JOHANNESBURG (Mineweb.com) -- Things never are as clear-cut as they might appear. That, at least, is a lesson that appears to be dawning on DRDGOLD after its cleverly-contrived strategy of walking away from its responsibilities at its North West mines by placing the mines in voluntary liquidation.
And it may have fallen into the trap of being somewhat less than wholly-frank with the public and shareholders in the messages it has put out.
As far as the South African government departments are concerned, DRDGOLD is not off the hook. It may have placed its North West mines in voluntary liquidation, but it has to continue with environmental responsibilities such as pumping even if the liquidator takes temporary financial responsibility. The state is certainly not in a mood to take on a fresh responsibility.
The company runs, in the process, a risk of placing its other South African interests in jeopardy, has given the host countries of its foreign operations pause for thought and has probably kyboshed any hopes it has of splitting ownership of its South African and overseas operations into separate local and offshore companies.
Sure, the liquidation has created problems for the AngloGold Ashanti and Harmony mines that lie to the south of the Hartebeesfontein and Buffelsfontein mines that make up DRDGOLD’s North West division. But theirs are technical problems that can be resolved. DRDGOLD has now placed itself uncomfortably in the cross hairs of the South African government.
DRDGOLD chose a route of extricating itself from the maintenance, rehabilitation, environmental and employment costs of running and closing Harties and Buffels by making use of the Companies Act. The mines, it was correctly argued, were owned by a separate corporate entity that, technically and legally, itself has the environmental etc liabilities even though that corporate entity has been a wholly-owned subsidiary of DRDGOLD for the past six years.
But the Companies Act, for all that DRDGOLD might argue to the contrary, is not the only, nor by any means the principal law governing the sound management of mining in South Africa. The Water Act, the Environmental Protection Act and the Minerals and Petroleum Resources Act are at least as equally as important. Ignore them or walk away from responsibilities in terms of these other Acts and directors could be acting ultra bona mores, outside the sprit of the legislation and, possibly, outside the letter of the law – all the laws, not just that which one chooses to shelter behind.
This concept of liability has not been considered by DRDGOLD and is vigorously and heatedly rejected as inapplicable by company spokesman Ilja Graulich.
Taking a quick tour d’horizon, the Water Act is the simplest. It states that no mine may pump water or transfer it to the property of another legal entity or mine. That prohibition and responsibility persists until the mine in question has received an official closure certificate – a certificate that will not be granted until all environmental requirements, including water flows, have been fully complied with.
So the 30 or so million litres of water that were being pumped daily under a non-cancelable contract by DRDGOLD from neighbouring Stilfontein’s Margaret shaft, cannot be allowed to flow into the DRDGOLD mines. And the 30 million litres being pumped daily from Harties and Buffels cannot be allowed to enter the Harmony and AngloGold Ashanti mines immediately to the south.
DRDGOLD believes that it can abrogate its responsibilities by liquidating the North West mines and leaving them to the liquidator. Perhaps it can. But no matter what resources the liquidator extracts from the mines and from their environmental rehabilitation trust funds, the mineral rights will revert to the state and, along with them, the responsibility for all that pumping.
The prospect – brought up emphatically at a meeting in Pretoria this Tuesday of the Department of Minerals & Energy, the Department of Water Affairs, the council for Scientific and Industrial Research, DRDGOLD, AngloGold Ashanti, Harmony Gold and the North West mines liquidator – is not relished by the state. And the government departments are most unhappy with the DRDGOLD move that could set a precedent for others. It would be too easy for other companies to follow suit and to get rid of their obligations in the manner DRDGOLD is attempting.
No, DRDGOLD is responsible for acquiring closure certificates for its erstwhile subsidiary’s mines and cannot abrogate or just walk away from its responsibilities, Companies Act or no Companies Act. And when it comes to pumping water, a cost apportionment will eventually be made, an apportionment that will include DRDGOLD, whether it likes it or not.
The state knows only too well that DRDGOLD’s wholly-owned Blyvooruitzicht mine – a veteran producer barely scraping out an existence – might be the next point at which DRDGOLD tries to opt out. If not pumped, water from Blyvoor would flow into AngloGold’s Tau Tona etc mines.
Graulich also says that the liquidator will eventually be in possession of at least R200 million or more from insurance claims for earthquake damage, to be added to the R110 million in the environmental rehabilitation trust fund. The mines owe employees R130 million for pay and benefits, R120 million to other creditors as well as an estimated R130 million at least for environmental restoration. And DRDGOLD itself reckons it is owed R1 billion by the North West mines, some of it, which it will claim. So it is not a given that resources available to the liquidator will match the mines’ liabilities.
“The company (DRDGOLD)”, Graulich says, “has no responsibilities.” They, he says, are now the liquidator’s.
Graulich offers as partial justification of the present water situation a claim that DRDGOLD has been pointing out possible North West water problems to AngloGold for some years. Maybe it has. But AngloGold and Harmony rely, they believe reasonably enough, on the non-transfer provisions of the Water Act and have not been willing to cave in to DRDGOLD’s veiled threats.
And the various arms of the South African government, too, are not prepared to allow one company to ride, as they see it, a coach and four through laws that are designed to protect make those responsible for environmental damage to pay for rehabilitation. The apparently-cavalier approach, too, will probably not be overlooked by the governments in Papua New Guinea and Fiji where DRDGOLD’s foreign mines are located.
In other words, DRDGOLD should not be counting on any favours when, if ever, it needs to talk to government about Blyvoor. Nor, perhaps, should it look to any when it tries to escape South Africa for offshore havens. And other jurisdictions will make darned sure that there can be no avoiding environmental responsibilities.
Of course, there may be some sympathy for DRDGOLD, which had been struggling, though failing, to run the Harties and Buffels mines profitably. But if the assets available to the liquidator are so generous, why has DRDGOLD decided to scarper?
There are more considerations to be taken into account than the merely commercial ones on which DRDGOLD has acted. Shareholders need more clarity on the existence of all the factors that could adversely affect their investment.
Market Data 
Markets 
AI
