Contract Mining vs Owner Mining for Gold: Costs and Risks

Contract mining has traditionally cost more per tonne than owner mining, but it needs far less capital up front. A South African study found contractors have traditionally charged a premium of about 15% to 20% over an owner-run fleet, with premiums as high as 50% reported when contractors were in short supply (Rupprecht, SAIMM, 2015). In return the contractor brings the trucks, the shovels and the crews, so you spend less capital before the first ounce of gold is poured. This guide sets out what each model costs, who carries which risk, what recent gold-company decisions show and how to test your own numbers with a calculator.

Terms used below. Contract mining means a company hires a specialist firm to dig, load and haul rock under a written contract. Owner mining (also called owner-operator or in-house mining) means the mine owner buys or leases the fleet and employs the operators. A hybrid splits the work, for example a contractor drills and blasts while the owner hauls. A schedule of rates (SOR) is a price list in which the contractor is paid per tonne or per cubic metre moved. AISC is all-in sustaining cost per ounce of gold sold. EBIT(A) is a company’s operating profit before interest, tax and amortisation. This page gives facts from named sources and is not investment advice.

Contract mining vs owner mining at a glance

The table compares the two models on the points that decide most gold projects. Each row is explained, with sources, in the sections that follow.

How contract mining and owner mining work in practice

In contract mining the owner keeps the mineral title, the mine plan, grade control and the processing plant. The contractor moves the rock. On the Bomboré gold mine in Burkina Faso, for example, the 2023 technical report says contractors mine the ore and waste while an owner’s team handles site management, grade control and mine planning (Orezone, Bomboré Phase II feasibility study, effective 28 March 2023). The same report expects peak numbers of 18 excavators and 132 trucks, about 1,100 contractor staff and 250 owner’s team staff at the mine, excluding the plant.

In owner mining the company carries all of that itself. It employs the operators, buys or leases the fleet and keeps the workshop running. Leasing blurs the line. Santana Minerals’ Bendigo-Ophir gold project in New Zealand plans an owner-miner model with a Komatsu fleet valued at NZ$115 million (US$65.8 million) whose main excavators and trucks are under a Komatsu leasing agreement (Mining Technology, 31 March 2026). So “owner mining” does not always mean paying cash for every machine.

History shows the choice swings back and forth. Australian open pits were mostly owner-run from the late 1960s, moved to contractors in the 1980s gold boom, and then turned back towards owner control at larger operations, according to a conference paper that sums up the reason in one idea: the owner takes more of the mining risk and in return avoids paying the contractor’s profit (AusIMM, Iron Ore 2002 proceedings). That paper also notes that the older schedule-of-rates contract was being replaced by arrangements that share operating cost and risk. For a broader look at contract structures see our note on mining contract trends.

What contractors charge and what they earn

Public contractor rate cards do not exist, because every rate depends on haul distance, rock hardness, fleet size and contract length. Feasibility studies are the best open window. Two gold studies give rates from named contractor quotes. The Bomboré study sets a base mining cost of US$2.45 per tonne mined in oxide rock and US$2.85 in fresh rock, based on current site contractor rates and quotations (Orezone, 2023). Vista Gold’s 2025 feasibility study for Mt Todd in Australia’s Northern Territory uses mining costs from an established Australian contract miner of $3.00 per tonne mined over years 1 to 15 and $3.30 over the life of mine (dollars as stated in the release) (Vista Gold press release, 29 July 2025). Vista says contract mining and third-party power reduce capital costs and operating risk for the project.

Chart

Operating profit margin of two listed mining contractors

Underlying EBIT(A) margin, % of revenue; Macmahon is the mining segment only

Chart

Contract mining rates used in gold feasibility studies

Dollars per tonne mined (ore plus waste); Bomboré in US$, Mt Todd as stated in the release; study inputs, not tender prices

These are study inputs, not today’s tender prices, and they cover different countries, rock types and gold prices. Treat them as a sanity check on your own quotes, not a benchmark.

The second number to know is the contractor’s margin, because it is what an owner pays on top of the contractor’s costs. Perenti, one of the large listed mining contractors, reported an underlying EBIT(A) margin of 9.8% for the year to June 2026, up from 9.6% a year earlier and 9.4% the year before that (Perenti results release, 24 August 2026; Perenti, FY25 release). Macmahon Holdings reported a mining-segment EBIT(A) margin of 8.1% for the same year (Macmahon results release, 18 August 2026). Those are group figures that include drilling and other work, so read them as a guide, not as a quote for your haulage.

When contract mining is the better choice

Contract mining tends to win in four situations.

1. Capital is scarce. Fleet purchases can take a large share of a new mine’s budget. Vista’s Mt Todd study uses contract mining as one of the ways to cut initial capital, which it puts at US$425 million (Vista Gold, 2025).
2. The mine life is short or uncertain. A Kwame Nkrumah University thesis modelled the Sefwi Anhwiaso gold mine in Ghana under both options and found contracting gave the higher return on investment and held up better when investment parameters turned against the project (KNUST, 2000). It is an old, single-site study, but the logic still holds: a fleet you do not own cannot be stranded.
3. You lack operating skill. Contractors bring trained crews and spare equipment that a small owner cannot easily match.
4. Your own cost is not proven. Endeavour Mining ran a full tender at its Karma mine in Burkina Faso (Endeavour sold its 90% stake in 2022), with bidders pricing the same schedule of rates, and moved from owner to contract mining. The sale of the owner’s equipment, parts and tooling added cash flow that helped keep Karma viable (AusIMM, Open Pit Operators Conference 2022).

Contracts also let an owner start quickly and scale a pit up or down by agreeing different terms, rather than hiring and releasing staff. Contract length varies. Macmahon’s August 2026 release lists new work with terms from 34 months to five years, plus a seven-year extension (Macmahon, 2026).

When owner mining is the better choice

Several gold producers have chosen to take mining in-house. Their stated reasons are consistent.

Chart

Contractor operating profit rose in the year to June 2026

Underlying EBIT(A), Australian dollars million

• Vault Minerals, King of the Hills (Western Australia). Vault will move load and haul to an owner-operator model from 1 January 2027, after the current contract ends on 31 December 2026. It cited cost efficiency and control, agility, workforce stability and capital benefits, backed by a 13-year reserve life, and plans a larger fleet including two 360-tonne excavators and 190-tonne trucks. It kept drill and blast with a contractor on a five-year term (Australian Mining, 10 November 2025).
• Aura Minerals, Brazil. On 2 October 2026 Aura agreed to buy the company that holds the contractor’s fleet, leases and workforce at its Apoena, Almas and Borborema gold mines, for an enterprise value of R$612 million (about US$118 million), with the switch targeted for January 2027, subject to Brazilian antitrust clearance (CADE). Aura’s own estimate is an AISC reduction of US$150 to US$200 per ounce from 2027, a forward-looking figure (Aura Minerals release, 2 October 2026).
• Centamin, Sukari underground (Egypt). In February 2022 Centamin (since November 2024 part of AngloGold Ashanti) announced it would move its underground mining from contractor to owner-operator after a five-year contract and an independently managed tender. It expected average cost savings of US$19 million a year from 2023 against the 2021 cost base, bought the incumbent’s underground fleet for US$10.5 million and gave underground drilling to Geodrill on a separate five-year contract (Centamin RNS, 8 February 2022). The savings are the company’s own forecast.
• Santana Minerals, New Zealand. Its chief executive said an owner-miner model removes the contractor margin typically built into mining costs (Mining Technology, 2026).

The pattern is large, long-lived pits with enough tonnes to keep a fleet busy. The tradeoff is that the owner now needs maintenance planning, parts supply and a trained workforce. Our guide to gold mining equipment maintenance strategies covers the maintenance side of that decision. For perspective on who runs the biggest operations, see our list of the largest gold producers and the largest gold mines and deposits.

One more sign that contractors are not short of profit: both Perenti and Macmahon grew underlying EBIT(A) in the year to June 2026, as the chart shows. That growth is the margin an owner can try to capture, provided it can run the fleet at least as well.

Hybrid models: split the work, not the mine

Many pits do not choose one model. Vault’s plan keeps drill and blast with a contractor while bringing haulage in-house, and Centamin took Sukari’s underground mining in-house while hiring a specialist for drilling. Karma shows the reverse path. The usual logic is to keep in-house the work that sets mine plan and ore quality (grade control, short-term planning) and to outsource work that needs specialist plant (drilling, blasting, crushing, or underground development). A hybrid also lets you test the market on one activity before committing the whole fleet. Our note on hybrid mining and drilling systems covers the equipment side.

The video below follows gold from rock to ring, which helps explain why the split between mining, processing and refining matters when you divide duties.

▶ Follows a small clay gold nugget from rock to ring: found, drilled, crushed, dissolved, caught on carbon, melted and refined. · 5:27

Safety and ESG duties stay with the owner

Hiring a contractor moves work, not accountability. In the United States, the Mine Safety and Health Administration (MSHA) states that its policy is to hold independent contractors responsible for violations committed by them and their employees, and it requires the mine’s production-operator to keep information on each contractor on site (30 CFR 45.1). In an October 2024 notice, MSHA reported that 40 of the 192 mine workers fatally injured from 1 January 2018 to 31 December 2023 were employed by independent contractors (Federal Register, 4 October 2024). That is roughly one fatality in five. Check the safety law of your own country, because the split of duties between owner and contractor differs.

Environmental and community commitments work the same way. The licence holder answers to the regulator and to neighbouring communities, so contract terms should require the contractor to report dust, water, fuel and incident data in the format you need. Fragmented data is a common problem when two companies run one pit. Local-content rules add another risk for contractors: Perenti’s FY26 release records an A$25 million impairment of idle surface fleet in West Africa linked to changes in localisation laws for surface mining (Perenti, 2026). Contracts should say who bears that kind of regulatory change.

Owner or contractor cost calculator

Use the calculator below to compare a quoted contract rate with an all-in owner cost. It converts fleet capital into a yearly charge, so a cheap-looking owner operating cost is not compared with a contract rate that already covers the fleet. Enter your own numbers; the defaults are round examples, not benchmarks. A lower owner cost does not mean owner mining wins: it leaves out management time, hiring risk and the downside if the pit closes early.

How to run a fair mining tender

Endeavour’s Karma paper is a useful template, because it priced the contractor options and the owner option on the same basis. The steps below follow its approach and common practice.

Infographic

Tender in 4 stages

1. 1Fix the scopeList drill, blast, load, haul, roads and dewatering, and who supplies fuel.
2. 2Share one haulage profileGive every bidder the same schedule and haul distances.
3. 3Price the owner optionAdd fleet finance, depreciation, insurance, labour and management.
4. 4Compare and write the risk termsSet productivity targets, price adjustment, term and exit rights.

1. Fix the scope. Decide whether the contract covers drill and blast, load and haul, roads, dewatering and grade control, and who supplies fuel and explosives.
2. Build one haulage profile. Give every bidder the same mining schedule and haul distances so that prices can be compared. Endeavour built a schedule of rates from haulage profiles and the mining schedule so that bidders competed on an even basis.
3. Price the owner option fully. Include finance cost and depreciation on the fleet, insurance, tax and customs, labour, and the cost of managing people. The Karma analysis included these items.
4. Profile each contractor. Check financial strength, safety record, equipment age and the other clients who compete for its fleet.
5. Plan for people. Staff transfer between owner and contractor is a major risk in either direction; the Karma paper treats human-resources issues as a project risk.
6. Negotiate the terms that move risk. Productivity targets, price adjustment for fuel and labour, term and extension rights, and penalties for missed tonnes should all be written down.

Check the ground before you choose a mining model

The mining model matters less if the ground is wrong. Before spending on a fleet or signing a multi-year contract, owners confirm what is in the pit and where the next ore sits. A satellite screen can show alteration minerals, structures and surface changes across a licence area at an early stage, and it narrows where field crews and drills go first. Farmonaut provides satellite-derived exploration targets from a licence boundary, as exploration targets that sit ahead of any resource estimate. The video below explains in plain words what satellites can and cannot show in gold exploration.

For the wider pros and cons of mining as an industry, see mining advantages and disadvantages.

▶ Explains that satellites cannot see a gold nugget but map the rock around it: iron stains, clay minerals and fault lines. · 4:25

If this topic matters to you, read AI in Mineral Crushing and Grinding: Pros and Cons next.

Related reading on this site: KoBold Metals vs 6 AI Exploration Firms: Pros and Cons.

Frequently asked questions

What is the difference between contract mining and owner mining?

In contract mining a specialist firm supplies the fleet and crews and is paid under a contract, often per tonne moved. In owner mining the mine owner buys or leases the fleet and employs the operators. The owner keeps the mineral title and the mine plan in both cases.

Is contract mining cheaper than owner mining?

It is cheaper to start, because you avoid buying a fleet. Over a long, steady mine life it is usually dearer per tonne, since the price includes the contractor’s profit. A South African paper put the traditional premium at 15% to 20% and the highest reported at 50% (Rupprecht, 2015).

How much do mining contractors earn on a contract?

Listed contractors report margins of roughly 7% to 10% before interest, tax and amortisation. Perenti reported 9.8% for the group for the year to June 2026, Macmahon 7.3% for the group and 8.1% for its mining businesses (company releases, August 2026). Your contractor’s margin on one contract may differ.

Why are gold companies taking mining back in-house?

Vault Minerals cites cost efficiency, control, agility and workforce stability; Aura Minerals cites operational control, equipment availability and lower unit costs. Aura estimates an AISC saving of US$150 to US$200 per ounce from 2027, which is a company forecast and not a result (Aura Minerals, 2 October 2026).

Does hiring a contractor transfer the safety risk?

Not fully. In the United States MSHA can cite both the contractor and the production-operator, and 40 of 192 mining fatalities from 2018 to 2023 involved contractor employees (Federal Register, 4 October 2024). Check your own jurisdiction’s rules.

What is a hybrid mining model?

A hybrid splits activities between owner and contractor. Vault Minerals will run load and haul itself at King of the Hills from January 2027 and keep drill and blast with a contractor for five years.

Which model suits a small gold project?

Small projects with limited capital and short or uncertain lives usually start with contractors, as the Ghana study and the Mt Todd and Bomboré feasibility studies assume. Owner mining makes more sense once tonnes are large and steady enough to keep your own fleet busy.

What is a schedule of rates?

It is a price list that pays the contractor per unit of work, for example per tonne hauled over a stated distance. Endeavour used a schedule of rates built from haulage profiles to compare bidders at Karma.

How long is a typical mining contract?

There is no single answer. Macmahon’s August 2026 release lists new awards from 34 months to five years and one seven-year extension, and Vault’s drill and blast contract is for five years. Longer terms lower the contractor’s price risk but reduce your room to change.

How do I compare a contractor’s tender with my own cost?

Put both on the same basis: the same schedule, haul distances and scope, and include fleet finance, depreciation, insurance and management on the owner side. The calculator on this page does the capital part of that for you.

Can satellite images check a contractor’s work?

Satellite images can show how a pit, waste dump or haul road footprint changes between dates. That is a useful independent cross-check on progress reports. They do not measure tonnes moved or grade; survey and truck data do.