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

panies for closure. It is common to base accruals on a unit production basis (such as $ per ounce of gold produced). The total amount of the accrual is estimated from the environmental closure cost plus other liabilities specific to a mine such as land holdings, personnel costs associated with the end of operations, and so forth. Financial auditors can perform annual reviews to determine the adequacy of these closure funds. The following (principally after van Zyl et al (2002a) and Miller (1998)) should also be noted regarding financial surety and closure cost accruals: Conceptually, financial surety is in place dur- ing the total life of the mine and will only be released (in part or in total) after the regulatory agencies have established that rehabilitation has been completed to their satisfaction. How- ever, the financial surety may not be a fixed amount throughout the life of the mine, but may vary as environmental issues develop at a mine, as regulatory changes occur and com- munity expectations change. Closure cost accrual takes place over the life of the mine based on a planned mine life, it is not necessarily a linear function as it may vary also over the mine life; and, In the US and some other countries, the finan- cial surety is not available to a mining operation for closure work at the end of the mine life. It may be released shortly after the work has been done, but the mining company must be a going concern in order to perform, or contract some entity to perform, the required activities. A few mining companies have established sinking funds to pay for the closure of a mine. Money from a sinking fund will be available in cash to pay for closure while an accrual is an accounting allowance that is not liquid. How- ever, it must be noted that while sinking funds may be attractive because they are liquid, in the case of a bankruptcy these become part of the assets of the company and will not be avail- able to pay for closure. Additional notes on (previously) preferred man- ners in which to manage closure guarantees and the clear direction of future expectations are in- cluded in Box 2. Table 1 provides a summary of policy guidelines developed by Miller (2005) for the ICMM in 2004. A number of proviso statements, justifications for • • • •

is recommended that any reader unfamiliar with financial surety issues and instruments carefully review these documents. Of marked value in exam- ination of these texts is the delineation of industry practice at two distinct points in time, and the clear evolution of both practice and general willingness to engage in the financial surety discussion that is displayed by industrial informants. His work docu- ments a marked change in mining industry atti- tudes to financial surety that has taken place over the period 1998 to 2005. To extrapolate from these changes, it appears certain that the application of fi- nancial surety mechanisms will become both more prevalent and more accepted in coming years. Readers should be aware however, that these docu- ments were written for and by an industry interest group. As such, it is reasonable to assume that the presentation of the case for financial surety is (inher- ently) conservative in its representation of perform- ance levels and surety requirements governments can or should demand. When writing for such audi- ences, the views of the less proactive, and less en- vironmentally advanced among the member actors may often be that which is represented. This stated, it should be noted that ICMM, is a small organiza- tion (16 company members as of mid-2005) of com- panies that see themselves as industry leaders and wish to be perceived as such by other mining stake- holders. They claim, and their reasonably progres- sive views lend weight to this, that they do not have a “lowest common denominator” approach, but seek to show leadership. The evolution of industry stance, as represented by that group, in the period between the two Miller assessments support this view. These points aside, the following call from the Gov- ernment of Ontario underlines a need to treat com- ments critical of strict financial surety approaches warily in the context of this document: Other jurisdictions have expressed concern that the introduction of provisions similar to those brought in by Ontario would cause premature closure of ex- isting operations and would also deter new invest- ment from coming to the jurisdiction. Ontario is proud that the 2002 Fraser Institute survey of ex- ploration investment decision-makers rated it as the best jurisdiction in the world for such investment. Clearly our tough rehabilitation requirements have not acted as a deterrent (Gammon, 2002, p4)

According to van Zyl (2000) another important concept is that of financial accruals by mining com-

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MINING FOR CLOSURE