The cut-off grade is the minimum concentration of a mineral in an ore that would still be economically feasible to mine. The cut-off grade for a certain mineral could be greater or less depending on what type of mine must be created to obtain it. If a surface mine can be used, the mineral would have a lower cut-off grade because surface mines cost less than underground mines. With an underground mine, the cut-off grade would be higher because it would really need to be worth the time and money to excavate the mineral.

Let's say it costs about $50 to mine one tonne (or 1000 kg) of gold ore. The lowest grade of the ore worth mining would be the cut-off grade (i.e., the grade at which the profit = cost of production). Assume the gold price is about $1000 per troy ounce (or $32 per gram.) Also there is research that shows only 95% of gold can be recovered from the ore to sell.

Formula used to determine Cutoff-Grade:

Cutoff-Grade = Cost of Production / (Recovery x Sale Price)

Thus, ($50/t)/(0.95 x $32/g) = 1.65 g/t = 1.65 ppm

This shows that to mine for a profit, there must be at least 1.65 grams of gold per tonne of ore.