A critical review of the impact of South Africa’s mine closure policy and the winding-up process of mining companies

Abstract

a financially distressed company to avoid liquidation and restore its profitability. The Companies Act 2008, Section 128(1)(b), defines business rescue as proceedings to facilitate the rehabilitation of a distressed company by providing temporary supervision of the company and management of its affairs and property. 3 Business rescue provides some relief to recover from temporary liquidity complications or long-term debt by providing an opportunity to restructure business operations. 3 The premise underlying business rescue is that the ‘going concern’ value of a company is generally greater than its liquidation or break-up value. The winding-up procedure, by contrast, Background: Most mining operations are viable for a period of 30 years, depending on the mineral extracted and the available reserves. Whilst the expectation is that mines will continue uninterrupted until the planned period is complete, unscheduled closure can occur. Sudden and unplanned mine closure can result in immediate environmental and social impacts. In South Africa, the challenges of mine closure are exacerbated by unexpected sudden closures owing to winding-up and business rescue processes. The literature is inconclusive regarding these issues and there is poor integration of affected communities by mining operations. Aim: We reviewed South Africa’s legal frameworks relating to mine closure, the winding-up of gold mining companies and the impact of sudden closure on the environment and communities. Method: This review built on and extended previous systematic reviews. We focused on the regulation for financial provisioning for prospecting, mining, exploration and rehabilitation. Two examples of gold mining companies that were closed prematurely were examined. We also reviewed the mine closure and environmental policies of other countries, notably Australia and Canada and noticed similarities to South African policies. Results: Differences are evident in the enforcement of compliance in Australia and Canada, which are more proactive in dealing with the challenges of winding-up and its impacts. Conclusion: South Africa could adopt these countries’ models to enforce compliance and proactivity regarding sudden mine closure. One recommendation is to establish a fund for immediate rehabilitation in such cases as part of the temporary mine closure framework.