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J.-M. Rendu, "Breakeven cut-off grade," in An Introduction to Cut-off Grade Estimation, Englewood, Colorado,
SME, 2014, pp. 17-26.
Definition
Jean-Michel Rendu
An Introduction to Cut-off Grade Estimation
Utility function
The value, or utility, of sending
one metric ton of material with
parameter value (grade) x to
destination 1 (process 1) is
U1(x). The utility of sending the
same material to destination 2
(process 2) is U2(x). The
destination that should be
chosen is that which results in
the highest utility Umax(x).
The cut-off grade xc is the
value of x for which U1(xc) = U2
(xc).
Utility function
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 𝑄+𝑐 ∙ 𝑟 ∙ 𝑉
𝑄+𝑐 = 𝑇+𝑐 ∙ 𝑥+𝑐
Where
▪ Q+c = quantity of valuable product contained in material above
cut-off grade
▪ r = the proportion of valuable product recovered during
processing
▪ V = market value of the product sold
▪ T+c = tonnage of material above the cut-off grade, xc
▪ x+c = average grade of material above the cut-off grade, xc
Cut-off grade and grade–tonnage relationship
Direct profit and loss
𝑈𝑜𝑟𝑒 𝑥 = 𝑥 ∙ 𝑟 ∙ 𝑉 − 𝑅 − 𝑀𝑜 + 𝑃𝑜 + 𝑂𝑜
▪ where
▪ x = average grade
▪ r = recovery, or proportion of valuable product recovered from the mined
material
▪ V = value of one unit of valuable product
▪ R = refining, transportation, cost of sales, and other costs incurred per unit of
valuable product
▪ Mo = mining cost per metric ton processed
▪ Po = processing cost per metric ton processed
▪ Oo = overhead cost per metric ton processed
Direct profit and loss
𝑈𝑤𝑎𝑠𝑡𝑒 𝑥 = − 𝑀𝑤 + 𝑃𝑤 + 𝑂𝑤
▪ Where
▪ Mw and Ow = mining and overhead costs, respectively, per metric ton of waste
▪ Pw = the cost of processing one metric ton of waste as may be needed to avoid
potential water contamination and acid generation, and to satisfy other
applicable regulatory and environmental requirements
Cut-off grade between ore and waste
𝑈𝑜𝑟𝑒 𝑥𝑐 = 𝑈𝑤𝑎𝑠𝑡𝑒 𝑥𝑐
𝑀𝑜 + 𝑃𝑜 + 𝑂𝑜 − 𝑀𝑤 + 𝑃𝑤 + 𝑂𝑤
𝑥𝑐 =
𝑟∙ 𝑉−𝑅
Precious metal example
*Other terms used in open pit mines include in-pit cut-off grade for material within the pit limits (the internal or mill cut-off grade) and ex-pit
cut-off grade for material not included in the pit limits (the external or mine cut-off grade).
External or mine cut-off grade with waste
stripping
𝑈𝑜𝑟𝑒 𝑥 = 𝑥 ∙ 𝑟 ∙ 𝑉 − 𝑅 − 𝑀𝑜 + 𝑃𝑜 + 𝑂𝑜 − 𝑠 ∙ 𝑀𝑤 + 𝑃𝑤 + 𝑂𝑤
𝑀𝑜 + 𝑃𝑜 + 𝑂𝑜 + 𝑠 ∙ 𝑀𝑤 + 𝑃𝑤 + 𝑂𝑤
𝑥𝑐 =
𝑟∙ 𝑉−𝑅