Most mining operations are viable for a period of 30 years, depending on the mineral extracted and the available reserves. Whilst the expectation is that mines will continue uninterrupted until the planned period is complete, unscheduled closure can occur. Sudden and unplanned mine closure can result in immediate environmental and social impacts. In South Africa, the challenges of mine closure are exacerbated by unexpected sudden closures owing to winding-up and business rescue processes. The literature is inconclusive regarding these issues and there is poor integration of affected communities by mining operations.
We reviewed South Africa’s legal frameworks relating to mine closure, the winding-up of gold mining companies and the impact of sudden closure on the environment and communities.
This review built on and extended previous systematic reviews. We focused on the regulation for financial provisioning for prospecting, mining, exploration and rehabilitation. Two examples of gold mining companies that were closed prematurely were examined. We also reviewed the mine closure and environmental policies of other countries, notably Australia and Canada and noticed similarities to South African policies.
Differences are evident in the enforcement of compliance in Australia and Canada, which are more proactive in dealing with the challenges of winding-up and its impacts.
South Africa could adopt these countries’ models to enforce compliance and proactivity regarding sudden mine closure. One recommendation is to establish a fund for immediate rehabilitation in such cases as part of the temporary mine closure framework.
In South Africa, many unscheduled mine closures have occurred in recent years. This phenomenon has left mining communities distressed through environmental degradation and socio-economic effects. In this article, the terms ‘unscheduled’, ‘sudden’ and ‘premature’ mine closure all refer to the same process of closing a mining operation before the planned date.
The processes of winding-up and business rescue sometimes enable mining companies to evade the normal but costly mine closure obligations.
Business rescue, by contrast, entails reorganising a financially distressed company to avoid liquidation and restore its profitability. The Companies Act 2008, Section 128(1)(b), defines business rescue as proceedings to facilitate the rehabilitation of a distressed company by providing temporary supervision of the company and management of its affairs and property.
The premise underlying business rescue is that the ‘going concern’ value of a company is generally greater than its liquidation or break-up value. The winding-up procedure, by contrast, requires the liquidator to send a certificate to the Companies Commission so that the company is dissolved and deregistered. This step ends the existence of the company as a juristic person and its capacity to bear legal rights and obligations. A serious concern is that government statutes cannot enforce compliance or sanctions on a dissolved company.
The winding-up and business rescue processes have led to sudden and forced mine closure, resulting in poor rehabilitation of tailings storage facilities (TSFs), which affects nearby communities.
When a mine is closed, considerable trauma and frustration affect the surrounding mining community. The distress results from job losses; safety threat issues associated with ‘Zama Zama’ (illegal miners) invading the disused shafts, electricity cuts, poor health and contamination of the soil, water and air.
In South Africa, successful mine closure is difficult to achieve even with community and government agreement on process and objectives. The difficulty is exacerbated when closure is sudden owing to a mining company’s liquidation. The complexity arises from the notion that the government is responsible for enforcing compliance and promoting the industry whilst also protecting human rights. The government finds it difficult to strike a balance and appears not to take proper responsibility for closed mines, which means mining companies may opt for liquidation and sudden mine closure. Mine closure has been known to occur when revenue streams dropped below the cost of operating the mine.
In recent years, the labour costs per kilogramme for gold mining have risen, whereas productivity has remained largely unchanged.
The World Bank predicts that in the next 25 years, several mines will close in developing countries.
This article reviews mine closure policy and its interaction with the winding-up procedure in South Africa. The Aurora Empowerment System, the Blyvooruitzicht Gold Mining Company (BGMC) and the Mintails Mining South Africa Pty Ltd. (MMSA) group of companies provide classic examples of sudden mine closure through a winding-up procedure. There is little research on identifying the key drivers of sudden closure. The known drivers include liability shifting amongst companies, unclear regulatory leadership on care and maintenance, challenges in enforcing an integrated closure plan and generic company regulation, poor mine planning, business rescue and the winding-up procedures.
This article focuses on the winding-up process as the main driver of unscheduled or poorly executed mine closure in the BGMC and MMSA case studies. Laurence
The objectives of this article are as follows:
To examine the interaction of mine closure policy and the winding-up process of mining companies in South Africa.
To review the effect of the interaction between mining and company laws.
To understand what happens in other countries regarding mine closure and the winding-up process of mining companies and to derive lessons from those experiences.
This study used no primary data but reviewed existing literature on policies pertaining to mine closure and the winding-up of mining companies. The review built on and extended previous systematic reviews. The review process involved searching for publicly available literature on mine closure and sudden mine closure. We examined international conference articles, peer-reviewed journal articles, theses, books, policy documents, guidelines, government publications, newspapers and company reports and tool-kits. Primary themes and key words were identified from these sources to assist with further literature search.
Several academic databases were used, such as Google Scholar, Scopus, African Mines online, Engineering Village, Chemical Rubber Company (CRC) netBase, Geoscience World and the South African Bureau of Standards. Other internet sites visited include the Department of Mineral Resources and Energy (DMRE), the Department of Environmental Affairs (DEA) (now called Department of Forestry, Fisheries and Environment), the Centre for Environmental Rights and Lawyers for Human Rights (LHR). Library catalogues were consulted to locate available material on library shelves and additional databases were suggested by librarians. Where additional information was needed, the process was repeated.
The keywords used during the search were limited to subjects concerning mine closure and mine liquidation or insolvency. We excluded oil, gas and marine mining. The sources obtained from the search were ordered according to the most cited, to select the most recent, relevant and valuable literature on the subject. Journal articles were located through indexing and abstracting publications.
As mentioned, the two case studies of BGMC and MMSA provided examples of the interaction between mining, environmental and company laws. We paid close attention to the dust impacts from TSFs after the sudden closure of these mining companies because of liquidation.
The articles, books and policy documents that met the search criteria were assessed according to relevance. A summary of all the literature search categories includes publication details, author details (reference), location of the study or document, the scale or unit of analysis, commodity, year and research subject matter.
Policy documents were reviewed to identify any existing gaps. The main legislative documents referred to were the
Adler et al.
This article focuses on the disjuncture between the winding-up procedure and the financial provisions. We noticed that this is a crucial issue in most prematurely closed and liquidated mining companies.
‘Corporate distress’ is defined in Chapter 6 of the
This scenario is not unique to South Africa. In Australia, United Kingdom, Poland and Spain (amongst others), corporate distress has been prevalent since 2013.
Corporate distress in South African mining results in premature mine closure, which exacerbates the complexity of the regulated mine closure process. Humby
This article discusses two procedures – business rescue and winding-up – through which a mining company expresses corporate distress. We focus mainly on winding-up because our case studies underwent this process, leading to liquidation. Furthermore, winding-up generally results in sudden closure of mine operation.
‘Business rescue’ is defined in the
‘Winding-up’ is defined in Chapter 14 of the
A company’s major and minor shareholders or the company creditors can voluntarily initiate either process without informing government statutory bodies. However, doing so contradicts the provisions set out in the MPRDA 28 of 2002. These provisions stipulate that once a company initiates mine closure processes, a closure certificate needs to be issued, which requires the involvement of the Department of Forestry Fisheries and the Environment (DFFE), the Department of Water and Sanitation (DWS) and the DMRE.
Winding-up is regulated under several Acts in South Africa. However, for insolvent companies, liquidation is regulated by the
Winding-up may also be conducted before creating a new company. The
This is a specific ground upon which a company may be wound-up by the court under Section 344 of the
An early example of a mining company that experienced winding-up was the Aurora Empowerment System. Its takeover of Pamodzi Gold Ltd. was finalised in October 2009. Since 2008, Pamodzi had operated a mine in Orkney, one of the richest gold mining areas in South Africa.
Sudden mine closure is common in South Africa and has direct repercussions for the environment and surrounding communities. In the BGMC case, a tailings storage facility was left unrehabilitated, and soon after the sudden mine closure, the wind blew the dust towards the nearby communities. The dust became a serious nuisance
Another example of a liquidated mining company is MMSA. It holds three mining rights that cover 1751 ha near Krugersdorp.
The PAIA documents reveal that the company and related entities hold less than R17m in funds for rehabilitation.
Mine closure planning is part of the mine life cycle, which includes exploration, pre-feasibility, development through operations and finally closure and rehabilitation. Closure planning is multidimensional and mutually dependent on the surrounding communities.
The best practice in mine closure planning is to consider closure even at the prospecting phase, when the feasibility of the mine and the design and mining permits are established.
Fourie and Brent
The MPRDA Section 38 (2) contains provisions that hold directors of registered mining companies and members of closed corporations accountable for any degradation, deprivation or contamination.
The MPRDA Section 43 (3) states that the holder of a mining right or permit must apply for a closure certificate upon cessation of mining operations or on relinquishing any portion of land to which the right or permit relates. Section 43 also mentions closure planning.
Rehabilitate the environment as far as reasonably practicable to its natural state or to a land use that conforms to the generally accepted principle of sustainable development.
Set aside a financial provision, which only the state can access, to ensure such rehabilitation.
Retain liability for environmental damage even after closure of the operation.
Most attention has focused on the financial provision, the duration of liability and the gaps that allow companies to contract out of their mine closure obligations.
Brent and Fourie
‘Financial provisions refer to the funds set aside for managing the environmental impact of mine closure as a common regulatory technique.
Mines must assess their environmental liability annually and increase the financial provision to the satisfaction of the minister (Section 41.3, MPRDA).
In 2005, the Department of Minerals and Energy published the Guideline Document for the Evaluation of the Quantum of Closure-Related Financial Provision Provided by a mine. The guidelines provide for quantifying various closure components. The quantum of financial provision must include a detailed itemisation of costs required for unscheduled closure, decommissioning and final closure and the post-closure management of residual and latent environmental impacts.
Humby
Humby
In November 2015, Financial Provisions Regulations were promulgated for implementation by NEMA. Requirements in the NEMA regulation Government Notice Regulation (GNR) 1147 stipulate that the financial provisions must be audited by an auditor registered with the Independent Regulatory Board for Auditors. The audit must be conducted annually with comprehensive reconciliation.
In January 2016, the mining industry raised concerns and requested clarity from the Deputy Director General of the then DEA about the 2015
The revised regulation in Chapter 3 of the
Regulation 10 deals with claiming against the trustees or directors of a fund or closure rehabilitation company or from the financial provision deposited into the account administered by the minister for that holder. Subregulation 10 (1) states if the holder, liquidator or business rescue administrator fails to initiate actions to rehabilitate within 30 days after being ordered to do so, the minister may order the trustees or directors of the trust fund or closure rehabilitation company to deposit an identified amount into the account administered by the minister. This amount will enable the minister to undertake the rehabilitation on behalf of the holder.
The aforementioned provisions seem reactive instead of preventative. They both discuss only what actions the minister can take should the rights holder, liquidator or business rescue administrator fail to initiate rehabilitation and closure. It appears that the 2019 Financial Provisioning Regulations will still emphasise environmental rehabilitation over the socio-economic impacts. The regulations do not contain provisions that would enable interested and affected parties to make representations if the financial provisions for a specific prospecting, mining, exploration or production operation are inadequate. Such provisions would be congruent with the national environmental management principle in Section 2 of NEMA. This section states that the participation of all interested and affected parties in environmental governance must be promoted and in line with the requirements of the
As mentioned in Sections Corporate distress in South African mines and Mine liquidation in South Africa of this article, winding-up through liquidation is becoming a working strategy for some mining companies that wish to evade the costly closure obligations. The mine closure framework itself provides little detail regarding sudden closure. This fact causes confusion amongst stakeholders regarding what should happen in the case of sudden, unscheduled or premature closure. Milaras
Olalde,
Olalde’s second investigation showed that coal mines leave a legacy of ruin. Since 2011, no large coal mines in South Africa had been granted closure certificates. Hence, some mines that were supposedly closed had not been rehabilitated but were simply abandoned, leaving local and global pollution. The third and final investigation exposed the R60-billion being held in mine rehabilitation funds across South Africa for mines that might never be closed. This investigation exposed:
[
Financial provisions for rehabilitation in each province.
It is evident that funds are available to clean up after mining pollution. Yet, it is unclear where these funds are currently held and what rehabilitation has been done to date. Since 2012, the Council for Geoscience and the DMRE have collaborated to rehabilitate derelict and ownerless mines. Annual updates on the project are provided in the Council for Geoscience annual report. The 2016–2017 annual report states that there were delays in rehabilitation projects in Gauteng
Studies have documented the multifaceted nature of mine closure.
Van Eeden et al.,
The
A draft
The community participation process establishes the legitimate key players in the community and provides them with a mandate. Good engagement with communities is also necessary to ensure that expectations are managed. This process limits the potential for external exploitation of the community and enhances community participation in identifying post-project options. Ultimately, the community should take ownership of post-closure initiatives. This approach essentially manages sustainability risks and facilitates the avoidance of costly legacies on closure.
The
Durand
The pollution of air, soil and water caused by mining activities and the poor rehabilitation of TSFs has detrimental impacts on the health and well-being of surrounding communities. In 2016, the Human Rights Commission
The three key national acts that have consequences for mine-related dust are the
Anglo Gold Ashanti
Air pollution in the form of dust from unrehabilitated TSFs can cause respiratory disease amongst surrounding communities. Nkosi, Wichmann and Voyi
Air quality monitoring and management are regulated under the NEMAQA. In 2013, the then DEA released the National Dust Control Regulations, founded on the need to prevent pollution and ecological degradation and to realise Section 24 of the South African Constitution. Moreover, Section 33 of NEMAQA requires mining companies to notify the Minister in writing if mining operations are likely to cease within a period of 5 years.
In Soweto, communities residing in close proximity to tailings dumps experience ongoing respiratory illnesses.
Blyvooruitzicht is a gold mining town located 6 km south-west of Carletonville in the Gauteng province, South Africa. Blyvoor gold mine commenced in 1937 and continued until August 2013, when BGMC was placed under provisional liquidation.
Before the sudden closure of the mine, there were 10 tailings dams (slimes) on the mine property, of which only two were active. Slime dam 6 was the disposal area, and slime dam 1 was utilised as a disposal area in emergencies.
(a) Tailings storage facility 6, (b) located close to the community, with (c) dust fallout.
In 2016, when residents of Blyvooruitzicht were interviewed by LHR, they mentioned that the air was not clean.
Blyvooruitzicht Gold Mining Company is one of the oldest gold mines in Carletonville, South Africa. In 1997, DRD Gold Limited acquired majority shareholding in BGMC and took over the gold mine operations. After the takeover, DRD Gold updated the EMP to comply with the MPRDA. The new EMP included a conceptual closure plan and a life of mine plan, which indicated that mining would cease in 2027.
In June 2011, BGMC voluntarily placed itself under supervision and business rescue in terms of the
In July 2013, VMR issued a stock exchange notice that its board of directors had resolved to pull out of the BGMC agreement because of continuing losses. In August 2013, DRD Gold announced that it would not fund BGMC operations. Gold prices around this time plummeted to an all-time low, creating challenges in sustaining the mine or even proceeding with the process of closure.
In the trust fund, the category of fixed assets shows that only R35m is available for financial provision for rehabilitation. However, approximately R108m would be required for environmental rehabilitation.
Humby
The gold mining operation of Blyvoor is now under a new owner, known as Blyvoor Gold Capital. This company purchased some of the assets previously owned by BGMC with the hope of starting production and providing jobs for the BGMC employees and the wider community.
Our second case study on mine liquidation is MMSA, also known as the Mintails Group. It operated in the Krugersdorp area, west of Johannesburg and focused on mining and processing gold.
Environmentalists, regulators and activists have been reporting the non-compliance of the Mintails Group since 2015. Hence, state officials were aware of the transgressions long before the final liquidation in 2018 – yet no legislation was enforced. An estimated R330m would be required for environmental clean-up, but only R20m is available for such rehabilitation.
Mintails denies some of its environmental liability, claiming that the issues predated their involvement. However, the law states that the rights holder acquires the liabilities with the new order rights.
Mintails South Africa: Tailings storage facilities site.
The most widely discussed and visible types of mine closure are abandonment and terminal closure. The latter occurs when an ore body is mined out and the company – after reclamation and rehabilitation – permanently ceases its operations. The given case studies have revealed that in reality, mines are ‘temporarily’ closed for political, economic, market, technical, environmental or social reasons; there may be an expressed intention to reopen, but this rarely happens. The case studies have also shown that there was a lack of mine closure planning by both companies. There was no evidence of contingency planning, forward planning for mine closure or adequate estimated closure costs in the EMPs. Inadequate funds had been set aside for rehabilitation by the time the mines were liquidated, which indicates a lack of monitoring and annual review of financial provisions. The lack of adequate mine closures that have already taken place and issues regarding the transparency and accessibility of closure documents makes it very difficult to verify the adequacy of a mine’s financial provision.
The financial provision for closure was set aside as trust funds for the two companies, indicating that some companies fail to manage their own funds.
Furthermore, the case studies highlight the lack of enforcement by the DMRE through allowing mining companies to operate without an issued mining right, as was the case with MMSA. Only when sudden mine closure occurs is everything revealed, namely that DMRE was not enforcing compliance with the mine closure plan. Mining companies use either business rescue or the winding-up processes to opt out of their obligations as set out in the mining and environmental regulations.
According to Andrews et al.,
In the 1960s, limited funding was set aside for mine closure costs and the policies addressing the issue were inadequate.
Most countries have mine closure requirements within their mining laws or the associated implementing rules and regulations for mining laws or within specific environmental legislation that is applicable to the mining sector.
Internationally, the minerals and metals sector has been under increasing pressure not only to improve social and environmental performance but also to demonstrate that it is making real contributions to sustainable development. The very concept of sustainable development originates from public awareness of the pollution of natural sites through industrial activities. The International Council on Mining and Metals (ICMM) insists that planning for closure should be a core business practice of mining companies.
Integrated mine closure good practice.
The final decision to close a mine occurs when there is no viable financial return from the mining operations. However, the Minerals Council of Australia accurately defines closure as a process, which begins during the pre-feasibility phase of a mining project and continues through operations until lease relinquishment. The mine closure policy sets clear objectives and guidelines, makes financial provision and establishes effective stakeholder engagement, leading to successful relinquishment of the lease.
Mining in Western Australia (WA) has occurred for more than 150 years and many mines have been abandoned after initial exploration or mining. Approximately 70% of Australian mines have been closed in the past 25 years, mostly as unexpected or unscheduled closures.
More recently, in 2010, the Western Australian Department of Mines and Petroleum (DMP) became responsible for the sustainable and responsible management of the resources sector in WA. The Environmental Protection Authority is responsible for assessing mine closure under Part IV of the
The objective of the
The mine closure plan guidelines require the identification of completion criteria to demonstrate that closure objectives are detailed in the plans. The completion criteria must include performance indicators, trends and projections to predict any long-term impact. The closure guidelines also cover financial provisions for closure; this requirement entails sufficient funds for closure being held and for the affected community not to be left destitute.
Australia has a Mining Rehabilitation Fund that is regulated by the
Regarding the winding-up of a mine, our document review identified a case in Queensland that was handled by Colin Biggers and Paisley Lawyers. A coal gasification mining company called Linc Energy Limited was liquidated in 2016. Two laws were applied during the liquidation period, namely the
It thus appears that Queensland deals accordingly with the winding-up of a mining company through the
In Canada, the federal government and 13 provinces govern environmental and mining regulations. The federal law is, however, considered superior to the environmental statutes in case of conflict.
Provincial governments are responsible, on behalf of society, for enforcing efficient and effective legislation regarding the development of mineral resources and the management of waste sites.
British Columbia pioneered legislation on reclamation, which aims to ensure that once operations cease, the mine-site land is restored to a useful, productive standard.
British Columbia’s
The
Each province in Canada has mine closure guidelines, namely British Columbia, Ontario, Quebec, Saskatchewan, Northwest Territories and Manitoba.
In June 2016, 10% of mining companies were delisted from the Toronto Stock Exchange in Canada because of formal insolvency proceedings. These proceedings had doubled between 2014 and 2015. However, the delisted 10% represented only 16 companies, probably because the capital structure of junior mining companies tended to be financed with equity (as explained here). Furthermore, there were difficulties in accounting for fixed assets in various jurisdictions and remote locations.
Canadian law provides ways for insolvent companies to prolong the process until they can either devise a restructuring plan or find a buyer. Canada’s main corporate restructuring law is the
Regardless of the approach or the requirements, the plans for rehabilitation, reclamation and mine closure vary in detail amongst and within individual countries. So do the requirements for financial provision and other surety instruments to ensure that the plans are carried out.
Several similarities and differences are observed in the regulations of South Africa and those of other countries. For example, Australia requires the approval of mine closure plans and surety regarding financial provisions for mine closure even before a mining project is approved and the same is required in South Africa. However, the Australian government provides a Mine Rehabilitation Fund to aid with rehabilitation on closure; such a fund does not exist in South Africa.
In Australia, the enforcement of environmental laws is the responsibility of environmental protection agencies, whereas in South Africa, is it the Mineral Resources and Energy Department.
Canada requires an impact management plan and a mine closure plan, which must be approved by provincial regulators. Furthermore, community participation during the planning and implementation of mine closure is regarded as a crucial contribution if the closure is to be successful.
From a compliance perspective, sudden mine closure through liquidation of a mining company presents challenges. When a mining company applies for a provisional liquidation, there is no provision in the
The
Determine the ambit of ‘property’, ‘assets’ and ‘liabilities’ for purposes of winding-up proceedings.
Articulate notice requirements and access to information.
Set out the role and responsibilities of directors, the liquidator, and the master during the winding-up process.
Evolution of mining versus company legislation.
The
In 1977, the
Developments in mining laws and the promulgation of the MPRDA and its regulations GNR 527 Government Gazette 26275 of 2004 (amended in 2013 and 2015) brought detailed improvements to closure models. The main aim of the MPRDA was to establish appropriate regulation to fulfil the requirements of the South African Constitution by ensuring orderly closure and minimising the state’s liability for abandoned and derelict mines. The MPRDA and Mining Charter together ensure that mining companies act responsibly and uphold sustainable development in areas where they operate. The charter has evolved since 2004 to the 2018 version mentioned in the ‘Socio-economic aspects of mine closure’ section of this article.
Regarding the companies’ regulatory frameworks, no major amendments were undertaken between 2004 and 2008. The
As discussed in the previous section,
South African legislation imposes on mine owners a duty of care. This duty includes adherence to common law, Acts of Parliament, provincial legislation and local governments’ rules, regulations and by-laws, the
The MPRDA and NEMA provide little clarity on the procedural rights for communities, particularly the extent of community involvement through public participation and the oversight of rehabilitation of land in their immediate vicinity.
Liefferink and Van Eeden
South Africa’s mining law makes provision for several responsibilities relating to the closure of mines and rehabilitation of the land. These include contributions to a rehabilitation fund and plans for dealing with the effects on the workforce and community when the mine closes. They form part of the SLP. As a prerequisite for obtaining a mining right, this plan outlines how the company intends to share some of the benefits that flow from mining. However, according to LHRs,
Mining companies that have mature assets can use liquidation to avoid the full expense of closure and rehabilitation, as described by Humby
References to ‘property’ or ‘assets’ in the
A common thread in the cases of BGMC and MMSA was inadequate financial provisioning for environmental maintenance and rehabilitation. Mines are prematurely closed because of corporate distress, meaning companies are in debt and file for bankruptcy. The issue of liquidity amongst mines has direct implications for financial provisioning regulations. According to a study by the World Wide Fund South Africa
When EMPs with substandard rehabilitation plans and financial calculations are accepted by the DMRE, problems regarding fund availability are exacerbated. This is one reason why Liefferink
There are minimal or no independent public reviews of financial provision calculations. Therefore, these are inadequately audited. Section 24P of the NEMA does not specify that financial provisions should complete a compulsory annual peer review process to assess their sufficiency. However, in terms of the proposed (as yet unpublished) 2019 Regulations for Financial Provisions, that would be a requirement.
When mining companies are sold to other companies, mining rights need to be transferred between the two owners. The financial provision regulation does not explicitly require rights holders to amend or replace their financial provisions when transferring or amending their rights and selling their operations. A mining right or permit can be transferred without any evaluation of the financial provisions for rehabilitation. This scenario presents a challenge for the acquiring company. A mine can also be sold without its mining right or permit being transferred to the buyer, as occurred with Aurora Empowerment System and BGMC.
The impact of the
There are currently no means to ensure the security of financial provisions during winding-up. The DMRE, insofar as its claim in respect of the financial provision is concerned, would not be a secured or preferred creditor upon insolvency. This scenario has implications for the DMRE in the event of insolvency of mines. As already noticed, the
Overall, South Africa appears to still be coming to terms with the idea of sustainable development in mining. Mining communities are not yet adequately included in mining projects from their inception to their closure. Regarding sudden or final closure, there has been inadequate consideration of the future (post closure), social and community aspects. Countries such as Zimbabwe struggle with similar issues. In Penhalonga in Zimbabwe, there are several deep-level gold mines and small-scale mines. The surrounding community was mostly concerned about the immediate environmental impacts from mining, including water and air pollution and the loss of biodiversity, especially flora. Most mines surrounding Penhalonga have been closed for various reasons, with the political climate in the country being the main one.
Blyvooruitzicht Gold Mining Company and MMSA are classical cases in South Africa; they illustrate how sudden mine closure through liquidation can devastate communities. Notably, at the time of liquidation, the owners of BGMC stated that worker disputes and in-fighting between trade unions, that is, the National Union of Mine Workers and the Association of Mineworkers and Construction Union – as well as several mine stoppages were factors that contributed to the financial difficulties.
The poor articulation of the
Unrehabilitated TSFs leading to environmental degradation, which then cascades to local communities, is a long-standing problem in the mine life-cycle. The problems that occur with sudden mine closure are the outcomes of poor compliance, poor implementation, poor integration, poor enforcement and gaps or conflicts in policies. At the mine project inception stage, it is important to estimate potential environmental and socio-economic impacts by conducting EIAs. An integrated strategy between government and other role-playing institutions is vital to the implementation of well-defined operational guidelines and final closure measures. However, some companies’ operational standards and guidelines pertaining to the environment fail to integrate mining and environmental policies throughout the mine’s life-cycle. This point was observed in the BGMC and MMSA case studies, where financial provisions were inadequate for environmental care, yet that was only recognised in the period of sudden mine closure.
During the operational stage of the mine, regulations about financial provision for rehabilitation and the continuous auditing of these funds, as well as active rehabilitation whilst mining continues, are essential policies. One practice that can affect these processes is the selling-off of marginal mines to smaller companies towards the end of the mine’s life, as part of the closure strategy. This point remains a challenge. There is no legislation that prevents mining companies from doing this.
Junior mining companies operate over the short term and cannot handle the environmental liability and thus file for bankruptcy, leading to sudden mine closure.
The Mining Charter provides that mines should design and plan their operations so that adequate resources are available for the closure requirements of all operations. Section 28(2)(c) of the MPRDA contemplates that mines should report annually on their compliance with the Charter.
At decommissioning and mine closure, mine operations are often left abandoned through care and maintenance orders or liquidation. When a mine is under care and maintenance, it is neither closed nor operational. Environmental and human rights activists view such orders as a ‘faux legal term’, referring to indefinitely warehousing a mine instead of spending on rehabilitation.
Our recommendations are that South Africa should adopt practices that work in other countries. For example, every closure should be viewed as site-specific, with local conditions determining the closure plan and post-mining outcomes.
International experience indicates that mining companies and local communities are equally ill-prepared to deal effectively with mine closure and often fail to generate post-mining economies.
South Africa can also learn from the ICMM, which in 2010 noticed that mine closure requires the attention of multiple stakeholders. The stakeholders include the government, the global mining industry, the local community and international organisations that are involved in ensuring sustainability in the mining sector. Stakeholder involvement is considered good practice internationally. The ICMM also allows for community participation in decision making from the early stages of mine development through to mine closure. The ICMM practices uphold ongoing maintenance and support of local mine communities even after the mine has closed. Both temporary mine closure and post-mine closure frameworks are required to address the impacts of sudden mine closure.
There are many lessons to gain from international experience. Firstly, mining is unique because of its transitory nature and its deep social and environmental impacts.
Thirdly, there is increasing global consensus that planning for mine closure should be part of the overall life-cycle of a mine to pre-empt or reduce its negative socio-economic impact.
Finally, the literature on deindustrialisation in developed countries indicates that an overarching response by government is required to assist communities affected by deindustrialisation.
This article has shown that mining companies in South Africa are currently able to use devious but legal strategies to evade their costly obligations. The use of the winding-up procedure by the BGMC and MMSA illustrates how a company can prevent the adoption of legislation or investigations pertaining to mine closure. A mining company can be dissolved or cease to exist through winding-up, which renders it unavailable to deal with the legal requirements of closure, community engagement, rehabilitation and financial provisions. These events can adversely impact a company’s investments. The NEMA ‘polluter pays’ principle is clear, but loopholes exist through other pieces of legislation, including the
This article also demonstrates how a company – such as MMSA – may gain favour from the state and may be allowed to operate without an issued mining right until liquidation. In the case of MMSA, the mining right was granted but not issued, and the company failed to meet multiple financial and social provisions. Despite the lack of a valid mining licence, MMSA continued its operations, amid many documented complaints of environmental contravention by the surrounding communities and NGOs. Despite Parliament recommending prosecution and civil suits for company directors and shareholders in their personal capacities, to recoup some of the costs, the National Prosecuting Authority has been silent on the matter to date.
Companies sometimes leverage their power with government to obtain favourable treatment, security and impunity. Where corporate interests have ‘captured’ the government or its agents, communities, human rights defenders and other rights holders risk losing fundamental protections and access to justice. In the MMSA case, it appears that the company benefited from the state’s lack of exercise of power or implementation of existing policy. The result was to the detriment of the surrounding communities. In this situation, the company avoided responsibility and liability; indeed, its actions seemed to be condoned by the state through non-enforcement by the DMRE.
The BGMC and MMSA case studies are classical examples of the use of legal strategies, such as the winding-up process, by mining companies. These manifest in a wide array of actions that obstruct justice, distort the facts and frustrate remedies for the affected communities. Hence, although South African mine closure laws appear comparable to the laws of other countries, there are gaps in compliance. It is clear that distressed mining companies are poorly managed, as observed in the cases of MMSA and BGMC. This lack of management and compliance ultimately reflects inadequate implementation by the DMRE, as well as the observed gaps in legislation on mining, companies and the environment.
Insufficient social impact assessment, contingency planning and public participation are evident in the mine closure planning process in South Africa. There is no specific mention of sudden mine closure planning in the MPRDA, the Regulations for Financial Provisioning or the NEMA. This silence is risky for both the mining communities and the environment.
Finally, the participation of the community, NPOs and activists in the regulatory processes is essential. A request to relevant stakeholders and environmental management systems is made through this article, for authorities to strengthen implementation and enforcement of legislation.
The authors would like to acknowledge Ingrid Watson for advisory on the key concepts discussed in the article.
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
M.M. and E.A. conceived of the presented idea. M.M. developed the theory and conceptualised the key message. E.A. conceptualised and verified the methods. E.A. and R.M. provided guidance and supervision. R.M. edited the draft and supervised the findings of this work. All authors contributed to the final manuscript.
This article followed all ethical standards for a research without direct contact with human or animal subjects.
The authors received no financial support for the research, authorship, and/or publication of this article.
The authors confirm that the data supporting the findings of this study are available within the article and its supplementary materials.
The views and opinions expressed in this article are those of the authors and do not reflect the official policy or position of any affiliated agency of the authors.