PAR’s Innovative Approach Against Illegal Mining

Illegal gold mining in South Africa is a serious problem with devastating consequences. The cost of illegal mining activities can be measured in lost lives, revenue, governance challenges, environmental degradation, and social instability. It goes without saying that illegal mining and sustainability are incompatible. That is why addressing the issue of illegal mining is critical and a priority for sustainability-focused mining companies.

Pan African Resources (PAR) operates a portfolio of gold mines in South Africa. Its operations include surface and underground mines in some of South Africa’s richest goldfields. The company has made sustainability a central part of its business, but illegal mining has been a major challenge to its sustainability efforts. Through innovation and collaboration, PAR is successfully addressing the issue of illegal mining activities.

South Africa is the world’s fifth-largest gold producer. The shocking thing is that illegal mining is estimated to account for as much as a tenth of South Africa’s annual gold production.

In South Africa, illegal miners, called “zama zamas”, target both abandoned and operating mine sites. They also infiltrate surface and underground mining properties. More than 30,000 illegal miners are estimated to operate across South Africa.

Pan African Resources’ Barberton mines complex, which consists of surface and underground operations, is among the properties that have been targeted by illegal miners due to the high-grade orebodies and rugged nature of the terrane.

The problem is illegal mining has become so serious in South Africa that the government has sent the army to try to help keep “zama zamas” out of mining areas. Where illegal mining is happening, everyone is losing.

Economic Impact of Illegal Mining

The economic impact of illegal gold mining is particularly staggering. An infiltration of illegal miners can reduce a mine’s lifespan and cause loss of production, revenue, jobs, economic benefits to communities, and loss of tax revenue to the government.

Illegal mining activities cost South Africa’s formal mining industry more than 7 billion rand ($370 million) annually. The cost includes lost mineral reserves and extra spending on security measures.

In addition to the direct loss to the mining industry, illegal mining also causes a massive leakage in the formal gold market. It is estimated that the sale of illegally mined gold siphons off more than R14 billion ($740 million) annually from the legal gold market. From lost export earnings to lost taxes and royalties, illegal mining costs South Africa’s government about $3 billion annually.

Illegal miners also steal mining materials and equipment from mining operations. Another thing they do is make unauthorized electricity connections from legal operations, which can result in unexpected power interruptions that can both risk the safety of miners and increase the production cost for mining companies by driving up electricity bills.

Environmental Impact of Illegal Mining

Illegal mining can cause severe environmental degradation through deforestation, pollution, and biodiversity loss. Since illegal miners operate outside compliance standards, their activities can cause irreparable environmental damage.

The gold mining and processing operation involves the use of materials and hazardous chemicals that can be harsh on the environment if not handled properly. Combined with limited skills, equipment, and a lack of will to protect the environment, illegal miners can degrade the soil and contaminate the water sources and air.

Additionally, illegal miners can be wasteful in their use of natural resources. For example, they often use excessive amounts of water to process gold-bearing material. As a result, they reduce water available to local communities and industrial mining operations. The resulting competition for water can raise tensions and stir water resource conflicts that undermine social stability.

Social Impact of Illegal Mining

Illegal mining is usually connected to violence and criminal activities. As a result, a surge in illegal mining erodes the safety and security of communities.

In many cases, illegal miners are armed with heavy weapons that they use to invade legal mine sites to steal mineral products and intimidate legitimate miners to assist their activities. Moreover, illegal miners are often involved in turf wars with rival groups in battles for the control of the best mine sites.

As a result, mining communities infiltrated by illegal miners can experience social unrest and an increase in criminal activities such as kidnappings, drug and human trafficking, illegal weapons trade, and prostitution. Taken together, illegal mining can erode investor confidence and make it difficult for legitimate mining companies to obtain funding for projects.

The demand for gold continues to rise, fuelled by central banks’ reserve asset purchases and a growing global middle class that is driving the demand for gold jewellery. The expanding industrial use of gold, such as in electronics manufacturing, is also driving demand for the yellow metal.

With growing gold demand comes surging gold prices, making the high gold price a strong motivation for illegal miners. With low overhead costs, illegal miners know they can make a killing when gold prices soar. In a situation like this, combating illegal mining can be more difficult and dangerous.

Illegal miners reduce mineral reserves and profit opportunities for mining companies. They also bring additional costs through the theft of products, material supplies, and electricity while creating a burden on communities. Moreover, illegal miners can increase the cost of managing old mine sites when they break perimeter fences to access mining areas and reopen closed shafts.

In addition to the direct loss of mineral reserves and theft of mine products and consumables, illegal mining activities can cause disruptions that lead to the temporary closure of legal mines. Such disruptions can result in missed production targets and increase production costs for legitimate mining companies. As a result, illegal mining can put off investors because of fears of significant financial loss to mining companies and social instability in mining communities.

Aware of the impact that illegal miners can have on investor confidence, the environment, and social stability, PAR has made the eradication of illegal mining a key part of its sustainability efforts. The company is leveraging a combination of advanced technologies and innovative initiatives to enhance its mine security and prevent illegal mining.

For example, PAR has invested heavily in surveillance technology to monitor its sites for illicit activities. It uses drones for aerial surveillance and has also installed advanced surveillance cameras at strategic points. Moreover, the company uses radar, long-range thermal cameras, X-rays, and seismic technologies to detect and prevent illegal mining activities on its properties.

These security measures have led to the arrest of hundreds of illegal miners and the closure of illegal mining facilities at Barberton mines and other sites.

PAR continues to invest in security technology to keep illegal miners out of its properties. It is currently working on upgrading perimeter fences, building physical barriers in high-risk areas, and installing systems that will improve screening and access control at the entrance to mining areas.

In the fight against illegal mining, PAR’s efforts go beyond strengthening internal security measures. Collaboration with authorities is also a major part of the company’s strategy and they call for the police to intervene when faced with situations that require extra force.

The involvement of specialized national police units in the fight against illegal mining activities has yielded enormous success for PAR and the company has been successfully able to identify and close many illegal gold-bearing material processing plants.

Apart from preventing the theft of its mineral resources and mining materials, PAR has also been able to enhance the safety of its teams. The company boasts an industry-leading safety record. In 2021, its reportable injury frequency rate per million man hours was 0.63, compared to the industry average of 0.90. In 2022, the company’s injury frequency rate dropped to 0.35, compared to the industry average of 0.71. Working with motivated, knowledgeable, and adequately skilled teams has also been a contributing factor to the company’s improved safety record.

PAR’s Mintails project consists of two major properties: Mogale and Soweto surface tailings storage facilities (TSFs). The company purchased these assets, which were previously owned by the now-liquidated Mintails mining company, for about $2.8 million.

The Mintails project is focused on reprocessing the historic TSFs to extract leftover gold. The project in Mogale will initially process more than 120 million tonnes of mine tailings material at the rate of 800,000 tonnes per month.

PAR is returning to what is considered mining waste material to extract remaining low-grade gold. With this operation, the company will increase its production of low-cost ounces and provide capital to prolong the lifespan of its mines as well as acquire new growth projects. That way, the company can deliver long-term value to investors while also advancing its sustainability mission. The Mogale operation is expected to yield 50,000 ounces of gold annually and increase PAR’s annual production by 25% over the current level.

While the Mogale tailings reprocessing operation is expected to run for an initial 13 years, the Mintails project’s lifespan could exceed 20 years when the Soweto TSFs are included. Considering that the areas around the Mintails assets have been major targets of illegal mining activities, restarting operations at the sites to reprocess tailings would close underground access points for illegal miners. Moreover, the project will create jobs and boost the local economy during the construction and mining phases, which some R2,5 billion has been allocated. Providing employment opportunities can remove a major incentive for illegal mining.

Besides extracting leftover gold, tailings reprocessing also helps with rehabilitating mining sites to reduce water and air pollution. At Mintails, PAR plans to rehabilitate the mining area, returning the land to a state where it could be used for agriculture, solar power farms, or housing projects.

Across the Evander and Barberton sites, the company has thus far freed up more than 22 hectares of land through tailings dump reprocessing and footprint rehabilitation. In Barberton, PAR has put some of its surplus land into a commercial-scale blueberry farming project, which supports the company’s efforts to develop sustainable economies for its mining communities.

Illegal mining reduces the mineral reserves available for legitimate mining companies, which can shrink their profit opportunity and investment returns, leading to mine closures and lost jobs. Aside from the direct impact on mineral resources, illegal mining activities fuel the theft of mine products, materials, equipment, and other resources as well as entice employees to collaborate through promises of cash windfalls. These can result in unexpected operational downtimes and social instability that can cause a hostile environment for established mining companies and host communities.

Since illegal mining disrupts operations and reduces profit potential for legitimate mining companies, it can erode investor confidence and make capital raising difficult for these mining companies, reducing their sustainability and growth potential.

PAR has made the combatting of illegal mining a top priority in order to safeguard the interests of its operations and legitimate stakeholders. It uses surveillance and access control technologies to detect and prevent illicit activities on its sites. Additionally, the company collaborates with the police and international crime-fighting syndicates to crack down on illegal mining activities.

In its periodic reporting suites, PAR highlights the proactive measures it is taking to combat illegal mining, detailing the progress and challenges of those efforts. Tackling illegal mining activities requires additional spending on surveillance systems and other security measures. These are costs to the company that can impact short-term financial performance, but they do provide the foundation for long-term prosperity, security, and protection of its assets.

Reporting on these matters helps build investor confidence and support the company’s efforts to protect its properties.

Keeping out “zama zamas” is in the best interest of PAR’s stakeholders. That is why the company continues to innovate around security measures and collaborate with authorities to safeguard its mine properties.

There still exist significant opportunities for PAR to bolster its fight against illegal miners. For example, the company could also partner with other mining companies to close access points for “zama zamas”. The company could coordinate with other mining companies around it to expand their tailings reprocessing operations and old mine sites rehabilitation to keep away the “zama zamas”. Additionally, the company could leverage artificial intelligence technology to improve its surveillance and detection of illicit activities on its properties, a process that is ongoing.

In its fight against illegal mining, technology and partnerships have proved valuable tools for PAR. Through innovations, the company has come up with efficient and effective techniques to reprocess tailing dumps and extract the most gold from mine waste. The tailings reprocessing operation has the added advantage of keeping illegal miners away.

The company also uses advanced security technology and collaboration with authorities to combat illegal mining. For the company, fighting illegal miners is part of its sustainability efforts. It helps the company to protect its mineral resources to deliver long-term value for investors. It also helps the company to ensure responsible mining practices that benefit its legitimate stakeholders across the board.