http://decisionnext.com/wp-content/uploads/2014/03/Sources-of-Value-in-Mining.pdf

From a value perspective, most mining companies are essentially high capital, long term investors in mining assets, and where and when they choose to deploy their capital critically shapes their ultimate investment fortunes.

This intent of this paper is to promote discussion about what the core principles of sustainable value creation in mining are. It is deliberately intended to be provocative and stimulate wider discussion, but does not claim in anyway to be the definitive analytical treatise. 

Many mining businesses can be overly consumed with operating costs. This can lead to buying low cost (i.e. high quality) assets without sufficiently emphasizing the entry price, and in operation, running the business at the lowest possible operating costs without sufficiently emphasizing the value available through revenue management. Value (and risk) needs seen as an integrated equation of capital (the entry price), operating efficiency (the cost of operation) and revenue management (the ability to optimise price). 

The strong emphasis on operating cost is probably a combination of the sheer mass of leadership and execution activity in this area, the fact that it is believed to be more controllable than other factors, and because it is immediately measurable. However, capital expenditure and revenue related decisions are sometimes not afforded the level of scrutiny and skilled assessment in terms of benefit and risk commensurate with its value impact, when in many instances this can be larger than operating leverage. 

Revenue management in particular in many mining companies is opaque and lack accountability. Marketing functions are often set up as “clearing houses” and can be prone to adopting discounting approaches which move product, leaving value on the table. There is a good reason why trading companies are currently out-bidding operators in asset acquisitions, and that is because they recognise the value that is not being realised in the market by some miners.