Gold$2,345.67/oz+0.82%
Silver$29.42/oz-0.34%
Copper$4.12/lb+1.15%
Uranium$85.50/lb+2.41%
Lithium (SC6)$1,240/t-1.08%
TSX-V$1,024.3+0.56%
Gold$2,345.67/oz+0.82%
Silver$29.42/oz-0.34%
Copper$4.12/lb+1.15%
Uranium$85.50/lb+2.41%
Lithium (SC6)$1,240/t-1.08%
TSX-V$1,024.3+0.56%
The Mining Watchlist

Capex, Opex & AISC

The Costs Behind Every Ounce and Pound

The three numbers that decide whether a mine actually makes money.

Key Takeaways
  • Capex is capital spending: the money used to build or sustain long-lived assets.
  • Opex covers running the operation, including activities such as mining and processing.
  • AISC is a non-GAAP measure used especially in gold mining to describe sustaining costs.
  • A metal price above AISC does not mean every dollar of the difference becomes free cash flow.
  • Compare costs on the same basis, and read the company’s definition and reconciliation.

Building the Mine and Running It

A restaurant needs money to fit out its kitchen before it opens, then more money for staff, ingredients and utilities. A mine has the same distinction on a much larger scale.

Capital expenditure, or capex
includes spending on assets such as the processing plant, mine development, equipment and infrastructure. Initial capex gets the project built. Sustaining capex keeps an existing operation working. Growth projects can require additional capital even after production begins.
Operating expenditure, or opex
covers the ongoing work. It can include drilling and blasting, moving material, processing, labour, fuel, power and site administration. Check which activities a quoted figure includes.

Cost Per Tonne and Cost Per Ounce

Cost per tonne measures spending against the amount of material mined or processed. Cost per ounce or pound relates spending to metal output. These are different denominators, so they cannot be substituted for each other.

Suppose processing costs are $20 per tonne. If a tonne yields 0.01 recovered ounces, processing alone costs $2,000 per recovered ounce. If it yields 0.02 ounces, that component falls to $1,000 per ounce. This hypothetical example isolates one cost; it is not a complete mine-cost estimate.

Grade and recovery can therefore change unit costs even when the processing bill per tonne is unchanged.

What AISC Adds

All-in sustaining cost, or AISC, broadens cash-cost reporting to include specified costs of sustaining production. The World Gold Council’s guidance explains its treatment of sustaining capital and other components.

AISC is not an accounting profit measure or a complete cash-flow forecast. Growth capital, financing costs and income taxes, among other items, require separate attention. Company definitions, by-product credits and the choice of ounces sold or produced also affect comparisons.

A Margin Illustration

At a hypothetical gold price of $2,000 per ounce and AISC of $1,400, the difference is $600. At $1,700 gold and unchanged AISC, it is $300. A 15% price decline halves that simplified margin.

The illustration shows why mining earnings can be sensitive to prices. In practice, costs also move, and the AISC margin does not equal the cash ultimately available to shareholders.

Read the Cost Fine Print

Is the figure a study estimate, company guidance or an actual reported result?
Are currencies, reporting periods and production measures consistent?
Are by-product credits reducing the reported cost?
What sustaining and growth spending remains ahead?
Is there enough contingency and funding if costs rise?

A low headline cost is useful only if you understand what it includes and whether the company can sustain it.

Follow the reconciliation back to reported financial results whenever one is available.

Mining Project Milestones

Next in the Mining 101 Series

How Mining Companies Make Money

Turning ounces and pounds in the ground into real cash flow.

Continue →