An analysis of the appropriateness of statutory financial security mechanisms for mine closure and rehabilitation in South Africa

Abstract

A lot of mine were left abandoned, unrehabilitated or unclosed prior to the introduction National Environmental management Act 107 of 1998 and most did not have plans for rehabilitation or mine closure. The law requires that no exploration or production operations may commence unless financial provision has been made that is guaranteeing the availability of sufficient fund. planning is a prerequisite in the early development planning phase and must continue throughout the mine life cycle and closure phase. The financial provisions must be maintained for the duration of the life of the mine until closure when the closure certificate is issued. The financial provision is critical in ensuring that environmental liabilities for rehabilitation and closure are addressed. The purpose thereof is to mitigate the negative impacts of mining operations on the environment. This paper will investigate financial provisions system which is currently in use in South Africa from the financial security methods employed, the setting up, determination, quantification as well as general rules applicable thereto. The surveys undertaken in this regard and records held by the DMR will be relied on. When mine operations stop, a closure certificate must be issued to serve as proof that the plans relating to reclamation and closure have been complied with. The effect of a closure certificate exonerates the holder of such right from any residual or latent environmental liabilities. The paper will further look into the reasons and barriers to proper mine closure. The overall SA legislative framework for environmental liability relating to closure and rehabilitation generally conforms with international expectations. This paper examines the principal legislation and in particular the 2015 proposed regulations for securing financial provision for environmental liabilities. The main objectives of the research were to evaluate whether the current financial provision systems are appropriate in guaranteeing mine rehabilitation and closure. Moreover, whether they can realistically alter the legacy inherited from past abandoned or unclosed mines. Lastly, examination of the correlation between closure certificate and financial provision in relation to mine closure. Findings indicate that money set aside as financial provision for environmental liabilities is not being spent by the state. The law is clear which steps mine companies must take for rehabilitation and closure of new and old mine sites including legacy abandoned sites. The law is only as good as its implementation and enforcement. The Success of any financial surety instrument depends on the care, effort put into setting it up, managing it and meticulous calculation. Most will work if they are done properly.