Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
JOHANNESBURG – South Africa’s cash-strapped power utility Eskom said on Friday it had revised its coal strategy to focus on contracts that offer long-term, fixed prices and security of supply as it faces possible power outages and low stockpiles of the fuel.
“Eskom’s long-term coal strategy has been revised to revert Eskom’s coal supply to dedicated long-term coal contracts for the life of the stations, with a preference for conveyor-delivered coal,” an Eskom presentation showed.
Eskom warns of potential power outages amid low coal inventories after a major supplier cut supplies and sought insolvency protection.
The utility also said it would extend its “cost-plus” mine contracts, through which it pre-pays mines to start up mining operations, pays the operating costs and a management fee and in return receives security of supply.
Africa’s largest public utility said it would in the short term buy 4 million tonnes of coal for immediate supply to bring all power stations above the minimum required level for stockpiles by the end of March 2019.
Eskom said it had 10 power stations with coal supplies of fewer than 20 days. Five of those had fewer than 10 days’ supply.
Eskom said it had concluded 27 new, short-term coal contracts between January and October for the supply of 15.8 million tonnes of coal in the current financial year.
In 2015 Eskom, whose generation capacity is around 45,000 megawatts, carried out controlled outages – known as load-shedding – as low cash flow and administrative problems affected operations.
The utility was also forced to cut power supplies for a few days in June due to a strike.
(By Alex Winning and Tanisha Heiberg; Editing by Dale Hudson)
