Gold miner AngloGold Ashanti said on Thursday that its first quarter 2008 production from South African operations had been "severely disrupted" by the power shortages.

The group said, in its outlook for 2008 at the release of its December quarter and full year results, that it expects to produce between 4.8 million and 5.0 million ounces of gold.

"This outlook statement is made in the context of the power shortage currently facing AngloGold Ashanti in South Africa, which will account for an estimated reduction of approximately 400 000oz of gold in 2008, and assumes that a sustainable 90 percent power supply is achieved for the remainder of the year," it said.

Business faces very particular challenges

Mark Cutifani, AngloGold Ashanti's CEO, commented: "The uncertainty around Eskom power supply is having a significant impact on our operations in South Africa. This uncertainty means that our South African business faces very particular challenges right now, and we're working constructively with organised labour, Eskom and the government to ensure that we find sustainable solutions that protect the reserve integrity and potential of these operations."

On 25 January, the South African national power supplier Eskom communicated to South African mining companies that it could not guarantee power supply to their local operations.

AngloGold said precautionary steps were immediately taken for the safety of all employees, with no employees transported underground to carry out mining activities, together with the cessation of milling activities.

"Following extensive discussions with Eskom and government, a power supply of 90 percent has been offered although at the time of writing, this was still to be attained, which means that first quarter 2008 production from South African operations has been severely disrupted," AngloGold said.

90% of power available

The company is still reviewing a scenario in which only 90 percent of power is available to its South African operations, it added.

A spokesperson for AngloGold Ashanti told I-Net Bridge on Thursday that the situation at present is that the group is working up towards the 90 percent level, but operations are still in the process of recovering from the stoppages 10 days ago.

He added that some of the mines were using the 90 percent power supply and it would "not be that long" before the remainder would be too.

"Equally important is Eskom's ability to maintain a continuous power supply, at a 90 percent level, given that since 25 January 2008, the company has experienced daily fluctuations in available power which in turn has further disrupted the attempt to return to normal production levels and milling rates," the company said in its release.

Since 2004, Eskom and AngloGold Ashanti have been working to improve energy efficiencies and reduce consumption, with both organisations committing funds and resources to the programme. These combined efforts have achieved a 17 percent improvement in energy efficiencies by AngloGold during this period, it said.

Production for the first quarter of 2008, based on 90 percent stabilising power supply and associated operating recovery, is estimated to be 1.10 million ounces at an average total cash cost of $467/oz, AngloGold Ashanti said.

I-Net Bridge