In the New Gold Rush, Equipment Suppliers May Strike It Rich

In the New Gold Rush, Equipment Suppliers May Be the Big Winners In an uncertain economy, gold almost always goes up in value. Little wonder, then, that the vertiginous swoops and dives of the stock market over the past three years have sent gold values to record highs. And with unemployment at its highest levels since the end of World War II, it's hardly surprising that many struggling workers have started thinking about trying their luck in the gold fields. From weekend panners to the go-for-broke stars of the Discovery Channel's Gold Rush: Alaska, it seems like the economic future for many Americans will involve following in the footsteps of the prospectors of generations past.

Yet while some would-be ore-hunters may find their fortunes in the bottom of a gold pan, the biggest beneficiaries of the current gold rush will probably be the same people who benefited from previous stampedes: the suppliers and towns that support the intrepid adventurers. From blankets to gasoline, gold pans to folding shovels, prospecting is a tool-intensive practice, and there's big money to be made in feeding the dream.

A Retail Bonanza

At the most basic end of the prospecting spectrum, supplies aren't all that expensive. Walter Evens, store manager of California-based Gold Fever Prospecting, points out that beginning prospectors "just need a gold pan," though he notes that "panning can be tedious, so many use a sluice box to consolidate material for panning."

With pans available for $4.95 and sluice boxes starting at $49, the cost of simple weekend prospecting is negligible. In many places, this sort of panning operation is also largely unregulated. In California, Evens notes, panning doesn't require a permit, although some states are stricter.

Not surprisingly, Evens sees a direct link between the price of gold and his store's business: "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 their hobby pay. In fact, he admits, "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."

Not all prospecting suppliers are quite so optimistic. Brad Jones, director of operations for the Gold Prospectors Association of America, is quick to warn would-be prospectors not to bet the farm on literally hitting pay dirt: "We're like a casino," he explains. "Casinos love it when people gamble, but don't want to see people do that as a full-time occupation."

Machines to the Rescue

The stars of Discovery's Gold Rush: Alaska have taken the full-time occupation route to an extreme, moving their lives -- and, in some cases, their families -- to the gold fields. They also have a much more extensive operation, which costs more money than basic panning. The group's leader, Todd Hoffman, has a deal with an established claim holder, who owns the mineral rights to the land that they are mining. In return for allowing prospectors to use the land, claim holders take between 10% and 20% of the gold that is found on their property.

While pans and shovels aren't too expensive, they also aren't all that efficient. Prospecting is, ultimately, a matter of sorting through large quantities of material in search of a small amount of gold, and full-time miners use machinery that is designed to speed up that process. Hoffman's prospecting team is working an area that is known for yielding small gold nuggets, so he uses a collection of machines that sort rocks and mud into progressively smaller grades, ultimately straining out everything larger than ½ inch in diameter.

These machines don't come cheap: Hoffman estimates that, brand new, his sorters, earth-moving tools and generator would likely cost between $150,000 and $500,000. However, he has a background in aviation and some of his team members have worked in machining, which meant that they were able to build and develop many of their own tools. In addition, Hoffman notes, the recession and the bursting of the housing bubble have forced many contractors to sell their tools at a fraction of their book values. It's a sad side effect of the economy, he admits, "but it also makes it a great time to buy equipment."

Without the technical skill of his crew, Hoffman wouldn't have been able to take his chances in Alaska. While Discovery has given him some money to help out with food and fuel, Hoffman had to find the cash to pay for his machines. "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."

"Go-To Guy"

While Hoffman and his team search for gold, they're also learning from the lessons of earlier gold rushes. Having built his own cheap, effective machinery, he's now designing and building 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."

Although they haven't advertised their equipment business, customers have found them. "I'm not soliciting business, Hoffman notes, "but several guys have approached me." Currently, he's working with a group in Arizona that "is talking to me about building machines for them."

For Hoffman, the sideline is more than just a revenue stream. 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."

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

A short tip to those that want to make some extra cash panning gold and make extra money at it. I should not give out this tip because its one of the best keep secrreats in the panning bussiness but thats the kind of guy i am, ill share to let some one that wants to make a extra couple bucks to do so. Years ago when gold mines were around and water power hoses were around washing thousands of tons of earth into huge slush boxes , and mines took dirt out of mines and slushed it outside the mine, they only took certain size nugets, a lot of the very small ones fell threw the huge slush boxes and got burried in the ground. Do resurch and find old mines and go there if you can legaly or to the strem near by and dig and pan there where the WAIST dirt was left, there you will find very small nuggets that they didn,t want or didn,t see way then, or find where they dumped the waist soil in mounds and they will be huge. With a pan you can see if even the smallest nugets come into your pan, work a area all of it, because the masses of water that ran down those old huge slush boxes they missed a lot of the small stuff, only looking for the larger stuff. Good luck

January 11 2011 at 12:59 AM Report abuse +1 rate up rate down Reply

The metals is a average persons to the rich persons game, NOW days anyone can hold gold,silver and all other metals IF THEY WANT TO. You don,t need a stock brokers licence to buy and trade metals, or and collage education. Its simple you buy the coins in RAW form when the price was low, then you sit on them HOPPING the price will go up some day. Plus the price of the coins as DATES are going to be into huge demand in comming years, when 3/4 of this gets melted when the price gets higer. When you think your stash of coins and bars are at a good price shop around and sell the stuff , its costs you nothing but gas, to take them to market, not like stocks that you have to pay fees to trade. Same with the gold panners that find small gold nuggets and pacer flakes, you just take it to a buyer and get paid, simple and easy as that, and no one even has to know how much you sold. Gold, Pladdium might reach 3 grand a oz, and silver might reach 60 bucks a oz. cash it in and you made a good deal. If you buy metals threw the market, or minning stocks then you will have to pay out and deal with all the other stuff involved ..who needs it.

January 11 2011 at 12:42 AM Report abuse +3 rate up rate down Reply
1 reply to ronsjigslures123's comment

All you people on these forms that bash gold and silver agaist the charts over stocks were consistant % over the years is reading to much into metals like it IS A STOCK, it is not its all togeather different, its not even on the same page. Metals don,t even work like stocks do, and to do a chart on it is stupid. Gold and silver and other metals is like a pot luck deal, there is no investment stragity involved, you can be a high school drop out and strike it rich in metals, metals don,t even perform like the stock market. Its simply those that saw this all comming and bought gold coins at 300.00, to 400.00 bucks EACH, and silver coins at 4 bucks each, and socked them away will get a return of TRIPLE there investment if they sold them today, if you gamble and hold on to them to see if they return 6 times what you paid then your a winner no matter how you look at it, Just a FEW short years ago you could have bought one oz gold coins for 400.00 each over popular TV coin selling shows, same with silver one oz. Egals at 6 bucks each ... The Coin Valt was on e of them .. and a coin place called shop at home tv. Those that bought this stuff will make a huge profit on there investments ... ALL these Jonney Come Lately,s that are trying to get good buys and low prices on all this stuff now are crying they didn,t get in a short seveal years ago. There is NO gray area here if you bought one gold Kugaran, or Saint Goddis, coin for 400 bucks today you will get payed 1,400.00 for that same coin, same with silver,pladdium.

January 11 2011 at 12:28 AM Report abuse +2 rate up rate down Reply

I like the sound silver makes in my pocket

January 10 2011 at 5:39 PM Report abuse +4 rate up rate down Reply
2 replies to dterraman's comment

The most important invention well since gold!

January 10 2011 at 5:30 PM Report abuse rate up rate down Reply

"Gold Rush" is baloney. Gold never has, never will be a hedge against inflation.

January 10 2011 at 4:10 PM Report abuse -3 rate up rate down Reply

dont be an idiot the value of gold isnt riseing the value of the dollar is dropping, its a constant in the oil rich countrys that use gold as there monitary unit, rushing out to mine gold is just what it has always been historical less than 4% of those who mine for gold find it and 2% make enough to stop and retire

January 10 2011 at 2:04 PM Report abuse +5 rate up rate down Reply

Peter Schiff and Stephen Leeb both predict that Gold will go to $5,000 an ounce and Leeb says commodities in general will soar. Oil is one of them. We're peaked for oil and the demand is growing in China & India like crazy. The Government is debasing the currency like crazy and everyone, including Americans, are losing faith in the dollar. I was just in Italy in Sept. and no one would accept my American money. A far cry from when I went in 2001 when they accepted American money with open arms.

January 10 2011 at 12:59 PM Report abuse +3 rate up rate down Reply
1 reply to defelicep's comment

You should do lots of reserch before you dive ALL the way in in gold hunting. There are a few ores that look just like gold but is not, years ago many people were duked into buying a wothless mines with a ton of iron pryrite in it, it looks exacualy like gold to a untrained eye, and found most places. If your lucky enough to find a few good size nuggets have them checked out first before you bellow : I STRUCK IT RICH

January 10 2011 at 11:15 AM Report abuse +3 rate up rate down Reply

I have been in the mixed up with metals for over 50 years, as a amature collector and investor all my investing is paying off AGAIN, it already paid off some yeras ago also. I panned for gold to get out in the woods many times on a summer day, most of the gold you find is pacer gold flakes, very small and you have to find a lot to make a oz. Yes there is places were you find gold nuggets and i even have found some of them and still have them today, and you have to remember you have to move a lot of dirt threw that pan before you find anything. But at today,s prices and they will go up, even a good pacer producing stream will give you a ok return on your work, if you throw in a few nuggets you will hit a nice return. But remember to have to know the LAWS of your state you can,t just pan anywhere like on state park streams and private property. Best place to start is ask your local Game and Fish guys and gals of the Laws of panning local streams.

January 10 2011 at 2:54 AM Report abuse +4 rate up rate down Reply
1 reply to ronsjigslures123's comment

I have played in the gold panning field for a few years. It is actually fun. If you want to dig in and get after it you could find more, but for me it was just the mountains, the streams and the friends that I was with at the time. I never did come home a millionair but I did come home with some keepers and some flakes. There is still plenty out there if a person wants to work and I mean work hard you will find it.

January 10 2011 at 11:14 PM Report abuse +1 rate up rate down Reply