Impacts of grade distribution and economies of scale on cutoff grade and capacity planning

Strategic mine planning focuses on cutoff grade selection, capacity planning and block sequencing. Despite significant knowledge accumulated, potential value can be added to mineral sourcing by addressing various aspects. A case study on a metallic deposit with a lognormal grade distribution examines if grade/metal distribution influences cutoff grade selection. Six data sets with different shape and scale factors, but the same ore tonnage and metal quantity, are analyzed. Results indicate deposits with lower shape and scale factors are more sensitive to metal price and discount rate changes. The study also investigates the effect of economies of scale (EoS) on project value, focusing on the ratio of variable cost to total cost (capacity factor). Two regression analyses are conducted for optimal capacity planning and cutoff grade selection. The first shows capacity planning is highly sensitive to the EoS of mining and mineral-processing costs, with grade variability and metal distribution being negligible. In the second analysis, grade variability and EoS of mineral processing costs are vital for cutoff grade selection.