Bloomberg News

Polyus Gold Output Little Changed in 2007, Costs Rise

January 31, 2008

OAO Polyus Gold, Russia's biggest producer of the metal, said output was little changed at 1.21 million ounces last year, while total cash costs increased as much as 35 percent.

Costs probably rose to $365 to $375 an ounce from $278 in 2006, outpacing a 16 percent growth in revenue. Full-year unaudited sales were $855 million, compared with $735 million a year earlier on higher prices, the Moscow-based company said in a statement today.

Gold producers are facing increasing cost pressure caused by the weakening dollar and higher energy and labor costs, Chief Executive Officer Evgeny Ivanov said at an investor conference today. Electricity costs will quadruple and labor costs will triple by 2015, he said.

Polyus is thinking about buying coal deposits near its mines for ``energy security,'' and is also cutting costs, Ivanov said.

A price of $1,000 an ounce for gold is ``possible'' in coming years, he said. Polyus' average selling price grew 17 percent to $706.5 an ounce in 2007.

To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net; Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net.

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.


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