In the econometrics of mineral resources, cut-off grades are threshold values used to determine the economic viability of mining operations.
The cut-off grade depends on several parameters, and we primarily distinguish between:
The geological cut-of grade
The geological cut-off grade is employed to generate frequency distributions of grades to separate mineralised materials from waste and to plot grade-tonnage curves for mineralised materials.
It is used to estimate mineral resources. Mineral resources represent part of the mineralised material that offers reasonable prospects for economic extraction (Pasieka and Sotirow, 1985).
The planning cut-off grade
During exploration and at various stages of planning a deposit’s exploitation, a cut-off grade is necessary to geographically and quantitatively define the limits of potential ore.
Since no precise information regarding possible mining operations is known at the outset of exploration, the planning cut-off grade at this stage is semi-quantitative: it aims to satisfactorily predict the value of the ore that may eventually be mined or processed.
The budget cut-off grade
The budget cut-off grade reflects the required cut-off grade to generate the cash flows needed during a given year. This is typically necessary to achieve a specific corporate objective and generate a desired cash flow for the enterprise (Pasieka & Sotirow, 1985).
๐๐ก๐ ๐ccountable cut-off grade
According to Williams (2014), the accounting cut-off grade is the annual cut-off sufficient for a given capacity to generate products covering operating costs, depreciation of fixed assets, and minimum profit requirements.
The limit cut-off grade
This is the grade at which revenues cover all cash expenses. These costs include fixed and variable costs, corporate and mining taxes, and all allocated capital expenditures (Pasieka and Sotirow, 1985). Dagdelen and Kawahata (2007) define the limit cut-off grade as the grade that can be used to differentiate ore from waste.
In addition to these, we also distinguish between the Marginal cut-off grade and the Operation cut-off gradeย (with its three variants).
