Anglo American says Eskom a major risk as it mulls growth

Medupi power station at Lephalale, Limpopo, South Africa. (Image courtesy of JMK | Wikimedia Commons)

Anglo American Plc sees South Africa’s struggling state-owned power utility and regulatory uncertainty posing major risks to its operations in the country, where it’s planning to boost spending to expand output for platinum, manganese and iron ore.

The challenges posed by Eskom Holdings SOC Ltd. have emerged as the key issues the company is having to deal with constantly, Anglo Chief Executive Officer Mark Cutifani told delegates at an investment conference in Johannesburg.

State-owned utility Eskom has been forced to implement rolling blackouts that caused economic output to contract the most in a decade in the first quarter

Eskom, which produces about 95% of South Africa’s power, has been forced to implement rolling blackouts that caused economic output to contract the most in a decade in the first quarter.

“There is absolutely no doubt it plays an important part in the decisions we make,” Cutifani said. “It probably represents our single most-important risk we deal with. This year, after a difficult start, we have been able to work with authorities and work around load-shedding,” he added, using the local term for power cuts.

The government also needs to improve the regulatory environment to get investors back into the mining sector and end uncertainty that has weighed against plans to build new mines in the country, he said.

“We still have a lot more to do,” Cutifani said. “I can’t say the regulatory environment is where we want it to be.”

South Africa is the world’s largest supplier of platinum-group metals and Anglo American Platinum Ltd. is exploring ways to boost output at its key Mogalakwena mine as prices for platinum metals rally. Kumba Iron Ore Ltd., another Anglo unit, is also weighing options to extend the life of its giant Sishen iron-ore mine by another 20 years from the current life of 13.

Anglo, founded in Johannesburg more than a century ago, is also spending $2 billion to build an underground operation at its Venetia diamond mine in Limpopo province. The plans come as President Cyril Ramaphosa, a former mine union leader and one-time platinum company investor, battles to attract investors in the sector and the country, amid sluggish economic growth and burgeoning debt.

(By Felix Njini)

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