Estimating scale efficiency of platinum-mining companies' environmental performance: a South African perspective

Abstract

The purpose of the study is to develop a data envelopment analysis (DEA) model to estimate the relative scale efficiency of platinum-mining companies' environmental performance. South African platinum-mines were used to demonstrate the model, which uses environmental performance indicators as the input variables in order to generate mineral extraction and financial performances as the output variables. The input variables considered were greenhouse gas emissions, water usage and energy usage, while the output variables were platinum production, return on equity and return on assets. The contribution of the study is that a DEA model was developed that could identify relatively efficient companies that could act as benchmarks with regard to environmental issues in the mining sector. A further contribution is that the study concluded that platinum-mining companies tend not to achieve economies of scale, where the companies that are relatively larger in size tend to operate on a scale that is too large and companies that are physically relatively smaller in size tend to operate on a scale that is too small.