DATE: 19 AUGUST 2015

1. PRESENTATION TO THE PORTFOLIO COMMITTEE OF MINERAL RESOURCES The extent of state liability for environmental damage cause by Acid Mine Drainage and Derelict and Ownerless Mines. DATE: 19 AUGUST 2015

2. PRESENTATION OUTLINE • Introduction • The extent of state liability • Acid Mine Drainage • Derelict and Ownerless • Valuation of the liability • Methodology • Results • Conclusion

3. INTRODUCTION The purpose of this presentation is to brief the Portfolio Committee for Mineral Resources on the extent of state liability for environmental damage caused by acid mine drainage and derelict and ownerless mines.

4. ACID MINE DRAINAGE (CONTINUE) • Government recognised the potential risks presented by Acid Mine Drainage. • The Council for Geo-Science was requested to embarked on a research project to identify new technologies to prevent Acid Mine Drainage. • Cabinet-appointed Inter-Ministerial Committee (IMC) on Acid Mine Drainage in September 2010. Under the guidance of the IMC, rapid investigations were conducted which articulated the situation in the Witwatersrand and corresponding remedial interventions required.

5. ACID MINE DRAINAGE (CONTINUE) • Cabinet endorsed the implementation of the remedial interventions proposed. • The emergency works project entails pumping Acid Mine Drainage from the Western, Central and Eastern Basins and the building of neutralisation plants (High Density Sludge plants) to neutralise AMD and remove dissolved heavy metals and some dissolved salt. Treated (neutralised) water is then discharged to the natural environment.

6. ACID MINE DRAINAGE (CONTINUE) • Key risk in Wits is water security in Vaal River System (largely Gauteng and Free State) and mainly water quality and Socio-economic development risks nationally • Other areas with mining impacts: (DWS, DEA and DMR initiatives to be integrated) • Platinum belt • KOSH and FS gold fields • Coal fields in MP, LP and KZN • Northern Cape and Central/ Eastern Highveld base metal mines

7. ACID MINE DRAINAGE (CONTINUE) Typical AMD profile Target values Env / Potable pH ~2.8 (6.5 – 8.6) Fe 800mg/L – 1200 mg/L (< 10 // 1) Sulphate > 4000mg/L (≤1000 // 600) Uranium up to 110 mg/L (≤ 70 // 30)

8. ACID MINE DRAINAGE (CONTINUE) Progress in Witwatersrand (“Emergency Works”) • Immediate Solution – WESTERN BASIN • Rand Uranium (Randfontein) AMD plant upgraded – 30 ML AMD daily • Improvement in surface and groundwater quality recorded • Additional refurbishments (pumping and treatment) urgently required to eradicate decant during high rainfall • Increase in pumping capacity underway to apprx 70 ML/D • Potential arrangements with Sibanye Gold for new clarifiers

9. ACID MINE DRAINAGE (CONTINUE) Progress in Witwatersrand (“Emergency Works”) • Short-term Solution – CENTRAL BASIN • Project commenced January 2013/ commissioned April 2014 • New AMD pump-station, treatment plant and waste disposal facilities at the South-West Vertical Shaft, Germiston • Pumping, treating (neutralising) and discharging ~72 ML AMD daily • Underground AMD managed at suitable level to prevent impacts

10. ACID MINE DRAINAGE (CONTINUE) Progress in Witwatersrand (“Emergency Works”) • Short-term Solution – EASTERN BASIN • Project similar to Central Basin currently under construction at Grootvlei Mine No. 3 Shaft, Springs • Project commenced June 2014 • Operations to commence April 2016 – expected treatment of 80-110 ML AMD daily

11. ACID MINE DRAINAGE (CONTINUE) The Immediate Solution Plant, Krugersdorp-Randfontein The Short-term SolutionPlant, Germiston: Pump-station The Short-term Solution Plant, Germiston: Chemical Preparation area Figure 3 The Short-term Solution Plant, Germiston: Chemical Preparation area

12. ACID MINE DRAINAGE (CONTINUE) • Projected cost for Witwatersrand AMD • Emergency Works (Neutralisation) + Long-term Solution (desalination) = ~R10b (for beneficial AMD use with cost-recovery) Figure 3 The Short-term Solution Plant, Germiston: Chemical Preparation area

13. ACID MINE DRAINAGE (CONTINUE) Funding for Legacy Mines • Section 19/20 of NWA not feasible for abandoned mines • Government contribution on Wits Basins +/-R600m • Possible avenues for funding include: • Fiscus • Current operational mines contributing in kind (assets such as pumps, shafts, land, mine waste facilities etc) • Estimated contributions to date • Western Basin: R50 M • Central Basin: R465 M • Eastern Basin: R100 M Figure 3 The Short-term Solution Plant, Germiston: Chemical Preparation area

14. ACID MINE DRAINAGE (CONTINUE) Funding for Current and Future Mines • Inclusion of AMD in water tariffs • Environmental Levy • Waste Discharge Charge System (WDCS) • Sale of bulk reclaimed mine water to mines/ industry (commercial use) • Sale of mine water treatment by-products e.g. gypsum, metal-rich sludge • Mining sector contribution • Research and Development on innovative Technology (cheaper and more efficient applications) (DWS and WRC initiatives) Figure 3 The Short-term Solution Plant, Germiston: Chemical Preparation area

15. ACID MINE DRAINAGE WAY FORWARD • Minimize AMD impacts – to be better managed during life of mine (WUL, EMPR and mine closure) • Part of DWS Annual Performance Plan: 2015-2019 to assess all catchments with potential of AMD generating mines ensuring Pro-active approach nationally (Currently busy with Olifants and Vaal Rivers) • Working towards a better integrated approach between DWS-DEA-DMR on mining (current and future) Figure 3 The Short-term Solution Plant, Germiston: Chemical Preparation area

16. ACID MINE DRAINAGE WAY FORWARD (CONTINUE) • Parallel initiatives such as monitoring, piloting new technologies, ingress control, remediation of surface AMD sources, etc. • New mine water policy/strategy underway by DWS • Ministerial appointment of Implementing Agent for Long-term Solution for the Witwatersrand in September 2015 Figure 3 The Short-term Solution Plant, Germiston: Chemical Preparation area

17. DERELICT AND OWNERLESS MINES • The information gathering of derelict and ownerless mines started as the Sustainable Development through Mining Project in 2005 and was concluded in 2008 • The Council for Geoscience (CGS) was contracted to maintain a database of approximately 6 000 of such mines in South Africa and also to oversee the rehabilitation of identified sites in 2012.

18. DERELICT AND OWNERLESS MINES (CONTINUE) • Asbestos mines are estimated to be 245 of the total estimated figure of 6000. • Given the health and environmental concerns related to Asbestos mines, the rehabilitation of former Asbestos mining areas was the highest priority for rehabilitation; followed by the sites proximal to communities, with the greatest risk to the health, safety and environment.

19. DERELICT AND OWNERLESS MINES (CONTINUE) History of Asbestos mining in South Africa • Asbestos mining in South Africa began in earnest in the 1930s. It attracted a multitude of big and small companies. • Mining and production methods were crude, with the fibre being separated from the ore by hand, and in some cases the 'mines' were literally spade-and-wheelbarrow operations run by farmers who had found deposits on their land.

20. DERELICT AND OWNERLESS MINES (CONTINUE) History of Asbestos mining in South Africa • Around early 1980s, the foreign companies had withdrawn from active asbestos mining in South Africa, and a long series of mergers and acquisitions had reduced the number of major producers to two: The Griqualand Exploration & Finance Company (Gefco) and Msauli Asbes. • Gefco produced the amphiboles crocidolite and amosite-commonly known as blue and brown asbestos-in the Northwestern Cape and in the north-eastern Transvaal. • Msauli produces chrysotile, or white asbestos, near Barberton. • These are some of the mines that are regarded as ownerless to date

21. DERELICT AND OWNERLESS MINES (CONTINUE) THE BAN OF ASBESTOS MINES: • Asbestos mining finally ceased operation in 2003 and the law was put in place in 2008. • Draft regulations to ban Asbestos were first gazetted in November 2005 for public comment and again in September 2007 and finally passed in 2008. • This Regulation was for the Prohibition of the Use, Manufacturing, Import and Export of Asbestos and Asbestos Containing Materials.

22. DERELICT AND OWNERLESS MINES (CONTINUE) THE BAN OF ASBESTOS MINES: • Most of the communities that were affected by Asbestos mining started to sue the government for their ill health, mainly complaining of Asbestosis. • Asbestosis is a chronic lung disease characterized by a scarring of lung tissues, which leads to long-term breathing complications. The disease does not have a cure. • As a consequence, the government made a commitment to initiate implementation on the Asbestos rehabilitation programme.

23. DERELICT AND OWNERLESS MINES (CONTINUE) OTHER COMMODITIES : • For all mines other than Asbestos mines, the estimated costs were determined in three categories. Class A : pose high environmental risk • Meaning a high probability of the occurrence of the impact with a severe consequence. E.g. Gold, Coal, Lead, Copper, Platinum, Silver, Uranium , Nickel, etc .

24. DERELICT AND OWNERLESS MINES (CONTINUE) OTHER COMMODITIES : Class B : pose medium environmental risk • Meaning a moderate probability of occurrence of the impact with a manageable consequence. E.g. Alluvial diamonds, phosphates, cement limestone, granite, etc. Class C : pose low environmental risk • Meaning a low probability of occurrence of the impact with a • negligible consequence. Eg. Industrial minerals like sand, aggregates, dimension stones, clays, etc.

25. DISTRIBUTION OF DERELICT AND OWNERLESS MINES IN SOUTH AFRICA

26. LEGACIES OF ABANDONED ASBESTOS MINES IN MPUMALANGA Erosion downstream Mine openings Settlement

27. DANGEROUS ABANDONED GOLD MINE SHAFTS IN GAUTENG

28. DANGEROUS MINE SHAFTS Gauteng: Munseiville Shaft (After) Gauteng: Munseiville Shaft (Before)

29. KEY ENVIRONMENTAL CHALLENGES DUE TO PAST COAL MINING ACTIVITIES – EMALAHLENI, MPUMALANGA Underground coal fires Thermal image of underground coal fire Acid mine drainage in old workings Acid mine drainage discharged to streams - Carolina LiDAR image showing subsidence

30. D&O AREAS THAT ARE HIGHLY IMPACTED BY ILLEGAL MINING • Illegal mining is mainly in previously gold mining areas around Gauteng, Free State and Mpumalanga. • Illegal coal mining in Osizweni, KZN • Illegal alluvial diamond mining in the Northern Cape • Sand and aggregates in the Eastern Cape.

31. VALUATION OF THE LIABILTY • Matlotlo Group, an actuarial and quantitative finance consulting business was engaged by the Department and the Council for Geoscience to perform the valuation estimating the environmental rehabilitation liability for the purposes of disclosure in the annual financial statements . • There were three methods applied in the valuation of the potential liability with respect to derelict and ownerless mines depending on the type of commodity as follows: • Asbestos Mines • Class A • Class B and C

32. VALUATION OF THE LIABILTY(CONTINUE) ASBESTOS MINES: The actuary used thedata of completed, actual rehabilitation of former Asbestos mining sites to set an assumption for the average actual rehabilitation costs of a former Asbestos mining site. • Each rehabilitation cost was adjusted for inflation between the date the rehabilitation works got completed and the valuation date • Based on this approach, the estimated closure cost per mine as at 31 March 2015 is estimated at R9 million. • Management decided that a provision needs to be made for maintenance and monitoring expenses in calculating the liability in respect of the rehabilitation of the Asbestos sites.

33. VALUATION OF THE LIABILTY (CONTINUE) OTHER COMMODITIES : For all mines other than Asbestos mines, the estimated costs were determined in three categories. Class A: The data data was analysed separately for gold mines and for coal mines. A suitable regression model was applied to the data and was used to estimate the closure provision given the size of mine.

34. VALUATION OF THE LIABILTY (CONTINUE) OTHER COMMODITIES : Class B& C : The guidelines for calculation of the rehabilitation provision are different to Class A mines. The Department adjusted the closure cost estimates for inflation from April 2004 to March 2015 using CPI to arrive at the closure cost estimates for Class B & C mines in the database. This is because no specialised rehabilitation methods are required. • The Department provided a list of commodities mined that would fall into this risk class. For these mines, the guidelines provide a rehabilitation cost rate per hectare. The minimum rate according to the guidelines is R50 thousand per hectare. The maximum rate for a site is R25 million.

35. VALUATION OF THE LIABILTY (CONTINUE) • The fair value of the liability in relation to rehabilitation of former Asbestos mining sites is estimated at R2 billion as at 31 March 2015.R199.6 million of this liability is disclosed as a provision and the balance of R 1.8 billion is disclosed as a contingent liability. • The best estimate present value of the closure cost of other derelict and abandoned mines is estimated at R45.1 billion as at 31 March 2015, consisting of R44 billion for Class A mines and R1 billion for Class B & C mines. • The estimated liability on Asbestos mines was disclosed on the Annual Financial Statements and was audited.

36. CONCLUSION • The Department will value the liability again on 31 March 2016 for improved estimation as a result of ongoing data improvements. • With the limited financial resources , the Department continues to explore other meaningful mechanisms to optimise the management of derelict and ownerless mines.

37. Thank You!