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Environmentalists exit Coal of Africa agreement

Negotiations were going nowhere – Save the Mapungubwe Coalition.

CAPE TOWN – In what must be labelled a win for big mining and a loss for the environment, the Save the Mapungubwe Coalition has pulled out of a memorandum of understanding signed with Coal of Africa (JSE:CZA) a year ago.

The aim of the MoU was to begin a process of constructive engagement that would result in the mine taking steps to mitigate the negative impacts of coal mining on the environment, specifically on scarce water and precious heritage resources. In return, the coalition agreed to temporarily suspend legal proceedings initiated in 2010 that were aimed at setting aside questionable mining approvals granted to Coal subsidiary Limpopo Coal Company for its Vele Colliery. 

The coalition includes the Endangered Wildlife Trust, BirdLife South Africa, WWF, the Wilderness Foundation and the Association of Southern African Professional Archaeologists. It was supported in its legal efforts by the Centre for Applied Legal Studies and the Centre for Environmental Rights.

The decision to pull out followed nine months of negotiation which “were going nowhere”, according to Yolan Friedmann, CEO of the Endangered Wildlife Trust. “The biggest stumbling block is the mine’s non compliance in terms of its water use.”

Coal of Africa CEO John Wallington (pictured) says that the basis on which the coalition is withdrawing and its allegations are inaccurate. “The mine is regularly audited by environmental authorities and to date has not received negative feedback on environmental compliance.”

However, research commissioned during negotiations, and paid for by Coal, revealed past and ongoing non-compliance with water legislation at Vele Colliery, and damage to the environment that now requires remediation, says Carolyn Ah Shene-Verdoorn, Policy & Advocacy manager at BirdLife SA.

In August the Coalition met with the Department of Water Affairs to alert them to the non-compliance at Vele Colliery. By December it had not indicated any plans to take further enforcement action.

The breakdown in these negotiations is but a hiccup in a year of problems at Coal. The company’s share price has fallen 80% this year to 160c and results to June showed bigger than expected losses. “The stock has been punished for falling cash flows, management changes, and illegal industrial action,” says Imara SP Reid analyst Percy Takunda. Falling coal prices and lower volumes will not have helped either.

Coal operates three collieries, Woestalleen, Mooiplaats, Vele, and is developing a fourth, Makhado. Woestalleen and Mooiplaats are at the end of their productive lives and are likely to enter into closure proceedings within the next 12 months, Takunda says. The future of the company lies with Vele and Makhado. This makes it essential that operations at Vele reach optimal production within the next few months.

In October Coal secured a $100m cash injection from Haohua Energy International, a unit of the Shanghai listed Beijing Haohua Energy Resources, in exchange for 23% of the company. This followed the decision by diversified miner Exxaro not to exercise its option to acquire a 30% stake in Coal’s Makhado coal coking operation. However, Takunda estimates that this investment will not be sufficient to cover Makhado’s funding requirements.

Meanwhile, also in October, the Coalition requested and was accepted as full member of the Environmental Monitoring Committee (EMC) for the Vele Colliery. 

The EMC was established as a condition of the environmental authorisation and water use licence issued by the departments of Environmental Affairs and Water Affairs respectively.

Various national, provincial and local authorities are represented on it.

“This is not us saying we are defeated,” says Ah Shene-Verdoorn. “Previously we did not speak out because we felt bound to negotiate with management directly, rather than publically. Now we will be able to draw public attention to issues if necessary.”

This just adds to the negative news for shareholders who are not likely to see the share price rerate in the near future.

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