On 20 November 2015 in Government Gazette 39425 Notice Number GN R1147 the Minister of Environmental Affairs published the Regulations Pertaining to Financial Provision for Prospecting, Mining, Exploration and Production Operations (the Financial Provisioning Regulations, 2015) which came into effect on the date of publication in the Gazette.

The purpose of the regulations is to regulate the determination and making of financial provision for the costs associated with management, rehabilitation and remediation of environmental impacts resulting from prospecting, exploration, mining and production operations throughout the lifespan of the operation and the latent or residual impacts that may arise in the future. The content of the regulations is broadly summarised below:

CHAPTER 2 – FINANCIAL PROVISION

• An applicant or holder of a permit or right must determine and make financial provision to guarantee the availability of sufficient funds for the rehabilitation and remediation of adverse environmental impacts to the satisfaction of the Minister responsible for Mineral Resources (the Minister).

• The applicant must determine the financial provision through a detailed itemisation of all the activities and costs which are calculated by the actual cost of implementing measures required for:
-  annual rehabilitation,
-  final rehabilitation, decommissioning and closure; and
-  Remediation of latent or residual environmental impacts.

• The applicant or holder of a right or permit must ensure that, at any given time, the available funds equal the sum of the actual costs of implementing the plans and reports for a period of at least 10 years forthwith.

• The applicant or holder must make financial provision by one or a combination of a:
-  Financial guarantee, which must comply with the format requirements set out in Appendix 1 to the regulations.
-  Deposit into an account administered by the Minister; or
-  A contribution to a trust fund established in terms of applicable legislation. Such contribution to a trust fund may only be in relation to financial provision made for the remediation of latent or residual environmental impacts, and not for annual rehabilitation or final rehabilitation, decommissioning and closure of the operation. This financial instrument may also not be used by an applicant/ holder for a mining permit in terms of the Mineral and Petroleum Resources Development Act 2002 (MPRDA).  Furthermore, such contribution to a trust fund must be established by a deed of trust and must comply with the requirements set out in Appendix 2 of the regulations.

• The general requirements of financial provision include, but are not limited to:
-  The determination, review and assessment of the financial provision must be undertaken by a specialist.
-  The financial provision liability may not be deferred against assets at the mine closure or the mine infrastructure salvage value.
-  Where the making of or adjusting of the financial provision had been undertaken in terms of a financial guarantee, such undertaking must be accompanied by a verification of registration of the financial institution.
-  Where the financial provision was undertaken by a deposit into an account administered by the Minister, if any interest is earned on the deposit, such interest must be used to defray bank charges and thereafter form part of the financial provision.
-  Where the financial provision applies to the remediation of latent or residual environmental impacts which may become known in the future, upon the issuance of the Closure Certificate in terms of the MPRDA, such financial provision must be ceded to the Minister.

• An applicant must ensure that the determination of the financial provision and the applicable plans are submitted for consideration to the Minister together with the application for environmental authorisation, the associated environmental management programme (EMPr) and the mining or production right. In addition, the Minister may only grant the environmental authorisation if the applicant also complies with the requirement to provide proof of payment/ arrangement of the financial provision prior to the commencement of any prospecting, mining, exploration or production operations.

• The holder of a right or permit must ensure that a review is undertaken in respect of the requirements for the financial provision made for annual rehabilitation, final rehabilitation and remediation of latent or residual environmental impacts. Thereafter the holder must ensure that the adequacy of the financial provision is assessed and any adjustments to the financial provision are made accordingly. The results of the assessment must be audited by an independent auditor and submitted to the Minister for approval. The submission of the audit report must be accompanied by a declaration signed by the independent auditor reconciling the financial provision submitted for approval.

• A holder of a right or permit must ensure that the EMPr is made available on a publically accessible website, at the relevant site office and to the public upon request.

• If the Minister is not satisfied with the determination, review, assessment or adjustment of the financial provision, he may request that the applicant revise the determination, have the financial provision reviewed externally or appoint an independent assessor to the satisfaction of the Minister.

• The Minister may retain such portion of the financial provision as may be required and based on an environmental risk report for any latent, residual or other environmental impact when the closure certificate is issued, and must return the remainder of the financial provision.

CHAPTER 3 – CARE AND MAINTENANCE

• A holder of a right or permit may apply to the Minister to be placed under care and maintenance. Such application must be accompanied by a detailed explanation of the merits of the application and a care and maintenance plan.
• The care and maintenance plan must comply with the information requirements set out in Appendix 6 to the regulations.
• A holder of a right or permit may only be placed under care and maintenance for a period not exceeding 5 years.
• A holder of a right or permit may not operate under care and maintenance without the approval from the Minister.

CHAPTER 4 – TRANSITIONAL ARRANGEMENTS

• Any actions taken in terms of regulation 53 and 54 of the MPRDA Regulations (2004) which can be undertaken in terms of a provision of these regulations must be considered to have been undertaken in terms of these regulations.
• Any financial provision submitted in terms of regulations 53 and 54 of the MPRDA Regulations for which approval is pending or under review when these regulations came into effect, must be dispensed with in terms of regulations 53 and 54, as if those regulations were not repealed.
• Financial provision that was approved in terms of the MPRDA Regulations must be regarded as approved in terms of these regulations and the holder must review and align such financial provision with the provisions of these regulations

CHAPTER 5 – GENERAL MATTERS

• Certain offences are identified in regulation 18.
• An applicant or holder convicted of an offence listed in regulation 18, is liable to a fine not exceeding R10 million or to imprisonment for a period not exceeding 10 years, or both.

APPENDIX 1: Financial Guarantee
APPENDIX 2: Deed of Trust
APPENDIX 3: Minimum Content of an Annual Rehabilitation Plan
APPENDIX 4: Minimum Content of a Final Rehabilitation, Decommissioning and Mine Closure Plan
APPENDIX 5: Minimum Content of an Environmental Risk Assessment Report
APPENDIX 6: Care and Maintenance Plan

Written by Warburton Attorneys

This Legal Brief should not be regarded a comprehensive discussion of the topics addressed and, in particular, should not be taken as legal advice or relied upon. For further information please contact: lulu@warburtons.co.za