Picture: REUTERS
Picture: REUTERS

Sibanye-Stillwater says the double-digit electricity price increase undermines the viability of the country’s gold industry.

The power regulator on Thursday approved an effective 13.8% hike in tariffs by state-owned utility Eskom.

That’s higher than the 9% increase planned for by Sibanye, said James Wellsted, a spokesperson for SA’s biggest gold producer. “These kind of increases, well above inflation, pose a risk to the sustainability of the industry and to job creation,” Wellsted said.

Sibanye is already considering cutting more than 6,000 jobs at unprofitable gold shafts amid a four-month wage strike by thousands of workers.

The new electricity charges will accelerate job losses at “energy-intensive mines”, according to the Minerals Council SA, which represents most producers.

With electricity accounting for 15% to 18% of gold producers’ cash operating costs, the new tariff means SA miners will remain marginal compared with their global peers, Morgan Stanley analysts, including Christopher Nicholson, said. The effect on platinum miners would be minimal, they said.

“Above-inflationary cost increases will result in higher cut-off grades and thus shorter mine lives,” Morgan Stanley said. “Over the medium term, this could be expected to have a second-round impact of reducing Eskom’s customer base as production continues to fall.”

Gold output in SA, once the world’s top supplier, plunged 31% in December, the biggest decline in six years. Producers are struggling to contain costs at the world’s deepest mines.

AngloGold Ashanti and Gold Fields have scaled down exposure to SA, refocusing attention on more lucrative assets in Ghana, Australia and South America, while Sibanye has diversified into platinum group metals.