Cost of sale
Getting 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 sale is everything spent between the mine gate and getting paid: smelter charges, penalties, freight and insurance.
What it is
Once a mine has produced concentrate or doré, it still has to deliver it and have it processed into metal. These costs come off the sale price. They are sometimes called realisation costs or offsite costs.
The main parts
- : a fee per tonne of concentrate for smelting it. Set yearly or per contract, and they swing widely with the balance of mine and smelter supply.
- Refining charges: a fee per unit of payable metal for refining it, for example per pound of copper or per ounce of gold.
- Penalties: deductions for impurities such as arsenic, mercury, fluorine or cadmium above set limits. A dirty concentrate can be hard to sell at all.
- Freight and logistics: trucking, rail, port handling and shipping to the smelter. Remote mines pay more.
- Insurance, sampling and marketing: smaller items, but they add up.
Gold doré has a small cost of sale: refining charges are low and bars are easy to transport. Base-metal concentrates have a large one.
Net smelter return
The money left after cost of sale is the net smelter return (NSR). It is the mine's true revenue at the mine gate, and it is what most royalties are paid on. That is why it is called an .
Typical size
| Product | Cost of sale as a share of gross metal value |
|---|---|
| Gold doré | under 1% |
| Copper concentrate | often 5–10% |
| Zinc concentrate | often 15–30% |
Together with payability, cost of sale explains why a zinc mine keeps much less of its metal's value than a gold mine.
Ranges are indicative and vary widely by deposit. This is educational material, not investment advice.
Key terms
Next in this track
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.Related articles
- 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.Mining economics3 min read
- Offtake and prepaymentsAn offtake agreement secures a buyer for a mine's product. A prepayment is cash paid upfront by that buyer, repaid in future deliveries.Mining finance2 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.Mining economics4 min read
Educational material only. Nothing here is investment advice or an offer to buy or sell any security or mineral interest.