Energy crisis closes South African mines

Rolling power cuts across South Africa are putting the lights out on the country's economy with gold and platinum mines suspending production.

Three of the country's largest producers, Gold Fields, Harmony and AngloGold Ashanti, said yesterday that they were ceasing production on safety grounds after the state energy utility Eskom announced that it could not guarantee power supplies at their plants.

Steve Lenahan, an AngloGold spokesman said: “We are only running power for emergency supplies, such as pumping water out, and have stopped producing at all mines.”

In what Alec Erwin, the Public Enterprises Minister, termed a “national emergency”, the world's biggest platinum miner, Anglo Platinum, said that it, too, had ceased production at all its local mines because of a lack of reliable electricity supplies. Trevor Raymond, a company spokesman, said: “We have completely halted operations in South Africa to conserve power.” It is also understood that Anglo Platinum's main rival, Impala Platinum, has suspended operations.

South Africa, by far Africa's largest economy, was also the world's largest gold producer until last month, when it was overtaken by China. The news yesterday led to a big jump in the prices of both metals on world markets and a slump in the share value of affected companies. The rand has weakened on the news.

The shutdown has renewed fears that the energy crisis, now in its second week, would shatter investor confidence in the country and knock economic growth plans off target.

“Goodbye Six Per Cent” read the front-page headline of the weekly Financial Mail in a reference to the Government's target for economic growth in 2008. Growth of 5 per cent over the past three years has fuelled a consumer boom among an emerging black middle class but failed to make an impact on high unemployment.

The heads of all big mining companies in the country have been called to crisis talks with the Government, which has announced a series of energy-conserving measures. They are likely to be informed of Government support, such as tax breaks, for those that import generators and take other energy-saving measures.

Marius Kloppers, the chief executive of BHP Billiton, the world's largest mining company, is expected to fly to South Africa today for emergency talks on whether to halt expansion plans at two aluminium smelters. A third smelter, in Mozambique, which is dependent on the South African grid, has already cut production.

Jerry Vilakazi, the head of Business Unity in South Africa, told The Times that the crisis had cost the country untold millions and severely damaged its reputation.

“The damage is huge,” he said. “We are talking millions, possibly billions of dollars. Many smaller companies have been on 50 per cent operating capacity for two weeks already.

“This development is very worrying, indeed. Mining is one of the biggest employers but the issue of safety and security in that sector is paramount, too. Our response now must be to instil confidence among domestic and foreign investors.”

Last December gold miners in South Africa held a one-day national stoppage, the first in the country's history, to protest against allegedly worsening safety standards in some of the deepest mines in the world, where air supplies, water pumps and lifts all need constant electricity supplies. “Work in the mines has become a matter of life and death,” Frans Baleni, the general secretary of the miners' union, said.

Buyelwa Sonjica, the Minerals and Energy Affairs Minister, said that the Government would introduce a rationing programme. She said: “We have discussed how quotas will be allocated, who will be exempt, what incentives and penalties will be in place, when it will start and what legislative enablers we need to have in place for the programme to work.”

Original Source:
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3254147.ece