The increase in the mineral prices not only focuses more attention on the sector, but also causes even more money to be spent on exploration thereby increasing the probability of finding new deposits. It also increases the value of any potential discovery through leverage. Mineral deposits are gauged by the net present value of future cash flow should the deposit be mined. Say for example we find a million ounce deposit of gold and an engineering study suggests it could be mined over ten years at a cost of $250 an ounce, including capital. Let's assume gold is at $350 an ounce. At a 10% discount rate that deposit would be worth roughly $70 million. However if the gold price were to increase to $400 an ounce (a 15% increase) the value of the same gold deposit increases to $100 million (almost 50%). That is over 300% leverage to the gold price (50/15). Imagine what a gold price at $600 or $1000 an ounce would do!!!
Lightning cracks the blackened sky,
Hear the thunder chariot ride
All brave men with hearts of war
Ride the path of mighty Thor
