Primary Mining
Also: primary production, mine production, extractive mining
Primary mining refers to the extraction of precious metals directly from the ground through mining, as opposed to secondary recovery from recycled material.
Primary mining forms the backbone of the global precious-metals supply. Primary mining is any extraction of gold, silver or platinum group metals directly from the ground – as opposed to secondary recovery from recycling. Fluctuations in mine production affect supply and, in turn, the spot price over the medium to long term.
Mining methods
Depending on the type of deposit and its depth, different methods come into play:
| Method | Description | Typical metals |
|---|---|---|
| Open-pit mining | Open surface excavation | Gold, copper, silver |
| Underground mining | Deep mining via shafts and tunnels | Gold, silver, PGMs |
| Heap leaching | Cyanide solution applied to bulk ore | Gold (at low ore grade) |
| Flotation | Ore concentration using air bubbles | Silver, copper, lead-zinc |
The ore grade – the concentration of the precious metal within the rock – is the decisive economic criterion. For gold, a so-called cut-off grade of 0.3–0.5 g/t is often today's lower limit for economic extraction.
From the mine to the doré bar
The production route breaks down into several steps:
- Prospecting & exploration – geological survey, drill sampling, resource estimation
- Development – infrastructure build-out, mine construction, processing plant
- Extraction – blasting, haulage, crushing of the ore
- Processing – cyanide leaching, flotation or smelting
- Pre-refining – production of doré bars (a gold-silver alloy, 60–95 % fineness)
- Refining – final processing at a refinery into fine gold (999.9)
By-product mining
A substantial part of silver and platinum-group-metal production comes from by-product mining: the precious metal is not mined as the primary target but arises as a by-product of copper, lead, zinc or nickel mining. Around 70 % of the world's silver production comes from such by-product sources. This makes the silver supply less price-sensitive – production continues even at low silver prices, as long as the main metal remains economic.
Costs as a price anchor: AISC
The economics of a mine are assessed via the all-in sustaining costs (AISC) – the total cost per ounce mined, including operation, maintenance, administration and waste removal. If the market price stays below the AISC for a sustained period, mines are throttled back or closed, which tightens supply and supports the gold price.
Primary production profit = (spot price × troy ounces) − AISC × troy ounces
The global AISC cost curve for gold ran at roughly 1,200–1,400 USD/oz in 2023. Historical price movements can be traced on the Historical Precious Metal Prices page.
Geographic concentration
Primary mining is heavily concentrated in a handful of countries:
- Gold: China, Australia, Russia, Canada, USA
- Silver: Mexico, China, Peru, Chile, Russia
- Platinum/palladium: South Africa (approx. 70 % platinum), Russia (approx. 40 % palladium)
This concentration makes supply vulnerable to geopolitical risk, strikes, export restrictions and natural disasters – factors that in the short term do not change the melt value of an existing holding, but can move the market price considerably.
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 legal market. From refining onwards, the doré bar carries a serial number that enables traceability.
In a nutshell
Primary mining determines the physical base supply of precious metals and acts as a long-term price anchor: when production costs (AISC) and the market price diverge, output – and thus global supply – responds with a delay of months to years.