Cutoff Grade Analysis in Mining Operations
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ScribdTranslationsCutoff Grade Analysis in Mining Operations
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ScribdTranslationsChapter III Limit cutoff content
Chapter 3: Limit Cutoff Content
In general, a cutoff grade must allow for the selection of
ore generating enough revenue to cover all deemed costs
pertinent.
The relevant costs vary depending on the situation
specific to each mine. They also vary according to the perspective of
authors. Overall, we encounter 2 different approaches:
II. Taylor approach: relevant costs are only the
operating costs.
• The concentrator works at full capacity, we
consider fixed costs and variable costs.
The concentrator silo is not operating at full capacity, we
only consider variable costs.
Indeed, at full capacity of the concentrator, an ore whose content ...
does not allow to cover all fixed and variable costs
it leads to a loss. However, if the hub is on standby for
ore, it is better to provide a poorer ore than none at all
ore at all. If the ore covers the treatment costs, then the
the loss incurred will be less than if nothing is provided to the
hub
If the revenues generated by the operation are discounted, the content of
the cut decreases over time, otherwise, it remains constant (all
things being equal)
1. Lane's approach: relevant costs include a cost
opportunity in addition to operating costs.
The opportunity cost is defined by Lane as the interest on the
capital that represents the still unexploited part of the mine. It is
in a way a penalty for delaying the utilization of the resource
available. The importance of this cost is heavily dependent on the
Estimated value of the resource and the chosen interest rate.
Chapter III Limit cutoff content
A direct consequence of including this cost is to raise the content.
of cuts, especially at the beginning of operations. As time goes by,
when the deposit is exploited, its residual value decreases, the cost
the opportunity also decreases as well as the cutoff content.
end of operation, the cut-off grade obtained by Lane joins
the one obtained by Taylor. The same considerations regarding
the full capacity use or not of the hub applies here.
If the concentrator is not operating at full capacity, it will be neglected.
fixed costs and opportunity costs in the calculation of the content of
cut.
In both cases, but especially in Lane's approach, 2 others
important factors influence the determination of the content
of cuts:
Expectations regarding the evolution of metal prices;
The technological capacity to subsequently recover the ore
at a lower concentration left on site.
For the first factor, let's consider what happens when the price
the metal decreases. Theoretically, it is necessary to exploit at a content of
higher cut to meet operating costs. This
behavior is correct if we anticipate that the price of metal
will not increase in the near future. If, on the contrary, it is expected
a short or medium-term increase (let's say over a horizon of 1 or 2
then it would be more profitable to sell ore now.
poor and to keep the richer ore for later (the gains
future compensations for current losses). Obviously, it is
extremely difficult to predict metal prices even on a
a two-year horizon and the exercise remains perilous.
Regarding the technological capacity to recover ore
abandoned, this factor largely depends on the mode of exploitation of
the mine. If we can recover the abandoned ore, then we can
allow for easier application of a high cut content.
If it is impossible to recover abandoned ore, then the content of
Chapter III Limit cut content
the cut will necessarily be revised downwards (and it will be impossible
to directly apply Lane's approach.
The following figure schematically shows the possible evolution of the
cut-off grade during the operation of the mine.
Note: The approaches of Lane and Taylor assume that one knows
the distribution of contents on which the selection is made. Here
all the concepts of geostatistics concerning the effect of support and
The available information must be considered.
The concept of optimal cut content requires beforehand the
definition of 3 limit cut contents and 3 cut contents
of balance. Taylor (1972) demonstrates that the optimal cutoff content
is necessarily one of these 6 cut contents.
Limit cut content
The cut-off levels cannot be chosen entirely.
freely, they must take into account the capacity of the facilities and
Chapter III Limit cut-off content
of the market. If a very high cut content is chosen by
for example, one must be able to develop enough
ore to power the concentrator. Similarly, more than
concentrate will be produced and we must ensure that there are outlets
existing for this concentrate.
Lane and Taylor recognize 3 important limiting factors. For
each corresponds to a limit cut content.
Limit of the mine (development and mining)
Ore processing limit (concentrator)
Market limit (foundry, sales contracts)
Let the following variables be:
c:cut content ;
xcproportion of the selected mineralized material - in the deposit -
(function of the cut-off content);
gcaverage content of the selected ore (after dilution; function of
the cut-off content) ;
y: recovery rate of the concentrator;
price of a ton of metal
k: cost of bringing one ton of metal to market (foundry, refining,
transport, insurance, etc...) ;
h: variable processing costs per ton of ore (crushing,
rise, concentration) ;
m: variable costs for extracting one ton of mineralized material
(development, drilling, shooting, including waste);
f: fixed costs (administration, engineering, capital expenses);
Chapter III Limit cut content
F: opportunity costs. Lane (1988) defines this term as being the
revenue that would be generated by an amount equal to the present value of the
deposit placed at a specified interest rate;
M: extraction capacity (mineralized material);
H: processing capacity (selected ore);
K: market capacity (metal);
v: net profit generated by a unit of mineralized material.
Using these definitions, we can see that 1 ton of mineralized material
give xcton of ore, etccgcton of metal.
In the following, we will take turns considering that the mine is the factor.
limiting, then the concentrator, then the market (foundry). In each
Indeed, we need to convert the capacity of the installation into equivalent "tons".
"of mineralized material" and allocate the fixed costs in $/ton of material
mineralized. Thus, the mine has a capacity of M tons of material
Mineralized, the concentrator processes H tons of ore or H/[Link]
of mineralized material and the market has a capacity of K tons of
metal is K/(gcy) tonnes of ore and K/(gcyxctonnes of material
mineralized.
The mine is the limiting factor:
M tonnes of mineralized material are mined and must support the
fixed costs. The net profit function to maximize is therefore:
V = [(p-k) xcgcy-xch-m-(f+F)]/M ……………………….(1)
The termexcgcrepresents the produced metal.
The term (p-k)xcgcit represents the gross income obtained from the sale of this
metal
the extraction cost incurred to access the material
mineralized and recover the ore
Chapter III Limit cutoff content
xcWhat is the cost of processing ore?
(f+F) represents fixed costs and opportunity cost
(f+F)/M represents the cost per ton mined due to fixed expenses.
In (1), the terms m and (f+F)/M do not depend on the content of
adopted cut. We can also maximize:
v2(p-k)qcy-hxc............................
where qc=xcgcThe curve of net profit per ton of mineralized material
depending on the cutoff content has a single maximum reached
in c1Since there is a monotonic relationship between c and xcwe can
also derive with respect to xcWhat about c (the xc optimal
automatically identify the optimal "c"). Taking the derivative of (2)
in relation to xcequal to zero and noting that
dqc/dxc= c, we find:
( )
This cutoff content expresses the fact that the concentrator and the
markets are on standby, all the material that allows to meet the
Variable operating costs will generate additional profit.
(Note: this cut content corresponds to the cut content "
breakeven
It should be noted that in this case, the optimal content does not depend
not at all of the time factor (which is included in the term
of opportunity F).
2. The concentrator is the limiting factor:
[( )]
( )
Chapter III Limit cutoff content
It should be noted that this time the factor of time comes into play in the
determination of the cut-off content by the presence of the term F (cost
of opportunity.
3. The market is the limiting factor
[( )( )]
If we increase the cutting yield, a surplus of metal will be produced that
cannot be sold or cannot be refined and we will have incurred
additional operating costs to operate at this content
(the development costs for mining will be higher). If we
lower the cut content, then we will have a lack of metal
incurring a loss.
Note that from previous formulas, we necessarily have:
c1< (c2,c3)
Note: It will be noted that the determination of the 3 limit cutoff grades
do not ask to know the distribution of the grades of the deposit.
However, this will not be the case for the break-even price holders.
and the optimal cut content.
Bibliographic References:
RENDU J.M., 2008. An Introduction to Cut-off Grade Estimation-SME. Published by
Society for Mining, Metallurgy, and Exploration.
MARCOTTE D., 2011. Economic aspects. Mining geology course.
[Link]
BECK D. M. B., 2013. Determination of optimal mining cut-off grades: mathematical
formulation and solution algorithm: (case study: hinoba copper mine in the
philippines).[Link]