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Mine Cost Estimation 

Authors: Jack Caldwell


This review describes how to estimate the cost of opening, developing, operating, reclaiming, and closing an ore body and mine site. The review describes cost estimating methods, gives ranges of costs, provides spreadsheet that may be used to estimate mining costs, for open pit and underground mines, and lists consultants and websites where additional information may be obtained.


Estimates in Mining Construction Estimate the cost of construction, operation, and closure of the new mine and its ore body. Faced with this instruction, most would panic. What information does the internet provide to help you estimate the cost of opening, operating, and closing a new mine and hence meet this management demand?

Open Excel; set up a spread sheet; list every item you can think of and get the dollars per unit rate for each activity. The first three activities are easy; the last, an exercise in the genius of experience, web skills, and guessing. This review provides guidance on the list of items and the places on the internet where information is to be found rapidly and at no cost. With this information you can estimate the cost of opening, operating, and reclaiming a mine site and an exciting ore body prospect.


A source of mining costs, at a fee, is CostMine (a division of InfoMine).

Here is how they describe their site:
We are dedicated to providing you with the cost data, software, and advice you need to make informed mining decisions. Our research team draws on its extensive background in mine planning, cost estimating, and project evaluation to understand your cost data needs. We know the demands placed upon you when you are asked to prepare a cost estimate. Our publications and software are designed to help you meet those demands.

There are a few sets of free information on the CostMine site, namely costs for: Mining Site Model; Electric Power; Mining Equipment Costs; Mining Wages and Benefits; Metal Prices and Cost Index; Smelting; and Mine Taxes.

Here is how they describe their site:
This site is a one-stop source of mine cost spreadsheet models and operating cost information based on verifiable engineering and production data and peer review by mining industry analysts from around the world.
Operating cost data is verified against publicly available information and our own sources and then used to construct detailed engineering-based mine cost models of all of the world's major metals mines. These models are available for download by registered minecost.com users. The models are in Microsoft Excel spreadsheets with embedded cost curve charts.

Cost Curves in Mining

Each downloadable spreadsheet model contains detailed production data and mine economics for historical years back in many cases to 1991 and projections for future years to 2006. All models have cost curves showing the operation's comparative cost ranking against all other mines in the industry. The models have been extensively road-tested by minecost.com users.

www.minecost.com is a co-operative website using shared information from mining analysts employed by mining companies, stockbrokers, investment banks, commercial banks and government agencies. Between us all, we are the best repositories of strategic mining information in the world. Through the internet we can bring all this information together.

Mine Cost Estimates

The website is operated by World Mine Cost Data Exchange Inc. which co-ordinates the modeling efforts of mining and resources analysts from around the world. We are analysts who create the models that are posted onto the site, using data we collect ourselves and data contributed by analysts who are registered users of the site. World Mine Cost Data Exchange is incorporated in Delaware with its registered office located in Wilmington. The modeling work is done out of Australia. We have representatives based in New York, the United Kingdom and Australia. Minecost also has associations with CHR Metals and Bloomsbury Mineral Economics. These associations materially enhance the quality of our base metals modeling.

Minecost.com constructs spreadsheet models of all major producers of copper, lead, zinc, nickel, molybdenum, iron ore, gold and silver around the world.

Here is a list of some consultants I found who claim expertise in estimating mining costs:

  • MQes Inc. ... who claim as follows:
    MQes' cost estimating expertise covers: capital cost estimates for mine, process and infrastructure areas of new and expansion projects; Operating cost estimates for mine, process, infrastructure, and G&A for new and expansion projects; Reviews of capital and operating cost estimates; and levels of estimates ranging from "order-of-magnitude" to bankable quality" depending on client needs. Our cost estimating expertise is based on many years experience in mining project EPCM and mine operations.
  • Ellis International Services ... who describes his experience thus:
    Mr. Ellis is a geologist, minerals economist and minerals property appraiser (valuer, valuator). He specializes in independent market value appraisal (valuation) of mineral lands, mine and quarry properties, particularly for litigation support as an expert witness. Mr. Ellis develops his appraisals in accordance with the USA's national appraisal standards, the Uniform Standards of Professional Appraisal Practice (USPAP), the International Valuation Standards (IVS) and other applicable standards. He also conducts geological and economic evaluations for the minerals and energy industries.
  • Arne Berckmans Mineral Resource Consultant. ... of Belgium:
    undertakes property evaluations and financial modeling of mining projects.
  • Micon International ... say this about their services:
    Micon International's engineering and metallurgical consultants are experienced in preparing both conceptual and definitive feasibility studies of precious and base metals, coal, uranium and industrial minerals, as well as in the independent review of feasibility studies undertaken on behalf of potential investors.
  • Ross Consulting ... features Donald E. Ross:
    Micon International's engineering and metallurgical consultants are experienced in preparing both conceptual and definitive feasibility studies of precious and base metals, coal, uranium and industrial minerals, as well as in the independent review of feasibility studies undertaken on behalf of potential investors.
  • Snowden Company ... is run by someone from Rhodes, a university where I went courting more than thirty-five years ago, namely:
    Vivienne Snowden who has been consulting internationally in geostatistics and resource estimation since 1987. Her experience includes operations research, lecturing in statistics, geostatistics, and biometrics. Her specialties include project management, technical reviews and audits, resource estimation and grade control for feasibility studies, facilitated workshops, and public, academic and industry in-house training courses in Applied Mining Geostatistics.

I am sure there are others who are experienced and competent. I did not find them on the web—so please if you know of or are a consultant whose name should be in this list, please send me information, including if possible a few case histories.

I take the following from the FGM Group site at www.mineval.com where they describe their services to mining companies including cost estimating:

It is generally recognized among various engineering associations that there are five major types of costing estimates that can be conducted depending upon the information available, and the end use of the economic analysis. These include: Mine Cost Theory

  1. Order-of-Magnitude (pre-feasibility): confidence of +50/-30 percent
  2. Feasibility: confidence of +30/-30 percent (may be +25/-25)
  3. Budget authorization: confidence of +20/-20 percent
  4. Definitive: confidence of +10/-10 percent
  5. Firm: confidence of +5/-5 percent
Typically lending institutions require a thorough feasibility-level analysis prior to committing to a project-financed loan. A study of this type requires a projection of the market for the product to be sold; an estimate of the initial, sustaining, and working capital needed for the project; and a detailed examination of the operating costs expected. Production rate and mine life are necessary input factors in order to derive the revenue stream, and of course the costing analysis provides a basis for ultimately estimating annual cash flows from the operation.

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Acid Mine Drainage Cost Estimates

A computer code to establish the cost of Acid Rock Drainage? Sounds too good to be true? Not so. I quote from the Office of Surface Mining Technical Innovation and Professional Services' website:

Version 4.0 of AMDTreat is now released. Version 4.0 is a major upgrade to the popular cost modeling software. Among the new features we are adding in version 4.0 is the ability to cost model up to 99 of each type of structure or treatment system, in a single project file, with full control over the incoming water parameters for each component; the capturing of over 1500 Other Costs; and inclusion of an integrated metric conversion capability (just right click on an input block). We have also added new cost estimating modules, including Limestone Bed and Bio Reactor in the Passive treatment section and Oxidants in the Chemical treatment section. In addition, the user has the ability to temporarily suspend any instance of a cost module from the cost estimate for the purposes of what-if modeling.
AMDTreat (Pronounced: am'-D-treat or A-M-D-treat.), a member of OSM's Technical Innovation and Professional Services (TIPS) suite of software, is a computer application for estimating abatement costs for pollutional mine drainage, commonly referred to as Acid Mine Drainage or AMD. (Also Acid Rock Drainage or ARD.) The current version of AMDTreat is v4.0. AMDTreat can assist a user in estimating costs to abate water pollution using a variety of passive and chemical treatment types, including vertical flow ponds, anoxic limestone drains, anaerobic wetlands, aerobic wetlands, bio reactors, manganese removal beds, limestone beds, oxic limestone channels, caustic soda, hydrated lime, pebble quicklime, ammonia, oxidation chemicals, and soda ash treatment systems. The acid mine drainage abatement cost model provides over 400 user modifiable variables in modeling costs for treatment facility construction, excavation, revegetation, piping, road construction, land acquisition, system maintenance, labor, water sampling, design, surveying, pumping, sludge removal, chemical consumption, clearing and grubbing, mechanical aeration, and ditching. AMDTreat also contains several financial and scientific tools to help select and plan treatment systems. These tools include a long-term financial forecasting module, an acidity calculator, a sulfate reduction calculator, a Langelier saturation index calculator, a mass balance calculator, a passive treatment alkalinity calculator, an abiotic homogeneous Fe2+ oxidation calculator, a biotic homogeneous Fe2+ oxidation calculator, an oxidation tool, and a metric conversion tool.

Mine Reclamation Cost Estimating

Why do none of the InfoMine Tools ever get used anymore? In answer to this question from a colleague, I guessed that nobody likes doing simple calculations anymore-we all like fancy black box computer codes. They are authoritative, take a lot of time to use (high consulting fee income potential), and are never questioned by reviewing regulatory authorities.

I have never use RACER which is short for Remedial Action Cost Engineering and Requirements System. To judge from the websites promoting it purchase and use it meets al my software code desirability criteria. Here is an overview of sites promoting the code:

Delta Research Corporation. They prepared the code for the U.S. Air Force, Directorate of Construction Cost Management. The code as they describe it is an engineering based environmental cost estimating system, that estimates costs for studies, remedial design, remedial action, and related site-work for environmental restoration projects. RACER estimates capital and O&M costs, contingencies, overhead and profit, and general indirect costs.

EarthTech is much slicker in their presentation, to wit: "Earth Tech's Remedial Action Cost Engineering and Requirements (RACER) software is a Windows-based environmental remediation/corrective action cost estimating system. RACER software quickly and accurately estimates costs for all phases of environmental remediation projects - from site investigation through site closeout. The system enables users to develop and update cost estimates, evaluate and compare the cost of various treatment options, quantify environmental liability for budgeting or regulatory/financial disclosures, and develop a consistent approach for project budgeting."

The US Army Corps of Engineers clarifies matters somewhat: "RACER is a Windows-based environmental remediation parametric cost estimating system developed for the Air Force by Talisman Partners. The HTRW CX continues to support the Air Force in the development of the RACER software and provides technical support for the remediation models included in the software."

Actually, by far the best listing of links to information for estimating the cost of environmental restoration is the EPA site: sixteen pages of links to sources of cost estimating information.


The Dow Jones Average tells you how much you are worth, how much money you made from wise investing, and how much you can spend on fancy goods and vacations. At least that is how it seems if you are at a party in Hawaii drinking with the thirty-something crowd. Now I am informed that the mining industry has its own Average or Index that can be used to decide on wise and unwise courses of action. I refer to the Mining Cost Service Indexes—hence the MCS-Is.

CostMine tabulates the MCS-Is from 1988. The MCS-I was set at 100 in 1994 for the Canadians and in 2004 for the Americans. Here is the August 2006 assessment of the MCS-I by CostMine.

“With all the talk of tire shortages, personnel recruitment problems, backlogs on new equipment orders, and fuel and lube prices up 30% in the past year, one would assume that mining companies are facing runaway cost inflation. According to newly released Mining Cost Service (MCS) Indexes, however, the situation is not as dire as might first appear. For instance, even though diesel fuel prices rose 25% in Canada and 33% in the U.S. over 12 months, the MCS Surface Mine Operating Cost Index increased only 5.6% for Canada and 7.0% for the U.S. in the same time period. The reason for this disparity is the tempering effect of labor costs. While prices for fuel and some supply items may fluctuate widely, the average cost of labor, which typically accounts for 50% of overall mine operating costs, tends to increase at a steady but relatively moderate rate. While some mines faced strikes and recruitment problems, with consequent spikes in wages, average mine wages increased only 2.2% in the U.S. in the past year, and 2.0% in Canada. No matter the reason, with base and precious metal prices soaring, cost increases are shrugged off quite easily by the mine operators.”

Mining Cost Service (MCS) Indexes

Operating Cost Index

Percent Change from 3 mo. ago

Percent Change from 1 yr. ago

June '06

Surface Mining U.S.




Underground Mining Canada




May '06

Surface Mining Canada




Underground Mining Canada





These data tell us that in the last twelve years costs have gone up nearly 38 percent at Canadian surface mines and nearly 35 percent in United States underground mines. Have salaries gone up pro rata, I wonder? I am told that since 1994, mine wages have increased 26 percent in Canada and 23 percent in the United States. Hefty increases in the cost of fuel (more than tripled in the U.S.), lube and electric power pushed the MCS-Is to the higher levels we see today. Thus looks like the miner did not get an increase pro rata the increase in the cost of mining—or of the cost-of-living—or the price of metals?


If you have not previously seen the Aventurine site, you have a treat awaiting you. If you need to estimate that cost of a mining activity, you have to get Sherpa software. Here is how Scott Stebbins describes his products:

Aventurine Engineering, Inc., designs and produces software used by cost estimators in the minerals industry, including computer programs to estimate the costs associated with underground, surface, and placer mines and has recently released a program specifically for estimating the costs of reclaiming mine sites.

Ultimately, Aventurine plans to offer a complete suite of software packages designed to estimate the costs, identify the risks, and quantify the economic potentials of a variety of accepted mining, mineral processing, and reclamation procedures. In addition to software products, Aventurine offers consulting services in the areas of mine cost analysis and mineral property evaluation.

Some detail about their codes:

Apex produces a complete cash flow schedule for your project and then computes the projected net present value, pay-back period, and internal rate of return on either a before- or after-tax basis.

Placer Mines uses production and deposit data supplied by the user to calculate a series of engineering parameters, which are in turn used by the program to estimate equipment, labor, and supply costs.

Reclamation Bonds uses project and site parameters supplied by the user to estimate the equipment, labor, supply, and administrative costs associated with mine site reclamation.

Surface Mines helps you estimate the costs of open-pit mining. Sherpa combines engineering-based estimating procedures with cost data from CostMine's Mining Cost Service to determine the pertinent capital and operating costs associated with surface development and mining.

Underground Mine is an engineering-based, menu-driven program that uses production and deposit data supplied by the user to calculate over 800 engineering parameters, which are in turn used by the program to estimate equipment, labor, and supply costs.

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