We had conversations along these lines during and after the Effective Mine Closure Exit Strategies session at the SME conference a couple weeks ago. I just wish I could access your full article without having to sign in as a member of AusIMM. Is it possible to make your paper available to all?

Thanks for raising an important topic. I look forward to the article and to learning our treatment of the issues.

My sense, for a long while, has been that we in the mining industry are so used to thinking of projects in an NPV context that we have lost focus on how cash-flow actually works, including at the end of mining when all the cash flow goes negative. I had a bloke who told me once: There is nothing you (environmental guys) can come up with for closure costs that will affect the decision on the project at all, because when it is discounted to 20+ years, it disappears.

It has seemed to me for a long while that there must be some exciting and important work to be done in mineral economics concerning how to address the economics of mines over the life cycle. I doubt that this is easy, or someone would already have done it (maybe your paper does). But the basic problem is that having invested a large sum to find, characterize and initiate a new mine, all the economic drivers are to maximize .positive cash flow, including by deferring costs to later times, so that the investment can be recouped in a timely manner. So we analyze whether the water-treatment plant can be deferred to (later) Year Y rather than (earlier) Year X, or we calculate what the "lag time" to ARD might be during which we don't have to cover the waste, or ...And the economic case for these matters is entirely self-evident in the standard model on a step-wise basis.

Until the evil hour when we actually do have to close. The GM at that point can't discount any longer, and he spends 100-cent dollars, at a time when the mine no longer is producing positive cash flow. So those discounted calculations had better have a real account into which costs have been accruing. Which sometimes happens and sometimes doesn't. But in any event, at that point we can't turn time's arrow around and undertake actions that might have been possible earlier that would have mitigated long-term costs.

We are all on board with the need for wealth generation, and the opportunities that natural-resource development may offer in this regard. There won't be a mine to close if there is no mine to open. But the business case for the environmental department is based around wealth preservation, so that the final accounts work out.

Well said. Totally agree with you. I believe nothing will change unless environmental professionals take a stand and come of age! In essence I don't want all the younger professionals wasting their careers filling in meaningless forms and never making a real difference for their companies, the communities in which they work and the environment.

Part of "coming of age" is that we need to find ways to generate *business cases* for the work that we consider needs to be done. Sure, there is some stuff that is entirely reactive, but there is much more that could be done proactively, and that is where we can make authentic contributions to our clients. Central to this is recognizing that we need to be clear as to what the problems are they we consider must be solved. Fuzziness on this is the source of much confusion and inefficiency. It is not enough to say we are going to have a closure plan. What must a closure plan accomplish? At what level of reliability? Over what time period? In short, how would we know we have a closure plan? And how would we show that to others, from corporate leadership at HQ to traditional land owners to whom the property will be tendered at the "end of closure." If we are unclear about that, what are the regulators and other stakeholders to make of it? For that matter, why would the shareholders of the ownership structure be prepared to put the plan forward (and feel they have received value)?

Well I compiled a closure plan a number of years ago for Broken Hill. It had over 1200 costed tasks over 71 Domains spatial areas and was deemed robust enough for AIG to consider providing insurance against the cost of closure failure. Even if parts of a modular plan change over mine life the figure was deemed to be robust enough to represent the likely overall cost of closure. The approach should always be to quantify the most likely outcome if managed satisfactorily and then focus on investigating areas of uncertainty and developing ways to best treat issues for best closure outcome rather than least cost option. The mindsets of deferred costs for environmental management and least cost option have to go in favour of a more rational and inclusive approach!

ICMM promotes the ideas of "plan for closure" up front and "mine for closure" during operations. Both seem like good ideas and I think are starting to be implemented to help manage the cost and complexity of closure for new operations. Closure of legacy properties, though, is a bit of a different problem in some respects.

One approach to funding may be to use the time value of money to advantage. If we can do a reasonable job of estimating costs to be incurred 20, 30, and 40 or more years down the road, relatively modest amounts can be put in trust today or during operations to grow into the future value needed to implement the plan. I've heard of such approaches being at least explored if not put in place.

I thought the ICCM was on to this but they're not rather they are merely glossing over the current state of play and process. What's proposed has been happening in part for twenty years and is old hat still producing legacy outcomes! Mine closure detailed planning and the full life of mine context needs to be brought into full focus in financials at project viability. No money allocated no resources to achieve the outcome. Communities around the world serve better from major corporations than being told, we'll make it up as we go along!

My own experience from the last few years suggests that the winds of change are blowing, at least in North America. We now have 20+ years of experience with treatment plants for ARD and fully appreciate their costs implications after mining operations cease. I have seen a resurgence of interest in passive or self-sustaining treatment systems at closure on the side of proponents as well as regulators. There is still considerable reluctance, no doubt arising from the dearth of examples of these systems. However, the alternatives are well understood and clearly unappealing.

Great but we still need to start with the end in mind and manage mine waste to minimise and our eliminate the need for water treatment options. Lack of foresight planning and willingness to adopt best practice management controls creates these challenges! The choice to do nothing is resounding in the magnitude of its use.

I see things differently, but maybe our perspectives reflect the different practices in our countries. I look at the closure of the Kemess mine, which was planned before mining started. Wastes were segregated from the outset, with reactive material being placed near the pit for backfilling. Each pile of waste was planned according to the rock that was directed to it, with the goal of minimizing or eliminating metal release and/or impacts. Kemess is the antithesis of do nothing and lack of foresight, and it presents a benchmark for others to emulate. I clearly see this attitude filtering into proposed mines and the Impact Assessments they produce.

That's great I don't see things differently at all, but this capability has been around for 20+ years and I have witnessed the compliance revolution put it firmly on the back burner to the point where advances made them have to be remade now. Why when the whole industry has known the basic principles to manage these things for so long have we chosen to avoid doing the appropriate thing?

Implicitly bring out at least two points that need serious consideration, through citing Broken Hill on the one hand and Kemess on the other. The issues are matters of scale in both area/mass and time. If one has a small (at least relatively)-scale deposit that will be exploited over a modest period of time (say a nominal 20 years), then one can do forward planning in some detail, and the costs that ultimately report can be estimated with some precision and the discount rate evaluated reasonably. On the other side lie large-scale mines that have been developed over something on the order of a century with wastes and excavations that are wherever they might be. And so you wind up with this massive program, as exemplified by your experience at Broken Hill. We have examples in N.A. too.

A couple of considerations for the Mine Planners NPV approach, mentioned above include some of the following. Economic liability - in most regions, performing reclamation during the active operating period for a mine can result in a significant tax benefit. In order to realize that tax benefit, an offset to taxable income needs to occur. So pushing closure costs into the post-operating period results in a loss of that potential benefits (somewhere in the 30% range). Another economic benefit provided through concurrent reclamation is the potential for partial bon release. Most regions now require some type of financial instrument to be in place to ensure sufficient funds are available to local government to complete closure activities in case the operator does not fullfill its obligations. Any areas of a site addressed by concurrent reclamation that meet the regulatory closure criteria can potentially be released from bonding requirements, which frees up those funds for use in other financial instruments or even capital expenditures.

Environmental Liability - Acid mine drainage from waste rock dumps, heap leach pads, tailings impoundments, and pits that have penetrated the ground water table all need to be controlled and treated to prevent contamination and future liabilities, and meet regulatory requirements as well as social commitments. Concurrent reclamation activities, such as covering waste rock dumps help to reduce the quantity and improve the quality of mine drainage, which ultimately reduces water treatment costs.
Regulatory Liability - Environmental regulatory requirements always become more stringent as time passes, resulting in higher closure and reclamation costs to meet the higher cleanup standards. Therefore, a proactive approach to closure through concurrent reclamation reduces liability from increasingly more stringent standards.
Social Responsibility - Probably more than any other issue, the failure by some mine operators to properly manage or close sites in safe and environmentally acceptable manner has affected the mining community's "social license to operate." Similar to the increasing regulatory requirements, community expectations will likely increase over time. Completion of closure activities proactively helps to reduce social liabilities and increase public acceptance.

Your discussions also highlight the variability in closure planning and execution that we see across jurisdictions, both for new and legacy properties. Some of the multinational operators have developed consistent internal standards for closure that apply state-of-the-practice methods uniformly across their geographic reach. Smaller companies, though, who are operating in one or only a few geographic areas may not have the resources or perceive the need to take extra steps when their regulatory and social licenses to operate don't demand it.

Well said interesting perspective on the missed tax opportunities just one in a myriad of opportunities to minimise life of project costs and maximise returns when project viability planning defers environmental and closure expenditure. Really how can you get the most out of a project when you haven't bothered to define the end point or at least the most probable end point.

The viability and profitability assessment of projects today are being made with only half the story at best. The downsides are the huge legacy liabilities which don't even enter corporate equations because risk minimisation allows them to sell properties approaching their use by dates to junior players or 3rd world governments!

As a mine planning engineer for a large utility company with active deep mines, I budgeted for mine sealing costs, UMWA withdrawal liabilities, Black Lung liabilities, in addition to perpetual treatment costs years before our operations shut down. Accruing this money before shutdown was necessary since this cost could not be recouped by the customers without any coal to charge against it. Primacy permits require operators to bond for reclamation cost associated with shutdown in addition to bonding for any perpetual treatment costs. This provides moneys to allows reclamation and treatment even if the operate does not fulfill their duties on closure. Close watch by the regulatory agencies to ensure contemporaneous reclamation (required by law) is followed and the bond amounts are reasonable is the key to ensuring the sites are reclaimed and any post mining treatment is continued.

You seem to be happening across at least some do the closure contingencies. Having done this for an operational mine are the costs able to be modelled and applied in a new project viability environment?

It’s been 18 years since I’ve been involved in deep mines thus my information may be dated. Permit application will require a bonding section. This section will list the acres of reclaiming land, buildings, conveyors, boreholes, shafts, etc. Reclamation costs for each will be used to set the amounts that bonds must be made on the operation. These calculations are cookbook in the regulations and are not very accurate. The mining plans should be designed to not have a post mining discharge. If is likely then a bond amount should be set for that also. I always calculated a better estimate of the reclamation cost to use for budgeting mine sealing cost. These costs were then divided by the remaining tonnage and set as a cost per ton. Black lung withdrawal may no longer be an issue since this figure was based on worker exposed before the regs and all would probably be retire by now. Other legacy cost should be included such as retirement/healthcare obligations. These should be refined every few years to make sure an adequate pool of moneys is available upon closure.

In the context of this discussion, it is worthwhile to note that in the Production Sharing Contract part of the oil and gas world, many host governments are requiring operators to develop and cost an abandonment plan as part of the project approval process. This cost is then put in to a trust fund on either a straight line or unit of production basis to be used at the end of project life. The money set aside is cost recovered and then deducted from current income as an operating expense - resulting in an ongoing tax benefit. Because of the long-term nature of most mines, this approach would likely have to complement rather than replace the bonding process, but having a mine proponent suggest this approach to regulators in the absence of a requirement to do so would show a great deal of good faith in the desire to address the final liabilities. I would suggest that projects that cannot economically withstand the real time accrual of abandonment liabilities likely don't deserve to proceed in any case.

This is good to hear and your concluding remarks are at the core of my main contention. This is especially relevant with coal mines which are set up to maximise returns with low ratio near surface coal in the short term when the biggest ad hoc and lasting impacts are made. Coal more than any other form of mining needs to bring these lives of project elements into project viability assessment but the current Stock exchange rules allow them not to. ASX guideline 31 is woeful in the omission of such cost estimates basically obfuscating the true measure of the mine to potential investors and financial institutions.

Thanks for the insight from O&G World. I recall the kerfuffle at the Bison Basin Uranium in-situ extraction project in the early 1980s. The mine was wildly under-bonded by the state agencies. Uranium price tanked, and the owners looked at the cost of closure versus their bond (Delta about a factor of 3) and, acting as rational economic decision-makers, hit the silk. The bond about paid for pumping costs until a plan could be developed. Fortunately, although the mining company was ready to walk away from any further business enterprises in the state, the companies contracted to purchase the uranium (I recall it being TVA) were not, and stepped up to fund the shut-down and groundwater restoration, though they had no legal commitment to do so. One of the benefits of the model you propose is that, even if final closure is not yet fully funded, there would be an *actual* accrual available were there to be an unanticipated closure that bears some reasonable relationship to the extent of the impacts to date.

I agree with your conclusion on cost structure. I take it that we all agree there are actual costs to closure, that is to the life-cycle of the project. It is therefore as appropriate for the project to place those costs in its own accounts as it is for them to plan on paying for the costs of tyre replacements. The magic is in the formulation of the appropriate rates, but that should be entirely possible.

In the UK we are dealing with the legacy of centuries of mining, where historically mineral winning or revenue/tax generation were key at the time but negative legacy not thought about. Whilst low energy mine water or ARD treatment can be a good solution in some situations, these still have long term maintenance and waste liabilities – we currently run around 70 schemes treating coal and metal mine legacy issues, but with plenty more to be dealt with once whole life solution costs can be developed that don't outweigh the benefits. It is important not only for operators to ensure they manage and account for such long term liabilities, but also governments to have the instruments to regulate and skills to enforce without being seduced by easy tax revenue at the front end. Someone will eventually have to deal with the outcome; be it operator, state or other party. Therefore it is better to get things right at the start, manage throughout and close properly to get the best outcome for all parties; but that involves good engagement by all parties at all stages and not as an afterthought when it is too late.

Absolutely and this is not achieved through template approvals Processes and often obfuscatory environmental impact assessments. Reality bites and you cannot avoid the real issues eventually. So why do we allow major project viability assessments to have such a short term view and not life of project cost estimates?

I'm loving the conversation on this post. A lot of great insights on how to succeed with this. So how can these all be pooled to make it widespread?

There is something that really needs to be done because without change communities and stakeholders are going to face another 25years of legacy producing nightmares right across the world!

As a decision consultant in both the oil and mining worlds, I observe that virtually all of the major oil companies and most of the large intermediates have implemented risk-based, inclusive, cross-functional decision processes that include cross business-unit decision board and a collaborative, learning approach towards option analysis in project development. These processes include consideration of both quantitative and qualitative (such as social license) considerations. The oil companies went that direction because they made awful decisions at the top of the last commodity cycle and the consequences of those decisions threatened the viability of some of those companies. The old style decision-making was deterministic, political, and often ego-driven. In other words, the pain of doing it the old way made them change.

The Mining industry is facing similar pain as this latest commodity cycle unwinds. Perhaps there is hope that this pain will cause the industry to re-think their decision-making processes, and to understand the role those have played in the past results.

Fundamentally, this is not a technical issue that is being discussed, but a behavioural one.

I agree to a certain extent because the adhoc technically or legally correct but not necessarily 'right' compliance approach causes awful short term reactive decisions to be made! That being said the whole EIA Bankable feasibility study relationship needs to be re examined from a whole of project life cycle perspective to bring the major life of mine risks to the company, community and nation into play so that suitable management controls can be considered and properly planned and resourced. This requires leverage that can only come from major lending institutions gaining buy in to potential liability accountability. Perhaps by the independent reviewer at the project viability stage. The current approvals process is fundamentally flawed and actively encourages obfuscation!

The attached article exemplifies what will happen if we do not do a better job as engineers in addressing the environment. For the Pebble Mine, the EPA issued a "pre-emptive veto" to kill it without even a hearing. The message is loud and clear; "there is nothing you can say or do as engineers and operators to make us believe you anymore". So we have to change our ways.

However, on the flip side, I consult on decisions in the mining and oil worlds and it is getting very, very difficult to find any mega investment that is profitable if one includes closing costs without discounting. This cost and risk recognition is clearly contributing to secular stagnation. Even with zero or negative interest rates, profitable investments in commodities are scarce, so profits are just being returned to the 1% and no jobs or raises for the rest. How can we invest, build and create jobs, while also recognizing the full life cycle cost picture? I do not have an answer.

http://www.washingtonpost.com/national/health-science/internal-memos-spur-accusations-of-bias-as-epa-moves-to-block-gold-mine/2015/02/15/3ff101c0-b2ba-11e4-854b-a38d13486ba1_story.html

I don't want to turn this into a thread on oil and gas economics, but O&G projects at all different scales are going ahead every day with closure costs being accrued on a real time basis.

Mega-projects - both mining and o&g - tend to be economically challenged because of their high capital costs, logistical constraints, long time horizons exposing them to significant pricing/market risks, and on and on. Advocating that they shouldn't bear the costs of closure is a bit like blaming the straw for breaking the camel's back. In fact, when the closure costs are deposited in a trust account on a unit of production basis, you are effectively discounting the closure costs, gaining a tax benefit from them at a time when there is income to pay for them, but cutting in to a operating margin that is admittedly already thin in the mining world (though typically not quite so thin in the o&g world).

In the Darwinian world of capital projects, it is a fact that not all projects deserve to go forward. The ones that do are increasingly going to have to obtain social license to do so. My point is that the real time accumulation of closure costs in trust would show those justifiably sceptical stakeholders that the project proponent is serious about their environmental responsibilities.

We need investment to promote jobs and revenue. First we need to really look at the big picture and treat all the issues seriously then you engineers it’s time to get the smarts out on how we can do things in radically different and smarter ways rather than defaulting to the Financial model dinosaur inputs that defer particularly environmental and closure costs until much later. Let’s take the blinkers off and view development infrastructure as major opportunities to maximise returns and minimise life of project costs. Run sensitivity analyses on timing size and best locations to minimise closure liability. Pump water uphill to the top of the site impoundment and gravity feed to where it’s needed to be used or mixed for release. Use passive energy sources to run water treatment and contaminated water collection. Design the site to minimise energy and if you have to degas say coal use that energy or reticulate it for local community power supply.

Schedule mining plans to accommodate the removal mimicked reconstruction and relocation of major creek systems rather than "engineered channels".
At least do the community the honour of doing a detailed design and costing of the whole of project life at the EIA stage rather than making bits up as the mine progresses. Honesty accompanied by well thought out plans is all most communities need to start coming on board. Just like children everyone knows when somebody is fibbing or avoiding telling the truth. Crickey its not rocket science. I was at a conference last year where a community manager gave a paper on strategies and methods of community consultation being employed. All sounded good but it was really about corporate facilitation and manipulation of communities. Why is it so hard to be honest with people?

I agree I would suggest that the key driver of change has to be in the financial institution accountability for liability and how the independent reviewer signs off on project feasibility. Rigour comes at the financial mine face to access funds. Just agreeing that we need global standards at industry level will just take us around another suite of compliance system obfuscation to avoid environmental costs. If the project couldn't access funds without demonstrating consideration of life of project issues properly then they wouldn't get the funds to start!

I also believe that there would only be a marginal extra cost for consumables because the job would be done right first time! What's the difference paying the right price for consumables or accommodating the cost of legacy sites. We just avoid the true cost of mining at the moment hoping guaranteed someone else will pick up the tab!

If the financial institution and "qualified person" (is that who you meant by reviewer signing off on Feasibility), then the discussion turns to NI 43-101 as to what is "economic" in investor's eyes. My own experience with trying to raise CIM's concern with even general cost estimate quality behind the economics analysis is that they are not very interested. Wonder what reception these ideas would get?

I am so over the way all of these costs are deferred and avoided it is about time the real cost of mining was presented to investors and the community. The costs are still there whether they are acknowledged in the feasibility or not. If they weren't then there would be no multimillion dollar site cleanups to do. I really saying we need to acknowledge the elephant in the room and manage these things rather than taking early profits and running away!

Continuing to be an interesting thread. Thanks, all.

It seems to me that part of the problem for mining is that the time periods involved in the mining life cycle (decades, often several too many) are very poorly aligned with how investment operates in the developed world. If one of us were CEO of Company X, we would be facing the AGM sometime in the last short while, and what the shareholders (and the financial analysts whose musings have a serious impact on share value, at least in the short run) have on their minds - overwhelming - is what happened last year to share price and dividend, and what will happen in the next Quarter to one year, just maybe, 35 years or so out. If they don't like what they hear, there is a very good chance they will take their investment elsewhere. This works out well when commodity prices are high, but is more "challenging" when we are in a downward cycle.

Meanwhile, a new project (exploration to delivery of concentrate) can be expected to require probably 10-20 years, and have a LOM of maybe a decade (small deposits) to ca. 100 years (a big porphyry). Even if concurrent reclamation and real accruals against closure were occurring, the time period of the mining does not match the time constants for modern investment strategies.

So what do we do? This works out well when commodity prices are high, but is more "challenging" when we are in a downward cycle. Currently: hunker down on the "core business", try some "reorganizations", extend project schedules at lower planning rates, take the heavy cutlery out on Capital projects, throw the exploration department off the back of the sleigh, see if we can spin the "non-core" properties off, and, if worse comes to worst, put the operation on Care & Maintenance. And prepare Q&A materials for the CEO so that he's well briefed for the next AGM.

The key has to be something such as: real-time accrual that is tied to realistic, data-driven assessments of liabilities. And that has to be information that moves upward from the working stiffs to the people who are designated as the responsible authorities under securities laws, so that the annual audits accurately reflect what is required. And then the investment/shareholder interactions can be realistically include din not only the investment decision, but in the ongoing management.

The heart of the problem (imo) is *not* some anti-capitalism conspiracy against mining, it is that we have a mis-match between time scales for investment perspectives and the intrinsic time constants for mining. This is more extreme, one can argue, for mining than for O&G, but we have much to learn from how the brethren in O&G are coming to terms with what they have learned.

Well said I agree with real time accruals, accurate costing and even reporting on measurable well defined outcomes in annual financial reports to shareholders and investors which were received well. The costs of closure were estimated 5 years in advance, provision made and reversed annually with progress /success reported against schedule. This built confidence in understanding the reclamation liability and the project finances as a whole.

Trouble is today the corporations cover their rear ends with compliance Paper Mountains based on a snap shot in time. There are never the resources allocated or identified upfront to do the job, so when additional infrastructure is required there are no funds available. The question you're asked when you plan ahead and are proactive about solving a long term problem is 'are we compliant?' And the answer for today is yes even if the Titanic is going to hit an Iceberg the reply is well we're compliant so we don't need it! Worst of all things like acid mine drainage take years to develop because of very poor earthmoving practice and execution so the site remains in 'compliance' without doing anything to fix the situation. We need detailed costing at project viability to drive effective planning and execution. Investors need to be educated and I'm sure they'd prefer to invest in robust accountable projects in the long run!

The lack of concern and understanding is not necessarily just at corporate level but also at governance level. At the Coal Authority we act with our mining specialists as 'honest brokers' to help mineral planning authorities without the specialist expertise to review bonding requirements for mining to evaluate closure liability and review annually. Having such a pool of expertise to provide independent compliance services better manages risk exposure to support more sustainable/less unsustainable mining. This is a model worth promoting to keep mining companies properly compliant and also to temper governments from 'quick' tax receipts without long term strategy for the consequences.

I hear you but adhoc development that this approach encourages always results in short term decision making and invariably legacy outcomes because the big ticket items that really need addressing are avoided.

I'm not sure what you mean by this approach encouraging adhoc development? It might be that I've not been clear in my original comment. As a governmental body picking up the legacy from a former nationalised mining industry, we manage mining legacy of over 172,000 mine entries, over 26,000km2 of subsurface workings under 8million properties and around 70 mine water legacy treatment schemes, which are increasing in number every year. Therefore we have a pretty good understanding of the long term legacy of mining and support other governing bodies in; managing the impacts of mining that they are responsible for; and ensuring that where new mines are planned that there are sufficient planned measures and financial instruments in place to deal with the legacy of mines closing. Therefore when I talk about 'honest' and 'independent' I really mean that as we bring all our experiences of what happens if you don't get it right. We truly understand the risks of managing an increasing legacy within the usual constraints of public funding, i.e. doing more for less.

Very good here in Australia there is a singularly ineffective EIA process disconnected from the BFS process with legislation especially in the corporate arena which allows for companies to gain approval without any intention of managing the life of project for closure. Bonding process is pathetic and understated by several orders of magnitude and government personnel have no experience to even pickup on the fact that an EIA has deliberately avoided or obfuscated major issues. An approval driven focus with short term decision making causes adhoc disasters!

Sorry I am misunderstood. We are all for acknowledging said costs, including risks, and the need to manage them (and to manage them, they need to be in the plans and cost estimates and fund them). However if we are to seek a solution.

I agree but as an industry we have shied away from even embarking on this outcome. After 28 years of waiting/ cajoling encouraging industry to do the best thing, they have chosen not and as such don't want to do anything that they're not regulated to do! We need a change of approach if there are ever going to be relevant properly recognised environmental professionals in the future. At the moment we might as well sell hot dogs as a profession it's more rewarding!

Not sure if I have missed something, but if not In Sweden you have to get some guarantee to cover the closure expenses usually through a bank. Not all at once but pretty soon. The hard thing as been touched on before is to get the calculations for costs right.

That's the point no Mining cost wants to get the costs right, they prefer a 'conceptually' watered down version and claim that there's no way of knowing where they'll be in 10 years. What I'm proposing that there be some underlying rules to the assumptions used to estimate closure. I.e. instead of running the project feasibility on a spot price for a commodity, use a 10 year rolling average and project what the open pit or underground workings, waste constructed landforms, tailings storage facilities, and water management structures would be required to achieve a final landform and effective closure. Then at least the goal of effective and sustainable closure and the likely big picture would be thought out for both project planning/cost effective implementation and community engagement purposes. Things like appropriate mineralised waste management practices, of known volumes of PAF and other mineralised materials will have been considered within the context of a specific landscapes geomorphology and hydrogeology. Approvals documentation and bankable feasibility documents will be more meaningful.

Although not there, that is not so far off from what we can and are supposed to do when grating a permit for a mine. Still, the numbers seems to be low balled quite often. Since the numbers get so high it is tough to ask much off a new company, but it needs to be done.

Excellent discussion. I have no experience with the financial art that is applied to closure costs, but I do agree with that the lack of funds for effective closure continues to feed the negative image of mining and creation of new legacy sits ( including the many mines cutting costs or going on care and maintenance at present that are a real concern for our future).

Sites that have or are managing operations and closure effectively (especially sites with an ARD risk), generally have a truly integrated plan inclusive of mining, processing, ARD management and closure. The total plan is regularly updated and costed and funds for final closure are invested. Responsibilities are clearly defined and linked to KPI's or similar, so that there is a real incentive to manage the mine in accordance with the plan.

With respect to ARD, relying on money in the bank to place a cover on an acid generating waste pile at closure WILL NOT WORK. We must plan for closure at the start and implement effective management strategies to prevent ARD. We know what these strategies are and we have real examples of leading practice around the world...so why is it so hard to convince companies to manage to prevent rather than mismanage to create a long term legacy for us all. Sadly, I think without regulation the many will follow the latter.

I believe that regulatory change needs to occur in corporations law w r t accountability at project viability!

In the process of doing this as we speak all information about cost and methods for preventing AMD/ARD from a mine and its waste that is PAG is welcome. (With more information than GARD guide and similar).

This discussion has been of great interest over the past few months and has stimulated much thought. Congratulations to all contributors and especially for kicking it off. I would like to add a few thoughts from experiences as a regulator and subsequently with a large mining company.

I interpret that part of cause was to look for ways of making executives and directors more accountable for LOM performance of their operations, including closure sustainability, and for decisions taken (or not taken) as early the feasibility stage. I am not sure that the discussion has yet explored this issue deeply. Corporation law (at least in the UK and I suspect also in Canada and the USA) already requires directors to understand the environmental risks posed by their operations and to have effective strategies in place to manage these risks at all stages of LOM. There are significant sanctions under these laws (and under environmental laws) to penalise directors and managers who fail in these obligations. However, I am not aware of many examples of where these sanctions have been applied, in particular to address inadequacies that were planted at feasibility, including commitments or predictions made during the SEIA process that were poorly based.
The industry and regulators have tried to address these issues over the past two or three decades and real progress has been made. It seems to me however that, despite all the effort made to avoid harmful mining legacies, we are still failing to win the support of our neighbours and the broader communities within which we work. We are not gaining in the battle to get more public support for what we do. The question is what can we do about it? And the comments already made by others in this discussion contain a number of ideas that should be discussed further.
A well founded mining project would by definition get things right from the start. In an ARD context it would be based on a rigorous level of characterisation of all the waste rock and tailings to be produced, location issues for waste storage facilities and the characteristics of the climate and receiving environment. Where ARD risks are shown to be high, the mineral waste disposal methods should be detailed and a detailed design produced for the required facilities. And all this needs to be done as part of getting the approvals to mine, let alone before PAF material is disturbed. In the rush to compress the studies and construction timetables and to improve project financials these ambitions are very often thwarted.
I was involved with a project that had just one large waste storage facility which in this case was for highly saline wastes. Its design and location were critical to project approvals so a great deal of effort and resources were put into materials characterisation, facility location and design and into the operating and monitoring procedures. All of these factors were reported in detail as part of the FS and SEIA and I recall that around $2m was spent on the detailed design alone. The only thing not described in as much detail for this facility was exactly how it was going to be closed since this was not clear and is often not clear at FS. The proposed closure concept adopted at FS needed to be tested and modified as necessary in the light of the research and investigation programmes that would be carried out during the life of the facility. This is all to say that a project with high risk materials that has been conceived properly will more often than not require the proponent to face higher up -front costs. It will take more time to get to construction and production, investigations will cost more, and detailed design costs will be faced earlier. Also operating costs will be higher to meet the various special handling requirements for various materials and this can be significant. Of course, if we are prepared to wear these additional costs we might well look forward to reaping the deferred benefit of greatly reduced closure costs. As has been discussed widely in this forum, currently project financials do not work in this way and establishment capital is pruned and closure costs are discounted into oblivion. Others have already commented on the need to fix this.
I am sure that better regulation is part of the answer, as is more awareness by regulators of these issues and how to use their powers to the overall benefit of the industry and society. In several global regions there are already adequate regulations to do the job, for example in Canada, the USA and in parts of Australia. The regulators in these same locations are experienced in ARD and mineral waste management in general and have a good understanding of the issues. There is still the challenge of getting experienced regulators in all the right places. This may not be possible and in those circumstances I like the idea of regulators requiring independent technical reviews at the FS/SEIA stage, or for major changes to a mine, such has often been employed by the PNG government. It is not a new concept but the industry will not likely be in favour of wide use of independent reviews since it adds several months to the approval process as comments are made and responded to. However, the price of getting something badly wrong will be much more than the review costs and delay at the start of a project.
In relation to closure planning and getting those costs in the right ballpark early on, there has been a lot of progress particularly in the larger companies. Comprehensive plans are required that identify knowledge gaps and require cost accuracy in the order of +/- 20% or better as time advances. The plans have to be reviewed regularly and corresponding provisions made in the accounts. The costs are generally revised annually. Legislation that covers mine closure specifically is starting to appear, e.g. the Western Australian 2014 mine closure guidelines that are mandated and require plans of the type being prepared by major companies to be submitted as part of the approval process. Guidelines for cost estimation are also provided. I am not aware how well this process is working but it is a step in the right direction I believe. I note that a streamlined process for small operations is provided in the WA guidelines. This is reasonable but needs to be very well screened to make sure that no high risk situations slip through. We all know how much damage smaller operations can cause in the wrong setting and the reputation of the industry at large suffers.

Great post however from a personal perspective any set of closure guidelines which allow companies to reduce their bond to only 1% of projected closure costs cannot be good for legacy issues or community safeguards. So the WA model is a retrogressive step in my book.

My experience is that mining companies will address costs that are understood in the industry - and can be explained to owners - as legitimate costs of doing business. Indeed, they will invest in new technologies (e.g. autonomous mining machines) that will provide a cost advantage in the future, even though the "job" could be done without that investment today. That is, the companies who are sufficiently well capitalized will do. 

The issue we face with respect to closure costs is whether they are legitimate costs of doing business that need to be pulled forward in time. I daresay all of us commenting on this thread think that this is so. But - I could be wrong - none of us is in senior management (Sarbanes-Oxley level in the US terminology) or a Board member. None of us has to front up at the Annual General Meeting and explain to the shareholders why we have in the last year and propose to in the next x years, pay more up-front costs than we are required to do in order to produce our commodity. This is to say, propose to make lower profits for the owners than we might otherwise have managed to wring out.

Now, the SOX/Board people are not hydrogeologists/geochemists/environmental or social scientists. They are lawyers/accountants overwhelmingly. To the extent that they include some mining/metallurgical engineers or geologists, they were trained in an era in which environmental management generally and closures planning specifically were not part of their curriculum. And of course, the shareholders are not technical people either.

What we have here is a failure to communicate, as Rod Steiger famously said to Paul Newman in Cool Hand Luke. We do not have a common understanding of what the problem is, and so we do not have consensus as to what would constitute an adequate solution to the problem. We can imagine moving forward incrementally, perhaps driven by regulations that gradually become incorporated into our costs structures - but usually only after bitter whinging and much litigation (e.g., Clean Air Act, Superfund....). But those of us on the technical side who favour realistic planning (and costing) of closure need to face up to our responsibility: we have NOT made a compelling case that that there are real business costs that must be accounted .

This is pretty disheartening to admit at this stage in my career. If I am such a smart guy, why have I not converted the Unbelievers? Maybe I should have gone outside my safety zone of geochemistry and retrained in mineral economics. Or worked with colleagues in universities and business-consulting firms to formulate new initiatives. Short of some new synthesis, I am not at all sanguine about substantial progress in this critical matter.

I agree as we get more and more multinational involvement there is less and less heart or commitment to do the right thing by the country or community in which they operate. It's all about the return to the shareholders and the financial groups with deliberately no inclusion of environmental matters to be suitably addressed. The equation is get in, get approval, mine the eyes put of the place, maximise early profit and return. Make the required buck and then minimise liability risk by divestment. Somehow the companies that initiate projects and run off with the treasure chest need to remain accountable. They're the ones who need to put in place good practices for mine waste landform design, water management and groundwater at the beginning.

Without which there's almost no point to closure planning later on... Legacies are created from day one by greedy companies avoiding every avenue of environment which may cost them something. Lawyers are taught to obfuscate in commercial law and to minimise corporate liability in doing so is their job. So as a profession are they mostly to blame for the situation we're in?

I don't think I agree. The senior officers and board members of a corporation (public or closely held) have *legal* obligations to work in the fiduciary interest of the owners. [As do we consultants when we undertake work for a corporation, incidentally.] They are personally liable if they breach those duties. If they fail in their duties to return value to the owners, they are lucky if all that happens is that they are dismissed. My comments about accountants/lawyers were not meant to disparage lawyers or accountants, but rather to highlight that they are not trained in the matters or with the perspectives that we engineers have been. We are not working on the same premises, or, really, the same problems. And we - both ways - miss the distinctions.

The problem, as I see it, is that we (I mean the industry) have too narrow and too traditional an understanding of what constitutes the fiduciary interest. Nobody gets charged with breach of trust for cutting costs and maximizing ROI in an empirically definable way (i.e., using short-term values). You and I (and pretty much everyone commenting here) see the bounds of the problem as including the full life cycle, and recognize "stakeholders" as a "shareholders." Standard business practice - and securities law - does NOT accept those boundary conditions. And unless/until "fiduciary responsibility" is extended in time and scope as you and I might wish, there will be a continuing failure to communicate.

In short, *we* have not provided a "business case" that convincingly sets out the value(s) we are including in the account that we assert must be managed. I don't for a moment think this is easy to do - or it would have happened. In fact, I am not at all sure I know how to cause the necessary discussions to occur. It certainly is the case that there is a role for bottom-up analyses (which must be very rigorous), and that presumably is our job. But we must find and work with "champions" who can operate from the top-down, too. How we find, engage, and ally ourselves with such people would go a long way toward progress and save us the worry and wear of worrying about that is to blame).

I have only found one champion in 28 years that wanted to do a great job. Everyone else wants to comply with the laws of the land and mitigate corporate liability risk by various obfuscatory practices within approvals documents and contractual arrangements with major contractors. The legal requirement is always there to address issues but smart legal teams on both sides usually mean that these things are inferred that say a contractor will do but the contractor ensures there are escape clauses where they're not held responsible. Governments hold 'compliance' up to the general community as if they've accomplished their duty but again as long as a document exists rather than works on the ground everyone is covered. It's a massive game of avoidance and blaming someone else when it all goes pear shaped.

We are in violent agreement on the essential technical issues. And we have a common belief - but I think it is qualitative, not rigorously quantitative - that investing in early activities will save more over the life of the operation (including) closure/post-closure) than it costs, and so would be cost effective.

What we do not have - or I should say, I do not have, is any rigorous analysis that shows the economics to be so. We can summon the closure/remedial costs for some mines that are expected to amount to hundreds of millions or maybe a billion or so dollars (say the Anaconda story) and infer that something similar would happen at New Mien X. But since mines are not replicated experiments, our inference is constrained by the strength of the analogy, not just to the kind of deposit and size, but to the specific, contingent histories, parts of which (the New Mine X) are not yet known.

What we need is a *parallel* case study that tracks something like the discounted cash flow rate-of-return for a mine managed in two ways, one "traditional" and the other with pro-active environmental management controls. This (DCFROR) is an analysis that the business decision-makers understand. In fact, it is the sort of metric they actually use when making decisions about things like whether to invest in new automation. I once tried to do this, but did not (of course) have any real numbers to work with, and so found that the arithmetic results were dependent almost entirely on how I set up the problem, what values I assumed, and (needless to say) the discount rate that I used. But I am no one's economist, and so it be that someone better trained and brighter than I, working with some industry input in order to have realistic data, could manage the analysis usefully. I would like to see that.
In the meantime, it seems to me we need to debate (individually) whether what incremental progress we can make working under the current systems is worthwhile and ethical (in this case, I mean adds value in meaningful ways - my usual test is whether I would be comfortable explaining it to my children). The alternative, suggested by Steve, is perhaps that we should consider becoming regulators and trying to use that leverage to improve overall industry performance. I think the Government of NT is looking to fill such a position in earth sciences now. And/or retrain in mineral economics.

Good one for one believes each site must have closure considerations and costs specifically applied to the landscape in which the mine is operating. Broad brush conceptual costing rubbish applied to sites just to get a figure for financial assurance is totally wrong and a counterproductive practice because it doesn't encourage companies to do the work or get smart about doing it. FA's are a financial imposition to revenue raise for governments who are even less likely to fix legacy liabilities than the companies because they don't have the expertise or wherewithal to achieve an outcome. Financial institutions have great leverage to potentially make things happen and hold companies to account and learn quickly that there are smart cost effective ways of producing a good outcome. I really believe getting the lending institutions and super funds on board with sustainable practice are key.

The above discussion laments how slowly minds are changed. I couldn't agree more, but this is not a revelation, is it? No one says that attitudes do not change; only that change is slow.

The requirement to post bonds for reclamation costs is only 35-40 years old. Our thinking - and practice - has evolved considerably during this time, but we will always conceive of better ways to do this. At the risk of stating the obvious, innovative practitioners will always bear the burden from seeing the gap between current practice and future possibilities.

Yes but since compliance true innovative practitioners are like hens teeth! There is a fundamental flaw in the equation that the very thing supposed to promote accountability is the very thing that is an obstacle to it occurring. Change is slow but it has dramatically slowed since 2000.

I hear what you are saying and agree with the thrust. My own experience does not paint such a dark picture and I have seen what I would call progress from many mining companies since 2000 in the management of ARD. However you are right wrt needing more to ensure accountabilities are felt and honoured by all who contribute to the adverse impacts of mining. More regulation is part of it I fear, along the lines of assigning joint and several liabilities a la superfund, and ways of weeding rogue operators out of the industry. Already the States has this but it is by no means smooth sailing. Maybe we need something like a "fit and proper person test" to be applied to directors and senior officers of mining companies? I don’t know how best to fix this. Would there be the political will to bring these measures to say Australia?

I believe it could be fixed in corporation’s law at project viability making the independent reviewer and financial institution accountable to see that adequate provision has been made and that right and proper planning and expertise are available. Take this off the government and let them be the administrators they want to be.

A surety that issues a bond is already accountable in law for the value of the bond. Bonds could be 10 or 100 times higher and any surety that issued them still would be accountable. But there are two problems. First: how (and by whom) shall the value of the required financial assurance be set? Second, what happens if there is no surety who will undertake the liability of the required bond?

Properly answering the first *might* limit the need for concern about the second. As I read the correspondence, you propose an independent reviewer. This seems plausible, as for example there are Design Review Boards that are responsible in some jurisdictions (and soon will be in more) for dam safety. But there is a substantial body of physics and engineering and a wide and long-lived record of engineering analysis and empirical data related to dam safety to which such DRBs can appeal. This is not so for closure: as has been pointed out by you and others, we do not have an empirical record of successful closures (judged over time periods on the order of 100 years), and certainly not across the range of climatic, geological, geomorphic, geochemical, and ecological conditions (much less socio-economic conditions) that we confront. We have no agreed body of science (as the engineers have in mechanics) that underlies the analysis that is required, and no consensus as to how risk analysis should/must be applied. Who, then, are the experts - and how would we know they are such - who shall be the Independent Reviewers? Under the current uncertainties, how would the Independent reviewers reach their recommendations - what is the proper attitude of prudence (not least to protect them from liability)? And to whom do they owe their duty (including, but not limited, who pays them and their liability insurance?)

Perhaps there is the outline of how this might work in the Office of the Supervising Scientist? Or some of the "independent" regulatory bodies around the world, like the Nuclear Regulatory Commission in USA, with authority over civilian nuclear activities. Incidentally, something similar has been suggested in USA, usually in terms of the US Geological Survey as the proposed entity that is sufficient in expertise and outside the realm of grubby capitalism.

But even if we could solve this - and perhaps we can - I am not sure we are over the second hurdle: if the costs of closure have been badly underestimated (as they pretty surely have in many instances), what happens when bonds are set 10x - 100x current levels? Do we really wish all mining to be done by 3-4 super-companies who are wealthy enough that they can fund the bond payments? How do we respond if no sureties will step forward to undertake the liability?

These objections are not meant to say that the status quo is adequate, but rather as caveats to point out how difficult the problem actually is.

I beg to differ this argument about we don't know all the answers is there for every project when it comes to mining and processing the ore yet we still proceed! We have a pretty good understanding of what is likely to work we just need to choose to do the work and get better and smarter at doing it through time. As for financial institutions being liable. If we look at ASX guideline 31 in Australia we can see this is clearly not the case for closure. The smoke and mirrors applied to appear to be accountable for everything but actually accountable for nothing is incredible!

I meant something less cosmic. We can do a rigorous slope stability analysis for an embankment and summon empirical experience to set factors of safety, and no one is going to argue about the physics that go into the slope stability analysis (though might argue about the data, of course, e.g. Mt. Polley). Flow and reactive transport under variably-saturated, non-isothermal conditions in a heterogeneous and anisotropic, deforming medium is simply not at that level of understanding. Doesn't mean we can't bind it, but the levels of underlying science are not at all comparable.

I'm with you. It's just that when it comes to taking on a project companies are gung-ho and apply themselves to solving the production and process engineering issues and then say it's all too difficult or expensive.

I agree entirely.

Perhaps the problem is that companies inherently externalise costs as far as they can, which yields better profits. In essence that is how modern business works and it is up to the government and the rest of society to ensure they pay for whatever impacts they cause (regardless of some people's faith in self-regulation). The following blog post was enlightening in this regardhttp://thearchdruidreport.blogspot.com.au/2015/02/the-externality-trap-or-how-progress.html.

From my experience, much of the problem is political. I recently attended a talk by Dr. Bjorn Lomborg regarding development funding priorities. Regardless of their conclusions or methods, a relevant factor is that, politically, environmental protection comes way down the list of priorities in the average citizen's life. My contention is that this is because most of the issues are invisible, long term and far removed, be they the extinction of the Northern White Rhino, CO2 emissions or groundwater pollution by AMD. In the end politicians gain office by prioritising what is important to the electorate.

In this context, mostly regulators try to do the right thing; however, they can live in a very frustrating world where they are overridden by politicians or senior managers. The latter tend to place current investment and political considerations such as jobs and taxes above good science and long-term consequences on their list of priorities. In Australia the election cycle is 3 or 4 years, depending on the government in question. There is little incentive to ensure good long term environmental or financial management in this context, except to be re-elected for the next cycle.

As environmental scientists we also invariably work for a mining client, regulator, academia or an NGO. Good science can easily become a victim of a particular political agenda or school of thought with a predetermined outcome, thereby discrediting our whole profession in the process. To me this is part of the reason why the mining industry (and to some extent environmental activism) has lost credibility along with the associated science. In some cases people also slavishly follow guideline documents and sometimes analytical methods that are essentially flawed. Many practitioners also have almost no fundamental training in the basic science they are practicing, geology and geochemistry for AMD assessments being a classic case.

As long as scientists are at the mercy of the payer, these issues will undoubtedly continue to plague us. It is even more of an issue in the currently subdued mining market where competition for work is fierce and budgets are tight. The question is what alternative model would work?

If we want to ensure our reputation and that of mining improves (along with actual performance), then scientific integrity must remain intact.

We cannot do much about politics and standards in a particular jurisdiction but perhaps professional organisations that accredit Engineers and Scientists need to be stricter when it comes to these ethical dilemmas. After all, if mining and mining professionals are to have any legitimacy in the public eye, no Mining Engineer doing a Reserve estimate can legitimately claim that closure is not a part of the overall mining cost in this day and age, regardless of what the financiers say.

The economic and software tools are also available to do a better job of costing. We would not continue to have booms and busts, with accompanying legacy sites, if current practices were working.

I'm a bit late on the wagon, but would be interested to hear others' views on these perspectives.

Well done valuable insights all very relevant especially environmental and engineering professionals having some intestinal fortitude to stand for the good thing and insist on adequate closure costing.

You have made more good comments, well done.

Yesterday at an ARD conference I was reminded of a quip by Dirk Van Zyl (UBC) to the effect that "a mine is just a waste management project and if a profit is made along the way then that just makes things better". This is sort of the paradigm shift in thinking that we need to have, certainly at the front end of projects.
So, with the tools that we currently have I think we just need to focus even more on getting the information levels and planning right before a mine can be approved. Then, provided implementation and performance is adequately monitored, we will have avoided many of the more serious situations and won't have to worry quite as much about closure. This means having articulate regulators and making it harder and slower to get approvals for a new mine or expansions.
I know this will be hereby too many people but I believe it is needed.

Never it's the only right and proper way forward for a sustainable, smart and profitable future for mining! Sound the trumpet and start operating in really smart innovative and cost effective ways to provide a future for the next generation of miners!

Thank you all for an interesting discussion. Especially interesting to a somewhat new in the subject (only 7 years or so in or around it). Personally I have gone from research to the regulatory side and as I tried to show earlier Sweden kind sort of have tried to fix this problem.

So if you want to open a mine you need to get support from a bank or financiers to show that if things go bad there still is money available to close the mine and treat the waste. Yes it could be problematic for small or new companies but is it not reasonable that you can treat the waste you produce? Polluter pays principle and so on.

So our problem I think is not that we do not have a law that can hold companies responsible but on how we do it.

So the regulatory side suggests and try to motivate how much money that is needed for treatment and closure. The company does the same, and then the court decides what is reasonable.

Now this is done in such an early stage that it is near impossible to get the numbers right and we have some bad examples recently where the numbers has been way to low. That partly is due to that the numbers are not corrected over time but also due to lack of time and knowledge of the people involved to do it. A bit too often it is in the hand of a consultant sometimes good sometimes not that good. And the regulatory side does not always have the knowledge to see what might be missing. To correct that could be expensive in form of salaries and a bigger “government” but in relation to the money involved it seems like it would be money well invested.

We just need the whole of life costs in the Bankable Feasibility viability process and hold the independent reviewer accountable. Then the financial institutions would have a vested interest in the mining company getting the figures right. There are companies and people who can get the numbers right but they are rarely if ever associated with those who specialise in approvals! Especially engineering firms with a vested interest in winning the construction contract. That's why the onus must be on the lending organisations. You can hoodwink government and community but just try hoodwinking a financial institution!

I agree with all the above comments. If there is no profit, only cost, then the management of the acidic water is avoided. At Global Aquatica we solve this by converting the waste water into cash generating revenue stream. We convert the acid into drinking quality water and convert the contaminants into valuable recyclable products. The revenue is used to increase the plant size and operate the plant. The remainder is revenue to the mine. The result is total eradication of the acid and the contaminants from the site with no stored wastes.

We are finding the mines are now very keen to proceed with AMD management.WWW.globalaquatica.com.au