The viability of an ore deposit during the extraction process is dependent on the cut-off grade. The cut-off grade refers to the minimum grade needed for the separation of economically valuable minerals from wastes (Herdyanti et al., 2021). The definition of this threshold plays an important role in setting the parameters for the entire operation. There are different approaches in determining the threshold depending on whether a financial or technical approach is utilized.
In the case of the financial approach, the cut-off grade is determined based on the principle of a break-even point where there are equal levels between the total cost and the value of the commodities produced. This grade assumes that all blocks above it will generate profits for the mine owners (Birch, 2022). It depends on constant prices for the commodities and expenses incurred.
On the other hand, a technical economic cutoff grade entails a more diverse set of considerations. The technical economic cutoff grade takes into consideration not only economic considerations such as achieving maximum Net Present Value but also physical limitations associated with the process of mining (Cutler & Dimitrakopoulos, 2025). The technical cutoff grade ensures that the process of extraction is in accordance with the real-world limitations posed by the plant’s structure.
It is particularly important to distinguish between these two grades in a changing cost situation where the costs vary with respect to quantity of material, distance of haulage, and energy required. The marginal cost of extraction varies each time because the costs keep varying.
However, the major distinction between the two is their flexibility. A financial cut-off grade uses a constant average cost for a determination of a static break-even point regardless of changes in the proportionality of costs in relation to the production output (Herdyanti et al., 2021). On the contrary, a technical economic cut-off grade varies depending on the situation. For example, to ensure optimal operation of a mining plant due to changes in costs, a technical economic cut-off grade may vary in order to avoid negative consequences that result from the idling of the mining facility (Johnson et al., 2011).
The following must be stated: the use of only a financial cut-off grade could lead to inefficient mining and premature closure of the mine site (Wellmer & Scholz, 2018). In such cases, technical-economic cut-off grade is more suitable to employ.
References
Birch, C. C. (2022). Optimizing cut-off grade considering grade estimation uncertainty – A case study of Witwatersrand gold-producing areas. Journal of the Southern African Institute of Mining and Metallurgy, 122, 1–10. https://doi.org/10.17159/2411-9717/1403/2022
Cutler, J., & Dimitrakopoulos, R. (2025). Optimising multi-element cut-off grades for a strategic production plan under geological uncertainty. International Journal of Mining, Reclamation and Environment, 1–15. https://doi.org/10.1080/17480930.2025.2455567
Herdyanti, M. K., Putra, D., & Saliman, H. (2021). Comparative study of cut-off grade optimization methods in underground gold mining. AIP Conference Proceedings, 2363, 030008. https://doi.org/10.1063/5.0061206
Johnson, P. V., Evatt, G. W., Duck, P. W., & Howell, S. D. (2011). The Determination of a Dynamic Cut-Off Grade for the Mining Industry. Lecture Notes in Electrical Engineering, 391–403. https://doi.org/10.1007/978-94-007-1192-1_32
Wellmer, F.-W., & Scholz, R. (2018). What Is the Optimal and Sustainable Lifetime of a Mine? Sustainability, 10, 480. https://doi.org/10.3390/su10020480
