A cut-off grade determines which drilling intercepts may and cannot be used in a JORC resource. It is the grade of mineralisation at which a deposit can be exploited profitably.
The price at which a firm can sell the underlying commodity and the cost of mining a deposit determine the cut-off grade. The cut-off grade decreases as the commodity price rises, but it increases when the cost of mining increases.
The “cut-off grade,” which determines which drilling intercepts can and cannot be included in the JORC resource estimate and, ultimately, the size of the economically mineable JORC resource, is a crucial detail for investors to notice when reading a JORC resource estimate.
The depth of a mineral deposit significantly impacts the cut-off grade due to variations in mining costs associated with different extraction methods.
Shallow vs. Deep Deposits
Shallow Deposits:
These are typically mined using open-pit methods, which are less expensive. Lower mining costs allow for a lower cut-off grade, meaning that a smaller concentration of the mineral can still be economically viable to extract. For example, a shallow gold deposit might have a cut-off grade of 0.5 g/t, allowing for the extraction of ore that is closer to the surface and easier to access.
Deep Deposits
In contrast, deeper deposits often require underground mining techniques, which are generally more costly due to factors such as increased labour, infrastructure, and safety requirements. As a result, the cut-off grade for deep deposits must be higher to ensure that the revenue generated from the extracted ore exceeds the higher costs involved. For instance, a deep underground deposit might have a cut-off grade of 3.5 g/t, reflecting the increased expenses associated with its extraction.
Economic Implications
The relationship between deposit depth and cut-off grade is crucial for mine planning and resource estimation. As mining costs rise with depth, companies must adjust their cut-off grades accordingly to maintain economic viability. This adjustment is essential for determining which portions of a deposit can be classified as ore and which must be considered waste, ultimately affecting the overall profitability and feasibility of mining operations.
In summary, the depth of a deposit directly influences the cut-off grade, with shallower deposits allowing for lower cut-off grades due to reduced mining costs, while deeper deposits necessitate higher cut-off grades to cover increased operational expenses.
Sources
Cut-Off Grades For Mineral Resource Reporting: Going The Extra Rare Earth Mile | SRK Consulting. (n.d.). Retrieved August 9, 2024, from https://www.srk.com/en/publications/cut-off-grades-for-mineral-resource-reporting-going-the-extra-rare-earth-mile
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