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Severstal's Vorkutaugol Focusing on Improving Efficiency and Cost Control

07/04/2013 - Vorkutaugol, one of Russia’s major coal producer and a part of Severstal Resources, has re-stated its key strategic objectives including a continued focus on enhancing operational efficiency and cost reduction.

Vorkutaugol is aiming to cut administrative costs by 20% by the year end.
Mr. Larin stated that the implementation of a company-wide comprehensive improvement program will not just increase the company’s competitiveness in the current economic climate but also aid its long term development.
Mr. Larin commented, “Given uncertain economic environment and where we are in the industry cycle, our key objective is to increase the efficiency of our mining units and focus on control and reduction of costs.”
The initiatives in place are aimed at improving the performance of each of the company’s business units and sites, and the cost reduction measures will not affect the employees of the coal business units.
Notable initiatives include the commissioning of a gas-reciprocating power plant at the Severnaya Mine, which will run on methane and improve the mine’s heat and energy efficiency. It is planned that the associated mine gas will satisfy 60% of the company’s need for electricity and 80% of the company’s heat requirements. As a result of the new gas-reciprocating power plant, across Vorkutaugol savings are conservatively predicted to be around 12% for electricity and 8% for heat.
During the global economic crisis in 2009, initiatives at Vorkutaugol have resulted in an approximate 30% reduction in costs. This has been achieved through initiatives to increase energy efficiency, improve warehouse and stock handling and other operational efficiency measures.
Also among the company’s key projects is the completion of the first phase of the modernization of the Pechorskaya Concentration Mill, which is expected to increase the recycling of rock mass in 2013 by 35% year on year to approximately 9.5 million tons (c.7 million tons in 2012), as well as further retrofitting of the company’s concentration facilities.
The construction at the Zapolyarnaya Mine of a shaft inclined towards the Pechorskaya Concentration Mill will substantially reduce the costs associated with the delivery of rock mass to the concentration mill. Consequently, the unit’s output capacity will increase, boosted by improving the winding throughput. In the long term, the Zapolyarnaya and the Vorkutinskaya mines will merge their transportation systems.
The completion of the inclined shaft at Vorkutaugol’s Vorgashorskaya Mine is another key project, marking the beginning of active development of the mine’sSouth-Western Block which holds a more valuable “Zh” rank coking coal. Vorgashorskaya is planned to hit the coal bed this year, following which mining preparation of the longwalls will commence.
The strategic objectives of improving cost and operational efficiency sit alongside the company’s number one priority of continually improving health and safety. Under the investment program to be carried by Vorkutaugol this year, 200 million rubles will be invested in health and safety improvement.
Sergei Yefanov, CEO of Vorkutaugol, stated, “Safety is our top priority and will continue to improve our performance and invest in this area.”