Mining firms content with power supply

US GOLD miner Newmont and Golden Star Resources, a Canadian mining firm with concessions in Ghana, have described as very productive Volta River Authority's (VRA) assurance that there would be no power supply disruption for the rest of this year.

Newmont's spokesperson Omar Jabara said Tuesday his company does not expect any electricity supply problems for the remainder of 2009 particularly at its Ahafo mine.

In the year-to-date, power supply has generally been stable “with minor systemic interruptions”, he stated in an emailed reply to questions.

Ahafo receives power from the VRA, a hydropower utility, and also has the option to run higher-cost diesel back-up generators during power disruptions.

In 2007, Newmont and other producers in the country were hit by nationwide power shortages owing to low water levels serving Ghana's hydro-electric facilities.

However, Jabara continues that the short-term grid supply outlook currently is “positive and stable”, with the current water level in the lake actually higher than it was this time in 2008.

In the early part of 2008, production at Ahafo was affected by transmission difficulties but this was resolved when an additional transmission line was built to help manage the supply of grid power to the plant.

The company had expected lower grid power availability last year, but was able to lower its cost projects for Ahafo several times, as power supply exceeded expectations.

Newmont also teamed up with three other miners to build an 80-MW power plant that started commercial operations last year.

It is still evaluating what effect recent changes in the rates charged by the VRA will have on the power costs at Ahafo, Jabara hinted.

In June 2008, the VRA hiked its power tariffs to approximately $0.22/kWh, up from the around $0.10/kWh, although the effective rate has since dropped to some $0.14/kWh because of the devaluation of the Ghana cedi.

Newmont and other mining companies in Ghana challenged the increase through the Chamber of Mines. Golden Star Resources late last week said it had received confirmation from the VRA that grid power costs would be reduced as a result of these negotiations.

The Canadian miner expects all-inclusive electricity rates of around $0.08/kWh, applied retroactively to January 1, 2009, to cut its total cash costs by an average of $40/oz this year.

It says the new rate is an interim rate which will be in effect until a final power rate formula is implemented.