South Africa’s Sibanye Gold has entered into an agreement with a coal provider to secure fuel for power production as it seeks to reduce its dependence on unreliable electricity supply from state-run utility Eskom.
The company said it would invest 22.5 million Australian dollars ($16.18 million) in Australia’s Waterberg Coal Group (WCG), adding this could be converted into shares and guarantee it has a supply of coal for its own power generation.
South Africa is facing an energy crunch, as Eskom struggles to produce enough power to meet demand. It has been forced to regularly cut electricity, damaging the economy and denting investment.
Separately from the 22.5 million Australian dollars investment, which can be converted into shares within 18 months, the gold producer also plans to inject A$8.5 million of working capital into WCG for project development.
“We have been investigating various energy alternatives for some time now and the Waterberg Coal Project has the potential to be a medium to long-term sustainable power solution,” Sibanye Chief Executive Neal Froneman said.
Sibanye has already said it is building a three-billion-rand ($226 million) solar-powered plant, but it said last month that it needed more than that to cope with electricity shortages that force Eskom to impose rolling power cuts.
Froneman told Reuters at the time that a coal mine was one option but that the company could also enter an independent power project where Sibanye controlled the costs it paid.