[miningmx.com] – THE Western Utilities Corporation’s (WUC’s) proposal
for treating acid mine drainage (AMD) may have been finally rejected by
Government, but it’s not stopping the listing of WUC, renamed Mine Restoration, on
Johannesburg’s Altx exchange next week.
Mine Restoration will contain the intellectual rights to technology and research that
went into cleaning mine water, but which has also enabled it to extract carbons
from which it can make briquetted coals, said an industry source.
A project in Witbank will provide some cash flow for the company. There’s also the
possibility that the water-cleaning technology could be used in other districts, or
countries, than just the Witwatersrand, the source confirmed.
“The UK-listed company that owns the WUC technology sold it to a local South
African group. This includes intellectual rights over AMD with nothing excluded: so if
it gets applied to any water basins in South Africa in the future, that will accrue to
Mine Restoration,’ he said.
What needs clarifying, however, is a statement on Mine Restoration’s initial public
offering invitation that its acid mine drainage technology is still being assessed by
the water department, when in fact, it has been rejected.
POLITICAL ENGINEERING
Government’s rejection of the WUC proposal for AMD raises the question as to why
tackling AMD has become a fraught, tortured process, especially as WUC’s plan not
only has technical sign-off, but is self-funded?
“It makes you cynical,’ says one gold industry source who asked not to be named
owing to controversial nature of his view. “One can only imagine Government can’t
let pass a R1.5bn tender opportunity,’ he says of Government’s recently proposed
alternative solution to stemming the AMD scourge.
The other notion circulating in the industry is no less controversial: that whoever
owns the technical process of retreating polluted underground water also gets to
benefit from selling it as potable water. Either way, the potential for making money
from environmental remediation would appear to be the none-too-subtle motivating
factor delaying the regulatory process. So say the critics and cynics in the gallery.
Miningmx understands that Government’s view is that it can provide a
middle way between keeping costs down and the future downside limited as well as
implement its own system, even though it hasn’t yet explained why its own solution
to AMD is better. Proposals are on the table now, but given the prolonged nature of
the AMD debate, it would premature to become overly optimistic.
Most of the focus of AMD has been predominantly on what is know in geological
terms as the central Witwatersrand basin where gold mining over the decades has
led to pollution of underground water. Think Boksburg on the East Rand, for
instance.
Moreover, the water table is now rising to surface because the mining areas are now
largely vacated by the original miners. Where once miners pumped and cleaned
water, there is now a cavernous vacancy, quite literally. Some miners continue to
operate – DRDGold and Central Rand Gold to name two – but they can do little to
permanently ameliorate the problem without Government consent. This is still a
moot point despite the expectation that in about a year, some acid-laden water will
be only just below 174m beneath surface, the level deemed environmentally
acceptable. Government, industry, and civil society are getting nervous. Tempers
are frayed.
But AMD is actually a national issue. Four coal miners in Mpumalanga province were
served with papers recently asking them to clean contaminated drinking water
supplied to Carolina, a nearby town. As a result, tackling AMD requires a response
that can be applied on a national level, and this may colour Government’s attitude.
It’s partly for this reason that the matter of AMD is now being heard by the Water
and Environmental Affairs Portfolio Committee, chaired by the somewhat bellicose
figure of advocate Johnny de Lange. His committee recently retained the Trans-
Caledon Tunnel Authority (TCTA) to investigate how it could find a solution to AMD;
a solution that must also get to grips with the threat of pollution from an estimated
270 slimes dams in the Witwatersrand. According to Mariette Liefferink, CEO of the
Federation for a Sustainable Environment, who was described by the Mail &
Guardian last year as SA’s self-proclaimed Erin Brokovich, the slimes dams can
go on leaching AMD into SA’s groundwater for hundreds of years. Clearly, the
problem is manifold.
TCTA IN, WUC, OUT,
Niel Pretorius, CEO of DRDGold, doesn’t know why TCTA was brought into the
process when on the request of De Lange he had presented in August 2011 the AMD
solution to his committee. DRDGold’s presentation was based on the proposals of
Western Utilities Corporation (WUC), an organisation that DRDGold helped found in
2005 along with Harmony Gold and a company called Mintails. Pretorius said the
presentation to De Lange had been well received: “We were quite encouraged about
it,’ he said.
The introduction of TCTA, however, presaged a change of heart by De Lange’s
committee as well as the water affairs department, which had been entertaining the
WUC proposal. The WUC proposal, developed by the miners themselves, was self-
funding and stacked up technically. In fact, the science of it had been a decade in
the making.
Instead, TCTA staged impromptu visits to DRDGold facilties where, on the precept of
viewing how the WUC proposal would apply to DRDGold were, in fact, establishing a
basis for their own proposal, says Pretorius. The TCTA solution was, however, more
expensive: a capital cost of R1.5bn would be required, says Pretorius. Gold miners
still operating in the affected areas would be required to contribute to the capital
cost with a shortfall covered by Government itself, or taxpayers ultimately.
In the meantime, the water affairs department rejected the WUC proposal on a basis
that Pretorius found unacceptable. “We took legal advice on the rejection and found
the reasons were not really valid,’ says Pretorius. It was actually the second time
the proposal had been rejected by the department. On the first occasion, issues
relating to a black economic empowerment structures, and opposition to the foreign
capital WUC had arranged were identified as stumbling blocks. WUC’s proposal sets a
capital call of some R500m, excluding the cost of sinking a shaft to access the water
at source, as it were.
What followed was a series of events that led to De Lange’s extraordinary outburst
in parliament on May 22, in which he asked the TCTA and the water affairs
department to “. make sure they [DRDGold] pay for every damn thing’ related to
AMD treatment. De Lange added that DRDGold was effectively bribing the TCTA such
that the gold producer be indemnified against future AMD charges if it allowed the
authority access to its property.
According to Pretorius, DRDGold had asked TCTA to provide guarantees that its
solution to AMD would not incur more charges than contained in the WUC solution.
“If they [TCTA] can’t allow us to limit our downside exposure, then they have to
guarantee that the new proposal does not result in new risks,’ says Pretorius. Two
meetings with the water department had been arranged and cancelled only days
before the committee meeting in parliament, says Pretorius. The claim that DRDGold
“should pay’ has resulted in disquiet among shareholders, says Pretorius.
Crucial to the entire outcome of the AMD controversy, a meeting between the water
affairs department and relevant gold producers has been planned this week in which
Government plans to set down a compromise proposal.
De Lange was unable to respond to questions before Finweek’s deadline, but
Marius Keet from the water affairs department says a potential compromise with the
gold miners is indeed in the pipes. “We are negotiating something, but I can’t give
more details for fear of derailing it,’ he said. He added, however, that there was no
chance of resuscitating the WUC proposal, regardless of how much planning had
gone into it.
“It was rejected last year already,’ said Keet. “There were many reasons why it was
not satisfactory of which the existence of foreign funding was just one part,’ he said.
Like it or not, the TCTA was the nominated party working on both a short term
solution to WUC, and then on the longer term. “Things are at a sensitive stage and I
don’t want to disrupt that,’ said Keet. He couldn’t answer more questions at the
time, but promised to respond via e-mail later in the week.
The key issue regarding any compromise is the financial risk to gold miners in
adopting Government’s scheme for AMD. DRDGold has said in the past it should pay
no more than 1.5% of the total cost, a calculation it based on rock it removed while
it owned the assets as a percentage of total rock moved at the asset. It has said
previously that it would challenge any attempt for it to pay more, especially as
Government already unconditionally withdrew a challenge DRDGold pay 44% of the
cost.
Certainly, there are no easy answers on the question of financial liability especially
when a system is being proposed that doesn’t have the miners themselves at its
genesis. “We have proposals to work on,’ says Pretorius. “Let’s hope they get
considered. It’s best that we’re talking,’ he said.
This article first appeared in Finweek
