Mining for Closure: Policies, practises and guidelines for sustainable mining and closure of mines

it is important to realise that the governmental policy and local financial markets may determine the type of instrument available for a specific location (Miller, 1998, 2005; van Zyl et al., 2002a; Van Zyl, 2000). It is clear that financial assurance instruments can be effective in promoting or enforcing environ- mental protection and while not yet “popular”, they are increasingly accepted by industry as perhaps the most effective manner in which to ensure that protection of the environment is achieved and pub- lic expectations are met in the mining sphere. 38 To quote Miller (2005, p13) on the topic of Environ- mental Financial Assurance (EFA): Mining companies accept that the major function of EFA is to protect the government and public in the event a mining company cannot meet its recla- mation obligations. While several large companies felt they were capable of fulfilling their environmen- tal obligations without the additional discipline of a financial assurance mechanism, they agreed that a financial assurance instrument does provide more certainty for the protection of the environment. … All companies accept that government needs to demonstrate to the community that it has received sufficient financial protection from the holder of mineral rights to ensure effective reclamation. Miller also provides comprehensive reviews of fi- nancial assurance in various regulatory regimes and the common instruments in use in two reports generated six years apart (Miller, 1998, 2005). It 37. Miller has an extensive and distinguished background work- ing with mining and related environmental policy issues. Among other roles he has served as Director of the Centre for Resource Studies at Queen’s University, Canada, as Assistant Deputy Min- ister, Mineral Policy for the Government of Canada, as President of the Mining Association of Canada and as a Director of the In- dustry Government Relations Group in Ottawa. 38. These views have evolved markedly. Miller (2005) indicates that in his 1998 study (1998), industry showed a marked prefer- ence for “soft” assurances such as: financial strength; self-funding of the obligation while retaining control of the funds; a financial test which determines the grade of the company; a corporate guar- antee based on that grade; self-funding through financial reserves; parent company guarantees and pledge of assets. By contrast, in the 2004 survey the majority of industry respondents recognized that harder methods such as letters of credit, bank guarantees, deposit of securities, and cash trust funds, may best serve the industry, as they are required to satisfy public expectations. As to which instruments best serve the interests of the government, the 1998 report noted that they would be those that best serve the mutual interests of the government and the company. In the current study, industry respondents suggested that cash deposits, any liquid instrument, and bank guarantees would best serve gov- ernments’ needs.

lower financial burdens to the national purse for mine closure and rehabilitation, and lowerrisksforsignificantliabilitiespost-closure One additional important point is raised here in the context of developing and restructuring econo- mies. Where governments do not have sufficient fiscal resources to deal with legacies, then even more innovativeness and flexibility will be required in order to protect the public and the environment from the risks posed by mining legacies. 2.3 This section provides details of a number of de- velopments that are acting to drive the uptake of mining practices in line with the concept of Mining for Closure . The first topic addressed is Financial Surety (or Financial Assurance). The majority of this discussion is derived or based upon position papers produced by Dr. C. George Miller (1998; 2005) on behalf of the International Council on Mining and Metals (ICMM) and its predecessor, the International Council on Metals and the En- vironment (ICME). 37 Importantly, financial assur- ance for mine closure and reclamation is a topic addressed in a number of the drivers listed here. 2.3.1 financial assurance for mine closure & reclamation key external drivers for best environmental practice mining • • guarantees issued by a bonding company, an in- surance company, a bank, or another financial institution (the issuer is called the ‘surety’) which agrees to hold itself liable for the acts or failures of a third party (Miller, 1998) At the present time, the most common use of environ- mental surety instruments are put in place to guaran- tee environmental performance after closure through the funding of mine site reclamation or rehabilita- tion. As such, financial assurance or surety is also the amount of money available to a government entity for closure of the mine in the case when the mine owner is not available to perform the work, (such as bank- ruptcy) during operations or any time thereafter. The financial surety can be provided by a variety of finan- cial instruments or cash deposited in a bank. However, Financial surety instruments can be defined as:

21

MINING FOR CLOSURE