HSE Legal Consulting


The Minister of Environmental Affairs published proposed amendments to the Financial Provisioning Regulations, 2015 on Friday 9 September 2016 under GN 1006 in GG 40265. Members of the public have 30 days to provide written comments.

The proposed amendments to the Financial Provisioning Regulations, 2015 are in response to concerns raised by the mining industry regarding the implementation of these regulations.  The proposed amendments are discussed below:

Deadline for submission of updated provisions extended
It is proposed to amend the current deadline for the review and alignment of current approved financial regulations (February 2017) to February 2018.

Inclusion of “Exemptions”
Exemptions as provided for in section 106 of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), have been included in the definitions of “applicant”, “holder” and “holder of a right or permit”. Accordingly, landowners or lawful occupiers of land who lawfully takes sand, stone, rock, gravel or clay for farming or for effecting improvements in connection with such land or community development purposes, who is currently exempted from obtaining a right or permit in terms of the MPRDA will have to comply with the requirements of the Financial Provisioning Regulations, 2015.

Rehabilitation Trusts
The proposed amendments also address the concerns relating to current rehabilitation trusts that may only be used for post-closure funding (latent or residual environmental impacts) and not for annual and mine closure rehabilitation. It is proposed to add a new subsection (5B) in regulation 17 that provides that this limitation only applies to trust funds established after 20 November 2015. It is also proposed to delete the entire Appendix 2 which contains the template Trust Deed.

Availability of Financial Provision
In terms of the proposed amendment regulations holders of rights will have to provide financial provisions equal to the sum of the actual costs of implementing the required plans and reports for a period of at least 10 years or for the period of validity of the right. If the validity of the right is shorter, then this shorter period is applicable.

Care and Maintenance
Amendments to the current Care and Maintenance provisions are also proposed. Existing holders of rights will also have to comply with the requirements if it is required and not only holders of rights granted since the Regulations came into force (20 November 2015).

Format of Financial Guarantee
In terms of the current Regulations a Financial Guarantee must comply with the standard form in Appendix 1 of the Regulations.  Various concerns with this standard form have been identified:
A tight deadline of two (2) business days to make payment to DMR should it call on the guarantee has been included in clause 2 of Appendix 1. It will be very difficult to assess the reasonability of the claim and to oppose the claim in the timeframe provided for in the Regulations.
Clause 2.1.3 of Appendix 1 provides that a guarantee may be called where rehabilitation has been undertaken, but “adequate progress” has not been made. It is firstly uncertain if the entire guarantee amount can be called up and secondly how “adequate progress” is defined.
Clause 3 of Appendix 1” provides that the DMR (Minister) will have to give account to the Guarantor of how the money was utilised within one year from the date of the payment by the Guarantor, any portion which remains unutilised must be refunded to the Guarantor with compound interest at the prime overdraft rate. It is unclear how a mining operation can be rehabilitated within one year and how this timeframe will secure the State against future latent liabilities.
To address the abovementioned, the amendment regulations propose to delete the entire Appendix 1.

So what for my operation?

Now everyone will sit and impatiently play the waiting game hoping that the amendment of these Regulations will happen sooner than later. The current Financial Provisioning Regulations, 2015 are legally in force and mining companies must ensure compliance. Companies that have commenced with the process of reviewing and aligning its financial provisions in line with the Financial Provisioning Regulations, 2015 should therefore not stop the process. The method of calculating the financial provision are not proposed to be amended and it will be beneficial for operations to have a closure and rehabilitation plan in place that is aligned with mine planning.

What is Shangoni’s approach?

Shangoni’s current approach is to align our clients’ financial provisioning with the new regulations (business as usual), unless otherwise requested by the client and confirmed by the relevant provincial DMR representative that a review/update in line with the MPRDA guideline document will be accepted. Companies with rehabilitation trusts funds should manage it as before.  Rehabilitation trusts funds should not be wound up and re-allocated to alternative financial vehicles to meet the requirements of the current Financial Provisioning Regulations, 2015.

For assistance or queries please contact Jan Nel 082 379 5935 or from our Rehabilitation department.