Effective approach to cost management for surface mines in Ghana: a case study of Sansu surface mine

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This thesis is about how to manage the operating cost of mining. Like all gold mining companies in Ghana, the Sansu Surface Mine of Ashanti Goldfields Company Limited (AGC) is saddled with the problem of surviving in the face of increasing operating cost and falling gold price. To solve this problem, AGC has adopted certain strategies including cutting down the labour force, looking for less costly materials and conducting performance auditing by a special Continuous Improvement Team (CIT). The main objective of this thesis is to provide an alternative strategy to reduce and control the operating cost of mining at Sansu Surface Mine. Accordingly, the thesis has studied the current mining operations and their organisation, cost performance levels, and cost management practices. Instead of Responsibility Accounting System (RAS) of cost management, which entails cost planning, budgeting and controlling on departmental basis as currently practised at the mine, this thesis has adopted Activity Based Management (ABM) Strategy for managing the operating cost of mining. Using the ABM concept, the mining operations have been reorganised into unit activities, i e drilling, blasting, loading and hauling. For each activity cost and performance standards have been developed and subsequently built into standard annual budget. By comparing the annual standard budget with the actual operating mining costs of the unit activities, the activities with high variances have been identified. Strategies to reduce the high variances and the cost controlling in respect of all the unit activities have also been outlined. Application of ABM strategy will not only keep the operating mining cost within budget but also ensure the full utilisation of available capacities and resources and so improve productivity and ultimately profitability.
A thesis submitted to the School of Graduate Studies, Kwame Nkrumah University of Science and Technology, in partial fulfilment of the requirements for the award of Master of Science degree in Mining Engineering, 2001