corporate governance framework for South African mining companies when placing a mine on care and maintenance

Abstract

Directors and management teams of mining companies are likely to be confronted with external or internal circumstances that may cause mining operations to be placed on care and maintenance. This is a complex process that poses several challenges in the following areas: governance, health and safety, environmental, socio-economic and financial. When large mining operations implement measures that lead to significant downscaling of activities, or cease production, this has severe impacts and wide-spreading consequences. Employees, shareholders, financiers, contractors and suppliers, surrounding communities as well as neighbouring mines are stakeholders who may be impacted negatively. Difficult decisions will be required. In making these decisions, directors need to strike a balance between the long-term sustainability of the company, and stakeholders' needs. Ethical behaviour and responsible citizenship require directors to make decisions in a manner that demonstrates considerations that reach beyond profits. However, no evidence could be found of prior research constructing a corporate governance framework that could guide and assist South African mining companies in their decision-making and actions when dealing with care and maintenance. Therefore, the primary objective of the present study was to develop such a framework, which would help directors of South African mining companies apply their fiduciary duties of skill, care and diligence effectively and efficiently when mining operations are placed on care and maintenance. Firstly, a literature review identified core components of corporate governance and care and maintenance. These include legal and regulatory compliance, risk management and accountability towards stakeholders and society in which the company operates. The relationship between corporate governance and South African legislative frameworks was investigated. Key aspects were identified of relevant legislation governing mines in South Africa, issues of interdependency, as well as care and maintenance. International guidance was also pursued. Secondly, a qualitative research approach was followed. Semi-structured interviews elicited data from participants with relevant experience care and maintenance. These interviews helped confirm and identify discrepancies in the data obtained from the literature review. Thirdly, a framework was developed, contextualised from the literature review and data collected from the semi-structured interviews. This framework identified the objectives, underlying values, risks, processes and procedures and ethical considerations of a corporate governance framework for care and maintenance. A recurring theme was that mining companies should not use care and maintenance as a reason to delay mine closure. Finally, the participants confirmed that the framework, if followed, will assist directors of mining companies in the discharge of their fiduciary duties of skill, care and diligence when having to place a mine on care and maintenance. Thus, the framework underlines the present study's unique contribution to expand the body of knowledge on corporate governance and its practical application within the mining industry