Integrated Annual Review 2012 Annual Financial Report 2012 Mineral Resources and Mineral Reserves Regional overview  
 

5.1.6 Improving our energy performance

During 2012, we developed a fully integrated Energy and Carbon Management Strategy for the Group (p93). This is a direct strategic response to the fact that energy already makes up just over 21% of our cost base amid a global trend of rising energy prices and shortages of supply. Under this strategy, we are targeting a 10% energy saving over the baseline by 2016 – subject to capital expenditure restrictions. To support our achievement of this target, all new mine developments must now meet a minimum requirement of at least 20% renewable energy use.

Implementation will be driven at a regional level, subject to coordination and monitoring by our Group-level energy and carbon steering committee.

Energy efficiency in South Africa

Our future energy management efforts in South Africa are focused on South Deep, which accounts for 19% of Group energy consumption. This is due to the scale and nature of our deep-underground mines there, which makes them particularly heavy users of electricity.

Gold Fields regularly engages with South African state utility Eskom on issues around energy pricing and security, both directly and indirectly through the Energy Intensive User Group, the Chamber of Mines and Business Leadership SA. During 2012, Eskom increased electricity prices by 16% – significantly lower than the expected price rise of 25%, though this masks higher tariffs for industrial users.

This appeared to respond to concerns raised by Gold Fields and other large-scale electricity users around the potential commercial impacts of large price increases. Nonetheless, given that this new price follows two successive increases of 26% – and that there are planned general tariff hikes of 8% a year for the next five years (in addition to likely sector premiums) – the cost of energy poses a threat to the profitability and sustainability of our South Africa operations. Although we are currently supported by a historically high rand gold price, it remains imperative that we improve energy efficiency at these operations.

The Energy and Carbon Management Strategy builds on previous efforts at our South African mines. These include:

  • Ongoing replacement of around 700, 45kW auxiliary fans at KDC with more efficient, 31.5kW units that provide the same airflow with less energy usage. The programme, which will result in electricity savings of 9 MW per hour, is partially funded through Eskom’s Demand Side Management (DSM) programme and will also contribute to our generation of Certified Emissions Reductions (CERs) under the international Clean Development Mechanism
  • Full commissioning of the Three Chamber Pump System (3CPS) at KDC East 4 shaft and KDC West 5 shaft, partially financed through the Eskom DSM programme. It is estimated that each of these systems deliver a 1.7MW per hour average energy saving
Cerro Corona plant, Peru   Methane flare at Beatrix, South Africa
Cerro Corona plant, Peru   Methane flare at Beatrix, South Africa

Figure 5.7: Group direct and indirect energy consumption (TJ) (pre-unbundling)

Energy consumption 2012   2011   2010   2009   2008  
Direct 6,514   6,081   5,239   5,239   5,224  
Indirect 18,790   19,691   20,089   19,676   18,669  
Total 25,304   25,772   25,618   24,915   23,893  
  • Implementation of our Compressed Air-Less Programme, to reduce underground compressed air pressure by utilising alternative power mediums – whilst maintaining sufficient pressure to provide safe working conditions. This is being implemented at South Deep
  • Institution of Closed Loop Refrigeration (CLR) at South Deep, to reduce the need to recirculate water to the surface for cooling
  • Piloting of a Waste Management Programme at KDC to address water and compressed air leaks. The programme, which is funded through Eskom’s DSM programme, will be rolled out more widely in 2013 if it proves successful
  • Ongoing load-shifting, with a focus on concentrating activity on the most efficient pumps during more expensive power phases

Despite such efforts, Gold Fields energy intensity (excluding Sibanye Gold) rose by 6% to 4.9 TJ/koz during 2012. This appears to reflect the impact of this year’s strikes (p139). Although the affected operations did not produce gold during this period, we continued to utilise at least 55% of our normal power in order to maintain safe underground conditions. Likewise, the June 2012 underground fire at KDC’s Ya Rona shaft further undermined energy intensity due to lost production and additional pumping requirements to support fire-fighting efforts.

Although energy intensity in the South Africa Region remains relatively high compared to the rest of the Group, we are confident of our ability to exploit further opportunities to reduce consumption through our new Energy and Carbon Management Strategy.

www.eskom.co.za

Figure 5.8: South Africa
energy consumption (pre-unbundling)
  Figure 5.9: West Africa
energy consumption
Figure 5.8: South Africa energy consumption (pre-unbundling)   Figure 5.9: West Africa energy consumption

Figure 5.10: Alignment of Energy and Carbon Strategy with overall Group strategy
Energy and Carbon strategy Corporate strategy          
Figure 5.10: Alignment of Energy and Carbon Strategy with overall Group strategy

Energy security in the Australasia and West Africa regions

The remote, off-grid location of both our Agnew and St Ives mines means we have only limited options in terms of our power supply.

We are facing a significant increase in our electricity costs in Australia, due to higher gas prices and the ending of our current power purchasing agreement with BHP Nickel West, through whom we have historically sourced our power. We are currently negotiating a new power purchase agreement with BHP Nickel West for Agnew and St Ives for a 10-year term commencing in 2014. A separate gas-sourcing agreement is also being negotiated with third parties.

Our operations in Ghana have faced a significant increase in the price of electricity supplied by the Ghana Grid Company (GridCo) and the Volta River Authority (VRA). Because new gas supplies in Ghana have been relatively sporadic, both companies have needed to reconvert their energy towards diesel/thermal generation – which has resulted in higher costs. The situation became more acute in August 2012, when an incident off the coast of Togo (involving an unidentified vessel that was attempting to evade a local naval vessel) ruptured the sub-sea gas pipeline running from Nigeria to Ghana. The sub-sea gas pipeline is only expected to come back onstream by April 2013.

This – along with a refurbishment programme being carried out by the Electricity Company of Ghana (ECG) – has resulted in ongoing load-shedding across the country, impacting our Damang mine. During load-shedding, Damang has been able to meet its own power needs using on-site diesel generators. Whilst the impact on production has been limited, energy costs have been higher as a result of co-generation.

Despite these challenges, on 30 January 2013 we became the first mining company in Ghana to successfully negotiate upfront electricity tariffs with the VRA for 2013, which should result in future savings. Previously tariffs were predated and paid in arrears. Likewise, on 20 February we secured our 2013 tariffs with the ECG.

www.ecgonline.info

www.gridcogh.com

www.vra.com