CompaniesGovernancenewsSouth Africa

Extra power costs could paralyse SA mining projects

Energy and Mining Advisors Ted Blom
Energy and Mining Advisors Ted Blom

JOHANNESBURG – MORE than 30 percent of South African mining projects will be terminated prematurely because of additional power costs in the absence of suitable solutions within the next 12 months.

This is the warning by independent power and mining expert and commentator after a cabinet minister recently conceded that the government must allow mining companies to produce energy for their own use.

Gwede Mantashe, the Mineral Resource and Energy Minister, made the announcement last week.

Ted Blom, the expert at Energy & Mining Advisors, noted most mining projects in Africa provided their own power for operations, but that increases the hurdle rate for committed capital to develop and run the project.

“The big difference is that provision of own power is already factored into those projects whilst South African projects have never factored in the costs of providing own power,” Blom said.

The prevailing power outages in South Africa dominated the Mining Indaba in Cape Town last week.

Blom argued the South African mining and beneficiation sector was built on the back of cheap and abundant electricity availability.

“The current environment has changed drastically and most business have not seen this coming,” Blom said.

He said only in the past two years had business started waking up to the new reality.

“..but, none have reviewed their business models to incorporate the new electricity reality,” Blom concluded.

A recent report by the Council for Scientific and Industrial Research (CSIR)’s Energy Centre indicated that load shedding cost the country’s economy between R60 billion (US$4 billion) and R120 billion in 2019 alone.

The total economic impact of load-shedding in South Africa could be as high as R338 billion over the past year, according to the report.

Eskom has projected load shedding to continue for the next 18 months but CSIR warned it could last until 2022.

– CAJ News

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