Green lobby group warns Anglo on culling
Pressure to ensure costs of closures are borne by the company widens gap between ’planning’ and ’doing’
MARK Cutifani’s radical plans to make Anglo American a more streamlined operation capable of withstanding the precipitous slumps in commodity cycles received considerable investor support when they were announced in December last year.
While Anglo was criticised by investors for not being more proactive in devising a strategy that would protect it from the worst of the commodity slump, the group’s new-found commitment to suspending or shutting mines that did not make a profit helped provide support for the share. The share price, which had been in free fall since August 2014, when it peaked at just under R300, continued to fall after Cutifani’s initial dramatic announcement, reaching a low of R57 in late January before resurging on the back of signs of a respite for commodities and subsequent details about the restructuring.
But implementation of that plan might not be as straightforward as shareholders expect. Already one NGO has given notice that the proposed sale of coal and iron-ore assets will be tracked closely to ensure the process is in line with tough regulations, which in the past have been frequently ignored.
Recently, shortly after Cutifani provided some details of his restructuring plans, the Centre for Environmental Rights highlighted the reality that it is one thing for head office to identify mining operations that need to be culled, but quite another for that culling to actually happen.
The gap between “the planning” and “the doing” has widened in the past 10 years.
This is not so much because of tougher laws aimed at protecting environments in which mining activity takes place and the affected communities; nor is it because of supposedly more enlightened shareholders pursuing responsible investment strategies.
It is because civil society organisations are determined, in the absence of effective oversight by the government or shareholders, to enforce tougher new regulations.
In his response, Andile Sangqu, executive head at Anglo, stressed the group’s deep ties with South Africa and told the CER that Anglo was committed to exiting its noncore assets in a responsible manner and will seek to ensure that the assets continue to be managed by experienced and credible operators in the best interests of employees, communities and other stakeholders.
The CER is an NGO that promotes the constitutional rights of South Africans “to an environment that is not harmful to health or wellbeing”; it also seeks to protect the environment for future generations. The centre provides support and legal representation to civil society organisations and communities determined to protect their environmental rights.
The CER called for transparency and public participation in the transfer of any of Anglo’s South African mining rights. The centre wants to ensure that Anglo’s efforts to rescue its profit performance and protect its shareholders’ interests are not at the expense of the environment and the communities that surround its mining operations.
In its letter, the CER refers to “the woeful legacy of unrehabilitated mining operations in South Africa and the common trend for large companies to transfer mining rights to smaller companies which cannot comply with the rehabilitation obligations attached to the rights”.
The CER also refers to the “full disclosure” report it issued last year, which noted that Anglo revealed “surprisingly little data on environmental non-compliances and incidents to its shareholders”.
It also noted concern about unauthorised water discharges and other water contamination by Anglo operations.
In a recent report, the Centre for Applied Legal Studies at the University of the Witwatersrand referred to the immense environmental and financial costs of past failure to rehabilitate closed mines — the cost of which has been borne by communities and the government. When a mine or shaft closes, communities are often left with polluted air, water and soil, says the report.
“Environmental degradation such as mining waste, acid mine drainage and soil erosion outlasts the lifespan of a mine, resulting in a legacy that poses a daily threat to the health, safety and wellbeing of communities. High incidence of respiratory illnesses and skin diseases have been reported in mine-affected communities.”
The closure of mines also leads to job losses, which compounds the social effect of the population inflow that followed the arrival of the mine.
The CALS report contends that consultation with the community on rehabilitation is often sporadic, with a select number of community representatives and limited information sharing. It repeats the CER’s concerns about large companies selling off ageing operations to junior miners, “thereby divesting rehabilitation obligations to companies that frequently lack the capacity and experience to conduct large-scale rehabilitation” as is now required by law.
Sangqu said Anglo companies holding mineral rights are required by law to annually assess their environmental rehabilitation liability and to make the necessary financial provisions to enable rehabilitation and remediation of affected sites, without placing a financial burden on the state.
“Any third party to whom a right is transferred would be required, by law, to continue to make these assessments and to make the necessary financial provision,” he said.
The CER calls on Anglo to undertake to publish on its website, and to make available for inspection and copying to anyone, on request, the mining rights it intends to transfer, the environmental management programmes governing these operations, its assessment of its environmental liability (including rehabilitation) for each operation to be sold and the full applications lodged with the Department of Mineral Resources
Civil society organisations are determined to enforce tougher new regulations Junior mining firms frequently lack the capacity to conduct rehabilitation
for approval of the transfer of the mining rights.
Sangqu said each operation earmarked for disposal had “a sustainable and profitable remaining life”. He also said Anglo remained committed to complying with all applicable laws, including those that related to the publication of some of the records requested by the CER.
“Anglo American will publish all information that it is required by law to publish, in the prescribed manner.”
But Melissa Fourie, executive director of the CER, said Anglo’s response failed substantively to address the centre’s concerns.
For the affected mining communities, the good news is that the CER’s determination might secure some protection for their environment. For shareholders, the bad news is that the CER’s determination is likely to result in a considerably slower restructuring process.