A guide to leading practice sustainable development in mining

Quantitative risk assessment techniques can be used by companies to demonstrate
to the community and regulators that closure issues have been identified and an
appropriate security deposit can be calculated. At the Martha gold mine in Waihi,
NZ, a quantitative risk assessment process determined that a total sum of around
$5.6 million would allow land management and maintenance responsibilities to be
undertaken in perpetuity. This was considerably less than the $100 million sought by
various groups in the community.
When the bond proposal was put to the regulators, the bond structure and quantum
were accepted without challenge. In the subsequent Environment Court hearing, the
judge chose to round the amount up to $6 million, and WGC posted a capitalisation
bond of that amount.
The process is subject to annual review and WGC will have the opportunity to re-evaluate
and modify its post-closure risk profile. There is an expectation that, over time, this focus
will enable the capitalisation bond to be further reduced (see LP Risk p.29).
Figure 5.33 - Martha mine, Waihi, New Zealand.
Provisioning for mine closure
Mining companies need to raise a provision for the anticipated expenditure to
be made on mine rehabilitation and closure costs. The amount of the provision
is recognised as the best estimate of the expenditure required to settle present
obligations, discounted using a pre-tax discount rate that reflects current market
assessments of the time value of money and those risks specific to the liability. The
best estimates of expenditure are based on what a company would rationally pay to
settle the obligation or transfer to a third party at the time. Companies should seek
advice from financial professionals on how to address these accounting issues.
170 LEADING PRACTICE SUSTAINABLE DEVELOPMENT PROGRAM FOR THE MINING INDUSTRY