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As a business that is involved in mining, quarrying and associated operations, one of your biggest challenges in the context of environmental rehabilitation is how to satisfy the exacting requirements of the DMR (Department of Mineral Resources). Not only do you have to consider the financing requirements for the end-to-end range of mining/quarry activities, from prospecting and exploration through to closure, but you also have to ensure that adequate provision is made for the rehabilitation costs of the impacted environment, now and into the future. All this without compromising the financial sustainability and cashflow requirements of your operations, while remaining compliant with regulation.
There are a limited number of approved funding vehicles you can use to make financial provision for your annual and final rehabilitation, decommissioning and mine/quarry closure liabilities. The Sanlam Group, through Sanlam Investments, Sanlam Trust, Santam and environmental rehabilitation specialists Cenviro Solutions, have significant experience in customising solutions appropriate to meet both your regulatory and your future financial rehabilitation obligations. Our complete, end to end rehabilitation solutions are structured to include an optimal combination of insurance guarantees and Section 37A trusts, underpinned by an optimal investment strategy.
For detailed information on Environmental Rehabilitation Solutions, you can download the full brochure.
Through Sanlam Investments we can assist you with developing a tailor-made investment strategy that will take into account your unique financial circumstances as well as your appetite for risk. Our role is to manage the assets you have set aside for your future rehabilitation obligations in a manner which optimises investment returns and mitigates any unnecessary risks.
While we have the flexibility to meet the specific tailor-made investment solution you require, our experience suggests that the most effective strategies in the mining rehabilitation arena tend to be those designed to yield an asymmetric return profile (that is, taking slightly more risk while limiting capital losses and maximising returns). The complete solution is able to provide capital guarantees in combination with certain investment strategies, providing you with greater levels of certainty if required.
To cover your mining rehabilitation liabilities, our investment capabilities can be accessed either through a Section 37A trust structure (for future contingent liabilities) or with our partners, Centriq, through their insurance structure (specifically for the ongoing environmental rehabilitation and mining closure activities).
Previously, 37A Trusts were a popular vehicle for funding the full, end-to-end mining rehabilitation liability as they attracted favourable tax treatments in accordance with Section 37A of the Income Tax Act, No. 58 of 1962. However, with the recent changes, National Environmental Management Act (NEMA) now limits the use of trusts as a funding vehicle. Accordingly, trusts may only be used for potential future environmental impact (contingent liability), which may only be identified at some point in the future. The underlying investments in this trust must also be of a capital guaranteed nature.
Through Sanlam Trust, we can help you establish, administer and manage your existing Section 37 trust, or we can set up a trust uniquely for your rehabilitation need. We can also create a ‘made to order’ off-the-shelf trust.
To manage the underlying investments, we utilise a range of customised investment strategies, taking into account your unique circumstances as well as the DMR’s regulatory requirements, which specify the underlying investments allowed.
Because NEMA limits the use of trusts to the future (contingent) environmental rehabilitation liability only, insurance guarantees have now become a popular funding vehicle for the ongoing rehabilitation and closure activities.
The financial provisions that mining companies have to make to cover the cost of their rehabilitation liabilities can be excessive. It is therefore important that clients consider rehabilitation solutions that take into account the unique challenges they face in their business. For example, solutions that tie up cash and result in the utilisation of credit lines are not beneficial and impact negatively on the company’s financial statements.
Through our partners in Centriq (underwritten by Santam), we issue insurance guarantees to the DMR, while also providing you with an efficient investment vehicle to build up and grow the funds set aside over the required period.
Whether the solution we provide is a Section 37A trust or an insurance guarantee, we provide you with flexible, customised solutions to adapt to an ever-changing financial, mining and regulatory environment. The Sanlam Group can customise unique, differentiated solutions based on the specific needs and circumstances of our clients. Our solutions cover all the factors that should be considered by a company in structuring their mining rehabilitation provisions, positively impacting your company’s overall capital efficiency.
For detailed information on Environmental Rehabilitation Solutions, download the full brochure
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