Time to clean up toxic water dispute

[miningmx.com] — WHY is it taking the South African government and the mining industry so long to tackle the phenomena of acid mine drainage?

According to estimates, mine related contaminated underground water is set to seep to the surface of Boksburg on Johannesburg’s east Rand within months. Only now, however, government may have no option but to warm to the notion of a public-private partnership that would pump and purify the underground water.

Urgent as the threat of acid mine drainage is, government has been tackling a philosophical dilemma that has prevented all progress. In essence, it has been struggling to reconcile its belief that water is national patrimony, just as minerals belong to the people, against the mining firm’s commercial imperatives.

For years now, mines have proven technology and structures to treat the contaminated underground water. But as listed companies, the cost of building these innovations in water purification need to be defrayed; more preferably, they should show returns. This can be achieved, say the mines, if they are allowed to sell the potable water to a utility such as Rand Water.

Government argues that the mines were the cause of the underground water contamination in the first place – which is quite right. The problem is, however, is manifold; in other words, there is one underground water problem, but many causes. So who picks up the tab? Is it the “last man standing”, the mining company still operating, and providing employment; or is it mining firms that used to mine the Witwatersrand; legal entities that have long ceased to exist.

At the height of this dispute, government said the mines should pay for the pumping and purification of water which should then be passed on to a HDSA-enabled third party which would sell the water to Rand Water. This is clearly a non-starter of note.

On this basis, an entity such as DRDGold’s Ergo, estimated to produce an after-capex profit of R200m to R250m, would end up paying R120m of projected profits with no prospect of a return. Ultimately, it would lose its shareholders and go bankrupt. This would leave the cost of pumping the underground water with the people which is to say, the increasingly burdened taxpayer.

It’s all very fraught.

As the situation currently stands, there is a technical solution the first phase of which will cost R170m to implement and which will arrest the rise of the underground water (but no more than that).

For that to happen, however, the mining industry wants to see its technical, regulatory and structural solution recognised by government and for some of the cost to be defrayed by government either in a direct subsidy, or by having a government-approved third party financier in the picture, or by allowing mines to sell the potable water to a water utility.

Marius Keet, regional director of water affairs in Gauteng, has agreed to submit proposals leading to an agreement by the end of the week. We watch and wait, bearing in mind that the technical solutions so far only extend to water in the central and west Wits region, and not the eastern or southern Witwatersrand, nor the Free State mines where similar problems exist.