Mining economics
The core concepts that decide whether a deposit can make money, explained one at a time.
- Grade and contained metalGrade is how much metal a tonne of rock holds. Multiplied by tonnes it gives contained metal, and the cut-off grade decides which rock counts.2 min read
- RecoverabilityNot all the metal in ore can be extracted. Recovery is the share the processing plant captures, and it depends on the ore's mineralogy and the process used.2 min read
- PayabilityA smelter or refinery does not pay for all the metal it receives. Payability is the share it pays for, and it differs widely between metals.3 min read
- Commodity priceMetal prices are set by world markets, not by the miner. Studies use long-term price assumptions, and small price changes move margins a lot.2 min read
- Cost of saleGetting a concentrate from the mine gate to a smelter, and paid for, costs money: treatment and refining charges, penalties, freight and insurance.2 min read
- Cost of productionWhat it costs to mine and process ore, measured per tonne of ore and per unit of metal, and how cash costs differ from all-in sustaining costs.2 min read
- Government take: royalties, taxes and state stakesThe state takes its share of a mine's cash flow through royalties, income tax, other levies and sometimes a free stake in the project. Together they can be the largest cost after operating costs.4 min read
- TollingInstead of building a processing plant, a mine can pay to process its ore at someone else's plant. Tolling suits small or early projects, with trade-offs.2 min read
- CAPEXCapital expenditure is the money spent to build a mine before it earns anything, plus the money spent later to keep it running and expand it.2 min read
- Infrastructure spendPower, water, roads, ports and camps can cost as much as the mine itself. Location decides how much infrastructure a project has to build.2 min read
- Life of mineHow long a mine produces, and how long the whole project lasts once the build years before and the closure years after are counted.2 min read
- Mining studies: PEA, PFS and FSThree studies of rising detail turn a deposit into a mine plan with a price tag: the preliminary economic assessment, the pre-feasibility study and the feasibility study. What each contains, how far to trust it, and what it unlocks.5 min read