Primary Mining
Also: Primary Production, Mine Production, Mining Output
Primary mining refers to the extraction of precious metals directly from the earth through mining, as opposed to secondary recovery from recycled material.
Primary mining forms the backbone of the global precious metals supply. Primary mining encompasses any extraction of gold, silver, or platinum group metals directly from the earth – as opposed to secondary recovery through recycling. Fluctuations in mine production affect supply and, consequently, the spot price over the medium to long term.
Mining Methods
Different methods are employed depending on the type of deposit and depth:
| Method | Description | Typical Metals |
|---|---|---|
| Open-pit mining | Open surface excavation | Gold, copper, silver |
| Underground mining | Deep mining via shafts and tunnels | Gold, silver, PGM |
| Heap leaching | Cyanide solution applied to crushed ore | Gold (at low ore grades) |
| Flotation | Ore concentration using air bubbles | Silver, copper, lead-zinc |
The ore grade – the concentration of the precious metal in the rock – is the decisive economic criterion. For gold, a so-called cut-off grade of 0.3–0.5 g/t is often regarded today as the minimum threshold for economically viable extraction.
From Mine to Doré Bar
The production process is divided into several steps:
- Prospecting & exploration – geological survey, drill samples, resource estimation
- Development – infrastructure construction, mine development, processing plant
- Extraction – blasting, ore haulage, crushing
- Processing – cyanide leaching, flotation, or smelting
- Pre-refining – production of doré bars (gold-silver alloy, 60–95% fineness)
- Refining – final processing at a refinery to fine gold (999.9)
Byproduct Mining
A substantial portion of silver and platinum group metal production comes from byproduct mining: the precious metal is not mined as the primary target but is recovered as a by-product of copper, lead, zinc, or nickel mining. Around 70% of global silver production comes from such byproduct sources. This makes silver supply less price-sensitive – production continues even at low silver prices, as long as the primary metal is economically viable.
Costs as a Price Anchor: AISC
The economic viability of a mine is assessed using All-in Sustaining Costs (AISC) – the total cost per ounce produced, including operations, maintenance, administration, and waste disposal. If the market price remains persistently below the AISC, mines are throttled or closed, constraining supply and supporting the gold price.
Primary production profit = (Spot price × fine ounces) − AISC × fine ounces
The global AISC cost curve for gold stood at approximately 1,200–1,400 USD/oz in 2023. Historical price developments can be traced on the Historical Precious Metal Prices page.
Geographic Concentration
Primary mining is heavily concentrated in a few countries:
- Gold: China, Australia, Russia, Canada, USA
- Silver: Mexico, China, Peru, Chile, Russia
- Platinum/Palladium: South Africa (approx. 70% of platinum), Russia (approx. 40% of palladium)
This concentration makes supply vulnerable to geopolitical risks, strikes, export restrictions, and natural disasters – factors that do not change the melt value of a holding in the short term, but can significantly move market prices.
Sustainability and Conflict Gold
Environmental and social standards are gaining importance in primary mining. Certifications such as Responsible Gold (LBMA) or Fairtrade Gold aim to keep conflict gold from crisis regions out of the legitimate market. The doré bar carries a serial number from the refinery stage onwards, enabling traceability.
In Brief
Primary mining determines the physical base supply of precious metals and acts as a long-term price anchor: when extraction costs (AISC) and market prices diverge, production responds – and with it the global supply – with a delay of months to years.