In New Gold Rush, Equipment Suppliers Can Strike It Rich

In uncertain economies, gold goes up.

Over the past 3 years, the dips and dives of the stock market have sent gold to record highs!

Many of the recently unemployed started thinking about trying their luck in the gold fields, from weekend panners to the "go-for-broke" stars of Discovery Channel's Gold Rush: Alaska.

But just like gold rushes of bygone eras, the biggest beneficiaries of the new gold rush will probably be the suppliers, the ones "feeding the dream".

At it's most basic level prospecting is all that expensive.

Walter Evens, store manager of California-based Gold Fever Prospecting, says beginning prospectors "just need a gold pan ($4.95)," and maybe "a sluice box ($49) to consolidate material for panning."

In many places, like California, basic doesn't even require a permit.

Evens sees a direct link between his store's business and the price of gold.

"Every time the price of gold goes up $100, 10 or 15 new people walk into my store. Since Gold Rush: Alaska started, our phones have been constantly ringing and we have new customers coming in and out."

Evens thinks his customers have a good chance of making money and has even thought about prospecting himself, "I've thought about going up to Alaska myself. A friend of mine is prospecting up there and I asked him if I could make enough money in a summer to last me all year. He told me that I could make somewhere around $50,000."

But not all prospecting suppliers are so optimistic.

The director of operations for Gold Prospectors Association of America, Brad Jones, says: "Casinos love it when people gamble, but don't want to see people do that as a full-time occupation."

Discovery's Gold Rush: Alaska stars have taken prospecting to the extreme, moving their lives and families to the gold fields.

They also run more complex operations, which costs more money.

Miner, Todd Hoffman, has a deal with a claim holder, who owns mineral rights to the land they're mining. Claim holders take between 10% to 20% of gold found on their property, for allowing prospectors to mine their land.

Pans and shovels may be cheap, but they also in-efficient.

Ultimately, Prospecting is sorting through large quantities of ruble in search of a small amounts of gold. Full-time miners use machinery to speed up the process.

Hoffman's working an area known for small gold nuggets, so he uses a machines to sort rocks and mud into progressively smaller pieces, straining out everything larger than ½ inch around.

These machines, sorters, earth-moving tools and generators cost between $150,000 and $500,000.

Due to the recession, many former miners were forced to sell their tools for a fraction of what their worth making it a good time to buy equipment.

Though Hoffman, a aviation machinist by trade, saved money making his own tools and The Discovery Channel chipped in with a little money towards gas and food, Hoffman had to raise money to pay for his equipment.

"I scraped together money by selling equipment, and I traded some equipment for other equipment," he recounts. "I also borrowed money from family and sold an airplane. I'm not sure how I made it, but we decided that we just had to go for it."

Hoffman has also gone into the gold rush supply business himself.

Having built his own equipment, he also designs and builds equipment for other prospectors.

"I've become sort of a poor man's go-to guy for gold mining machinery. I'm refurbishing shakers that are 20 or 30 years old and working with engineers to design and build equipment that is cheap and effective." says Hoffman. His customers find him by word of mouth.

For Hoffman, the equipment building hustle is more than just an income source. It's also a chance to share his experience. "After using my equipment, I looked at the things that I did right and the things that I did wrong," he says. "My machines are not going to be high-flying, brand-new stuff. I'm making quality equipment that a guy can buy and use to attack his dream. I think that gold prospecting is one avenue that we can use to develop wealth in our country again."

Source - Daily Finance