CUT-OFF GRADE STRATEGY: ANALYSIS FOR DOMINGA PROJECT

Abstract

Cut-off grade is a concept used in the mining industry to decide whether to consider the material from the mine as ore or waste. The decision of the specific cut-off grade used in a mine should be periodically evaluated because this concept involves variables such as commodity prices, mining costs, processing costs, metallurgical and mining recoveries, and it is also necessary to take into account the grade distribution of the deposit. The Dominga project, an IOCG deposit located in Chile, is studied to evaluate the differences of applying different methodologies to select the cut-off grade that maximizes the discounted value of the project. To work with the Dominga project it was necessary to build a recovery model to meet the requirements of the software involved in this study (Whittle Software, version 4.5.3). After this, three different case studies were developed using different strategies to define an iron cut-off grade that maximizes the NPV. These different strategies are identified as using the marginal cut-off grade, a defined cut-off grade and a cut-off grade optimization. As a result, from the three different case studies, the improvement in the discounted cash flow generated by applying a strategy of cut-off grade optimization rather than a marginal strategy is 3%. If capital expenditure is considered, an improvement of 8% in the NPV is achieved. If this strategy is compared with using a defined cut-off grade, the results are similar. As a conclusion, for this particular deposit, where the iron ore grade displays homogenous distribution, the effect of applying cut-off grade optimization and the use of a defined iron cut-off grade is very similar.