As gold sets new highs, it would only be natural to assume that profit forecasts for gold mining companies would be soaring too. Surprisingly, profit forecasts are not jumping.

Though some brokerage analysts have raised their full-year projections in recent weeks, the Zacks Consensus Estimate is not moving higher for most gold miners. Rather, it is essentially unchanged for Barrick Gold (ABX), Eldorado (EGO), Goldcorp (GG) and most of their peers.

Where are we seeing increases are for companies that are significantly dependant on other metals, such as copper or silver. For example, the 2009 Zacks Consensus Estimate for Freeport-McMoRan (FCX) has risen 67 cents over the past 30 days to $3.79 per share. (This morning, FCX reported third-quarter profits of $2.07 per share, topping forecasts for $1.14 per share). Analysts hadPan American Silver (PAAS) is also seeing expectations rise with the Zacks Consensus now at 75 cents per share, versus 70 cents a month ago.

Ore Quality Is An Issue

A big reason why the gold miners are not shining as brightly as the precious metal is the quality of the ore being mined. There is a general school of thought that the miners are digging up ore that is more difficult to process. As result, this is adversely impacting costs.

When miners dig up gold, they are effectively taking rock out of the ground. Though the goal would be to just dig up gold, the actual rocks contain various other metals and minerals. This means the mining company has to separate the gold from the other metals. Ore is considered to be higher quality when there is a greater concentration of gold in the rocks. Conversely, ore is considered to be of lower quality if the rock contains less gold.

Obviously, it is in every miner’s best interest to dig up higher quality ore. However, as more and more gold is dug up, the quality of the ore decreases, hurting margins. It is this concern that has many analysts unwilling to raise their profit forecasts.

Investors should note that this is not dissimilar to what is occurring with oil. Many of the newly discovered oil fields are in areas where it is expensive to drill in. An example is Brazil’s Tupi field, which lies several miles below sea level.

Not The First Time Analysts Have Been Cautious

What’s interesting about the lack of estimate revisions is that this is not the first time it has happened. Back in February, when gold broke above $1,000 for the first time this year, I pointed out that brokerage analysts were not raising their forecasts. (Read Why Gold Miners Are Not Glittering.) Rather, analysts were cutting forecasts at that time.

Since then, gold mining stocks have rallied with Market Vectors Gold Miners (GDX) gaining about 43%. However, had you invested in a fund that tracked the S&P 500 instead, you would have realized an approximate 42% return. In other words, you could have gotten a similar return with considerably more diversification by buying S&P 500 SPDR (SPY) instead of GDX. (An investment in gold, via Gold SPDR (GLD) would have only earned you an 11.2% return over the same period of time.)

As you can see, while gold has been rallying, it has not given investors the best opportunities to profit. The mixed earnings estimate picture for gold miners suggests that the risks of investing in these companies remains elevated. Though gold mining stocks could still go higher, especially if third-quarter margins are better than expected, there are industries whose short-term prospects are brighter.

Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Zacks Investment Research

Last 5 posts by Charles Rotblut

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