The hidden costs in smelting, refining, and transportation can be the real factors that decide whether an investment is worth it.
Net smelter returns (NSR) show the true value you will get from the ore.
Different metals take different journeys from mine to market, and every step along the way chips away at their value.
Take 𝘇𝗶𝗻𝗰. It is often mined alongside lead, which complicates processing. It’s not just the mining that costs. It’s the separation, the refining, and then the penalties for impurities like iron. A typical zinc concentrate might see its NSR drop to around 43%. If a deposit looks rich on paper, the final profit might be much lower.
𝗖𝗼𝗽𝗽𝗲𝗿 does better in terms of NSR. A copper concentrate with 23.9% copper content can still yield about 67% NSR after transportation and smelting fees.
The reason?
Copper is in high demand, and any recoverable by-products, like gold or silver, can give a nice boost to the returns. Penalties for arsenic still exist, but copper’s simpler supply chain and strong global need keep it a better option compared to zinc.
𝗟𝗲𝗮𝗱 struggles with more costs. Its processing often involves combining treatment and refining charges. This knocks the NSR down to around 35%. Even though lead ores sometimes contain valuable by-products like silver, it’s hard to reach high profitability. Lead is commonly found in polymetallic ores. This leads to extra penalties and higher refining costs.
𝗡𝗶𝗰𝗸𝗲𝗹, when mined alongside platinum group metals, also has a complicated supply chain. A bulk nickel-copper concentrate might have around 8.9% nickel and 13.5% copper, achieving a 56% NSR. While PGMs are valuable, their refining process is complex and expensive. This means even though the gross value of nickel deposits can be high, the actual returns are smaller once processing is factored in.
Then you have polymetallic deposits. Which mix metals like copper, lead, zinc, and some precious metals. These might look attractive because of the range of recoverable materials, but they come with trade-offs.
When metals are mixed together, the processing becomes more complex and costly. Smelters charge penalties for certain metal combinations, and recovery rates can be lower. A polymetallic ore with both zinc and copper can end up reducing the NSR for both metals because the processing conditions don’t favor either one entirely.
Even commodity cycles play a part. In boom times, copper and gold tend to benefit the most from higher NSRs, since their supply chains are more efficient. Lead and zinc see smaller gains because their processing remains costly regardless of the market conditions. During market peaks, zinc might only manage a 43% NSR, while copper can push past 67%.
Before investing, ask two things:
- What’s the NSR for the metal?
- What will it cost to refine, process, and transport the ore?
