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Sibanye Gold signs “term sheet” for reliable coal supply

coal to power
Sibanye Gold requires reliable coal supply to power its own power plant, which is yet to be built.

In South Africa, the country’s largest individual producer of gold, Sibanye Gold, has signed a “term sheet” with the Waterberg Coal Group to ensure a regular supply of coal to enable the company to generate its own electricity.

Reliable supply of coal resources

Sibanye’s CEO Neal Froneman said in a statement on Thursday: “Waterberg has the potential to be a medium- to long-term sustainable power solution for Sibanye.

“This will facilitate Sibanye securing a reliable energy supply while simultaneously having a greater control over energy costs.”

The term sheet stipulates that the gold producer is to invest “AU$8.5 million of working capital to enable the WCG to further develop its Waterberg Coal Project [in the Limpopo Province].”

Sibanye will have the right to develop 51% shareholding in the WCG  within an 18 month period after the contract is finalised.

According to Bloomberg, large power users such as Sibanye, are expected to reduce their energy consumption by as much as 20% when the national power utility is running at a deficit.

The Waterberg Coal Group, which includes Waterberg Coal Co. and Firestone Energy Ltd, as well as Sekoko Resources Pty Ltd and Sekoko Coal Pty Ltd,  has a coal mineral resource of 3.4 billion metric tonnes.

Relying on own power generation

In August, the gold producer said it was seeking to procure a coal mine to contribute to its transition away from the national electricity grid.

In the first half of 2015, Sibanye lost ZAR125 million ($9.82 million) in revenue due to the state-owned power utility Eskom’s frequent power outages.

According to Sibanye Gold, the lost revenue is only 1.3% of the company’s estimated ZAR9.8 billion ($770 million) in turnover, but the increasing cost and unreliability of electricity was driving the company to seek alternative power solutions.

In February Froneman said: “You have to put it in perspective [:] 20% of our [Sibanye Gold] costs are related to electricity. It’s the second biggest single cost and labour is at 55%, so 75% of our costs in the gold sector are related to labour and electricity.

“Quite honestly, in many respects, you are dependent on something you can’t really control.”

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.