Cost Overruns in the Mining Industry: Causes, Cases & How Better Cost Estimating Prevents Them
In this presentation, Costmine’s Director of Costing and Engineering, Gordon Sobering, PE and QP, explores the recurring causes of cost overruns in the mining industry. Drawing on decades of experience and multiple real-world case studies, he highlights how cost blowouts are often not the result of unforeseen surprises, but of predictable gaps in planning, scope, data, and project execution.
Mining projects are complex undertakings. They involve thousands of variables, long timelines, and high capital intensity. When assumptions made early in the process do not align with real-world conditions, the consequences are expensive. Gordon walks through common patterns that emerge in over-budget projects, starting with poorly defined scope, inadequate data to support the level of study, and overconfidence in early-stage estimates.
Using examples from projects in East Asia, South America, and the United States, the presentation walks through the downstream impact of missing or inaccurate inputs. In one case, a project assumed simple “free mining” conditions for its expansion earthworks, only to discover hard rock that required drilling and blasting, causing schedule delays and higher equipment and fuel costs. In another, unstable pit walls and changing orebody chemistry forced redesigns and processing adjustments. Delays in finalizing power and water agreements, worker shortages, political interference, and poor commissioning processes further contributed to schedule slippage and capital escalation.
Gordon explains that these types of overruns are not random. They often come from predictable sources, such as outdated technical studies, unrealistic expectations about labor productivity, or failure to run trade-off and risk studies early in the project lifecycle. He emphasizes the value of early and continuous third-party review, front-end loading, and flexible project plans that can adapt to new information.
The talk includes detailed commentary on how better cost estimation methods can help prevent these problems. Monte Carlo simulations, contingency planning, and the use of first-principle models allow mining professionals to build more realistic estimates, understand their exposure to uncertainty, and spot signs of over-optimism before construction begins.
Costmine’s tools are designed to support this kind of practical, grounded decision-making. Mining Cost Service provides detailed data on labor, supplies, utilities, and taxes. Equipment Cost Service includes cost information for over 3,000 pieces of surface, underground, and processing equipment. SHERPA estimating software allows users to flex cost models across different scenarios and production plans. WOODY brings these capabilities into a benchmarking environment that allows users to compare their estimates directly against technical studies, surfacing discrepancies and red flags early in the process.
The presentation closes with a checklist of practices that lead to better cost outcomes. These include building a strong baseline, revisiting forecasts against actuals, setting up structured procurement and contracting strategies, and continuously calibrating models against real data. Most importantly, it emphasizes the need for clarity around scope, awareness of uncertainty, and the discipline to challenge assumptions.
For mining professionals tasked with planning, evaluating, or executing large capital projects, this presentation provides a clear look at why cost overruns happen and what can be done to avoid them. It is both a cautionary tale and a practical guide for more reliable mine planning.
