MANAGING AND ESTIMATING CLOSURE AND RECLAMATION LIABILITIES - A PRACTITIONER’S VIEW

Abstract

Abstract. With the global mining industry’s focus on Sustainable Development, there has been a significant emphasis on mine closure and reclamation performance and reporting through the development of the International Council on Mining Metals (ICMM) Sustainable Development Framework and Principles, the Minerals Council of Australia’s (MCA) Enduring Value Framework for Sustainable Development, the Global Reporting Initiative (GRI), and the Equator Principles. In addition financial reporting obligations under International Financial Reporting Standards and the Sarbanes-Oxley Act (2002) have also led to better understanding and improvements with industry closure performance, liability management, and reporting, and provide improved guidance on evaluating and measuring liability. Under these sustainable development principles and financial reporting obligations, mining companies are required to self-regulate their compliance to these obligations for mine closure planning and associated cost estimates across all life cycle phases of their mining projects. Internal processes should be developed within mining companies to better understand their closure liabilities and obligations. The likely closure costs and cost estimating processes should be developed for long-term life of mine (asset) planning and budgeting, financial reporting for corporate balance sheet provisioning purposes, and regulator reporting for environmental bonding and financial assurances. Mining companies need to plan for, prepare, and actually “mine for closure” right from the start of a project. This means that their closure and reclamation liabilities throughout each stage of the mine life cycle phases; exploration, during feasibility studies and mine construction, start-up and operations through to the last day of production and beyond, must be understood, planned for, managed, and controlled. This paper will discuss how these closure liabilities are calculated, how they are utilised internally within an organisation and what must they deliver in terms of improvement, performance, and reputation. Early recognition of closure and reclamation liabilities promotes improved strategies for operations to plan additional mitigation strategies and anticipate progressive closure and rehabilitation activities. Closure planning creates shareholder value if these long-term liabilities can be reduced or eliminated during operations. A well-established closure planning process combined with a closure and reclamation cost estimating process ensures investment, development, and operating decisions made today are made in full recognition of the potential financial impacts for closure in the future. ______________________