The Group is very proud to be one of the lowest cash cost producers in Russia with its costs remaining relatively constant in a global environment of increasing input costs.  This has been achieved partly by the increase in ounces produced due to economy of scale and partly by the implementation of a large number of cost control and reduction measures at Pokrovskiy.  The key aim of these measures is to ensure a more efficient use of equipment, consequently reducing the amount of raw materials, fuel and energy that are used. One such measure was the implementation of the MicroMine mine planning software which has decreased ore dilution and increased efficiency.  The introduction of a computer monitoring system using satellites and global positioning system hardware has also resulted in a decrease in fuel consumption and an increase in stockpiling efficiencies and the upgrading of the equipment fleet at Pokrovskiy is also contributing to the cost cutting programme.  Direct mining expenses for Pokrovskiy during 2006 were 28% labour, 35% energy and 37% raw materials.

During the first six months of 2006, Pokrovskiy operations achieved a remarkable decrease in unit operating costs, in spite of increases in raw material and energy costs of c.20%, average rouble appreciation of c.3% and the mining of harder ore.  This was the result of an improved comprehensive cost control policy.  The Pokrovskiy Rudnik GIS Total Production Cost in 2006 increased by just 4% from 2005 to US$239/oz and this small increase was achieved despite a 14% increase in diesel fuel prices, an 8% increase in electricity prices and an increase of up to 9%  in prices for various chemical reagents and consumables.