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Gold output halted amid South African energy crisis PDF Print E-mail
Sunday, 27 January 2008

Agence France-Presse. Johannerburg

Gold production ground to a halt in South Africa on Friday as the industry became the latest victim of a spiralling electricity crisis which the government labelled a national emergency. The three main companies operating in a country with a long record as the world's biggest gold producer announced they had suspended production because of unreliable energy supplies.

Gold Fields, Harmony and AngloGold Ashanti said in separate statements they had been notified by state energy utility Eskom that it could not guarantee supplies to their mines and could not say when they would resume operations. Tens of thousands of miners were told not to bother reporting for shifts in a move the companies said would cost hundreds of millions of dollars in production.

A spokeswoman for Harmony, which operates 22 gold mines and employs 43,000 miners, estimated that around 300 kilogrammes of production would be lost after both the morning and afternoon shifts were cancelled. 'That's around 600 million rand ($85m) in today's market,' spokeswoman Amelia Soares told AFP.

Ian Cockerill, chief executive of Gold Fields, which produces about 200 kilogrammes, acknowledged that it would 'have a serious effect on the South African operations and will negatively affect our gold production.' While the mines had earlier been plagued by short-term power cuts, Soares said it was the first time they had to cease production for the day. Large parts of Africa's economic powerhouse have been intermittently plunged into darkness in recent weeks as Eskom imposes planned blackouts to conserve dwindling electricity supplies.

The commercial capital Johannesburg has been hardest hit, and analysts have warned of foreign investors taking flight as everything from factory production to traffic regulation has been affected. It is the view of cabinet that the unprecedented unplanned power outages must now be treated as a national electricity emergency,' he said. This had been caused by poor planning and a sudden shortage of coal.

Erwin said the government would introduce incentives and penalties to encourage consumers to switch to gas and solar energy, as well as energy savings measures. 'It is a reality that there will be further significant increases in electricity prices,' said Erwin. Approval has already been given for an above-inflation tariff hike of 14.2 per cent.

Erwin said there was 'no question of stopping' large foreign investment projects and said the 2010 football World Cup should not be adversely affected. 'There is no threat to the successful holding of the event as plans to ensure electricity security in that period are well advanced.' Meanwhile, plans to build new power stations and recommission others would be fast-tracked where possible.

The main opposition Democratic Alliance said the government's savings measures did not go far enough. 'South Africans must now face the reality of power cuts becoming the norm at least until 2013,' said leader Helen Zille. And the minority Freedom Front Plus condemned the effect on the mining industry, saying it 'will deliver a devastating blow to the country's economy, not to mention the damage to foreign investment that it will be causing.'

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