Barros, E, Masetti, L, Chaves, M & Domingues, V 2025, 'Aspects of financial guarantees for mine closure', 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. 1-13, https://doi.org/10.36487/ACG_repo/2515_28
(https://papers.acg.uwa.edu.au/p/2515_28_Barros/)
Abstract: The non-closure or inadequate closure of mining enterprises represents a risk for the government, considering that the federal government of Brazil can be held responsible for, and bear the costs of, recovering abandoned mines. Consequently, the implementation of financial guarantees is commonly used by regulatory authorities as a measure to reduce the risk of abandonment before execution or inadequate execution of the mine closure plan. Financial guarantees are resources that entrepreneurs should present, in advance, to guarantee the necessary budget for execution due to the closure of a mine. However, this alternative has some weaknesses that make the measure not very effective, such as: (i) the financial impact on the cash flow, which may make new ventures unfeasible, especially those related to small miners; (ii) the increase in the cost of implementing enterprises, considering that the need to present the financial guarantee may drive investors away from the sector; (iii) the absence of banking products and insurers to offer a financial guarantee, combined with the need for companies to have high credit with financial institutions to acquire such insurances; (iv) non-elimination of liabilities related to abandoned areas resulting from illegal mining, the risk of responsibility being attributing to the federal government; and (v) the definition of the mine closure plan during the project phase is conducted conceptually as it depends on technological and social conditions that change throughout the useful life of a mine; thus, every closure project can be changed when it is carried out, impacting the proposed budget and, consequently, the amount to be guaranteed. It is up to regulatory authorities and entrepreneurs to jointly discuss the best alternatives to mitigate the risk of non-closure of mines without impacting the attractiveness and feasibility of the mining activity. This paper aims to discuss the challenges concerning financial guarantees in the mining sector scenario.

Keywords: financial guarantees, risk mitigation, financial impact