Friday January 25, 06:17 PM
Gold price soars as SAfrican power crisis halts production
By Mariette le Roux
CAPE TOWN (AFP) - The price of gold hit a record high Friday as production ground to a halt in South Africa on the back of a spiralling electricity crisis the government has labelled a national emergency.
The three main companies operating in a country with a long record as the world's biggest gold producer announced they had suspended production because of unreliable energy supplies.
The world's biggest diamond producer, De Beers, also announced suspension of its operations due to the same problem.
The companies said in separate statements they had been notified by state energy utility Eskom that it could not guarantee supplies to their mines, adding they did not know when operations would resume.
Announcements by Gold Fields, Harmony and AngloGold Ashanti propelled the price of the yellow metal to a record high 923.73 dollars, and that of platinum to 1,701 dollars per ounce.
On the London Bullion Exchange, an ounce of gold was traded at 921.25 dollars in the morning.
Tens of thousands of miners in South Africa were Friday told not to bother reporting for shifts in a move the mining companies said would cost hundreds of millions of dollars in production.
A spokeswoman for Harmony, which operates 22 gold mines and employs 43,000 miners, estimated that around 300 kilogrammes (10,600 ounces) of production would be lost after the morning and afternoon shifts were cancelled.
"That's around 600 million rand (85 million dollars / 60 million euros) in today's market," spokeswoman Amelia Soares told AFP.
Ian Cockerill, chief executive of Gold Fields, which produces about 200 kilogrammes a day, said the situation would "have a serious effect on the South African operations and will negatively affect our gold production."
While mines were earlier plagued by short-term power cuts, Soares said this was the first time they had to cease production for a day.
De Beers' spokesman Tom Tweedy said they have reduced power consumption to a "survival load" which has ceased production from its mines.
Tweedy said they only use "sufficient power to avoid risk to employees and property, and to maintain ... the safe underground working conditions".
"Therefore essential ventilation, pumping and lighting and all safety related services will continue while regular operations will cease," he added.
Large parts of Africa's economic powerhouse have been intermittently plunged into darkness in recent weeks as Eskom imposes planned blackouts to conserve dwindling electricity supplies.
The commercial capital Johannesburg has been hardest hit, and analysts have warned of foreign investors taking flight as everything from factory production to traffic regulation has been affected.
Warning of price hikes and quotas to steady supply ahead of the 2010 football World Cup, Public Enterprises Minister Alec Erwin told journalists demand had to be cut.
"It is the view of cabinet that the unprecedented unplanned power outages must now be treated as a national electricity emergency," he said. This had been caused by poor planning and a sudden shortage of coal.
Erwin said the government would introduce incentives and penalties to encourage consumers to switch to gas and solar energy, as well as energy savings measures.
"It is a reality that there will be further significant increases in electricity prices," the minister said. Approval has already been given for an above-inflation tariff hike of 14.2 percent.
Erwin said there was "no question of stopping" large foreign investment projects and said the 2010 football World Cup should not be adversely affected.
"There is no threat to the successful holding of the event as plans to ensure electricity security in that period are well advanced."
Meanwhile, plans to build new power stations and recommission others would be fast-tracked where possible.
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