JOHANNESBURG (mining weekly.com) – The instruction has gone out - the Gold Fields team must cut the large gold-mining company's electricity consumption by another 50MW.

The JSE-listed Gold Fields is out to repeat its 10% or 50MW cut that it made between 2008 and the end of 2009.

"I have instructed the team to find another 50MW," Gold Fields CEO Nick Holland tells Mining Weekly Online, who believes that South Africa would benefit enormously if every company took steps to reduce their consumption by 10%.

In his personal capacity, he has decided to cut 20% out of his own domestic power bill: "I have decided personally, and I've discussed this with Eskom, I want them to come out to my house and tell me how I can save 20%, because we are also wasting electricity at home."

Holland has told the National Electricity Regulator of South Africa (Nersa) in his presentation last month that Eskom's proposed tariff increase of 35% a year every year for three year had to be reduced.

"I have said to government that we have to reduce these headline costs and we need to find a way of government recapitalising the power sector themselves and possibly recovering that through additional taxes over time.

"Nobody likes to hear about higher taxes, but is it not better to pay tax than to kill industry that is the very lifeblood of the economy.

"If we shrink the industrial machine, then it's going to be much worse that if a broad-based additional tax, just to catch up some of the backlog," he advocates in a videod interview that can be accessed on www.miningweekly.com.

He sees much of the problem stemming as from a funding backlog that needs to be caught up.

"Another thing we need on power is a long-term price path. We need certainty for long-term projects. We need certainty on what the long-term price path is going to be. Without that, we can't make sensible investment decisions," he says.

Currently Nersa has only been asked to rule on a three-year price determination.

Holland says that companies like Gold Fields, which make decades-long investment decisions, do not want to start projects and have to stop them again because of new power tariff hikes, which would lead to a wastage of capital.

"I am hopeful that we will come up with a solution that's in the best interests of the country as a whole," Holland adds.

He is not a believer in Gold Fields providing its own electricity owing to it being most cost-effective to source power from South Africa's large power grid.

"The most effective power solution right now is to leverage off the grid. For us to build new capacity when we need 560 MW would require very substantial investment.

"This is not like other countries where you can run mines off 20 MW or 30 MW. We mine down to 3 500 m which requires significant ventilation capacity and water reticulation systems to get cool air to the face.

"You don't just move off 560 MW of capacity to build your own power station tomorrow. It's just not affordable for us to go away and build new capacity. We are stuck with the grid," he says.

He does not see the introduction of independent power producers (IPPs) as being a solution in the short-term.

"IPPs will, by and large, be offshore entities, which will require a short payback on their capital, a risk-adjusted rate of return that reflects the risk profile of South Africa and they are going to require purchase power agreements that are underwritten by government.

"We ‘re going to have to hunker down to save some power and make sure that we have a long-term power solution," he says.

To watch a video on Gold Fields CEO Nick Holland's comments on power, go to www.miningweekly.com and click on 'Multimedia' and then on 'Video Clips'

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