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The ESKOM DEBACLE


The situation at ESKOM, the SA utility, will ultimately be at a minimum a real problem or could get out of control. The utility is a disaster and I’m sure it is about to get downgraded by Moody’s. S & P already downgraded the utility sometime ago and once both services have placed it in the junk category funds will be forced to sell which closes off any possibility of re-financing their massive debt.
On top of that historically poor maintenance and corruption has left the utility a disaster coupled with poor management and yet again the recent turnover of the chairman last week.

For SBGL, if this goes the worst way, it will certainly lead to reduced if not significantly reduced production. Somehow even with this horrible scenario I think the miners will get enough electricity to muddle through although there is no easy solve to the decades of mismanagement at the utility.

As a result of possible reduced production though there is obviously less supply of platinum group metals in what will be an already chaotic market of demand from investors and users. So prices will insulate any drop off in my opinion.
On top of that the more this thing gets out of control the more impact on the South African economy which weakens the Rand that all local expenses are paid in, even though gold and the platinum group metal mine output is sold in dollars. Obviously this also insulates the miners.

A major problem for South Africa and a significant, troubling human challenge given its impact on the population. My take. If there is any hair on SBGL though, this is the area of exposure.

Here is an article that appeared on Bloomberg:
Eskom Chairman Resigns as South Africa Blackouts Resume 
https://www.bloomberg.com/news/articles/2020-01-10/eskom-chairman-mabuza-steps-down-after-resumption-of-blackouts

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