By Glenn Ashton · 17 Jun 2015
South African wealth is founded on our extraordinary mineral bounty, conservatively valued at over $3 trillion (R36 trillion). Our future is dependent on how we manage this geological legacy. We can either harness the full spectrum of opportunities or lay ourselves open to what is known as the “resource curse” where natural resources are exploited by unscrupulous or corrupt entities, with minimal national benefit. A recent example provides some insight in how we appear to be headed down the wrong path.
Most people familiar with the mining landscape are aware of the well-publicised attempts to gain mineral rights to access the apparently lucrative wild coast heavy mineral sands, known as Xolobeni, that have repeatedly failed. Not only is this resource located amidst a rich, relatively pristine ecosystem but this is hosted within an equally rich and dynamic social fabric, protective of its cultural and natural heritage.
The erstwhile developer of this resource is a relatively unknown minor listed Australian mining company, Mineral Commodities Limited, known as MRC, headed by one Mark Caruso. Caruso creates the impression of the archetypal “ocker,” a rough and ready Australian bloke, prepared to get things done come what may.
Over the past 18 months Caruso has commissioned a new mineral sands mine called Tormin, some 350 kilometers north of Cape Town. Permission and rights to operate Tormin were gained by the former MD, South African Andrew Lashbrooke. These two have subsequently fallen out and have become embroiled in legal action in Cape High Court, where Lashbrooke seeks substantial financial redress and damages.
Tormin has also been at the centre of serious allegations that its methods of operation are illegal and irregular. It has removed tens of thousands of tonnes of garnet and ilmenite that it has not received the requisite permissions to extract. These materials have illegally been stored in informal stockpiles on agricultural land.
From an environmental perspective, a lack of suitably careful mine management has seen cliffs adjacent to the treatment plant collapse onto the beach. The company has changed its mining methods without due permission or consultation and also built illegal hard breakwaters and jetties on the beach.
On top of this, the trucks delivering materials from the mine have seriously damaged hundreds of kilometres of road by transporting materials down minor backroads instead of using the approved route. Some of the materials are radioactive and require prominent identification but vehicles are allegedly improperly identified, monitored or managed.
Local communities in Lutzville and Koekenaap are up in arms because promised benefits from the mine have failed to materialise. Instead of local job creation, workers have been brought in from Xolobeni in order to curry favour from that community.
These community tensions have resulted in allegedly illegal protests. In November the police arrested 28 community members who await finalisation of the case, with the next hearing due in July. Community leaders accuse mine management of arrogance and of only dealing with selected ward councillors who are compromised through “benefits” provided by the mine. The community feels let down by the justice system and elected leaders.
MRC has pursued a similar modus operandi in Xolobeni, where for years it has pitted members of the community against each other in order to gain permission to access the resource. False petitions have been compiled, and violence and intimidation has recently resulted in a restraining order being issued against “leaders” associated with MRC. These conflicts have been widely covered in the media and have even become the subject of an award winning film, “The Shore Break.”
However MRC, and Caruso in particular, came to South Africa having apparently learned some useful tricks in ingratiating local officials and appointees during previous mining ventures with his UK listed company, Allied Gold, in the Solomon Islands in the South Pacific. Caruso gained the rights to the largest known gold resource in the Solomons, Gold Ridge, where the land rights had controversially been signed away by the resident community in a deal which created longstanding and significant social rifts. After Allied sold Gold Ridge the mine was subsequently shut down because infrastructure was insufficiently robust to deal with local flooding. Similarly poor community relations have dogged MRC’s other investments in gold mines in Papua New Guinea and Sierra Leone.
It is notable how these patterns echo the experiences of those involved in both the Tormin and the Xolobeni mineral sands resource projects. Not only has MRC been instrumental in setting community and even family members against each other at Xolobeni, through sly selection and appointment of various community proxies who have been given vehicles and benefits such as executive positions in subsidiary companies Blue Bantry and Xolco, but it has spread its influence far wider.
For instance well-supported allegations exist that MRC’s attempts to exploit the Xolobeni resource is intimately linked both to the highly contentious wild coast N2 toll road debacle, as well as to a bizarre political decision by the President to illegally interfere in regional traditional leadership matters by removing rightful amaPondo chiefs in the area. This matter was eventually decided by the Constitutional Court, which reinstated the very leaders who happened to question both the controversial N2 toll road and the Xolobeni mineral sands mine.
The link between the mine and the toll road relates to the necessity for a suitable route to transport nearly half a million 40 tonne truck loads of resource to the Durban port. It also aligns with government’s insistence that mega-projects will deliver improved living standards, despite numerous studies showing otherwise. The fact that MRC has established intimate relationships with various key political and traditional leadership stakeholders is not co-incidental.
South Africa needs to manage investment and exploitation of our mineral resources in environmentally and socially responsible and sustainable ways. We need to maximise the benefits and beneficiation of our resources. Good behaviour must be encouraged, bad practice curbed.
It appears we have failed to follow these fundamental precepts in the case of MRC. The company has created zero local beneficiation, in fact the MRC/ Lashbrooke court case centres on export of the garnet resources that were to be locally beneficiated. Now MRC simply ships its ill-gotten gains offshore to China and Australia, while creating significant social and environmental externalities.
Judging from this case it appears the Department of Mineral Resources (DMR) is not a suitable agency to promote and monitor the planning and implementation of mining. Extensive interaction has proven the Department to be remarkably un-transparent and non-responsive to enquiries about MRC’s mining operations, which should be in the public domain. Since DMR assumed oversight of environmental compliance the flow of information on mining in general, and Tormin specifically, has essentially dried up.
If we are to maximise the benefit of our resources we cannot countenance the non-transparent oversight of mining and the externalisation of social and environmental impacts. Our mineral resources must benefit the nation, not just the entities exploiting them. In order to do so we need transparent due diligence processes, not a free for all where resources are exploited by unscrupulous opportunists.