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Mining Costs - CAPEX vs. OPEX

Mining Costs - CAPEX vs. OPEX

Depending on the location of the project and the type and quantity of the minerals contained within the deposit, the mining costs can vary a lot between different mining projects.

In general, underground mining is more expensive than open pit mining as with open pit mining the minerals are found near the surface at a maximum of approximately 200-400 meters depth in bulk tonnage.

The mining costs are estimated in a mining company's feasibility study which, when available, can be found on the company's website (often hidden between the news releases).

In the feasibility study you should look for the expected CAPital EXpenses (CAPEX) and OPerational EXpenses (OPEX) to inform yourself about the mining costs of the specific project.

Capital Expenditures (CAPEX)

Capital expenditures are the investments incurred by a mining company in their fixed assets to increase the value of that asset. Most common capital expenditures are the investments in fixed assets to bring a new mineral project into production. However, buying a property or the investments incurred to expand the current production level of an existing mineral project are also referred to as CAPEX.

When the CAPEX is known you can verify if this amount is freely available on the company's (most recent) balance sheet. If the CAPEX is available on the balance sheet, of if you can find an announcement between the company's news releases in which the company explained to have accepted a financing offer, you know that the project will be developed. If the CAPEX is not available then you must be really careful with this specific mining stock as this will often result in downward pressure on the company's share price, until the project financing is arranged.

Operational Expenditures (OPEX)

The operational expenditures are those recurring costs for operating the mine. In short, OPEX are those direct and indirect costs to mine, process and sell the ore.

 

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About Jeroen Snoeks

Jeroen Snoeks - UndervaluedEquity.com

Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for investors passionate about investing in undervalued stocks. Through UndervaluedEquity.com, he shares his experience and knowledge and will soon reveal his personal stock portfolio.


 
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