HomeNewsDMR clarifies its mine rehabilitation financial provision process

DMR clarifies its mine rehabilitation financial provision process

In a statement released over the weekend, the Department of Mineral Resources (DMR) outlined some of the processes it follows with regards to mine rehabilitation fund provisions, in response to aspersions cast on the department and its processes following speculation pertaining to the Oakbay Investment’s Optimum coal mine.

Earlier this month, the Gupta-owned Optimum coal mine was brought under the spotlight for allegedly transferring R1.5 billion from its environmental rehabilitation trust fund which was an apparent breach of the Income Tax Act and the new financial provisioning regulations made by the Minister of Environmental Affairs last November.

In the statement the DMR unequivocally stated that neither permission nor approval has been sought by the holder for the withdrawal of the funds, and as such, the DMR has not granted approval for a withdrawal of the financial provision.

The DMR notes that when certain financial institutions terminated their relationship with the mining rights holder, it notified the department of its intention to transfer the rehabilitation funds which were held with Standard Bank, to another financial institution.

The department then acknowledged the receipt of the notification and proactively advised that in the event of the transfer of funds, the holder was to ensure that the funds so transferred are transferred to a financial institution registered with the South African Reserve Bank. The DMR also emphasised that the funds should remain in the trust, as rehabilitation funds cannot be used for any other purpose.

“In the event of cancellation or replacement of the financial provision as well as the closure certificate (lapsing of the right), the holder has to lodge an application for the formal approval process,” the DMR notes, explaining that all right holders are obligated in terms of section 24P of National Environment Management Act (NEMA), to annually assess their environmental liability in a prescribed manner, and submit an independently audited report to the Minister of Mineral Resources, on the adequacy of their financial provision.

In terms of the NEMA, the DMR is entrusted with the responsibility of ensuring that all right holders make financial provision for rehabilitation. This financial provision may be held in three specific forms without any deviations or exceptions: contribution to a trust fund, a bank guarantee or a deposit into an account administered by the DMR or a combination of these.

After acquiring Optimum Coal, a subsidiary of Glencore South Africa, which had been placed under business rescue posing considerable risk to the mining sector due to significant job losses, Optimum applied in terms of section 11 of the Mineral and Petroleum Resources Development Act (MPRDA), to cede its mining right to Tegeta, a request which was approved by the Minister of Mineral Resources upon Tegeta meeting all relevant criteria.