Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: Mining companies are licking their wounds over being forced to pay twice for mine rehabilitation.
Creamer: This whole mining rehabilitation issue has come up again under the National Environmental Management Act, known as Nema. There are certain financial provisions there, which now prevent excesses from going into the following year. That means that if you do a rehabilitation and you find that it didn’t cost you as much as you thought there is excess in the fund, they won’t allow you to take out that excess.
So, people have been debating this and they have been working as a stakeholder group interface with the government for some time now, because this was put through in 2015. They haven’t been able to persuade, not even the opposition the DA, to actually change the amendments.
There are amendments going through this legislation, several of them, but one of them that is not going through is that you can use excess funds into the following year, you can roll those over. This means that some of the people are saying we will then have to put our hands in our pockets again to do the rehabilitation even though there is money in the trust fund.
I am playing on words, but a trust deficit is between the citizenry of South Africa and the mining industry, because there have been some hands put in the cookie jar regarding rehabilitation and they want to make sure that that particular trust money is not touched, even if it is in excess they want the mining companies to put their hands back in their pocket and pay for capital rehabilitation and mine closure.
One of the other shocks that came up is that even if you get a mine closure certificate it doesn’t mean to say you are not liable going forward in the years ahead. So, people want the environment restored and, as I say, they even asked the official Democratic Alliance opposition to look into this, but this has not benefited the mining industry, which will probably face a gazetting soon. I think the gazetting is coming through in the next days or weeks.
They will have a chance to comment so hopefully they will reach some sort of compromise. What could happen is that they should try and encourage these mines to do the rehabilitation on a yearly basis so that they can see exactly how much is spent and if there is an excess, perhaps they can put it over into the following year and make them roll over on a yearly basis so that they keep watching.
The penalties are huge, if they find that the mining companies have faked any of the reviews or have not complied, the CEO can go to jail for 10 years and the penalty is also huge, it is R10-million. People got together with the Department of Mineral Resources (DMR) this week and the comments from the DMR was that it is so difficult to change this legislation it is like trying to fix your car while your car is going.
In the meantime I think they will have from now till February 2019 to actually comment and hopefully reach some sort of solution. Many of the people who are involved there are saying that it will put foreign investment off. Already a person who had persuaded foreign investors to put money into a project here said he could barely get over the Charter. People are asking why haven’t you sorted out your Mining Charter yet, this is going on and on.
Now he will have to tell them there is more bad news around the environmental issues and even if you get a closure certificate you are still liable for several years into the future and any excess in that trust fund has got to stay in the trust fund. Heaven knows when that will eventually be able to be used, but the DMR is saying they are scared that they will be landed with the rehabilitation, what if the companies run into financial difficulty and they have been faking rehabilitation? What if they go into liquidation? We want to be able to get some money there to make sure that rehabilitation takes place.
Kamwendo: With palladium overtaking platinum, the rich north is getting richer and the poor south poorer.
Creamer: This makes me cry, because of that terrible Volkswagen scandal in the US, people have moved away from diesel, they are turning their backs on diesel vehicles and going into petrol driven vehicles. When they use those petrol driven vehicles, it creates a demand for palladium. Where does the bulk for palladium come?
From the northern hemisphere. So, what happens with the platinum price, the demand is down so you see the price down. This week we saw the palladium price overtake the platinum price, which means that people in the north are getting richer, people in the south are getting poorer. It is not our doing, it is not the fault of platinum, it is the fault of the actual misrepresentation of how the emissions are going into the atmosphere from cars.
A false report on that has created this anomaly now, which hopefully will correct itself, because platinum does have qualities which can out do the palladium, it is just the people with the petrol driven engines prefer that, because they can get away with that, whereas diesel can’t. If, I think, the palladium price goes too high, there will be a correction and you will see demand build for platinum, because it has got those additional qualities.
One of our companies, Sibanye, has been pretty sharp and spotted the palladium price increase potential 18 months ago and since they bid for the American company that is a big supplier of palladium, the palladium price has gone up 64%. We see that the platinum price has only gone up 2% and even today’s price at $923 per ounce is not that hot.
Kamwendo: The big South African ferrochrome company, Hernic Ferrochrome, has been placed in business rescue.
Creamer: When you think of a big company like that, it is owned by Mitsubishi Corporation of Japan. That is the major shareholder of Hernic Ferrochrome. We also know the chrome price isn’t bad at the moment.
They are in ferrochrome, which means they add to it and even do better. Even though Henric Ferrochrome is mainly owned by the big Japanese company Mitsubishi Corporation, which is in 80 countries, 500 group companies around the world, it has been placed in business rescue.
It is all around this issue of some conditions around credit which has to be repaid next year has been breached. Against that background they have decided the Mitsubishi Corporation will call in a business rescue team. A lot of people are quite optimistic that this will be solved and that will be great, because whenever there is business rescue like this it is always the creditors and often the smaller ones out there that get hit, so hopefully they won’t have that.
Jubilee, which is listed on the London Stock Exchange, put out a report yesterday saying it is not going to affect them at all. So, perhaps the impact of this is not going to be great, but in the meantime we see Hernic Ferrochrome based in Brits going into business rescue.
This is a company which has got chrome mines and a lot of furnaces and close to 700 employees. Hopefully they will be able to sort this out. There seems to be optimism that Hernic Ferrochrome will sort out its problems.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.