The cost of mining projects can vary greatly depending on the location, type, and quantity of minerals in the deposit. Generally, underground mining is more expensive than open-pit mining, as open-pit mining involves extracting minerals near the surface with a maximum depth of around 200-400 meters.
A mining company’s feasibility study, which can often be found on the company’s website (typically within news releases), provides an estimate of the mining costs for a specific project. Look for the expected Capital Expenditures (CAPEX) and Operational Expenditures (OPEX) in the feasibility study to get an idea of the project’s costs.
Capital Expenditures (CAPEX)
Capital expenditures refer to investments made by a mining company in fixed assets to increase their value. Common examples include investments to bring a new mineral project into production or to expand the production capacity of an existing project. CAPEX also covers property acquisitions.
Check the company’s most recent balance sheet to see if the necessary CAPEX is available. If it is, or if the company has announced that it has accepted a financing offer, it’s likely that the project will be developed. However, if the CAPEX is not available, exercise caution when investing in the mining stock, as this could lead to downward pressure on the share price until project financing is secured.
Operational Expenditures (OPEX)
Operational expenditures are the recurring costs associated with operating a mine. OPEX includes both direct and indirect costs related to mining, processing, and selling the ore.