How mining and metals works: from rock to metal
The steps from exploration to refined metal, the main products and customers, how miners make money, and the metrics they watch.
Industry brief, with a one-minute summary: Mining and metalsKey takeaways
- A mine digs up rock that contains a small amount of valuable metal, then separates the metal from the rock.
- Bulk commodities: iron ore and coking coal (bought by steel mills), bauxite (made into alumina, then aluminium), thermal coal (bought by power plants).
- Base metals: copper (wires, motors, grids, buildings), aluminium (cars, packaging, buildings), zinc (coating steel), nickel (stainless steel and batteries).
- Precious metals: gold and silver (jewelry, investment, central banks, electronics).
Key idea
A mine digs up rock that contains a small amount of valuable metal, then separates the metal from the rock. Profit depends on how much metal is in the rock, how cheaply it can be extracted, and a price the miner cannot control.
Ore is rock that contains enough metal to be worth mining. Grade is the share of metal in the ore. Copper ore often has a grade below 1 percent, so a mine moves more than 100 tonnes of ore to get 1 tonne of copper. Gold is measured in grams per tonne of ore. Iron ore is much richer: often more than 55 percent iron.
Main products and who buys them
- Bulk commodities: iron ore and coking coal (bought by steel mills), bauxite (made into alumina, then aluminium), thermal coal (bought by power plants).
- Base metals: copper (wires, motors, grids, buildings), aluminium (cars, packaging, buildings), zinc (coating steel), nickel (stainless steel and batteries).
- Precious metals: gold and silver (jewelry, investment, central banks, electronics).
- Critical minerals: lithium, cobalt, graphite, nickel, rare earths and others needed for batteries, magnets, electronics and defense. Governments call them critical because supply is concentrated and hard to replace.
- Mining and metals value chain
- ExplorationFind a deposit: geology, drilling, sampling. Most prospects never become mines.
- Studies and permitsFeasibility studies, environmental approval, community agreements, financing
- ConstructionMine, processing plant, power, water, roads, rail, port
- ExtractionOpen pit (dig from the surface) or underground
- Drill, blast, load, haul
- Processing at the mineCrush and grind ore, then concentrate the metal
- Output: concentrate (for example 25 to 30 percent copper) or a product such as iron ore fines
- Smelting and refiningTurn concentrate into pure metal; often in another country, such as China or India
- Fabrication and useWire, sheet, steel products; cars, buildings, grids, batteries
Discovery to production often takes 10 years or more, which is the root of commodity cycles.
| Cost area | Approximate share of cash cost | What drives it |
|---|---|---|
| Mining (drill, blast, load, haul) | About 30 to 40 percent | Tonnes of rock moved, haul distance, diesel price, truck productivity |
| Processing (crush, grind, concentrate) | About 30 to 40 percent | Tonnes of ore processed, electricity price, grinding media, water |
| Site overheads and maintenance | About 10 to 20 percent | Staff, camps in remote areas, equipment upkeep |
| Transport, smelting and refining charges | About 10 to 20 percent | Distance to port and smelter, freight rates, fees charged by smelters |
So-what
Most costs depend on tonnes moved and processed, not on metal produced. So when grade falls, cost per tonne of metal rises even if nothing else changes.
Key metrics, in plain words
- Grade: metal content of the ore, in percent or grams per tonne.
- Recovery rate: the share of the metal in the ore that the plant actually captures.
- Throughput: tonnes of ore processed per day or year.
- Strip ratio: tonnes of waste rock moved for each tonne of ore in an open pit. A higher strip ratio means more cost.
- C1 cash cost: the direct cost of producing one unit of metal (for example USD per tonne of copper), including site costs but before royalties, depreciation, sustaining capex and corporate overheads.
- All-in sustaining cost (AISC): cash cost plus the capex and overheads needed to keep the mine running; common in gold.
- Reserves and mine life: metal that can be mined profitably, and how many years it lasts.
- Cost curve position: where the mine sits when all mines are ranked from cheapest to most expensive. First quartile means among the cheapest 25 percent.
A gold mine in Ghana processes 2 million tonnes of ore a year at a grade of 1.5 grams per tonne, with 90 percent recovery. How many grams of gold does it produce in a year?
An open-pit mine's strip ratio rises from 2 to 4 as the pit gets deeper. What does that mean for cost?
Sources for this lesson (1)
- Recognized public explanations of case-interview concepts and frameworks
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