The Business Case for Mining whilst Managing the Environment

This article was originally drafted by the South Africa Node of the Millennium Project for the newsletter “Southern Africa Horizon Scan” as part of the Rockefeller Foundation’s Searchlight Process. For more Searchlight content on futurechallenges.org, please click here.

According to commentators and participants at a recent AngloGold Ashanti / Motjoli Resources Mining for Change workshop in Johannesburg, the development of green mining initiatives and more environment-friendly projects will become an increasingly economically viable option for the mining industry. While, initially, it may be costly to initiate or implement environmental programmes to comply with environmental legislation, the long-term benefits a mining company could reap by going ‘green’ could be a more viable option for the industry, they suggest.

According to Duane Newman, head of sustainability and climate change at Deloitte & Touche, high energy costs and pressures for sustainability are triggering environment-friendly mining, and companies are realising that their operations could be more viable if they were more environmentally friendly. This has resulted in some mining companies studying capital-intensive co-generation plant projects, which can be more cost effective in the long term, particularly if planned government policies come into play, such as increased tax breaks, incentives and carbon credit benefits. Renewable-energy generation can also be seen as another source of revenue for a mining company and becomes a commercial division for the company, harnessing wind, solar or biomass-produced energy.

Further, it is becoming difficult for mining companies to ignore regulations, as one is now seeing an integrated reporting journey in which the public and environmentalists demand one simpler, integrated report from organisations – combining the company’s financial results and historical information with reporting on its compliance with sustainability and environmental legislation. The more progressive companies are currently developing more transparent ways of communicating this information.

Meanwhile, Nedbank Capital joint head of resource finance Peter van Kerckhoven says mining companies are realising the positive impact environment-friendly mining has in terms of creating good relations in the community as well as stability. Van Kerckhoven says socio-economic, environmental and sustainability elements are interrelated; however, environmental challenges and solutions continue to become more important in the lives of mining companies. As mining companies are labour intensive and many are operating in rural communities, sound environmental practices and social upliftment initiatives are key to the sustainability of their own operations. However, Ernst and Young’s report, ‘Business risks facing mining and metals from 2011 to 2012’, points out that maintaining a social license to operate has become a more significant risk to companies, listing it at number four in the 2011 to 2012 top ten business risks list.

The role of mining companies in the future of Southern Africa and for African economic growth is immense. It can furthermore be argued that mining companies are better suited to lead the way in developing sustainable projects than other industries, as they are more project orientated, have a larger budget to develop socioeconomic and environmental projects and have an on-the-ground capacity to manage and implement the project. This is practically possible as illustrated by the following examples:

•           Anglo American Thermal Coal’s R28.1million (US$3.5million) gypsum housing project, which was a joint winner in Nedbank Capital’s Green Mining Awards entails the use of gypsum waste products as building materials while the by-products from the gypsum baking process are potentially used in other applications, creating future business opportunities which are being explored.

•           BHP Billiton Aluminium South Africa’s Ongoye Forest project involves restoring a 500ha degraded and threatened forest and providing a sink for between 60 000 t and 125 000 t of carbon dioxide (CO2) over a 20- year period. The project has the potential, through the use of indigenous tree species, to promote ecological restoration, as well as conservation of medicinal plants.

•           First Quantum Minerals’ Kansanshi Mining’s conservation farming project is aimed at conserving and rejuvenating soil, while simultaneously improving food security. It involves minimal soil disturbance, crop rotation and using crop residues to increase the humus layer of the soil. This project, started in 2010, has the potential to provide new sources of income for communities affected by mining activities, as well as to slow and possibly reverse deforestation.