How sustainable is mining in SA

Published: 01 May 2017 | The Sustainable Energy Resource Handbook

How sustainable is mining in SA?

Reeling from a plethora of difficulties over recent years, it is unsurprising that many observers have wondered about the future path and sustainability of South Africa’s mining industry. Speaking from a range of disciplines, experts from SRK Consulting interrogate the various sustainability factors – including reliable energy provision – that shape mining’s outlook today.

The parlous state of the country’s minerals sector was exacerbated a few years ago when state utility Eskom told mines it could no longer provide them with a reliable supply of electricity. This compounded problems like commodity price weakness, rising operational costs, an uncertain regulatory environment and concerns over water management.

While the mood in recent months has changed for the better – with expectations of a global recovery that has already seen significant recovery in the price of certain commodities – mining still has a mountain to climb if it wants to regain something of its former stature. Its future sustainability, moreover, lies in an increasingly complex world of competing demands and expectations – requiring integrated responses that cover a full 360 degree appreciation of risks and opportunities.

The good news is that awareness is growing about the need to ‘do things differently’, and technology is also playing its role in facilitating solutions to improve efficiency and long-term sustainability in a range of fields. What began as a search for reliable power has, somewhat unexpectedly, led to a possible solution to rising energy costs with renewable energy proving to be increasingly competitive.

Reliable, affordable energy

To discern the level of mining companies’ concern about the sustainability of their current source of energy, one need only track the response of Sibanye Gold; the company is not only the largest producer of gold in SA, but is among the top ten gold producers globally and the fifth largest producer of platinum group metals (PGMs) in the world.

Sibanye’s power costs rose from 9% of operating costs in 2007 to over 20% in 2015, despite its consumption actually dropping 15% during this period. Supply constraints also interrupted mining continuity and led to substantial production and revenue losses.

It therefore plans to start generating its own renewable energy by the end of this year, from a R3 billion, 150 MW solar photovoltaic (PV) independent power project. Other base load alternatives, including gas- and coal-fired power stations to supply between 200 MW and 600 MW, are also being explored.

In terms of costs, Sibanye is adamant that solar PV electricity costs have fallen to the point that they are now comparable to Eskom’s; and while Eskom’s costs are expected to increase at rates above CPI, the cost of solar PV power is expected to continue dropping.

The presence at this year’s Investing in African Mining Indaba of Tesla, well known for its innovations in battery technology, is another indication that mines are expected to be looking at a range of off-grid options for securing their energy supply and lowering their costs. Power storage has long been a limiting factor for renewable energy generation from sun, wind and water; more affordable high-capacity batteries with improved efficiencies and security outside of renewable energy generation times (for example, daylight hours for solar facilities) via storage could change all that.

Deeper means more energy

The point to remember is that many of SA’s mature deep-level gold mines – which on the face of it may be considered in their sunset years – are also the sources of great hidden value. If technologies can be developed to continue releasing this value safely and economically, then even higher levels of energy will be demanded for basic functions like hoisting, cooling and ventilation. Rising grid power prices may make these levels of power consumption unaffordable.

So it should be unsurprising that SA mines are considering alternative sources and experimenting with renewable options. Some local platinum and coal mines have already established solar facilities as test sites, generating power for certain of their surface infrastructure.

The scenario beyond SA is likely to be similar, as relatively high interest rates put a dampener on most African governments’ aspirations to beef up their large-scale, centralised generating capacity, or to embark on expensive distribution networks. These projects have high capital costs and long lead-times between initiation and revenue-generating phases, which can render them uneconomical in a high interest rate environment.

More realistic are those schemes that put the solution directly into the hands of the end-users, who must themselves meet the initial investment but enjoy the benefit of a much shorter turnaround time. The solar PV revolution quietly sweeping the African countryside is founded on this principle, bringing light and productive energy availability to low-income homes.

Similarly, mining projects in Africa’s more remote and unserviced regions will increasingly deploy renewable energy as this technology evolves to compete with traditional fossil fuels, or at least are likely to attempt a mix of energy sources. In countries like SA, which are weighing their options regarding carbon emissions regulation, mines must also consider a future carbon tax as a real business risk that on-site renewable generation can start to address.

Indeed, SA’s Renewable Energy Independent Power Producer Program (REIPPP) has been so successful in attracting foreign and local funding from private sources, that many African countries are considering the same model. The concept requires little commitment from public funds – just a firm hand in creating and implementing a fair and transparent framework for adjudicating tenders and ensuring that power purchase agreements are met.

Conserving energy, water

Alongside new ways of generating more energy, and doing it cheaper, is a parallel effort that has been ongoing for some years now: simply using less electricity. Driven by forces including overall cost-cutting, Eskom’s price hikes and environmental factors, mines have become much better at conserving their energy use.

Energy reduction measures in operations have included better planning and maintenance of equipment to limit energy intensity and wastage. Results have been encouraging; one example was the successful 10% cut-back in usage at Eskom’s request, during the dark days of load-shedding.

A similar focus has fallen on water in recent decades, as mining sustainability becomes increasingly caught up in managing this precious resource – both as a vital factor of production and an environmental risk. Challenges related to climate change and the variability of water supply will also feature increasingly on the agenda. The approach has shifted radically, away from sourcing-all-you-can-to-meet-peak-needs, and towards a careful management of the water balance on mine sites while grading water according to quality for different purposes.

An important lesson learnt over the past century in mining is that the uncontrolled use of water results not only in higher costs from wastage, but in substantial environmental cost through pollution. On a mine-by-mine level, this leads directly to higher closure costs; on the broader social level, SA is still dealing with a legacy of acid mine drainage in a number of mining regions.

The future will see better management of the different water qualities on mine sites, with new mines designed with the necessary reticulation options to ensure more recycling and re-use. While the ‘zero water use’ vision expressed by mining companies at the Mining Indaba is some way off, it is a worthy goal for mines to aim at bringing no extra water onto site for its operations.

In the meantime, there has been plenty of progress achieved in collaboration between mines, municipalities and communities – to share water resources and conserve wherever possible. This will become a key operational imperative as competition grows for scarce water resources, and will require mines to engage actively with their local stakeholders – including industry and agriculture. There is much scope for mines and industry, for example, to cooperate on how to make the most of industrial-quality water without incurring the high treatment costs of purification to drinking standard.

Technology is playing its role in mine water management, with improved dewatering systems and innovations to cut evaporation from effluent dams. Some solutions even address more than one sustainability issue at a time, such as the concept (now tried and tested) of floating solar panels on tailings dams – generating electrical energy while reducing water loss through evaporation.

Good nature

The impact of mines on the natural environment is clearly one of the core elements of sustainability – and one in which the mining sector has made great strides in recent decades. Driven by wider and deeper government regulation across the globe, mines have developed a vast body of knowledge and expertise focused on how to leave the environment as pristine as it was before mining.

SA’s legislators have certainly been quick to follow the example of more developed countries, and in many cases have set the bar for environmental compliance. The impact has been overwhelmingly positive, with larger operators buying into global best practice by active participation in initiatives like the International Council for Mining and Metals, whose roles include promoting environmental conservation. Like all regulated fields, this needs effective policing, and the state is developing the necessary capacity to fully cover all the bases in terms of regulatory enforcement.

Social impact and shared value

Governments have the difficult task of balancing not only the fiscal benefits of mining to the shareholders, on one hand, and the state, on the other – but also of ensuring that mines spread their benefits as widely as possible to surrounding communities and society at large. The latter aspect has become increasingly topical as an element of sustainability – especially as a number of mining operations globally have been temporarily suspended or closed completely due to disruption by disgruntled communities.

The start of this discussion needs to be around the status of any mine as a diminishing asset; stakeholders need to recognise the mineral asset as the ‘seed capital’ for a broader ecosystem, in which all stakeholders invest – so that the ecosystem can develop a life of its own and survive even after the mineral asset is depleted. Without the input of all stakeholders, this vision is not sustainable.

The reasonable expectation that stakeholders have of a mine as a source of sustainable development, is that they will all be left better off than when the mining project began. Sadly, this has not been everyone’s experience of the SA mining industry. When workers invest their labour, for instance, they expect themselves and their families to be better off than when they started – with regard to services like education and health provision.

This aspect of sustainability is often difficult to attain in SA’s historical context, however, as the majority of mineworkers still do not bring their families with them to join the community. The migrant system appears more stubbornly entrenched than many would have expected, creating even greater strains on operational stability; with so many families living apart, and requiring support to survive in distant rural areas, it is even more difficult to develop sustainable mine-based communities.

Mines nonetheless are expected to address these issues in their Social and Labour Plans, and there is progress on various fronts to institutionalise social investment, local economic development and skills development.

A further aspect of the state’s role in SA’s context is to broaden mining’s benefits through ownership and control. This is also clearly a sustainability issue, as it addresses questions of legitimacy and social order – which must in the long term be satisfied if the industry is to remain a stable and rewarding place to invest.

Here, the path has been tricky to say the least. While the principles of broad-based black economic empowerment are generally accepted as a valid approach to address past injustice in the economy, applying the approach has proved more difficult. The Mining Charter process, for instance, and the surrounding uncertainty has done the sector no favours in terms of attracting much-needed investment.

Mechanising for productivity

Certainly the sustainability of SA mining will also have to be built on the continued viability of mining enterprises that can compete with global competitors, especially as the downside of commodity price cycles ejects the poorest performers from the survival race. This competiveness is under stress in certain segments of the SA mining industry, as our traditionally labour-intensive operations struggle to keep up with comparative outputs per employee in more developed sectors.

While retro-fitting many of our deep-level, narrow-reef mines with mechanised mining options may not necessarily yield the results anticipated, there are plenty of examples in SA where mines are planned and run from scratch in a mechanised and more productive manner. Best practice is combining with technological advances in remote mining equipment, digital communication, sensors and monitoring.

With greater automation and remote operation, workers can be located further from the high-energy danger zones of underground operations, for instance, making mines both safer and more productive.

There is clearly no ‘silver bullet’ to secure the sustainability of SA’s mining sector, but an integrated approach is effective is it addresses all relevant factors – with a healthy dose of mutual respect and common purpose among stakeholders.

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