JOHANNESBURG (miningweekly.com) – The latest 9% electricity tariff increase allowed to State power utility Eskom was set to nullify the benefit of the cost-cutting programme that Anglo American Platinum (Amplats) undertook last year, Amplats CEO Chris Griffith said on Wednesday.
Speaking to Creamer Media’s Mining Weekly Online in a video interview (see attached), Griffith emphasised the need for Eskom to emulate the cost cutting being undertaken across the rest of South African industry so that it could in future ensure that its tariff increases did not exceed inflation.
While mining companies were going all out to stay viable by keeping their own cost rises below inflation, unsustainable Eskom increases were wiping out their efforts.
Already faced with paying R3-billion a year for power in 2014 compared with R1-billion for much more power five years ago, the new 9% increase would add another above-inflation R600-million a year going forward.
If the country continued to have power tariff increases of between 10% and 15% for the next five years, the company’s power bill would go to R5-billion a year. (Also watch attached Creamer Media video).
The effect on the mining industry would mean that previously profitable shafts would become unprofitable.
“We need to get Eskom back to inflation-related increases,” Griffith said, adding that the company had managed through major self-help measures to reduce its own power consumption by more than 30% in the last five years, taking it down from 90 MW to 60 MW.
Smelter draws had also been timed to release more power for the rest of the country. For example, Amplats had sufficient installed capacity to enable it to lower power usage during morning and evening power peaks and catch up during the remaining 20 hours of the day.
RAND BASKET PRICE STILL LOW
While the weak rand had taken the rand gold price to record levels, the same was not the case in platinum, where dollar price falls in platinum, palladium and the other metals in the overall Amplats platinum group metals (PGM) basket had fallen significantly below the 2015 average. (Also watch attached Creamer Media video).
The platinum price was currently below $1 000/oz, already $50/oz less than last year’s average and the palladium price at $555/oz, well down from an average around $800/oz in 2014.
While the weakening of the rand was certainly helping, the major weakening of the
dollar PGM basket price to $1 650/oz from $2 400/oz in 2014 was keeping
Amplats’ rand PGM basket where it was in 2015 – “and we know what a difficult environment 2015 was,” Griffith recalled to Mining Weekly Online.