Primary Mining
Also: Primary production, Mine production, Mining output
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 global precious-metal 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 thus, in the medium to long term, the spot price.
Extraction methods
Depending on the deposit type and depth, different methods are used:
| Method | Description | Typical metals |
|---|---|---|
| Open-pit mining | Open excavation at the surface | Gold, copper, silver |
| Underground mining | Deep mining via shafts and galleries | Gold, silver, PGM |
| Heap leaching | Cyanide solution on bulk material | Gold (at low ore grade) |
| Flotation | Ore concentration through 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 applied today as the lower limit for economic extraction.
From the mine to the dore bar
The production path is divided into several steps:
- Prospecting & exploration - geological survey, drill samples, resource estimation
- Development - infrastructure build-up, mine construction, processing plant
- Extraction - blasting, hauling, crushing of the ore
- Processing - cyanide leaching, flotation or smelting
- Pre-refining - production of dore bars (gold-silver alloy, 60-95 % fineness)
- Refining - final processing in a refinery to fine gold (999.9)
By-product mining
A significant share 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 when extracting copper, lead, zinc or nickel. Around 70 % of global silver production comes from such by-product sources. This makes 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 persistently below the AISC, 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 was around 1,200-1,400 USD/oz in 2023. Historical price developments can be tracked 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 % platinum), Russia (approx. 40 % palladium)
This concentration makes supply vulnerable to geopolitical risks, 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 are intended to keep conflict gold from crisis regions out of the legal market. From refining onwards, the dore bar carries a serial number that enables traceability.
In brief
Primary mining determines the physical base supply of precious metals and acts as a long-term price anchor: when mining costs (AISC) and the market price diverge, production - and thus global supply - reacts with a delay of months to years.