DRD embroiled in fracas over Tolukuma mine

DRD embroiled in fresh fracas

By: David McKay
5th Nov 2002

Johannesburg - Durban Roodepoort Deep, fresh from disputing claims of aggressive accounting on its electricity hedge, is now embroiled in a troublesome environmental fracas with Oxfam over the gold producer's operations in Papua New Guinea. This follows a report today (04 November) by the newly launched Oxfam Community Aid Abroad which said Durban Deep pumps 50,000 tonnes a year of waste into Papua New Guinea's sensitive riverine system from its Tolukuma Gold Mine as well as dropping barrels of cyanide and diesel transported by ill-maintained helicopters.

"The Tolukuma mine in PNG clearly demonstates an unwillingness on the part of DRD to respect the rights of the women, men and children affected by the mine," Oxfam mine ombudsman, Ingrid MacDonald said in her report. "The Tolukuma Gold Mines continues to pump 50,000 tonnes of mine waste into the river system every year with devastating impacts on the local communities," she added.

Oxfam also published an internal memo penned by Mark Wellesley- Wood, now chairman and chief executive of Durban Deep. The international aid organisation said the intercepted memo articulated Wellesley-Wood's distress at the high level of mercury content in rivers near Tolukuma, an environmental risk which Wellesley-Wood said in his memo would be "disastrous" for the company if dealt with incorrectly.

Finally, Oxfam complains that Durban Deep has refused to engage with MacDonald despite several representations.

Having shucked the controversy over its electricity hedge, Durban Deep today unveiled a $60 million capital raising programme which tapped the funds of North American and European shareholders and investors. The stock was last trading just over a percent higher on Nasdaq, but one senses the environmental dispute is a blister ready to morph into a suppurating sore.

Aggressive response

Durban Deep responded by breaking the embargo on Oxfam's report by 24 hours - a step termed by financial director, Ian Murray, as "pre-emptive" and "proactive" - and issuing its own strongly worded statement. In it, Wellesley-Wood said the South African headquartered company was answerable to its shareholders and stakeholders in PNG, but not Oxfam. It was for this reason that Durban Deep had declined to cooperate with Oxfam on its claims of Durban Deep's environmental abuses.

In an interview with Mineweb, Wellesley-Wood expressed exasperation with Oxfam: "An ombudsman is supposed to have a neutral format. However, I intend to engage with Oxfam tomorrow," he said. He confirmed, however, that Durban Deep was responsible for 50,000 tonnes a year of waste discharge, a matter that was allowed for in a permit from the Papua New Guinea government which did not stipulate volume on the waste pumped into the system. Wellesley-Wood said that Tolukuma management ensured the water was monitored and managed in accordance with government environmental regulations. In its official response, Durban Deep said it had an excellent relationship with the Papua New Guinea government.

The leaked memo

Wellesley-Wood told Mineweb the leaked memo was "an act of malevolence" and taken out of context. The memo, published by Oxfam, reads:

"I noted in the review conducted by D. v/d Bergh and M (Mike) McWha that TGM (Tolukuma Gold Mine) has a mercury problem. It would appear that one of the unfortunate chemical properties of mercury is its persistence and ability to concentrate in the food chain. Its effect on humans - birth of deformed babies - is also obnoxious. This is a crucial risk management exercise and one that, if we get wrong, could have a disastrous effect on the group."

Oxfam said the matter should have been communicated to shareholders: "Drawing on leaked confidential information, the new Oxfam Community Aid Abroad report reveals how the top 100 Australian-listed company, DRD, has failed to disclose this information to its shareholders". But Wellesley-Wood countered that it was an internal memo and deserved to be kept as such.

In addition, the note was written three years ago when he was a non-executive of the company and a member of Durban Deep's audit committee. He was acting as an interested director, he said. Durban Deep states officially that: "If anything, the leaked internal document indicates how seriously DRD views its environmental responsibility."

Wellesley-Wood confirms cyanide was accidentally dropped from a helicopter transporting supplies to Tolukuma, located atop a mountain peak. However, he says the cyanide was in hard discs which lodged themselves in soft riverside mud on impact. As a result, the dispersal of cyanide was neither extensive nor damaging. The mud was excavated and treated through Durban Deep's mill while the local community was supplied with fresh water in the interim.

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