Understanding the implications of NEMA

We’ve seen extensive change in law, which has resulted in the ‘moving’ of environmental authorisation legislation from the Mineral and Petroleum Development Act (MPRDA) into the National Environmental Management Act (NEMA) in November 2015. What are the implications?

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This has signaled a radical change in how mining companies provide for, calculate and report on their mining rehabilitation liabilities.

Under the old regulations mines had to submit unforeseen closure and financial closure plans. NEMA, however, requires three types of rehabilitation plans, the minimum content of each being prescribed by the regulations. This means more work for specialists in the field who are required to assist the Department of Mineral Resources (DMR) achieve their goals.

Cenviro Solutions is an Underwriting Managing Agent (UMA) underwritten by Centriq Insurance Company Limited and headed up by Rehabilitation Guarantee Specialist and Managing Director Leentie Smit, who has more than 10 years experience in the structuring of liability solutions for corporate clients.

To find out more we caught up with Smit for more on the implications for the industry.

Please tell me about your background?

I completed degrees in BCom Accounting Sciences, BCom Hons in Accounting Sciences and a Certificate in the Theory of Accountancy (CTA) at the University of Pretoria. I was awarded membership of the Golden Key Society for academic performance during this period and qualified as a Chartered Accountant (SA).

I have always worked in the insurance industry, focusing on consulting roles and the structuring of corporate liability solutions. I am privileged to be able to utilise my vast experience in this field by structuring mining rehabilitation guarantee solutions for my mining clients. I was the founder of Cenviro Solutions and have headed up this dynamic company and team of skilled employees since inception.

What are some of the latest developments in the mining industry that your company must take note of now that the new NEMA regulations have been gazetted?

NEMA has placed more responsibility on various industry specialists to assist the DMR with the monitoring of compliance with the required regulations. Underwriting risk in a responsible manner is paramount to our business. The involvement of specialists provides more comfort on the adequacy of the calculation of financial provision and compliance with the rehabilitation requirements as set out by the mine’s environmental management plan. The financial guarantee wording has been amended and it is important that we ensure compliance with NEMA by issuing financial guarantees using the prescribed NEMA wording.

How is the interaction between your company and the DMR?

We have been very fortunate to build excellent relationships with all regional offices of the DMR as well as officials at the office of the Director General. In our experience, our requests and questions have been attended to promptly and we have assisted the DMR with the interpretation and implementation challenges facing the industry on the new NEMA regulations.

What are some of the most difficult matters that your company has to deal with on a day-to-day basis in the mining industry?

The challenges our mining clients face impact on us as a solution provider daily. The decline in commodity prices, increased cost of production and the need for cost cutting to sustain mine viability has resulted in many mining clients seeking alternative structures to fund in order to meet their mining rehabilitation obligations. Our challenge is to assist our mining clients in structuring the optimal solution to fund for their rehabilitation obligation, while at the same time preserving cash flow and optimising the underlying investment returns.

How have the fluctuations in gold price affected your business?

Currently gold is one commodity that is not suffering the general decline in commodity prices. Saying that, material downside fluctuations in commodity prices impact negatively on the profitability and sustainability of our clients. Sustained low commodity prices will have an impact on the viability of many mining operations, which will impact our claims experience.

Why is your company the preferred service provider in the industry?

Cenviro Solutions (underwritten by Centriq Insurance Company Limited) believes in structuring solutions that will stand the test of time in an ever-changing financial, regulatory and mining environment.

We have seen the impact that various unforeseen factors have had on the mining industry.

Our solutions consider applicable legislation, tax and accounting treatments, cash flow requirements and ultimately the maximisation of the investment returns on the underlying funds required to fund the mining rehabilitation obligation. Our service is unmatched and we take great pride in going the extra mile for our clients.

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