February 2015

Obstacles and opportunities for effective mine closure

  • By Bruce McCarthy MAusIMM, Principal, Mattiscombe Resources

Red Dome gold  mine illustrates why an early focus on post mining outcomes is essential to build transparency, credibility and trust.

Towards the end of the 20th century, mines in Queensland focused most of their environmental energy on closure outcomes, understanding environmental challenges and putting plans together to attempt to control the longer term liabilities by effective operational management.

The change of regulator and emphasis around the year 2000 brought about a flurry of quality assurance systems development and government administrative processes, namely ‘compliance’ which became an excessive, prescriptive paper monster and drove most environmental resources into gaining multilayered approvals to allow a project to proceed.

Upon reflection as we enter 2015, one could argue that none of this has actually made any real difference on the ground within the landscape contexts of these sites. Where are the successfully rehabilitated and closed sites?

The main issue – mine closure planning

‘Environmental compliance’ has become a somewhat convenient concession to process and combined within the safety management system, fails to deal with the root cause of the problem. Compliance as a day-to-day management tool doesn’t incorporate a realistic life-of-mine (LOM) vision or closure plan that can be implemented effectively.

What is worse, operational environmental staff have become systems administrators without the technical wherewithal or experience to influence negative operational impacts on closure. What is now required is the incorporation of adequate and robust financial resource estimates to achieve satisfactory closure outcomes within a project’s financial viability assessment, which will drive a LOM vision and a smart and well thought-out implementation plan.

The JORC Code, 2012 edition (current version) allows for greater detail on environmental matters within the scope of Table 1 in the JORC Code, but the real reason that these matters are not dealt with in a Reserve statement can be found in ASX Guideline 31, which allows for the omission of closure items in Reserve statement reporting.

The environmental impact assessment process (red tape) is a regulatory administrative document which requires a very significant suite of varying studies to be conducted. Due to the format and its generic content, it often fails to adequately address the specific impacts of different types of infrastructure within a site’s unique landscape context.

Significant issues and impacts can be – and often are – overlooked. This is a result of the nature of the approval focus, along with the lack of multidisciplinary operational experience to understand the practical implications of basing assessments on relatively short-term mine life and conceptual infrastructure designs.

Often, detailed mine design is completed after regulatory approval is given and focusses on construction and commissioning at the least possible cost. This is then followed by one or two years of operation, without consideration of the likely mine closure and possible legacy consequences arising from placing a piece of infrastructure within a specific landscape context. Mine engineering and feasibility planning practice tends to group mine development infrastructure, reclamation, drainage and closure processes as operational and deferred costs not to be considered in net present value calculations to assess project viability.

The real downside is that as the mine develops, so do the environmental issues that need to be managed: landforms, hydrology, hydrogeology, geochemistry and water management. If there was no capital allocation considered for infrastructure, nor operational costs associated with the staged implementation of progressive rehabilitation, there is no portion of the production unit cost to pay for the implementation of controls.

The real consequences of the absence of robust and detailed closure planning at feasibility are:

  • no LOM development capital or operating resource allocation
  • no realistic vision or plan to provide a transparent platform for discussions with stakeholders and community
  • no specifications for landform construction developed for earthmoving contractors
  • poor short-term operational ad hoc judgments with respect to environmental matters
  • no effective operational financial control of progressive rehabilitation and outcomes
  • no credit or kudos with the community for a job well done
  • inadequate or failed closure outcomes because of poor planning
  • eventual failure of compliance and development of legacy issues.

The Domains Concept

Twenty five years ago the original Domains mine closure concept (the Domains Concept) was developed at Red Dome Gold Mine in north Queensland (Figure 1).

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Red Dome was a complex gold copper operation developed over a number of phases in its 11-year operational history. The deposit was characterised as a porphyry gold-copper type and contained significant poly-metallic base metal mineralisation, notably lead and zinc.

At any one point in time the mine only had a life expectancy of less than three years, which created a degree of urgency with respect to rehabilitation planning and implementation. From 1989 the mine possessed a necessarily fairly detailed LOM decommissioning plan. This had emerged as a proactive response to the proposed Mineral Resources Act legislation and became a very useful budgeting and financial reporting document that facilitated fund allocations as a closure provision in normal corporate accounting practice.

Domains are defined as ‘contiguous spatial units within a landscape context (sub-catchment) having specific like suites of challenges to effect closure’.

These units segregate the mine site according to operational, physical and temporarily related components, enabling a suite of meaningful
individual plans to be assembled. The approach is fundamentally different to engineering approaches because it assesses the landscape and inherent opportunities, threats, flaws and weaknesses prior to making decisions on where to place important infrastructure within sub-catchments.

The LOM plan using the Domains Concept developed a suite of sub-plans as discrete units within a whole document. The mine closure ‘elephant’ was thereby reduced to a series of manageable bite-sized pieces. For practical implementation, each domain unit had an individual plan with a clear site description of the landform, topography, material characteristics, drainage, available soils, map, operational and closure objectives, discussion of operational constraints, rational assumptions for undertaking the work and a suite of defined tasks for which realistic costs could be assigned.

The business plan

Identified tasks by domain were assigned cost and expense codes and incorporated within the operational and capital budget expenditure procedures and reforecast every three months. A rolling closure provision was assigned annually and was reversed as tasks were completed. In this way, progressive rehabilitation was measured and reported to shareholders in annual financial reports.

The process provided a corporate vision of closure for the management team within the business plan rather than a disconnected regulatory syntax. It was modular and easily adapted to changing production scenarios and provided a platform to develop and integrate environmental management plans to operational circumstances pre-ISO quality systems. This automated compliance reporting via a defined database was reflected through a Geographic Information System (GIS).

The Domains Concept approach worked and facilitated robust and measureable operational financial management, providing real evaluation of environmental impacts for each spatial unit defined. A cumulative track record of demonstrated final land form objectives and rehabilitation was developed, and achieved most closure success criteria within seven wet seasons post-mine closure. Most of all, it provided a vehicle to build transparency, credibility and mutual trust with government agencies, landholders and the community.

Towards sustainability

The current approach  – pursuant to the JORC Code, incorporating environmental matters in JORC’s Table 1 – if it omits or understates detailed LOM closure costs from eserve statements and project viability, surely doesn’t provide a basis to align with the The Six Tenets of Sustainability for Mining Planning Statement (Robertson 2013: e-book). Robertson writes:

‘… planning for the sustainable mining of resources is a global necessity; determination of the potential impacts and the optimization of mine development, operation and reclamation, to minimize these impacts, is a requirement of responsible stewardship; and planning and provision for post mining sustainable land use management and custodial succession are necessary.’

Furthermore, as shown in the ICMM 2008 Handbook Planning for Integrated Mine Closure: Toolkit (www.icmm.com/document/310), the following diagram (Figure 2) clearly identifies closure issues at all stages of the mining cycle, but entrenches the detailed closure design at a late stage in proceedings. This defers costs to a point when revenue is almost non-existent.

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Rather than Detailed closure planning occurring late in the development of the productive use of a mine, much more detailed planning needs to occur at the feasibility stage to determine whether the project is truly viable and all the major issues can be satisfactorily addressed during the life of the operation.  Image courtesy ICMM 2008 – Planning for Integrated Mine Closure: Toolkit, page 32.

The industry is necessarily concerned about red tape, project delays and land access difficulties, but complying with the process and not incorporating detailed costings for the projected life of the project at the viability stage, falls short of addressing important whole-of-project responsibilities for the environment and community health by which we are judged. For many issues, not least the landform drainage and geochemical challenges, leaving the development of a LOM plan to such a late stage in proceedings cannot undo the inevitable consequences of ill-advised or simplistic management implications for ad hoc landform construction, diversion drainage and impoundment sizing during operations.

Starting with the end in mind

Surely the answer is always to start with the end in mind and get smart about planning the project properly (Figure 2). Ideas to consider include:

  • extract a closure context from the environmental impact assessment (EIA) study process and develop a meaningful operational closure document
  • optimise project landforms and infrastructure by spatial unit within the landscape for a beneficial closure implementation, applying key findings from the EIA to mitigate legacy risk
  • produce a LOM business plan, developed as an integral component of the JORC Reserve statement, assuming a 5-10 year rolling average commodity price and mine life, with costs and scheduled +/-15 per cent
  • make robust LOM cost estimates and financial provision to achieve a practical closure outcome and incorporate them as a significant material factor to be addressed by JORC Reserve statements, to then determine a project’s real viability
  • involve the independent reviewer from financial institutions in the sign-off process for LOM closure provisions
  • adopt an internal provision for closure systems based on an assessment of the predicted cost of closure
  • demonstrate a measurable track record of success as work progresses to shareholders and community, reported annually to ASX.

The challenge

The mining industry can and should expedite project closure planning, to effect closure at feasibility, because the industry already has the expertise. Somehow we have chosen to merely comply with financial and other legislation, to get projects up and running and generate high revenue streams with low-ratio, easily accessible and profitable commodities early in the mining life cycle.

Then, when we’ve flooded the market with the commodity there is mass unemployment, mine shut-downs with site care and maintenance programs and a genuine prospect of a legacy liability. Somebody reaps the profits but rarely takes responsibility for the environmental or social legacy. In that respect, nothing has changed since 1970.

What if one of the main reasons for the boom-bust cycle and high volatility in commodity prices with the ensuing fallout was a direct result of the way we go about project viability assessment?

Perhaps the longer term view we need to adopt, could be that we determine to have less projects, but ones that are more viable and financially robust. That is, projects which are better able to weather commodity price fluctuations. In this way, they might achieve their projected mine lives in a sustainable manner, without failing suddenly and leaving masses unemployed; townships and communities affected; and with minimal legacy cost to the community or state. 

References

ICMM 2008. Planning for Integrated Mine Closure: Toolkit. Available from: www.icmm.com/document/310 (The International Council on Mining
& Metals).

JORC, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code). Available from:
www.jorc.org. (The Joint Ore Reserves Committee
of The AusIMM, Australian Institute of Geoscientists and Minerals Council of Australia).

Mackenzie W and Cusworth N, 2007. The use and abuse of feasibility studies, in Proceedings Project Evaluation 2007, pp 65-76 (The AusIMM: Melbourne).

McCarthy P, 2013. The mining life cycle, presentation to AusIMM Melbourne Branch, June 2013.

Nethery B, 2003. The role of feasibility studies in mining ventures, Presentation to Conference Board of Canada, Structuring more effective mining ventures, 17-18 Feb 2003, Vancouver. Available from www.cartaexploration.com/downloads/external%20pdfs/Role_of_FS_in_Mining_Ventures_Feb1103.pdf.

Project Management Institute Incorp, 2013. A Guide
to the Project Management Body of Knowledge,
fifth edition.

Queensland Department of Environment and Heritage Protection, 2012. Rehabilitation requirements for mining projects (Guideline 18).

Robertson A M, 2013. The six tenets of sustainability for mining [online], EnviroMine: Environmental Technology for Mining. Available from
www.technology.infomine.com/enviromine/issues/sustain_tenets.html.

Unger C, Lechner A and Wilson I, 2013. Prevention of negative mining legacies a mine rehabilitation perspective on legislative changes in Queensland, The AusIMM Bulletin, February, pp 60-64.

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