Ore Grade
Also: Grade, Mineral Grade, g/t
Ore grade indicates how many grams of a precious metal (e.g. gold or silver) are contained per tonne of raw ore, and is the most important metric for assessing the economic viability of a mine.
Ore grade (German: Erzgehalt) is one of the central metrics in mining. It describes the concentration of a recoverable metal in raw ore and is typically expressed for precious metals in grams per tonne (g/t). An ore grade of 5 g/t means: every tonne of mined rock contains an average of 5 grams of gold (or the metal in question). The current gold price largely determines the minimum grade at which extraction is profitable.
How Ore Grade Is Calculated
Measurement is carried out through systematic sampling (drill cores, trenches) and subsequent chemical analysis in the laboratory. A statistically averaged block grade is derived from many individual samples and incorporated into resource and reserve estimates.
Metal grade [g/t] = (contained metal [g]) / (ore weight [t])
For the total production of a mine, the simplified formula is:
Metal yield [g] = ore grade [g/t] × tonnage [t] × recovery rate [%]
Cut-Off Grade: The Economic Lower Limit
The so-called cut-off grade is the minimum ore grade below which material is no longer mined because costs exceed revenue. It depends directly on the gold price and the All-in Sustaining Costs (AISC):
| Mining Method | Typical Cut-Off Grade |
|---|---|
| Open-pit mining | 0.3 – 0.5 g/t |
| Underground mining | 2 – 4 g/t |
| High-grade underground mine | > 8 g/t |
When the gold price rises, the cut-off grade falls — deposits that were previously uneconomic suddenly become viable. This mechanism influences global gold supply with a lag of several years.
Significance for Investors and the Market
Ore grade is a key indicator of the profitability of mine production and mining stocks. High-grade mines produce at lower unit costs and are more resilient against falling metal prices. Low-grade large-scale operations (bulk mining) compensate for the lower grade through enormous volumes.
For the primary mining of gold: the global average grade has been declining for decades, as the easily accessible, richly endowed deposits have been largely exhausted. The structurally declining supply from existing mines is a long-term driver of the gold price.
In byproduct mining — for example silver as a by-product of a copper mine — the effective ore grade for the secondary metal is reported separately and contributes to cost reduction.
In Brief
The higher the ore grade, the more economical the extraction — and the less sensitive a mine is to falling precious metal prices. The globally declining average grade structurally limits primary supply and provides structural support for the gold price.