Posted on January 28, 2008

‘Nightmare’ Now Reality at Mines

Fin24 (Sandton, South Africa), January 25, 2008

The “nightmare” of all South Africa’s major gold and platinum mines shutting down, because of power cuts, became true on Friday.

“Tens of millions of rands a day are being lost. It’s a nightmare,” said T-sec chief economist Mike Schussler.

The JSE gold mining sub-sector closed almost 6% lower on Friday.

Chris Hart, Investment Solution economist, said mining was a key industry for the country.

“From that point of view the (power) cuts seem . . . almost a disaster. ”

The Chamber of Mines earlier announced that several gold and platinum mines had to shut down operations because Eskom could not guarantee power supplies on Friday.

Coal supplies that got wet due to the weather formed part of the problem, said senior executive Frans Baker .

Apparently some power stations had also gone down.

‘Very dramatic’

Harmony Gold spokesperson Amelia Soares said the company had only run emergency facilities in Friday.

The company would lose R60m from Friday’s suspended operations, she said.

Gold Fields spokesperson Willie Jacobsz said the company was losing production of around 7 000 ounces per day because of the shutdown.

The impact of power cuts was “very, very dramatic. It is radical . . . unprecedented,” he said.

AngloGold Ashanti said it had halted mining and gold recovery operations throughout SA.

BHP Billiton SA said its Bayside, Hillside and Mozal aluminium smelters continued to operate although power cuts were occurring at these locations.

The manganese mine at Hotazel was not operational on Friday.

“We have voluntarily reduced load at Metalloys and MMC since Thursday.”

Consumers can’t solve the problem

The company said its coal mines were continuing to operate. “[We] are doing everything [we] can to ensure coal supply to Eskom.”

Trade union Solidarity said platinum company Lonmin had been busy withdrawing its workers from the workplace on Friday.

None of the mining companies had a timeframe of how long the situation was expected to continue.

Gold Fields spokesperson Jacobsz said Eskom had indicated to them that all key industrial consumer (KIC) loads would be reduced to “survival levels” or switched out totally for the next two to four weeks.

Earlier, on Friday, the Democratic Alliance said the shutdown of the mines indicated the electricity crisis was out of control.

“[Government’s] fundamental mismanagement of Eskom is now threatening to derail our future economic prospects,” said DA minerals and energy spokesperson Hendrik Schmidt.

Freedom Front Plus head Pieter Mulder said the government and Eskom could not expect consumers to solve the problem instead of the suppliers.

“The government’s measures will punish consumers with fines, quotas and rationing, while the crisis was largely caused by poor short term planning and maintenance at Eskom.”

Rand likely to weaken

Hart said while in some ways, the power crisis was a result of the success of South Africa’s previous economic growth, “[Now] we can’t progress from what we have achieved”.

He said the rand was likely to weaken even more than it already had.

T-sec chief economist Schussler said he had not been approached by so many people for economic advice since September 11.

“My brain is fried. Everyone is up in arms,” he said.

“People are very very negative. Negativity in its own right will have an impact on the economy.

“Would you invest in a country whose electricity is not secure? As we lose interest so do foreigners.”

Schussler said government needed to spend more time on the power issue that “fighting amongst themselves.

“It’s time the blame gets laid on the right people.”

Despite numerous efforts, comment from Eskom on the situation could not be obtained.