Mining cost breakdown: the strip ratio drives most of the cost

Mining has a bigger structural difference than any other industry: there is NO purchased raw material in the normal sense - ore comes directly out of the ground, not from a supplier. The industry's biggest cost - overburden stripping - doesn't sit neatly in one category, it ALLOCATES across both equipment and labor.

The costing unit: ONE TON OF RUN-OF-MINE ORE (before processing) or ONE TON OF CONCENTRATE (after processing, if costing the processing stage) - state clearly which point you're measuring at, since value differs enormously between the two.

The extraction sequence

1. Geological exploration - determining reserve size and ore body location.
2. Overburden stripping - removing the non-mineral rock/soil layer covering the ore body.
3. Drilling & blasting, then excavation.
4. Haulage - moving ore out of the pit with mining haul trucks.
5. Crushing, screening, beneficiation - raising mineral grade, separating tailings.
6. Transport of concentrate to the point of sale/export port.
7. Land rehabilitation of mined-out areas.

The central issue: the overburden strip ratio

The strip ratio - the volume of waste rock that has to be removed to get one unit of ore - drives most of the mine's equipment and labor cost, but stripping itself produces no sellable product. This isn't a separate category among the ten - it's how equipment hours and labor hours get ALLOCATED between stripping (no revenue) and ore extraction (revenue).

Ten categories

1. Materials - only explosives and processing reagents

There's no "input material" that is the ore - the ore IS the thing being extracted, not a purchased input. This category is left with explosives (by weight) for drilling and blasting, and processing reagents (by liter/kilogram) for beneficiation. Convert to per-ton-of-ore using actual consumption divided by ore output in the same period.

2. Equipment - the largest category, mostly owned

Drill rigs, mining haul trucks, excavators, crushers/screens - too capital-intensive to rent the way residential construction does, so mines typically own their fleet. Split equipment hours between STRIPPING and ORE EXTRACTION when allocating depreciation - see above.

3. Labor

Drill/excavator/haul-truck operators, by shift. Same principle: split hours between stripping and ore extraction.

4. Tailings - stands in for "scrap"

After processing, ore that doesn't meet the required mineral grade is rejected as tailings. This is the mining equivalent of scrap, costed via recovery rate (concentrate output divided by run-of-mine input to processing).

5. Consumables

Drill bits, crusher/screen liners, mining haul truck tires (enormous and expensive) - divided by operating hours or ore quantity processed before replacement, same tool-life logic as any trade.

6. Subcontracted work

Specialized exploration drilling contractors, professional blasting services (many jurisdictions require a separate license for industrial blasting). Take the exact contract price, converted to per ton of ore.

7. Rework

Reprocessing tailings if the technology allows additional recovery, or reprocessing ore that fails sale-grade quality. Different from tailings - this is redoing work to recover value, not discarding it.

8. Packaging - small for bulk, can be significant for premium concentrate

Most ore ships in bulk, unpackaged. Only meaningful for certain premium refined minerals requiring bagging or drumming.

9. Freight - mine to port/plant, sometimes very far

Long conveyor systems, dedicated rail, or trucks, depending on distance from mine to point of consumption. Can be a large share of cost for remote mines.

10. Overhead - including the rehabilitation provision

Mine management, safety, AND the provision for land rehabilitation - many jurisdictions require mining companies to accrue this fund throughout the mine's life, not pay it as a one-time cost at closure. Cost per ton of ore extracted in the period.