Council for Geoscience, and Mintek 2012 Annual Report briefings

Meeting report

Mintek 2011/12 Annual Report briefing
Mr Mohau Mphomela, Board Chairperson, Mintek, explained to the Committee that Mintek had reappointed the current Chief Executive Officer (CEO) for the next term of five years.

Mr Mphomela then set out the highlights of the last financial year. Mintek was a fully functioning body with all of its executive positions filled. It received a clean unqualified audit report. The Board was happy with the total combination of all the good results. The current term of Boards ended in February.

Mr Abel Mngomezulu, President and CEO, Mintek, said the core business of Mintek was research and development of efficient mineral processing technologies and of green technologies. It promoted mineral based economies and built world class research and development excellence. He reviewed Mintek’s objectives and said it had a good financial year. Its total income was around R400 million, and it had a surplus of about R43.4 million.

He explained that Mintek had not talked about its clean audit reports in the past, but in this year it had included this result in the presentation, having received a clean audit opinion, with no adverse findings on predetermined objectives and compliance, for the third year in a row. The only negative feature, which Mintek was addressing, was that of client dissatisfaction, which was too high. Mintek used to meet once a year to discuss this issue, but now it had met quarterly.

Mintek had 12 postgraduate full time bursars in 2012, and 42 undergraduate full time bursars. It had 29 undergraduate part time bursars, and 51 postgraduate part time bursars as well. Mr Mngomezulu noted that more black people were entering Mintek, but most of them could not afford to do postgraduate studies on a full time basis, and would work, after obtaining their first degrees, to support extended families, but continue with their studies later. Mintek thought that the number of postgraduates at Mintek would continue to increase.

Ms Mamokete Ramoshaba, General Manager: Corporate Services, Mintek, said there had been a slight increase in Mintek’s turnover rate. It was losing professionals, especially engineers, who were highly mobile. However Mintek was trying to address the situation through various strategies. 57 employees had resigned in 2011/2012. Currently, 71% of the staff was African, with 48% being male and 23% being female. 19% of the staff were white, with 12% being male and 7% being female. There was under-representation of some groups in terms of professional and technical levels. Mintek undertook human capital development in areas such as internship programmes, graduate development programmes and enhanced relationships with Higher Education Institutes (HEI) and other similar organisations. It had absorbed all the former bursary-holders.

Mr Peter Craven, General Manager: Business Development, Mintek, spoke to the rehabilitation of derelict and ownerless mines. Mintek was a recipient of R90 million over a period of three years, ending in March 2013, and had in the 2011/12 undertaken four projects. Two were reported as being substantially completed. There was a plan to spend the full R90 million allocation by the end of the year. The reason why the programme appeared to have built up very slowly was that the first eighteen months were spent planning, identifying sites and other issues, whereas the latter half of the project was when the tenders were awarded and work was done.

Mr Alan McKenzie, General Manager: Technology, Mintek, explained that ConRoast technology was being commercialised by Jubilee Platinum, and Bay 2 plant construction had started. Mintek was able to re-employ 19 of its retrenched staff through the Bay 2 plant project. Mintek wanted to create a South African Rare Earth Element refinery. Partners had been selected and negotiations had started. Technical development work was ongoing.

Savmin water treatment technology was aimed at water treatment, including Acid Mine Drainage (AMD). Mintek had signed a cooperation agreement with Veolia, a water treatment company, to develop and commercialise the technology.

One of Mintek’s more successful projects was in Canada. Mintek had completed an 18 month ferrochrome project for Cliff Natural Resources, to bankable level. It started with laboratory scale testing and concluded with a large pilot smelting campaign. Over 500 tons of ore was processed.

Mr Mckenzie said that sensor-based sorting was identified as a strategic project and would make a significant impact in the industry. He gave an example of work done for Anglo American Platinum at Mogalakwena. The cut-off grade was lowered by waste rejection and the Platreef resource that was being mined could be doubled.

Dr Makhapa Makhafola, General Manager: Research and Development, Mintek, explained that a slip cam watched electrodes and would identify any fissures on the electrodes. There were PGM Beneficiation Technologies that physically processed platinum group metal (PGM)-based and precious metal powders. The main aim was to develop different methods for production of precious metal and alloyed powders. This included methods of mechanical alloying, water atomisation and gas atomisation. The PGM that owners produced would further be utilised in the development of precious metals coating for high temperature applications.

The Spence project was a two-year long, high temperature, heap bioleaching project for BHP Billiton Base Metals, and it had been concluded in December 2011. It was highly successful, from a technology viewpoint, in demonstrating that heat accumulation and copper extraction could be controlled within the desired range. The project provided commercial revenue stream for over two years. Within rural communities, there were three small, medium and micro-enterprise (SMME) projects started up that were still in existence. The start-ups created 145 jobs. 165 learners were trained in small scale mining, pottery, glass beads and jewellery. She added that of the 46 SMMEs created prior to 2011/12, 32 were still in existence.

Mr Sakhi Simelane, General Manager: Finance, Mintek, said that the total revenue for the year was R421 million, compared to R337 million in 2011. The group revenue had increased by 17%, compared to the prior year. The total assets of Mintek were R617 million and its total liabilities were R210 million. Products and services increased by 42%.

Mr Simelane explained that international revenue had grown by 74% and group commercial revenue was generated primarily in South Africa, UK, USA and Canada. The revenue derived from foreign customers related mostly to pilot plant work. Mr Simelane did not expect an increase in staff costs. There would be an increase in the use of energy. Major capital expenditures for 2012 included the Bay 2 upgrade to include atomizer, at R44 million, upgrading of mineral processing pilot facilities, at R5 million, and establishment of a cleanroom, at R13 million. In this regard, he pointed out that Mintek faced some challenges with its deteriorating facilities and ageing equipment. Money was generated from operations. Equity increased by R43.3 million, due to the increased surplus. Cash and investments increased due to better debt collection and inflow of cash received in advance. Mr Simelane was hoping that Bay 2 would improve Mintek’s revenue. The downside was that electricity consumption would increase drastically to about R4 million a month. Overall, Mr Simelane noted that Mintek’s financial position was stable.

Mr Mngomezulu returned to human resource issues, and said there was concern with the staff turnover rate, because it was at 4.6% in 2010, and now had stabilized around 8.5%. He said that there was an improvement in that most people working at Mintek had taken on part time studies.

He noted that another concern was that Mintek was reliant to some extent on project based funding. Whilst this had its positive side, in that Mintek was able to measure itself and be open about what it was doing, including partnerships with other companies in the Medium Term Expenditure Framework (MTEF) period, it also had its negatives, because if that money was not secured past the MTEF period, then Mintek may have to retrench some of the staff working on those projects.

Discussion
Ms J Ngele (ANC) asked whether the Committee was likely to be involved in the next appointment of a Chief Executive Officer, and commented that she had been very impressed with what the current CEO had achieved.

Ms Ngele asked if Mintek was training internally and externally.

Ms Ramoshaba said that staff were an important asset and Mintek continued to invest in and award bursaries. It would be exploring the Schools of Excellence further, and had discussed the matter already at a preliminary level.

Ms Ngele wanted clarification and explanations on retrenchment.

Mr Zulu confirmed that in this financial year there had been retrenchment of 39 employees, not because of funding, but because there was nothing for them to do. If Mintek was able to, it would call the staff back to the placed in different divisions when work programmes were started, and of the 39, the majority had been called back, with only 9 not having been placed again, as there was no work for them.

Ms Ngele also asked if Mintek was doing something about the rural communities who lacked markets.

Mr M Sonto (ANC) asked about the challenges of implementing the rural community programmes in small-scale farming, and what outcomes it brought.

Mr McKenzie noted that Mintek would purchase, and use as gifts, products from the people that Mintek trained in rural areas. The Department of Mineral Resources also tapped into work from ladies in areas that Mintek had trained. Mintek tried to form partnerships with government agencies, and would follow up on the businesses that Mintek had created, to ensure their sustainability. Mintek would also offer help in terms of marketing and selling products.

Ms F Bikani (ANC) noted that Mintek had a clean audit, but asked if Mintek was managing to pay suppliers within 30 days.

Mr Zulu credited Mintek’s internal audit with the clean audit, saying that it had found and reported on all mistakes that Mintek had made throughout the year, so they could be corrected.

Mr Mphomela confirmed that the Audit Committee was very stringent and there was an open-door policy maintained between Head of Internal Audit and the Chairperson of the Audit Committee. They had established good communication, and were able to deal with problems directly. The Head of Internal Audit was protected in respect of any matters raised.

The Chairperson asked if the Internal Audit and Audit and Risk Committee was the same entity.

Mr Mphomela explained that there was an Audit and Risk Committee that reported to the external Audit Committee.

The Chairperson noted that four or five members of that Committee had only been reported as attending one out of four possible meetings, and named some who were not frequently present.

Mr Mphomela explained that some people had left, resigned or were currently being replaced.

Ms Bikani noted the staff turnover figures and asked what specific initiatives it had to ensure retention of staff.

Mr H Schmidt (DA) was confused about graph on the resignations, and wanted clarification.

Mr Simelane wanted to clarify the annual resignations and staff turnover. The staff turnover rate was the product of the number of resignations of employees, divided by the Mintek staff complement. Mintek staff complement always changed, so the turnover rate also always changed.

Mr C Huang (Cope) thanked Mintek for an excellent presentation, saying that its performance was a “breath of fresh air”. He was, however, concerned about the Mintek dissatisfaction frequency rate, and suggested that perhaps there was a need to monitor this monthly, instead of quarterly.

Mr McKenzie said that when Mintek completed a project, it would do a survey. If the client was unhappy, then it would immediately be dealt with. At Corporate level, there were meetings every three months, to deal with these issues. The individual business units, however, had to address any problems as soon as they were raised.

Mr Huang said that there had recently been announcements of more mega watts of power being produced in South Africa, using cutting edge technology that would be the future growth path. He suggested that Mintek should also be doing its own research into green energy, particularly given its concerns around the high electricity charges, and come up with its own solution.

Mr Craven said that green energy, and use of electricity and water were all environmental impacts that Mintek considered. Mintek applied a lot of the state grant to producing electricity, and looking at other alternatives. Mintek was heavily involved in green energy and regarded it as an important and strategic requirement at the company.

Mr Huang asked if Mintek patented all its research and development.

Mr Craven replied that Mintek looked at new developments and would consider if it was preferable to patent them, or keep them as a trade secret. Mintek left fundamental research to universities, but it did become involved in applied research. As soon as Mintek became involved it would look at commercialisation or potential technology transfers, which resulted in patenting or trade secrets. Mintek was compliant with intellectual property management requirements.

Mr Huang noted that South Africa had an abundance of platinum group metals (PGMs), which he thought would help boost the mining sector. He suggested more research and development into products using PGMs that were being used overseas and locally.

Mr H Schmidt (DA) also referred to the fact that there was an ongoing study to broaden the market of PGMs, and wanted to know if Mintek was involved and, if so, to what extent.

Mr Schmidt pointed out that ownerless mines were not the responsibility of Mintek, but of the Department of Mineral Resources (DMR). For this reason, he questioned who had come up with the figures of the R90 million needed, and asked if Mintek had allocations from the DMR for these projects, and how, from a technology viewpoint, it had become involved with these mines.

Mr Craven noted that there was a global problem with the rehabilitation of mines, with the USA having the biggest problem. South Africa had over 6 000 sites, but in some cases, rehabilitation of these sites could cause more harm than good, so sometimes it was better simply to leave them as they were. DMR had focused on asbestos mines, which also formed 90% of Mintek’s focus. The problem was too big for one single entity alone to handle. Mintek used its technical skills to identify any value in the dumps that it could recover, to help pay for the cost of the rehabilitation. Mintek’s capability, within its current structure, was about five to ten projects. Mintek had applied for funding of R150 million, but was not sure yet how much money would be received from DMR.

The Chairperson asked if it was impossible to trace former owners of these mines, or whether this question should be asked of DMR. He wondered what Mintek’s recovery rate was.

Mr Craven said that in most cases, the owners were known, but the companies were no longer in existence, so there was no legal entity that carried the responsibility; it must be remembered that some of these mines dated back one hundred years or so. Most of Mintek’s activity was involved in the retreatment re-treatment of waste and scrap from dumps. Mintek was involved in technology developed for the retreatment of gold and uranium dumps, but the dumps currently being treating by Mintek were asbestos dumps, where there was no value. Certainly, in respect of gold and other precious metal dumps, the value contained in the dumps would be look at.

Mr Sonto wondered why the responsibility should not lie with whoever had formerly owned the mine.

Mr Craven explained that these were abandoned mine sites. Some were even on top of Table Mountain.

Mr Schmidt said it was a legal problem as well. Some sites were now valuable, such as the dumps, now that new technology was able to do recoveries He wondered if Mintek did research to assess whether rehabilitation of certain mines would create value, or, if Mintek was not doing this, he asked if any other entity was investigating it.

Mr Craven said Mintek could look at whether there was potential for recovery, but in most cases would simply be contracted to come up with various technologies to re-treat a dump, with no initiatives into value being taken by those who had rights to a dump. Mintek had not had any instances to date where it had the chance to look at an abandoned dump, identify what value it had, and going through the process of tendering. At the moment, Mintek was just looking at asbestos mines and open quarries where there was no value. It could, in the future, look at whether or not there was potential to recover material, and if it was economically viable to do so.

Mr Schmidt asked for more details on the Bay 2 plant construction.

Mr McKenzie said that the Bay 2 was a large demonstration scale smelter facility. It was upgraded five years ago and was developed for ConRoast technology, for smelting PGM.  Anglo American Platinum negotiated with Mintek, and required a capital upgrade of the facility. This included a plant where liquid metal was turned into fine liquid powder. Construction was complete, and Mintek was now in the commissioning phase. This phase allowed Mintek to employ some of the people that were formerly retrenched. It was not easy to come up with a new use of platinum that would create a demand for a substitute for half of the consumption. There were two projects, the hydrogen fuel cell and medical application of metals, that were part of Mintek’s development work. These would not, however, substitute the use of large quantities of PMG that went into auto catalysts.

Mr C Gololo (ANC) asked if Mintek had been in any way involved in the health developments on treatment of HIV.

Mr Makhafola said that Mintek was not involved in the HIV treatment part, from the side of affordability and reliability. It was involved with some research into HIV, AIDS and malaria.

Mr Gololo commented that he was pleased to see the Mintek surplus, and asked if it would be used for exploration or research and development.

The Chairperson asked if the surplus represented an underspending.

Mr M Sonto (ANC) wondered if Mintek having a surplus negatively impacted upon the state grant.

Mr Sonto asked what revenue stream Mintek was using to develop its programmes, and how viable they were.

Mr Mngomezulu explained that if Mintek was a commercial entity, the surplus would be called a profit. He noted that Mintek had spent 98.9% of the Parliamentary grant given. Mintek did not make profits (surplus) in respect of the Parliamentary allocations, but did make profits from its commercial work. The surplus was deliberate, as Mintek tried to have five or six months of all employees’ salaries as a surplus, so that at least every employee would be guaranteed that salary if Mintek ceased to exist.

Mr Simelane added that one third of Mintek’s revenue was comprised of the grant, of about R140 million, and the rest of the money was made through commercial activities. The grant was used for research activities. The surplus did not amount to under spending, because it did not come from the grant. Mintek would invest the surplus into research and capital equipment.
 
Mr Sonto was pleased to hear about the unemployed graduate programmes, but asked if Mintek benefited from them, and how it would deal with the inflow of unemployed graduates.

Mr Mngomezulu said that the unemployed graduates were brought to Mintek through a council. Mintek paid for the salaries, mostly for post graduates, and a number of them who had worked at Mintek had subsequently been absorbed by Mintek. Part-time bursaries holders were mostly young people. Mintek tended to have a gap in skills, largely because of resignations, in the 40-50 year old range.

Council for Geoscience (CGS) 2011/12 Annual Report briefing
Mr Phuti Ngoepe, Chairperson, Council for Geoscience, announced that the 2011/12 year had been the one-hundredth anniversary of the Council for Geoscience (CGS). CGS was doing well financially and was stable. He was also happy to announce that South Africa would hold the “World Cup” of geology, as the 35^th International Geological Congress (IGC35) was going to be held in South Africa in 2016.

Mr Gerhard Graham, Acting Chief Executive Officer, CGS, said that some of the targets set for the 2011/12 year may have been unrealistic as the Auditor-General noted that CGS only reached 68% of targets. Through the audit process, CGS had seen customer satisfaction remain fairly high, at 88.87%. CGS fell short of targets in the maps area, where it had a target to produce five maps and publications focusing on exploration investment, but only achieved two. The target for maps and publications published focused on other thrusts was twenty,  but actual performance was fourteen. He explained that this shortfall arose because a while back, CGS had lost some commercial income and had stopped doing surveys, and thus could not attend to finishing the maps sooner.

There were 27 rural development projects in progress, and 23 regional and African development projects in progress during the period. 

The total revenue for 2011/2012 was R241.4 million. The total government grant, as of January 2012, before additional funding, was worth R154.4 million. The commercial surplus was R26.6 million. Contract revenue was worth R79.3 million and sundry income was worth R17.3 million.

There were 41 staff and students who were enrolled for MSc and PhD degrees, and six engineering geologists undergoing training. A number of staff had left, mostly scientists. Scientists made up 38.87% of CGS total staff. There was 71% staff satisfaction, according to reviews for this period.

Mr Graham explained the audited financial statements for 2011/12 add the multi-year budget for 2012/13 to 2014/15 (see attached presentation). He noted that CGS would be making a withdrawal from reserves, because of the decreased surplus. He noted that the Auditor-General (AG) had made findings in relations to supply chain management, predetermined objectives and the financial statements.

Mr Graham moved on to the internal organisational structure, noting that the demographic profile of staff of the CGS was 55% African, 31% White, 4% Coloured and 2 % Indian. There were only eight bursary-holders for 2012, compared to 22 and 29 in 2011 and 2010 respectively. The bursaries were given to 88% Africans and 12% Indians for the 2011/2012 financial year.

Mr Graham explained the five National Geoscience Mapping Programmes. These were geological mapping, geotechnical mapping, geophysical mapping, geochemical mapping and metallogenic mapping. Geological mapping with a 1: 50 000 scale had much more detail than geological mapping with a 1:250 000 scale. It would take 2 640 maps to be made at this level for South Africa, but there would be benefits for those trying to find mines. There was a need for geotechnical mapping to focus on open areas. High-density airborne geophysical mapping dealt with matters like mineral deposits or groundwater. CGS would start with two areas in the next few weeks. Geochemical mapping involved the CGS taking soil samples every square kilometre. So far, between 25% and 28% of the country had been covered. This was aimed at exploration and providing information.

He set out some of the CGS objectives in relation to the derelict and ownerless mines project. CGS aimed to develop rehabilitation plans, update, maintain and rank the database, as well as integrate it better into the DMR’s licensing system, to do field investigations and database ranking to identify priorities and help with closure of dangerous holdings that posed immediate threats to human safety. The State’s liability with the ownerless mines was reassessed and increased from R30 billion to R41 billion, due to inflation and additional sites identified in the database.

CGS’s field investigations focused on asbestos sites, of which there were over 200 in the database. Comprehensive rehabilitation plans and bills of quantities were being prepared for the rehabilitation of identified high-risk sites. There were a number of derelict and ownerless mines in Mpumalanga that had been identified for rehabilitation. Work was done to help with the exploration and beneficiation of Rare Earth Elements

Due to shortage of time, Mr Graham focused on only the most essential remaining aspects of the presentation. He noted that the geological mapping of Namaqualand was completed and there was a base for a project in exploration-stimulating, in the mining and energy sector. CGS was currently undertaking a new project on an Investors Handbook, which sought to assess the potential of various raw materials in South Africa, with separate studies on the different natural resources, compiled in a manual on new occurrences and deposits with investment and supply options for investors and purchasers in South Africa. CGS was also busy with a Strategic Mine Water Management Project, involving making canals of the natural watercourse between Florida Lake and Fleurhof Dam, and projects investigating Acid Mine Drainage (AMD) in Limpopo.

Discussion
Ms Bikani asked how CGS was planning to ensure there was no recurrence of the AG’s findings.

Mr Huang said that there were a few problems with the audits, and this may have been because of retrenchments. The CGS had not have a clean Audit Report for a long time. He suggested that there was a need to look more closely at its performance.

Mr Leonard Matsede, Chief Financial Officer, CGS, said that this year the CGS resolved issues of the irregular expenditure. There were no other issues with Supply Chain Management in this year. There was also no recurrence of contracts awarded irregularly, as in the past. CGS had, at one stage, been very thin in terms of staff around procurement very thin but now it had replaced staff and employed staff to fill the vacancies that had previously impacted on the procurement. CGS had also elevated its checks. CGS had originally outsourced its internal audit, but was now going to advertise for a permanent internal auditor, like Mintek.

Ms Bikani asked what CGS would do, in coordination with Mintek and DMR, to ensure an improvement in the problem of the derelict and ownerless mines. She wondered if the organisations met regularly to ensure that their work on derelict and ownerless mines was coordinated.

Ms Mosidi Makgae, Manager: Environmental Geoscience Unit, CGS, said that in relation to coordination of derelict and ownerless mines, CGS already met with the DMR on a monthly basis, to give updates. The Deputy Minister of Mineral Resources constantly met with Mintek and CGS to discuss challenges and progress on projects. The Deputy Minister was, in particular, looking at the opportunities around job creation and considering how best to tackle the rehabilitation programme. CGS was working on all these issues.

Mr Huang wondered if discussions with Google and other companies, for instance to combine efforts with something like Google Maps, would save on costs and increase mapping opportunities.

Mr Graham said that CGS was already investigating and becoming involved with Google and gathering data was done by the organisation. The CGS had a partnership with Garmin. it would make maps cheaper and more accessible, but the hard work and gathering data would still lie with CGS.

Mr Lorimer asked if CGS prioritised which areas to map in relation to commercial interests.

Mr Graham responded that the priority areas were not commercial. In recent times, there had been instances where there might be mineral interests, but CGS gathered information in support of a government objective. There were instances where stakeholders like mining companies needed more information.

Mr Sonto commented that the commercial income of CGS used to be good, and asked what had caused it to drop, and what CGS had done differently that then caused it to recover.

Mr Graham reported that between May and September 2009, the commercial income had decreased, since, due to problems in Madagascar, Eskom had suspended a big project, and at the same time some Ghana and Gabon work came to an end. CGS was now far more careful when doing international work because the risks were higher. It used to do 70% of its work outside of South Africa, but now it did 70% to 80% of the work within South Africa.

Mr Sonto mentioned the issue where a student was given money directly, but the University was acting very slowly, and asked how CGS was attempting to expedite the process.

Mr Matsede reported that the R21 000 still had not been given back, from the university. It was possible that the legal costs for recovery may be greater than the amount, so CGS might end up writing off this amount.

Ms Bikani asked about marine mapping in relation to commercial gains.

Mr Graham said that most marine mapping was commercial. CGS had done some work for National Geographic, for example. However, CGS did not do large scale, but small offshore areas. The cost of marine mapping was ten-fold compared to on-land mapping. The CGS had put a proposal through the DMR, to National Treasury. CGS knew of some areas where it knew gains could be made. This proposal was worth about R200 million. It would exceed R1 billion to really tackle offshore mapping of South Africa.

The Chairperson thanked CGS for an informative report. He asked for a written action plan and report on corrective measures to address the issues raised by the AG. The Committee would be following up on derelict and ownerless mines, with both CGS and Mintek, as well as standing issues of AMD and seismic events in mines.

Report adoption
Members adopted both Annual Reports, of CGS and Mintek.

Other Business: Study Tour
The Chairperson reported back that he had spoken to the Chair of Chairs about the possibility of a Committee Study Tour to Australia. The funding was a major stumbling block and it was agreed that this could happen in the next financial year.

The meeting was adjourned.