Insurance guarantees – the financial tool shaping SA’s mine rehabilitation landscape

As the mining industry attends the 2025 Mining Indaba, mine rehabilitation remains under the spotlight as a critical and long-term challenge. Despite the stringent regulations governing environmental rehabilitation, it’s incredibly difficult for mines in South Africa to achieve full closure certificates. Regardless of the reasons, this highlights the complexity of the process and the critical role of financial provisioning.

Juanita Putter, Head of Mining at Lombard Guarantee, believes innovative financial solutions will go far in solving this issue. "Mine rehabilitation is an integral part of mining. It’s about compliance, but also about ensuring the economic and social value created by mining extends for generations to come," she explains.

Due to the intricate nature of restoring mined land to its original, or alternative sustainable use, Putter says the process of mine rehabilitation can span decades. It involves extensive environmental work, including land reshaping, soil treatment, and re-vegetation - all of which requires significant time and resources. Over and above environmental concerns, the socio-economic impact of mines on local communities further complicates the process.

Putter notes, "Mining isn’t just about extracting resources; it’s about building communities. Mines bring jobs, infrastructure and money to under-served regions. Rehabilitation must account for these socio-economic factors, ensuring that communities remain viable even after a mine closes."

South African regulations enforce strict financial provisioning for environmental rehabilitation under the National Environmental Management Act (NEMA). Companies must demonstrate their ability to fund rehabilitation before they can start mining. However, this doesn’t always translate into swift closure certificates, as the process is hindered by challenges such as legacy environmental issues, incomplete rehabilitation plans, and evolving legislative requirements.

According to Putter, delays also stem from the long-term nature of rehabilitation monitoring. "We believe that, to date, very few mine closure certificates have been issued in South Africa - as rehabilitation often continues for 15 to 20 years after mining operations end. This multigenerational challenge demands a partner who is committed to the long haul," she says.

When it comes to rehabilitation, mines have three primary options for financial provisioning: depositing cash with the government, establishing an approved trust, or securing a rehabilitation guarantee. Among these, guarantees are often the preferred choice due to their financial flexibility and efficiency.

"By not tying up significant capital upfront, Lombard Guarantee enables mining companies to allocate resources to operational and growth initiatives," Putter explains. "As the guarantor, we conduct rigorous risk assessments, considering the life of the mine and the rehabilitation liability so we can tailor optimal solutions for our clients."

Unlike other guarantees, insurance-backed guarantees offer additional advantages. Putter highlights, "Using traditional facilities with a bank could deplete a company’s capacity for loans or overdrafts, which could be better utilised for operational growth. With an insurer, the guarantee is secured for the long term, ensuring continuous compliance without compromising financial flexibility."

Rehabilitation efforts are a cornerstone of Environmental, Social, and Governance (ESG) practices. According to Putter, the integration of ESG principles ensures that mining activities contribute positively to the environment and communities they impact.

"While a rehabilitation guarantee may sometimes feel like a grudge purchase, it is essential to ensuring that the harm done to the environment is mitigated, and that communities continue to thrive. Our role at as a guarantor is to support mining companies in meeting these responsibilities in a way that aligns with their broader sustainability goals."

Looking ahead, Putter says Lombard Guarantee is developing products to add value to their clients; this includes innovative solutions enabling mines to raise funding from their clients upfront by issuing these clients with a guarantee to secure those funds.

"We’re committed to supporting the mining sector through tailored solutions that address both current challenges and future opportunities," Putter concludes. "As the industry evolves, so must the financial instruments that underpin its sustainability."

The 2025 Mining Indaba will bring together industry leaders, community representatives, and policymakers to address the evolving needs of the mining sector. With its theme of inclusivity and sustainability, the event promises to drive transformative discussions, including the role of rehabilitation in ensuring long-term value creation.

As South Africa leads the way in mining rehabilitation practices, Putter says Lombard Guarantee continues to position itself as a trusted partner for the industry, committed to overcoming these challenges and supporting a more sustainable future for African mining.