# Mining Model Build a life-of-mine financial model with variable grade schedules, two-tier CAPEX, unit cost analysis (C1 and AISC), and project-level NPV and IRR outputs for feasibility and investment decisions. - Canonical: https://finamodel.com/templates/mining-model - Excel download: https://finamodel.com/templates/mining.xlsx - Category: Energy - Model type: Project finance - Difficulty: Advanced - Audiences: Developers & sponsors, Investors & analysts, Mining Companies, Mining Engineers, Project Finance, Commodities Investors - Tags: mining, commodities, aisc, ore-reserves, project-finance ## Overview A Mining Operations Model evaluates an open-pit gold mine over its 12-year economic life: 2 years construction, 10 years operations. The model forecasts gold production from ore reserves (30Mt total, milled at 3Mtpa, producing ~250Koz annually), all-in sustaining cost (AISC) using contractor-based mining costs ($2.50/tonne moved including waste), processing ($15/tonne ore milled), and site G&A ($5/tonne ore milled). At $2,000/oz gold price and 45-55% EBITDA margins, a 3Mtpa operation generates $200-250M annual EBITDA at full production, sustaining 6-8x debt-to-EBITDA leverage and target 1.25-1.30x DSCR on non-recourse project finance. The Mine_Plan sheet tracks annual ore mining, strip ratio escalation (4.0:1 waste-to-ore initially, rising to 5.8:1 by Year 12 as the pit deepens), and ore milling (constrained by mill capacity and feedstock from opening stockpile or current mining). Payable metal (oz) = ore milled × head grade × recovery × payability %, producing net smelter return (NSR) after treatment costs. Operating_Costs applies volume-driven mining/processing costs escalated at 2.5% inflation annually, plus NSR-based royalties (5% to government/third-party). Capex during construction ($300M including pre-stripping, processing plant, TSF, infrastructure) is drawn over two years; interest during construction (IDC) is capitalized into asset cost (~$14M). Sustaining capex ($20M annually in Year 1 real terms) covers fleet replacement and TSF lifts. Mine closure cost ($30M cash outflow in Year 12) is treated as a sole CFI expense with no balance sheet ARO liability. This model suits mining investors, project finance lenders, and acquirers evaluating mine valuations, debt capacity, and downside resilience at commodity price stress. Key metrics include AISC (all-in sustaining cost per oz, typically $1,100-1,300 for tier-2 mines), unlevered IRR (8-15% target depending on gold price), project IRR, and equity IRR to sponsors. Sensitivities to gold price (±$100/oz spans 30% swings in EBITDA), ore grade, and strip ratio escalation dominate project returns; hedging or off-take agreements may fix commodity price exposure. ## What's included - Production schedule with variable ore grade and recovery rates - Initial development and sustaining capital expenditure breakdown - C1 cash cost and all-in sustaining cost (AISC) calculations - Tax and royalty regime modelling by jurisdiction - NPV and IRR sensitivity across commodity price scenarios - Ore reserve estimates and mining plan over project life - Annual mining volume and processing throughput - Mining costs (labor, equipment, explosives) and processing costs - All-in sustaining cost (AISC) and all-in cost (AIC) calculations - Commodity revenue and price assumptions - Capital expenditure for mining equipment and processing facilities - Project NPV, IRR, and payback period ## Mining Model: Life-of-Mine Financial Model for Open-Pit Gold Projects This mining model helps you assess an open-pit gold project from construction through closure. It integrates mine plan, cost, debt, and tax to produce NPV and IRR. The model uses a 12-year horizon with a two-year build and ten operating years, ideal for feasibility studies and investment decisions. Rates and financial results described here reflect illustrative model settings, not industry benchmarks. ### Key Operating Drivers: Grade, Strip Ratio, and Production Schedule The model's operating core revolves around the mine plan, which determines ore and waste movement, head grade, and metal production. A fixed head grade of 1.50 g/t is assumed, reflecting a conservative mid-life average. - Ore is mined at 3.5 Mtpa, but the mill capacity of 3.0 Mtpa means a stockpile builds by 0.5 Mtpa, providing a buffer. The strip ratio starts at 4.0 waste:ore and escalates by 0.2 annually, correctly modelling deeper pit economics. - Production ramp-up occurs in Year 3 at 80% utilisation, reaching 100% from Year 4 onward, capturing realistic start-up inefficiencies. ### Calculation Flow: From Physical Volumes to Cash Flows The model's calculation flow begins with physical volumes: total material moved drives mining costs, while ore milled drives processing and site G&A costs. Revenue is derived from payable metal ounces, which factor in recovery rate (90%) and payability (99.5%). - Costs are volume-driven, not revenue-linked, so a gold price drop directly impacts margins. The flow then integrates capital expenditures, including initial construction capex ($300M) and sustaining capex ($20M annually), debt drawdowns and repayments, tax and royalties, and finally free cash flow available for debt service and equity distributions. - This interconnected flow ensures that each assumption propagates through to project returns. ### Outputs: Project and Equity Returns, AISC, and Payback The model produces key investment metrics including project IRR, equity IRR, NPV, AISC, and payback period. Project IRR is calculated from unlevered free cash flows, while equity IRR reflects the cash flows to equity after debt service. - AISC is computed by summing mining, processing, site G&A, royalties, sustaining capex, and corporate G&A, then dividing by payable metal ounces. The model also outputs a full set of financial statements—income statement, balance sheet, and cash flow statement—and a debt waterfall showing DSCR and DSRA balances. - These outputs are essential for evaluating feasibility and comparing against industry benchmarks. ### Practical Use: Supporting Investment and Financing Decisions This mining model is designed for evaluating an open-pit gold project from the perspective of an investor, lender, or acquirer. It answers the question: should I invest in, lend to, or acquire this mine based on life-of-mine free cash flows and debt coverage? - The model incorporates project finance debt with a target DSCR of 1.30x and a minimum covenant of 1.20x, making it suitable for non-recourse financing scenarios. Sensitivity to gold price and strip ratio can be assessed, though scenarios are not built-in. - The outputs, particularly NPV and IRR, provide a quantitative basis for go/no-go decisions, while the validation checks ensure model integrity. ## Built for resource project evaluation Use this model for pre-feasibility studies, project finance, or acquisition analysis where commodity price, grade, and CAPEX timing drive the investment case. ## Structured around real mining economics A useful mining model needs production schedules, unit cost benchmarks, and fiscal regime logic that reflect how resource projects are actually evaluated. ## Better for scenario and stress testing This gives you a framework to test commodity price volatility, cost overruns, and reserve downgrades without rebuilding the model from scratch. ## Built for resource project evaluation Use this model for pre-feasibility studies, project finance, or acquisition analysis where commodity price, grade, and CAPEX timing drive the investment case. ## Structured around real mining economics A useful mining model needs production schedules, unit cost benchmarks, and fiscal regime logic that reflect how resource projects are actually evaluated. ## Better for scenario and stress testing This gives you a framework to test commodity price volatility, cost overruns, and reserve downgrades without rebuilding the model from scratch. ## Features - **Reserve modeling:** Track ore grade, density, and mining recovery rates to project ore tonnage and metal content over project life. - **Cost curve development:** Build unit cost for ore extracted ($/tonne) and processed ($/tonne) to model total AISC and sensitivity to processing rates. - **Commodity price scenarios:** Model base, bull, and bear commodity prices to show project economics across the commodity cycle. ## Use cases - **Project development and investment approval:** Present mine plan, NPV, and capital requirements to internal stakeholders and investors for project greenlight. - **Asset valuation:** Use operating model to calculate fair value for mining properties in mergers, acquisitions, or asset sales. - **Hedging strategy:** Model cash generation at different commodity prices and design hedging programs to protect downside. ## Frequently asked questions ### What is a mining financial model? It is a model used to evaluate the economic viability of a mineral project by forecasting production, costs, revenues, and returns over the life of the mine. ### What should a mining model include? A strong mining model should include production schedules, grade and recovery assumptions, CAPEX, OPEX, royalties, taxes, and NPV/IRR outputs. ### Who uses mining financial models? Mining companies, project finance teams, lenders, and investors use them for feasibility studies, debt sizing, and acquisition analysis. ### What is the difference between C1 and AISC? C1 covers direct cash costs of production. AISC adds sustaining capital, corporate overhead, and other costs to give a fuller picture of the cost to maintain operations. ### Can I model different commodity price scenarios? Yes. The model is designed for sensitivity analysis across commodity prices, production volumes, and cost assumptions. ## Related templates - [Oil & Gas Upstream Model](https://finamodel.com/templates/oil-gas-upstream-model)