Sibanye-Stillwater issues “dire” outlook for SA precious metals if power curtailments persist

SIBANYE-Stillwater warned continued power curtailments in South Africa at the current rate will have “dire” consequences for the country in which marginal shafts will face early closure and Government’s ambitions to tackle Eskom’s performance will be hurt by lower  mining sector taxes and royalties.

Richard Stewart, COO of the miner’s South African operations, said it lost 48 kilograms of gold and 23,000 ounces of platinum group metals (PGMs) last year as a result of higher and longer power curtailments imposed by Eskom during the fourth quarter of 2022.

If power curtailments of this order are sustained this year “as much as as 15% of total production output in our operations and in the South African industry in general” will be affected, said Stewart. This is equal to 118,000 oz of the upper end of Sibanye-Stillwater’s gold production forecast for this year and 270,000 oz of forecasted PGMs.

Anglo American Platinum (Amplats) said on February 20 that said power rationing in South Africa could reduce its recently updated refined sales forecast of four million ounces of refined platinum group metals (PGMs) by 5%.

“As levels and duration of curtailments goes up the potential impact on production goes up exponentially,” said Stewart.  “This unfortunately has significant unintended consequences not just for industry but for the country,” said Stewart.

“Losing revenue on our shafts will impact Government’s ability to earn revenue from taxes and royalties. This is the exact revenue they require in order to address the challenges at Eskom,” he said. “Marginal shafts will become increasingly unprofitable and this may force early closure of these shafts which will excerabate an already dire situation in country.”

There would also be a direct impact on downsteam industry, including communities near mines and Sibanye-Stillwater’s suppliers. “Ultimately, we are looking at a spiral here which will become increasingly worse,” said Stewart.

Natascha Viljoen, CEO of Amplats estimated an average of 200MW in curtailments per week were likely for the group for the first six months of this year. For industry this is the equivalent of stage 2 and stage 4 loadshedding for two and one day respectively which for non-intensive electricity users would be stages 4 and 6 per week.

Stewart also pointed out that the firm’s gold and PGM businesses were hit hard during the 2022 financial year by increased theft of copper cable. “When you look at the gold business it was significantly disrupted,” he said. “There was a four-fold increase in cable theft from the first quarter to the fourth quarter.

“It [copper cable theft] has truly become run by organised syndicates and we need a multi-stakeholder approach to deal with this scourge,” he said.

Theft of metal resulted in the collapse of a pylon in February which cut power supply to Sibanye-Stillwater’s Cooke shafts, west of Johannesburg. About 20 employees conducting maintenance at the shaft were stranded underground for about three hours.

Gwede Mantashe, minerals and energy minister for South Africa, announced in September that government would establish a “specialised police unit” aimed at curbing illegal mining estimated to have cost the mining industry R49bn in 2019.