ATC201111: Report of the Portfolio Committee on Mineral Resources and Energy on the Oversight Visit to Mpumalanga, Limpopo and Gauteng Provinces dated 11 November 2020

Mineral Resources and Energy

Report of the Portfolio Committee on Mineral Resources and Energy on the Oversight Visit to Mpumalanga, Limpopo and Gauteng Provinces dated 11 November 2020                   

 

The Portfolio Committee on Mineral Resources and Energy (PCMRE), having conducted oversight reports as follows:

 

1.         Introduction

 

The Portfolio Committee on Mineral Resources and Energy (PCMRE) took a resolution in the meeting held on 19 February 2020 that it should visit Optimum, Koornfontein and Lily Mine in Mpumalanga. The PCMRE also decided to visit Northam Platinum Limited in Limpopo for the following reasons:

 

• Both Optimum Coal Mine and Lilly Mine are under Business Rescue (BR). Based on the presentations received from the Business Rescue Practitioners (BRPs), the Committee resolved to visit these mines to get the progress on recovery of the three mine workers who were trapped underground at Lily Mine. In addition, the Committee sought to get an update from the Chief Executive Officer (CEO) of Vantage Gold fields and the attorneys representing the families of those workers.

 

• On 06 September 2019, a letter was received from the Speaker of the National Assembly (NA), Ms T Modise, for the PCMRE to consider a submission from MrMguzulu, Branch Secretary of the National Union of Mineworkers (NUM) in Optimum mine where he alleged that Optimum and Koornfontein mines were placed under BRPs since February 2018 because the mines not access banking facilities. Consequently, workers were living in abject poverty and have never received income since 2018.

 

• Additionally, on 26 November 2019, a letter was received from the Speaker of NA where Mr Kevin Tiro raised concerns regarding Northam Platinum Limited (NPL) Zondereide mine in Thabazimbi. MrTiro alleged that while the company has been existence for 30 years, where the mine conducts its operations has not benefitted anything. The Speaker requested to be kept abreast of the developments in this regard.

 

Thus, from 9 to 11 October 2020, the Committee undertook an oversight visit to the aforementioned mines, including a visit to the hotspot areas in Gauteng Province where illegal mining is reported to be escalating.

 

2.         Composition of Delegation

 

2.1        Parliamentary Delegation

 

The delegation was constituted by the Chairperson of the Committee as the Leader of the delegation, Mr S Luzipo (ANC), Mr MG Mahlaule (ANC), Mr M Wolmarans (ANC), Mr JH Bilankulu (ANC), Ms VT Malinga (ANC), Mr K Mileham (DA), Ms C Phillips (DA), Ms N Hlonyane (EFF), Mr NM Nxumalo (IFP)

 

Accompanying the Committee was the Committee Secretary, Ms A Boss; Committee Researcher, Mr S Maboda; Committee Assistant, Ms A Sombexe; and Mr J Molafo, Communications Officer.

3.         Reports on the Oversight to various provinces

 

This section provides a summary of the oversight visits. 

 

3.1 Visit to Lily Mine – Mpumalanga Province

 

Three employees (Yvonne Mnisi, Pretty Nkambule and Simon Nyerenda) were tragically trappedin a sinkhole when the container they were in was swallowed by a sinkhole. They have been trapped underground at the Vantage Goldfields Lily mine in Barberton since 05 February 2016. On the 29th of March 2017, the PCMR of the Fifth Parliament visited Lily mine site where the container had sunk. Despite a number of meetings between the Committee, the Department and other stakeholders (including the Business Rescue Practitioner, family representatives), as well as the prospective buyers of the mine, there has been minimal progress in retrieving the miners. When the current (Sixth Parliament) Committee met on 23 June 2020, it resolved that is should conduct an oversight visit to Lily Mine to appraise itself of a number of developments that have been reported, interact with affected parties and also pay a visit to families of the three mineworkers who are still missing.

 

Indeed, on the 9th of October 2020, the Committee visited the affected families. Firstly, the Committee met with the affected families in their tent that they had erected since the tragedy had occurred four years ago. The Chairperson of the Committee, Mr Luzipo, explained the purpose of the visit to the affected families and community members, who were present. The Chairperson sought permission from the families, to first, allow the Committee to see the area in which the tragedy had occurred as the Parliamentary Members of the Sixth Parliament had not seen the Lily Mine, where and how the tragedy had occurred. The families granted the Committee permission. The Chairperson informed the families that the Committee had made a decision on what needs to be done regarding the Lily Mine tragedy, however, this would be presented to the families after Committee Members had seen the mine. 

 

At the Lily Mine, the CEO of the mine, Mr M McChesney briefed the Committee on the history of the mine and the incident. He explained that Lily Mine started its operations in 2000 and it was an open pit. About 12 million tons of waste had been excavated to mine out the ore body which was continuing down deep. When further drilling was done it was found that the ore body continued to occur vertically, hence a decision was taken to set up an underground mine. What happened tragically on that day, a portion of the crown pillar collapsed. According to him, crown pillars are designed not to collapse but this one unfortunately collapsed.  The Mine Rescue Services (MRS) commenced with their operations to retrieve the container after the tragedy, which was believed to be containing the employees. They spent 8 days working around the clock trying to rescue the three individuals. The rescue mission was extremely difficult, as MRS could not get the machinery underground. Eventually, a meeting comprising the DMR, the trade union (organised labour), families, and management took a collective decision that the rescue was not going to be safe to continue.  The mine management approached SRK Consulting, the best rock engineers in the world, according to Mr M McChesney The SRK report provided options on how to get the container out. The two options were presented to the Department of Mineral Resources, under the leadership of the former Minister, Mr MosebenziZwane. The two options were as follows:

 

• Surface Recovery Plan: According to Mr McChesney this plan has negative environmental impacts. It would cost R500 million, and take three years to complete. Additionally, the mine would not have a future; and

 

• An Underground Recovery Plan. The underground recovery option was approved by the then Minister of the DMR, Mr Zwane. However, to date, nothing has been done. The Plan would cost between R100 million and R200 million.  According to Mr McChesney there is no scientific finding on why the pillar had collapsed.

 

The parliamentary delegation returned to the families wherein the Committee Chairperson informed the families that the PCMRE had compiled a report on the Lily Mine issue and that its recommendations would be submitted and debated in Parliament. In its report, the Committee had made the following recommendations, which the Chairperson highlighted:

 

• Closing the legislative gap between the Mineral and Petroleum Resources Development Act (MPRDA) and the Companies Act;
• That the state should declare the mine a disaster area in order to unlock resources that will assist to retrieve the bodies of the three workers; and
• That the state should consider expropriating the mine with a reasonable compensation, retrieve the bodies and resume operation in the public’s interest.

 

The family Attorney, Mr W Bloem spoke on behalf of the families. Mr W Bloem alleged that the DMRE had produced a report based on doing oversight (walkabout) in the mine and made a decision not based on science that because of ground instability, it was nearly impossible to retrieve the bodies. The Attorney recommended that the DMRE go back to the drawing board and do its own rescue plan, based on science. Furthermore, the Attorney stated that the families have no confidence in the BRP process. They see the process as a delaying tactic as the owner refused to accept a number of offers. The company has been under business rescue for more than four years.

 

 

 

3.2 Visit to Optimum Mine – Mpumalanga Province

 

On 4 August 2015, the Board of Directors and Management of Optimum Coal Holdings, the parent company of Optimum Coal Mine, resolved to place the company under Business Rescue. This was as a result of historical operational and financial difficulties and extremely difficult coal market conditions. The mine was subsequently purchased by Tegeta Exploration Resources in 2016. In a number of interactions between the Committee and stakeholders affected by the business rescue process and the possible sale of the mine, the Committee has registered its unhappiness with slow progress in the conclusion of the business rescue process, as well as continued suffering of employees, some of whom are owed wages and overall uncertainty facing the mine. The Committee had visited Optimum Mine to receive update on progress regarding the above issues and also interacted with stakeholders, including employees, BRPs, in order to ascertain if the intervention of the DMRE is yielding the desired results.

 

3.2.1 Update by the Department of Mineral Resources and Energy

 

Ms D Malebe, DDG Mineral Regulation stated that since the last presentation in Parliament in June 2020, the Department met with the BRPs to get progress on what has happened. She indicated that not much has happened in terms of compliance from the environmental point of view. Additionally, she stated that no progress had been made in terms of Social Labour Plan (SLP) projects. As of last month, September 2020, employees were still not paid. She indicated that there are two or three pieces of the mine operating but did not know what the proceeds from those activities are utilised for.

 

3.2.2 Update by the BRPs

 

3.2.2.1 Koornfontein (KFM)

 

The Senior BRP, Mr J Damons gave an update for both Koornfontein and Optimum Coal Mine: With regards to Koornofontein, their plan was adopted after close to three years facing off legal battles from Gupta related parties, either to liquidate the mine, to remove the practitioners and various interdict applications.

 

They have Competition Commission approval and Section 11 transfer of the mining right, which were conditions precedent for the transaction to go through.

 

He reported that the Mine has been sold to Black Royalty Minerals and they are currently in control of the mine and the mine will soon be restarted. The first leg of the purchase price was received.  The first leg portion will be used to pay for outstanding costs, legal expenses and the employees.

 

He reported that they have managed to pay 420 former employees their packages as set out in the adopted business rescue plan, which amount to approximately R93 million.  The remainder of approximately 105 employees will be paid before the end of October 2020.  This has been a long and hard fight and has brought such a respite to the former employees who had two bleak Christmas’.

 

He indicated that they have faced various challenges in the business rescue over a period of over two years which will be set out in the full report that will be sent to the Committee. They are finalizing the second leg of the sales transaction, which involves the transfer of the allocation at Richards Bay where KFM is a shareholder in.  The proceeds from this second leg will go to paying other creditor’s claims as compromised in the business rescue plan. The restarting of the mine will contribute greatly to job creation in the area and the economy at large.

 

3.2.2.2  Optimum Coal Mine (OCM)

 

The Senior business rescue practitioners were happy to report that on the 28 September 2020, 87.9% of the creditors (including ESKOM) and the two unions NUM and UASA, voted in favor of the adoption of the OCM business rescue plan.

 

This comes after more than two year’s battle through court applications brought by Gupta related entities/parties.  They have had a total of more than 40 High Court matters to deal with.  Although the OCM plan has been adopted there is still a liquidation application from Westdawn, believed to be a Gupta related entity that will be heard at the end of November 2020.  This creditor only represents approximately 3% of the voting interests in OCM, so they are very confident with the case they have made out in opposing the liquidation application.

 

The business rescue practitioners managed to intercept in the middle of 2018, VAT refunds totaling R89 million due to OCM which was to be paid to an agent appointed by the Gupta’s.  The business rescue practitioners had to bring an urgent High Court Proceedings to attach these funds, which was done successfully and these funds assisted in running OCM for another few months.  Mining was halted in November 2018 and OCM was placed under care and maintenance.  All staff were retrenched so that they could excess their Pension benefits while the BRPs try to find a solution for OCM.

 

OCM has been without power for some time.  The business rescue practitioners had to make other plans to deal with security and pumping and treatment of water.  The power was cut by ESKOM since the mine could only make part payments for electricity charges to ESKOM.  The power cuts resulted in massive damage to the mine in the form of cable and other theft because without power the mine could not be secured fully. They could not understand that on the one hand ESKOM is a creditor in OCM of more than R1 billion rand, but the power gets cut for non-payment or part payment of electricity charges to ESKOM. 

 

The business rescue practitioners faced with minimal post commencement funding and no secured purchaser had to make other plans to generate income at OCM to pay critical expenses such as ESKOM, Security, critical staff and the legal team.  The business rescue practitioners sometimes went through many months without getting paid and are currently still owed outstanding fees by OCM.

 

They sold certain assets not critical for the future of the OCM. They started with awarding small mini pit mining projects on property falling outside the life of the mine to generate the necessary funds to pay monthly care and maintenance expenses.  They are currently managing very well with the income received from these operations.

 

The mini pit operations have allowed smaller black operators to access the industry, it has so far appointed 100 of the 500 permanent employees of OCM and 80 individuals from the community.  They expect to have 300 individuals appointed by these operations by the end of the year, mostly comprising of former OCM employees.   The business rescue practitioners are now implementing the adopted business rescue plan.

 

Templar who converted their R1.3 billion-rand debt to equity in this process have commissioned a report on the status of the mine and what it would cost to restart the mine.  This process will be completed by 18 December 2020. He indicated that they will have an indication early in January 2021 when operations will be restarted and will circulate a report and include the Committee (PCMRE).

 

They believe that the full implementation of the adopted business rescue plan will in turn, bring relief to former employees and creditors as their claims will be settled as per the adopted plan and that this will lead to further job creation in the area and be a major contributor to the economy.

 

The BRPs were honest to state that the BRP process has been a complicated one. Since 2012, there had been 4 000 cases of BR processes in the country, and only 20 percent success rate has been recorded.

 

The Committee was taken to Botha’s Hoek to view how the mini-pit operations.

 

3.2.3 Update by the National Union of Mineworkers (NUM)

 

The National Union of Mineworkers acknowledged that the new buyer of the mine would have to invest a lot of capital because of the poor state of the mine. As stated above, the Union reaffirmed that a Gupta associate company is working against the BRP process. The court case is scheduled for the 24th of November 2020. The Union indicated that it is working well with the BRPs. 

 

The Union was grateful that Parliament had come to address the issues it had raised. The Union had felt that Government or the DMRE did not support them. The Union argued that Government had given the mine to the Guptas, thus Government should have intervened earlier. 

 

 

 

4.    Visit to Northam Platinum Mine - Limpopo

 

On 10 October 2020, the Committee met with petitioners in Thabazimbi, and the DMRE, following a petition to the Speaker of the NA by the community and local entrepreneurs. They complained that the mine shut out economic and employment opportunities for small businesses and local residents.

 

Prior to meeting the Northam Mine Management, the Committee met the community and local entrepreneurs led by Mr Kevin Tiro. Mr Tiro reiterated that the mine excludes the local community in its business, despite the community being impacted negatively by the mine activities, such as pollution. Mr Tiro stated that in the past three years, the mine has spent about R8 billion in expansion programmes. However, the community was excluded from these projects. Mr Tiro alleged that the community and local entrepreneurs are not involved in the existing business. Furthermore, Mr Tiro stated that local people are not prioritised in recruitment processes. Most of the recruits are from outside the 50 kilometre radius. According to Mr Tiro, over 50 percent of employees in the mine should be from Thabazimbi, currently this is not the case.

 

In terms of Broad-Based Black Economic Empowerment (B-BBEE), the company complies. However, Mr Tiro argued that those companies are not from the Thabazimbi local community.   Furthermore, he stated that stakeholder consultation on the Social Labour Plans (SLP) is non-existent. The community representatives acknowledged that some work in the mines might be specialised, but believe that while the specialised skills exist within the community, they are not utilised by the mine. By way of illustration, a project for the installation of pre-paid meters was given. The tender was awarded to a company from Klerksdorp. Installations were done by the local community, meaning the skills exist within the community. They also argued that in specialised projects, there is still a need for local labour.

 

Mr Tiro stated that the company, Northam Platinum Mine, would better respond to most of the questions asked by the Committee. 

 

The Committee proceeded to meet with Northam Platinum Mine. Mr Nelson Dlala, Operations Executive of Northam Mine Platinum Mine, welcomed the parliamentary delegation. The General Manager of Northam Mine Platinum, Mr Daniel Johannes Gonsalves, together with Mr Dali Duma, Mr Lusanda Sam, and Ms NcedisaMaqoma, delivered a presentation. The presentation highlighted the following key issues:

 

• The mine officially opened in January 1993. It produces about 180 tonnes of reef per month and 20 000 tonnes of waste per month. Metals produced in the mine include platinum, palladium, rhodium, gold, chrome, nickel sulphate and copper.

 

• The company has a total staff complement of 9 209. The majority of employees are from North West (16.6 percent, Limpopo (14.1 percent) and the Eastern Cape (13.2 percent) provinces, respectively. The aforementioned total number of employees include contracts. Thus, of the 9 209 employees, 6 300 are permanent. It was reported that only 14 percent of the employees are women in the company.

 

 

• The company has about over 4000 suppliers. The suppliers are categorised as follows: Tier 1 (Thabazimbi and Moses Kotane Municipalities), Tier 2: North West Province, Tier 3 (Rest of South Africa). Of the over 4000 supplier companies/suppliers, only 39 are from Thabazimbi and Moses Kotane Municipalities. Regarding the process of selecting suppliers, the company uses a closed tender system. Thus, it invites suppliers on its database, including local suppliers.

 

• During the current financial year, the company has spent R2.3 billion on compliant suppliers, and R1 billion on non-compliant suppliers. The non-compliant supplier is a supplier that does not meet the transformation requirements. 

 

 

• Between July 2019 and September 2020, the company has spent R4.9 billion on corporate social investment. This includes the provision of interest free home loans to employees.

 

After the Northam Platinum Mine had presented, the community and local entrepreneurs were afforded an opportunity to share their views or ask questions to the company. The representatives of the community and local entrepreneurs appreciated the engagements facilitated by Parliament and indicated that is the first time they encounter the General Manager of the company. They felt that the presentation was high level as it did not speak to the real issues affecting the community of Thabazimbi, the exclusion thereof in company plans. They argued that the company is structured in a way that prevents black-owned companies, particularly from Thabazimbi, to participate. Thus, the representatives are calling for the company to be unbundled.

 

The PCMRE raised a concern about the stakeholder consultation process on the SLPs. The company stated that, in its consultation process, it follows the Municipal Integrated Development Plan (IDP) process. Thus, every year, it aligns itself with the Thabazimbi Local Municipality. The company requests the list of projects from the municipality and contribute accordingly. Some Members in the Committee, including the local community representatives were concerned that the aforementioned process still excludes the community of Thabazimbi, as the company is consulting with the municipality, not the community.  The company stated that almost 80 percent on SLPs is allocated to the community.

 

The DMRE indicated that it had done inspections to ascertain compliance on SLPs by the Northam Platinum Mine. It was found that the company was not compliant. The Director- General, Mr Mokoena, acknowledged that the issue of trust deficit between the DMRE, mining companies and communities was raised during the first consultations of the mining charter. In addition, he stated that in the 2016 – 2020 SLP report, which is the second generation of SLPs.   

 

5.         Visit to illegal mining sites – Gauteng Province

 

The PCMRE has been seized with the issue of illegal mining as part of legacy issues that the Portfolio Committee of the Fifth Parliament flagged as requiring ongoing monitoring. Furthermore, the DMRE has reported to the PCMRE that the nature of the problem is evolving, given the aggressive nature of resistance faced by officials when trying to seal shafts that are used as entry points by illegal miners to access ore bearing material underground.

 

On its last day of the oversight, 11 October 2020, the Committee visited a number of illegal mining sites in Johannesburg, namely, Council for Geosciences Makausi settlement sealed shaft, Council for Geosciences Balmoral settlement sealed shaft, DRD/Ergo Jerusalem slime dump rehabilitation and Council for Geoscience van Ryn Rehabilitation and upward spiral mining permit.

 

In aforementioned sites, it was evident that the issue of illegal mining is very similar to that of illegal electricity connections. The Department addresses an issue in a specific site and the following day, the illegal miners are back or have found an alternative spot. According to the DMRE, it closes shafts, and the illegal miners vandalise them. In Balmoral Settlement, illegal miners reopened the sealed shaft more than 20 times. The Department found a way to permanently close the shaft. When the shaft was permanently closed, illegal miners went across the road to do a new shaft for themselves. As the illegal miners mine, they compromise the adjacent roads – as there would be no more support underneath. In one instance, the road had collapsed due to illegal mining.

 

The Department encourages that when a mining area is rehabilitated, it should be used immediately to avoid illegal mining.  The Committee was impressed with the manner in which the DMRE, together with its entities, continues to close off old shafts that are used for illegal mining activities, and the repurposing of the land for recreational facilities like the new race track in Ekurhuleni.

 

 

1. Observations

 

This section provides a synopsis of the key issues observed by the Committee, particularly emanating from the presentations, discussions, and the walkabouts in the mining sites.

 

• With regard to Lily Mine, BRPs continue to struggle to secure an attractive offer to sell the mines to new owners. It then felt that the current owners appear to put their financial interests far ahead of those families and employees whose members are still trapped underground.

 

• Regarding the Optimum mine, it was learnt that over and above its failure to pay salaries of workers, the mine, which is also under Business Rescue, also faces operational challenges due to unmaintained equipment and inability to pay for electricity. The Committee once again felt that mine owners also put their financial interests ahead of those workers who have not been paid salaries for years.

 

 

• The Committee is pleased with progress on Koornfontein. The mine has been sold to Black Royalty Minerals, they are currently in control of the mine, and the mine will soon be restarted. Former employees will be paid out their packages as set up in the adopted rescue plan. 

 

• The Committee is concerned that on the one hand, owners apply for the mining rights using the Mineral and Petroleum Resources Development Act (MPRDA), but on the other, they invoke the Companies Act in order to delay selling off the mine when faced with financial difficulties.

 

• The Committee noted with concern, the non-existent relationship between the Northam Platinum Mine and the community of Thabazimbi. The Committee then directed that the DMRE should, as soon as possible, facilitate a meeting between the company, business owners and the community in order to find a lasting solution, and that it should report back on what has been agreed upon.

 

• Of the 9 209 employees at Northam Platinum Mine, only 14 percent are women.

 

• The majority of employees at Northam Platinum Mine are outside the Limpopo province.

 

• The Committee was displeased with the absence of the DMRE Regional Manager in Mpumalanga and the Northam Platinum CEO, especially as no apology had been tendered for the two officials.

 

• The Committee noted the good work the Department is doing in dealing with the challenge of illegal mining.

 

• The Committee was concerned about the poor role the Department is playing in ensuring compliance with the SLPs by the mining companies.

 

1. Recommendations by the Committee

 

The Portfolio Committees having heard the presentation recommends the following:

 

• The Department of Mineral Resources and Energy facilitate an engagement between the Community of Thabazimbi and the Northam Mine Executive and provide feedback to the Committee.

 

• As the mining companies are developing the third generation of Social Labour Plans for submission to the Department, robust oversight by the Department, on the implementation of the Plans is critical.

 

 

• During the Third Quarter of the 2020/21 financial year, the Department should brief the Committee on progress made by the BRPs on Optimum Mine business rescue process.

 

• The DMRE to ensure that former employees of Optimum are given first preference on employment, when the mine is opened and ramped up to full capacity.

 

• The DMRE to ensure that the next generation Social and Labour plan of Optimum primarily addresses the economic and social needs of former employees, who had been negatively affected by the business rescue process.

 

• The DMRE continue to provide full legal and administrative support to the process of reopening mines currently under business rescue.

 

Report to be considered.