Mining services provider Cenviro Solutions is involved in discussions with local regulatory bodies responsible for the revision of the National Environmental Management Act (Nema) – particularly as the Act pertains to financial provision regulations for tailings storage and mine waste facilities – to benefit local miners in proactively planning their facilities.

“We are ensuring that, where possible, our clients’ concerns are addressed. Regulations must be fair and workable for all concerned, without increasing the administrative burden on the State or the financial burden on miners.

“Our goal is to assist our clients in understanding the impact of these regulations, and to secure the required insurance capacity for them in the international market,” explains Cenviro MD Leentie Smit.

Cenviro is the specialist underwriting managing agent for local company Centriq Insurance, an approved financial guarantee provider for the Department of Mineral Resources and Energy (DMRE).

Cenviro structures cost, cash flow and tax efficient mining-rehabilitation guarantee solutions that meet mining clients’ specific financial, environmental and statutory requirements.

The third draft of the replacement Financial Provision Regulations was released in August this year, with the transition period for mining right and permit holders, who applied for rights and permits before November 20, 2015, expiring on June 19, 2022.

Smit stresses that the third draft contemplates two categories of applications and their method of determining financial provision differs, based on latent environment risk.

Firstly, applicants categorised as low risk – for example, prospecting rights that exclude the removal and disposal of minerals and mining permits for a low-risk commodity – will calculate their financial provision using a prescribed template, spreadsheet and master rates.

“By comparison, higher-risk applicants will be required to itemise their activities and costs, based on actual market-related rates, as contained in the yearly rehabilitation plan; the final rehabilitation, decommissioning and mine closure plan; and the environmental risk-assessment report. Criminal sanctions for applications and holders who fail to comply with the regulations remains a reality, with the possibility of a penalty of up to R10-million, and/or up to ten years imprisonment.”

Cenviro anticipates that, in general, financial provisions calculated in terms of the new proposed Nema regulations will increase, compared with the previous Mineral and Petroleum Resources Development Act calculation method, particularly in the coal sector.

However, the new proposed calculation method may slightly decrease the level of financial provision required when compared to the calculation method outlined in the November 2015 Nema regulations.

Further, Smit stresses that the new proposed regulations do not allow for the use of financial guarantees for the financial provision of latent environmental impacts.

If unchallenged, miners might need to consider implementing more than one financial provision solution if their preferred method is financial guarantees.

“Many of our mining clients have experienced a challenging year, and find the uncertainty pertaining to the impact that the Nema regulations will have on their business daunting.”

Smit says Cenviro’s long-term goal is to remain innovative and structure insurance solutions within the regulatory framework in a manner that assists its mining clients to plan for their rehabilitation cost from a financial and environmental perspective.

Further, economic constraints have prompted miners to reassess their existing financial provision solutions, including the restructuring of existing methods of financial provisioning, resulting in the optimisation of existing 37A trust funds.

Despite uncertainties about the regulations, Smit adds that new mining projects will have the advantage of having their financial provision requirements determined based on the sum of their anticipated disturbance of their first year of operation, and the associated latent impact thereof. This provides more cash flow at the crucial startup phase.

Cenviro also plans to host a Nema-related event next year to connect professionals in the mining space and share “valuable insight” on the regulatory changes.

“Should the DMRE heed our appeal to issue financial guarantees for the costs associated with the mitigation, rehabilitation and management of latent environmental impacts, we intend to assist our clients and the State in structuring a solution which, upon granting a closure certificate, triggers the transfer of these provisions to the relevant Minister.

“It will be vital to gain an in-depth understanding to ensure that miners have budgeted for the implementation of the regulations in the new year,” Smit concludes.