Last week’s capitulation by Standard Bank CEO Sim Shabalala to investor pressure and the tides of history, with the bank committing to publish a Paris-aligned fossil fuel strategy for the 2021 period, could not come at a more interesting time. Left and right, investors are rushing for the door with their coal assets, resulting in the proliferation of ever-more-marginal mining companies.
From some pretty broad-ranging conversations over the past few weeks a consistent picture has emerged of a not-so-sleight-of-hand that sees big-ticket companies such as Anglo and BHP demerging to create ever-smaller local empowerment companies upon which they then dump their rapidly devaluing mining assets.
Earlier this month shareholders approved the creation of Thungela Resources by Anglo American to take over its coal export assets, while South32, already a spin-off from global giant BHP, expects to hand over ownership of South32 SA Coal Holdings to Seriti Resources on June 1. This is the widely employed practice of “pass-the-parcel”, whereby mining companies around the globe transfer assets to successively more marginal operators as mineral reserves are depleted, or as one of my more cynical sources put it: “The Anglo to Zama-Zama” cascade of mining.
In a statement at the end of last year aimed at Anglo and South 32, Glencore CEO Ivan Glasenberg said: “We see some of our competitors ... selling their coal mines. How does that help the world to reach the Paris Accord? ... Those mines then are not depleting or running down, they’re going into the hands of investors, whether the Chinese ... or other players who have no intention of reducing emissions. If anything, it gives them a free hand to start producing more.”
He was quick to add, though, that he would not rule out a demerger of coal assets if shareholders demanded it.
It is easy to see how this process works. Opaque policy and legislation leave the required “sustainable end state” at the end of mine closure, and rehabilitation as an ethereal concept whose costs are routinely underestimated. Mining houses assume closure certificates are not being granted, and as such it is far better to move marginal assets onto the books of smaller companies whose operating costs and financial liabilities are lower.
This cascades down to fly-by-nighters, and in the end the costs associated with the environmental hazards posed by these mines get passed on to the public purse. These costs are not to be sniffed at either; in 2016 then water affairs minister Nomvula Mokonyane said that the long-term plan to treat acid mine drainage alone will cost in the region of R12bn, not to mention the carbon tax and export costs to the SA economy from our continued coal-derived high emissions profile.
Unfortunately, it is particularly tricky to get a clearer picture on the expected investments required to either close down operating mines or rehabilitate abandoned ones. In 2019 a Promotion of Access to Information Act application was required for the Southern African Institute of Mining & Metallurgy at Wits University to obtain a list of mine closure certificates applied for in 2011 to 2016. The result was a list of certificates granted over the period for all nine regions of SA.
The report found “that the mine closure system as implemented in SA is largely ineffective. Although closure certificates are being granted, these are for prospecting sites and small-scale mines, which have a relatively small environmental impact. No large mines of any environmental significance were relinquished over the period under review, with very few applying for closure certificates.”
To be fair, South32 will provide $200m over 10 years to fund South32 SA Coal Holdings’ environmental rehabilitation and closure liabilities, and at least some of the R2.5bn Anglo is providing to Thungela will be similarly headed, but if these provisions are adequate, why the need to pass the buck?
• Maguire holds a master’s degree in global change studies from Wits and has been developing green economy solutions for the private sector, NGOs and the state for more than a decade.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.