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Containing costs key as double-dip worries rise

19th August 2011

By: Jonathan Faurie

  

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Gold-mining major Gold Fields reports that containing costs will be a major priority of the company moving forward as fears of a double-dip recession gain momentum.

Industry analysts and economists are warning the public and large corporations to ‘tighten the belt’ as it is a case of when rather then if the world will slip into a second recession since 2009.

CEO Nick Holland reports cost containment must not be seen as shrewd foresight on the part of the company in anticipation of the looming financial crisis; rather, it has been a policy of the company for the past five years.

“The world has the perception that the South African mining industry, particularly the gold industry, is characterised by high costs, which are unique to South Africa. Yes, the industry is characterised by high costs, but so is every mining industry in the world,” says Holland.

However, it would seem that the South African industry is particularly volatile.

There will be a series of electricity tariff increases over the coming years. The National Energy Regu-lator approved an increase of 24.8% in 2010, an increase of 25.8% in 2011/12 and a final increase of 25.9% in 2012/13. This exerts significant pressure on mines, particularly in a gold sector characterised by deep- level underground mines, which use significant amounts of electricity daily to run operations.

Other cost pressures relate to double-digit wage increases and rising final prices.

Edited by Creamer Media Reporter

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