Determination of optimum cutoff grade with considering dilution

Abstract

In open pit mining, cutoff grade is one of the most important factors in production planning, which is simply defined as a grade that discriminates between ore and waste. It is also a sensitive parameter can have a major impact on the net present value and cash flow of the projects. On the other hand, dilution is one of the most important and sensitive parameters in the mining projects, which is closely related to the cutoff grade. Choosing the optimum cutoff grade is of considerable importance, since it has a significant impact on the mining operations. One of the most popular algorithms for determination of the optimum cutoff grade is the Lane’s algorithm. But in the Lane’s algorithm, mining dilution and its cost is not considered during the cutoff grade optimization. In this paper, effects of dilution on the cutoff grade are studied using Lane’s theory. Dilution and its cost is inserted directly into cutoff grade optimization process. The cutoff grades obtained using suggested method will be more realistic rather than ones by using the original form of the Lane’s formulation. Results of the study showed that with an increase of dilution, average grade decreases and consequently the cutoff grade increases. As a result of dilution, the quantity Qm increases and the quantities Qc and Qr decrease. Therefore, the annual profit and NPV of project is very significantly reduced.