Africa's biggest gold-miner, AngloGold Ashanti, believes the power shortage in South Africa is “manageable” and expects to achieve enough energy savings to elimate the effects of power rationing on output by the end of next year, CEO Mark Cutifani said on Tuesday.

Most of South Africa’s mines were forced to shut down for a week last month, after power utility Eskom could not guarantee electricity supply, sending the prices of platinum and gold to new records.

Eskom is now supplying mines with 90% of their normal power usage and recently said that this situation was expected to continue until 2012.

“We're managing the issue...we think the situation is manageable,” Cutifani commented, just one day after rival Gold Fields said it would close shafts, defer a project and possibly cut almost 7 000 jobs because of the power shortage.

The company had previously planned to run a 15% energy efficiency programme over five years, which it will now implement over 18 months, Cutifani said.

AngloGold Ashanti had said on February 7 that it expected the January shutdown and ongoing shortages to cut output by 400 000 oz this year.

Cutifani, who joined the company in September, said that AngloGold Ashanti would already have reduced its power use by about 5% by mid-year, through energy efficiency initiatives, and was confident that it would achieve a further 5% in savings by the end of next year, in order to run at the 90% level which Eskom expects will be required until 2012.

“By the end of 2009 we will have mitigated...totally removed the impact of the energy issue in terms of our operations,” Cutifani said in a presentation to the BMO Capital Markets Metals and Mining Conference, under way in Florida this week.

However, while South Africa would continue to provide a solid base for the company for at least the next 15 to 20 years, it was “not going to be the place where you see us drive growth”, he commented.

AngloGold, which recently announced that it was reviewing its asset portfolio, would seek to further develop the potential of operations in the Americas and improve production in the rest of Africa, which posed the “most significant operating challenges”, but offered significant growth potential, Cutifani said.

"That for us, represents where our key operating opportunity is," he commented.

In particular, the company expected to provide some "early insights" in its next quarterly report into a turnaround plan for the loss-making Geita mine, in Tanzania.

AngloGold Ashanti said earlier this month that it would consider selling its Mali assets, which include the Morila mine, co-owned with Randgold Resources, and the Sadiola and Yatela mines, in which Canada's Iamgold owns 38% and 40% respectively.

URANIUM 'BUFFER' TO RISING ENERGY COSTS

AngloGold Ashanti expects revenue from uranium sales to reduce the cost of gold production by between $20/oz and $30/oz by 2010, Cutifani said.

"It's a significant cashflow contribution," he said.

Uranium production, which the group plans to double to two-million pounds a year by 2012, would act as a 'hedge' against rising energy costs in South Africa, which the company expects may double over the next five years, he said.

"From our point of view, the uranium business would almost totally buffer us in terms of our operating costs within South Africa."

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