company produces 100,000 ounces per year, it earns $10 million. Now, let’s imagine gold goes to $600 per ounce. Our company will make $200 per ounce, or $20 million in profit. Gold is up 20%, but our company’s profit has doubled… and its share price will follow. But prospect generators are explorers. They are out in the field sampling rocks and trying to find the next big mine. Generally, they don’t have any producing properties. So they don’t respond to the rising gold price like the giant miners Barrick or Newmont do. On the other ha
