Sustainable profits create sustainable mines.
Mine is losing money?
It means it’s not accounting for all costs, including sustaining capital (SustEx).
Many mines only consider operating costs (OpEx) when setting cut-off grades.
This might make the deposit look larger and more profitable initially, but it’s misleading.
Using just OpEx ignores the ongoing capital expenses required to keep the mine running.
For example, when mines set a lower cut-off grade, they include lower-grade material, which reduces overall margins and cash flow. Imagine a mine with a total cost of $150 per tonne and a gold value of $50 per gram.
Setting a cut-off at 3 grams per tonne gives a decent margin if the average grade is 5 grams per tonne. But if 20% of the material is only 2 grams per tonne, the average grade drops, slashing margins and cash flow by 30%.
Mines that don’t include SustEx in their cost basis often find themselves in a cash flow crunch, unable to fund necessary environmental protections. In Central America, one mine lowered its cut-off so much that all operating profits went just to meet SustEx needs, breaking even with no returns for investors. This lack of funds also means they can’t afford proper environmental measures, leading to both financial and environmental failure.
Including all-in-sustaining costs (AISC) in financial planning ensures that only profitable material is mined, improving overall margins and cash flow.
This allows the mine to remain financially healthy and capable of funding environmental measures.
This approach aligns with economic and environmental sustainability, supporting both profitable operations and responsible mining practices.
It’s why the industry now sees AISC as the best practice for reserve estimation and life-of-mine planning.
Credits to Phil O’Connell
