In mining, volume is often worn like a badge of honour. More tonnes, more uptime, more fleet running – all seen as signs of productivity and success. But volume, on its own, doesn’t guarantee profitability. In fact, chasing production at all costs can quietly erode value – especially when decisions aren’t anchored in cost visibility or commercial discipline.
The industry has matured, but the “tonnes first” mindset still lingers in many operations. It’s time we had a more honest conversation about when less can deliver more.
Understanding the Value Curve: Not All Tonnes Are Equal
In a simplified view, mining operations generally have fixed and variable cost components, and that mix changes dramatically depending on where you are on the value curve.
- The first 70-80% of a mine’s production is often produced efficiently.
- The next 10-20% might still be profitable, but marginal.
- The final stretch, especially when chasing monthly or quarterly targets, can be expensive, unplanned, disruptive, and risky.
That last block of production is often where things go wrong:
- Equipment pushed harder than planned
- Reductions in operating efficiency
- Consumables usage increasing out of ratio
- Deferred maintenance accumulating risk
- Value generated is less than usual or even nil
What looks good on the ROM pad might not look so good on the bank account.
The Case for Standing Equipment Down
It can feel counterintuitive, even uncomfortable, to park equipment that is available and has capacity to run. But sometimes, the best financial decision is to stand down.
Here’s where the opportunity lies:
- When market pricing dips and selling more product returns less than the incremental cost of production. We will touch on incremental costing shortly.
- When post-ROM factors (e.g. processing, logistics, or even the market) are the bottleneck – running above the flow that the bottleneck allows can build excessive stockpiles and burn cash much earlier than required.
- When rostered labour can be more beneficially deployed to interdepartmental, project, or ancillary works.
Standing equipment down strategically, even if you have the labour and capacity to operate, can:
prevent avoidable cost creep and protect margins, ultimately preserving the resource in the ground for a period when it makes more economic sense.
Why Incremental Costing Matters
Most mining personnel understand their average cost per tonne. Fewer actively track their incremental cost per tonne, especially for downstream activities post the ROM pad.
Incremental costs can be the silent killer
Average costing hides the true cost of pushing production past a baseline capacity. Incremental costing tells you what it costs to produce one more unit past the baseline, and it can highlight:
- Increased haulage costs when cycle times are greater than average
- Increased processing costs for ore that is more metallurgically challenging, and needs to be processed at a lower throughput rate or with higher reagent usage
- Diminishing efficiency of operators working extended or additional shifts
- Increased wear rates on mobile plant components, and additional maintenance or downtime risk when you need the machine most
If the incremental cost exceeds incremental revenue, you’re burning cash! In that case, does it really matter that production charts are showing an upward trend?
Challenging Rules of Thumb
Often, operating at full or increased capacity will be the right decision, but this is not always the case as mining is an extremely dynamic industry. There are long-standing industry assumptions worth revisiting:
“We need to keep the machines moving.”
→ Is the cost to move less than the value generated?
→ Will the value generated be realised soon, or should it be discounted to account for the time-value of money?
→ How does the discounted value compare to other opportunities that exist?
“If we maximise tonnes, we will dilute cost.”
→ Does the fixed cost dilution outweigh the additional variable costs?
→ Have we considered the full breadth of incremental costs, including costs downstream of mining?
→ Can you demonstrate that the incremental revenue received will exceed the incremental cost to produce?
“We have the labour rostered, so we need to run.”
→ Are we accounting for increased fatigue risk and reduced operator productivity?
→ Can we reallocate any cross-skilled labour to important project or ancillary work?
→ Is this an opportunity to review the Training Needs Analysis, to upskill our people or get ahead of expiring competencies?
“All downtime is bad.”
→ Will strategically introduced downtime improve asset and component life?
→ Are operating risks being reduced by introducing downtime?
→ Do current capital allocation goals call for the preservation of cash?
What Value Looks Like in Practice
Mining operations that outperform peers in similar commodities and geographies tend to show the same behaviours:
- Caution in chasing unbudgeted production for optics alone
- Integration of cost data into production targets
- Operations Managers empowered to make decisions based on margin, not just throughput
- A clear understanding of which tonnes are profitable – and which are not
These sites don’t avoid production; they just do it with purpose. Some of the contributing factors that allow site to operate at this level are as follows:
- Considered and well-designed chart-of-accounts that allow for various types of cost understanding (by department, by pit / orebody, activity-based-costing, etc)
- Integrated and cross-departmental understanding of all costs along the value stream (fixed vs variable, average vs incremental)
- Mine planning and scenario-analysis systems that allow for individual block economics to be updated with dynamic revenue and cost factors
- Asset management systems that allow for dynamic impact assessment of varying operating profiles
- Well-rounded commercial partners who understand and can demonstrate individual block economics, empowering decision makers to act accordingly
Final Thoughts
The goal isn’t to mine less; it’s to mine smarter. Volume is only valuable when it’s paired with margin; otherwise, it’s just effort expended when not required.
In an environment where input costs are rising and price volatility is a constant, decisions made on the edge of the value curve matter more than ever. Knowing when not to operate, when to slow down, or when to reallocate effort is a sign of commercial maturity, not weakness.
Mining value, not volume, is about long-term sustainability and success, and it starts by challenging assumptions that may not be serving the bottom line.