Two mid-tier gold miners tethered growth projects very firmly to the “good of the environment” this week, tapping into the zeitgeist of the latest catchphrase of environmental, social and governance (ESG).
ESG is an acronym that covers a vast awakening of the mining industry to decades of environmental degradation (E), community and social upheaval (S), and corporate governance issues (G) that have dogged the broader sector globally.
Speak to almost any NGO involved in these matters and there’s a dark scowl and a litany of complaints and accusations about how the industry behaves.
Investors are becoming more discerning, wanting or demanding that the companies their funds underpin have clean, green credentials. It can be seen with coal at the moment. For any company wanting to build a coal mine the big trick is to find financing.
Blood diamonds, or pretty stones coming from war zones or propping up despotic regimes or blood-thirsty guerrilla movements terrorising the local populace, is another case in point. That’s not to say coal mines won’t be built or that conflict diamonds won’t enter the market, but it’s become a lot tougher as investors and consumers demand ethical and environmental standards be upheld.
SA obstructs renewable energy
One of the issues — among many — for SA’s mining companies is that their reliance on Eskom and its network of coal-fired power plants could result in carbon penalties for their mineral exports, making them globally uncompetitive.
The deepest of ironies is that, despite companies’ best efforts to get renewable energy projects under way at mines, reduce their reliance on carbon-based electricity from Eskom and lower their ever-rising power costs, the government, which talks a fine game about green energy, will not let them cut that umbilical cord.
Eskom is in dire straits. Its balance sheet is too heavily laden with debt, topping R450bn, and it cannot cover the interest let alone capital repayments from its revenue. This is a result of decades of chronic corruption, mismanagement and the imposition of racial ideology that demanded little, black-owned mining companies supply coal instead of the large, historically white-owned entities that had life-of-mine, cost-plus coal supply agreements.
That aside, mining companies are now looking at ways to tap into ESG. Without being too cynical, some strategies are genuine and others look to prosper from what looks like a good thing. This is not to pass judgment on the following two examples, but it gives a flavour of what CEOs and boards are looking at and how they see their roles.
DRDGold is a world-leading, gold tailings dump retreatment specialist. It extracts minuscule specks of gold from millions of tonnes of waste that came out of other companies’ processing plants and it makes a lot of money doing so.
In the process, DRDGold has cleared the giant dumps that surrounded central, eastern and, more recently, western parts of Johannesburg, the historical heart of SA’s gold mining industry. Gone are the ugly, bare, yellowing dumps that reminded anyone visiting or living in Joburg about the history of the city. It opens up land for development and removes a major health hazard.
DRDGold CEO Niel Pretorius spoke at the company’s interim results of potentially setting up an enormous tailings storage facility near Carletonville where it has started processing 250-million tonnes of dumps.
The plan is to clean up the environmental damage caused by dumps placed on porous dolomitic rock — which is resulting in polluted groundwater sources — treat them, extract gold, then place this waste on a new site astride a granite base.
Pretorius spoke generously of co-operation between companies owning the dumps stretching 70km and more west of Joburg, with DRDGold providing either space in a yet-to-be built plant or on the giant dump for reprocessed material.
The logic of the offer is hard to fault — and why not make good money out of a lingering problem and clean up the environment for future generations.
This is a process that is going to take time, with egos, boards, self-interests, legal hurdles and logistics all presenting their own unique challenge. But maybe the ESG enlightenment taking root in the industry will expedite the process.
Mining for change
Pan African Resources has put its hand up to buy the Mintails gold-bearing dumps near Soweto and Krugersdorp from the failed company’s liquidators. The Mintails attempts have come to naught, with adverse community and environmental legacies enough to frighten off most investors.
Pan African’s CEO Cobus Loots and his team, however, see a cheap opportunity to extract 2-million ounces of gold from these dumps and sort out an environmental problem.
Their idea when it comes to funding is rather interesting and one not often seen in SA. Pan African plans to tap into green funds, mainly domiciled in Europe, positioning the Mintails project as a rehabilitation one to finance the processing plant and new tailings facility at a cost of R2bn to R3bn, rather than putting debt on its own balance sheet.
There’s no doubt Pan African will make a profit out of this project for itself and its backers but, again, it removes a hazardous environmental problem and frees up land for economic development.
Anglo American CEO Mark Cutifani and his peers in large multinational resources companies spend a lot of time talking publicly about mining making a positive difference to host communities and the countries in which they operate.
This industry, which has a rotten reputation of exploitation, is talking a language that many understand and accept. The difficulty is translating it into action that brings tangible differences to the environment and societies they affect, and to overcome the deep cynicism that this might be window dressing to secure a licence to operate.
There’s only one chance at this. If it’s a confidence trick in any way there’ll be no coming back for a second attempt.
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