Pokrovskiy - Finance
The Group is very proud to be one of the lowest cash cost producers in Russia with its costs remaining relatively constant in a global environment of increasing input costs. This has been achieved partly by the increase in ounces produced due to economies of scale and partly by the implementation of a large number of cost control and reduction measures at Pokrovskiy. The key aim of these measures is to ensure a more efficient use of equipment, consequently reducing the amount of raw materials, fuel and energy that are used.
The very competitive costs of production at the mine are a result of the continued commitment of the team to run the mine in the most efficient and effective way. Efficiency is achieved in particular by strict compliance with the mining plan for the deposit, supported by Micromine modelling, and by using the global positioning system to control efficiency of mining operations and implementation of a comprehensive programme of cash cost optimisation developed in 2005.
The Group reports and breaks down Pokrovskiy's operating costs following industry best practice according to the internationally recognised Gold Industry Standard (GIS). At Pokrovskiy the GIS total production cost in 2007 increased by just 9% to US$258/oz and this marginal increase was achieved despite a 13% increase in electricity prices, a dollar to rouble depreciation of 7% and general Russian inflation of c.12%. Direct mining expenses for Pokrovskiy in 2007 were 29% energy, 29% labour and 42% raw materials.
For the six months ended 30 June 2008, GIS total production costs for the Pokrovskiy mine increased by US$56.7 per ounce or by 23% from US$249.9 per ounce for the six months ended 30 June 2007, to US$306.6 per ounce for the six months ended 30 June 2008. This increase was relatively modest, considering the Group experienced a 32% increase in wages and salaries, a 20% increase in chemical reagents and consumables, a 41% increase in diesel fuel and a 14% rise in electricity prices.
