This measure of mining activity is derived by subtracting the cost of supplies, minerals received for preparation, purchased machinery installed, purchased fuel, purchased electricity, and contract work from the sum of the value of shipments and receipts for services (mining products plus receipts for services rendered) and capital expenditures. The result of this calculation is adjusted by the addition of value added by merchandising operations (i.e., the difference between the sales value and the cost of products sold without further processing).

"Value added" avoids the duplication in the figure for value of shipments and receipts for services that results from the use of products of some establishments as supplies, energy sources, or materials by others. Moreover, it provides a measure of value added not only in mineral production but also in the development of mineral properties. Value added is considered to be the best value measure available for comparing the relative economic importance of mining among industries and geographic areas.