Economic performance

At AngloGold Ashanti’s Cripple Creek and Victor Gold Mining Co. (CC&V), in the western United States, a reliable water supply is vital. The mine recently renegotiated its water supply contract with the City of Victor, during 2008 following cooperative efforts to upgrade Victor’s water system in 2007.

New developments in the existing water agreement include doubling the “wheeling fee” – a fee for the use of Victor's infrastructure to bring water purchased from Cripple Creek and Colorado Springs to the mine site. There is now a cost associated with the storage of water purchased from other sources but kept in Victor's reservoirs. The 2008 agreement still includes gold price escalation and CC&V continues to pay all maintenance costs at the nearby Altman pump station because Victor currently cannot afford to maintain it.

“We pay the costs for the Altman pump station. We had divided the costs with the City of Victor previously, but rather than raise the water rates to gain enough revenue for Victor to maintain it, we agreed to maintenance,” says Jane Mannon, Community Affairs Manager at Cripple Creek & Victor.

The original water agreement with Victor was signed in 1999. The agreement set up a cost structure for the sale of water to CC&V on a sliding scale: $3.10 (per 1,000 gallons) for the first four million gallons per month, and $0.75 (per 1,000 gallons) once the 4 million mark had been reached. These agreed prices increased with the escalating price of gold.

In 2006, the city and CC&V reviewed the original agreement, and the billing system, and it became apparent that the city has not been charging the agreed rate for usage over four million gallons of water. CC&V mine had been overcharged in the region of $600,000. In addition, the price escalation based upon the price of gold had not been applied. An amendment to the original agreement was approved which agreed not to institute the gold price escalation until the overpayment was recovered.

CC&V also signed an Operating and Maintenance Agreement in 1999, to address Victor’s water supply system. CC&V agreed to pay the first $35,000 for operation and maintenance of the existing Altman pump station, a key component of Victor’s water supply infrastructure including utilities, and the City of Victor would pay the balance. CC&V waived $17,221 of this cost in 2007 based upon the City of Victor's poor financial situation and further signed an agreement to allow Victor to purchase water from the neighbouring town of Cripple Creek and sell it to CC&V, as an income generator for Victor.

Since 2006 CC&V has donated towards these improvements to the water delivery system:

• a pipe to replace a leaking ditch to Bison Reservoir - $90,000;
• a pipe from Cripple Creek transmission line to Altman pump station - $250,000;
• a pipe from Altman to Victor water station on Victor Pass - $500,000; and
• CC&V also waived the remaining $160,000 balance due from CC&V overpayment of water costs.

Mannon explains that following the above developments, the State of Colorado has continued to tighten its monitoring requirements, and rather than drawing two cubic feet per second (cfs) of water at the Altman pump station, CC&V is allowed one cfs at Altman and one cfs where water flows into the reservoir. If there is no water going into the reservoir, CC&V cannot draw it out at the pump station.