The latest draft has a number of changes that will make the mining industry far more comfortable than the previous revisions of the regulations. However, the negative balance sheet impact that compliance will have on the mining companies, has not changed.
Aurecon Technical Director Pieter Scholtz recently presented a paper on sustainable asset transformation at the South African Mine Closure Conference in Sandton. He shed light on what it takes to transform a mining asset, reaching its end of life, to ensure financial sustainability for the mine, socio-economic sustainability for the communities living in the area, and environmental sustainability. Learn what it takes through the video below.
“Sustainable asset transformation is such a behemoth task that most mines have not even considered it yet. With the new legislation this will change, because if mining companies don’t get this right their investor attractiveness and financial health will deteriorate. Is it really possible though for them to create value for their shareholders during the development, operational and closure phases, while also creating value for the communities in which they operate in the short term, but without destroying value for the original and post-closure landowners and stakeholders in the long term? It depends,” says Scholtz.
Within the context of the mining sector, asset transformation can be described as reducing a mine’s closure and post-closure liabilities and costs by transforming them into new business ventures that will ensure environmental and socio-economic sustainability post closure.
“Aurecon has developed a process whereby we guide clients to sustainable asset transformation,” says Scholz. “From our experience, we identified five of the most important criteria to be met.”
Sustainable asset transformation will be near impossible unless…
To enable the identification and co-development of possible sustainable businesses that can be developed in a way that also drives the reduction of liabilities and costs for the mining company is not a quick process. To get this right, in-depth stakeholder desirability, technical feasibility, and financial viability studies need to be done.
“A co-development approach needs to be followed with the relevant stakeholders to ensure that the envisaged businesses will not fall apart once the mining company withdraws from the area. Based on our experience, we believe that if you don’t start when you are five years or more away from closure, it will be impossible to identify the right opportunities, attract the right investors and create buy-in from all the relevant stakeholders in time. The further away from closure mining companies start with their asset transformation planning, the greater their financial rewards will be,” says Scholtz.
Diverse teams that are well led are much more successful than monotypic teams. When it comes to asset transformation, this is especially true: integrated and diverse teams are an imperative for asset transformation success.
“Mining companies often create silos for the different competencies that exist within the business. There will be a social and labour team, the environmental team, the engineering team, the beneficiation team and the mining team, all with their own skills, goals, and plans. This approach may work well during the operational phase of a mine, but unless these skills, plans and ways of thinking are fully integrated, planning for asset transformation becomes very difficult,” asserts Scholtz.
Apart from the local and international market trends needing to be understood; an understanding is required of the capabilities and existing assets of the post-closure beneficiaries; the constraints imposed by the existing infrastructure, as well as the post-closure land capability; asset transformation will only succeed if the right blend of agricultural, commercial and industrial businesses for that area is developed.
“If this blend is not optimised, it becomes impossible to create both an effective circular economy and a constant inflow of foreign currency. Unless these two requirements are met, it will be impossible to create sustainable post-closure economies,” adds Scholtz.
By far the greatest influencer of asset transformation success, says Scholtz, is how effectively all stakeholders work together to co-develop the post-closure development concepts.
“Engaging effectively with the local communities, unions, municipalities, governments and NGOs is the most difficult component of mine closure and the most important requirement for asset transformation,” says Scholtz.
Besides the challenges that can be experienced if the regulators or the interested and affected parties are not aligned with the planning, sustainable asset transformation is not possible unless the stakeholders, who will have to ensure the continued success of the transformed businesses, are not fully invested in these businesses.
“We have found that unless the post-closure economy stakeholders have taken full ownership for the success of these businesses, everything will come to a standstill once the mining company withdraws its presence and money,” adds Scholtz.
Because it is not a priority for the mine management whose bonuses are based on the operation’s short-term safety, financial and production figures, long-term asset transformation or mine closure planning doesn’t get the focus it deserves. This is especially true if the execution of these plans will require more engagement with stakeholders and a greater budget allocation to the ‘soft’ services departments on the mine.
“Unless mine management’s performance measurement is also linked to long-term triple bottom line sustainability for the company, it will be very difficult for the closure teams to implement the measures required for sustainable asset transformation,” says Scholtz.
Sustainable asset transformation is more complicated than it appears to be and, as the mining industry globally embraces this initiative, we will continue to learn of new pitfalls that will have to be considered, but also of new ways to improve our successes.
“Although asset transformation will not become easier. The exponential evolution of technology and the resultant continued evolution of the global population’s needs will likely increase the complexities around asset transformation planning and execution. Regardless of how difficult sustainable asset transformation is, it is possible, but more than it being possible, it is our duty to get this right. As the custodians of our children’s future, we will commit a crime against humanity if we can’t leverage our means, ingenuity and intellectual capabilities to ensure sustainable asset transformation of our depleted mines,” concludes Scholtz.
Besides the technical know-how, Aurecon has all the tools and mechanisms to help members of the mining industry steer through the governance, programme feasibility, set-up, milestone measurements, assurance and reporting requirements to ensure their boards, executive committees, stakeholders and managers are aligned to facilitate successful asset transformation.
Pieter Scholtz is Aurecon's Technical Director for the Resources and Manufacturing Unit in Tshwane.