The next and, presumably, final draft of the proposed changes to the NEMA Financial Provision Regulations are expected to be published any day now, for the last round of public comment. Government has been consulting extensively over the last 15 months on these amendments with various stakeholders and the final amendments are set to be tabled in the next few days / weeks with a view to the final amendments being Gazetted soon thereafter.
This will offer the mining industry with one more chance to influence the changes to the regulations before they are finalised. Thereafter, the only recourse the industry will have will be in the courts.
The regulations have the potential to be devastating to the mining industry with the increase in liability and cost of closure that can drive smaller mining operations out of business. South Africa has 6000 abandoned mines, which means that the industry as a whole needs to look beyond the risk and find a sustainable solution despite arguments against the regulations. There are opportunities to reduce liability and costs if the regulations are carefully considered and strategically implemented.
Careful mine planning with closure in mind, clever use of financial instruments to house the rehabilitation funds and reasonable auditing can all assist in reducing the rehabilitation liability, which is expected to surge under the regulations.
The Department of Mineral Resources (DMR) plans to prepare guidelines to assist in the interpretation of the regulations as soon as they are finalised. The DMR also intends on changing the perception that closure certificates are never granted. The maturation of the one environmental system and the finalisation of the amendments to the regulations will assist government in processing closure certificate applications.
Some of the key changes to NEMA that are expected to be tabled, include:
- Currently there needs to be actual mine rehabilitation provisioning of ten years, looking forward, which is an impractical requirement considering that some mining rights / permits have shorter terms than this. It is expected that this period will be amended to reduce the provisioning period to three years.
- The regulations do not allow rehabilitation trust funds to be used for final closure. This restriction will most likely fall away.
- We may see the care and maintenance provisions in the regulations being deleted, which would be a welcomed change.
- If the DMR calls on a rehabilitation financial guarantee, the regulations afford the issuing financial institution with two days to assess the claim. Given that this time period is wholly insufficient, an extended time period is likely to be proposed in the amendments.
The mining industry should really engage in this final consultation process to influence final changes that it would like to see made to the regulations. The deadline for compliance with the regulations for all existing holders of rights is looming. 19 February 2019 is just around the corner. If companies have not started work to comply, we suggest that they do so urgently.
Written by Garyn Rapson, a Partner at Webber Wentzel