Even during the early days of the gold rush, back when there was plenty of ‘easy pickins’, making a living was pretty tough. And very, very few struck it rich.
But this actually had a lot more to do with the economics of gold mining than it did with the actual rarity of gold itself. Because as we discussed in Part 1, gold isn’t actually that difficult to find.
Anyone can fill up a few vials worth over a season – with enough time & effort. (Even today).
However, finding a fortune’s worth of gold is another matter entirely.
Let’s take a closer look…
They Called it a “Rush” for a Reason…
Remember how in Part 1 I’d mentioned that gold follows fairly predictable rules?
While this is handy information for a prospector, it’s also a double edged sword.
Because unless you were the very first to discover a gold bearing watercourse, or “virgin ground” as they called it, then the odds that others have already mined out the lion’s share from all the obvious spots (inside bends, behind boulders, bedrock traps, etc.) are all but assured.
Furthermore, the typical process in the gold rush was for mining crews to basically start at the mouth of a given watercourse, and move their way upstream – dredging out all the choicest material off the bedrock as they went – and then processing massive volumes of it through a sluice box.
Some teams would also blast material off the riverbanks with high-pressure hoses, channeling it all into the top of the sluice.
(As you can imagine, these processes can significantly alter ecosystems, which is why dredging & hydraulic mining is now illegal in most countries).
They’d continue dredging & blasting their way upstream until they either hit a “pay streak”, and were able to trace the lode source, such as a gold-quartz vein – or until they stopped finding enough gold to justify the effort.
Then they’d move on to stream #2. Or perhaps stream #102.
And this is how all the obvious gold deposits were systematically extracted by the old-timers lucky enough to be “first”.
Today’s miners don’t have the opportunity to stake out virgin ground – unless they’re staking out stuff way up in the high country (far from any watercourse). It’s virtually impossible to find virgin ground anywhere near a creek.
So instead of rushing to dredge out a newly-discovered watercourse before someone else claims it up – miners now have to utilize different strategies.
While this isn’t as ideal, there’s still plenty of “leftover” gold to be recovered.
There’s a few reasons for this:
- Different business models. It made more economic sense for the old-timers to rush from one creek to the next, sucking up the easy gold as they went, and ignoring the spots that weren’t a sure thing. This had a much higher “ounce per hour” yield compared to sticking around and thoroughly processing material.
- Different technology. Over the last 100+ years, we’ve managed to conjure up some new gold-finding technologies that give today’s miners some impressive capabilities. This includes things like metal detectors, ground-penetrating radar, and vastly more efficient machinery for processing material.
- Different market conditions. There are various different gold rush periods (depending on the area), but up here in British Columbia, our iconic gold rush was in a little town called Barkerville, around 1860. At that time, gold was worth about $19/ounce (USD), which is roughly $570 USD per ounce adjusted for inflation to 2018. The price of gold today is currently just over $1,200 per ounce, or more than double what it was during the historical gold rush… which means miners today can justify close to double the recovery cost. So it now makes a lot more sense to be thorough.
Keeping in mind that the days of easy pickins’ are over, let’s examine the best strategies for maximizing gold recovery today…
Precision Targeting vs Bulk Processing
There’s basically two ways you can tackle an area.
- Targeted hand-mining
- Machine mining operations
With hand-mining, your focus is strategic material extraction from natural traps & crevices, sniping nuggets off bedrock with metal detectors, and so on – because you’re only processing your choicest pay-dirt through a small sluice box. Typically all of your equipment can fit in your backpack.
And with machine-assisted mining, everything’s basically “bigger”. You’re using excavators instead of shovels, and a 20+ foot sluice box (called a highbanker), jackhammers to peel off layers of bedrock… and so on. With this approach, it’s all about processing material – the key is to keep that sluice running at capacity, all day long.
Which is better? It depends.
Let’s say you have a standard placer claim in BC (about 21 hectares). This sounds like a lot, but in terms of how much of it will plausibly contain gold, you may only have a few hundred cubic meters of potential pay-dirt, depending on the topography, access to bedrock layers, and the historical variations of the watercourse.
The yield from the claim will depend on how well you can identify those “pay zones” – and what makes the most sense for extracting the gold from them.
First there’s the physical logistics:
- Is the claim only accessible by hiking in? Or are there serviced roads & paths throughout?
- Is it even possible to bring in heavy machinery?
- Are the banks of the watercourse a gradual incline – or shear cliffs?
- Are the creek’s gravels mere inches from bedrock? Or will you have to clear 10+ feet of overburden to reach the richest deposits?
And then there’s the economics:
It’s all about gold per tonne. (That’s the mining equivalent of cost-per-acquisition).
Obviously, with heavy machines you can process substantially more material than hand-mining. But even if the site accommodates heavy machinery – this also greatly increases your floor cost. Permits, purchasing/leasing equipment, maintenance, wages, fuel, transport… etc. It all adds up.
You could end up extracting several pounds of gold… but your costs are similarly impressive.
(Sort of like big-budget marketing. When things go well, they go really well. But when things go south…)
In contrast, with hand-mining everything’s done on a much smaller scale.
Far less material to process, far less gold recovered… but also far less costs. And this is also where strategy & technology can really give you an edge.
So if you’re focusing on the right areas, with the right tools – you can end up with far more profits as a solo hand-miner… even with a fraction of the gold.
But while finding gold is fun, and profits are obviously desirable – there is still the question of magnitude.
Whether you’re machine-mining on a claim with rich enough dirt to pan out (pun intended), or hand-mining with enough precision to score a decent haul – usually the bottom line financials are a lot less impressive than the gold itself.
The reality is, even during the glory days of the gold rush, most of the “successful” prospectors basically just made enough to subsist on their claims for a few years, until the pay streaks dried up. The smart ones banked the majority of their profits, and quit while they were ahead.
The vast majority returned home with basically nothing to show for their efforts. But there were also a small handful of prospectors who truly did strike it rich – creating generational wealth with a single discovery.
We’ll talk about them shortly.
But for now – let’s pause the history lesson and quickly recap the core parallels between mining gold out of the hills vs mining the value out of your own market…
Nuggets of Wisdom for ‘Digital Prospectors’
Just as there’s a sizeable chasm between simply finding gold and actually striking it rich – the same is true for internet entrepreneurs, marketers & tech companies.
Let’s examine some parallels…
- Simply being first is a huge advantage
Much like being the first prospector on virgin ground – being first to market with a product (or concept) can create an enduring “halo effect” across your industry, where your business is associated with something that becomes a cultural staple in your niche.
Ideally, this is a novel invention or product that you can roll out. But that’s a lot easier said than done.
An alternative – and a very effective one – is to “coin” a process that becomes widely referenced. For example, years ago I described a process for affiliate marketers to generate very targeted traffic, which I called the Conduit Method. It seemed to strike a chord, and for several years, people referred to those types of sites as “conduit sites”, etc.
So you don’t need to invent the next iPhone. Even describing a unique process can be enough to send ripples across your market. (Think: trademarking vs patenting). And it’s often much, much more affordable to introduce a process vs a product.
This can amplify your results at every stage of the growth cycle – right from earning links to earnings multiples.
- The “easy gold” is obvious to everyone
Just as even the greenest prospector (like yours truly) can quickly determine the spots on a creek where gold will accumulate – pretty much everyone is using the same keyword research & ad intelligence tools to find the most obvious keywords, interest targets, and ad angles.
It ain’t rocket science.
But if you’re only targeting the obvious spots, you’re just picking through other people’s leftovers. This can still work out, but it usually depends on running lots of volume. For marketers – this means paying top dollar CAC.
This is often why the richest gold is now found in the crevices, smaller & overlooked tributaries, and ancient streambeds (where the creek used to flow, hundreds or thousands of years prior). It’s still there, and there’s still plenty to extract – but it takes a combination of elbow grease & intuition to find these golden anomalies.
So it’s not just being able to read your market that’s essential. It’s also the ability to predict your competitors – and identify the gaps in their targeting.
- Your model is paramount
We commonly hear that “content is king”.
As I see it, that’s a very narrow perspective. Content is basically just a medium for enacting your model. For prospectors, “content” would be their material. It still needs to be processed to extract the gold from it.
And for marketers, content fuels traffic & CRM… but this ultimately just feeds your business model. And it’s those variables – things like your LTV, sales cycle, conversion rates, etc – that will determine if your “material” can be processed at a profit.
Miners & marketers alike tend to focus on targeting. Finding the “gold”. But really, the money gets made (or not) when you start scaling up your extraction.
Getting your extraction model optimized is what allows you to actually profit from the gold you find.
- Early adoption often creates new frontiers of “virgin ground”
One of the easiest ways to find good gold is to bring a metal detector to abandoned mines and scan the tailings – and the whole area in general. This is a great example of how breakthrough technologies can unlock new frontiers in areas that are considered depleted – or at least no longer viable.
This happens frequently in our own industry as well. For example, the emergence of Facebook & Twitter opened up entirely new channels to reach your prospects (both organically & with paid media)… where we used to have a near-total reliance on Google for top-of-funnel visibility.
Early adopters with FB Ads (and using FB for promoting content) enjoyed massive, cheap & highly targeted traffic for several years – while their competitors duked it out in the top-dollar CPC’s with Adwords.
Looking for similar early-bird opportunities to mine the “same ground” with new channels is a very worthwhile activity.
And so on – the parables from the gold rush are seemingly endless.
But we still haven’t really covered the proverbial process of finding the real mother lode… and truly striking it rich.
That’s because I’ve saved the best “parable” for last.
In Part 3 – which I’ll post in a few days – we’ll discuss the ultimate outcome for every prospector.
Digital and otherwise 🙂