Surface / Underground Mining
Also: Surface mining, Underground mining, Open-pit mining, Deep mining
Two fundamental mining methods in which ores are extracted either in open-pit surface mining (near the surface) or in underground mining (in deep tunnels and shafts).
The choice between surface (open-pit) and underground mining largely determines how expensive and how profitable a deposit can be developed economically - and thus indirectly influences the global supply of precious metals and the gold price.
Surface Mining (Open-Pit)
In surface mining, the ore-bearing rock is extracted from the earth's surface in large, terraced pits (open-pit). Heavy blasting loosens the rock, and excavators and dump trucks transport it for processing. This method is economical 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 possible
- Simpler safety conditions for miners
Disadvantages:
- Considerable land use and landscape impact
- Waste rock volumes many times the ore volume
- Depth limited by the stability of the pit slopes
Well-known open-pit gold mines include the Boddington mine in Australia (the largest open-pit gold mine in the world) and the Cripple Creek & Victor mine in Colorado (USA).
Underground Mining
Where the deposit lies deep or consists of narrow, high-grade ore, underground mining is preferred. Through shafts and tunnels, miners access the ore veins several kilometres below the surface. The South African Witwatersrand mines - historically the most important gold sources in the world - reach depths of over 4 km; the Mponeng mine, at more than 4 km, is currently the deepest gold mine in the world.
Advantages:
- Access to deep, high-grade deposits
- Lower land use at the surface
- More selective extraction reduces waste rock
Disadvantages:
- Considerably higher operating costs (ventilation, cooling, hoisting)
- More complex occupational safety (heat, rock pressure, gas hazards)
- Higher capital intensity for development
Economic Threshold: Cut-off Grade
The boundary between profitable and unprofitable mining depends on the cut-off grade - the minimum ore grade at which extraction covers the total costs (including AISC). If the gold price rises, this threshold falls, and previously uneconomic deposits become mineable - a direct feedback effect on primary supply.
Break-even threshold: Revenue/t = Ore grade [g/t] x Metal price [EUR/g] >= AISC [EUR/t]
Silver, Platinum and Palladium
Silver, platinum and palladium are predominantly obtained as a by-product of copper, lead and nickel mines. There, the profitability of the main metal determines whether the mine operates - in these cases the precious metal supply is largely price-inelastic.
In Brief
Surface mining dominates global precious metal production by volume through low unit costs; underground mining develops high-grade deep deposits at higher AISC. Both methods influence long-term supply through their cost structures - and thus the price development you can trace in the historical precious metal prices.