Electricity in mining
Rail transport and the mining industry
Road transport
Water utilisation on gold and platinum mines
National Ports' policy
Liquid fuel
Gold production
Electricity in mining

Electricity is an important input for all forms of mining. It is a major energy source for the transport of personnel, material and ore, production machines and mineral processing.

In addition it is the exclusive power source for vital health and safety related applications such as the pumping of water, ventilation and refrigeration.

Most underground mines experience an inflow of groundwater. This water has to be pumped out to maintain safety in the workings. Some gold mines in South Africa are situated in an area where the ore body is overlain by water bearing dolomitic strata. One such mine pumps some 70 Ml of groundwater per day to surface.

The workings of mines are ventilated to remove dust and fumes and provide healthy atmospheres for workers. A survey of South African gold mines indicated that the average quantity of ventilating air circulated was some 6 cubic m per second per 1000 ton of rock mined per month. A mine producing 200 000 ton per month would therefore circulate 1 200 cubic m of air per second. That is 1,2 ton of air per second.

The virgin rock temperature increases with depth. The rate of temperature increase, or the geothermic gradient, varies according to the type of rock and therefore differs from place to place.

In mine workings heat flows from the exposed rock surfaces to heat up the air. In order to provide a safe environment for workers in deeper mines it is necessary to cool the ventilating air. This is achieved by refrigeration plants which supplies chilled water that is in turn used to cool the air. A survey conducted in 1993 indicated that the installed refrigeration capacity in South African gold mines exceeded 1 400 MW of cooling power.

In underground gold operations these health and safety applications may consume in excess of 55% of the total electricity used.

On the average gold mine the cost of electricity amounts to some 11,4 % of the total working cost. On collieries the average cost of electricity amounts to some 8 % of the total cost for underground mines and 6 % for opencast mines.

In 1999 the mining industry consumed 31 352 GWh or 18,4% of the electricity sold in South Africa.

National Electricity Regulator statistics for 1999 revealed that there were 1039 mining electricity consumers in South Africa of which 1002 obtained their electricity directly from Eskom. This situation came about for a number of reasons, e.g.:

  • Many mines had been established in areas before the local Municipality was formed
  • Local Municipalities were unable to meet the requirements of mines in respect of electricity supply and service
Because of Municipal electricity prices were mostly higher than those of Eskom, mines were also reluctant to enter into electricity supply agreements with Municipalities.

Through the years Eskom and the mining industry have developed a thorough understanding of each other’s needs and concerns that resulted in formal agreements, negotiated through the Chamber of Mines, which provide benefits to both parties. For example Eskom will, in the case of shortages of electricity, as far as is reasonably possible, allocate the available electricity to the pumping, winding and ventilation requirements of mines. In return mines agree to shed load when Eskom experiences under-frequency conditions in its system.

Because mines can control their electricity demand to some extent they are able to make use of tariff options that minimise their cost of electricity. These tariff options are Eskom’s Megaflex time-of use tariff and Nightsave, a tariff that does not impose a demand charge during off-peak times, i.e. at night.

For this reason the average price of electricity purchased by mines from Eskom during 2000 was US$0-01,86/kWh ( R0-12,91/kWh) compared to the average price for all customers of US$0-01,91 (R00-13,23/kWh).

(Note - the average exchange rate during 2000 was R6-94/US$1-00)

In further attempts to maximise tariff utilisation for cost containment mines have also participated in Eskom pilot studies on real time pricing.

The mining industry is, however, not only a major consumer of electricity it is also the major supplier to the electricity supply industry.

During 2000 Eskom burnt some 92,289 million ton of coal at an average cost ofUS$6-40 (R44-40/ton). This was 40,8% of South Africa’s total coal sales for that year making Eskom the largest single consumer of coal in the country. The revenue to the mining industry amounted to US$590,35 million (R4 097 million).

It is therefore clear that the mining industry, and especially the coal mining industry, has a special interest in the well being of the electricity supply industry.

Rail transport and the mining industry

Rail transport in South Africa is dominated by poornet a division of Transnet, a state owned enterprise. Most mines producing bulk products, e.g. coal, iron ore, manganese, depend on Spoornet to convey their products to markets, harbours and customers.

The following selected primary mineral products illustrate the dependence of the mining industry on Spoornet:

Commodity Exports transported by rail Local consumption transported by rail
Coal 68 Mt to Richards Bay (Coal Link)
1.9 Mt to Durban
14 Mt transported to various customers
Iron ore 21.4 Mt transported to Saldanha (Orex) 10.7 Mt transported from mines to local steel producers
Manganese 1.8 Mt to Port Elizabeth 1.8 Mt transported from mines to local plants
Copper 49 kt transported to various harbours for export 88 kt transported from mines to local plants

In general individual mines have little influence on the price of their products, especially where products are sold in international markets. The costs transporting products are thus critical to the profitability of a mining operation. Rail transport costs are already affecting the profitability of some of these mines.

Spoornet tariffs for mineral cargo are not determined by the market mechanism only, as provision is included for the cross-subsidisation of services provided to other consumers.

Spoornet has been subject to under-investment for many years, the average age of the fleet is 26 years. This old fleet is costly to operate and maintain, thus adding significantly to Spoornet’s overhead costs. Transnet recently announced that it intends spending R15bn to upgrade Spoornet’s ageing fleet.

The restructuring of Spoornet is currently under consideration. Some salient features of the envisaged new structure are:

  1. General Freight Business and Coal Link remaining part of an integrated rail freight operation and the current reporting structure of Orex to Spoornet will be maintained. There could be further engagement on the future restructuring of Orex.
  2. Spoornet retaining a network of 15 800km that includes a selection of low density lines with expanded volumes up to 2020. To ensure the viability of this network, the current efficiencies and productivity will be improved to the required levels and be supported by the required levels of investment.
  3. The retrenchment of approximately 8000 employees in the period up to 2006.

The issues of concern to the mining industry are:

  • An advanced restructuring model has been agreed on by Government and Labour without involving major customer groupings. Business was in fact totally excluded from the process
  • The inclusion of a specialised operation like Coal Link in the general rail freight business means that its current cross-subsidisation of the general freight business will continue. As a result no freight tariff will be cost-reflective, which is contrary to good fiscal practice
  • While mention is made of further engagement on the future restructuring of Orex, there is no indication of the future arrangement envisaged for it. In view of the positions held by Spoornet management and Labour it is unlikely that Orex will be concessioned off
  • The continued inefficiency of most rail routes, combined with insufficient investment in infrastructure maintenance, will further impair what is an important logistical link for the mining industry.

In the meantime Spoornet is moving ahead with a strategy to concession and lease railway lines with limited volumes of traffic, while its closed lines are being prepared for sale.

Water utilisation on gold and platinum mines

Gold and platinum mines receive potable water from bulk providers, e.g. Rand Water, into reservoirs from where it is reticulated through the mining area. Wastewater is collected, treated and re-used or disposed of. Most mines undertake extensive treatment and recycling of water used for dust allaying, cooling and metallurgical processes. Only sufficient water is purchased to make up losses.

The major industrial applications of potable water on mines are:

  • Drinking water in the workings
  • Dust allaying for occupational health purposes. This water must be clean so as not to pollute the atmosphere.
  • Air cooling to prevent heat stress in workings. This water must be of sufficient purity to prevent fouling of heat exchangers.
  • Metallurgical processes. The water must be sufficient pure not to interfere with the process.

In addition most mines also distribute potable water to hostels and villages for drinking, cooking, ablution and sanitation. It is estimated that some 30% of the water purchased from Rand Water by mines is distributed for such domestic applications.

These mines are therefore also water service providers as envisaged in the Water Services Act.

National Ports' policy

As a result of its large reserve base South Africa is a major mineral producer.

The domestic market for most of the mineral commodities produced is, however, relatively small. Hence South Africa's mineral industry is very much export orientated.

Because of the quantities and mass involved most mineral products are exported by sea.

As a result of this volume of seaborne exports the mining industry has a material interest in South Africa’s ports system.

Mineral products are exported mainly through Richards Bay, Durban, Saldanha and Port Elizabeth.

The two ports of most importance to the mining industry are Richards Bay and Saldanha.

Richards Bay is home to the Richards Bay Coal Terminal, a dedicated coal loading facility. A special railway line connects Richards Bay with the major coal fields in Mpumalanga. The Richards Bay Coal Terminal can handle 72 Mt coal per year.

An iron ore loading facility at Saldanha handles all the irone ore exports from the Sishen iron ore mine 861 km away.

Port infrastructure

South Africa currently has seven commercial ports, namely Durban, Richards Bay, East London, Port Elizabeth, Mossel Bay, Cape Town and Saldanha Bay.

South Africa’s overall port infrastructure is rated amongst the best in the world. On a continual basis infrastructure has been ranked as an advantage that South Africa should use to attract investment.

Yet if overall the infrastructure is world class, there is a strong belief, borne out by patterns of actual Government expenditures, that inadequate maintenance of infrastructure in recent years will negatively impact on the cost of doing business in South Africa.

A study conducted by the Department of Transport estimates that capital spending on ports, as a percentage of long-term capital requirements, was less than 40% of what it should be. As a consequence the cost of repairs is eventually going to escalate substantially.

Management of ports

Portnet, a division of Transnet Ltd manages and controls all seven South African commercial ports. Transnet Limited is a public company of which the South African Government is the sole shareholder,

During the last few years it became apparent that Portnet was hindering rather than facilitating trade between South Africa and the rest of the world. Its high and poorly crafted tariff structure, together with operational efficiencies undermined South Africa’s international competitiveness.

The freight transport system in South Africa still reflects a structure designed to support an import-substitution economy, with export and import wharfage charges at South Africa’s ports being high by international standards. Until recently these charges were also levied on an ad valorem basis.

The 1999 "Moving South Africa" document by the Department of Transport categorised the fact that exporters start paying higher than global average wharfage costs for container values over R20 000.

While the port system has been successful in tailoring mechanisms for bulk exporters of coal and iron ore, the general sector is characterised by high port costs.

In order to improve the situation Portnet was separated into:

  • Port operations which focuses on terminal and cargo operations in strategically segmented, commercially viable business units
  • The National Port Authority which focuses on the provision of total port infrastructure and marine related services, the management of port activities in a landlord capacity and the regulation of the port system.