Integrated Annual Report 2014

Natural capital

Energy and carbon

We have mitigated the risk of energy supply failure by installing emergency generators at all of our operations, which ensures that our people can be evacuated safely in case of a power failure.

We also have agreements (NRS 048-9) with Eskom that we will be notified of load curtailment two hours beforehand. Curtailment is 10% in stages 1 and 2 to 20% of normal load in Stage 3. Stage 4 requires load curtailment of up to 50% as instructed by Eskom. The NRS ensures that our electricity supply will not be completely cut off and operations will be notified of the need to reduce consumption to ensure that essential services can continue to function normally.

Non-essential activities may need to be curtailed to reduce the overall load and to meet Eskom’s requirements. The NRS 048-9 pre-agreements protect Sibanye from arbitrary load curtailment and allow for prudent planning and timeous implementation of load curtailment.

Our energy supply agreements protect Eskom and Sibanye’s interests. These agreements make provision for Sibanye to receive electricity supply that is stable in terms of voltage fluctuations. Sibanye will be given notice should the need for curtailment or load shedding become necessary. In return, the agreement makes provision for Eskom prices to be paid, provide access to Eskom to enter the premises for maintenance of equipment and infrastructure. Sibanye will also notify Eskom of the anticipated maximum demand.

As Eskom is reliant on fossil fuel based energy, we are also exposed to the impending carbon tax.

IMPLICATIONS OF CARBON TAX

We held a carbon management workshop on 17 July 2014 to review the latest developments in climate change and carbon management, including the implications of the carbon tax with the intention to qualitatively assess risks and opportunities for Sibanye. While the carbon tax legal framework is still being developed, opportunities have been identified for us in terms of positioning for the envisaged carbon tax. These include revenue recycling opportunities, such as tax deductions for energy efficiency projects. Revenue recycling is an incentive in the form of tax rebates and offsets that government offers to encourage a move to a low carbon economy.

We have appointed an energy service company to explore whether we may qualify for a tax deduction. Additional revenue recycling opportunities are being planned, including the national carbon offsets mechanism and establishment of a local carbon emissions trading system. During interactions with National Treasury, it became evident that certain certified emission reductions (CERs), such as those of the Beatrix methane project, may not be eligible for offset against the proposed carbon tax.

Anticipated carbon tax implication for Sibanye in 2016
Scope 1 and Scope 2 emissions (“best case scenario”)R93,143,837
Scope 1 and Scope 2 emissions (“worst case scenario”)R260,615,369

The figures quoted are indicative of the financial implications of carbon tax for Sibanye in today’s terms and at the anticipated tax rate of R120/t of CO2e. The 2014 carbon footprint and hence the financial implications were based on Scope 1 and Scope 2 emissions, assuming that Eskom passes on its carbon tax liability for its Scope 2 emissions to the consumer.

GREENHOUSE GAS EMISSIONS
  • Scope 1: All direct GHG emissions
  • Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam
  • Scope 3: Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (for example, T&D losses) not covered in Scope 2, outsourced activities and waste disposal, among others

Source: The Greenhouse Gas Protocol – an international accounting tool for government and business leaders to understand, quantify, and manage GHG emissions – developed by the World Resources Institute (WRI) in partnership with the World Business Council for Sustainable Development (WBCSD).

CARBON MANAGEMENT

Our carbon management strategy has been integrated with our approach to energy management, given that our carbon footprint is dominated by our energy use and, in particular, the use of fossil-fuelled electricity sourced from Eskom.

In terms of our integrated energy and carbon management strategy, we worked towards realising the following in 2014:

  • To understand our consumption and emissions. We measured, monitored and managed our energy and carbon footprints, using energy management and information systems, to determine that electricity consumption contributes approximately 87% to our carbon footprint. We monitor electricity consumption monthly and convert this to carbon dioxide equivalent (CO2e) quarterly to determine our carbon footprint.
  • By embedding energy and carbon issues in all planning and stage gate processes, we ensure that our operations optimise long-term asset performance and incentivise good asset management, including waste reduction.
  • Our drive to optimise asset performance includes new functionality in enterprise software, which requires all operations to order refurbished and reusable equipment prior to new equipment planned for early 2015. This reduces demand for new equipment and associated carbon emissions.
  • As we focus on replacing carbon-intense energy with renewable energy sources, like solar and wind, or switching to less intense energy sources by, for instance, moving from coal to gas, we installed concentrated solar power (CSP) to heat the elution circuit at the Driefontein No 1 gold plant in 2014. This installation will use solar energy to supplement a portion of the electricity purchased from Eskom. Optimisation of electricity generation from methane also advanced with underground secondary sealing in 2014 to increase the supply of methane gas and thus electricity generated.
  • We have invested in energy savings by using more efficient equipment and implementing the latest energy-saving measures. Posters are placed in prominent positions at each operation to encourage employees to save energy in the workplace. We also use energy service companies and plan to bring more on board in 2015 to increase the number of energy-saving measures for maximum benefit.
  • We have focused our support systems to share knowledge and best practice, raise awareness, manage change and empower employees. Our Carbon Management Policy and awareness campaigns are included in the induction of all employees and contractors. Carbon management is also being integrated into existing systems, such as the Safe Technology initiatives, by including carbon reduction considerations in the design and planning of projects.

While energy consumption targets are set and measured at operational level, translations from energy consumption into carbon intensities are conducted as part of the ongoing carbon footprinting exercise. Depth of mining and ore yields are considered when setting carbon intensity ratios.

The Beatrix Project, as well as ventilation fan projects at Beatrix, Driefontein and Kloof have contributed to our optimisation and reduction of carbon dioxide (CO2) emissions.

Another carbon reduction project at Beatrix was registered under the Clean Development Mechanism (CDM) of the Kyoto Protocol to the United Nations Framework Convention on Climate Change in late 2013. It involves the installation of energy efficient 45kW axial ventilation fans in underground operations.

These fans are more energy-efficient than their older equivalents. The project accrued approximately 7,685 certified emission reductions in 2014.

Certified emission reductions (also known as carbon credits) are emission units issued by the CDM to assist organisations in offsetting their emissions and complying with their targets. Nedbank Limited (Nedbank) provided the funding for this CDM project at Beatrix, and will purchase the certified emission reductions generated by the project. The details of the project agreement are being worked out by the parties, including South Deep mine.

Registration of the Kloof and Driefontein ventilation fan projects has been delayed, as the CDM methodology used for these projects has expired, until a suitable methodology becomes available.

We are also involved in a number of projects in collaboration with Eskom, supporting the use of renewable energy, such as solar power, and climate change adaptation initiatives, such as the optimal Tailings Storage Facility Cover Design Study. A conceptual financial risk model has been developed to assess the optimal cover design of the various tailings storage facilities. The model takes into consideration the lower, likely and upper scale of each option.

BEATRIX METHANE CAPTURE PROJECT

The processing of the second batch of Beatrix certified emission reductions for the period from 1 April 2012 to 31 December 2014 has begun. This process will be managed through the CDM process. Sibanye and Merquria have reached a mutually beneficial agreement to transfer the Beatrix certified emission reductions to a third party. The R54 million Beatrix methane capture and destruction project officially began on 28 July 2006 when the operation entered into an agreement with carbon and climate change advisory firm, Promethium Carbon (Proprietary) Limited, for project administration and approvals. The system was designed and built to extract and flare, on surface, 400l/s of methane gas from identified sealed off working areas at the Beatrix South section. The flare was commissioned on 21 May 2011, extracting an initial 50l/s of methane gas. As at 31 December 2014, 195l/second of methane gas is extracted from underground and flared. Methane is a potent greenhouse gases, which contributes to global warming and climate change at a rate 25 times higher than carbon dioxide. The Beatrix Project was, therefore, eligible to register under the CDM of the Kyoto Protocol to the United Nations Framework Convention on Climate Change in 2011 to earn certified emission reductions or carbon credits.

We began the issuance process to earn 36,010 certified emission reductions (from 1 July 2011 to 31 March 2012), and the issuance of certified emission reductions by the United Nations Framework Convention on Climate Change has been completed.

The Beatrix Project generated 25,151 (2013: 45,194) carbon credits in 2014. The volume of methane to the flares fluctuated and decreased to a large extent, resulting in lower carbon credits than the previous year.

The project was also registered under the Voluntary Carbon Standard for the reduction in greenhouse gases on 13 March 2013 and 9,643 voluntary carbon units (VCUs) were issued on 5 September 2013. The VCUs were held in our Markit Registry account and transferred to the VCU buyer’s account (Nedbank) on 7 November 2013. The income generated from the 9,643 VCUs, in this once-off deal, amounted to R323,084.

The Markit Registry allows account holders to manage all their global carbon, water and biodiversity credits in a centralised, financial markets-based registry system. It manages environmental portfolios, and provides support for existing and emerging environmental programmes and markets. The volume of methane destroyed since commissioning the Beatrix Project to 31 December 2014, including the main flare as well as the borehole flares, is 10.9 million cubic metres. A total of 164,201 equivalent tons of carbon dioxide (tCO2e) was destroyed between July 2011 and the end of December 2014. The global warming impact of methane gas is 25 times higher than carbon dioxide.

The Beatrix Project has not reached its full capacity of 400l/second as secondary sealing has not yet been completed to ensure that the migration of methane is contained. Secondary sealing is due to be completed in May 2015.

The Beatrix Project contributes to foreign reserve earnings for South Africa through the revenue generated from the sale of carbon credits. It also has a positive impact on the environment in that it contributes to clean power generation, reducing reliance on coal based electricity and harmful greenhouse gases. In addition, the project has created employment – during the construction and operation phases – and it has facilitated skills development in a much safer working environment.

Methane is a colourless and odourless gas, which cannot be detected without specialised electronic equipment. Unlocked during mining operations and transported by air from sources deep underground, it is extremely dangerous as it is highly explosive and can displace oxygen so that those exposed to it are prone to suffocation. A methane management system has been developed at Beatrix to control this risk. The mine standard requires a minimum of two flammable gas detection instruments per stope panel while there must be at least one instrument per development end when work is underway. At the Beatrix mining units 1 and 2, there is a telemetry system with strategically placed flammable gas and velocity sensors, critical fans and carbon monoxide sensors. Environmental conditions are monitored in the central control room at Beatrix Mining Unit 1, located at No 3 shaft, on a 24-hour basis. Clear call-out procedures are followed in the event of an emergency.

Where elevated concentrations of flammable gas are constantly present in the general atmosphere, a location is declared hazardous based on the results of risk assessments. Hazardous locations require special operating conditions to be followed, such as explosion protected apparatus, telemetry monitoring, strict adherence to mine standards and awareness training for all employees. Hazardous location meetings are held on a monthly basis, involving all related disciplines.

To ensure proper supervision at all working places, the mine has developed a Work Place Management (WPM) system – documents containing special instructions, hazard identification, risk assessments, Department of Mineral Resources recommendations, a flammable gas register and handing over notes are stored in the mine overseers’ offices. The WPM system is also used during the induction of new employees or when people are moved from one mining section to another.

In addition to flammable gas induction training, the mine has regular safety awareness sessions, such as safety flashes and special awareness drives, including the annual methane month in May and the monthly Methane Emergency Preparedness Safety Health (MESH) days when specific methane safety related topics are discussed.

Beatrix currently generates 1MW of power (constrained by the flow and quality of methane).


ENERGY USE

In 2014, we committed to:

  • include Cooke in energy monitoring, and brought Beatrix in line with the monitoring systems at Kloof and Driefontein;
  • continue research into variable speed drives for medium-voltage main fans at Kloof and possibly at Cooke 4;
  • continue to design, develop and implement strategies that seek to reduce the energy consumption of our operations and, thereby, reduce the carbon footprint of the Group, pursue any potential opportunities and use energy–efficient technologies where this is feasible;
  • comply with applicable legal and other requirements to which we subscribe; and
  • encourage business partners and suppliers to adopt similar principles.

Funded by Eskom Integrated Demand Management, we have introduced various measures, such as pump load shifting, water control valves and geyser load switches to save energy during peak consumer times.

These measures successfully reduced consumption although production increased in 2014. With the inclusion of Cooke, the Group’s annual average electricity demand is expected to increase from 416MW to 488MW in 2015.

We realised a saving of 23.7MW (2013: 33.4MW) in 2014 due to various energy saving initiatives and projects.

Emergency generators were only used for testing and not for actual emergencies in 2004 due to the agreement with Eskom.

Apart from the Beatrix project, Sibanye also employs CSP as an alternative energy source. Oil in the gold-winning elution circuit at Driefontein is heated by CSP.

Major energy savings were realised in performancebased contracts with an extended service provider at Kloof and Driefontein to unlock savings in compressed air and water. A saving of 1MW per year is envisaged to realise an annual saving of R6 million across the Group. Energy saving initiatives were not implemented at Cooke in 2014 but measures are planned for 2015.

Energy consumption in 2014 (%)
  Beatrix Driefontein Kloof
Mining/winding10.113.415.4
Pumping15.628.429.0
Compressors19.717.117.7
Ventilation20.612.013.7
Refrigeration6.410.012.3
Processing21.613.57.7
Other6.05.64.2
Energy use (TJ)
ENERGY-SAVING MEASURES IN 2014 AVERAGE SAVING (MW)    
  • BEATRIX
    • Installed energy efficient cooling fans
    • Reduced refrigeration
    • Removed surface fan
    • Generated power from methane

    3.67

  • DRIEFONTEIN
    • Reduced use of compressed air and water
    • Generated energy by running turbines
    • Installed heat pumps on geysers

    13.59

  • KLOOF
    • Controlled air and water networks
    • Fixed air and water leaks
    • Reused water in bulk air cooler
    • Operated at reduced air pressure

    6.41

Direct and indirect energy consumption per operation as at 31 December 2014 (TJ)
  Beatrix Cooke Driefontein Kloof Total
Direct775.92,194.6564.7807.14,342.3
Indirect2,346.02,255.55,284.05,501.815,387.3
Total3,121.84,450.15,848.76,308.919,729.6
Energy intensity (GJ/tonne milled)
  2014 2013 2012
Beatrix0.690.700.74
Cooke0.77
Driefontein1.091.081.21
Kloof1.361.361.37
Emissions tCO2e
  2014 a2013 b2013 a2012 b2012
Scope 1*109,840120,07661,62096,81256,038
Scope 24,404,5624,559,9953,773,9194,672,4713,812,182
Scope 3863,009633,928572,398579,043555,066
NOx (t)19,90114,618219.7413 353190.26
SOx (t)63246410.854249.38

*Scope 1 emissions exclude fugitive mine methane which amounts to 660 256 tCO2e for 2014

  1. a.Sibanye has undergone significant structural changes over the last two years – firstly, with the unbundling from Gold Fields, and then through the acquisition of the Cooke. This made it necessary, in terms of the Greenhouse Gas (GHG) Protocol’s ‘A Corporate Accounting and Reporting Standard’, for the carbon footprint to be adjusted (restated in terms of the GHG Protocol) to include the Cooke operations GHG emissions. The method used to effect these adjustments was the ISO Standard, ISO 14064 Part 1 ‘Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals’.
  2. b.Figures reported in 2013 annual report.

Sibanye has also adjusted its 2012 and 2013 nitrogen oxide (NOx) and sulfur oxide (SOx) emissions to account for the acquisition of the Cooke assets and improved calculation, which applies internationally credible air-pollutant emission factors from the US Environmental Protection Agency, and includes the NOx and SOx emissions for the combustion of all of Sibanye’s fuels.