Further, Cooper says this means that "the market seems to have penalized companies for the rising costs associated with lengthening the life of a mine operation...the market does not seem to be paying for the optionality offered by increasing reserves when they come with increased costs." The strongest periods of underperformance seem to correspond with times when cost inflation was high. Cooper concluded that "investors seeking gold exposure also want safety in terms of cost containment, and when part of the reason for buying stocks falters, the choice is abandoned for alternative investments." BofA-ML estimates that the average all-in cost for the industry was up 19% from the previous year to $1,081 an ounce during the first quarter of 2011. The increase is largely due to rising fuel prices, higher labor costs, increased regulatory expenses and declining ore grades. While it's true that these rising costs are putting a strain on miners' profitability, it's important to keep it in context. While cash costs have increased 19%, profit margins -- the true gauge of a company's value -- have expanded 25% on average, more than offsetting the cost increases. In fact, financials for the majority of gold companies have been improving for years. According to Cooper, many gold companies "have been generating positive cash flow and growing earnings on a per-share basis." Although it hasn't showed up in share price performance, senior gold miners have seen the strongest gains with average per share earnings increasing roughly 67% since 2009. Corporate cash flows for gold producing companies have also increased significantly. The average senior gold miner now has more than twice the amount of cash flow; mid-sized intermediate gold companies' cash flow has more than tripled. This year's carnage has created a substantial opportunity to buy healthy, gold mining companies at historically low prices compared to gold bullion. Cooper says that "the net result is that gold companies can now be purchased for about their intrinsic value for the spot price of bullion." Historically, one could purchase about 4.4. units of the XAU for the price of an ounce of gold. That ratio fell to less than 3 units per ounce in the mid-1990s when gold prices bottomed but has averaged 5.2 units during the current bull market.