1. Mine Closure and Rehabilitation: Canvassing the Issues
Presentation to the Parliamentary Portfolio Committee on Mineral Resources
25 October 2017
Tracy Humby
Professor, School of Law, University of the Witwatersrand
Consultant: Young Earth Attorneys
Board Member: Centre for Environmental Rights

2. Main points
Poorly regulated mine closure is a significant problem that detrimentally affects SA’s poorest citizens and the productive capacity of our soil, water and air
Poorly regulated mine closure increases State liability
End-of-mine-life closure processes are not working
The drivers of unplanned, chaotic or poorly executed mine closure processes derive from numerous institutional failings in the public and private sector
Dealing with the mine closure problem requires a whole-of-government response with the mineral authorities and oversight bodies taking the lead

3. Context Definition Mine closure and the metaphor of trauma
Behind the trauma:
End-of-mine processes
Closure processes
Operating company processes

4. Mine closure definition
Reclamation
Remediation/Mine Closure
Regeneration
The process of transforming an active mine into a set of safe and stable landforms that are non-polluting and provide habitat and ecosystem services supporting economic activities by the new land users’
Daniel Limpitlaw et al 1997, Rehabilitation and soil characterization, Proceedings of the 11th International Conference on Coal Research, Calgary, 9-12 September, 1997, pp

5. Mine closure and the metaphor of trauma
“A huge amount of trauma is associated with the closure of mines” (job losses, electricity cuts, safety issues, soil contamination, acid mine drainage, dust pollution, zama zamas, continue-mining-at-all- costs mindsets)
Swanepoel: “The gold industry is sitting with a terminal problem, and no one is giving us the right medicine. We need hospice care but there are no hospices. Nobody wants to talk about death.”
Mine downscaling and closure is the “doom side of the doom”.

6. Context: End-of-mine processes
Exploration
Development
Operation
Mine Closure
Management of Residual and Latent Risks
Decommissioning & Rehabilitation
Relinquishment
Release of Private Liability: In SA Application for a Closure Certificate (s 43, MPRDA)

7. Context: Closure processes
Annual/
Progressive Rehabilitation
Setting Aside Financial Provision
2015 FP Regs
Exploration
Development
Operation
Mine Closure
Integrated Closure Planning
2014 EIA Regs
Management of Residual and Latent Risks
Decommissioning & Rehabilitation
Relinquishment
Release of Private Liability: In SA Application for a Closure Certificate (s 43, MPRDA)

8. Context: Operating company processes
Exploration
Development
Operation
Mine Closure
Specialization/Contracting Out
Change of operators through:
Change in ownership or control of operating company
Sale of the mine
Business rescue
Transfer of mining right – s 11, MPRDA
Transfer of other licences
Companies Act, 2008
Practices associated with Illicit Financial Flows aimed at burdening operating company with debt and denuding it of assets
Putting mines on Care and Maintenance
Winding up & Liquidation
Companies Act, 1973
Insolvency Law

9. Poorly regulated mine closure is a significant problem that is detrimentally affecting SA’s poorest citizens and the productive capacity of our soil, water and air

10. Poorly regulated mine closure increases State liability
Rehabilitation of D & O mines
Cost of AMD remediation
Carolina Water Crisis
Unquantified health costs
Police resources expended upon artisanal mining and mine-related conflicts
Unravelling of security situation on unrehabilitated and abandoned mines (linked to unresolved policy and regulatory framework for ASM)

11. The end-of-mine-life closure processes are not working
Small number of closure certificates being granted
Mining companies not applying for closure certificates
Region
Mining rights (excl. road works)
Mining rights for road works
Mining permits
Prospecting rights
Unlisted sites
Total per region
% per region
North West 3 6 59 39 24
131
16%
Limpopo 65 77
145
18%
Mpumalanga 4 10 1%
Northern Cape 87 42 11
143
Free State 1 45 63 99 13
221
28%
Gauteng 5 15 2%
KwaZulu-Natal 33 21 7%
Western Cape 20 38 5%
Eastern Cape 29 12 41
Total per type 27 57
363
288 68
803
100%
% per type 3%
45%
36% 9%
Table 1: Distribution of granted closure certificates, 2011 – 2016
Source: Ingrid Watson ‘The state of mine closure in South Africa: The myth of relinquishment’ Unpublished paper, Centre for Sustainability of Mining and Industry, based on data obtained by Mark Olalde, Investigative Journalist.

12. The end-of-mine-life closure processes are not working
Fleurhof Extension 25
Major property developments proceeding without closure certificates allegedly being obtained; town planning schemes releasing mining companies from liability

13. The end-of-mine-life closure processes are not working
Apparently R60 billion in financial provision for mine rehabilitation sites remains unused because mines are not legally closed.
A data-driven investigation shows that nearly R60-billion is being held in funds for the rehabilitation of mines across South Africa. Mpumalanga, the country’s most important coal-mining province, alone holds more than R17-billion.
This money cannot be used for rehabilitation while a mine is still operational, but the Department of Mineral Resources (DMR) can use it if a mine is abandoned. The department is yet to provide an instance in which this money has been used, however.
Instead, most mines are not deemed legally closed, and the money cannot be touched.
Mark Olalde ‘South Africa: R60 billion held for mines that are never closed’ Oxpeckers, 15 June 2017 (

14. Drivers of unplanned or poorly executed mine closure processes derive from numerous institutional failings in the public and private sector
Single point, liability-shifting closure certification process
Unclear regulatory leadership on care and maintenance
Generic company law regulation relating to fundamental transactions, business rescue and winding-up do not articulate AT ALL with closure processes (continue-mining-at-all-costs mindsets)
Model, amount and fragmentation of financial provision
Unimaginative, poorly conceptualized, and poorly enforced integrated closure planning
Lack of transparency

15. Drivers …Single-point certification process
Orderly process of decommissioning, rehabilitation, relinquishment and management of residual and latent impacts “a myth”
Sudden v planned closure
DMR/DPME inquiry into low levels of closure certificates for mining rights
In practice … only a small percentage of mines are closed according to plan, with the majority closing prematurely or suddenly for a variety of reasons.
Laurence, D. (2006). Optimisation of the mine closure process. Journal of Cleaner Production, 14(3–4), 285, 286.

16. Drivers … Single-point certification process
Continue-mining-at-all-costs mindsets (Aurora, Blyvooruitzicht)
DMR/DEA: Criteria for drawing a line in the sand? Partial closure?
Images of Blyooruitzicht Gold Mine, courtesy of Mark Olalde, Investigate Journalist, 2017

17. Drivers … Single-point certification process
‘The requirement to reduce mitigated risk to zero is unattainable, and since it cannot be achieved, no mines are getting closure permits. This means that the best possible practices are being rejected, and since undertaking best practice brings no reward, mines are not bothering to do their best.’
‘It is a political impossibility.’
M. Milaras, F Ahmed TJM McKay ‘Mine closure in South Africa: A survey of current professional thinking and practice’ Paper presented at Mine Closure 2014, held in October 2014, Johannesburg, South Africa

18. Drivers ….Regulation of care and maintenance
Unclear how many mines are being put on ‘care and maintenance’ as opposed to being closed
Atlatsa to place South Africa’s Bokoni mine on care and maintenance, 24 July ( africas-bokoni-mine-on-care-and-maintenance )
Glencore places Eland mine on care and maintenance, 7 October ( and-maintenance )
AngloGold intends to place its Kopanang mine and the Savuka section of the TauTona mine on care and maintenance, 28 June ( as-many-as jobs-at-south-african-mines)

19. Drivers ….Regulation of care and maintenance
November: 2015 FP Regulations regulate care and maintenance for the first time
June - October 2016: DEA sends out a “clarification” note for comment, incorporating section on C&M; DEA publishes draft amendments to the FP Regulations (no substantive changes to C&M provisions); amendments published (but no change to C&M provisions)
March 2017: DEA invited CER and others to a meeting about the FP Regulations to discuss proposed amendments. Proposed that the C&M provisions are deleted with the following explanation: “Since these provisions are also fundamental to many other aspects of the MPRDA including section 52 and others, it would be better placed within the regulatory framework of the MPRDA… The objective of the provisions on care and maintenance and deemed closure which would seem to have no place in a regulation dealing with financial provision is difficult to understand. Care and maintenance and deemed closure are aspects which are integral to the mining regime provided for under the MPRDA  within the context of closure planning and should be addressed in a coherent manner with other relevant provisions in the MPRDA by regulations under that Act and not in an environmental regulation.”
March 2017: CER, LHR and FSE made a joint comment on those proposed amendments in which they said that Reg 16 on care and maintenance should be retained (substantiated)
No proposed amendments to the FP Regulations have been published for comment to date.
LEADERSHIP needed on regulation of C&M

20. Drivers … Articulation with company law processes
C&M a signal for corporate distress
Companies manage corporate distress through
Fundamental transactions (major sale of assets)
Business Rescue (Aurora, Optimum mine)
WindingUp/Liquidation (Blyvooruitzicht)
See also Annexure Slides
Company ‘adaptation’ facilitates dereliction
Need for DMR/DTI/DoJ to start working on operating company processes

21. Drivers … Articulation with Company Law
2011 – 2012: Shift of Blyvoor Mining Company’s (BMC) ownership to VMR (but contested later)
July 2013: VMR walks away
August 2013: BMC directors initiate winding-up proceedings
1700 workers immediately unemployed
Water pumping to prevent flooding and accumulation of AMD stops overnight
November 2013: Liquidators sell mine to Goldrich Holdings (directors also responsible for Aurora/Grootvlei)
2014: Goldrich misses contractual payment and itself goes into business rescue; liquidators spend 5 months in court to regain control of the mine; zama zamas occupy mine site, Eskom cuts electricity to only operational shaft and AMD collects
2015: Trashed mine in limbo
2016: Mine developer (Blyvooruitzicht gold) purchases Blyvoor from liquidators for R250 million
2016: Unclear whether s 11 transfer granted or whether Blyvoor Gold given new 30 year mining rights

22. Drivers … Articulation with Company Law
Mine closure risks for these processes:
Change to more precarious operators, can lead to rapid unravelling (Blyvoor)
Custodians of the environment/environment do not feature as interested, affected or relevant parties in these processes – extent of liability and capacity to manage not considered
No priority for the environment amongst claims
DMR not aware of initiation of processes
Business rescue/liquidation authorities unaware of regulatory requirements
Operating companies may be deregistered/liquidated without complying with closure obligations
Without regulatory closure DMR cannot access FP resources

23. Drivers …Financial Provision
“Set-aside” model
Is the R60 billion leverage-able?
Insufficient FP
Golfview’s business rescue plan, submitted in 2015, shows R622-million in total liabilities, R29-million in environmental rehabilitation costs and only R5- million in a trust fund
Atha Africa Ventures’ proposed coal mine in the Mabola Protected Environment holds about R5.8-million for rehabilitation in a strategic water zone with likelihood of AMD and decant
DMR’s rigorous application of new FP regs KEY
DMR must take the lead to establish true status quo of existing FP

24. Drivers … Financial Provision
Respondents reported that the prime challenge facing sustainable mine closure was the inadequate funding of and poor cash flow management of the closure process. Thus, long-term remediation measures were usually sidelined due to budget constraints. This became especially chronic near the end of life-of-mine when cash flow becomes constrained.
M. Milaras, F Ahmed TJM McKay ‘Mine closure in South Africa: A survey of current professional thinking and practice’ Paper presented at Mine Closure 2014, held in October 2014, Johannesburg, South Africa

25. Drivers … Integrated closure planning and enforcement
Sustainable closure not being adequately conceptualised and implemented at the OUTSET of mine design (Milaras et al)
Baseline indicators do not encompass adequate detail and recommendations to guide sustainable mine closure (noise, land capacity, geochemistry characterisation, baseline visual assessments, social indicators, soil capacity and ecological relations most sorely neglected)
Closure costing exercises inaccurate and unrealistic thereby permanently hindering mine closure (outdated DMR Guideline)
Integrated closure planning not being conducted (‘Key failure lies in mine closure generally being pushed out towards the end of the life of the mine when money gets tight.)
Closure objectives – unrealistic, unimaginative and not capitalising on new opportunities (climate change adaptation land uses)

26. Drivers … Integrated closure planning and enforcement
Poorly conducted operational monitoring (water quality; dust; air quality parameters; soil indicators such as depth, organic composition, expected agricultural yield, carrying capacity, stability requirements, erodibility, water infiltration features; environmental pathways and interactions; GHGs; social indicators) – high equipment and maintenance costs and lack of expertise are challenges.
DMR is responsible for environmental enforcement under One Environmental System (Tormin case affirms) – the buck for enforcement planning will stop there.

27. Drivers … Integrated closure planning and enforcement
Cliff collapse in Tormin case

28. Drivers … Lack of transparency
Companies and (until recently) government fight to keep details of FP and closure secret
DMR enforcement of existing disclosure requirement: 2014 EIA regs – Regulation 26(h) – Environmental authorisation, EMPR independent assessment of financial provision, closure plans, compliance monitoring report.
Disclosure will open up debate on adequacy of FP and allow for better decision-making (no independent assessment of FP, practice of rubber-stamping)
Possibility of using government’s Open Data Portal.

29. Dealing with the mine closure problem requires a whole-of-government response with the mineral authorities and oversight bodies taking the lead
PPCMR
DEA
DPME?
DWS
DMR
DTI
DoL
DoJ

30. Questions
What should be the short, medium and long-term priorities for addressing our mine closure problem?
Leadership on C&M?
DMR accountability for rigorous implementation of new FP regs and EIA regs?
Inquiry into and policy debate on use of existing FP funds?
DMR/DEA/DTI working group on articulation between company law and mine closure/environmental laws
Closer DPME monitoring of DMR performance?

31. Correspondence

32. ANNEXURE SLIDES

33. Drivers … Articulation with Company law
Fundamental transactions (amalgamation or merger, disposal or all or greater part of the assets of a company, scheme or arrangement involving reorganization of share capital)
Shareholder approval requirements and court approval in certain instances (s 115, Companies Act, 2008)
Main policy objective: Protecting interests of minority shareholders
No point of articulation with mining/environmental laws

34. Drivers … Articulation with Company law
Business Rescue: Underlying policy objectives are -
Reorganizing a financially distressed company to avoid liquidation and restore profitability (s 128, Companies Act, 2008)
Balance rights and interests of “relevant stakeholders” and “affected persons” – Neither concept includes the State as custodian of variety of natural resources
Business rescue practitioner must have legal expertise

35. Drivers … Articulation with Company Law
Stay on legal proceedings against company in business rescue excludes:
Criminal proceedings against company or any of its directors or officers
Proceedings by a regulatory authority in execution of its duties, provided authority notifies business practitioner in writing (s 133(1), Companies Act, 2008)
Business rescue practitioner must only consult with ”affected parties” and company management.

36. Drivers … Articulation with Company law
Winding up: Chapter 14, Companies Act, 1973
Policy objective: Protecting creditors, identifying and realizing assets of company, payment of creditors claims and distribution of residue to members.

37. Drivers … Articulation with Company law
Roles and responsibilities of liquidator, board, Office of the Master re closure obligations unclear
Companies being liquidated without applying for or obtaining closure certificates
DMR/DTI – Working Group on mine closure/company law articulation
Fig 1: Compulsory and voluntary liquidations in the mining and quarrying sector, South Africa: 2000–2015 Source: Statistics South Africa Statistical Release P0043 Liquidations and insolvencies (August 2016).