Full Disclosure 2016

Sentula Mining Limited's disclosure of environmental non-compliances in annual reports

2011 company reports

The 2011 Sustainability Report made the following disclosure relating to the Nkomati matter referred to in the DEA’s 2013-2014 NECER:

Nkomati was issued with pre-compliance notices from the DWA and the MDEDET as well as a compliance notice from the DMR. The compliance notice from the DMR was accompanied with an order to stop mining at the Madadeni opencast section. This was subsequently lifted following the approval of an Environmental Management Programme amendment for the site. Sentula took the decision to place Nkomati Anthracite on care and maintenance pending the resolution of all legislative requirements at the operation.

Nkomati has been in close communication with government departments and independent consultants regarding environmental licensing at the operation. A number of applications are in progress. These include an Integrated Water Use Licence Application and a Section 24G rectification for activities around the opencast section.¹

The Sustainability Report lists one “monetary fine or sanction related to non-compliance with environmental legislation”.² It is not clear from the report what this fine or sanction relates to. According to the report, there were no environmental incidents in the reporting year.³

Sentula’s 2011 Integrated Annual Report also states as follows with respect to Nkomati:

Nkomati has experienced a number of environmental legislative challenges. The mine has been in operation since the 1980s and has changed hands a number of times during this time. In March 2011, following a directive from the DMR relating to the opencast section’s Environmental Management Programme, production at this section was suspended. Both legacy and recently arising challenges exist, however, Sentula remains committed to legal compliance and ethical practices. In demonstration of this commitment, in May 2011 Nkomati was placed on care and maintenance pending the finalisation of all environmental applications.⁴

In relation to environmental and social complaints, the Sustainability Report states that a number of complaints were received in South Africa regarding blasting activities. The report states:

Although they occurred on host mines’ sites, we view them in a very serious light and appropriate action is taken to mitigate these effects.⁵

It is also reported that a complaint regarding blasting damage to houses at Nkomati was received, but an independent investigation determined that the cause of the damage was poor construction rather than blasting effects. Other complaints received in relation to Nkomati related to access and communication.⁶ In this regard, the Integrated Annual Report states:

Complaints received with regard to Nkomati Anthracite have been responded to and, where appropriate, action taken. Complaints regarding environmental issues such as blasting effects, access, and communication were all recorded. We continue to engage the community and the relevant authorities to resolve these issues.⁷

With respect to compliance more generally, the report states:

The environmental impacts of mining are becoming increasingly highlighted as the effects of acid mine drainage become more apparent. There is increasing pressure on mining companies and contractors to ensure that the impacts of their operations are quantified and mitigated as far as possible. Sentula remains committed to responsible mining and we are currently reviewing all our environmental monitoring procedures to ensure compliance to environmental best practice. South African legislation requires that a number of specialist studies and impact assessments are carried out before environmental management plans are approved. In addition, water resources are protected through the licensing of water uses, particularly in industries such as mining. These and other legislative requirements dictate the manner in which Sentula is able to operate in the South African context. We are not yet required to reduce our emissions, however, as the effects of global warming become more apparent, pressure to do so will likely increase. Sentula has begun to monitor the carbon emissions of the entire organisation. This year a baseline carbon emission level was established and a target-based strategy for reducing our overall emission is being implemented.⁸

The Integrated Annual Report also states as follows:

Sentula aspires to be recognised as a responsible, ethical organisation. Our sustainable development goals are in line with this aspiration and through this ongoing process of review we aim to consistently improve our performance in the areas of sustainability and responsible mining. We have identified the following focus areas for improvement going forward:

• Stakeholder engagement
• Environmental licensing
• Monitoring procedures.⁹

2012 company reports

The 2012 Sustainability Report made the following disclosure relating to the Nkomati matter detailed in the 2013-2014 NECER report and the company’s 2011 reports:

Nkomati Anthracite, an operational anthracite mine, was placed on ‘care and maintenance’, in May 2011. Operations are expected to fully resume in the 2013 financial year. Nkomati Anthracite has a resource base estimated to be in excess of 80 million tonnes. Its main customer is Xstrata, through supply of coal to that company’s ferrochrome furnaces.¹⁰

The report states further:

Despite being on care and maintenance pending the resolution of all environmental licences and applications, Nkomati Anthracite was issued with a directive and a pre-compliance notice from the DWA in this reporting period. Nkomati Anthracite has been in close communication with government departments and independent consultants regarding environmental licensing at the operation. A number of applications are in progress. These include an Integrated Water Use Licence Application, which has been finalised and is awaiting formal decision and a Section 24G rectification for activities commenced around the opencast section.¹¹

The report states that two “monetary fines or sanctions related to non-compliance with environmental legislation” were received during the year.¹² Again, the subject of these fines or sanctions is not clear from the report. However, given that the Nkomati Anthracite matter is described earlier in the report under the heading “Environmental Incidents and Sanctions”,¹³ it is presumed that the directive and pre-compliance notice issued are the two sanctions referred to.

The Sustainability Report also recorded 9 significant spills during the reporting period.¹⁴ With respect to these spills, the report states:

Although this represents a significant rise from the previous reporting period, the increase in vigilance and recognition of environmental spills as serious incidents should translate into decreased incidents going forward. None of the spills were recorded in sensitive or wetland areas and all environmental incidents are managed and rehabilitated to best environmental practice.

A number of complaints were received regarding blasting, mining and operational activities within South Africa in the reporting year.¹⁵ In this regard, the report states:

Even when the source of the complaints occurs on our host mine’s sites, we view them in a very serious light and appropriate action is taken to mitigate these effects and engage with the complainants.¹⁶

The 2012 Integrated Annual Report states that, with respect to sustainability issues in general (including safety, health and environmental issues), 6 stakeholder complaints were received during the year.¹⁷

With respect to stakeholder engagement and compliance more generally, the 2012 Integrated Annual Report states:

Sentula realises that without constructive input from our stakeholders and commitment from them to uphold our business principles and values, we cannot build a sustainable business that can add value to society. This is particularly true in all our coal mining investments, including our Nkomati Anthracite operation. Although there have been a number of challenges with regard to stakeholder engagement at this operation, we remain committed to improving relationships with all stakeholders. To this end Nkomati Anthracite has invested significant time and resources into engaging with the local communities, governmental departments, NGOs, the tribal authorities and local municipal structures. As part of our commitment to open and transparent engagement with our stakeholders, Sentula took the decision to make copies of all our environmental authorisations and applications available for download on our website. This decision was noted and commended in the Centre for Environmental Rights 2011 publication document on access to information entitled “Unlock the Doors: How greater transparency by public and private bodies can improve the realisation of environmental rights.”¹⁸

With respect to air quality management, the report states:

Although we are not yet required by legislation to reduce our emissions, pressure in the form of tax, incentives such as the proposed South African general carbon tax may become a reality in the near future. In preparation for these measures and as responsible corporate citizens Sentula has begun to monitor the carbon emissions of the entire organisation.¹⁹

2013 company reports

Sentula does not produce separate Sustainability Reports from 2013 onwards.

It is reported in Sentula’s Integrated Annual Report that there was one environmental incident in the 2013 reporting period, a diesel spillage at one of Benicon’s host mining sites. In terms of the measures taken following this incident, the report states that “the area was rehabilitated to best environmental practice and disciplinary action was taken against the operator responsible for the incident.”²⁰

The report states that neither Sentula nor any of its subsidiaries received any sanctions for non-compliance with environmental legislation in the reporting period.²¹

In relation to the Nkomati matter, the following disclosure is made:

Subsequent to the 2013 financial year-end, Nkomati received notice that the DWA had opened a case against Nkomati in 2011, for transgressions under the NWA, including operating without a water use licence. The case was investigated by the DEA, who added charges relating to unlawful activities commenced under the NEMA. Nkomati was issued with a water use licence by the DWA in October 2012. In 2011 Nkomati applied for a section 24G application, for the rectification of the unlawful activities commenced under NEMA. After careful consideration of all relevant circumstances, including that it would be in the best interest of all stakeholders for mining operations to recommence, Nkomati decided to plead guilty to eight charges, including those charges in relation to historical alleged contraventions, which arose prior to 2007. Nkomati entered into a plea and sentence agreement with the State, in terms of section 105A of the Criminal Procedure Act, No 51 of 1977. As a result of this decision Nkomati was fined R5 million, of which R1 million was suspended.²²

The report states that, with respect to sustainability issues in general (including safety, health and environmental issues), there was one stakeholder complaint received during the year.²³

With respect to air quality management, the report states:

As the effects of climate change become more apparent, there is a need not only to quantify and report on carbon emissions, but also to find more innovative ways to reduce emissions without slowing development or growth. Although the industry is not yet required by legislation to reduce its emissions, incentives and disincentives, such as the proposed South African general carbon tax announced to take effect in 2015, will soon become a reality. In preparation for these measures, and as a responsible corporate citizen, Sentula has, over the last three years, improved its carbon emissions monitoring across the Group.²⁴

2014 company reports

In 2014, Sentula reported that there were no environmental incidents, but that it had received two “monetary fines or sanctions related to non-compliance with environmental legislation”.²⁵ Again, the subject of these fines or sanctions is not specified, but it is presumed that these relate to the fines received in the Nkomati Anthracite matter.

The fines received in the Nkomati Anthracite matter are referred to elsewhere in the report, under the heading “Environmental incidents and sanctions”, as follows:

During the 2014 financial year, Nkomati Anthracite Proprietary Limited received notice that the Department of Water Affairs (“DWA”) had opened a case against it in 2011 for transgressions under the National Water Act, No 36 of 1998 (“NWA”), specifically for operating without a water use licence. The case was investigated by the Department of Environmental Affairs (“DEA”), which added charges relating to unlawful activities commenced under the National Environmental Management Act, No 107 of 1998 (“NEMA”). In 2011, Nkomati applied for a section 24G rectification of the unlawful activities commenced under the NEMA. Nkomati was issued with a water use licence by the DWA in October 2012.

After careful consideration of all the relevant circumstances, including that it would be in the best interests of all stakeholders for activities to resume at the operation, Nkomati decided to plead guilty to eight charges, including charges pertaining to alleged historical contraventions which arose prior to 2007. As part of the DEA 24G [sic] rectification process, Nkomati entered a plea and sentence agreement with the state, in terms of section 105A of the Criminal Procedure Act, No 51 of 1977, and was fined R5 million, of which R1 million was suspended.

Nkomati subsequently received authorisation for activities to commence at the Madadeni opencast section.²⁶

The report states that one environmental complaint was received during the year which related to blasting at Benicon.²⁷ The report states that the complaint was resolved as follows:

The matter was swiftly resolved by way of a personal visit from the Benicon management team to the complainant and the blasting method was adjusted so as to remedy the problem which brought about the complaint.²⁸

With respect to environmental management, the report states as follows:

During the period under review, Benicon, JEF and Geosearch retained their ISO 14001 certifications, and Ritchie attained it. CCT continues to work towards obtaining its certification.²⁹

With respect to air quality management, the report states:

Furthermore, as the effects of climate change become more apparent, the need to quantify and report on carbon emissions becomes necessary, as well as finding more innovative ways to reduce those emissions without slowing the development or growth of businesses. Although the South African mining industry is not yet legally obliged to reduce its carbon emissions, incentives and disincentives such as those contained in the National Treasury’s Carbon Tax Policy Paper, anticipated to come into effect in 2015, will soon become a reality. In preparation for these measures and as a responsible corporate citizen, Sentula has, over the past four years, improved its monitoring of the impact of its operations on the environment and carbon emissions and has implemented procedures to ensure an understanding of and adherence to environmental legislation across the Group.³⁰

With respect to compliance generally, the report states:

In a constantly changing legislative environment, compliance with all applicable legislation can be challenging. In order to mitigate the risk of noncompliance, the Group subscribes to a compliance service which makes all applicable legislation available through a legal register and also explains and contextualises any legislative changes through a newsletter service.³¹

2015 company reports

In 2015, Sentula stated that it had not received any monetary fines or sanctions for non-compliance with environmental legislation. Sentula also reported that there were no Level 2 or 3 environmental incidents during the reporting year.³²

In its 2015 Integrated Annual Report, Sentula reported that two environmental complaints were received by Benicon during the year relating to blasting noise. Sentula reports that the complaints were swiftly resolved by management’s visits to the affected parties and that Benicon has subsequently switched to electronic blasting to reduce the sound vibrations.³³

With respect to environmental management and compliance, the report states:

During the year under review, Benicon, Geosearch and JEF retained their ISO 14001 certifications. The Group continues to work towards obtaining certification for each of its remaining subsidiaries.³⁴

The report states further:

Sentula continues with its efforts to comply with all applicable environmental laws and in addition to the compliance service to which the Group subscribes, Sentula makes use of specialists to advise on and mitigate the risks of non-compliance.³⁵

2016 company reports

[This section was not included in the version of the assessment sent to Sentula for comment on 27 September 2016, as Sentula’s 2016 Integrated Annual Report was published on 30 September 2016.]

In 2016, Sentula stated that it had not received any monetary fines or sanctions for non-compliance with environmental legislation. Sentula also reported that there were no Level 2 or 3 environmental incidents during the reporting year.³⁶

Sentula reported that there had been two stakeholder complaints during the reporting period.³⁷ These complaints were received by Nkomati, and are described by Sentula as follows:

[A] community leader was not consulted prior to operations resuming and a blasting incident which resulted in a number of houses being damaged. Management held meetings with the complainants and the matters were resolved amicably.³⁸

In relation to operations at Nkomati, Sentula reports that:

The Nkomati anthracite mine, which was previously classified as a “held-for-sale” asset, has been brought back into operation and is well on track to achieve record production and profitability. During the past fifteen months the emphasis was on ensuring that the open pit mine achieves steady state production and that we complete the planning for the reopening of the underground mine. Open pit steady state production was achieved subsequent to the end of the financial period and underground make-safe operations are scheduled to start during 2017. Longstanding shareholder disputes have been resolved, paving the way for raising the necessary capital to resume underground mining operations.³⁹

With regards to risk management, Sentula states that:

As part of Sentula’s Risk Management Strategy, the ISO 14001 standard – a voluntary measure of environmental compliance and maintenance of industry standards – has been selected as a target standard to be achieved.

During the period under review, Benicon, Geosearch and JEF retained their ISO 14001 certifications.⁴⁰

Sentula repeats the following statement from its 2015 report:

Sentula continues with its efforts to comply with all applicable environmental laws and makes use of specialists to advise on and mitigate the risks of non-compliance.⁴¹