Cynthia Carroll, Anglo CEO & SA mines minister, Buyelwa Sonjica
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SA govt to act on power-related mine job cuts
Allan Seccombe
Posted: Wed, 05 Mar 2008

[miningmx.com] -- THE South African government is expected to make an announcement on Friday regarding power supply to the mining industry after the sector warned of job cuts at current levels at some operations.

The mining industry held talks with the Department of Minerals and Energy and power utility Eskom last week to extract some concessions on power supply and save jobs.

“What we’ve indicated to the government is that some mines are badly affected and that jobs are at risk at those mines. We’ve dealt with it on a case-by-case basis and we hope that they will be able to do something for those mines to save jobs,” said Frans Barker from the Chamber of Mines.

Anglo American CEO Cynthia Carroll and Xstrata CEO Mick Davis have both voiced industry concerns that the mining businesses appears to be bearing the brunt of the current power crisis, and that the obligation to consume less power should be more evenly spread across other electricity users.
some mines are badly affected
Eskom declared force majeure on electricity supply in January, shutting down the mining industry for a week. Power has subsequently restored to 90% of average consumption to mines and heavy industry.

Some companies argue this just isn’t enough electricity to function without cutting jobs, a massively sensitive subject in South Africa where unemployment reduction is a key government focus.

Gold Fields has warned that nearly 7,000 jobs are at risk and that it will mothball shafts and postpone a depth extension project at its Driefontein mine because of the power situation. Gold production will drop not only at Gold Fields but across the sector. Platinum producers have also warned on reduced output and rising costs.

Gold Fields estimates every one percent cut in power is a two percent reduction in production. Ian Cockerill, Gold Fields CEO, said jobs could be saved if it had 95% of its normal power needs.

"I think after more discussions that we’ve had with various parties, one would hope we might be able to reduce these numbers or at least come up with a rational way of getting ourselves into a healthier position," Cockerill said.

It is understood there are "quite a few" mines that are in a difficult position, but Eskom is unable to increase power levels to the entire industry. It just doesn’t have the capability at the moment, said an industry source.

It is hoped that Eskom will increase power to individual mines hardest hit by the power cut, but the problem is that power has to come from somewhere and it could mean others will have to do with less.

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The daily Beeld newspaper reported on Wednesday that power cuts could be implemented in certain high usage areas in the country to supply the mines with power and curb job cuts.

No new construction projects will be approved during the next six months if they use more power than the average household, the newspaper reported.

Eskom’s problems stem from unplanned maintenance, run down stock piles, wet coal and a skills shortage after it cut its workforce by half. Eskom is running at slightly more than half its installed capacity because of this.

The unions responded furiously to threats of layoffs, with threats of strikes. The minister of public enterprises Alec Erwin raised the point, which some analysts have also highlighted, that the mining industry could be using the power crisis as an opportunity to right-size their operations, trim their expensive workforce and shut down problematic shafts.

Meanwhile, Eskom has invited tenders from companies to convert waste heat into electricity to generate an extra 3,500 megawatts of power, Reuters reported Ompi Aphane, chief director of electricity at the Department of Minerals and Energy, as saying on Wednesday.

"We believe that there is an upside of 3,500 megawatts and a process is already underway with Eskom. A bidding process has started to try and capture these megawatts," Aphane is quoted as saying.