The Mine Is Underperforming.
Why Will You Do Better?
Csaba Jancsovics
ONYX Industrial Performance Solutions
4 November 2026
An underperforming mine can make an attractive acquisition target.
There is an operating history to examine, infrastructure already in place and a list of improvements that could lift earnings. A buyer with capital and experienced operators may see considerable value that the current owner has failed to capture.
The acquisition case needs a convincing answer to one question: why will this mine perform better under your ownership?
“More focus”, “better management” and “greater operating discipline” become meaningful when the buyer can explain what will change, why it has not happened already, and how those changes will produce cash.
A change of owner can create an opportunity.
The investment case must explain why.
There can be good reasons why a different owner is better placed to deliver.
A mine may have spent years competing unsuccessfully for development funding within a larger portfolio. Dedicated ownership could give it the capital and management attention it needs. A buyer with relevant technical experience may also be able to pursue improvements that the previous owner lacked the capability to evaluate.
But the change can bring additional costs. Leaving a major’s portfolio may mean replacing shared technical services, procurement arrangements, systems and financial support. Those costs need to sit alongside the benefits of greater attention and faster decisions.
The buyer’s advantage should be specific to the mine: a constraint it can remove, a capability it can bring, or a decision it can make that changes the economics.
Similar operating results can conceal very different investment requirements.
A mine with weak planning and coordination may have the equipment and infrastructure it needs, yet struggle to turn its plan into reliable weekly production. Better maintenance, prepared work areas and effective supervision could improve output without major expansion.
An underinvested mine presents a different proposition. Deferred development and maintenance may need to be funded before production can rise. The opportunity could be substantial, but capital must go in before benefits come out.
Then there are physical constraints: difficult geology, changing ore characteristics, limited access or inadequate infrastructure. Some can be overcome economically. Others reduce what the asset can realistically deliver.
These causes can coexist. The important point is to understand how much each contributes to the performance gap.
A benchmark helps identify where to investigate. It does not establish how much improvement belongs in the valuation.
Low truck utilisation, for example, might suggest spare capacity. But if trucks are waiting because too few loading areas are available, improving truck availability will achieve little until development catches up.
The buyer then needs to test the improvements together. Higher mining output needs somewhere to go. Higher plant throughput must be assessed against recovery and downstream capacity. Maintenance savings must be consistent with the reliability required to achieve the production target.
Benefits can also overlap. Better availability, higher utilisation and increased throughput may describe different parts of the same production gain.
The acquisition model needs to reflect how the whole operation will work after the changes, including what must happen first.
“The opportunities may look attractive individually.”
“They still need to work together at the mine.”
The constraint determines where management attention and investment will have the greatest effect.
If processing is limiting output, additional mining capacity may build stockpiles rather than sales. Once the plant constraint is removed, mine development or logistics may become the next limit.
The improvement programme must follow that movement. Otherwise, the business can spend heavily on areas that make little difference to saleable production.
Trade-offs need equal attention. Pushing more tonnes through a plant may reduce recovery. The relevant question is what happens to saleable metal, operating costs and cash flow across the range of achievable operating conditions.
A technically sound plan still needs the authority and people to deliver it.
The operating plan needs people, authority and funding.
Their cost and timing belong in the acquisition case.
A new owner may be able to approve development funding, strengthen leadership and resolve decisions that have stalled. Other changes depend on counterparties, regulators, workforce arrangements or joint venture partners. The timetable should distinguish between decisions the buyer controls and agreements it still needs to secure.
The site team’s capacity also needs testing. It must keep the operation safe and productive while supporting the ownership transition and delivering changes across the business.
Who will lead the work? Which roles need strengthening? What specialist support is required? Who will translate the priorities into maintenance schedules, available work fronts and clear instructions for the next shift?
The cost and mobilisation time of that capability belong in the acquisition case, alongside the physical work.
These are practical tests of whether identified potential can become deliverable improvement. The next task is to establish what that improvement is worth.
The path from operating potential to future cash flows requires several judgements.
First, remove overlapping benefits and test the constraints. Then establish what the business can deliver with the proposed people, investment and implementation sequence.
Next, account for the expenditure and time required to get there.
Additional development, critical spares, plant modifications and working capital may all be needed before higher earnings produce cash. Some changes require downtime. Others take months to stabilise.
An attractive annual EBITDA improvement can still leave the buyer with a substantial funding requirement during the first year.
The duration of the benefit matters too. Grade, hardness, mining depth and haul distance change over the mine’s life. An improvement demonstrated on today’s ore needs to be tested against the future mine plan.
The operation must also be able to sustain the improvement after the turnaround team steps back. If performance depends on a few exceptional people continually intervening, the buyer needs to understand that dependency and its ongoing cost. Planning, maintenance and supervision need to work reliably through ordinary changes in personnel and operating conditions.
WHAT SHOULD THE BUYER PAY?
Once those factors are reflected in cash flow, there is a separate decision about price.
The seller may expect credit for the asset’s potential. The buyer must commit capital, assemble the team and carry the risk that delivery takes longer or achieves less than expected.
The price needs to leave an adequate return for taking that on.
That is why slower delivery, partial benefits and additional funding should be tested before committing. What happens if development runs six months late? If recovery improves by half the expected amount? If a critical appointment takes longer than planned?
Can the business fund that period, and does the acquisition still meet the investor’s return requirements?
Those tests also show where further diligence matters most. An uncertain initiative contributing modest value is one thing. An uncertain assumption supporting a large part of the purchase price deserves much stronger evidence.
Bringing capital and operating experience together can create a real advantage in mining. Some assets could perform materially better under a different owner.
The strongest acquisition case will explain exactly why: which constraints the buyer can remove, what it will commit, and how the operation will change.
Before paying for the upside, know why it is yours to capture.
Leave a return for the work, capital and risk involved.