In simple terms, the head grade is the average grade of each metal that will be fed into the mill of process plant.
The way this is done is by sampling the ore actually going into the hopper at the top of a mine plant, and seeing what it grades, and then comparing this to the result out the other end to calculate the average recoveries. It’s important to understand, however, that the head grade is often quite different from the average grade of the resource or reserves being mined.
One reason for this is that ore bodies often vary in grade from area to area, and not all ore being fed into the mill will always be the same grade. Or, in underground mining, a vein can narrow in places to where you’re taking more waste rock with it and diluting it more than in other places. There are strategies to manage this, for example by stockpiling ores of various grades by the mill and then blending them so as to produce a more constant head grade, but that’s not always possible.
Rules can require miners to use a certain minimum mining width in calculating mining reserves that are wider than the veins to be mined, so the ore is diluted by waste rock in the calculation. But in practice, sometimes the veins are very distinct and separate from the host rock very easily, and it’s possible to take only the rock from the narrower, paying section to the mill. Hence it’s also possible for head grade to exceed reserve grade albeit less commonly.
The thing to keep in mind is that different mines are built to operate on different margins, using different economies of scale, which makes it difficult at times to predict profitability just from knowing the number of tonnes mined or ounces produced.