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Definition

This is a mining term which refers to the cost extracting a metal or mineral from its ore body so that it can be sold. In South Africa, this concept is mainly applied to precious metals mines involved in gold or platinum group metals (PGM) mining.Thus marginal mines have a cost of extraction which is very close to the current price of the metal which they mine. This tends to make the share's price very volatile because slight changes in its price can have a major impact on their profitability. If the gold price is about R30 000 per ounce and the company's cost of extraction is R28 000 then a 7,1% move in the price can double or wipe out their profits. The cost of extraction should contain all the costs of running the mine and a major component of that in South Africa is usually the cost of labour.

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