Energy and resources (4 of 5)

Mining and metals

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Companies dig up rock that holds a little metal, separate the metal out, and sell it to makers of wires, steel, cars, batteries and buildings.

The big idea: A miner sells at a world price it cannot control, so its profit is the gap between that price and its own cost per tonne. The price tends to settle near the cost of the most expensive mine still needed to meet demand, so the cheapest mines earn money in almost every year and the most expensive only in good years. Because a new mine takes 10 years or more, supply reacts slowly and prices move in long cycles.

One unit, in numbers: One tonne of copper from a mid-cost open-pit mine: USD 10,500 comes in, and USD 4,000 (38%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: 20 to 40 percent for miners at good prices; under 5 percent for steel makersRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: Very highVery large sums must be tied up before the business earns anything, so the cost of that money weighs heavily on profit. More on capital intensity
The number to watch: Cash cost and position on the cost curveThe direct cost of producing one unit of metal (C1 cash cost), and where the mine ranks when all mines are lined up from cheapest to dearest. First quartile means among the cheapest quarter.

Ask this first in a case

Which metal and which step: mining, smelting, or steel and aluminium making?

Words used above (2)

C1 cash cost:: The direct cost to produce one unit of metal, before royalties, depreciation and sustaining capital.
Cost curve:: All producers ranked from cheapest to dearest, showing how much each supplies.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Miners sell ore, concentrate or metal at prices linked to world benchmarks, such as the London Metal Exchange price for copper.
Profit per tonne is the market price minus the mine's own cost per tonne, so the cheapest mines on the cost curve earn the most.
By-products such as gold, silver and molybdenum found with copper are sold too, and can cut the net cost of the main metal sharply.
Smelters and refiners earn fees from miners for processing concentrate, which rise when concentrate is plentiful and fall when it is scarce.
Steel and aluminium makers earn the spread between the metal price and the cost of ore, coal, scrap, power and alumina.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One tonne of copper from a mid-cost open-pit mine, sold at USD 10,500 (a round price between the 2025 London Metal Exchange average of about USD 9,700 and the higher prices of 2026). Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Sale price of one tonne of copper	USD 10,500	100%
Minus Mining: drill, blast, load and haul the ore and waste rock	USD 1,750	17%
Minus Processing: crush, grind and concentrate	USD 1,750	17%
Minus Site overheads and maintenance	USD 900	8.6%
Minus Transport, smelting and refining charges	USD 600	5.7%
Minus Royalties and mining taxes	USD 500	4.8%
Minus Sustaining capital: new trucks, tailings dams and pit expansion to keep producing	USD 1,000	9.5%
What is left (contribution)	USD 4,000	38%

Check: USD 10,500 minus USD 6,500 of costs leaves USD 4,000.

So what: The mine keeps about USD 4,000 a tonne, but most of its costs are paid per tonne of rock moved, not per tonne of copper. If the grade falls by a fifth, cost per tonne of copper rises by a quarter, so the levers are grade, recovery and haulage productivity, and every plan must be tested at a lower copper price.

Key measures(8)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Cash cost and position on the cost curve
The direct cost of producing one unit of metal (C1 cash cost), and where the mine ranks when all mines are lined up from cheapest to dearest. First quartile means among the cheapest quarter.
Typical: At a large, low-cost Chilean copper miner in 2025: about USD 1.2 per pound (about USD 2,600 per tonne) after credits for by-products such as gold and molybdenum, and about USD 2.4 per pound (about USD 5,200 per tonne) before them[2]
Ore grade
The share of metal in the ore. Lower grade means more rock moved and processed for each tonne of metal. Glossary: Ore grade
Typical: About 0.2 to 0.4 percent copper at large open-pit mines in the Americas, and about 1.1 percent at a rich underground mine in Indonesia, in 2025[3]
Strip ratio
Tonnes of waste rock moved for each tonne of ore in an open pit. It rises as the pit gets deeper, which raises mining cost. Glossary: Strip ratio
Recovery rate
The share of the metal in the ore that the plant actually captures. Glossary: Recovery rate
Throughput
Tonnes of ore the plant processes per day or year; together with grade and recovery it sets metal output.
All-in sustaining cost (AISC)
Cash cost plus the capital and overheads needed to keep a mine running; the standard cost measure in gold. Glossary: All-in sustaining cost (AISC)
Reserves and mine life
Metal that can be mined profitably, and how many years it lasts at the current rate.
EBITDA margin
Profit before interest, tax, depreciation and amortization, as a share of revenue. It swings strongly with the metal price.
Typical: About 60 percent at a low-cost copper miner in 2025, a year of high copper prices[2]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Which metal and which step: mining, smelting, or steel and aluminium making?
What has the metal price done, and how much of the change does it explain?
Where does the mine sit on the cost curve, and what are its grade, recovery and strip ratio doing?
Can the mine ship what it produces: rail, port, power and water?
Does the decision still work at a low price, not only today's price?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Exploration: find a deposit by mapping, drilling and sampling
Margin varies
Small explorers (juniors) and the exploration teams of large miners
Most prospects never become mines; the few that do are sold or developed at a large gain.
Step 2: Studies, permits and construction: feasibility, environmental approval, community agreements, then build the mine, plant, power, water and roads
Margin varies
Miners, engineering contractors, governments and local communities
Often 10 years or more from discovery to first production; delays here are a common reason projects slip.
Step 3: Extraction and processing at the mine: drill, blast, haul, crush, grind and concentrate
Fat margin
BHP, Rio Tinto, Codelco, Freeport-McMoRan, Antofagasta, Vale, Coal India
US metals and mining companies averaged about 24 percent operating margin in January 2026 data; low-cost copper mines earned far more in 2025.
Step 4: Logistics: rail, ports and bulk ships to smelters and steel mills
Medium margin
Miner-owned railways and ports, bulk shipping companies
Rail and port capacity often limit how much a mine can sell.
Step 5: Smelting and refining: turn concentrate into pure metal
Thin margin
Smelters in China, India, Japan and Europe; Hindalco, Aurubis, Jiangxi Copper
Paid by fees from miners; the 2026 benchmark copper smelting fee fell to zero because smelters compete for scarce concentrate.
Step 6: Steel and aluminium making: turn iron ore, coal, scrap and alumina into metal
Thin margin
China Baowu, ArcelorMittal, Tata Steel, JSW Steel, Emirates Global Aluminium
Earns the spread between the metal price and raw material costs; US steel makers averaged about 4 percent operating margin.
Step 7: Fabrication and trading: wire, sheet, tubes and metal trading
Thin margin
Wire and cable makers, service centres, traders such as Glencore and Trafigura
Volume businesses that pass the metal price on to customers.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Most of the profit sits at the mine, and within mining in the lowest-cost, highest-grade deposits, because the price is set by the dearest mine still needed. Smelting, steel making and fabrication earn thin spreads. When a step is concentrated in one country, such as refining of lithium, graphite and rare earths in China, that step gains power over the whole chain.

Cost structure(5)

The main costs, each as a share of revenue (the money from sales).

Mining (drill, blast, load and haul), share of cash cost: About 30 to 40 percent
Processing (crush, grind, concentrate), share of cash cost: About 30 to 40 percent
Site overheads and maintenance, share of cash cost: About 10 to 20 percent
Transport, smelting and refining charges, share of cash cost: About 10 to 20 percent
Capital spending, as a share of revenue at a large copper miner (2025): About 43 percent (USD 3.7 billion on USD 8.6 billion of revenue)[2]

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Operating margin, US metals and mining companies: About 24 percent[1]January 2026 data.
Operating margin, US steel companies: About 4 percent[1]
Operating margin, US precious metals companies: About 40 percent[1]Boosted by record gold prices.
Operating margin, US coal companies: Slightly negative (about minus 4 percent)[1]
World copper mine production, 2025: About 23 million tonnes, with Chile about a quarter[4]
World crude steel production, 2025: About 1,849 million tonnes, with China a little over half[5]

Typical cases(7)

Case prompts you might hear in this industry.

A copper miner's profit fell by half. Why?
Should we build a new lithium mine in Africa?
Cut the cost per tonne at an iron ore mine by 15 percent.
An electric vehicle maker wants secure supply of battery minerals. What should it do?
Should an Indian steel maker double its capacity?
Should a Gulf aluminium smelter build a plant abroad or buy a bauxite mine?
Should we buy a gold mine at today's price?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Planning at today's price, especially at the top of a cycle. Test at a low, a middle and a high price.
Confusing tonnes of ore with tonnes of metal. Multiply by grade and recovery.
Forgetting that grade falls and the strip ratio rises as a mine gets older, so cost per tonne of metal creeps up.
Looking only at mines when the real bottleneck is refining capacity, often concentrated in one country.
Ignoring permits and community consent, which decide timing as much as engineering does.

What changed, 2024 to 2026(5)

Recent changes a case could turn on.

China tightened control of critical minerals: the number of mineral trade codes under Chinese export controls has tripled since 2023, with controls on heavy rare earths from April 2025. Controls on battery materials announced in October 2025 were suspended until 10 November 2026, so check whether they are back in force.[6]
Copper hit records: the London Metal Exchange price passed USD 13,000 a tonne for the first time in early January 2026, driven by US tariff worries, outages at large mines in the DRC, Indonesia and Chile, and expected demand from grids, data centres and electric vehicles.[7]
Concentrate is scarce: the benchmark fee miners pay smelters to process copper concentrate was settled at zero for 2026, the lowest ever agreed, squeezing smelters in China, Japan and India.[6]
Tariffs on metals: the United States put a 50 percent tariff on semi-finished copper products from August 2025, and from April 2026 charges 50 percent on the full value of goods made almost entirely of steel, aluminium or copper, and 25 percent on many products made largely of them.[8]
Carbon at the border: the EU's Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026, so importers of steel and aluminium into the EU must pay for the emissions made in producing them (by buying certificates, the first in 2027 for 2026 imports), which favours low-carbon routes such as gas-based and electric arc furnace steel.[10]

Players by region(8)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: BHP
Rio Tinto
Glencore (mining and trading)
Anglo American
Vale
Freeport-McMoRan
Middle East: Ma'aden (Saudi Arabia, phosphate, gold, aluminium)
Emirates Global Aluminium (UAE)
Alba (Bahrain, aluminium)
Gas-based steel plants in the Gulf
India: Coal India
NMDC (iron ore)
Vedanta and Hindustan Zinc
Tata Steel
JSW Steel
SAIL
Hindalco (aluminium and copper)
Europe: ArcelorMittal (steel)
Norsk Hydro (aluminium)
Boliden (Sweden)
KGHM (Poland, copper)
Southeast Asia: Indonesian nickel producers and processing parks
PT Freeport Indonesia (Grasberg)
Amman Mineral (Indonesia, copper and gold)
China: Zijin Mining
CMOC
Ganfeng and Tianqi (lithium)
China Baowu (steel)
Latin America: Codelco (Chile, state owned)
Antofagasta (Chile)
SQM (Chile, lithium)
Southern Copper (Peru and Mexico)
Africa: Copper and cobalt mines in the DRC and Zambia run by global and Chinese miners
Platinum and gold miners in South Africa

Words to know(12)

Linked words have a fuller entry in the glossary.

Ore: Rock with enough metal in it to be worth mining.
Grade: The share of metal in the ore, in percent or grams per tonne.
Recovery rate (glossary entry): The share of the metal in the ore the plant actually captures.
Strip ratio (glossary entry): Tonnes of waste rock moved per tonne of ore in an open pit.
Concentrate: A powder with much more metal than ore (for example 25 to 30 percent copper), sold to smelters.
C1 cash cost (glossary entry): The direct cost to produce one unit of metal, before royalties, depreciation and sustaining capital.
AISC (glossary entry): All-in sustaining cost: cash cost plus the spending needed to keep the mine running.
Cost curve (glossary entry): All producers ranked from cheapest to dearest, showing how much each supplies.
Marginal producer: The last, most expensive mine needed to meet demand; the price tends towards its cost.
Tailings: The waste left after processing, often stored behind dams that must be kept safe.
Critical minerals: Minerals such as lithium, cobalt, graphite and rare earths that are vital and hard to replace.
DRI and EAF: Direct reduced iron and electric arc furnace: a lower-carbon way to make steel, common in the Gulf.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(11)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.