RE: Cut-off Grade Explanation This article is close - but you would include only the processing cost in determining the cut-off grade inside the pit (instead of the mining + processing cost). The reason being, that you have to mine that tonne of rock anyways, the decision is whether or not it is profitable to run it through the mill or just put it in the waste dump.
When they say a $1300 gold price in calculating the pit, they are assuming that every tonne of ore inside the pit that would produce a positive amount of cash flow will be run through the process plant. As I showed in my previous post, the processing cost of a 0.4 g tonne of ore is ~$1300/oz. Ideally, as they increase the size of the ore body, they will be able to decrease the $16/tonne to process, which will convert some of the waste in the pit into ore by reducing the cut-off grade. This will reduce the strip ratio as well as increase the resource ounces (but lower the grade).