Closure costing/rehabilitation liability maths: why doesn’t it add up?

Authors: Neubauer, AA Download Paper Open access courtesy of:

DOI https://doi.org/10.36487/ACG_repo/2215_87

Cite As:
Neubauer, AA 2022, 'Closure costing/rehabilitation liability maths: why doesn’t it add up?', in AB Fourie, M Tibbett & G Boggs (eds), Mine Closure 2022: Proceedings of the 15th International Conference on Mine Closure, Australian Centre for Geomechanics, Perth, pp. 1179-1192, https://doi.org/10.36487/ACG_repo/2215_87



Abstract:
Estimation of closure and rehabilitation liabilities is undertaken throughout the mining lifecycle for different purposes. However, often rehabilitation and associated liability estimation does not yet form part of what is considered core business for mining operations, so the rigour of the process and comprehension of how to approach this may be limited. Reconciling rehabilitation budgets with updated liabilities after progressive rehabilitation and associated closure studies or activities often results in queries on why the overall rehabilitation liability has not dropped by approximately the same or a similar amount to the expended rehabilitation budget. Specifically, financial assurance (rehabilitation security) estimates may be required to be lodged in part or in full and may have significant impacts on cash flow, especially for more junior operators. Without a linear relationship between rehabilitation budgeting and expenditure versus decrease in financial assurance, and with operational pressures and competing priorities, environmental professionals may have difficulty advocating for and receiving adequate rehabilitation budgets. Silos may also exist between mine planning and environment/compliance. Limited incentives for senior management and short-term and longterm mine planners specifically to drive improved closure planning/costing and progressive rehabilitation may also impact the ability to secure and implement appropriate rehabilitation budgets. This may be further compounded by perceptions of net present value for rehabilitation without appropriate context on rehabilitation risks (i.e. longer-term impacts of delaying rehabilitation often result in increased rehabilitation challenges, costs, and financial pressures). Low confidence levels in cost estimation and which aspects should be considered or included, a limited closure knowledge base, lack of alignment between closure stakeholders on closure vision/objectives/completion success criteria, and inaccuracies in closure costing assumptions may all impact financial assurance and liability estimations and consequent reconciliation of rehabilitation budgets. Without visibility on reliable rehabilitation liability estimates and impacts on finance from undertaking associated activities, rehabilitation may become mainly driven by compliance rather than considering the financial advantages that progressive rehabilitation brings. This has been a driver in recent Queensland and New South Wales rehabilitation reforms to push progressive rehabilitation. Using recent case studies, the author illustrates examples of why anticipated decreases in rehabilitation liabilities are often not realised and provides suggestions for improving the likelihood of achieving more reflective rehabilitation liability accounting. When rehabilitation liabilities are more reflective, the direct relationship between rehabilitation expenditure and reduced financial assurance can be established, which increases the likelihood of mining operations recognising associated financial benefits.

Keywords: closure costing, rehabilitation liability, financial assurance, closure cost estimates, rehabilitation expenditure

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