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S.Africa: Sibanye Gold seeks to buy coal mine to support its transition off the grid

Sibanye Gold mine
Sibanya Gold seeks coal mine to assist in its power struggles

On Thursday, South Africa’s largest individual producer of gold, Sibanye Gold, said that it is seeking to procure a coal mine to contribute to its transition away from the national electricity grid.

Mining Review Africa reported that Sibanye Gold plans to begin generating 150MW of power from the first phase of its solar power plant towards the end of 2017.

The company’s ZAR3 billion ($235 million) solar power plant, which is currently under construction, is not enough to cope with the electricity shortages, said chief executive Neal Froneman.

The Economic Times reported that while presenting the company’s interim results Froneman said the solar project was “not the first prize in terms of becoming less dependent on Eskom. We really have to do something more material.

“It means we will have to look at becoming in control of coal resources because our analysis shows that if you want to protect your cost position from an energy perspective you need to be in control of the source of that energy.”

Revenue loss drives alternative solutions

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.”

Sibanye Gold dividends

The Economic Times reported that gold producers are struggling with decreasing prices and rising costs although Sibanye Gold’s high-grade ore deposits are helping to keep the company profitable for the time being.

Sibanye Gold declared a dividend of ZAR0.10c ($0.007c) a share and according to Froneman, Sibanye Gold was sticking to a target of paying at least a billion rand in dividends to shareholders by the end of the year, but admitted it would be “tough”, The Economic Times reported.

Froneman said: “It’s not something I’m saying we are going to do, it’s a target.”

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.