in the late 1990's when precious metals had been in a bear market for more than a decade, an analyst was asked what the proper price-earnings ratio was for a gold company, i.e what a dollar of eps was worth. to paraphrase the analyst, he said he didn't know because he couldn't remember the last time a gold company had earnings of $1 per share.

the link below is to an article on how increasingly difficult it is to find and develop new gold projects, and why new supplies of gold are unlikely to come to market even with higher prices. eric sprott has gone so far as to speculate that with rising oil and gas prices, we may stop using scarce hydrocarbons to develop marginal projects, and just revalue upward the existing stock of gold.

we don't have that option with silver; unlike gold, industry consumes silver, and needs new supply. with increasing costs, marginal high-cost mines won't make any money, or even go into production, while the robust projects of sso will still be profitable, and the market will pay a premium for that. once again, size matters.

http://www.theglobeandmail.com/servl...