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  • Moody's

    Stillwater Mining Company -- Moody's announces completion of a periodic review of ratings of Sibanye Gold Limited

    Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Sibanye Gold Limited and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.

  • South African Mining Revival Threatened as Power Cuts Take Toll
    Bloomberg

    South African Mining Revival Threatened as Power Cuts Take Toll

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterWhen South Africa’s state-owned utility announced record power cuts on Monday afternoon, Impala Platinum Holdings Ltd. had two hours to hoist thousands of workers from 1 kilometer (0.6 miles) deep shafts.The deepening crisis at debt-ridden Eskom Holdings SOC Ltd. shut down South Africa’s key mining industry for 24 hours, hitting gold and platinum producers that had been enjoying a renaissance on the back of higher metal prices. The rolling blackouts threaten to tip South Africa’s economy into recession and hobble miners already impacted by community protests and xenophobic violence.Johannesburg-based Implats was ordered to cut electricity usage to 55 megawatts from about 300 megawatts, forcing it to reduce power to furnaces by 90% and shutting down refrigeration and compressor plants.“It was drastic, it makes life very difficult,” said Johan Theron, a spokesman for Implats. “We can’t operate like this but if we don’t cut the power, the national grid collapses.”“The world will still need the minerals and metals that South Africa has, but in the short term this is potentially damaging to investment prospects,” said Ross Harvey, an independent economist and mining analyst. “For as long as Eskom remains in its current state, we are not going to see the kind of investment that we need.”Power is critical to keep South Africa’s mines running and Eskom is responsible for supplying 95% of the electricity used by the continent’s most advanced economy. Some companies, such as Anglo American Platinum Ltd., can minimize losses by using expensive diesel generators, but they remain dependent on the utility’s baseload supply.Stability Needed“South Africa urgently needs to stabilize Eskom,” said Jana Marais, a spokeswoman for Amplats. “Frequent load curtailments pose a risk to our operations as they risk the safety of our people and can lead to loss of production and revenue.”Implats, along with Sibanye Gold Ltd., Petra Diamonds Ltd. and Harmony Gold Mining Co. resumed operations on Wednesday as Eskom scrambled to repair broken plants.Sibanye, which requires about 750 megawatts to run its platinum and gold operations, still doesn’t have sufficient power, said spokesman James Wellsted. The company has been forced to postpone pumping water from underground mines or reduce ventilation to manage supplies, he said.“It’s still very uncertain and you can understand why investors are being reluctant to invest,” Wellsted said.When platinum producers reached a wage settlement last month with the biggest and most militant labor union, it appeared to pave the way for them to capitalize on record palladium prices and for some to resume paying dividends next year. Now more problems are piling up.While Eskom’s struggles are the biggest drag on South Africa’s economy, other issues have contributed to business confidence slumping to the lowest level in two decades. Community protests are leading to huge losses, and xenophobic violence is sapping investor appetite for South Africa, Amplats Chief Executive Officer Chris Griffith said in October.Rio Tinto Group’s Richards Bay Minerals shuttered its operations on Dec. 4 after violence in surrounding communities led to an employee being shot on the way to work.Illtud Harri, a spokesman for Rio Tinto, didn’t immediately respond to emailed queries.To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.netTo contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Dylan Griffiths, Nicholas LarkinFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Ramaphosa Cuts Short Trip as Power Crisis Grips South Africa
    Bloomberg

    Ramaphosa Cuts Short Trip as Power Crisis Grips South Africa

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterSouth African President Cyril Ramaphosa cut short a trip abroad to deal with an escalating crisis at the state power company, as week-long blackouts threaten to tip the economy into recession.The rand declined the most in a month Tuesday as Eskom Holdings SOC Ltd. said there’s a high likelihood of power cuts all week and mining companies including Sibanye Gold Ltd., the world’s biggest platinum producer, temporarily halted operations. Vodacom Group Ltd., the nation’s biggest mobile operator, said the outages are disrupting its service.Ramaphosa returned from Egypt, having terminated his trip a day early to “attend to urgent domestic priorities,” the presidency said in a statement. Eskom management will brief the president on Wednesday morning on “plans to mitigate and resolve the current electricity crisis,” it said.“As plausible as some of the explanations that Eskom is putting forward are, it’s really not sufficient,” Ramaphosa’s spokeswoman Khusela Diko said. “We are supposed to ensure that we are on top of issues of maintenance and we are supposed to ensure that we are able to forward plan,’’ she said in an interview with SAFm radio Wednesday morning.Eskom, which supplies 95% of the power used in Africa’s most industrialized economy, has struggled to meet demand for power since 2005, due to its failure to properly maintain aging power stations and invest in new ones. The latest round of outages were caused by simultaneous breakdowns at several plants and were exacerbated by heavy rains that caused flooding and soaked coal stockpiles.The company implemented a record level of cuts -- 6,000 megawatts -- to prevent a total collapse of the grid late Monday. The utility scaled down the level of cuts to 2,000 megawatts on Wednesday as it made “good progress” in the recovery from localized flooding at its plants and returned several units as scheduled. Breakdowns were at 13,302 megawatts early Wednesday morning, it said in a statement.The rand was down 0.1% to 14.7979 per dollar by 7:30 a.m. in Johannesburg. The economy contracted an annualized 0.6% in the third quarter, and the latest power deficit has compounded the risk of a recession.Ramaphosa’s decision to return to South Africa came after the main opposition Democratic Alliance appealed for him to cancel his engagements in Egypt to address the crisis at home.“It is telling that at the height of what is not just an electricity crisis, but an economic risk and safety threat, the president decided to jet out of the country on an international sojourn to Egypt,” DA leader John Steenhuisen said in a statement. “Ramaphosa is greatly mistaken if he thinks he can run a country and manage this crisis via a cell phone.”The Department of Mineral Resources & Energy said in a statement it’s considering short- and medium-term interventions to address the electricity shortage. These include allowing independent power producers to bring capacity on stream earlier.Besides Sibanye, Impala Platinum Holdings Ltd. and Harmony Gold Mining Co. Ltd., which had shut down mines, said operations had resumed. Petra Diamonds Ltd. said it had also resumed operations at reduced capacity. Palladium rose above $1,900 an ounce for the first time and platinum headed for the biggest daily gain since September.In Cape Town, the nation’s biggest tourism hub that’s gearing up for the year-end holiday season, the city council warned that if the power cuts intensify, it could interrupt water supplies.The outages and heavy rains are creating a “perfect storm” for insurance companies, said Christelle Colman, a spokeswoman for Old Mutual Ltd.’s property and casualty insurance unit. High levels of claims are expected due to foods spoiling in freezers, power surges damaging electronics, an increased number of vehicle accidents and additional incidents of theft, she said.Vodacom and MTN Group Ltd., Africa’s largest wireless carrier, both said the power cuts were affecting their mobile-phone towers and batteries.“Our towers do use batteries as a back-up, but these do have limited power and will eventually fail,” Vodacom spokesman Byron Kennedy said.South African Weather Service forecasts show rain in Mpumalanga, the province in which most power plants are located, will continue through Friday.(Updates with comment from Presidency spokeswoman in 4th, Eskom load-shedding stage in 5th and miners resuming production in 10th paragraphs.)\--With assistance from Mike Cohen, Prinesha Naidoo, Colleen Goko, Felix Njini, Roxanne Henderson, Loni Prinsloo and Amogelang Mbatha.To contact the reporters on this story: Paul Vecchiatto in Cape Town at pvecchiatto@bloomberg.net;Liezel Hill in Johannesburg at lhill30@bloomberg.netTo contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, ;Lynn Thomasson at lthomasson@bloomberg.net, Paul Richardson, Andre Janse van VuurenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Palladium Tops $1,900 as South Africa Power Cuts Fuel Supply Woe
    Bloomberg

    Palladium Tops $1,900 as South Africa Power Cuts Fuel Supply Woe

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterPalladium surged to a record, topping $1,900 an ounce, after South African mining companies halted operations in response to the country’s power cuts. Platinum also rose.South Africa, the world’s biggest producer of platinum and No. 2 palladium supplier, faced a sixth day of rolling blackouts Tuesday. State utility Eskom Holdings SOC Ltd. is struggling with breakdowns at plants and heavy rains that have soaked coal used as fuel.“Tight supply that potentially could get even tighter due to production problems in South Africa helps provide the underlying support,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.Palladium may “pause at $1,900 given some technical resistance, but overall the price could go higher,” he said.A spokesman for miner Sibanye Gold Ltd. said the company resumed some mining operations Tuesday afternoon while some power shortages remain. Impala Platinum Holdings Ltd. said it resumed mining operations after power was restored.Palladium rose to as high as $1,905 an ounce on Tuesday in the spot market before paring gains to $1,898.96 at 5 p.m. in New York, according to Bloomberg generic pricing. Prices climbed for 13 straight days through Tuesday, the longest stretch since mid-2014. Futures for March delivery on the New York Mercantile Exchange rose 0.7% to settle at $1,869.10.Spot platinum surged 3% to $921.90 an ounce. Gold and silver also rose.Palladium’s RecordsPalladium has smashed through new records over the past two years because of limited supply and higher demand for the metal, which is used in autocatalysts that reduce emissions from gasoline-fueled vehicles. The car industry has boosted purchases to meet stricter air-quality rules, sending prices up about 50% this year.Automakers are not that price sensitive given how little palladium contributes to their total costs, said Hansen.“The demand has been really strong on palladium, and any kind of hiccup in supply coming on line has been a knee-jerk reaction for palladium prices,” Phil Streible, senior market strategist at RJO Futures, said by phone Tuesday.Citigroup Inc. sees palladium prices jumping to $2,500 by mid-2020 because of a persistent supply deficit. There are no signs of substitution with cheaper platinum or significant amounts of scrap metal coming to market, the bank said.Analysts have been less bullish on the outlook for platinum, given weaker demand for the metal, mainly used in autocatalysts for less popular diesel vehicles. Prices are up 16% this year, helped by investment buying.Longer term, platinum may benefit from Asia’s push for fuel-cell electric vehicles, which use platinum catalysts in the electrodes, according to a report this week from precious metals refiner Heraeus Holding GmbH.\--With assistance from Ranjeetha Pakiam, Justina Vasquez and Steven Frank.To contact the reporters on this story: Elena Mazneva in London at emazneva@bloomberg.net;Justina Vasquez in New York at jvasquez57@bloomberg.netTo contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Joe Richter, Luzi Ann JavierFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Rand Drops as South Africa Blackouts Stretch On: Eskom Update
    Bloomberg

    Rand Drops as South Africa Blackouts Stretch On: Eskom Update

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterSouth Africa has been hit by a sixth straight day of rolling blackouts as state-owned power utility Eskom Holdings SOC Ltd. acts to prevent a total collapse of the grid after a raft of plant breakdowns. The company implemented a record level of cuts -- 6,000 megawatts -- late Monday, prompting platinum and gold mines in the country to halt operations.Highlights So Far:Eskom says there’s a high likelihood of cuts all week. The utility plans to cut 4,000 megawatts -- known as Stage 4 -- until late Tuesday.Producers including Sibanye, Implats and Harmony stopped mining operations and mobile-phone networks have been affected.The City of Cape Town warned that a return to Stage 6 could lead to water-supply interruptions.Rains that have soaked coal and caused flooding may continue through Friday.Read more: Record Blackouts Shut South Africa Mines as Recession Risk RisesHere are the latest developments, updated throughout the day. Time stamps are local time in Johannesburg.Rand falls (2:47 p.m.)The rand fell 1% to 14.8158 per dollar by 2:47 p.m. in Johannesburg. It was the outlier in emerging-markets, which traded largely flat versus the dollar. The South African currency has now weakened two days in a row after Eskom raised the blackouts to a record level Monday. The rand declined Tuesday by the most on a closing basis since Oct. 30.Perfect storm for insurers (2 p.m.)Between the power cuts and heavy rains causing flooding in parts of South Africa, it’s a “perfect storm” for insurance companies at the moment, said Christelle Colman, a spokeswoman for Old Mutual Ltd.’s property and casualty insurance unit.The business typically expects higher levels of claims during periods of extended load-shedding, she said. These vary from claims related to frozen foods spoiling in freezers when outages exceed the scheduled time period to power surges damaging electronics around the home.There’s also an increase in claims due to power surges and motor car accidents during night-time blackouts. The rotating power cuts also mean more incidents of theft and robbery, especially during December when South Africans travel for summer holidays.Battery Theft (1:30 p.m.)The constant outages are affecting the performance of batteries powering MTN Group Ltd.’s equipment, said Africa’s largest wireless carrier. The company spent about 300 million rand last year ($20 million) on batteries for existing sites and has 1,800 generators in use.The company is also having to spend more on security to protect its batteries, generators and general site equipment from thieves and vandals.“Load-shedding is seeing entire neighborhoods cloaked in darkness at predictable times, which is offering criminals greater cover for their thieving,” the company said.Limited impact at Gold Fields (1:15 p.m.)Gold Fields Ltd., which operates one mine in South Africa, said the impact of power cuts has been limited so far.“We have managed the impact so far by shifting load between critical activities to ensure our core mining activities can continue,” said spokesman Sven Lunsche. “If load shedding continues at Stage 4 or above for a prolonged period, however, and there are sustained interruptions linked to our production ramp up it will become more challenging and we will need to implement alternative mitigations to ensure business continuity.”Manufacturing contracts (1 p.m.)South Africa’s statistics office said factory production contracted for the fifth consecutive month in October, when Eskom implemented the previous round of power cuts. That adds to the risk of a second recession in as many years. Manufacturing accounts for about 13% of gross domestic product.Anglo Platinum costs (1 p.m.)Anglo American Platinum Ltd. said that the rolling blackouts may add to its production costs this year, which are already likely to exceed an earlier forecast.The company is engaging with Eskom to understand the technical constraints and see where it can assist, spokeswoman Jana Marais said separately.“We have standby diesel power generators in place, and all our operations have emergency-response plans which detail what should happen in the event of load-shedding, which includes the safe evacuation of employees, shutdown procedures and communications.”Vodacom connectivity (12:30 p.m.)Vodacom Group Ltd. said its customers around the country will be experiencing network-connectivity issues due to the Stage 4 load-shedding affecting its mobile phone towers.“Our towers do use batteries as a back-up but these do have limited power and will eventually fail,” said spokesman Byron Kennedy. “A notable complication with Stage 4 load shedding over consecutive days is that batteries don’t get enough time to recharge to full capacity.”Vodacom has recently put mitigation measures in place including additional batteries and generators around the country, he said.Cape Town water (12 p.m.)A return to Stage 6 could lead to water-supply interruptions in Cape Town, the city warned.“Load-shedding of this severity is likely to constrain our ability to provide water supply in the reticulation system across the whole of Cape Town in the usual way,” it said in a statement. “Residents should not panic, but please use water sparingly and prepare just in case they do experience a period of no water supply.”Platinum, palladium rise (10:30 a.m.)Platinum and palladium led gains among major precious metals after South African producers said they had stopped operations. Platinum gained as much as 1.2%. Palladium rose as much as 0.6% to a fresh record of $1,894.47 an ounce, closing in on $1,900 for the first time. The metal has rallied 50% this year amid tight supply.High likelihood of cuts all week (10 a.m.)Eskom plans to cut 4,000 megawatts until 11 p.m. on Tuesday as it continues to face a shortage of generating capacity. Breakdowns are at 15,200 megawatts, the company said in a statement.“The incessant rains continue to impact coal handling and operations at our power stations. The probability for load-shedding remains high for the rest of the week.”Rains to continue (10 a.m.)Heavy rains have soaked coal, which is used as fuel, and caused flooding at Eskom’s Kriel and Camden power stations, the utility said. South African Weather Service forecasts show rain in Mpumalanga, the province in which the electricity plants are located, will continue through Friday. Rainfall in Lephalale, near the giant Medupi plant, could reach as much as 25 mm (1 inch) today, forecasts show.Mines close (Earlier)Producers including Sibanye Gold Ltd., the world’s biggest platinum miner, recalled workers from underground and stopped milling ore after Eskom announced Stage 6 cuts on Monday night. No. 2 producer Impala Platinum Holdings Ltd. didn’t start the 4 a.m. underground shift Tuesday and the company has stopped milling ore and shut its smelter.\--With assistance from Prinesha Naidoo, Felix Njini and Loni Prinsloo.To contact the reporters on this story: Colleen Goko in Johannesburg at cgoko2@bloomberg.net;Roxanne Henderson in Johannesburg at rhenderson56@bloomberg.netTo contact the editors responsible for this story: Amogelang Mbatha at ambatha@bloomberg.net, Liezel Hill, Pauline BaxFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Record Blackouts Shut South Africa Mines as Recession Risk Rises
    Bloomberg

    Record Blackouts Shut South Africa Mines as Recession Risk Rises

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterPlatinum and gold mines in South Africa stopped operations as the country was hit by record levels of rolling blackouts that are crippling key parts of the economy, threatening another recession.Producers including Sibanye Gold Ltd., the world’s biggest platinum miner, recalled workers from underground and stopped milling ore after state-owned power utility Eskom Holdings SOC Ltd. announced late Monday it would cut 6,000 megawatts from the grid to prevent a complete collapse.The rolling blackouts, which continued for a sixth straight day Tuesday, have a far-reaching and debilitating effect on the economy. In the first quarter, power cuts contributed to the biggest contraction in a decade. South Africa is the world’s main source of platinum-group metals, used primarily in autocatalysts.Eskom downgraded the cuts to Stage 4, or 4,000 megawatts, overnight and was still on that level Tuesday morning. The utility has experienced a raft of breakdowns as it struggles to maintain aging plants and grapples with faults at two giant new power stations, Medupi and Kusile. The utility has also blamed heavy rains that have soaked coal used as fuel.While mining directly makes up only about 8% of gross domestic product, a shutdown in the industry will also hit manufacturing, which accounts for double that. The work stoppage will also weigh on South African exports, half of which is made up by mining products. That could again widen the deficit on the current account, which is one of the factors that keeps the rand and the economy vulnerable to global events.“It does mean that the economy is heading for a recession,” Iraj Abedian, chief executive officer of Pan-African Investments and Research Services, said by phone from Johannesburg. “There’s no way that hot on the heels of the previous quarter’s negative growth in GDP with this type of humongous and material disruption to the continuity of business that the economy can register positive growth.”Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.For miners, the industry-wide shutdown comes as South African producers seek to capitalize on rallies in prices for palladium, rhodium and gold, which have boosted earnings.\--With assistance from Rene Vollgraaff.To contact the reporters on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net;Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.netTo contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, ;Rene Vollgraaff at rvollgraaff@bloomberg.net, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Record Blackouts Force South Africa Miners to Halt Work
    Bloomberg

    Record Blackouts Force South Africa Miners to Halt Work

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterSouth Africa’s biggest platinum and gold mining companies are scaling back some operations as record power cuts, now in their sixth day, start to cripple key parts of the economy.Eskom Holdings SOC Ltd. on Monday moved to Stage 6 load-shedding from 6 p.m. local time, meaning it cut 6,000 megawatts from the national grid, the most yet, after a technical problem at the new Medupi Power Station. The utility has since downgraded the status to Stage 4.Workers at Impala Platinum Holdings Ltd. didn’t start the 4 a.m. underground shift Tuesday and the company has stopped milling ore and shut its smelter, spokesman Johan Theron said by phone. Harmony Gold Mining Co. Ltd. was still weighing plans to resume operations at nine underground mines shut down on Monday evening after state-owned Eskom Holdings SOC Ltd. cut 6,000 megawatts from the national grid, spokeswoman Marian van der Walt said by phone Tuesday.“Due to safety we decided not to allow people underground and may actually be doing the same today,” Van der Walt said. “We are still assessing, but things aren’t looking much different today.”Sibanye Gold Ltd., the largest private-sector employer halted “all high energy-intensive activities” Monday evening, spokesman James Wellsted said. “We are stopping milling operations,” he added.Petra Diamonds Ltd. stopped mining at its South African operations.South Africa’s mining industry is a pillar of the economy despite its contribution to gross domestic product declining in recent years.A spokeswoman for Anglo American Platinum Ltd. said she couldn’t immediately respond to emailed queries.(Updates with companies’ comment from second paragraph)To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.netTo contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Hilton Shone, Helen NyamburaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • South Africa Hit by Record Blackouts, Raising Recession Risk
    Bloomberg

    South Africa Hit by Record Blackouts, Raising Recession Risk

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterSouth Africa’s state power company intensified rolling blackouts to a record, signaling a deepening crisis at the debt-ridden utility and raising the risk of a second recession in as many years.Eskom Holdings SOC Ltd. said on Monday it will move to Stage 6 load-shedding from 6 p.m. local time, meaning it will cut 6,000 megawatts from the national grid, after a technical problem at the giant new Medupi Power Station curbed supply. That’s the biggest cut yet. The utility downgraded the status to Stage 4 as of 10 p.m.The utility is curbing power for a fifth straight day as it struggles with breakdowns at plants and heavy rains that have soaked coal used as fuel. The blackouts have a debilitating effect on the economy by curtailing mining and factory output and causing crippling traffic delays.“It does mean that the economy is heading for a recession,” Iraj Abedian, chief executive officer of Pan-African Investments and Research Services, said by phone from Johannesburg. “There’s no way that hot on the heels of the previous quarter’s negative growth in GDP with this type of humongous and material disruption to the continuity of business that the economy can register positive growth.”South Africa’s statistics office announced last week that gross domestic product shrank an annualized 0.6% in the three months through September. Power cuts also dented the economy in the first quarter, when it contracted the most in a decade, led by a drop in manufacturing, mining and agriculture outputEskom’s announcement marked the end of a torrid day on Twitter for South African President Cyril Ramaphosa. His weekly letter to the nation highlighting how Medupi is a fitting symbol of the importance of state-owned companies was derided on the social-media site.At 10 p.m. local time he issued a statement commiserating with his countrymen.“The ongoing load-shedding is devastating for the country. It is causing our economy great harm and disrupting the lives of citizens,” he said. “The anger and frustration that this load-shedding has caused is understandable.”Municipalities were also caught off guard, with Johannesburg electricity distributor City Power saying it has no load-shedding schedule for Stage 6.The one thing that could prevent GDP from dipping as deep as it did in the first quarter is the fact that many businesses are winding down as the Christmas holidays approach.Growth would have to rebound about 0.8% in the fourth quarter to reach the government’s forecast of a 0.5% expansion in the three-month period, said Gina Schoeman, an economist at Citigroup South Africa. The economy is unlikely to grow that much, she said.Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.Load-shedding at Stage 6 is “no cause for alarm as the system is being effectively controlled,” Eskom said in a statement. “Eskom’s emergency response command centre and technical teams will be working through the night to restore units as soon as possible.”Mining companies say they are probably bearing the full brunt of load-shedding because they are among the heaviest users of electricity. Sibanye Gold Ltd., the country’s biggest private employer, has to reduce power use by 20% during load-shedding, said spokesman James Wellsted.“It’s concerning and if it continues for a long time it will impact on production and the entire industry, not to mention the economy,” he said before Stage 6 load-shedding was announced.(Updates with latest from Eskom in second paragraph)\--With assistance from Felix Njini, Antony Sguazzin and Paul Vecchiatto.To contact the reporters on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net;Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.netTo contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Paul Richardson, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Bloomberg

    Eskom Ramps Up Power Outages, Risking a South African Recession

    (Bloomberg) -- South Africa’s state power company intensified rolling blackouts to a record, signaling a deepening crisis at the debt-ridden utility and raising the risk of a second recession in as many years.Eskom Holdings SOC Ltd. said on Monday it will move to stage 6 load-shedding, which means it will cut 6,000 megawatts from the national grid after a technical problem at the Medupi power station that affected generation supply. That is the biggest cut yet.The utility is cutting power for a fifth straight day as it struggles with unplanned breakdowns at its plants. It was previously cutting 4,000 megawatts after at least 14,200 megawatts of unplanned breakdowns. The blackouts have a debilitating effect on the economy by curtailing mining activity and factory output and causing crippling traffic delays.The latest round of load-shedding started two days after the statistics office announced that gross domestic product shrank an annualized 0.6% in the three months through September. Power cuts already hit the economy in the first quarter, when it contracted the most in a decade, lead by a drop in manufacturing, mining and agriculture output.This “throws the gauntlet to the government to rise to the occasion and stop pretending that Eskom can be fixed,” Iraj Abedian, chief executive officer of Pan-African Investments and Research Services, said by phone. “In the meantime, it does mean that the economy is heading for a recession. There’s no way that hot on the heels of the previous quarter’s negative growth in GDP with this type of humongous and material disruption to the continuity of business that the economy can register positive growth.”Eskom said on Twitter stage 8, under which 8,000 megawatts would be cut, will result in customers having power for only half of the day.The one thing that could prevent GDP from dipping as deep as it did in the first quarter is the fact that many businesses are winding down as the Christmas holidays approach.December is the “least damaging time to have load-shedding” because the economy is geared more toward the services industry, with construction work and factory activity set to slow for the holiday break, said Dawie Roodt, chief economist at the Efficient Group.Mining companies say they are probably bearing the full brunt of load-shedding because they are among the heaviest users of electricity.The world’s biggest platinum-group metals producers prioritize electricity allocation to underground mines and ensure workers’ safety while reducing power to smelters. Still, production may suffer as companies stockpile ore for processing later when there is sufficient power, Jana Marais, spokeswoman for Anglo American Platinum Ltd., said. Cutting power to smelters also adds to costs because the plants are designed to run continuously, she said.Sibanye Gold Ltd., the country’s biggest private employer, has to reduce power use by 20% during load-shedding, said spokesman James Wellsted.“It’s concerning and if it continues for a long time it will impact on production and the entire industry, not to mention the economy,” Wellsted said.Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.To contact the reporters on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net;Felix Njini in Johannesburg at fnjini@bloomberg.netTo contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Bloomberg

    Eskom Blackouts Raise Risk of Second South African Recession

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterSouth Africa’s flagging economy could face a second recession is as many years due to a new wave of nationwide power cuts.Eskom Holdings SOC Ltd., the state-owned power utility seen by Goldman Sachs Group Inc. as the biggest threat to the country’s economy, started a fifth day of rolling blackouts on Monday due to further losses of generating capacity at its plants. While the power cuts are implemented to prevent a collapse of the electricity grid, they have a debilitating effect on the economy by curtailing mining activity and factory output and causing crippling traffic delays.The latest round of so-called load-shedding started two days after the statistics office announced that gross domestic product shrank an annualized 0.6% in the three months through September. Power cuts already hit the economy in the first quarter, when it contracted the most in a decade, lead by a drop in manufacturing, mining and agriculture output.“As it is, the fourth quarter was going to be flat but now there’s a growing chance that it could be negative,” said Elize Kruger, a senior economist at NKC African Economics.The one thing that could prevent GDP from dipping as deep as it did in the first quarter is the fact that many businesses are winding down as the Christmas holidays approach.December is the “least damaging time to have load-shedding” because the economy is geared more toward the services industry, with construction work and factory activity set to slow for the holiday break, said Dawie Roodt, chief economist at the Efficient Group.Mining companies say they are probably bearing the full brunt of load-shedding because they are among the heaviest users of electricity.The world’s biggest platinum-group metals producers prioritize electricity allocation to underground mines and ensure workers’ safety while reducing power to smelters. Still, production may suffer as companies stockpile ore for processing later when there is sufficient power, Jana Marais, spokeswoman for Anglo American Platinum Ltd., said. Cutting power to smelters also adds to costs because the plants are designed to run continuously, she said.Sibanye Gold Ltd., the country’s biggest private employer, has to reduce power use by 20% during load-shedding, said spokesman James Wellsted.“It’s concerning and if it continues for a long time it will impact on production and the entire industry, not to mention the economy,” Wellsted said.Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.To contact the reporters on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net;Felix Njini in Johannesburg at fnjini@bloomberg.netTo contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Hilton ShoneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Platinum Catch-22 Prevents Miners Tapping the Hottest Metals
    Bloomberg

    Platinum Catch-22 Prevents Miners Tapping the Hottest Metals

    (Bloomberg) -- South African miners face a conundrum: increasing palladium and rhodium output to take advantage of soaring prices risks depressing the already fragile market for sister metal platinum.That’s because palladium and rhodium are mined as byproducts, with every extra ounce of the former typically coming with two to three additional ounces of platinum. Stricter emissions standards have boosted palladium and rhodium consumption in autocatalysts for gasoline cars. By contrast, the backlash against diesel vehicles, where most platinum gets used, has seen the metal languish.Consequently, some of the world’s biggest platinum miners, including Sibanye Gold Ltd. and Impala Platinum Holdings Ltd., are loathe to boost production, even as palladium’s eight-year supply deficit could widen in 2020.“They can’t increase production because the main metal is platinum and they don’t want to make the price come down,” said Rene Hochreiter, an analyst at Noah Capital Markets Ltd. in Johannesburg.Platinum has rallied 15% this year from a decade low, but demand is forecast to drop in 2020, pushing the market back into a surplus. Palladium has jumped 41% in 2019, while rhodium has surged 144%.“Expanding production to try and benefit from higher rhodium and palladium prices can be quite risky,” said James Wellsted, a Johannesburg-based spokesman for Sibanye. “Most companies seem reluctant to raise production in South Africa due to the possible impact it will have on the platinum price.”The rally in palladium and rhodium is extending the life of older shafts along Rustenburg’s platinum belt, but producers aren’t rushing to invest in new mines, according to Johan Theron, a spokesman for Implats. Boosting production would make the platinum market “even more supplied,” he said.Given the geological and market restraints, Implats expects output from South Africa’s mines to start declining over the next five years. New projects in South Africa would take years to develop, while those in neighboring Zimbabwe may be stymied by political and economic uncertainty, he said.Anglo American Platinum Ltd., the most profitable of South Africa’s producers, will make a final decision on whether to expand its Mogalakwena mine at the end of 2020, according to spokeswoman Jana Marais. Unusually, the company’s flagship mine produces more palladium than platinum, but Amplats must weigh the prospects for power supply from South Africa’s troubled state-owned utility before moving forward, she said.MMC Norilsk Nickel PJSC is one company planning to boost supplies. The world’s top palladium producer said its platinum-group metals output could almost double by 2030. Still, there isn’t enough metal in the near term to close the current supply gap, Sibanye Chief Executive Officer Neal Froneman said last month.(Updates with Nornickel’s plans in final paragraph)To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.netTo contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas LarkinFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • This Is How the Palladium Boom Comes to an End
    Bloomberg

    This Is How the Palladium Boom Comes to an End

    Palladium – a sister-metal to platinum that’s used mostly in car catalytic converters – has gained nearly 28 percent so far this year, outpacing the 26 percent rise in West Texas Intermediate crude, the 22 percent jump in nickel, and the 16 percent gain for lumber. On the supply side, most of the world’s palladium is a by-product of southern African mines mainly focused on platinum. Manufacturers whose converters at present use more palladium than platinum are likely to take several years to switch back to the cheaper metal.