Determining the different cut-off grades in a mine

Determining the different cut-off grades in a mine
Gideon Gipmai Yowa
(September, 2017)

Senior Instructor, Mining Eng. Dept., PNG University of Technology. PNG

      1.  Overview

In mine planning process, the cut-off grade is determined prior to producing the reserve physicals. The different cut-off grades are the break-even cut-off grade (BECOG), incremental cut-off grade (ICOG), mill cut-off grade (MCOG), and resource cut-off grade (RCOG). The BECOG is the one used for producing the reserve stope shapes and reserve statement. 

2.  .Break-even cut-off grade (BECOG)

The BECOG grade considers the full cost of the operation. Usually the operational cost and production physicals over 12 months are used to calculate the unit cost. The unit cost is expressed in $/tonne of ore. 

Other parameters like the mill recovery, royalty, inflation, and metal price are also used in formulating the BECOG.

Inflation component = Full unit cost X inflation %

Royalty component = Price X royalty %

The full unit cost ($/t) is the cost of operation including, mining, processing, general and administration (G&A). Some additional costs like refining, selling, amortization, depreciation are considered and are dependent on the commodity mined, market arrangements and the management decisions.

Inflation component is added to the full unit cost. Stopes (ore blocks) designed can be mine within years so yearly inflation rate must be considered for the increase in cost. 

The commodity price is usually the average price over a period. Normally guidance on what price to use for the grade calculations comes from site management or the corporate office.

The royalty component is taken away from the commodity price. The royalty varies in different countries.

The mill recovery is usually the average recovery over a period say 12 months in the processing plant.

3.  Incremental cut-off grade (ICOG)

The ICOG only considers the variable cost component of the operation while the fixed costs are not included. The understanding is that the stopes (ore) above the BECOG shoulder the fixed costs while the incremental ore are able to meet the variable component of the fixed costs.

The practice of ore blending is essential in mining incremental ore. Incremental ore is mined together with high grade ore. When incremental ore dominates the production tonnes, the operation becomes marginal or uneconomic.

4.  Mill cut-off grade (MCOG)

MCOG grade considers the variable cost of milling, G&A, and load and haul cost of mining. All the costs are variable costs component of the fixed costs.

The MCOG is usually applied on stockpiles of low grade ore. The understanding is that the mining component of the costs has been sunk already. If the material can meet the variable costs and the load and haul variable costs, then it can be blended with ore above BECOG. 

5.  Resource cut-off grade (RCOG)

The RCOG is similar to BECOG, except that different values of mill recovery and commodity price are used. Usually higher values of mill recovery and commodity price are used hoping that the mining scenarios will be better in the future. Moreover, resource geologists use the RCOG for resource wire-frame and block modelling.

6.  Conclusion

The reserve of a mining operation is sensitive to the BECOG determined.  When the BECOG increases, the reserve decreases because the materials below the BECOG are removed from the reserve. Likewise, when the BECOG decreases, the reserve increases whereby the materials previously left out of the reserve wireframe are being added to the reserve.

The BECOG is sensitive to the cost, the commodity price, the mill recovery and the mine royalty. When anyone of the parameters changes, the BECOG also changes and thus the reserve physicals also changes.
Determining the different cut-off grades in a mine Determining the different cut-off grades in a mine Reviewed by Gideon Gipmai Yowa on September 25, 2017 Rating: 5

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