S.Africa mines to be hit by Eskom power hikes: Anglo

CAPE TOWN (Reuters) - South Africa's mining sector needs to work closely with utility Eskom to find ways of cutting power consumption in the face of planned steep rises in electricity prices, the head of Anglo American Plc said.

Eskom wants to raise prices by 35 percent a year for the next three years to help fund a 385 billion rand power expansion programme.

"A number of the mining groups here today are both major suppliers to and customers of Eskom. Clearly none of us is in a position to sustain large electricity price increases year after year," Anglo Chief Executive Cynthia Carroll told the Indaba mining conference in Cape Town on Tuesday.

Anglo, a major coal producer, and other miners should work together with Eskom to reduce demand and come up with other sources of power, she said.

"This could entail seconding senior management to Eskom, as Anglo American has done ... (or) supplementing supply by generating our own electric power."

Carroll said the company remained on track to cut costs by $2 billion by 2011.

She said although the short-term outlook for the mining sector was uncertain due to the uneven progress of the global economic recovery, the fundamentals were strong.

"While the recovery is unlikely to be entirely smooth, I think we should take comfort from the strength of underlying fundamentals in our key markets such as China, India and Brazil," she said.

"India's growth may well be the most important trend of the next decade. In addition, the longer-term prospects for Brazil and a host of other developing countries should reinforce these trends for many years to come."