NEWS

90 000 gold and platinum jobs at risk as Eskom hikes loom

The Minerals Council South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;font-family:Georgia, serif;font-size:24.96px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;">Africa</a> is ringing alarm bells over the threat posed to employment and production in the <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;font-family:Georgia, serif;font-size:24.96px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;">gold</a>and <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;font-family:Georgia, serif;font-size:24.96px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;">platinum</a> sectors as a result of recently approved electricity tariff increases, including the 13.8% hike to be implemented from April 1. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> In addition, the council is warning that the hikes will accelerate the State-owned utili<a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a>’s yearly production, respond by closing unprofitable <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/operations" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">operations</a>. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> The body’s revised estimates point to 90 000 <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a> and <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">platinum</a> jobs being at risk as a result of the increases, approved by the National <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/energy" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Energy</a> Regulator of South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Africa</a>(Nersa) on March 7. The figure represents a modest improvement on the 150 000 job losses forecast ahead of the regulator’s fourth multiyear price determination (MYPD4) decision. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Some 464 000 people were employed across the <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/mining" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">mining</a>industry in 2017 and the council estimated earlier this year that about 18 300 of the 53 500 jobs shed in the industry since 2006, when South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Africa</a>’s <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/power" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">power</a> crisis emerged, could be directly attributed to electricity tariff increases. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Nevertheless, the outlook for the <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a>-<a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/mining" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">mining</a> sector remained especially dire, with the council indicating that only two mines were likely to remain viable at the end of the three-year period. Previously, only one mine, with a yearly output of 20 t, was expected to remain viable. In 2018, the industry is likely to have produced about 132 t of <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a>. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Nersa has granted <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> increases of 9.4% for 2019/20, 8.1% for 2020/2021 and 5.2% for 2021/22, following an adjudication of the MYPD4, in which <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> requested hikes of 17.1%, 15.4% and 15.5% respectively. The State-owned utility would increase tariffs on April 1 by 13.8%, however, given that the regulator had already approved a further 4.41% hike, in line with an earlier adjudication of three regulatory clearing account applications. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Minerals Council South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Africa</a> CEO Roger Baxter said on Monday that the “front-loaded” nature of the hikes would hurt all miners as well as smelting <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/operations" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">operations</a>. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Deep-level <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a> and <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">platinum</a> miners would be particularly hard hit, however, given that many mines were already unprofitable or marginal, as well as the fact that electricity made up about 25% and 17% respectively of a <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a> and <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">platinum</a> mine’s cash production costs. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Chief economist Henk Langenhoven said total industry production costs would rise by 29% over the three-year period, which was 12% lower than would have been the case should Nersa not have disallowed R102-billion of revenue sought by <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> in the MYPD4. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Nevertheless, the outcome was “inconsequential” for the <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a>sector, potentially only saving about 8 000 jobs. For <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">platinum</a>, the impact was larger, potentially saving 22 800 jobs. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> The hikes would further erode the competitiveness of the South African <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/mining" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">mining</a> industry relative to global peers, which were enjoying lower tariffs and were also less affected by supply interruptions. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> At R1.06/kWh from April 1, <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a>’s Megaflex <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/industrial" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">industrial</a>tariff was higher than average <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/industrial" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">industrial</a> tariffs of about R1/kWh in the US and well above those of around 66c/kWh available in Quebec, Canada. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> “Our electricity prices in South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Africa</a> have gone up by 538% over the last ten years, which has obviously had a huge impact particularly on our deep-level <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a> and <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">platinum</a>mines,” Baxter noted. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Africa</a> had also experienced a sustained period of rotational <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/power" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">power</a> cuts in mid-March, with Stage 4 load-shedding, equating to cuts of 4 000 MW, declared by <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a>on several days. During those periods, mines were required to reduce their load by 20%.  <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">ESKOM</a>’S MINE-LINKED REVENUE TO FALL <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Although <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> immediately noted that R102-billion in revenue had been disallowed by Nersa for the MYPD4 period, Langenhoven cautioned that the approved hikes were likely to supress demand further and accentuate <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a>’s so-called death spiral. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> He said that, while <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> expected <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/mining" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">mining</a>-related revenue to rise to R50-billion by the end of the MYDP4 period, the modelling done by the Minerals Council of South <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/africa" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Africa</a>showed that its revenue could fall to about R30-billion as a result of operational closures. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> “If the <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/mining" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">mining</a> industry’s usage declines as tariffs make certain <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/operations" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">operations</a> and activities unprofitable, <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> will not achieve its targeted sales volumes,” Langenhoven explained. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> “Inevitably, the increases awarded to <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> will only serve to accelerate the <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/power" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">power</a> utility’s downward spiral that will come as a result of inflated tariff increases and the declining electricity usage by a critical consumer.” <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Baxter indicated that the industry had noted the offer of special pricing agreements for companies experiencing distress as a result of the hikes, but was unaware whether any <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/platinum" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">platinum</a> or <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/gold" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">gold</a> miners had applied to <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/eskom" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">Eskom</a> and Nersa for relief. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> He also expressed frustration at the regulatory logjam preventing up to 2 000 MW of small-scale embedded generation <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/projects" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">projects</a> from being implemented and indicated that the issue was receiving the priority attention of organised <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/business" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">business</a>. <p style="padding:0px 0px 1.5em;margin-top:0px;margin-bottom:0px;color:#111111;font-family:Georgia, serif;font-size:20.8px;letter-spacing:-0.2px;white-space:normal;word-spacing:-0.5px;background-color:#FFFFFF;"> Various <a class="topiclink always-topic" href="http://engineeringnews.co.za/topic/mining" style="color:#000000;text-decoration-line:none;border-bottom:1px dashed #03B8DE;">mining</a> companies have announced that they are studying various self-generation options, but remain concerned about the lack of regulations to facilitate projectsof larger than 1 MW and for wheeling power from such projects.

26 Mar,2019

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