Production cost of extraction enterprise products: when technology is more influential than mining depth

Vitaliy O. Bash

Abstract


The article examines the impact of mining technology on production costs and the economic condition of mining enterprises. The necessity of clarifying the widespread perception in mining practice regarding the decisive influence of mining depth on the economics of an extraction enterprise is substantiated. Using the examples of the "Pivdennodonbaska No. 1" coal mine and PrJSC "Sukha Balka", which engages in underground iron ore mining, the possibility of a systemic deviation from the expected dependence is demonstrated: a mining enterprise operating at a significantly greater depth can achieve lower production costs. To identify the causes of this phenomenon, a statistical analysis of production cost components and the ecological rucksack method (MIPS), which allows for the accounting of hidden material flows of production, were utilized. Regression models of the ecological rucksack mass for coal and iron ore production were constructed, and the connection between its components and production costs was investigated. Significant inter-industry differences in the structure of material flows and cost formation were established; for iron ore production, a significant correlation between production costs and the abiotic component of the ecological rucksack was identified.

The proposition that mining depth in itself does not determine the economic performance of an extraction enterprise—the technological foundation being decisive—is substantiated. The increasing complexity of equipment, rising power-to-labor ratio, and material intensity can create new economic constraints. It is shown that increasing productivity, mechanization, automation, and digitalization of production are not unconditional guarantees of an enterprise's economic viability. It is proposed to evaluate the technological development of mining enterprises not only by the level of productivity and technological equipment but also by changes in the structure of costs and hidden material flows.


Keywords


mining industry, mining depth, production cost, mining technology, ecological rucksack, material flows, smart manufacturing

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DOI: https://doi.org/10.15407/econindustry2026.03.065

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