JOHANNESBURG (miningweekly.com) – The legislative provisions that govern the mining industry’s environmental rehabilitation provision obligations have recently been removed from the Mineral & Petroleum Resources Development Act (MPRDA) and transferred to the National Environmental Management Act (Nema).
In November 2015, new regulations were published under Nema, detailing the requirements for financial provisions, which must be made by the mining industry.
“The publication of the regulations in terms of Nema is in line with a move towards government’s “one environmental system programme”, and the transfer of all environmental governance law out of the domain of the MPRDA,” said Clyde & Co associate Kate Swart.
She noted that the regulations now provided more certainty on how to calculate the financial provisions required of all mining and prospecting rights applicants or rightholders.
Speaking at an EY-hosted Nema discussion event on Friday, she explained that prior to any exploration, prospecting or mining taking place, rights applicants or holders had to make financial provision for rehabilitation and remediation on an ongoing basis, and upon closure of a mine, as well as the decommissioning and closure activities at the end of an operation.
“They must also make remediation provisions for latent or residual environmental impacts. This requirement also includes specific provision for the pumping and treatment of polluted or extraneous water,” she said.
The changes in financial provisions now outlined under Nema would have a major impact on the mining industry, Cenviro Solutons MD Leentie Smit said.
She explained that, previously, a Section 38 trust was allowed to make provisions but that a trust could now only be involved in latent and post-closure activities.
“It is going to change the way people structure the way they make financial provisions and the way they use different financial vehicles together,” she said.
“Another challenge for the South African mining companies is that they will need to start providing for their liabilities and use one of the financial vehicles available to fund them. The challenge with this is that some companies might have cash flow restrictions and we expect the financial provisions to materially increase,” Smit said.
Swart stated that, in addition to the requirements for new financial provisions, the regulations required that existing provisions be reviewed and aligned with the new regulations.
“Such review must take place within 15 months of the regulations [taking effect], or within three months of [a company’s] financial year-end. Should the rightholder be unable to meet the revised financial provision, a payment plan may be entered into with the Mineral Resources Minister,” she said.
She highlighted that penalties for noncompliance were harsh.
“Failure to implement and timeously review the new regulations carry a fine of up to R10-million and jail time of up to ten years,” she pointed out.