| Tue 17 Jun 2008, 12:44 | | WEZ - Wesizwe Platinum Limited - Concludes study on Eskom Contingencies |
|
WEZ
WEZ
WEZ - Wesizwe Platinum Limited - Concludes study on Eskom Contingencies
Wesizwe Platinum Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/020161/06)
JSE code: WEZ & ISIN: ZAE000075859
(the "Company" or "Wesizwe")
Wesizwe concludes study on Eskom Contingencies
Wesizwe has concluded an extensive study into the contingencies available to it
to deal with the currently strained Eskom reserve power margin situation. The
study examined six different co-generation options to supplement any potential
shortfall in Eskom power supply. The options considered were:
1. Generation fuelled with diesel using a variety of prime movers available
in the market;
2. Generation fuelled with Heavy Fuel Oil ("HFO") again using a variety of
prime movers available in the market place;
3. Local coal-fired power station (syndicated with other producers);
4. Botswana-based coal-fired power station (syndicated with other
producers);
5. Hybrid Solar-LNG Power generation; and
6. Independent Power Producer ("IPP") with existing private power station
operators.
The study concluded that:
The co-generation measures to be adopted by Wesizwe to cover the capital
construction period from September 2008 through to the completion of shaft
sinking and the commencement of project ramp-up in 2011/2012 were adequate and
that any Eskom shortfalls or outage incidents would not in any way affect the
capital construction program. The requirement for this period is less than 2 MW
from September 2008 until April 2009, from which date <10 MW will be required
for the remainder of the capital construction programme. Eskom have contracted
to supply 2 MW by September 2008. Cogeneration facilities to be installed by
April 2009 will cover 18MW of potential demand and utilize diesel fuelled
reciprocating engines, this being the most economical solution for this limited
period base load duty. The cost of these 18MW power generation contingencies
(R168 million) is built into the Bankable Feasibility Study released on 31 March
2008.
Eskom power lines and transformers providing a firm supply of 40MW of power are
scheduled to have been installed by June 2010 and a firm supply of 80MW to meet
the total mine and concentrator load of 65 MW by end 2011. In terms of Eskom`s
current grid planning and the supply contract entered into with Wesizwe, Eskom
would be able to provide for the project`s complete power and energy
requirements by June 2010. The full 65 MW will only be required by 2016 and any
slippage in Eskom`s delivery on this project will therefore be unlikely to
impact the project. However, despite this assurance by Eskom, cogeneration
facilities to cover the full power requirement for the project will be in place
at all times to accommodate any Eskom shortfall in the event of Eskom project
slippage.
The study concluded that, even in the event of an Eskom incident, it was highly
unlikely that any Eskom-related shortfalls or outage incidents would exceed more
than 10% of the power requirement for any sustained period. This has important
implications for the cost of power in that the weighted average price of 90% of
the Eskom rate and 10% of the estimated cogeneration rate, (which would be
substantially higher than the Eskom rate) for some realistic percentage of time
less than continuously, is unlikely to increase the overall cost of power by
more than 20%. As power constitutes only 6,5% of the project`s working cost,
this increase does not have a material impact on the project`s viability or the
current net present value ("NPV") and internal rate of return ("IRR") estimates.
A further consideration is that as Wesizwe will be creating 3,200 new jobs and
has a broad-base of black-owned ownership, it was highly likely that the project
would receive priority treatment in existing and new Eskom capacity coming on
stream, further reducing the risk of power availability impacting materially on
the projects capital construction programme, ramp-up or steady-state production.
This factor, combined with the cost-effective co-generation cover for the
project`s full power requirement at all stages of its development, has mitigated
the power risk to a minimum.
As regards the capital requirements for co-generation, these should not impact
materially in the project`s economics. The company is currently considering the
options available to it to extend the 18MW co-generation facility to a 65MW
facility and will commission a full feasibility study into the option selected
once this decision has been made. The results of this will be made available to
investors as soon as this is completed.
Commenting on the results of the study, Wesizwe CEO Mike Solomon said "We are
very pleased with the outcome of the study, as the indicative impacts of any
Eskom problems are significantly less than we anticipated, as is the associated
risk. It is clear from the study that we have a completely manageable situation
with power availability for the project and the economics and risk thereof, and
while we as management do not for one minute underestimate the serious
implications of the Eskom situation, we have a clear, well researched and
coherent strategy to deal with the situation. We are therefore not unduly
worried that the power situation will impact materially on the project`s
progress or economics. With this issue under control, its full steam ahead with
the project"
Johannesburg
17 June 2008
Enquiries
College Hill +27 11 447 3030
Nick Williams
Fred Cornet
Wesizwe Platinum +27 11 994-4600
Mike Solomon, CEO
www.wesizwe.com
Date: 17/06/2008 12:44:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
