Cut-off Grade, Mine Productivity, and Legacy Mines Many aspects influence the financial productivity of any mine. Obviously the presence of the desired material is key, but both geological and nongeological elements influence the overall success of the mine. Some important factors, in addition to the strategy of the company and their management, include: Resource Quality: Ease with which the ore can be mined, the type of mineral resource, the size of the ore deposit, ore grade (concentration of desired material within the rock) Input Costs: Labor, energy, and water use; infrastructure and services; other materials used in the mining process Macroeconomic Factors: Metal prices, ability to obtain credit and interest rates, exchange rates Other Factors: Governmental permitting rules, financial resources, social and political factors Together these factors determine whether a site is worth mining and/or whether a mine will stay open and, if so, for how long. They will also influence the extensiveness of the mine (how much land is mined), the amount of waste products created, the number of jobs maintained, and more. A mining company has some control over only some of these factors. The grade of an ore is the concentration of the desired material within the rock. There is more metal (a higher concentration) in higher grade metal ores. Ore grades are often given in percentages or in units of ppm. The cut-off grade of an ore is essentially the lowest grade of an ore that is worth mining. If the ore grade is less than the cut-off grade, then a mining company will not make money mining that ore. According to Fellows (2010), the cut-off grade of an ore is one of the main factors in determining the economics of the mine. It might seem as if the cut-off grade of an ore is determined permanently at the time of exploration and mine opening, but actually the cut-off grade changes throughout the lifetime of the mine (and thus, changes the estimates of the amount of ore in a reserve). For example, if cut-off grade drops, the mine is now able to profitably extract metal from an ore with a lower ore grade (a lower concentration of metal in the ore).
1) For the factors listed below, note whether the cut-off grade would likely rise or fall and explain why. The first one (a) is an example: a. Increased market price of the metal? Rise or Fall Explain: If the mine can receive more money for each ounce that they produce, then the extra costs of processing more lower concentration ore are worthwhile. Therefore an increased market price could lead to a lower cut-off ore grade.
b. New beneficiation technologies? Rise or Fall Explain:
c. Better (more equitable) labor agreements? Rise or Fall Explain: d. Rising energy costs? Rise or Fall Explain: e. More stringent environmental regulations? Rise or Fall Explain:
d. Many closed mines exist throughout the United States (and other countries). If the cut-off grade drops for ores once extracted from these legacy mines, what might happen to these old mines?
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