Commodity price
Metal prices are set by world markets, not by the miner. Studies use long-term price assumptions, and small price changes move margins a lot.
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The commodity price is what the world pays for the metal. A miner cannot set it, only survive it.
What it is
Metals are traded globally, and every producer receives roughly the same price for the same metal. A mine is a price-taker: it controls its costs, not its revenue per tonne.
Where prices are set and how they are quoted
| Metal | Main market | Usual unit |
|---|---|---|
| Copper, zinc, lead, nickel | London Metal Exchange (LME) | US$ per tonne (or per pound) |
| Gold, silver | London bullion market, COMEX | US$ per troy ounce |
Prices are quoted in US dollars, but most mining costs are paid in local currency. A weaker local currency lowers a mine's costs in dollar terms; a stronger one raises them.
Spot price versus long-term price
- Spot price: today's price.
- Long-term price: the price a study assumes over the mine's life, usually based on analyst forecasts, and often below a high spot price.
Mines take years to build and decades to operate, so studies use long-term prices. A project that only works at today's spot price is fragile.
Price cycles
Metal prices move in cycles driven by economic growth, new supply and stock levels. Prices can rise or fall 30–50% within a few years. New mines take five to fifteen years to develop, so supply responds slowly, which tends to make cycles larger.
Why it matters: margins move more than prices
A mine's costs barely change when the price changes, so the margin absorbs the whole move.
A 10% fall in price cut the margin by 30%. The thinner the margin, the larger this effect. Price also sets the cut-off grade: a higher price turns more rock into ore.
Ranges are indicative and vary widely by deposit. This is educational material, not investment advice.
Key terms
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Educational material only. Nothing here is investment advice or an offer to buy or sell any security or mineral interest.