[miningmx.com] – MARK Cutifani, president of the Chamber of Mines of South Africa (CoM), and CEO designate of Anglo American, warned of further gold and platinum mine restructuring if electricity utility, Eskom, was allowed 16% per year electricity tariff increases from 2013 to 2018.
Cutifani also called upon the South African government to gird Eskom’s balance sheet and added that the total electricity tariff increase was primarily intended to provide a return on capital and not to cater for coal cost increases, as purported. Coal costs comprised only 12% of the total tariff increase application, he said.
“It is our collective view that the electricity price is reaching a tipping point where further excessive increases in the electricity price may result in further restructuring in the platinum and gold mining sectors,’ Cutifani said.
“In these sectors alone, despite declines in gold production and a sideways movement in platinum production, electricity costs have increased by over R7bn when comparing 2012 to 2007,’ Cutifani said in the statement.
“This is based on a threefold (28%) increase in the electricity price in the same period. The, Eskom proposed, further doubling in the price by 2017 is simply unaffordable and will prejudice the platinum and gold mining sectors,’ he added.
The CoM said that the issue of electricity supply had not been absorbed into government’s industrialisation and beneficiation strategy. The CoM called for “. a proper regulatory impact assessment of the costs and benefits’ of Eskom’s tariff increase application, especially inview of government’s industrialiation and beneficiation programme. “This will expose the tradeoffs that exist in policy and pricing decisions,’ Cutifani said.
Actions required of government included a re-evaluation of Eskom’s cost efficiencies, a pricing trajectory in the first quartile, and the removal of a R13bn in costs related to integrated demand management in the pricing application as this should be covered by the fossil fuel electricity levy.
Cutifani concluded that required increases in coal production – amid an estimated R2.1Bt shortfall between 2019 and 2040 – could only be developed in an investment criteria that offered investors a fair return on capital and decent capital costs. The proposed increase in electricity cost would dissuade new coal mine builds.
