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Abstract
ABSTRACT Critical to the exploitation of mineral resources in any country is the cutoff grade of the deposit. It defines the ore reserve and return on investment over the life of the mine. Consequently, the revenue from the ore reserve influences the mineral royalty. This study aimed to establish a relationship between cutoff grade and mineral royalty, focusing on the opportunity cost associated with the mineral royalty. The net present value approach was used to calculate the opportunity cost. The relationship between cutoff grade and mineral royalty was established by integrating the mineral royalty as an opportunity cost into the break-even cutoff-grade formula. Results showed that the cutoff grade had a linear relationship with the opportunity cost due to the mineral royalty. For example, 1% and 2% mineral royalty resulted in opportunity costs of US$0.09/t ore and US$0.19/t ore, respectively, and yielded cutoff grades of 0.20%Cu and 0.21%Cu, respectively.
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