Far from recovering the 14,000oz of platinum lost to blackouts in February, Anglo American Platinum (Amplats) will report additional setbacks to finished metal production in the next week or two because of electricity shortages, CEO Chris Griffith says.
Amplats, which is 80% owned by Anglo American, told the market it expects to recover the stalled production during the course of 2019, but the continuing difficulties at state power utility Eskom have meant the company has fallen further behind, Griffith said in an interview on the sidelines of the PGM Industry Day conference.
Asked if Amplats has made any headway in recovering the 14,000oz, with a value of R173.54m, it was unable to process earlier in 2019, Griffith said: “No. We haven’t had power to do so. So how are we expected to do so? In addition, we’ve lost more. We’ll update the market in the next week or so.”
Apart from the smelters, which have been negatively affected by power curtailments since February, some mines have also been interrupted.
Amplats copes with the outages by continuing to produce from its mines and concentrating ore. It stockpiles that concentrate for when it has enough electricity to smelt it.
“At some point … when we have sufficient runs we can work through it. So the metal is not lost forever, but as it stands now according to my run rates I’ve lost quite a bit more than that number we spoke about. In the last two months we’ve had massive electricity reductions,” Griffith said.
“If we have that kind of problem going into the winter months then it will get to a point where we cannot catch up in this year. …we’re not writing off yet [or saying] that we still can’t make our forecast,” he said.
The recently announced tariff hikes for Eskom’s electricity will put additional pressure not only on Amplats but the entire platinum industry, which has only recently moved into profit after a decade of low prices and soaring costs left two-thirds of the sector unprofitable or marginal, he said.
The effective 14% increase in electricity prices in the first year of a three-year pricing window will add an additional R500m to Amplats’s annual costs, Griffith said. By the end of the third year, Amplats will be paying R1bn a year in electricity charges.
“The energy situation in SA can only be described as a crisis, not only for us and the industry but the entire country,” Griffith said, adding that Amplats wants to invest in a solar plant of up to 100MW and Sibanye-Stillwater wants a solar project of 150MW, but Eskom and the National Energy Regulator of SA (Nersa) have locked the projects up in bureaucratic red tape that has slowed progress to a crawl.
Griffith said the carbon tax will also add R200m-R300m in costs to Amplats.
“Is this the right time to implement a carbon tax if the end result is an increase in unemployment? The message from the mining industry is: don’t do it,” he said, emphasising that the government should allow companies to implement their large renewable energy projects.
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