Aguirre, L & Parshley, J 2025, 'Comparative analysis of different types of closure cost estimates', in S Knutsson, AB Fourie & M Tibbett (eds), Mine Closure 2025: Proceedings of the 18th International Conference on Mine Closure, Australian Centre for Geomechanics, Perth, pp. 1-11, https://doi.org/10.36487/ACG_repo/2515_27
(https://papers.acg.uwa.edu.au/p/2515_27_Aguirre/)
Abstract: This paper explores the types of closure costs and, based on experiences, a hypothetical example will be presented to illustrate the overall differences between: financial assurance (FA), life of mine (LOM), asset retirement obligation (ARO) and sudden closure (SC). These estimates are crucial for accurately reporting financial liabilities, ensuring regulatory compliance, and planning for the eventual closure of mining operations. The FA estimate defines the cost that a government agency would incur to perform all actions documented in an approved closure plan, should the company abandon the site without implementing closure. The LOM estimate incorporates all closure costs associated with the current mine plan, typically reported on a cash flow basis and used for prefeasibility and feasibility studies, due diligence audits, and annual planning. The ARO estimate focuses on the fair value or best estimate of current liabilities associated with mine closure, as required by financial reporting standards such as Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Finally, the SC cost estimate is typically developed and used for internal planning purposes to aid in options analysis and decision-making. The estimated SC cost would reflect all costs for immediately implementing closure, with no exclusions. By developing a comprehensive hypothetical example for all four cost types, this paper aims to provide a clear understanding of the details and scope. It analyses the differences between legal and constructive obligations, salvage consideration, cover and grading closure activity, as well as post-closure activities for each cost type.

Keywords: closure costs, cost estimating