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Break-even cut-off grade is the grade at which recoverable metal value just covers mining plus processing cost. The marginal cut-off, used for material already broken and hauled, covers processing cost only and is therefore lower — which is why mined stockpiles are sometimes processed at grades below the break-even figure.
Break-even cut-off
Cut-off grade = (mining + processing cost) / (metal price per gram x recovery)
Marginal cut-off
Marginal cut-off = processing cost / (metal price per gram x recovery)
Higher prices make lower grades pay, expanding reserves without any new drilling. That is why reserve statements must state the price assumption used.
Yes. Lane's theory shows the optimal cut-off varies with which part of the operation is the bottleneck — mine, mill or market — and typically starts high and declines over the mine life.