2
Cutoff Grade Reporting Terminology
• Direct Grade—traditionally, COGs have been
reported in assay units of the prime commodity
(g/t [opt] Au, %Cu, etc.). Occasionally, the COG
may be reported as the assay value of a specific class
of the target element, such as acid soluble copper.
• Equivalent Grade—in polymetallic deposits, equiv-
alent units are often used (e.g., gold as g/t gold
equivalent or AuEq) where the equivalent value is
determined by the combined economic value of the
primary and other elements. Equivalent value cal-
culations are usually based on average grades, metal
prices, process recoveries and other relevant conver-
sion factors. Equivalent grade can be assigned to each
block in the planning block model (discussed later).
This method suffers from the fact that it assumes
constant ratios between commodity prices, process
recovery, commodity prices, and payabilities.
• Revenue Value—our preferred method is to report
COG based on revenue, commonly referred to as
net smelter return (NSR) or returned metal value
(RMV), although that term does not adequately
describe the actual economic value of the ore. Instead
of the term cut-off grade, we prefer the term cut-
off value (COV) because it better describes the eco-
nomic value used for planning.
STARTING POINT—RESOURCES MODEL
Regardless of the commodity, mining method, processing
method, or any other factor mineral resource estimation,
mine planning, and declaration of mineral reserves depends
on having a reliable resource model. Typically, these are pre-
pared by the resource geologist and include considerations
of the mining method, general economics of the commod-
ity, and reasonable prospects of economic extraction. This
paper assumes that a block model has been prepared with
suitable block dimensions, orientation, and data fields.
MINE PLANNING MODEL
For mine planning purposes, we recommend that the mine
planners work with the resource geologist to modify the
resource model to eliminate fields that are not required
and add those that are required (for example: processing
recovery rates, NSR) for the planning exercise and create
a purpose built planning model. This may reduce the size
of the model and minimize the potential for mistakes. As
an example, resource models often contain multiple grade
calculations to serve as internal checks of the models, such
as the example in Table 1 for gold grades.
In this example, the planning model should only
include the field to be used for planning purposes and
revenue calculations to reduce the chance of inadvertently
applying the wrong field. The resource modeler must be
included in the creation of the planning model and approve
the resource fields. The engineers should add any specific
fields that they may need for planning purposes.
Overall Project Considerations
The planning model cannot be prepared in isolation. The
level of detail in the planning model will depend on the
maturity of the project. An early-stage evaluation model
(e.g., initial assessment) will not have the same amount of
detail that the model for an operating mine will have.
In preparing the planning model, the engineer must be
careful to include all factors required for mine planning as
well as other factors required to support overall project eval-
uation and reporting. These might include consideration of
the following factors.
• Geotechnical
• Geometallurgical
• Hydrological
• Environmental/ESG considerations
• Property ownership
• Jurisdictional boundaries
• Royalties/Streaming agreements
The planning model input and reporting fields should
be reviewed by all who provide input data and will use the
output to ensure that the model will return usable results
before it is approved for use. It is easier to modify the
model before the plans are complete than to revise the plans
because the model has changed.
REVENUE SIDE OF THE EQUATION
The definition of “revenue” depends somewhat on the pur-
pose to which it will be used. For any specific project, it is
important that the definition be formalized, and all bat-
tery limits, restrictions, inclusions, and exclusions be clearly
defined. We will define “revenue” as “revenue at the gate”
(Rev-g) (i.e., what the value of the material is when the
salable product departs the property). Rev-g is shown in
Table 2.
Rev-g is the income from the customer, less all expenses
and burdens associated with delivering the material to the
customer, and less all direct fees and charges. Some of these
Table 1. Gold Grades (g/t)
Au OK Au NN Au ID2 Au ID3
6.39 5.99 6.27 6.48
Cutoff Grade Reporting Terminology
• Direct Grade—traditionally, COGs have been
reported in assay units of the prime commodity
(g/t [opt] Au, %Cu, etc.). Occasionally, the COG
may be reported as the assay value of a specific class
of the target element, such as acid soluble copper.
• Equivalent Grade—in polymetallic deposits, equiv-
alent units are often used (e.g., gold as g/t gold
equivalent or AuEq) where the equivalent value is
determined by the combined economic value of the
primary and other elements. Equivalent value cal-
culations are usually based on average grades, metal
prices, process recoveries and other relevant conver-
sion factors. Equivalent grade can be assigned to each
block in the planning block model (discussed later).
This method suffers from the fact that it assumes
constant ratios between commodity prices, process
recovery, commodity prices, and payabilities.
• Revenue Value—our preferred method is to report
COG based on revenue, commonly referred to as
net smelter return (NSR) or returned metal value
(RMV), although that term does not adequately
describe the actual economic value of the ore. Instead
of the term cut-off grade, we prefer the term cut-
off value (COV) because it better describes the eco-
nomic value used for planning.
STARTING POINT—RESOURCES MODEL
Regardless of the commodity, mining method, processing
method, or any other factor mineral resource estimation,
mine planning, and declaration of mineral reserves depends
on having a reliable resource model. Typically, these are pre-
pared by the resource geologist and include considerations
of the mining method, general economics of the commod-
ity, and reasonable prospects of economic extraction. This
paper assumes that a block model has been prepared with
suitable block dimensions, orientation, and data fields.
MINE PLANNING MODEL
For mine planning purposes, we recommend that the mine
planners work with the resource geologist to modify the
resource model to eliminate fields that are not required
and add those that are required (for example: processing
recovery rates, NSR) for the planning exercise and create
a purpose built planning model. This may reduce the size
of the model and minimize the potential for mistakes. As
an example, resource models often contain multiple grade
calculations to serve as internal checks of the models, such
as the example in Table 1 for gold grades.
In this example, the planning model should only
include the field to be used for planning purposes and
revenue calculations to reduce the chance of inadvertently
applying the wrong field. The resource modeler must be
included in the creation of the planning model and approve
the resource fields. The engineers should add any specific
fields that they may need for planning purposes.
Overall Project Considerations
The planning model cannot be prepared in isolation. The
level of detail in the planning model will depend on the
maturity of the project. An early-stage evaluation model
(e.g., initial assessment) will not have the same amount of
detail that the model for an operating mine will have.
In preparing the planning model, the engineer must be
careful to include all factors required for mine planning as
well as other factors required to support overall project eval-
uation and reporting. These might include consideration of
the following factors.
• Geotechnical
• Geometallurgical
• Hydrological
• Environmental/ESG considerations
• Property ownership
• Jurisdictional boundaries
• Royalties/Streaming agreements
The planning model input and reporting fields should
be reviewed by all who provide input data and will use the
output to ensure that the model will return usable results
before it is approved for use. It is easier to modify the
model before the plans are complete than to revise the plans
because the model has changed.
REVENUE SIDE OF THE EQUATION
The definition of “revenue” depends somewhat on the pur-
pose to which it will be used. For any specific project, it is
important that the definition be formalized, and all bat-
tery limits, restrictions, inclusions, and exclusions be clearly
defined. We will define “revenue” as “revenue at the gate”
(Rev-g) (i.e., what the value of the material is when the
salable product departs the property). Rev-g is shown in
Table 2.
Rev-g is the income from the customer, less all expenses
and burdens associated with delivering the material to the
customer, and less all direct fees and charges. Some of these
Table 1. Gold Grades (g/t)
Au OK Au NN Au ID2 Au ID3
6.39 5.99 6.27 6.48