Common systemic drivers of closure cost underestimation for earthworks

Authors: Smedley, E; Denholm, E; Lakis, S; Mackenzie, S Download Paper Open access courtesy of:

DOI https://doi.org/10.36487/ACG_repo/2615_33

Cite As:
Smedley, E, Denholm, E, Lakis, S & Mackenzie, S 2026, 'Common systemic drivers of closure cost underestimation for earthworks', in AB Fourie, G Boggs, J Heyes & M Tibbett (eds), Mine Closure 2026: Proceedings of the 19th International Conference on Mine Closure, Australian Centre for Geomechanics, Perth, pp. 1-13, https://doi.org/10.36487/ACG_repo/2615_33



Abstract:
Despite increased scrutiny from regulators, financiers, and stakeholders, mine closure cost estimates continue to systematically underestimate closure costs. This paper examines recurring technical and commercial drivers of underestimation observed across a broad range of mine closure studies, with a focus on rehabilitation earthworks. Drawing on a review of both internal and third-party closure cost estimates, supplemented by comparisons with measured production and cost data from implemented works, this paper identifies a consistent pattern of optimistic assumptions embedded within many estimates. A major issue is overestimating equipment productivity by relying on standard production values without adjusting for site constraints or considering the specific nature of the work. These assumptions can materially distort unit rates when applied to large‑scale rehabilitation tasks. This paper also explores the impact of overoptimistic volumetric assumptions, particularly for landform reprofiling and reshaping activities. Simplified geometric models frequently underestimate actual material movements, double handling and trimming losses when compared to surveyed as-built outcomes. In addition, a recurring source of underestimation is the inadequate allowance for indirect costs, including contractor preliminaries, temporary works, supervision, management activities and quality control. For practitioners, this paper provides a structured lens for stress‑testing closure cost estimates by explicitly linking assumptions to observed cost variance. Rather than advocating for conservatism, the findings highlight where targeted adjustments, validation against measured data, and more transparent treatment of indirect costs can materially improve the defensibility and credibility of closure cost estimates.

Keywords: cost estimation, continual improvement, risk, earthworks

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