Mining group Sibanye-Stillwater has decried the operating environment in SA, saying that the environment in Europe was increasingly becoming more supportive than in its domestic market where the worsening energy crisis was hurting the mining industry, one of the bedrocks of the economy.
In a hard-hitting operational update released on Tuesday, the world’s largest producer of platinum group metals (PGMs) said while it was able to soften the effect of load curtailment by rescheduling energy intensive activities to lower demand periods, such measures are less effective during extended periods of load-shedding.
To find sustainable solutions, it was pursuing self-generation projects and working with stakeholders to remove red tape and alleviate other obstacles, such as limited network access, with the aim of commissioning additional generation “as quickly as possible”.
The mining group’s comments came as power utility Eskom implemented stage 6 rolling blackouts indefinitely, reigniting fears of a potential grid collapse during the peak winter season where demand is expected to far exceed the available supply.
Eskom’s energy availability factor, a measure of electricity output as a share of total installed generation capacity, currently sits at about 53% compared with 65% in 2020.
Sibanye-Stillwater also warned that deteriorating quality of public services and the increase in organised criminal activity had become an increasing risk, pointing to copper cable theft that causes power disruptions and thus lost production, and can potentially compromise the safety of underground employees.
The quarterly production report came less than a week after Fraser Institute ranked SA in the bottom 10 global mining jurisdictions for the second year. It ranked SA 57 out of 62 countries in the overall investment attractiveness index, according to the institute’s annual survey.
“The increasingly supportive environment in Europe is in stark contrast to the operating environment in SA, which has continued to regress,” Sibanye-Stillwater said in a statement.
Sibanye-Stillwater has been building its footprint in Europe and the US where carbon-free initiatives such as electric vehicles were gaining traction. It is doing so through its battery metals strategy that seeks to diversify its revenue sources.
The security of supply of critical minerals was becoming a top national priority for many governments with active support building for the establishment of local and regional value chains, according to the mining group.
Meanwhile, the group’s adjusted ebidta or core profit fell to R7.8bn in the March quarter versus the record R13.6bn a year earlier as the average PGM basket prices came off the boil. But the company said the outlook was positive for the second half of 2023 given that PGM prices have since bottomed out and were rising.
Production at its SA PGM operations declined 8% year on year to 379,791oz, partly a result of load curtailment, copper theft-related production disruptions. In the US, PGM production declined 18% to 100,690oz after Stillwater West mine suffered structural damage to the shaft which accesses the deeper levels of the mine.
Production from the SA gold operations (including DRDGold) rose 46% on an annual basis following the resumption of the operations after the industrial action in the first half of 2022. Gold production (excluding DRDGold) rose 71%.
Its shares slumped 10%, the most since early November, to trade at R40.15 by late afternoon trade on Tuesday on the JSE.
The operational update undershot expectations by a large margin in a sector quite important to economic growth,” said Casparus Treurnicht, portfolio manager at Gryphon Asset Management.
“Most of it could have been prevented if government has ensured the proper maintenance of power and transport infrastructure and providing proper policing and justice for illegal activities.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.