Gold producer DRDGold CEO Niël Pretorius told investment firm CX Investments in an interview that investors were becoming more supportive of projects that may not necessarily have vast economic upside, but that will deliver in terms of environmental or social value-add.
He explained that the mining industry was increasingly seeing “other” opportunities where the primary objective might be environmental clean-up and social investment.
“We are more often highlighting to investors that we have a competency, we have a role and a purpose, and we can do something meaningful here.
“There is an environmental legacy left behind by mining, which is in certain instances an embarrassment, but we can do something about it to improve the quality of lives of those living around those areas, as well as the environment,” Pretorius pointed out.
These projects often come at little to no cost anyway, depending on how it is approached. Personally, Pretorius said his experience has been that investors are not offended by these kinds of suggestions anymore.
“The contemporary morality of investment is almost demanding some of these kinds of projects, as part of the investment story.”
DRDGold, for one, already uses mostly grey water in its processing activities and will soon be aggressively investing in solar power, and will be producing metal at an attractive rate, while paying heed to the environment.
Pretorius added, however, that he does not believe it is up to mining companies to decide where investors should spend their “charity money”, but rather to provide them with an opportunity for investment to be structured in such a way that it appeals to them economically, while promoting sustainable development.
He highlighted that DRDGold does not look at social and environmental capital as an add-on cost, but rather it structures business in such a way that there is not a compromise on financial return.
For example, with the company using recycled water, it ends up being cheaper as an input cost, while boding well for water preservation.
On the social investment side, DRDGold had taken income from its landholding sales activity and put it into social programmes, which Pretorius said has benefitted thousands of lives.
He clarified that this has been funded from another source of income that the market does not consider to be “core”, rather than it being an operating expense.
Pretorius said mining companies were likely to be increasingly measured on their adaption of environmental, social and governance (ESG) aspects and whether it adds to costs, or if they were able to do it in such a way that it delivers environmental, social and economic value.
If a mining company claims to be embracive of ESG, an astute investor would conduct quality assessments. “If you are not a quality mine, they will take their ESG money somewhere else. You have to add real value and empowerment, not just charity value, and be competitive.
“ESG is not an excuse for mediocrity.”
DRDGold mines by cleaning up, which has involved the rehabilitation and restoration of 900 ha of land in Gauteng.
When asked whether ESG is here to stay, Pretorius responded that the exceptionally good companies have, for years, been experts at environmental governance and social relevance.
If companies’ environmental and social value-add only sound good on paper, and are being used more as a marketing ploy instead of making any real impact, they will not be around for very long.
“The companies that survive in the long run are the sustainable ones, with real ESG components. In the meantime, inequalities and environmental damage remains, and therefore ESG will remain relevant for the foreseeable future.”