Grant-Stuart, DJ 2008, 'Alternative Approaches for Providing Financial Provision for Mine Rehabilitation and Closure', in AB Fourie, M Tibbett, I Weiersbye & P Dye (eds), Mine Closure 2008: Proceedings of the Third International Seminar on Mine Closure
, Australian Centre for Geomechanics, Perth, pp. 137-143, https://doi.org/10.36487/ACG_repo/852_13
The requirement for financial provision for mine closure is intended to manage or limit the risk of the
Government (i.e. the taxpayer) inheriting the environmental liability for decommissioned mines that have not
been correctly closed or rehabilitated. While many countries still do not have comprehensive or formal mine
closure legislation, the requirements for financial closure provision in those countries or states that do have
such legislation vary considerably.
Depending on the country or state in which a particular mine may be located, financial provision may take
the form of a trust fund; cash deposit; letter of credit; surety bond; or any other guarantee.
Furthermore, the methods used for determining the quantum of the required financial provision vary
significantly across the globe. For example, the amount of financial provision can be calculated from a
simple rate per unit area in some cases, or it could be estimated from a schedule of quantities with specific
rates for measured items of work.
The South African Minerals and Petroleum Resources Development Act (Act 28 of 2002) requires that a risk-
based approach to determining the financial provision be adopted by the mining company. A guideline
document was developed by the Department of Minerals and Energy (DME) to assist the regulator in
assessing adequacy of financial provision, and recommends that the risk class of a particular mine is
determined from the throughput and type of mineral mined. Then, depending on the class of mine and level
of information available, the method of determining the amount of financial provision may be based either
on a master rate per unit area, or it may be calculated from a more rigorous analysis using a measured
schedule of quantities priced at current commercial rates.
Either way, the object is to ensure that there are sufficient funds available at any stage in the life of a mine to
cover the cost of rehabilitation and closure. Needless to say, there is an understandable reluctance on the
part of many mines to set aside large sums of capital in an inaccessible trust fund established for this
The purpose of this paper is to explore means to ensure that the regulatory requirement for financial
provision is met, while at the same time avoiding the need to “lock up” funds that could otherwise be put to
productive use. The question is raised whether it is appropriate to apply the same methods of determining
the financial obligation across the board to different types of mine infrastructure.
Legislative requirements, the means of providing financial guarantees and the methods of calculating the
quantum of financial provision used in various countries are examined with a view to applying the most
advantageous practice to all parties, while still complying with South African legal requirements.
Department of Minerals and Energy (DME) (2005) Guideline Document for the Evaluation of the Quantum of Closure
Related Financial Provision Provided by a Mine.
Golder Associates (2005) Report on International Practice in the Determination of the Quantum of Financial Provision
for Mine Rehabilitation and Closure.
United States Department of the Interior, Office of Surface Mining: Overview: Reclamation Bonds for Coal Mining
, viewed 3 September 2008.
Western Australia Department of Minerals and Energy (1998) Guidelines to Help You Get Environmental Approval for
Mining Projects in Western Australia.