August 2019

Social aspects of mine closure

  • By Terence Jeyaretnam, Partner, Climate Change and Sustainability, EY

How do mines ensure a sustainable transition to post-mining and reduce the impact of closure on local communities?

The Australian landscape is dotted with abandoned towns that were established because of mining booms. These towns were built on the hope of prosperity, with fortune seekers coming from miles around, even crossing seas, to settle and join the community. Unfortunately, there is only one certainty when it comes to mining – the commercially extractable resources will run out. And when this happens, it can be difficult to stop people leaving, leading to local economies evaporating.

To be truly sustainable, the resources sector should plan for inter-generational economic growth going forward. To achieve this, the sector needs to capitalise on two main fronts:

  • use mining operations to diversify the local economy
  • identify and plan a replacement socio-economic benefit following closure.

Diversifying the local economy during operations

The mining industry traditionally tends to be inwardly focused. Community development programs may be developed such that the entity and/or asset owner reaps direct benefits – for example, traineeships to provide the next generation of mechanics to service the mine’s fleet of vehicles. Or a mining corporation building up a broad range of local companies to act as nearby, cost-effective suppliers. While these programs do bring benefits to local communities by way of skill and economic development, their focused nature means they tend to increase the community’s reliance on the mine.

A better long-term outcome for the community is for the mining company to support the development of a viable alternative industry (or two) – ideally industries that do not rely on the mining operation and that leverage other local attributes. There may be a rational reason as to why such industries didn’t grow and prosper in the region previously, and mining can act to remove some of those barriers. For example:

  • infrastructure is often upgraded to service the mine, increasing the town’s access to larger external markets
  • in-migration can swell local residential numbers, increasing the size of the local market 
  • as a corollary to this, different skill sets may also be imported into the region.

By looking at the development of a mining project as an opportunity for the region to overcome some of these broader barriers, the operation can contribute to a diversified and sustainable local economy, where mining still plays a key part – but not the only part. In the process, it may de-risk an operation from community-led disruption.

Planning for post-closure benefit 

Alongside developing diverse economic benefits during a mine’s lifespan, mining companies can help to protect the town from adverse closure impacts through forward planning and a shift in mindset – treating closure as a potential opportunity, rather than a liability.

The process by which a site transitions from a mining operation to a successfully closed site is relatively well-known within the Australian mining industry, and there are ‘best practice’ guidelines available. Despite this, the number of mining leases in Australia that have been formally relinquished back to the state are few and far between. 

One of the key reasons for this is that post-closure land use often remains an afterthought. Many of the examples of successful repurposing of mine sites have occurred on sites that have not been operating for many years. The repurposing activities may have been hastily or opportunistically created – perhaps a mining company has looked to generate some revenue to offset the prospect of prolonged land management costs, or an entrepreneurial company (outside the industry) has recognised a unique asset and proposed a solution. 

One way to challenge this is through seeing closure as an opportunity – not a liability. This mindset should be adopted from the start of a mine’s life (in the planning phase) – not as the site heads towards end of production.  

Most mine sites have a unique character that can provide opportunities that normal lands cannot. They also generally have excellent infrastructure including power, transport, and amenities to support a new site purpose. If a mindset shift occurs, and sites are considered as a continuing asset rather than a liability, there may be a raft of sustainable socio-economic opportunities that could be planned ahead and realised following closure, thereby ensuring the ongoing sustainability of the community that developed alongside the mine.

Conclusion

As an industry, we could be on the brink of a change in the way we think about closed sites. There are isolated examples of opportunities being implemented at closed sites and these have demonstrated the proof of concept; however, we are not seeing companies implement a structured process for identifying and implementing site-specific opportunities after closure. Such a process starts with an outward looking perspective and understanding that mine sites can continue to contribute to ongoing socio-economic benefits beyond the life of a mine. 

The views expressed in this article are the views of the author, not Ernst & Young. This article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.

Image: Edward Haylan/Shutterstock.com


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