Environmental liability and risk related to mine closure in Canada - ME Feature Article

With a growing number of mines reaching closure and seeing closure costs materialize, regulators, lenders and banks are observing projects that fail economically by miscalculating these costs. Mine closure costs are often categorized as a type of liability, which is defined as the money owed by the company to offset effects from the project and the money available to pay for those debts, such as bonds. Often, decisions made before the first day of mining — such as co-disposal, dry stack tailings, waste segregation — can significantly change the bond calculation. Once the bond is calculated and funded, operators are encouraged to conduct closure research and use applied science for progressive bond release prior to final closure. However, the author has observed few instances of financially significant progressive bond release, as there are typically no robust procedures for bond return, either before or during closure activities. As a result, many companies decide that entering a state of care and maintenance (C&M) is less risky than attempting to fund closure activities with an unknown bond return mechanism. Although perhaps less risky in the short term, the primary long-term risk with entering C&M is that it increases the chances of the bond not covering the cost of closure and the chances of the government/regulatory agency inheriting the mine closure. Bonds are typically reevaluated on a regular cycle, such as five years, so every mining company goes through this financing challenge eventually.