Harmony Gold wants new SA electricity solution, Gold Fields sees rand remaining strong for long, Kumba wins Sishen South iron-ore project case

South Africa as a whole needs to come up with a solution to the electricity funding dilemma to avoid a wave of negative knock-on effects throughout the economy. Read on page 10 of this edition of Mining Weekly that the tariff proposal will, in the words of Harmony Gold CEO Graham Briggs, "stop smelters, stop mines and stop business".

Harmony's own cash costs will be lifted 15% a year and electricity costs will come to represent 25% of the company's total costs instead of the current 13%. Prior to the higher electricity tariffs, Harmony was actually predicting a scenario of lower costs in kilogram terms and the company is hoping to accelerate surface-material projects less sensitive to the electricity issue.

South Africa's second-largest gold producer, Gold Fields, expects the rand to remain strong for the next 12 to 18 months. Read on page 14 of this edition of Mining Weekly of Gold Fields CEO Nick Holland having "made peace with the rand being where it is" and of Gold Fields structuring its business around current rand levels.

Gold Fields has based its business plan for the 2010 financial year to June on R230 000/kg compared with a rand gold price of R260 000/kg at the time of going to press. "We were not banking on the rand weakening and we won't bank on it. If you back out a dollar gold price of $1 030/oz, it takes you down to the low R7 to the dollar. We don't see the rand weakening significantly for the next 12 months at least. I don't see any change in the short term," Holland says.

South Africa's biggest iron-ore-miner, the Anglo American-controlled Kumba Iron Ore, has managed to elbow steelmaker ArcelorMittal South Africa out of its claim to be part of the R8,5-billion Sishen South project, which is going ahead at full steam in the Northern Cape.

Read on page 20 of this edition of Mining Weekly of Kumba being quite relieved that clarity has finally been obtained on the long-standing issue. The arrangement of ArcelorMittal obtaining certain product from Kumba's Sishen and Thabazimbi iron-ore mines on a cost-plus basis remains intact for the steelmaker, with the arbitration relating to Sishen South alone, which has still to produce iron-ore. Kumba is also involved in another arbitration on the Faleme iron-ore concession, in Senegal, West Africa.

To watch a video on Harmony Gold CEO Graham Briggs on power tariff dilemma, go to www.miningweekly.com and click on ‘Multimedia' and then on ‘Video Clips'.