An Australian perspective on the impacts that increasing regulatory demands and approval timeframes are having on traditional mine planning processes
Mining is generally accepted by the public at large because of the role that it plays in society as a provider of minerals and metals for the public’s needs and general wellbeing (Boutilier and Thompson, 2011). A mining company’s overarching objective is to maximise extraction of the available resource, delivering the greatest economic advantage within allowable boundaries. These boundaries are governed by the environmental and social inputs of the day and, to some extent, by reasonable prediction of these inputs into the future. Unfortunately, mining is now portrayed as a necessary evil as opposed to a worthy necessity servicing the needs and prosperity of society.
The ultimate risk to any financially feasible mining project is that of environmental approval and achieving development consent to undertake the required mining activities. As environmental and social considerations now play an overwhelming role in mineral development, these considerations should be evaluated alongside more traditional mine planning, business and economic considerations (Eggert, 2006). As a result, successful mine planning requires the understanding of environmental and regulatory considerations and adopting these considerations as part of the mine planning process.
Environmental and regulatory considerations
Regulatory approval processes associated with a mine’s development consent are intended to be systematic, streamlined and time-based. However, several steps throughout an approval process can be delayed by items such as:
- the introduction or alteration of legislation
- the failure of Environmental Impact Statement (EIS) adequacy
- the recommendation and request for additional environmental modelling
- the open-ended time frames relating to legal challenges.
From a project development perspective, the issue of time is by far the key consideration, not only in regards to the project schedule, but also in terms of the project economics. In addition, the regulatory approval process can dictate the selection of a mining method, recommend changes to the mine plan and ultimately refuse development consent of a project altogether.
Case studies provide valuable insights into present-day issues complicating the regulatory approval process. In New South Wales, for example, the typical approval timeline for a new coal mine can range in duration from three to five years. Certainty of approval is by no way guaranteed, and any approved mining project is bound to incur conditions of operation or changes to the proposed mine plan. Recent indications suggest that brownfield expansions are favoured over greenfield developments, while underground mining is the preferred method compared to open cut mining. Mining companies can expect the usual negative sentiment towards the destruction of agricultural land, water impacts, noise and dust implications, along with heritage and ecology impacts. There is also an increasing requirement for preservation of visual amenity and maintenance of solastalgia. In contrast, favourable project economics and the general requirement to maximise a state’s resources are no longer clear-cut justifications for approval.
Over and above initial mine planning and project approval aspects, the cyclic nature of the mining industry highlights growing concerns around mine closure. The most prevalent issue is the financial implications to a mining company and the potential long-term liabilities should it fail in its obligations to fully rehabilitate a mine site. The clear disconnect between mine closure planning undertaken from a historic perspective and the eventual requirements and expectations in the future are increasingly evident. Detailed mine closure planning during the initial project development phases is often overlooked and not given detailed consideration. This is primarily due to the nature of project evaluation and the handling of discounted cash flow analyses and, more specifically, relates to the obsession with deferring costs to improve a project’s bottom line. The costs associated with closure are generally several decades into a mine’s life and, as such, have a reduced bearing on the overall economics of a project due to the time value of money. In reality, and at some point in time, these deferred costs must eventuate. Preconceived benefits of deferred closure costs are further exacerbated by poor accrual of actual liability or are complicated by a change in mine ownership and poor transfer of liability risk. Closure costs inevitably escalate over time, and mining companies do not successfully accrue the perceived liability on an ongoing basis. There is now increased pressure on mining companies to not only improve mine closure planning from the outset, but also to ensure that the relevant funding is available to support the required closure plan at that time.
In summary, environmental and regulatory processes not only have the ability to significantly delay a mining project, they can also instigate changes to a mine plan. It is therefore imperative that these considerations are understood and incorporated into the traditional mine planning process.
Traditional mine planning and project development processes
Prior to construction and operation, a mine is typically evaluated using the classic three-staged study process over several years. This study process involves the initial concept or scoping study to develop concepts and ascertain what the mine could be. The prefeasibility study (PFS) determines what the mine should be by evaluating a range of suitable options, shortlisting these options and selecting a preferred option to progress to more detailed studies. Culturally, the final and most important stage of the study process is to determine what the mine will be, and this is determined through a more detailed feasibility study (Cusworth, 2012). The feasibility study takes place at two levels: firstly, for final internal corporate assessment purposes and, secondly, for obtaining external funding (West, 2006). Inherently, the overall mine planning process is driven by economic outcomes. Consequently, project teams often get caught pursuing the most optimistic results to ensure the project’s survival and protect perceived professional integrity as ‘not feasible’ is often synonymous with failure. The feasibility study provides the highest level of credibility for any new project, although such credibility, especially from an economic perspective, is lost over time. Mining approvals can significantly impact time and, therefore, the credibility of a feasibility study. It is all too common to take shortcuts in the development of projects to create the perception of cost savings and expediting the delivery timeline. Atkins and van Olden (2016) point out that:
… boards of so many small to mid-tier mining companies, and a few majors, focus on relentless project delivery too early in the project process, with so little time and effort applied to risk analysis and option development. Unforeseen risks can cost any timeline or budget far more than the effort required assessing and mitigating these.
Regulatory and social risks are the greatest unforeseen risks prior to a mine being established. Unfortunately, in early project study stages, the identification, quantification and management of these risks through mine planning is often limited due to bullish mine planners, the use of obsolete environmental mine planning constraints or a misunderstanding of evolving regulatory requirements. The importance and eventual impact of such risks is generally only identified through the EIS. Here, the feedback from key specialists and regulators allows for the alignment of mine and environmental planners, thereby facilitating the most approvable mine plan.
As the PFS provides the platform for developing and assessing several different mine plan options, the integration of up-to-date environmental constraints and regulatory risks at this study stage-gate is self-evident. The PFS now lends itself to an increased level of importance from a mine planning perspective. Incorporating preliminary EIS modelling and zones of affectation for each favourable option and the selection of the preferred option is therefore based not only on economics, but a regulatory risk-based perspective reflecting the current perception and interpretation of environmental constraints to mining at that time. The PFS provides the appropriate platform by which to gather suitable inputs for an EIS and submission of that EIS to seek development consent. This increased emphasis and reliance on a PFS is echoed by the Joint Ore Reserves Committee’s use of such a study as the minimum standard by which to report a mining reserve (JORC, 2012).
Therefore, if used correctly, the PFS has the ability to be as important as the feasibility study. In turn, the feasibility study should be used for its intended purpose – determining what the mine will be and to support funding for mine development. It is clear that using the feasibility study for inputs into an EIS brings with it several layers of uncertainty, inefficiencies and potential waste. These downsides can be reduced by undertaking the feasibility study following receipt of the relevant development consent relating to the PFS preferred option. The feasibility study will therefore assess an exact mine plan, reflect economics of the day and improve credibility. Should the PFS preferred option not gain regulatory approval, savings can be made in regards to cost and time by eliminating rework or shelving a completed feasibility study altogether.
Conclusions and recommendations
The sentiment towards mining has changed. Traditional approaches to mine planning and project evaluation are complicated by evolving environmental legislation, expectations and time frames. These issues are further exacerbated by bureaucratic inertia. In addition, even with prudent mine planning and best practice dialogue with relevant stakeholders and regulators, regulatory approval is not guaranteed. There is a requirement to adjust strategies to accommodate uncertainty and therefore improve decision-making.
Adjusted strategies include the mindset change and increased importance of the PFS. The PFS provides a logical point with which to develop a range of options that consider the project economics and incorporate relevant environmental and social risk relating to each option. The PFS is to be undertaken at the relevant level of detail so that it may be used as an input to an EIS. Therefore, the PFS is used for its intended purpose – identifying what the mine should be. The feasibility study is then used to determine what the mine will be. The final business decision is then made based on known outcomes and information of the day.
In view of the changing regulatory environment and the associated impacts to traditional mine planning processes, the following considerations are put forward:
- Mining companies should develop an approvable mine plan framework that reflects the most current political, social and scientific constraints to mining. This framework should be systematically updated by specialist mine planners and EIS expertise.
- Preliminary environmental data collection is to be undertaken as part of early exploration. Inevitably, exploration requires a review of environmental factors through which suitable information may be collected to complement background environmental monitoring used in subsequent EIS submissions.
- EIS specialists should be engaged prior to developing the scope of works for the PFS. Typical EIS requests for information items should be included as PFS deliverables.
- More detailed mine closure planning should be undertaken from as early as the PFS stage. Corporate reviews and sign-off should be implemented for each study stage-gate or due diligence study to capture increasing closure liability risk. A mine closure cost management and execution plan should be incorporated into feasibility study deliverables.
- Preliminary EIS modelling for each shortlisted PFS option should be undertaken. Relevant zones of affectation should be risk assessed from an approvability point of view. This will provide quantitative information supplementing the economic assessment traditionally used to select the preferred option within a PFS.
- The PFS should be used as inputs to the EIS and mine approval process.
- The feasibility study should be used for its intended purpose – to assist in making internal corporate decisions and seeking funding for the proposed mine.
A feasibility study based on an approved development consent is more credible and eliminates uncertainty.
In conclusion, early systematic collaboration with regulators and stakeholders, timely collection of pre-mine data and the integration of science and engineering is now more important than ever before when arriving at the most resource-efficient yet approvable mine plan. Undertaking systematic mine planning – including all stages of study, namely concept, prefeasibility and feasibility study – is paramount. Specific emphasis on the PFS during mine planning is also increasingly important to ensure the right outcomes. Taking shortcuts to improve on project delivery incurs layers of unforeseen risk that are catastrophic to any new project. The elimination of such risks can be highlighted, evaluated and reduced during the PFS. Undertaking systematic mine planning, including evaluating and accepting environmental risk, is not only good practice, it is also a professional obligation.
Atkins A and van Olden K, 2016. Divergent thinking – the value-add proposition in mining consulting, The AusIMM Bulletin, April 2016.
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Cusworth N, 2012. Basis of studies, in Cost Estimation Handbook, pp 21–28 (The Australasian Institute of Mining and Metallurgy: Melbourne).
Eggert R, 2006. Mining, sustainability and sustainable development, in Australian Mineral Economics, pp 187–194 (The Australasian Institute of Mining and Metallurgy: Melbourne).
JORC, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code) [online]. Available from: www.jorc.org (The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia).
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