Mining in focus
Watson. Blyvooruitzicht gold mine is a good example where a once hugely productive mine was passed on from one big company to the next and, in the end, no one is taking responsibility for the environmental rehabilitation.
“ Even when in care and maintenance, the company still carries full environmental responsibility for that mine,” says Beech. So, if a junior acquires an old shaft and decides to shelve it for a while, the company exposes itself to massive environmental liability and financial risk.
“ The basic costs don’ t go away,” says Beech. That means all fixed costs, excluding employment costs, will remain in place. A mine will still have to, for example, keep all the excavations in good order, continue checking the support, carry on with concurrent rehabilitation, water the roads and monitor the dust fall-out; all this doesn’ t change.“ What does change is that the mine reduces its production costs, but overall the costs don’ t just disappear,” says Beech.
“ Any company that intends obtaining and re-opening a mothballed mine, needs to understand that they are taking over a liability and they have to ensure that there are sufficient funds available for rehabilitation and closure when they take over this liability,” says Watson.“ Research shows that while there might be sufficient funds for mine closure, it is almost like a double tax.
“ Companies make financial provision, but they cannot access those funds( held by the DMR) until they have completed the rehabilitation programme. So, these junior miners must spend money to rehabilitate, while their funds are sitting with DMR, and only once rehabilitation is complete, will the DMR authorise the rehabilitation and the company can have its money back,” explains Watson. For small junior mining companies this is a big burden, and a concern for the DMR, the government department ultimately responsible for the environmental closure and rehabilitation of derelict mines. The DMR clearly lacks the resources and capacity to deal with this problem.
Watson says that in an ideal world the major mining companies would mine out the resource and then close it, instead of passing it on to smaller companies to carry the burden.“ However, I realise that this is not realistic. The company that re-opens the mine must make the financial provision, operate the mine, and close it. I also recognise that big companies with massive overheads can’ t continue to operate a mine and make it financially viable past a certain stage, whereas smaller companies will be able to do that,” says Watson.
In the end, the buck stops with government, it needs to make sure that companies that acquire the mothballed operations, have sufficient resources not only to operate the mine effectively, but to close the mine effectively as well.
Challenges
Scott says the main challenge of revitalising a mothballed operation is to bring the mine back into operation with minimal unplanned expenses.“ All machinery that has been placed under care-and-maintenance will need to be tested, recommissioned and certified as safe for use. It may also require some repairs or replacing of expensive parts,” says Scott.
The associated risk is that some of the parts may have been cannibalised by previous operations to reduce operating costs. If the facility was not guarded properly during the shutdown period, material and equipment may also have been stolen and / or sold as scrap material.
Re-using existing infrastructure and processing plant equipment reduces the potential of introducing new technology. Tying in new technology requires careful engineering and redesign, which often comes at a cost and with time delays. A detailed cost-benefit analysis is imperative.
On the staffing side, there may be a challenge to recruit lost skilled workers. Retrenchments are usually part and parcel of an operation being mothballed. The skilled workers that were not redeployed to other operations within the company are usually lost. Recruiting a new workforce usually comes at a higher cost and requires a period of time for the new workforce to be trained so they are familiar with the modified operations.
Scott also notes that there may be legacy issues with a mothballed operation. In other words, what was the previous relationship with local communities, authorities and other stakeholders? What will it take to rebuild relationships and improve perceptions of the benefits of restarting the operation?
“ As with any new business venture, one needs to evaluate the opportunity properly, truly understand the original reasons for an operation being mothballed; and as long as the gains outweigh the pains, there is no reason to not forge ahead,” concludes Scott.
JANUARY 2018 MINING MIRROR [ 27 ]