An Environmental Management Accounting Model For The South African Mining Industry

AN ENVIRONMENTAL MANAGEMENT ACCOUNTING MODEL FOR THE SOUTH AFRICAN MINING INDUSTRY by Maryna Möhr-Swart Submitted in partial fulfilment of the requirements for the degree DOCTOR TECHNOLOGIAE in the Department of Environmental, Water and Earth Sciences FACULTY OF SCIENCE TSHWANE UNIVERSITY OF TECHNOLOGY Supervisor: Prof D S Coetzee Co-supervisor: Prof J N Blignaut February 2008 DECLARATION BY CANDIDATE “I hereby declare that the thesis submitted for the degree D Tech: Environmental Management, at Tshwane University of Technology, is my own original work and has not been previously submitted to any other institution of higher education I further declare that all sources cited or quoted are indicated and acknowledged by means of a comprehensive list of references.” Maryna Möhr-Swart Copyright © Tshwane University of Technology 2007 ii This study is dedicated to my mother Jubilie Weideman and my late father Jack Weideman for their support and unconditional love iii ACKNOWLEDGEMENTS I would like to express my sincere gratitude and appreciation to: • my two promoters, Professors Faan Coetzee and James Blignaut for their encouragement and professional guidance • the Chamber of Mines of South Africa and the Department of Environmental, Water and Earth Sciences, Tshwane University of Technology for allowing me to complete this thesis by giving me the support and the time needed • Coaltech for financial assistance • Johann Beukes, Louis du Plooy and Annalise Minnaar for their friendship, motivation and being a crutch when I needed one • the different mines for their support and patience, and providing the information to make this thesis possible • Marilyn Farguharson, my editor who taught me what an ‘em dash’ is • Jo Grindley, the person who knows a lot more about computer programmes than I • the following people who, as friends and colleagues, played a significant role during the completion of my study: Lindie Erasmus, Ray Jansen, Nico du Preez, Nikisi Lesufi, Babalwa Nxusani, Dick Kruger, Jaap Viljoen, Thembi Kodisang, Marie Janse van Rensburg, Jubilie Ehlers and the international EMA family iv • Seakle Godschalk, a special thanks for helping to develop the mining framework and to make my dream come true by establishing EMAN-Africa • Christelle Brak and Loraine van Aarde, the best friends anyone could ask for • the most important people in my life — my mom, Jubilie Weideman, husband Sias and my children, Angelika and Pieter, for their love, support and constant motivation and also their patience, and • my Creator and Anchor in life Maryna Möhr-Swart v The fact is, if you want to save the planet, you can’t it without making a profit Steven J Bennet Ecopreneuring,1991 vi ABSTRACT The mining industry in South Africa is complex It encompasses different types of mining operations, given the wide spectrum of operations from underground and open cast mining to the processing of the ore The mining industry has become increasingly aware of the need to activate sustainable mining operations and to reduce the environmental impacts of operations This realisation was specifically brought about by the changes to environmental legislation Companies within the South African mining industry should recognise that their long-term future and sustainability is inescapably linked to their ability to reduce their environmental impacts and continuously improve their overall environmental performance Being aware of their environmental costs (and benefits), company’s exposure to potential environmental problems can assist managers in their strategic planning and help them to reduce the company’s exposure to future environmental risks and liabilities There is, however, an apparent lack of documentation of and accounting for environmental costs in a systematic and detailed manner and opportunities for cost savings are lost This study analyses and compares how mines are currently managing environmental costs and how this practice could be improved The main problem, which is involved in attempting to carry out systematic identification of the potential for materials efficiency improvements lies in vii traditional cost accounting systems, which are unable to provide relevant information on the company’s physical structure or materials flow Environmental management accounting (EMA) is able to address this problem The research method followed during this project is a combination of a modelbuilding study and a comparative study, using four case studies, to compare methods currently used by the selected mines and to refine the existing theory and model Obvious differences between the various case studies are the different commodities mined and the different mining methods used The results show a number of similarities between the case studies in terms of what limitations were found in existing systems Results indicate certain environmental costs, for example water, energy and consumables, were hidden; commonly accumulated in overheads by the current accounting systems Consequently these costs were being allocated in a manner that did not necessarily reflect their actual use Failure to properly account for environmental costs meant that opportunities for improved financial performance had been overlooked Fairly minor or low cost changes to existing accounting systems could lead to substantial operational improvements Building on the existing EMA framework developed by the international renowned experts, and following on the analysis of existing practices at selected mines, a framework has been developed for the mining industry The viii framework takes into account the unique characteristics of the mining industry In summary, implementing EMA Environmental performance will results be in better enhanced with decision-making less negative environmental impacts This will have overall potential cost savings resulting in better competitiveness and better legal compliance ix INDEX PAGE ACKNOWLEDGEMENT ……………………………………………… iv ABSTRACT……………………………………………………………… vii LIST OF TABLES……………………………………………………… xvi LIST OF FIGURES……………………………………………………… xviii LIST OF GRAPHS……………………………………………………… xix GLOSSARY……………………………………………………………… xx CHAPTER 1: INTRODUCTION………………………….…… 1.1 Introduction……………………………………………………… 1.2 Background and motivation…………………………………… 1.3 Problem statement……………………………………………… 1.4 Hypothesis……………………………………………………… 1.5 Aim and objectives………………………………………….…… 1.6 Previous research……………………………………………… 1.7 Research method…….………………………………………… 13 1.8 Difficulties and limitation encountered during the study…… 16 1.9 Outline of the thesis………………………………………….… 18 CHAPTER 2: MINING AND THE ENVIRONMENT………… 21 2.1 Introduction to mining…………………………………………… 21 2.2 Mining in South Africa…………………………………………… 21 2.3 Coal and gold as natural resources…………………………… 24 2.3.1 Coal……………………………………………………………… 24 2.3.2 Gold……………………………………………………………… 27 2.3.3 Cost trend in the mining sector………………………………… 31 2.3.4 National resource accounts…………………………………… 32 2.4 Mining and processing ………… ……………………………… 35 2.4.1 Coal mining methods…………………………………………… 36 2.4.2 Gold mining methods…………………………………………… 38 2.4.3 Metallurgy gold plant…………………………………………… 39 x Environmental media Costs in R Environmental cost categories Ropes (50%) Stone dust (100%) Building material (50%) Iron and steel (50%) Protective clothing (100%) Intermediate total 575 500 14 000 641 600 125 400 056 600 Info source Air and climate Waste water Waste Soil and ground water Noise and vibration Biodiversity Radiation and landscaping Health and safety Other Total 6060 6070 6010 6040 8154 0 0 0 0 0 244 450 575 500 14 000 641 600 442 300 0 0 244 450 0 0 0 0 0 0 0 0 0 0 0 125 400 125 400 0 0 0 575 500 14 000 641 600 125 400 056 600 3.5 Energy Fuel (50%) 911 000 6035 0 0 0 0 911 000 911 000 Intermediate total 911 000 0 0 0 0 911 000 911 000 0 0 0 0 0 0 0 0 0 0 0 259 200 536 050 442 300 244 450 0 125 400 911 000 259 200 3.6 Water Intermediate total Total section Processing costs of non-product output Slurry transport 0 0 0 0 0 Intermediate total 0 0 0 0 0 Total Section 0 0 0 0 0 Total environmental costs 37 710 560 400 575 850 487 500 244 450 224 400 Environmental earnings 5.1 Subsidies, awards None 0 0 0 0 0 37 710 560 0 0 Intermediate total 0 0 0 0 0 0 768 900 31 402 060 358 Environmental media Costs in R Info source Air and climate Waste water Waste Soil and ground water Noise and vibration Biodiversity Radiation and landscaping Health and safety Other Total Environmental cost categories 5.2 Other earnings Oil and scrap sales Recoveries (50%) Stock movement (100%) 8037 -821 100 8031 -1 428 800 8329 0 0 0 0 0 428 800 0 0 0 0 0 0 -821 100 0 -821 100 -1 428 800 Intermediate total -2 249 900 0 -1 428 800 0 0 -821 100 -2 249 900 Total environmental earnings -2 249 900 0 428 800 0 0 -821 100 -2 249 900 Saldo Costs/earnings 35 460 660 400 575 850 487 500 184 350 224 400 768 900 30 580 960 35 460 660 359 ANNEXURE 10 360 Environmental costs Mine C 2001 – detail Environmental media Costs in R Info source Air and Waste water climate Waste Soil and ground water Radiation Health and safety Other Total Environmental cost categories Waste and emission treatment 1.1 Depreciation for related equipment Capital expenses Equipment for waste collection Ventilation shaft Sludge 690 000 485 065 495 145 298 123 0 495 145 383 000 0 298 123 485 065 0 307 000 0 0 0 0 0 0 0 690 000 485 065 495 145 298 123 Intermediate total 968 333 495 145 681 123 485 065 307 000 0 968 333 750 165 500 000 645 352 54 000 447 000 50 980 532 113 760 023 837 000 0 0 0 0 750 165 0 0 0 760 023 0 0 0 50 980 532 113 0 500 000 54 000 0 0 0 0 0 0 645 352 447 000 0 0 0 837 000 750 165 500 000 645 352 54 000 447 000 50 980 532 113 760 023 837 000 11 576 633 510 188 583 093 554 000 0 929 352 11 576 633 1.3 Related personnel Personnel Personnel waste water plant 973 000 351 677 0 351 677 0 0 973 000 973 000 351 677 Intermediate total 324 677 351 677 0 0 973 000 324 677 1.2 Maintenance, operating materials and services Operating materials waste water plant Concurrent rehabilitation Use of rehabilitation provision Geographic expansions Maintenance overhauls Waste removal Waste removal hostels Maintenance waste water plant Maintenance costs Intermediate total 361 Environmental media Costs in R Info source Air and Waste water climate Waste Soil and ground water 0 Radiation Health and safety Other Total 0 Environmental cost categories 1.4 Fees, taxes, charges Intermediate total 0 0 1.5 Fines and penalties Intermediate total 0 0 0 0 1.6 Insurance for environmental liabilities 0 Insurance for fire risk Insurance for hazardous chemical spills Insurance for environmental incidents Intermediate total 0 0 0 0 1.7 Provisions for clean up costs, remediation 0 Provision for rehabilitation provision for final closure 70 427 700 0 0 0 70 427 700 70 427 700 Intermediate total 70 427 700 0 0 0 70 427 700 70 427 700 100 297 343 495 145 542 988 068 158 861 000 0 88 330 052 100 297 343 64 000 68 285 722 472 64 000 68 285 722 472 Total section Prevention and environmental management 2.1.External services for environmental management Environmental auditors Consultants EIA specialist 64 000 68 285 722 472 362 Environmental media Costs in R Info source Air and Waste water climate Waste Soil and ground water Radiation Health and safety Other Total Environmental cost categories Water monitoring Intermediate total 231 456 086 213 231 456 231 456 231 456 0 0 854 757 2.2.Personnel for general environmental management activities 086 213 Environmental personnel on mine Environmental management HO 910 507 892 265 0 0 0 910 507 892 265 910 507 892 265 Intermediate total 802 772 0 0 0 802 772 802 772 0 0 0 0 2.3 Research and development Intermediate total 2.4 Extra expenditure for cleaner technologies Intermediate total 0 0 0 0 0 Cleaning of dams Pollution control measures Staff env training and awareness Environmental community projects 31 000 615 000 27 976 78 400 0 0 31 000 0 0 0 0 615 000 0 0 0 0 0 0 27 976 78 400 31 000 615 000 27 976 78 400 Intermediate total 752 376 31 000 615 000 0 106 376 752 376 641 361 262 456 615 000 0 763 905 641 361 2.5 Other environmental management costs Total Section Material purchase value of non-product output 363 Environmental media Costs in R Info source Air and Waste water climate Waste Soil and ground water Radiation Health and safety Other Total Environmental cost categories 3.1 Raw Materials Intermediate total 3.2 Packaging materials None Intermediate total 0 0 0 0 0 0 0 0 3.3 Auxiliary materials Intermediate total 0 0 0 0 0 0 706 166 600 000 0 565 166 141 000 600 000 0 0 0 0 706 166 600 000 10 306 166 565 166 741 000 0 0 10 306 166 3.5 Energy Utilities 160 000 0 0 0 160 000 160 000 Intermediate total 160 000 0 0 0 160 000 160 000 3.6 Water Purchased from EDR 714 036 714 036 0 0 714 036 Intermediate total 714 036 714 036 0 0 714 036 24 180 202 10 279 202 741 000 0 160 000 24 180 202 3.4 Operating materials Operating materials Process material Intermediate total Total section 364 Environmental media Costs in R Info source Air and Waste water climate Waste Soil and ground water Radiation Health and safety Other Total Environmental cost categories Processing costs of non-product output Intermediate total 0 0 0 0 Total Section 0 0 0 0 129 118 906 495 145 18 084 646 10 809 158 476 000 0 96 253 957 Total environmental costs Environmental earnings 5.1 Subsidies, awards None Intermediate total 0 129 118 906 0 0 0 0 0 0 5.2 Other earnings Sales of scrap wood Sales of scrap metal Sales of scrap paper -17 088 -542 167 -1 545 0 0 0 -17 088 -542 167 -1 545 0 0 0 0 0 0 -17 088 -542 167 -1 545 Total environmental earnings -560 800 0 -560 800 0 0 -560 800 128 558 106 495 145 18 084 646 10 248 358 476 000 0 96 253 957 128 558 106 Saldo Costs/earnings 365 ANNEXURE 11 366 Environmental costs Mine D 2001 - detail Environmental media Costs in R Info Air and climate Waste water Waste Soil and ground water Radiation Health and safety 29 810 000 29 810 000 0 0 0 0 Other Total 0 29 810 000 0 source Environmental cost categories Waste and emission treatment 1.1 Depreciation for related equipment Depreciation water treatment plant Equipment for Waste collection Sludge 298 123 298 123 0 0 298 123 Otter dam 829 488 829 488 0 0 829 488 Depreciation of equipment 523 000 0 523 000 0 523 000 39 460 611 32 937 611 523 000 0 39 460 611 0 866 000 Intermediate total 1.2 Maintenance, operating materials and services Operating material 551 000 551 000 Maintenance costs 866 000 0 Geographic expansion 551 000 866 000 049 000 0 049 000 0 049 000 Concurrent rehabilitation 40 070 000 0 40 070 000 0 40 070 000 Other rehabilitation costs 440 000 0 0 0 440 000 440 000 Operating material waste water plant 565 165 565 165 0 0 565 165 Waste removal - hostels 532 113 0 532 113 0 0 532 113 50 780 0 50 780 0 0 50 780 760 023 0 760 023 0 0 760 023 Waste removal Maintenance waste water plant 367 Environmental media Costs in R Info Air and climate Waste water Waste Soil and ground water Radiation Health and safety Other Total 66 884 081 551 000 565 165 342 916 41 119 000 0 14 306 000 66 884 081 10 461 000 0 0 0 10 461 000 10 461 000 393 000 0 393 000 0 393 000 351 677 351 677 0 0 351 677 11 205 677 351 677 393 000 0 10 461 000 11 205 677 0 0 0 0 source Environmental cost categories Intermediate total 1.3 Related personnel Maintenance and operation personnel Contractors Personnel waste water plant Intermediate total 1.4 Fees, taxes, charges Cost for transporting waste Cost for permits Intermediate total 1.5 Fines and penalties Intermediate total 0 0 0 0 1.6 Insurance for environmental liabilities Insurance for fire risk Insurance for hazardous chemical spills Insurance for damage to property and injury to people Insurance for environmental incidents 0 Intermediate total 0 0 0 0 Provision for rehabilitation 770 000 0 770 000 0 770 000 Provision for final closure 50 898 626 0 0 0 50 898 626 50 898 626 1.7 Provisions for clean up costs, remediation 368 Environmental media Costs in R Info Air and climate Waste water Waste Soil and ground water Radiation Health and safety 55 668 626 0 770 000 173 218 995 551 000 33 854 453 342 916 52 805 000 Other Total 50 898 626 55 668 626 75 665 626 173 218 995 source Environmental cost categories Intermediate total Total section Prevention and environmental management 2.1.External services for environmental management Costs for environmental consultants auditing and inspection Water monitoring 231 456 231 456 0 0 231 456 Intermediate total 231 456 231 456 0 0 231 456 2.2.Personnel for general environmental management activities Environmental personnel on mine 438 120 0 0 0 438 120 438 120 Environmental management HO 892 265 0 0 0 892 265 892 265 330 385 0 0 0 330 385 330 385 0 0 0 0 Intermediate total 2.3 Research and Development Intermediate total 2.4 Extra expenditure for cleaner technologies Intermediate total 0 0 0 0 0 369 Environmental media Costs in R Info Air and climate Waste water Waste Soil and ground water Radiation Health and safety Other Total source Environmental cost categories 2.5 Other environmental management costs Environmental community projects 78 400 0 0 0 78 400 78 400 Intermediate total 78 400 0 0 0 78 400 78 400 640 241 231 456 0 0 408 785 640 241 Total Section Material purchase value of non-product output 3.1 Raw materials Sundries 030 000 Intermediate total 030 000 030 000 0 030 000 030 000 0 0 3.2 Packaging materials 030 000 None Intermediate total 0 0 0 0 3.3 Auxiliary materials 0 Personnel protective clothing Intermediate total 0 0 0 0 3.4 Operating materials 0 Operating material 527 000 0 527 000 0 0 527 000 Process material 165 166 565 166 600 000 0 0 165 166 16 692 166 565 166 16 127 000 0 0 16 692 166 Intermediate total 3.5 Energy 370 Environmental media Costs in R Info Air and climate Waste water Waste Soil and ground water Radiation Health and safety Other Total source Environmental cost categories Utilities 600 000 0 0 0 600 000 600 000 Intermediate total 600 000 0 0 0 600 000 600 000 Water purchased from EDR 714 036 714 036 0 0 714 036 Intermediate total 714 036 714 036 0 0 714 036 37 036 202 10 279 202 18 157 000 0 600 000 37 036 202 3.6 Water Total section Processing Costs of non-product Output Processing of waste rock material Processing of return dam solutions Intermediate total 0 0 0 0 Total Section 0 0 0 0 0 Total environmental costs 211 895 438 551 000 44 365 111 19 499 916 52 805 000 0 85 674 411 211 895 438 Environmental earnings 5.1 Subsidies, awards None Intermediate total 5.2 Other earnings 0 0 0 0 0 371 Environmental media Costs in R Info Air and climate Waste water Waste Soil and ground water Radiation Health and safety Other Total source Environmental cost categories Sales of scrap wood -17 088 0 -17 088 0 0 -17 088 Sales of scrap metal -542 167 0 -542 167 0 0 -542 167 Sales of scrap paper -1 545 0 -1 545 0 0 -1 545 Intermediate total -560 800 0 -560 800 0 0 -560 800 Total environmental earnings -560 800 0 -560 800 0 0 -560 800 211 334 638 551 000 44 365 111 18 939 116 52 805 000 0 85 674 411 211 334 638 Saldo Costs/earnings 372 ...DECLARATION BY CANDIDATE “I hereby declare that the thesis submitted for the degree D Tech: Environmental Management, at Tshwane University of Technology,... cited or quoted are indicated and acknowledged by means of a comprehensive list of references.” Maryna Möhr-Swart Copyright © Tshwane University of Technology 2007 ii This study is dedicated to... Environmental, Water and Earth Sciences, Tshwane University of Technology for allowing me to complete this thesis by giving me the support and the time needed • Coaltech for financial assistance • Johann