Mining insurance expertise to the power of 3 · company is allowed (through a structured insurance...

customised mining rehabilitation solutions | www.sanlaminvestments.com 1

Mining insurance expertise to the power of 3

2 www.sanlaminvestments.com | customised mining rehabilitation solutions

Mining insurance

expertise to the power of 3

Helping you efficiently manage your environmental rehabilitation obligations


Choosing the right solutions for your bonds and guaranteesThere are a limited number of approved funding vehicles you can use to make financial provision for your annual and final rehabilitation, decommissioning and mine or quarry closure liabilities.

The Sanlam Group, through Santam, Cenviro Solutions, Sanlam Trust and Sanlam Investments, have significant experience in customising the right solutions to meet both your regulatory and future financial rehabilitation obligations. Our complete end-to-end rehabilitation solutions include a structured insurance solution underpinned by an optimal investment strategy. Cenviro Solutions are regarded as specialists in the field of mining rehabilitation guarantees, while Santam Bonds & Guarantees offers niche security insurance products through contract and trade bonds.

These are supported by the investment expertise of Sanlam Investments, which may result in lower insurance premiums over the long term and more positive cashflow.

As a business that is involved in mining, quarrying and associated operations, one of your biggest challenges in the context of environmental rehabilitation is how to satisfy the exacting requirements of the Department of Mineral Resources (DMR).

Not only do you have to consider the financing requirements for the end-to-end range of mining and/or quarry activities, from prospecting and exploration through to closure, but you also have to ensure that adequate provision is made for the rehabilitation costs of the impacted environment, now and into the future. All this without compromising the financial sustainability of your operations, and remaining compliant with regulations.

It is critical to carefully contemplate the range of possible solutions available to you and to implement the correct one. Implementing the wrong solution in attempting to meet the requirements for bonds and guarantees may have a negative impact on the cashflow of your company.

introduction


Santam understands that a specialised business requires specific insurance solutions with the highest level of expertise.

customised mining rehabilitation solutions | www.santam.co.za 5

funds (money held back by the principal to complete work that may be required during the maintenance period). This is normally 10% from start of contract until completion and then decreases to 5% from completion of the contract until the end of the maintenance period. This guarantee enables the contractor to obtain the retention money before final completion of the contract.

• Advanced Payment Guarantees: These cover the principal for a prepayment of monies advanced to the contractor (usually to cover cost of materials). The guarantee normally reduces with work completed. This type of guarantee considerably improves the contractor’s cash flow and prevents the contractor from having to utilise their own funds.

TRADE BONDSThese bonds provide the relevant security to protect a government department (DMR) or supplier (for example Eskom) against an enterprise’s failure to pay its debts. This product offering includes, but is not limited to:• Utility Guarantees: These cover the principal for

the deposit or payment of monthly accounts on an electricity or water account.

YOUR SURETY PARTNER FOR SUREWith the backing of Santam, Santam Bonds and Guarantees offers niche security insurance products to a diverse range of individuals, privately owned and large publicly quoted groups in South African and sub-Saharan African markets.

TAILOR-MADE SURETY BOND SOLUTIONSSantam Bonds and Guarantees offer risk solutions in the form of contract and trade bonds in support of mining operations and associated utility provider requirements. We guarantee the performance of the mining contractor and also offer guarantees for prepayments (Advanced Payment Guarantees) and cover risks associated with the defects liability period of the contract (Retention Guarantees). We are also an accepted provider of Utility Bonds, otherwise referred to as “Eskom Guarantees”, which guarantee the payment of power consumed by the mine.

CONTRACT BONDSThese bonds are required for mining operations, and protect you from financial loss, should the contractor fail to perform their duties in terms of the contract. This product offering includes, but is not limited to:• Retention Guarantees: These cover retention

Why

www.santam.co.za

Santam Bonds & Guarantees?• We offer competitive market rates and tailor-made world-class guarantee facilities.• Constant innovation and sound knowledge of the local and global surety market ensures

we remain a cut above the rest.• Our extensive intermediary networks and solid intermediary relationships remain one of

our core strengths.• Our client base includes BEE and upcoming contractors• We have the backing of reputable international reinsurers.• We have the backing of Santam, the leader in short-term insurance in South Africa.• In 2016, Global Credit Ratings affirmed Santam’s claims paying ability rating of AAA(ZA)

with a stable outlook.• In 2016, Santam received a Standard & Poors (S&P) international rating of BBB+

Santam is an authorized financial services provider (licence number 3416)

6 www.cenviro.co.za | customised mining rehabilitation solutions

Previously 37A Trusts were the most popular financial vehicle for funding mining rehabilitation liabilities, particularly because premiums paid into 37A Trusts were tax deductible. Insurance guarantee solutions have since become more relevant in the current economic environment where mining companies aim at preserving cash. These insurance guarantees allow companies to fund their future environmental rehabilitation liability in a more cash-efficient manner.

Cenviro Solutions offer the complete solution and are regarded as specialists in the field of mining rehabilitation guarantees.

For mines and quarries, the challenge has never been greater: how will you efficiently manage your environmental rehabilitation obligation under stringent NEMA regulations and ensure that you maintain a viable business without cash flow concerns?

Funding for these mining rehabilitation liabilities has a significant impact on the financial results of any business. By choosing an expert to structure a customised mining rehabilitation guarantee solution, the impact on the financial results is likely to be favourable.

Specialists in developing mining rehabilitation guarantee solutions.

Cenviro Solutions?• The required guarantee is immediately provided (and accepted) to the DMR, whilst the mining

company is allowed (through a structured insurance solution), to fund for the future mining rehabilitation liability over a period of time, resulting in a positive cash flow.

• These solutions are structured using a customized approach, therefore meeting the mining company’s cost-efficient, cash flow and taxation requirements. This results in the optimal solution to address the future mining rehabilitation liability.

• Our clients will benefit through the various expertise that the Sanlam Group offers. For example, having access to various bonds and guarantees (offered by Santam and Cenviro) required by various parties (for example, DMR and Eskom etc.), whilst at the same time having access to the specialist investment skills offered by Sanlam.

• Cenviro is underwritten by Centriq Insurance Company Limited (100% owned by Santam).

Why

www.cenviro.co.za


Cenviro Solutions offers the complete solution


investment expertise

Investments

Sanlam Investments manages the underlying investments once you have selected a specific bond or guarantee product. We have the investment expertise to build up your capital reserves and grow the underlying investment, drawing on our significant experience in managing customized mining rehabilitation funds (including trust funds).


How we manage the underlying investmentsUsing a range of customised investment strategies in a way that optimises your investment returns and mitigates any unnecessary risks, we manage the assets you have set aside for your future rehabilitation obligations. We do this taking into account your unique circumstances as well as the DMR’s regulatory requirements.

Our experience suggests that the most effective strategies in the mining rehabilitation arena are

those designed to yield an asymmetric return profile, that is, taking slightly more risk while limiting capital losses and maximising returns. Our absolute return strategies are designed to provide investors with this asymmetric return profile. The complete solution aims to provide capital guarantees in combination with certain investment strategies, providing you with greater levels of certainty. We are also able to revisit your existing 37A trusts to make sure they are relevant in a changing mining and regulatory environment.

We develop tailor-made investment strategies for your unique financial circumstances as well as your appetite for risk.

Sanlam?We are a leading broad-based financial services group in South Africa. We have close to 100 years in the industry and are present in 25 countries around the world. In close to ten decades, Sanlam has set benchmarks for wealth creation, innovation and empowerment in South Africa. We have:

▷ The investment expertise to build up your capital reserves and grow the underlying investment – specifically using our absolute return and asset liability matching expertise.

▷ We have the ability (through our specialist investment skills) to ensure that the mining rehabilitation provisions are structured in a manner that will result in lower, scalable insurance premiums.

▷ These insurance premiums are critical to ensuring that mining companies have sufficient funds at the end of the life of the mine to rehabilitate the land. The right investment should grow over time and, ultimately, result in lower insurance premiums required to ensure a fully funded liability.

Why

www.sanlaminvestments.com


Speak to us for more information on how to draw on the powerful mining expertise of Sanlam, Santam and Cenviro Solutions.


T: +27 (0)21 950 2600F: +27 (0)21 950 2126

[email protected]

55 Willie van Schoor Avenue, Bellville 7530Private Bag X8, Tyger Valley 7536, South Africa

Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Radius Administrative Services (Pty) Ltd (“Radius”), Blue Ink Investments (Pty) Ltd (“Blue Ink”), Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Private Wealth (Pty) Ltd (“SPW”) and Sanlam Employee Benefits (Pty) Ltd (“SEB”), a division of Sanlam Life Insurance Limited; and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments(RF)(Pty) Ltd(“SCI”) and Satrix Managers (RF) (Pty) Ltd (“Satrix”).This publication is intended for information purposes only and the information in it does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Services Act. Although all reasonable steps have been taken to ensure the information in this document is accurate, Sanlam Investments does not accept any responsibility for any claim, damages, loss or expense, however it arises, out of or in connection with the information in this document. Please note that past performances are not necessarily an accurate determination of future performances and the performance of the fund depends on the underlying assets and variable market factors. International investments or investments in foreign securities could be accompanied by additional risks, such as potential constraints on liquidity and the repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk and settlement risk, as well as potential limitations on the availability of market information. Independent professional financial advice should always be sought before making an investment decision. Sanlam Life together with Cenviro Solutions (Pty) Limited (underwritten by Centriq Insurance Company Limited) is an authorised financial services provider (FSP No 46209). Centriq Insurance Company Limited is 100% owned by Santam Insurance Limited, while Sanlam Insurance Limited owns 60% of Santam. Both Centriq and Santam are on the list of approved providers of mining rehabilitation insurance guarantees to the Department of Mineral Resources (DMR). The full details and basis of the awards are available from the Manager.

Mining insurance expertise to the power of 3 · company is allowed (through a structured insurance...

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