Ore grade is the concentration of metal in the rock being mined. It determines almost everything else about how a deposit can be worked and what it costs.
Grade sets the volume of rock handled
Producing an ounce from low grade ore requires moving and processing far more material than producing the same ounce from high grade ore.
Almost every operating cost in a mine scales with tonnes handled rather than with ounces recovered, including drilling, blasting, haulage, crushing and grinding.
Halving the grade therefore roughly doubles the material that must pass through the plant for the same output, and the cost follows.
Energy is the largest consequence
Grinding rock to the fineness required for metal recovery is among the most energy intensive industrial processes in routine use.
Because that energy is consumed per tonne, a lower grade deposit consumes proportionally more power and fuel for each ounce it yields.
This ties mining costs to energy prices in a direct way, and it is why cost inflation in the sector tracks fuel and electricity closely.
Cut off grade decides what counts as ore
Every operation sets a cut off grade, the concentration below which material is treated as waste rather than fed to the plant.
The cut off is not a geological fact but an economic one, calculated from the metal price, processing costs and available capacity.
When prices rise, marginal material becomes worth processing and reserves increase without any new discovery; when prices fall, the same material reverts to waste.
Grades have been falling in mature districts
The most accessible high grade deposits were mined first, so the average grade of newly developed operations has declined over the long term.
Producers have compensated with larger scale and more efficient processing, which requires heavier capital investment before any metal is produced.
The result is an industry with higher fixed costs and greater sensitivity to price, since large plants must run near capacity to justify themselves.
Recovery rate compounds the effect
Not all the metal in the ore is captured. Recovery depends on mineralogy, particle size and the chemistry of the extraction process used.
Difficult ores where metal is locked inside sulphide minerals need extra treatment before conventional extraction works at all, adding both cost and complexity.
A deposit's economics therefore depend on grade and recovery together, and a high grade ore that processes badly can be worth less than a lower grade one that processes cleanly.