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OPERATING EXPENDITURE
Rand million 2011 2010 % change 2009
Production costs 9,497 7,317 30 5,960
Movement in inventories (149) (459) (68) (600)
Finished products 247 (171) – (440)
Work-in-progress (396) (288) 38 (160)
Finance gains (587) (286) 105 (329)
Other – (2) – (30)
Cost of goods sold 8,761 6,570 33 5,001
Selling and distribution costs 3,698 3,041 22 2,838
Sublease rent received (8) (8) – (8)
Mining operating expenses 12,451 9,603 30 7,831
Mineral royalty 1,762 1,410 25 –
Cost of services rendered – shipping 2,374 2,560 (7) 2,697
Operating expenses 16,587 13,573 22 10,528
Financial review
R150/tonne from the R111/tonne achieved in 2010. However, at
US$21/tonne the mine remains well positioned in the lower part of
the cash cost curve.
We saw a R39/tonne increase in unit cash cost which was driven by
a few key factors:
– Inflationary pressures, principally on labour and contract mining,
pushed up costs by almost R7/tonne;
– A number of cost items increasing well in excess of inflation,
such as the price of diesel which increased from R7.50 per litre
to R9.30 per litre. This accounted for R7/tonne of the nearly
R13/tonne increases in excess of inflation and increased
maintenance cost on the larger mining fleet contributed a further
R3/tonne;
– The increased mining activity added almost R11/tonne or
10%; and
– The production shortfalls added R9/tonne.
Further increases in unit cash costs are anticipated as the mine
increases the waste stripping according to plan. The increased waste
stripping is expected to add 10% per annum to unit cash costs
(before mining inflation) for the next 2 to 3 years.
The group’s Asset Optimisation and Supply Chain programmes are
now embedded in the business. Sishen mine’s Asset Optimisation
initiatives are focused on improving the efficiency of mining
operations on a sustainable basis. Through these initiatives and
procurement savings we seek to contain some of the cost increases.
The Sishen Mine unit cash cost structure per major cost component
– both on a Rand per tonne as well as a percentage basis – is
illustrated below. Compared to 2010, with the significant increase in
the cost and utilisation of diesel, the relative contribution of this cost
item to the mine’s cost structure saw an increase from 13% to 17%.
SISHEN MINE UNIT CASH COST STRUCTURE
2011 (R/tonne)
2010 (R/tonne)
2011 (%)
2010 (%)
27.87
34.75
21.12
18
23
19
28
29.43
5.32
7.91
6.21 3.81
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3
5
29.76
20
14.51
25.33
22.51
20
19.53
13.61
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Labour Outside service Maintenance Fuel Drilling & blasting Energy Other
SISHEN MINE UNIT CASH COST (R/tonne)
160
150
140
130
120
110
100
111.20*
(US$15.23)
6.84
12.74
10.82
8.87 150.47
(US$20.75)
2010 Inflation Cost escalation Mining volume
Production volume 2011
* The 2010 unit cash cost was restated to take into account non-cash share-based payment expenses
Annual Financial Statements 2011
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