Why you should apply a cut-off grade strategy to your tactical mine plan

Why you should apply a cut-off grade strategy to your tactical mine plan
Mine scheduling is a task as old as the mine itself.

After completion of your geological resource models and creating an economically feasible pit design you are still left with the final challenge of open pit mine planning; the schedule.

Traditionally, scheduling of open pit ore and waste is simply defined by an economic break-even cut-off grade. Mineralized material with a metal content value greater than the process cost is scheduled as ore and everything else as waste. This is a simple, proven and effective method to evaluate a deposit.

But is it the best?

Mine scheduling, in and of itself, is a manually intensive process. Planning for traditional cut-off grade is difficult enough without having to worry about varying the cut-off grade throughout the life of a schedule. However, with the advance of mine scheduling technology, the challenge of implementing a time variable cut-off grade, or cut-off grade strategy, is a much more attainable option.

Wondering if a cut-off grade strategy is the right option for your mine? Here are three compelling reasons to consider applying a cut-off grade strategy to your tactical mine plan.

3 reasons to apply a cut-off grade strategy to your tactical mine plan

1. Faster payback period

The payback period is the amount of time it takes to recover the cost of an investment. To achieve a fast payback period, you need to have exceptional cash flows in the early years of your investment period.

How can cash flow be increased earlier in your project? 

Using a cut-off grade strategy in your schedule in combination with great internal pit phasing will increase the head grade at the mill. This allows you to target high-margin, high-grade ore, pay off the investment faster, and retain value for the life of the project.

2. Drive higher net present value and internal rate of return

Net present value (NPV) is the reigning champion of mine planning metrics. As mining professionals, we strive to optimize NPV at every step of the mine planning process. The scheduling process is no different. And for decades, academics and operators alike have been utilizing different tools to maximize the NPV of mine schedules.

Driving high NPV for a project is a result of high discounted cash flows. A higher cash flow comes from higher revenues, which, again, is a result of higher-grade material recovered earlier in the schedule. By implementing a variable cut-off grade strategy, you can bring higher grade material forward in the schedule to attain a higher NPV.

The same principle applies to your internal rate of return (IRR) — the metric used to estimate profitability. IRR is a discount rate that makes the NPV of all cash flows equal to zero. By recovering , high grades early on in the project, it will equate to more money, better cash flow, and a better IRR for your project.

3. Increased ability to account for opportunity cost

In mining, we often face challenges that make ideal or optimized results impossible to achieve. There might be an operational, environmental or social challenge that seems to force a fixed cut-off grade for the entire project. However, in these cases, it is especially important to understand and consider what your schedule might look like using a cut-off grade strategy.

Using this approach  enables you to show key stake-holders, either in the boardroom or the line-out room, how the mine schedule is affected by these barriers. Having this information readily available will make it clear to everyone whether the financial gain is worth the attempt to try and alleviate the barrier in order to achieve the schedule with the optimized cut-off grade strategy.

It’s time for a change

Mine engineering is a complex subject and variables are utilized throughout the planning process. Do we use a single, fixed value for wall angle? Process recovery? Cost?

So why has the industry accepted a fixed cut-off solution for so long?

Certainly, a break-even analysis is great for ultimate pit design as it ensures that you maximize the value of the deposit. But when it comes to scheduling, it is time that we utilize different cut-offs for different stages of the mine life.

Employing a cut-off grade strategy is the next step in improving your scheduling process. It embodies the complex geo-spatial nature of ore deposits and is an efficient way to bring value forward in a mine life, increase IRR, and pay off your project faster.


Interested in learning more about how to optimise your cut-off grade strategy? Check out our blog Cut-off grade optimisation: How to bridge strategic mine scheduling and short term tactics.

Why you should apply a cut-off grade strategy to your tactical mine plan

Fred Busche, P.E.
Mine Engineer, North America
June 27, 2019

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