Planning and operational cutoff grades based on computerized net present value and net cash flow

CIM Bulletin, Vol. 78, No. 878, 1985

ARNOLD R. PASIEKA, Consulting Mining Engineer, Hatch Associates Ltd., Toronto, Ontario, GEORGE V. SOTIROW, Special Projects Engineer, MAPAO North Bay, Ontario

The object of this paper is to outline a computerized net cash flow approach for practical cutoff grade determinations. A cutoff grade carries not only geological but also economic value, in which costs are balanced against revenues. For different situations, cutoff grades are a 'standard of value' that are determined for the purpose of classifying economic or uneconomic mineral reserves in a specified time frame. In a constantly changing technical and economic environment, the decision to develop or maintain a mining operation at its best economic potential, requires an appropriate cutoff grade strategy, a strategy consistent with short- and long-term operational and corporate objectives and one based on realistic marketing and metal prices forecasts. The use of a project evaluation computer program, in combination with specific corporate net cash flow requirements, shows the most promising and flexible team approach for cutoff grade optimization.

Keywords: Computer applications, Cutoff grades, Cash flow, Costs, Capital expenditures, Ore reserves, Computer programs.