RedBack mining company cries foul over increase in electricity tariffs

RedBack Mining Incorporated, operating in Ghana as Chirano Gold Mine, has expressed dismay about government’s increase of electricity tariffs without engaging the mining industry.
The President and Chief Executive Officer of RedBack Mining Incorporated, Richard Clark, on the company’s website said "The recent announcement in Ghana regarding proposed increases in power costs for bulk users is unfortunate, as the decision appears to have been made without any formal discussions with the mining industry. We appreciate the situation which Ghana faces, regarding the escalating oil prices and we remain ready to work with the government towards adjusting to this reality,” he said.
“Through the Chamber of Mines we look forward to reaching an acceptable compromise which takes into account Ghana's requirements and also recognizes the cost challenges to the gold mining industry and the interests of our shareholders," Mr. Clark observed.
Though the company believes that the government’s policy of increase in electricity tariffs for mining companies, steel mills and other high voltage consumers to about 100%, as a result of higher world oil prices, is in the right direction, much could have been achieved if the government had engaged them in discussions about its intentions.
According to a release on the company’s website, “Red Back has not been party to any formal discussions or negotiations with the ECG or any other government body, and therefore any increase to this point has been determined without consultation with Industry.”
The release further states “We have joined with the Ghana Chamber of Mines and other mining companies in commencing discussions with the relevant governmental agencies, regarding the size of this increase and the apparent focus of this increase on the mining sector.”
According to the statement, even though the company is aware that the cost of power from the national grid in the country (Ghana) will take effect from today, July 1st 2008, it has not received any official notification from the Electricity Company of Ghana (ECG).
To the company’s understanding, the cost of power could increase from the current level of approximately $0.10 per kilowatt an hour (kWh) up to approximately $0.22per kWh.
The statement, however, indicated that the situation would greatly affect the company’s operations if the cost of power reaches $0.22per kWh.
“At $0.22 per kWh power cost would affect Chirano cash costs by approximately $40-$50 per ounce. On a Life of Mine basis (using $0.22 per kWh for power), estimated cash costs are projected to be approximately $430 per ounce, still at the lower end of the cost curve for gold mining companies”, the statement added.
It would be recalled that government last week announced a ‘Bulk Generation Tariff’ of Gp16.91 per kilowatt an hour for mining firms, steel mills and other high voltage consumers. This translates into an ‘End User Tariff of Gp 22.31per kilowatt per hour.
This announcement has raised eyebrows in the mining Industry, of which the Chamber of Mines yesterday met with stakeholders in the industry to take a decision on the announcement.