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The All In Sustaining Cost for mining an ounce of gold at the moment is around \$1,000 ; i.e. if gold mines sold gold at around \$1,000 an ounce they would make neither a profit or a loss. The equivalent cost for mining silver is \$10 an ounce. Silver is about 20 times more common than gold in the Earth's crust and from what I can tell the physical mining and refining process for the two metals is basically very similar so naively I would expect it would cost about 20 times as much to mine the same weight of gold as of silver. However the true figure is 100 times as much.

Does anyone who has experience in this area know why? Thanks in advance!

NMech
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Hadi Khan
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2 Answers2

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  1. Minerals that are more concentrated are cheaper to extract. In general. If you think about a 40 ppm ore body versus a 2 ppm ore body, to get the same amount out of each, you have to process (mine, crush, refine) 20 times as much rock. That costs money. [This can be even more extreme if you consider yield--it is generally easier to get higher percentage extraction in a high grade ore than a low grade one...consider if your leach process has a minimum of say 0.5 ppm heading to tails...that impacts you more with 2 ppm start than with 40.]

    There will be some differences Au vs Ag based on the chemistry--I think especially with competition with copper in adsorption/refining. So I'm not sure which is cheaper if equal grades (and similar host rock, but that's not given either) to extract. But just the sheer difference in concentration makes a vast difference in costs which drives up the cost of gold production.

  2. Price has allowed a lot of gold mining to occur that would not if prices were lowered. You can process lower grade ores and use more extreme practices. I just got done with several months of operations consulting at a complicated gold processing plant. Basically throughput was main driver, yield was second (assuming grade fixed by geology). Cost was for all practical purposes irrelevant.

    Sure they would do a calculation for any new project or change in operations. But pretty much anything that would increase gold ounces per year was going to carry its costs. But that works a lot better at $2000/oz vs. at $500. This leads to industry costs on overage increasing. The industry has a long history with this--if/when prices crash, you will see cost cutting that is dramatic.

P.s. It is common that gold and silver are found/extracted in similar bodies. So a gold mine/plant will have some silver as a byproduct. Sometimes this even justifies the economics for a marginal plant. However, in general, you can look at the production of these two metals relatively independently. (Copper may also be a recoverable byproduct in a gold mine, depends on the concentration...kind of a nuisance for gold processing generally but if enough of it, you can justify separating it and selling it, versus letting it go to tails.)

guest
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Silver is commonly a byproduct of lead and zinc mining, and to a much lesser extent, copper. Therefore, the economics of silver mining are determined largely by the demand supply balance of zinc and lead in the world.

hurreechunder
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