Economic performance

The electricity crisis that hit South Africa in January 2008 was one of the most critical moments that AngloGold Ashanti and the mining industry have faced in South Africa. In terms of the actual – and longer term – impacts on production and jobs, and the impact on investor confidence, it was an event that destabilised the country.

Rather than succumbing to alarm and panic, however, the company sought to manage the difficult situation as best it could. Indeed, AngloGold Ashanti ultimately used the crisis as a catalyst to review its energy efficiency performance, to explore new initiatives to decrease its electricity usage, and to speed up implementation programmes. This case study will explore that journey.

INITIAL IMPACT OF THE CRISIS

Large parts of the mining sector (which contributes 4.9% of South Africa’s total Gross Domestic Product) were hard-hit by the crisis, resulting in a five-day shutdown of some mines in January 2008. Restarting operations was not a simple or quick process, and it had to be done initially using no more than 90% of the previous power supply. All this translated directly to lost production, and presented a real, looming threat of job losses. Even as the national electricity supplier Eskom’s situation stabilised, it was made clear that mines and other sectors would have to operate within a lower energy allocation, requiring continuous energy efficiency measures and strategies.

Richard Mack, Engineering Head: Southern Africa Division explains, “When we received the call from Eskom on 24 January 2008 to say that it could not guarantee us power, AngloGold Ashanti immediately had to assess the situation. The decision was made not to send any of our people underground, because the unpredictability of the power supply meant the mines had become unsafe working environments.”

The underground working environment requires a continuous supply of respirable air, and refrigeration is required to maintain temperatures at a maximum of 28.5°C in the environment (because ambient temperatures may reach up to 55°C). The deeper the working area, the higher this ambient temperature is likely to be in the absence of ventilation. The refrigeration plant and the ventilation fans system consume around 27% of the total power used by these deep-level operations.

In the face of these challenges, AngloGold Ashanti’s management worked together with Eskom, the unions and the government to find solutions. The ultimate aim was to produce optimally, using less energy. Intensive engagement with the unions to avoid job losses, and avoiding statements which might create uncertainty for the public and employees, were also key strategic processes.

SECOND PHASE

After the initial shock of the shutdown, a second phase followed. This entailed the formation of a task team to manage the way forward and to put contingency plans in place to minimise future economic shocks. This task team comprised representatives from the Department of Minerals and Energy (DME) and the Department of Public Enterprises, Eskom, the Chamber of Mines, mining companies, and unions - the National Union of Mineworkers, UASA and Solidarity. The team considered ways in which Eskom and the mining industry could collaborate to reduce sector demand by 10% over the coming months and, simultaneously, provide mines with the reassurance of an uninterrupted power supply (and thus the necessary guarantees for workplace safety). The Chamber of Mines played a key role in trying to minimise the initial impact of the crisis, and has increasingly focused its attention on orchestrating a more strategic, stakeholder driven approach to dealing with the power constraints.

Following the stabilisation of Eskom’s power network after the shutdown, a power supply of around 90% of previous levels was made available to operations. AngloGold Ashanti was able to resume limited production after a period by gradually bringing mines back to maximum possible production, one by one.

OUTCOMES BETTER THAN EXPECTED

Had AngloGold Ashanti been forced to continue to operate at this level of power for the rest of 2008 without implementing any energy efficiency measures, it would have meant a loss of about 400,000 ounces in production for the year – some 20% of previously forecast output for the year. This was the advice given to the market on 7 February 2008, two weeks after the shutdown: half of this was due to the January shutdown and start-up and the rest due to production constraints for the remainder of the year.

In response, AngloGold Ashanti began investigating possibilities for speeding up the implementation of already planned energy efficiency measures, and seeking possibilities for new ones. Working with Eskom and the government, separately and also through the Chamber of Mines, negotiations led to an agreement whereby companies who were able to show their energy-saving achievements, and their plans for energy efficiency, were able to secure an enhanced power supply.

By early May, the company had achieved some 3.5% in energy savings, and Eskom agreed to raise the company’s power supply to 96.5% of the total previously contracted rate. By 6 May 2008, when first quarter results were announced, AngloGold Ashanti was able to announce that production for the quarter, at 1.2 million ounces, was 9% better than the guidance given three months earlier at the height of the power crisis. By the end of the second quarter of 2008, more than 6% in energy efficiencies had been achieved.

In total AngloGold Ashanti lost 270,000 ounces of gold production in 2008 as a result of the power crisis. “It is important to remember that when the Eskom electricity crisis hit, AngloGold Ashanti had already started to implement energy-saving projects – these began as early as 2003. We were one of the first signatories of the Energy Efficiency Accord, an agreement between business organisations and the DME to demonstrate commitment to the department’s energy efficiency strategy,” says Mack.

The accord commits industry, including the mining sector, to a 15% reduction in electricity consumption by the year 2015 through a number of sector-specific strategies linked to demand side management.

“If we had not already had some of these initiatives in place, the impact of the power shortage would have been much more severe for AngloGold Ashanti,” adds Billy Mawasha, Engineering Head: Africa Region. “Further initiatives are currently being investigated and implemented which should see us getting down to our targeted 10% below the Energy Conservation Scheme benchmark (corrections and adjustments for growth excluded) by the end of 2009.”

Unfortunately, however, Eskom’s initial blanket requirement that the mining industry decrease its power consumption by 10% following the electricity crisis in January 2008 meant that AngloGold Ashanti, which had already made significant headway with its energy efficiency programmes, was measured on the same scale as other industry peers who were just beginning to put implementation programmes and strategies in place.

Given the fact that the mining industry is one of the largest consumers of the country’s energy, and taking into consideration the rising cost of electricity in South Africa and the company’s commitment to reducing its carbon footprint, it makes business sense to produce more gold on less power.

AngloGold Ashanti aims to continue reducing its power consumption, to ensure that it stays ahead of power requirements and continues to improve efficiencies.

ONGOING ENERGY EFFICIENCY IMPROVEMENTS

Improvement in energy efficiency has been achieved through, amongst others:

• Three Chamber Pipe Feeder System at Moab Khotsong Mine – this system recovers the potential energy of water going down the mine and uses it to assist in pumping the used underground service water to the surface. On average this system will reduce the energy used by conventional water pumping methods by 70%.
• Waste heat recovery system – compressed air generation plants produce a significant amount of heat, which is released into the environment after being cooled through cooling water circuit arrangements. The aim of this project is to use this unwanted heat to heat up change house and residence hot water supply systems.
• Compressed air management system – this is a real-time control and scheduling system for different compressors to achieve optimal efficiency.
• Relocation of the VK100 compressor machine – this project entails the physical relocation of a compressor machine from Tau Lekoa Mine to Moab Khotsong Mine, where it can service the base load requirements of the compressed air load for the Vaal River operations. The relocation will address the energy inefficiencies being experienced by some of the larger machines that are presently servicing this base load. This project is already in progress and the unit is scheduled to be brought on line during the third quarter of 2009.
• Refrigeration plant real-time control – this is a system that will control the operation of the refrigeration plants to ensure their optimal operation and only when needed.
• Main ventilation fans guide vanes control – this is a system that controls the inlet vanes of the main fans to ensure efficient performance.
• Replacing conventional incandescent lamps with energy efficient compact fluorescent lamps.
• Effective control through switching off unnecessary electrical loads – for example, installing daylight switches that will ensure lights are only switched on at night.

Not all the energy saving initiatives have been underground. Some of the smaller, behaviour-based initiatives that the organisation has adopted include switching off equipment on weekends and encouraging human intervention: people in the organisation are encouraged to identify and intervene in the unnecessary use of energy at all operations.