Historical average tantalizes gold price. (Metallic Minerals).

Gold mining is tough going when the price of the international standard languishes below $300 US per ounce. The Seabee mine in northern Saskatchewan is an anomaly in that $280 per ounce is enough to trigger a growth scenario. Once the gold price reaches its inflation-adjusted historical average, however, the company owning the province's only producing gold mine will see activity like never before.

"At $563 we'd be a very busy company, says Claude Resources President Neil McMillan.

He insists there's nothing to prevent gold from reaching that seemingly lofty height in the next five or 10 years. McMillan, who also serves as Metallic Minerals Chairman for the Saskatchewan Mining Association, firmly believes gold was trading too low even as it began nosing around $300 earlier this year.

People are talking about gold again, he says, giving reason to believe the metal's value will return to par with its historical relation to other consumable items. Through most of the last 250 years an ounce of gold has been enough to buy a quality suit of clothes and McMillan sees four signs gold's purchasing power may return.

"First, the ongoing supply-demand deficiency is continuing to build pressure on the price. The sentiment in the marketplace is this deficiency cannot be maintained."

Second, countries that have recently experienced financial crises have increasingly turned to gold. In Argentina and in Japan in particular, where the consumption of bullion has skyrocketed five-fold, the financially secure option many choose is to buy gold.

Third, there is a perception that gold mining companies are changing their marketing techniques. Companies that had been involved in the practice of forward-selling their gold may not do so in the future.

Finally, McMillan says, there is a growing realization that central banks simply do not have enough gold on hand to meet the continuing deficiency between production and consumption. Their methods of accounting do not accurately reflect the amount of gold in the system.

"The central banks are not filling the deficiencies and they are not big sellers of gold," McMillan explains. "Eventually the gold has to come from somewhere and that is from increased production."

McMillan knows the cycles of the gold industry and doesn't expect the price will rush unabated toward $500. It's more likely to gain two steps and lose a step -- back and fill is the industry term -- on a generally upward curve.

Gold last peaked in 1981 and bottomed out in 1999, right on schedule with its 17- to 21-year peak-to-trough cycle. Traditionally, now is the time it would be getting ready for its bull run.

"If it can break and hold above a certain level you have that psychological breakthrough," McMillan says. "Then it becomes a herd mentality where investors ask 'What's the next sector that will move?' and the momentum begins to drive the price."

Some gold mining companies -- recognizing the potential and responding to the price bump -- have increased exploration spending three-fold.

"I expect gold mining exploration in Saskatchewan to pick up and a lot of that will be based on the success and long-term viability of the Seabee mine," McMillan says.

Elsewhere in the precious metals sector, Saskatchewan's 'really monstrous' potential play is in diamonds in the Fort a la Come area. Money continues to be spent on exploration and reports of the number of gem-quality diamonds have done nothing but encourage further exploration. Companies operating in the area are contemplating the next big step in exploration -- sinking a shaft to acquire a bulk sample -- in an effort to determine production feasibility.

Saskatchewan is often accused of being anti-business but rarely is that complaint heard in relation to direct mining activity. In fact, many in the industry are quick to give credit where credit is due and McMillan is no exception.

"This is a good province to mine in," he states unequivocally. "The government clearly understands mining's importance."

McMillan is further encouraged by the provincial government's approach to the possibility of a diamond mine within its borders. They know it is not a sure thing, he says, but they are believers and they are willing to nurture the industry's expansion.

"The government is keenly aware of its potential and, I believe, is handling the situation properly," he says. "What they've done to this point sends out a very good signal to the entire mining industry."