Mines are home to the kind of applied research that the federal R&D tax credit was designed to incentivize, from developing new extraction plans and optimizing processing circuits, to engineering solutions to manage water, ground stability, or environmental compliance.

Yet many mining companies overlook these credits, assuming the incentive applies only to companies with formal laboratories or dedicated R&D departments.

In reality, the credit under Internal Revenue Code (IRC) Section 41 is available to any taxpayer that incurs costs while attempting to develop or improve a product, process, technique, formula, or invention through a process of experimentation grounded in the physical or biological sciences, engineering, or computer science.

For mining and mineral processing companies, that definition means that a wide range of everyday activities may be eligible for this tax credit.

Understanding the Four-Part Test for R&D Tax Credit Eligibility

To qualify for the research credit, an activity must satisfy a four-part test created by the IRS. Each element is relevant to the work mining companies perform daily.

1. Permitted purpose. The research must relate to developing or improving a product, process, technique, formula, or invention. In mining, this includes efforts to improve extraction efficiency, recovery rates, throughput, safety, or environmental performance.

2. Technological in nature. The work must rely fundamentally on tenets of engineering, physical science, biological science, or computer science. Mining operations are inherently rooted in geology, geotechnical engineering, metallurgy, chemical engineering, and increasingly in data science and automation.

3. Technological uncertainty. At the outset of the research, there must be unresolved questions related to whether the product or process can be successfully developed, how it should be developed, or what design approach will achieve the desired result. Ore bodies are variable, geotechnical conditions are unpredictable, and processing chemistries differ from deposit to deposit. Mining engineers rarely have certainty about whether or how a given approach will work until they test it.

4. Process of experimentation. The taxpayer must analyze and compare potential solutions using structured techniques such as modeling, simulations, iterative testing, or other systematic evaluation methods. Mine planning, blast optimization, pilot-scale testing, and process-control refinement all involve evaluating alternatives to resolve uncertainty.

Qualifying Activities: Mining Operations

Once an ore body is defined, the work of determining how to extract it safely, efficiently, and economically involves substantial engineering judgment and experimentation.

Mining Activities That May Result in Qualifying Research Expenditures

• Developing and evaluating mine-development plans after the ore body is defined
• Conducting engineering analysis of alternative extraction methods, such as open-pit versus underground approaches and sequencing alternatives
• Designing and testing alternative blasting plans to improve fragmentation, yield, or safety
• Analyzing blast-performance data to improve dispersion and efficiency
• Designing and evaluating alternative pit or stope-infrastructure workflows, including haul-road geometry and loading configurations
• Engineering and testing dewatering solutions for groundwater management, flow control, or slope stability
• Designing or testing ventilation or ground-control systems for underground operations
• Modeling and simulating mine sequencing, extraction rates, and production scheduling
• Engineering mine-reclamation methods involving testing, such as soil mixes, revegetation, or water-treatment approaches
• Designing or developing custom extraction tools, drilling attachments, or material-handling components
• Developing and testing automation or semi-automation technologies for haul trucks, loaders, or drilling rigs
• Designing and testing sensor-based monitoring systems for slope stability, fragmentation, or water flow

Qualifying Activities: Plant Production and Processing

Processing plants present some of the most compelling opportunities for R&D credits. Optimizing recovery, throughput, and product quality requires ongoing experimentation with equipment, chemistry, and process design.

Processing Activities That May Result in Qualifying Research Expenditures

• Designing or redesigning plant layout, material flow, crushing circuits, or milling processes
• Experimenting with alternative equipment configurations, media, reagents, or process-control parameters
• Testing alternative screen setups, feed rates, RPMs, pressures, temperatures, or chemical-dosage levels
• Designing, engineering, or fabricating custom equipment or tooling to improve throughput, recovery, or safety
• Modeling, simulating, or performing calculations to optimize production output, recovery, or energy efficiency
• Designing and testing process-water systems, tailings-handling methods, or water-treatment infrastructure
• Engineering and experimenting with material-handling systems, conveyor logic, dust-suppression systems, or flow-path optimization
• Conducting lab-scale or pilot-scale experimentation in areas such as flotation chemistry, leaching conditions, milling performance, or gravity-separation parameters
• Developing and testing automation, machine-learning, or advanced control-system logic for real-time grade sensing or throughput optimization
• Designing, engineering, and constructing prototype wash plants to test alternative process flows, equipment configurations, recovery methods, or throughput concepts
• Engineering energy-efficiency improvements, including motor-load optimization and process-heat recovery
• Designing and testing environmental-management technologies, such as improved slurry thickening, dust-control systems, or wastewater-treatment methods.

Whether the work is conducted at lab scale, pilot scale, or in full production, the key question is the same: Was there technological uncertainty, and did the company use a process of experimentation to resolve it?

What Costs Can Be Claimed for R&D Tax Credits?

The R&D credit covers several categories of expenses, and the mix varies from one mining operation to the next. Wages paid to employees who perform, supervise, or directly support qualified research activities are one key component. This extends beyond engineers to include geologists, metallurgists, plant operators, and other technical staff whose time is devoted to resolving technological uncertainties.

Supply costs can also be significant. Materials and inputs consumed during research — such as reagents used in flotation testing, fuel consumed during blast trials, or feed stock processed during pilot runs — can be eligible. Amounts paid to third-party contractors who perform qualified research on the company's behalf also count, generally at 65% of the contract amount.

Documentation Is the Deciding Factor

Recent case law has reinforced an important lesson: legitimate research can go unrewarded if it is not properly documented. Courts have recognized that on-site, applied experimentation — even when conducted in production environments rather than laboratories — can constitute qualified research. But they have also denied credits where taxpayers could not substantiate the connection between specific activities and the costs claimed.

For mining companies, this means maintaining contemporaneous records that link research activities to identifiable costs. Useful documentation includes project logs and engineering reports, trial protocols and test results, before-and-after performance data, time-tracking records for employees engaged in research, and records of supplies consumed during experimentation.

The good news is that many mining operations already generate much of this information through normal engineering and operational workflows. The challenge is organizing and preserving it in a way that supports a credit claim.

We’re Here to Help

For help assessing whether your mining or processing company's activities qualify for the R&D tax credit, contact your firm advisor.

Additional Resources

• R&D Tax Services
• Energy & Utilities Practice