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Power threat to SA mining industry

Power – a threat
to SA mines
Johannesburg, South Africa — MININGREVIEW.COM — 24 August 2009 – The pace of South Africa’s recovery from its worst economic recession in 17 years is threatened by the inability of its national power utility to raise funds to build the power plants needed to keep the world’s biggest precious metal mines running.
Bloomberg News reports that state-owned Eskom Holdings Limited may give details at its annual results presentation on Thursday on the progress it has made in sourcing financing for a five-year, R385 billion-rand expansion programme. Eskom has already deferred several projects, citing funding difficulties.

Underinvestment led to the near collapse of the country’s power system in January last year, closing most mines and metal smelters for five days. That was preceded by months of intermittent power cuts in the country’s biggest cities, and resulted in electricity rationing to Eskom’s biggest customers, curbing economic output.

The global economic crisis has slashed commodities consumption, leading to the temporary closure of a number of metal alloy smelters across the country. Companies including Xstrata Plc and Samancor Limited “’ the world’s two biggest ferrochrome producers “’ are now reopening smelters, while Harmony Gold Mining Company said it had boosted its electricity use in the quarter ended June 30.

“If those smelters come online and the economy turns around and we reach, say, 3% growth “’ which is not impossible “’ it will cause a serious electricity shortage,” said Freddie Mitchell, an economist at Efficient Finance Holding Limited in Pretoria. “I foresee the possibility of blackouts again.”

Economic decline in South Africa slowed to an annualised rate of 3% in the second quarter from 6.4% in the first, according to Statistics South Africa. That was the third consecutive quarterly contraction and came after a 5% rate of expansion in the second quarter of last year.

While national power use has declined for nine straight months, last month’s contraction of 3.4% was the smallest this year, according to the statistics agency.