An Analysis of Cost Reduction Initiatives on the Performance of Makomo Resources (Pvt) Limited.

Abstract

This research evaluated the cost reduction practice sat Makomo Resources. The study made an examination into the effectiveness of the measures as used and their impact on the performance of Makomo Resources, as well as the literature review relevant to the study. It was prompted by the trend in total cost of mining, measured in dollars per tone ($/ton) at the mine relative to other comparable mining entities countrywide. The main objectives in this case study were to verify impact of the practices and policies in cost management, optimisation of equipment availability and utilisation, managing variable costs and overtime costs, sustainable development improvement opportunities and the use of IT in implementing effective cost reduction. The main instruments used were the questionnaire and follow up interview questions. Primary and secondary data were used for analysis. The conclusions of the study were based on 70% response rate of the questionnaires. The main results of the research were that there were some opportunities across the value chain which if utilised can help to effectively in cost reduction. There commendations that can be implemented include urgent implementation of a cost control committee, full utilisation of Original Equipment Manufacturer (OEMs), implementation of problem solving action plans, thorough supervision of contracted services, use of latest mining equipment, price negotiations in spares procurement, overtime reduction and use of IT services such as responsible accounting. The areas for further study were suggested as; to explore more on cost management through benchmarking with other performing mines in the country and region so as to get an anatomy of their operations in relation to cost management, like the UNKI and ZIMPLATS in Zimbabwe and GLENCORE in South Africa.