Centerra Gold can better handle mining cost inflation because of location: CEO

TORONTO – Centerra Gold is in a better position to handle inflationary pressures than many other miners because it has access to cheaper suppliers near its main operations in Asia, says the company’s CEO.

“As we’re operating in central Asia primarily, we are looking at suppliers in a lot of commodities, in a lot of areas, that a Western producer does not have access to, whether its a Kazak explosives supplier or a Ukrainian tire supplier,” CEO Steve Lang said in an interview Friday.

“We’ve had some areas there that it’s been a cost advantage to us.”

The Toronto-based gold miner has stuck to its cost and production estimates, unlike many other gold miners. Industry players are battling the higher cost of fuel, steel, local wages and equipment.

Two of the world’s top gold companies have had to revise their plans for the year in the face of cost pressures.

This week the world’s largest gold miner, Barrick Gold Corp. (TSX:ABX), increased the estimated costs on some projects as it grapples with poor weather and higher wages as well as rising prices for steel, cement, fuel and equipment.

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It followed news from the world’s second-largest producer, Goldcorp (TSX:G), which said it was cutting production estimates, blaming supplier issues and weather problems.

Lang said inflation is providing a “difficult environment” for gold miners to work in right now.

“On fuel prices, we came into the year and had given our guidance based on (an) $85 oil price, so we’re clearly having a bit of pressure there,” Lang said.

Oil is currently trading near US$96 a barrel and has been above US$100 several times this year.

Lang added that wages in the Kyrgyz Republic, where Centerra has a major operation, have gone up about 10 per cent but the company expects inflation there to stabilize once a new government comes to power after an election this year.

Lang said Centerra is trying to cut costs by focusing on efficiency, procurement and alternative suppliers.

Meanwhile, gold miners have been riding high on the price of the precious metal, which is breaking records nearly every day. Investors are turning to the security of gold as they worry about the value of currency amid the European and United States debt crises.

Centerra Gold Inc. (TSX:CG) reported earnings results that sparkled Thursday, saying second-quarter profits soared 131 per cent over last year and revenues were up 60 per cent, with both figures beating expectations.

Centerra owns the Kumtor mine in the Kyrgyz Republic, the Boroo mine in Mongolia and interests in mines in Nevada, Turkey and Russia.