Sibanye Gold mulls cutting ties with Eskom

Sibanye Gold mulls cutting ties with Eskom

2015-02-19 12:16

Johannesburg - Sibanye Gold [JSE:SGL], the biggest producer of the metal in South Africa, intends to become energy-independent “over the next few years” as state utility Eskom struggles to supply the economy with enough power.

The company is considering investing in solar power and building its own coal-fired plants of 200 megawatts to 600 megawatts to reduce reliance on “inconsistent and increasingly expensive” electricity, the Westonaria, South Africa-based company said in a statement on Thursday.

The investment in solar power would cost about R3bn ($258m) and generate 150 megawatts, Sibanye said. The company’s overall demand is 500 megawatts, it said.

Eskom, which generates about 95% of electricity used by Africa’s second-biggest economy, is struggling to meet demand after it failed to adequately invest in generation in the 20 years following the country’s first democratic elections. The utility requires industrial users to cut consumption by as much as 20% when it’s running short of power. Residential consumers have had 11 days of load shedding this month.

“Ongoing delays at Eskom’s new capacity-build projects and a lack of critical maintenance at its existing stations has resulted in regular supply interruption, which is likely to continue for the foreseeable future,” Sibanye said.

The company’s power costs will swell to 20% of overall expenditure in 2015 from about 9% in 2007, a year before the country had power shortages that idled mines and smelters for five days.

Profit increase

The company’s so-called headline earnings rose 14% to $69.7m in the six months through December from the preceding six-month period, it said on Thursday. Gold production increased 23% in the six-month period to 877 400 ounces. For the full year, headline profit declined 46% to $130.9m from 12 months earlier.

READ: Sibanye Gold ups dividend, earnings fall

Sibanye, a collection of aging but cash-generative South African mines, is the third-best performer on the FTSE/JSE Africa All-share index this year, having risen 36%. The company has cut costs and increased production by mining more efficiently and buying nearby resources since it was spun out of Gold Fields [JSE:GFI] in 2013.

Sibanye will pay a second-half divided of 62 SA cents a share, bringing the total annual payout to 112c a share, it said. That means R1bn was returned to shareholders in 2014, it said.

  • Rick Meijer - 2015-02-19 12:32

    only way to go

      Paul Coetzee - 2015-02-19 13:00

      Correct. All Industry leaders should (need to) follow. And while they are about it, they should start looking for a reliable water supply. Thats next on the ANC's list.

      New_South_African_Glory - 2015-02-19 14:12

      Paul Sasol built a power plant for themselves in the past two years. They started after Medupi and finished before Medupi and is already using their own power. Their solution was scalable and came in at much less than half the Medupi cost / MW capacity.

      Timber Gate - 2015-02-19 16:54

      Good work, this is what we all need to do. This is the most patriotic thing anyone one can do, companies included. Read more: Google "Timber Gate Going off the grid makes you a patriot".

  • Bradley Duncan - 2015-02-19 12:32

    Between non-payment, illegal connections and customers moving away from the power utility to alternate sources, Eskom is falling further behind in making itself financially secure. They are never going to get to a profitable and stable state at this rate.

      Jaco Nel - 2015-02-19 12:58

      Eskom will just keep hiking electricity prices for the poor suckers left reliant on them. They’re already going to push 2015/2016 prices up so we can pay for screw-ups they made. Hope they keep in mind that if they keep on increasing prices it’ll soon make more financial sense (hence the move by Sibanye) to go independent. And you know what, in the long run it’s better for the environment too.

      Bradley Duncan - 2015-02-19 13:05

      100% Jaco.

  • Rick Meijer - 2015-02-19 12:33

    oh and don't involve Hitachi powersystems in your plans.. that is a guarantee for disaster..

  • Hermann Viljoen - 2015-02-19 12:33

    This is a clever business move.

  • Moeg Geploeg - 2015-02-19 12:39

    That's the way to go, eskom power supply is too unreliable for big business to plan 5 years and ahead. Eskom and and it's masters the anc could have avoided the situation if they had listened to calls in 1998 to immediately plan for additional power stations. Together with money been wasted and just bad financial management together with all the illegal electrical connections and the culture of non payment by municipalities and the massas they are a road of self destruction unless they privatise eskom and put the right qualified people at the helm

  • Foxiloxi - 2015-02-19 12:57

    The only people that are going to be left needing electricity from Eskom are those that are currently not paying !!

  • Yvette Abercrombie - 2015-02-19 13:02

    So the privatization of energy begins with or without Eskom ...

  • Thabelo Shoeshoe Moshoeshoe - 2015-02-19 13:27

    Is this good or bad

  • Jaco De Witt - 2015-02-19 13:38

    When Eskom is finally stable on supply there will be very few people left needing them. Then the tax will go up to finance the white elephants.

  • Mohamed Altaaf Raoof - 2015-02-19 13:55

    50 cents bet that the miners will strike due to lack of load shedding. any takers?

  • Genet Joobs - 2015-02-19 16:50

    Just do it!

  • Ria Cook - 2015-02-19 17:20

    Go for it! I wish all big companies would do this - by the time Eskom has finished all the planned power stations (if that will EVER happens), I hope nobody will be interested in what they have to sell.

  • peter.oreilly.5458 - 2015-02-19 17:29

    Why not When years back working for a sugar mill Zululand Sugar Millers and Planters They had their own plant which not only provided power for the plant but all the staff houses All Manufacturers should do so

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