In mining and metallurgical engineering, the crude, feed and concentrate ore grades are three key interactive factors for both ore processing cost and solid waste emission. The total cost involved in the mining and metallurgical engineering, including the waste processing cost, can be reduced by optimizing the three ore grade decisions. The paper analyzes the relationship between grade and ore output/waste emission in the mining, ore blending, beneficiation and smelting stages, respectively, and thus derives the corresponding grade-cost relationship model. The chained grade cost models are then built and a grade-cost marginal index(GCMI) is defined. A grade optimization method is also developed to determine the grade decisions. Finally, the proposed models and method are applied to a practical numeric sample in the Ansteel Mining, and the analysis results are reasonable and helpful to the practical production decision.