Putting risk, reputation first
Identifying and managing risks is becoming an increasingly complex proposition for mines and their consultants.
Debbie Geraghty, regional manager at Marsh Africa, says this is most evident in changes in the proposed new National Environmental Management Act that will impact how miners manage and cost for future environmental damage or rehabilitation.
“Section 37A of Trust is restricted to latent environmental liabilities. Mines have traditionally made financial provision for rehabilitation liability by means of a Department of Mineral Resources trust and newer mines by means of insurance guarantees. The existing Department of Mineral Resources trust would now be used for latent environmental liabilities and mines would have to arrange additional trust or guarantee for rehabilitation liabilities,” she says.
“At Marsh we have a specialist division that handles guarantees and, where required, provides advice on combined solutions including trusts using top-up guarantees. We investigate the possibility of incorporating the trust into a cell captive facility for funding the rehabilitation costs.”
Geraghty says it is difficult to determine at the beginning of a project what the environmental damage may be over its life. Some companies have therefore drawn on the services of environmental experts to do environmental impact assessments during operation to determine the amount of the rehabilitation liability.
The period in the immediate aftermath of the commodities boom had been put to good use by many miners to improve efficiencies, operations and environmental protection. This became necessary not only because markets were subdued, but especially because mines had been focused on output during the boom years.
“What happened in relation to risk management is that additional risks were identified as the mines would optimise production and run the plants at 100% capacity to obtain the benefit of the higher ore prices. Maintenance was pushed out and not always done when it was originally scheduled. Upon investigation of our claims stats from 2008 there was an increase in the frequency and severity of losses.
“We highlight to clients when the prices are high to keep to their scheduled maintenance programmes. The mines will also keep a tight rein on costs during periods of high metal prices.”
An organisation that is more than qualified to grasp the enormity of the risks involved in operating mines across the globe is Anglo American.
Deputy chair in SA Norman Mbazima acknowledges the environmental responsibilities that come with mining activity.
“Communities are hugely important. And you have to look at it like that. Mining can bring lots of benefit, but it can impact as well. So, we need to recognise the impact, minimise or eliminate it and understand both the good and bad that can happen to communities as a result of mining being there.
“In years gone by, we had communities that maybe weren’t fully clued up, but those days are gone. You can now sit around a table with the community and talk about these issues. And I feel good about that, and that we can put our community value proposition on the table and let them engage with us. It’s no longer an unequal relationship.”
Mbazima says Anglo American can draw on its long history to develop strategies and support structures that allow it to produce effective community engagement. He concedes the company could also do better, but that it has a framework on which to build and improve its future work.