China Gold cuts costs to offset lower prices

China Gold International Resources, the sole overseas listed arm of the nation's largest gold miner, China National Gold Group, will raise output, cut production costs and scout for acquisition opportunities amid lower bullion prices.

The Hong Kong and Toronto-listed state-backed company would lower costs by improving metals recovery ratios, material procurement cost and advanced production techniques, said Song Xin, who was promoted from chief executive to chairman of China Gold in February.

"Since our recovery ratio has risen, our unit production costs have fallen processing the same amount of ore rocks," Song told the South China Morning Post.

The gold recovery ratio of China Gold's main profit driver, the Changshanhao mine in Inner Mongolia, rose to 54 per cent last year from 22 per cent in 2007.

Song said it was achieved through quality control of its crushing machines to ensure consistent ore rock size, increasing the penetration rate of chemical agents used to extract gold, good equipment maintenance to minimise down time, and staff training to improve productivity.

The mine's cash production cost last year fell 14 per cent to US$707 per ounce, while total cost declined 7 per cent to US$866. Song would not give a projection for this year.

Cost cutting is vital since the mine's ore grade is lower than some of its rivals and gold price fell almost 30 per cent last year, before rising 7.3 per cent in this year's first quarter.