Mining - Industry

Mining - Industry

The Mining Industry is involved in the extraction of precious minerals and other geological materials through the use of sophisticated and productive machinery, along with digitization, to continuously prosper by increasing productivity while decreasing cost. With its main assets its reserves and resources, this industry provides most of the materials to build infrastructure and instruments of daily use, to obtain large amounts of energy, and to supply agricultural needs. Typical activities in the mining industry include metals production, metals investing, and metals trading. With the present mining challenges, the mining legacy has repeatedly discussed its relationship with environmental health and sustainable development.

Mining Is A Difficult Business:
  • It's highly risky
  • Requires huge upfront capital expenditures
  • Mines tend to be in remote locations
  • Mines often tend to be in countries with significant politicalĀ  & social risk (tax changes, social backlash, etc.)
  • Miners are price takers - swings in prices can greatly impact the business

Mining Company Valuations

  • The valuation of a mine can move rapidly based on some key driversĀ 
    • How much ore is left to mine (mine life)
    • % of valuable ore per ton
    • Cost to mine a ton of ore
    • Market price of the metal being mined
  • The cost of energy has a huge impact on the mining industry
    • One of the largest mining costs is energy - to move rock, crush it, drill, etc.
    • For some ores the cost of energy can be 50% of the cost!
  • The mining industry has become less labor intensive over time as technology has improved

Other Mining Tidbits

  • As mining technology and metals prices have increased, deposits that were historically unprofitable can now be minedĀ 
  • Over time the average grade of mines goes down as easier-to-mine deposits are depleted. This requires prices to go go - so the higher costs associated with mining lower grades can be recovered
  • Over time the timeline to get a new mine active has increased dramatically: all of the preparations, studies, permits, approvals, etc. can take 10-20 years