Effective strategies for estimating design growth in mine closure

Abstract

In 2018, the International Council on Mining and Metals (ICMM) surveyed its members to assess the status and profile of mine closure across its membership. Although there are several new mines coming onstream on an ongoing basis, the survey found that over the next 25 years, more than 40% of the operations that responded to the survey are expected to close based on commodity prices and mine life estimates at that time, and almost 20% are expected to close in the next 10 years.With many mines expected to close around the world in the coming years, it is becoming more important than ever for mining companies to accurately quantify, estimate, and report on the total cost of closure.Planning for closure and its associated costs needs to commence from the early developmental stages of the mine itself and continue through final relinquishment of the site (Dunow, 2022). Improved understanding of mine closure costs will empower the mining industry to enable a more sustainable transition to post-closure land uses that leave behind a sound and stable environment and self-sustaining communities. Turner & Townsend has been working on closure projects for over ten years and our data shows that mine closure costs can double from the initial estimate. There are many reasons for the overruns such as site changes, acceleration or delay of closure, closure assumptions, and legislative changes. Implementing effective strategies to account for these changes in the estimate is the purpose of this paper.A typical estimate is made up of various parts that endeavour to account for the total cost of a project. This includes direct costs, indirect costs, allowances, contingencies, and escalation. Direct and indirect costs are based on known scope and costs, whereas allowances, contingencies, and escalation are amounts to account for unknown scope that is known to exist or will exist as the project progresses.Specifically, an allowance is an amount added to the estimate to account for costs that are certain to occur but cannot be identified with any accuracy (Dobre, 2023). Estimate allowances are typically divided into two separate categories: design growth (changes to design assumptions as the engineering progresses) and quantity/cost growth (inaccuracy in material take-offs or pricing assumptions). We propose the use of a third allowance specific to mine closure to account for those items listed previously.We will use data we have gathered in developing mine closure estimates and managing closure execution projects in North America, Australia, and Africa, and present a methodology to determine a closure cost allowance that can be included in the cost estimate. This paper will be valuable to mining professionals involved in estimating the costs of mine closure and those setting aside the funding needed to deliver on mine closure plans.