Break Even Analysis - How to Calculate the Cut Off Grade
For conducting a mining project's break even analysis, you first need to know about the operational expenses (OPEX). When the OPEX is known, you can calculate the mineral's cut off
grade, which is the break even grade, below which it is not economically viable to mine the
ore. To find out how I come up with the cost price per tonne (OPEX) if a feasibility study isn't
available, I refer you to the note at the bottom of this page.
Before I can calculate the cut off grade, I first need to show a basic equation which converts a troy
ounce into grams per ton:
1 troy ounce = 31.1034768 grams per ton = 28.349523125 grams per tonne
As you can see, the difference between a ton and a tonne is approximately 10%.
Then, you need to be aware of the following conversions:
1 ton = 2,000 pounds
1 tonne = 2,204.62262 pounds = 1,000 kilograms
1 kilogram = 2.20462262 pounds
1% of a tonne = 22.0462262 pounds = 22 pounds(rounded)
I believe this last conversion is really convenient, because when I read a mining company's press release in
which they announce a drill result of 2% copper, I now quickly know this equals to 44 pounds (lbs), or - assuming a
copper price of $ 3 per pound - a mineral value of $ 132 per tonne. To learn more about how you can determine the
mineral value per tonne, I recommend you to read the metal value page.
In the following example, you will find the hypothetical cut off grade for an ounce of gold (which is
actually the break even analysis for gold mining):
Mining Costs per Tonne (OPEX)
Current Price per Ounce
Cut-Off Grade (ounces per tonne)
Cut-Off Grade (grams per tonne)
($ 150 / $ 1,500 =) 0.10 ounce / tonne
(0.10 x 28.349523125 =) 2.835 grams / tonne
I have also included an example to find the hypothetical cut off grade for a pound of copper (which is
actually the break even analysis for copper mining):
Mining Costs per Tonne (OPEX)
Current Price per Pound
Cut-Off Grade (pounds per tonne)
Cut-Off Grade (percentage per tonne)
($ 33 / $ 3 =) 11 pounds / tonne
((11 / 22) x 1% =) 0.50 percentage /tonne
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Note: When the cost price per tonne can not be
found in the mining company's feasibility study, I kindly ask the mining company's management to give me their best
estimate. In order to be extra conservative in my calculation, I normally apply a discount rate of 20% on the
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