Conflicting laws for a mine in liquidation allow Blyvoor mine’s owners to dodge their responsibilities.
Mining is an inherently destructive activity. Over more than a century in South Africa, mining companies have been able to do what they want and dodge their environmental responsibility. The cost is now being borne by the government. Six thousand derelict mines will cost R30-billion to rehabilitate, according to the department of mineral resources.
Excellent legislation such as the National Environmental Management Act has now been put in place, forcing mines to allow for the cost of rehabilitation in their upfront costs. But the grey area between government departments and legislation is creating cracks that mines can slip through.
One such mine, Blyvoor, is located in Blyvooruitzicht, southwest of Johannesburg. A year after its optimistic predictions of how gold mining would continue at the site past 2030, owner DRDGold sold the mine to Village Main Reef. The latter started operations last year, but then said the sale had not gone through and pulled out. The mine had to go into liquidation and neither company is willing to admit to owning it.
Mariette Liefferink, the head of the nongovernmental organisation Federation for a Sustainable Environment, said this is not a new situation.
“DRD[Gold] is known to alienate its mines when the cost of liabilities exceeds the profits,” she said.
Liefferink was approached by residents around Blyvooruitzicht, who were suffering after environmental control measures, such as dampening the dust at the mine, were stopped. A similar thing happened when DRDGold sold its West Rand operations to Mintails, a company that re-mines slimes dams for gold.
“Neither Village [Main Reef] nor Blyvoor accepts any responsibility or liability for the impact,” she said. This has left problems such as the “near certainty” that local water sources have been contaminated by uranium and other toxic metals, as well as the residents’ inhalation of dust.
She has approached all the relevant departments and has the trail of correspondence to prove it. Water and environmental affairs said that only the department of mineral resources can deal with Blyvoor, which, in turn, said it cannot enforce any rehabilitation obligations on DRDGold or Village Main Reef because all the liabilities belong to the mine, which is in liquidation.
Competing laws mean that, when a mine goes into liquidation, the Insolvency Act and the Companies Act take over. The funds each mine has to deposit with the mineral resources department for rehabilitation are theoretically not protected and could be used to pay creditors.
The same Companies Act also allows a company to deregister without having to obtain a closure certificate, which the Mineral and Petroleum Resources Development Act (Minerals Act) requires. Again, the water and environment departments do not need to be involved.
Numerous submissions by environmental organisations as part of proposed changes to the Minerals Act have raised concern that the department does not have the necessary know-how to declare that a mine has rehabilitated an area and can consequently close. The acid mine drainage crisis, which is costing water affairs billions of rands to fix, is an example of this.
Catherine Horsfield, a lawyer at the Centre for Environmental Rights, said there is a trend in the mining industry for larger, often listed mining companies to sell their operations when they become less profitable. They sell to smaller mining companies that pull out the last feasible deposits and then go belly-up before the environmental damage has been rehabilitated.
“It is a convenient way of evading the environmental liability after reaping the profits in ‘better’ years,” she said. In the case of Blyvoor, DRDGold gave repeated predictions of long-term profitability (beyond 2030) in its annual reports. But within 18 months of the company selling its shares in Blyvoor to Village Main Reef, both seller and buyer say it is no longer profitable. Now that it is in liquidation, who will rehabilitate the environmental damage that made the operation so profitable previously? It seems both seller and buyer will manage to escape their environmental responsibility.
Horsfield said the trend was repeated in the “Kosh” area, named for its location between Klerksdorp, Orkney, Stilfontein and Hartbeesfontein and home to a group of mining houses. Harmony Gold bought all the shares of African Rainbow Minerals and took over the mine. It then sold the mine to Pamodzi Gold. Six weeks after the transfer, Pamodzi declared bankruptcy.
The minerals law is clear that the sale of a mine can occur only after the minister has signed off on it. This is meant to allow the department to investigate the financial stability of the buyer, ensuring that it can continue operations without having to lay off workers, and that it has the finances to rehabilitate the area.
DRDGold spokesperson James Duncan said that, whenever a mine is sold, the rehabilitation funds are transferred to the seller. In the case of Blyvoor, the company lowered the sale price specifically so that Village Main Reef could top up the R77-million shortfall in this fund when it took over. “DRDGold does not sell an asset unless the rehabilitation liability goes with it,” Duncan said. In its financial results, R111-million is recorded as the environmental liability for Blyvoor.
In the case of Blyvoor, the liquidator should be able to draw on the R35-million fund that was deposited with the mineral resources department to complete the closure plan and rehabilitate the area, he said.
“DRDGold will not dump an asset on a buyer that either has inadequate substance or is buying only to ‘rape and escape’, thus trying to transfer risk in the matter.”
He said his company is spending R80-million a year across all its operations to vegetate tailings dams and suppress dust â€“ more than it paid out in dividends to shareholders.
In its financial results, Village Main Reef said it is not responsible for the mine and therefore has no environmental liability. It cannot comment because of the liquidation process, it said this week.
An investigation into the financial provisions of mine closures in South Africa by the World Wide Fund for Nature said: “There are indications that a number of mines are not making adequate provision for closure.”
The report said the minerals department is also remiss in having financial guidelines for remediation that are outdated and have not been increased to reflect inflation. In many cases, this meant the money set aside for rehabilitation was not sufficient. The department also does not have a formula for calculating the cost of ensuring that water resources are not contaminated, it said.
The department did not respond to questions this week.
The Chamber of Mines, in its Guidelines for the Rehabilitation of Mined Land, said the cost of rehabilitation could be as much as 10% of the operational costs of a mine. It bemoaned the lack of government guidance. The new laws tell the industry what to do to minimise the environmental impact, but not how this should be done, it said. Each operation therefore had to work out how the laws applied as it went along.
The net result is that mines have to operate in an environment in which they are not sure about which department they must report to at different times. But it also means that, in cases of bankruptcy or liquidation, there is no clear imperative for remediation.
Horsfield is hopeful of amendments to the Minerals Act that would ring-fence remediation funds, regardless of the circumstances. But this will take time as the amendments have to go through a lengthy process before being implemented.