In a surprise move, South African electricity utility Eskom has withdrawn its authorisation for the mining industry to increase its electricity use from 80% to 90% on Thursday.
News of the decision came from Gold Fields, the world’s fourth-largest gold producer, which informed the media in a statement.
”Gold Fields is disappointed to confirm that Eskom has informed the company that authorisation to increase electricity load from 80% to 90% by this evening, has been temporarily withdrawn in order to ‘protect further frequency decay and system instability’,” the gold producer said.
”To comply with this instruction, and in the interest of safety, production at Gold Fields’ operations is being pulled back to the 80% power level,” it said.
Gold Fields, which reported its December quarter results earlier on Thursday, has already warned that it may be forced to close shafts and trim capital expenditure in light of the current power crisis.
South African mines have only just started resuming operations after they were forced to suspend mining and processing for five days after the country’s power situation reached a level where uninterrupted supply could not be guaranteed.
Eskom and its only shareholder, the South African government, promised that power supplies would be ramped up after a crisis meeting was held with the mining industry on Tuesday.
Mining companies began preparing their operations for production later on Tuesday when power was increased to 80% of normal consumption, with many awaiting the promised increase to 90% on Thursday before resuming full operations.
The government and Eskom asked its biggest customers reduce consumption by 10% in an attempt to stabilise the country’s power supply situation, but the surprise announcement means that the mining industry will still have to function at 20% less power than it normally does.
Gold Fields has already warned that a 10% cut in its power needs would translate into a 20% fall in production.
It predicted that its production in the March quarter could be between 20% and 25% lower than the December quarter should it only receive 90% of its normal usage.
The gold producer reported a 3% decline in attributable gold production to 960 000oz for the quarter.
As a result of the country’s power crisis, Gold Fields has also decided not to pay an interim dividend.
Shares in Gold Fields were 65 cents lower at R110,10 on the JSE shortly before 4pm.
Meanwhile, Public Enterprises Minister Alec Erwin said on Wednesday that the power crisis will not put off investors, nor limit its ability to stage the 2010 Soccer World Cup.
Economists have warned that the power crunch could severely crimp growth in Africa’s richest economy and threaten a multibillion-rand infrastructure plan, partly aimed at preparing for the soccer tournament.
South Africa’s economy has flourished for the last several years, although it still lags its emerging-market peers in the area of foreign investment and has desperately tried to lure investors since the end of apartheid in 1994.
The Soccer World Cup was seen as an ideal way of marketing the country to tourists and drawing much-needed foreign money.
Erwin said energy issues would not derail these efforts.
”We are engaging with investors … We believe the investment process and the growth process will continue,” Erwin told a joint sitting of Parliament called to debate the energy meltdown.
”And we are also absolutely certain that there is no risk to the security of electricity supply for 2010,” said Erwin. – I-Net Bridge, Sapa