CAPEX
Capital 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
On this page
CAPEX (capital expenditure) is the money spent to build the mine and its equipment, as opposed to the cost of running it.
What it is
is spent on assets that last for years: the plant, the mine itself, equipment and infrastructure. Most of it is spent before the mine produces anything, which is why building a mine needs financing.
Three kinds of capex
- Initial (or development) capex: the cost of building the mine to first production. The headline number.
- Sustaining capex: spending during operations to keep production going, such as replacing equipment or raising a tailings dam.
- Expansion capex: spending to grow production beyond the original plan.
What initial capex covers
| Item | What it includes |
|---|---|
| Mine development | Pre-stripping waste in an open pit, or tunnels and shafts underground |
| Processing plant | Crushing, grinding and separation equipment |
| Tailings storage | The facility that holds processing waste |
| Infrastructure | Power, water, roads, camp and more: see infrastructure spend |
| Owner's costs and engineering | The owner's team, engineering and project management |
| Contingency | A reserve for the unknown, typically 10–25% |
How accurate the estimate is
The estimate improves as a project advances:
| Study | Typical accuracy |
|---|---|
| Preliminary economic assessment (PEA) | ±30–50% |
| Pre-feasibility study (PFS) | ±25–30% |
| Feasibility study (FS) | ±10–15% |
Even feasibility estimates are often exceeded during construction. Cost overruns are common in the industry. See mining studies for what each study contains.
Capital intensity
Capex is easier to compare as capital intensity: capex divided by annual production. For example, $500 million to build a mine producing 50,000 tonnes of copper a year is $10,000 per annual tonne.
Why it matters
Capex has to be paid back from the margin before a mine makes any real return. A deposit can have a healthy margin per tonne and still not be worth building if the capex is too large for its size or life.
Ranges are indicative and vary widely by deposit. This is educational material, not investment advice.
Key terms
Next in this track
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.Related articles
- 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.Mining economics2 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.Mining economics2 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.Mining economics2 min read
Educational material only. Nothing here is investment advice or an offer to buy or sell any security or mineral interest.