How Much Does a Mine Cost?
By Mikka Pineda
Mines vary in size and complexity, but here are a few numbers to give you an idea of the scale of costs pre-tax.
- Rock breaker (used): US$29,800
- Ripper head (used): US$1,861
- Drill (used): US$950,000
- Tunneler (new): US$2,500,000
- Excavator (used): US$2,000,000
- Underground diesel truck (used): US$81,000
- Conveyor (new): US$10,500
- Radial stacker (new): US$89,000
- Grader (new): US$200,000
- Loader (used): US$70,000
- Haul Truck Tire (new): US$9,500
- Longwall coal mine: US$71,400,000
For giant-scale mining projects…
Clearly, mining is no popsicle stand. And those are just capital costs. Infomine offers a glimpse into operating costs – themselves big chunks of change.
Capital costs are typically a mining company’s biggest expense – and an eye-watering one. On top of that, companies must pay labor costs, interest payments and environmental cleanup (assuming the country has and enforces environmental regulations).
Mining is not a small business and can’t ever be. Large miners can still afford a new mine even with 40% lopped off their “excess” profits. But less well-endowed companies may find themselves short of funds for a major expansion (i.e. a new mine):
Example large company: BHP Billiton – Iron ore business segment
US$6,229,000,000 profit in FY2008
US$8,735,000,000 fixed assets
Threshold (assets x 10-year government bond yield, or 5.42% as of May 28, 2010): US$473,437,000
Taxable profit: US$6,229,000,000 – US$473,437,000 = US$5,755,563,000
Profit after 40% mining tax = US$3,453,337,800
Example small company: Whitehaven Coal
A$166,856,000 profit in FY2008
A$508,838,000 fixed assets
Threshold (assets x 10-year government bond yield, or 5.42% as of May 28, 2010): A$27,579,020
Taxable profit: A$166,856,000 – A$27,579,020 =A$139,276,980
Profit after 40% mining tax: A$83,566,188 (US$70,700,000)
For further analysis of Australia’s mining tax, see RGE’s Australia’s Big, Bad Mining Tax: What’s at Stake?