Gold pans are used to find ores and gems in soil. The are made by placing a bowl in your crafting grid, nothing else is required. Use the gold pan by right-clicking sand or gravel. Then, in a stream of running water, right-click on the block under the running water to check for minerals
This process takes a long time, and you will only get native ore (Native Copper, Native Gold, or Native Platinum). A sand or gravel block can be collected from a few times, before the collection process destroys the block. Also you can only do the collection process 50 time in a Chunk, before a message appears stating "This area seems to be overworked. You probably wouldn't find much."