Strategic Analysis of Electricity Use in the Mining Sector in Southern Africa

Rising Global Demand for Commodities, along with Mergers and Acquisitions, Boosts Electricity Use in the Southern African Mining Sector

The mining sector's response to the Southern African electricity crisis has been largely disjointed and sentiment driven. The type of solutions and mitigating strategies being explored by mining companies differ based on the mining sector as well as on an individual mine. Whilst the response has been swift and deliberate by some companies, others are lagging behind and are still evaluating a range of possible mitigating strategies. The global demand for commodities and increasing number of mergers and acquisitions (M&As) in the mining sector are the main drivers for electricity use in the southern African mining sector. Companies seek to exploit the potential synergies that exist between operations.

"Acquiring or merging with other companies helps a company to grow and reap cost benefits," says the analyst of this research. "Furthermore, mergers can assist in identifying expansion opportunities that were previously not fully utilised or exploited." Presently, the global economic slowdown has resulted in a number of expansion projects being kept on hold. However, global trends indicate that many governments are investing significant amounts of capital to boost the industrial and construction sectors. Increased activity in these sectors boosts the demand for copper, nickel, platinum and manganese.

Mining Companies Strategise on Becoming Less Dependant on Utilities for Power

Depressed commodity prices have impelled several mining companies to close down. This is likely to reduce the amount of electricity consumed by the mining sector significantly, especially in early 2009. "The credit crunch and increased risk aversion have also stifled the number of planned expansion projects," notes the analyst. "Nonetheless, the overall mining sentiment is that many of these projects are in the pipeline and are not permanently cancelled."

Mining companies are looking at becoming less dependant on utilities for power. Equipment suppliers should seek to provide cost-effective solutions to meet short-to-medium-term goals. "In-house company initiatives can create a culture of innovation and significant energy saving for mining companies," concludes the analyst. "Furthermore, transparency and a greater degree of coordination are required between government and mining companies."

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

By Product Segment:

• Gold
• Coal
• Platinum
• Uranium
• Ferrochrome