Dilution can best be defined as the proportion of waste tonnage to the total weight of ore and waste in each block. Predicting the internal dilution based on geological boundaries of waste and ore in each block can help engineers to develop more reliable long-term planning designs in mining activities. This paper presents a method to calculate the geological internal dilution in each block and to correct the ultimate grade of each geological block according to the internal dilution values that have already been calculated for each one of them. In this regard, the input data is first indexed based on the lithological logs of drill holes. The occurrence probabilities of ore and waste in each block are calculated via 100 realizations using the sequential indicator simulation. Dilution is computed as the ratio of waste rock tonnage to the total tonnage of ore and waste. Furthermore, joint simulation of the continuous variables is performed for each mining block using the minimum/maximum auto-correlation factors. In the next step, for each block, the final grade variables including iron and iron oxide are computed by considering the calculated internal dilution. These analyses are applied to the Gohar Zamin iron ore deposit, and the actual internal dilution calculated based on the lithological logs of blast holes is compared with the same values obtained based on the proposed method in each block. The results obtained were found to be satisfactory.