Open-Pit / Underground Mining
Also: Open-Pit Mining, Underground Mining, Surface Mining, Deep Mining
Two fundamental extraction methods in mining, in which ores are recovered either in open-pit operations (near the surface) or by underground mining (in deep tunnels and shafts).
The choice between open-pit and underground mining fundamentally determines how costly and how profitable the economic development of a deposit can be – and thus indirectly influences the global supply of precious metals and the gold price.
Open-Pit Mining
In open-pit mining, ore-bearing rock is extracted from large, stepped pits from the surface. Massive blasting breaks up the rock, which is then transported to processing facilities by excavators and dump trucks. This method is economically viable when the ore grade is low but the deposit is large in volume.
Advantages:
- Lower extraction costs per tonne of ore
- High mechanisation and throughput rates achievable
- Simpler safety conditions for miners
Disadvantages:
- Substantial land use and landscape disturbance
- Volumes of overburden many times greater than ore volume
- Depth limited by the stability of pit slopes
Well-known open-pit gold mines include the Boddington mine in Australia (the world's largest open-pit gold mine) and the Cripple Creek & Victor mine in Colorado (USA).
Underground Mining
When a deposit lies at depth or consists of narrow, high-grade ore (so-called high-grade), underground mining is preferred. Via shafts and tunnels, miners access ore veins at depths of several kilometres. The South African Witwatersrand mines – historically the world's most significant gold sources – reach depths of more than 4 km; the Mponeng mine, at over 4 km, is currently the deepest gold mine in the world.
Advantages:
- Access to deep, high-grade deposits
- Smaller surface footprint
- More selective extraction reduces waste rock
Disadvantages:
- Substantially higher operating costs (ventilation, cooling, hoisting)
- More complex occupational safety requirements (heat, rock pressure, gas hazards)
- Higher capital intensity during development
The Economic Threshold: Cut-Off Grade
The boundary between profitable and uneconomic extraction depends on the cut-off grade – the minimum ore grade at which production covers total costs (including AISC). When the gold price rises, this threshold falls, and previously uneconomic deposits become viable to mine – a direct feedback loop affecting primary supply.
Break-even threshold: Revenue/t = Ore grade [g/t] × Metal price [EUR/g] ≥ AISC [EUR/t]
Silver, Platinum, and Palladium
Silver, platinum, and palladium are predominantly recovered as byproducts from copper, lead, and nickel mines. There, the economics of the primary metal determine whether the mine operates – meaning precious metal supply in these cases is largely price-inelastic.
Key Takeaway
Open-pit mining dominates global precious metal production by volume through its lower unit costs; underground mining unlocks high-grade deep deposits at higher AISC. Both methods influence long-term supply through their cost structures – and thereby price developments that you can trace in the historical precious metal prices.