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OES opens up business prospects for mines

The One Environmental System (OES), implemented on 8 December 2014, cleared up any confusion in the mining industry about which department was responsible for environmental authorisation for mining and ancillary activities.
Photo: City of Johannesburg
Historically, mining activities were regulated in terms of an environmental management programme (EMPR) approved by the minister of mineral resources under the Mineral and Petroleum Resources Development Act, 2002 (MPRDA). Although separate authorisation in terms of the National Environmental Management Act, 1998 (NEMA) was also required to undertake activities on a mine site that were secondary to mining (such as clearing vegetation and storing dangerous goods), the perception of many in the mining industry was that a separate environmental authorisation (EA) under NEMA was not required.

Paradigm shift


The OES resulted in a paradigm shift in regulating environmental matters from the MPRDA to NEMA. This involved promulgating a complex set of laws which included mining specific listed activities under NEMA's listing notices and deleting the provisions under the MPRDA which regulated EMPRs. The result is that mining right holders are now required to obtain an EA under NEMA instead of an EMPR under the MPRDA to commence with mining operations.

Fox in the hen house


A key feature of the OES, is that the minister of mineral resources is the competent authority under NEMA for issuing EAs to authorise listed activities that are "directly related to- (a) prospecting or exploration of a mineral or petroleum resource; or (b) extraction and primary processing of a mineral or petroleum resource". The assignation of this power has been seen as putting the proverbial fox in charge of the hen house.

While this may be true in relation to, among other things, the "primary processing" of a mineral resource, it can be argued that the minister of environmental affairs has the power under the OES to issue EAs for activities on a mine site which are regarded as "secondary processing" and which are not "directly related" to the extraction and primary processing of a mineral resource. This argument is supported by the amendments to NEMA's listing notices in April this year, which excluded secondary processing from the mining specific activities under NEMA's listing notices.

Although no definition of the term "directly related to" has been included under NEMA, some guidance has been provided in relation to the meaning of primary and secondary processing of a mineral resource. According to the Act, "primary processing" includes "winning, extraction, classifying, concentrating, crushing, screening or washing" of a mineral or petroleum resource, and "secondary processing" includes "the smelting, beneficiation, reduction, refining, calcining or gasification" of a mineral resource.

Commercial opportunities


The delineation of mandates under NEMA between the environmental and mining ministries based on, among other things, whether activities are "directly related to" the extraction and primary processing of a mineral resource, presents a number of commercial opportunities for mining companies.

Firstly, mines can dispose of secondary processing assets which are not directly related to the extraction and primary processing of the mineral resource to third parties, without impacting their primary processing activities. This is particularly advantageous for older mines planning on downscaling their operations and focusing on their core assets.

Secondly, the delineation of mandates under the OES opens up the possibility for new activities that are not directly related to the extraction or primary processing of a mineral resource to be undertaken on a mine site and regulated independently by the minister of environmental affairs.

However, given that no definition of "directly related to" has been provided under NEMA, there is no clear-cut guide to determine which ministry should be competent to authorise these kinds of activities.

Our view is that this determination can only be made by analysing the factual circumstances of each case, and, in particular, the purpose of the activity in question and whether it is at all related to the extraction and primary processing of a mineral resource; whether the activity will be undertaken by a third party or the holder of the mining right; and whether the activity will be undertaken for the sole purpose or benefit of the mine.

Financial provisioning


Lastly, it is arguable that the requirement for financial provisioning under NEMA is only relevant to activities that are directly related to the extraction and primary processing of a mineral resource.

This means that mines do not have to put up financial provisioning for facilities or activities which are not directly related to the extraction or primary processing of a mineral resource, even though any such facility or activity is developed or undertaken on the mine site.

This also means that mines that were in existence before the OES took effect, and which are undertaking activities that are not directly related to the extraction and primary processing of a mineral resource, could motivate to reduce the quantum of their financial provisioning.

While it is clear that the OES presents commercial opportunities for mining companies, exactly how open the minister of mineral resources and the minister of environmental affairs will be for these opportunities to be realised remains to be seen.

About the author

Tshegofatso Masilo, Beatrix Spargo, Kirsty Kilner and Garyn Rapson are with law firm, Webber Wentzel
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