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Johannesburg - South Africa's second largest gold
producer Gold Fields (GFI) on Monday confirmed that it had approached national power utility Eskom with a view to sourcing additional power for its operations as it fights off 6 900 pending job losses as a result of the power restrictions.
Speaking during a conference call on Monday afternoon, Gold Fields CEO Ian Cockerill said the company had requested additional power.
He said Eskom had undertaken to consider appeals for extra electricity on a case-by-case basis and Gold Fields was asking for "a little more power".
Eskom has indicated that the quota of 90% of average historic
electricity consumption will remain for at least five years.
This means Gold Fields has to use 61MW less than its average 601MW usage and this has necessitated a review of operations, which has culminated in the company's announcement that it had already closed one of its shafts and was planning to mothball three others.
Expansion plans, which would have delivered replacement and new
production ounces, have also been deferred.
'Don't want to shed jobs'
"We don't want to shed jobs," said Gold Fields head of South African operations Terence Goodlace.
He said 1 000 of the jobs at risk were due to the depletion of the Ventersdorp Contact Reef horizon above 95 level at South Deep while the balance were directly attributable to the power rationing.
"We have been operating at 90% for about two-and-a-half weeks now and it has been quite a trapeze act," said Goodlace.
He said the power crisis had focused the company's mind and accelerated the closure or mothballing of some of the more marginal shafts ahead of schedule.
Goodlace said the company was looking at opportunities for self-generation of electricity and would spend some R200m installing
additional emergency power by the end of 2008.
'Clearly we are disappointed'
But at a cost of about $1m per MW to generate, the cost of
self-generation could outweigh production benefits.
Gold Fields has estimated that costs will rise and production will drop in the current quarter.
The gold producer warned that 3 000kg of production would be lost in the quarter and with the gold price currently at R232 336.76 a kilogram, it could lose close to R697m of revenue.
Cockerill said Gold Fields' inhouse view held that the gold price would continue its march upwards.
"Clearly we are disappointed that we are not able to take advantage of this gold price," said Cockerill, echoing Goodlace's point that it was paradoxical that gold producers have to consider downscaling in the current record-high gold price environment.
Shares in Gold Fields closed 5.89% lower at R108.75 on the JSE on Monday.
- I-Net Bridge