Published: December 19, 2019 |

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Several South African gold and PGM mining companies were affected by power cuts Monday enacted by state power utility Eskom.

Power supply shortfalls at South African state utility Eskom, which supplies over 95 percent of the country’s electricity, left the country’s gold and platinum group mining operations adjusting their operations. Eskom imposed power cuts Monday evening, which saw the company for the first time implement stage 6 load-shedding, resulting in a 6-GW reduction from the country’s national grid.

South Africa has been experiencing limited power supplies for nearly a week, due to a breakdown at Eskom’s new Medupi power plant and flooding at the Kriel power plant and coal mine. Both resulted in no coal deliveries and rain-soaked coal.

Current load-shedding is at stage 4, which results in 4 GW being cut from the national grid.

With stage 6 load shedding hitting the grid for the first time, Indigo Ellis, head of Africa and senior analystat Verisk Maplecroft, told S&P Global Platts Tuesday that stage 8 load-shedding is on the horizon without sustained investment and management to remedy Eskom’s woes.

“Eskom cannot seem to escape drama after drama at its new ‘flagship’ coal-fired plants, Medupi and Kusile,” Ellis said. “The power utility has been forced, since August, to buy diesel to keep the lights on — a worst case scenario in terms of its capabilities to generate power effectively.”

Eskom Tuesday said it would return comment as soon as possible.

OPERATIONAL IMPACT

At one of the world’s largest platinum producer, Anglo American Platinum, spokeswoman Jana Marais told S&P Global Platts Tuesday that the company’s South African operations have been impacted by Eskom load shedding.

At Sibanye-Stillwater, the world’s largest platinum miner, James Wellsted, senior vice president and head of investor relations, told Platts Tuesday the company’s operations had been impacted to varying degrees throughout the last week of load shedding.

“We have been halting certain activities at our processing plants as well as diverging some of our activities,”said Wellsted, citing the rescheduling of pumping of groundwater at gold operations to off-peak periods. “Under stage 4 we continue to operate our underground mines; however, last night when Stage 6 came into effect, we temporarily halted operations at our deep-level mines,” except for essential services. “This morning, however, Stage 4 was re-introduced and underground operations will resumed this afternoon.

Our production will be affected although at this stage the impact will not be severe,” Wellsted added. “It does depend on how long the problems at Eskom persist though.”

Impala Platinum, the world’s third-largest platinum producer, told Platts Tuesday night shift crews Monday night and day shift crews Tuesday did not go underground.

“We should be able to get back again tonight,” Impala spokesman Johan Theron said.

Johannesburg-listed PGM producer Northam Platinum told Platts Tuesday it had reduced power at its smelter and concentrator, “but no impact on the underground operations.”

South African miner Gold Fields said Eskom’s stage 4 load shedding impact on its South Deep gold mine has had alimited impact to date.

“We have managed the impact so far by shifting load between critical activities to ensure our core mining activities can continue,” Sven Lunsche, Gold Fields’ vice-president and head of corporate affairs, said Tuesday.

“If load shedding continues at stage 4 or above for a prolonged period, however, and there are sustained interruptions linked to our production ramp up it will become more challenging and we will need to implement alternative mitigations to ensure business continuity,” Lunsche said.

ADVANCE LOAD CUTTING

In the case of Anglo American Platinum, Marais said Eskom provides notification in advance of load curtailment,“which to some extent assists operations in minimizing the impact from supply disruption.”

Lunsche said Gold Fields has a load curtailment agreement with Eskom “which helps us better manage interruptions and work with Eskom in a collaborative manner to reduce demand on the system, including receiving Eskom notifications timeously.”

However, Verisk Maplecroft’s Ellis said Eskom provides enough notice of planned outages for maintenance, but the level of mismanagement residing in the upper echelons of the company means that even the utility company “cannot anticipate when unplanned outages will happen.”

“We are in unchartered territories, and this is a highly worrying sign for the state of South Africa’s economic growth,” she said. “Investors in South Africa need more visibility on how Eskom will come up with a structured, fast-moving, and effective remedy plan, but the company is keeping tight-lipped about the full extent of its operational troubles.

“Eskom needs to face the facts — it’s failing, and the quicker the government can step in, the better,” Ellis added. “The right time for the government to step in was yesterday.”

Source: S&P Global

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