Woolley, M & Hutton, A 2006, 'Calculating a Realistic Security Bond and Assessing True Mine Closure Liabilities', in AB Fourie & M Tibbett (eds), Mine Closure 2006: Proceedings of the First International Seminar on Mine Closure
, Australian Centre for Geomechanics, Perth, pp. 525-535, https://doi.org/10.36487/ACG_repo/605_45
During the 1990s a number of mine operators in NSW, Australia became insolvent and mining leases, along
with the closure and rehabilitation liabilities, were passed back to the government. In many cases it was
found that the Security Bond held by the government represented only a small portion of the actual amount
required to effectively close the operations to appropriate environmental and public safety standards.
Accordingly, where no alternative was identified, these mines were managed by the Department of Primary
Industries - Mineral Resources (DPI-MR) as part of their Derelict Mines Program (DMP). Even when
supplemented by DMP funds, there was frequently insufficient money for full or even adequate rehabilitation
and the works undertaken were generally to make the site safe.
Derelict mines continue to burden NSW taxpayers as well as being a public safety and environmental risk.
Their legacies arguably represent a risk to the mining industries public licence to operate and to the image of
sustainable mining practices throughout Australia generally.
With the aim of investigating potential underlying causes for the failure of the government to hold sufficient
security for closure, the DPI-MR commissioned URS to undertake a study into their security review process
including benchmarking of processes against other agencies in Australia and worldwide. A number of
findings were made, including that the majority of agencies did not hold sufficient securities to cover
potential mine closure liabilities.
A key recommendation was that mine operators should have the responsibility for “self assessment” of the
total costs required for rehabilitation and closure of the mine. Operator cost estimates would then be
reviewed by the DPI-MR and set as the security bond for the operation.
Consequently a Rehabilitation Cost Estimate Tool was developed by URS/GSSE to enable a thorough and
consistent approach for all NSW mine sites to use in the estimation of closure liabilities. The cost estimation
approach would form a minimum standard for establishing an appropriate security bond for the site.
The Tool is now being used as a basis for closure cost assessment in NSW and following some modification,
is currently being trial for use by the Victorian DPI in their management of mines and extractive industries.
This paper explores the inaccuracies of past bond estimation methodologies, particularly in relation to the
under estimation of the security bonds and also includes the findings of the benchmarking review. A
summary is provided of the approach taken in development of the Rehabilitation Cost Estimate Tool for
NSW as well as discussion on how the Tool was modified to fit the Victorian context. In conclusion,
recommendations are made for the industry going forward based on the feedback from the state agencies,
industry groups and the mine operators alike.
URS Australia (2004) Options Assessment Paper, Review of Security Bond Estimation Processes.
URS Australia (2002) Review of Mine Rehabilitation Security Processes.
NSW Department of Primary Industries (2005) Managing Derelict Mines, Primefact 22.
Mine Closure 2006, Perth, Australia 535