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InDABA ReVIeW

South32 energised for next move

Mike Fraser

ot on the heels of striking an agreement development. role in Eskom’s grid stability and disaster
Hto divest its South African Energy Coal “Our Hillside and Mozal aluminum smelt- management plans.”
business, South32 Ltd is considering a po- ers have experienced an increase in load- Fraser insisted South Africa was improv-
tential sale of its manganese alloy smelters shedding each year for the past three years. ing as a credible mining jurisdiction but said
as the country’s power crisis continues. In FY2019, for instance, Hillside was load- “urgent” steps were still required to further
According to chief operating officer Mike shed 52 times, so approximately once per boost the country’s attractiveness for future
Fraser, South32 is on track to complete the week on average, and consistently through- resource and industrial development.
sale of its shareholding in SAEC to Seriti Re- out the year. Therefore, it highlights the un- “We would like to see further and rapid
sources Holdings Pty Ltd – a black-owned reliability we are experiencing with Eskom action on fiscal policy to stabilise the fiscal
and operated South African mining compa- power supply.” deficit and state debt,” he said.
ny – during the second half of the year. Fraser said while reliability of power sup- “Regulatory and structural reforms that
The transaction, which includes an upfront ply remained an ongoing concern for both can revitalise South Africa’s economy are
payment of almost R100 million, is subject to South32 and South Africa more broadly, his needed. One example would be to encour-
a number of conditions, including approval company’s power agreements with Eskom age private investment in power genera-
from troubled power utility Eskom and South do include a load-shedding provision which tion…and enable access to the national grid,
Africa’s Minister of Mineral Resources and allows for the smelters to be used as addi- which we think is an important next step.
Energy. tional capacity when technical issues arise. “Stabilising our state-owned entities will
Fraser said the company was pleased “Therefore, we plan for load-shedding mean that hard decisions need to be taken
with the divestment process so far and was and ensure the smelters are running at peak to close or sell those which are uncom-
now turning its focus to options for its man- performance to minimise the impact of load- petitive. State-owned enterprises that are
ganese alloy smelters in both South Africa shed events on production,” he said. “We key enablers of economic growth such as
and Tasmania. are also deploying new energy efficiency Transnet and Eskom must instill and deploy
“The options under consideration include technology at the Mozal smelter that will policies which are supportive of developing a
looking for potential new owners for those boost production with no additional power competitive industrial economy.
operations who may be able to benefit from consumption. “Urgent action to address Eskom’s techni-
synergies with their existing businesses,” “Hillside and Mozal are baseload custom- cal performance to ensure a low cost and
Fraser said. ers, which means their demand can be met reliable supply of coal will help stabilise the
“The Metalloys smelter in Gauteng is not from lower cost baseload power generation utility.”
immune to the challenges around cost and plants without the need for significant trans- Fraser added that reducing Eskom’s pri-
reliability of power supply which we have mission infrastructure. Therefore, the rate mary fuel costs would come from procur-
heard about in the ferrochrome industry in paid by Hillside is reflective of the low cost ing less from high-cost coal suppliers rather
recent weeks. And in the past few years, to Eskom of delivering bulk power to the than slashing the prices paid by long-term,
we’ve seen new alloy smelting capacity smelter. stable feeders.
emerging in Malaysia after producers were “A stable baseload supports the reliable – Michael Washbourne
offered attractive power deals to incentivise operation of the grid and Hillside plays a key

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