Neal Froneman, CEO of Sibanye Gold

Sibanye Gold today declared its intention to become fully independent of Eskom over the next few years, pointing out that doing so will make a material difference to its production costs writes Laura Cornish.

This announcement was delivered on the back of the company’s operating and financial six month and year end results to 31 December 2014. A 13% increase in production over the last six months to December alongside a R4 billion profit for the period reveals its dedication and success already in overcoming the challenge associated with the current Eskom power crisis.

Its intention however is to invest heavily into reducing its reliance on the national grid which is a costly exercise in the short term but as indicated, will have major cost-saving benefits in the long-term considering the current power crisis will not be resolved for years to come.

“On listing in 2013, we stated that we would be exploring alternative sources of long term electricity supply in response to the risk that uncertain, inconsistent and increasingly expensive power supplied by the state owned power utility, Eskom, posed to our current operations and future development,” says Sibanye Gold CEO Neil Froneman.

“On-going delays at [its] new capacity build projects and a lack of critical maintenance at its existing stations, has resulted in regular supply interruption, which is likely to continue for the foreseeable future.”

While Sibanye have successfully implemented numerous measures that have enabled it to reduce electricity consumption by approximately 20% since (since 2007), spiraling capital costs have led to rapidly escalating power costs for consumers as Eskom has consecutively implemented punitive annual electricity tariff increases. Power costs as a percentage of operating costs at Sibanye, have swelled from approximately 9% in 2007 to a projected 20% in 2015.

For now, the company continues to work with Eskom to manage and minimise the impact of load shedding to mitigate short-term risk but has begun exploring alternative supply options to reduce reliance on that state-owned utility power provider.

“In 2014 we completed a pre-feasibility study investigating the potential of solar power as an alternative source of electrical power. The pre-feasibility study confirmed that solar power provides an economically competitive solution to Sibanye’s electricity requirements, which will partially insulate us from the effects of interruptions in Eskom supply,” states Froneman.

“We are contemplating a phased R3 billion investment, with involvement of financial partners, in establishing a solar photovoltaic generating plant with a peak generating capacity of 150 MW. This represents a substantial portion of Sibanye's overall 500 MW power demand, and will provide around 10% of our electrical energy requirements when averaged over the course of a day.”

A site large enough to host a 150 MW installation with limited potential for other land use has been identified close to Driefontein and Sibanye intends to submit permitting applications shortly, and anticipates 2017 as a start-up year for generating its own independent captive electricity.

Sibanye has also undertaken several studies into other alternative energy sources that it considers reliable and over which it will be able to exercise some control. “To this end, we are completing an in depth investigation into coal fired power stations varying in size from 200 MW to 600 MW. A key aspect of this will be ensuring reliable quality coal sources. We are also engaging with technology partners in order to develop a deeper insight into independent power generation,” Froneman concludes.

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