The high cost of poor closure estimates

Abstract

Planning for closure and its associated costs needs to commence from the early developmental stages of the mine itself and continue through the final relinquishment of the site. Our experience with mine closure estimating over the past several years indicates that most mine closures overrun their initial cost estimates by between 20 and 100 percent. Challenges to accurately estimating mine closure costs include changes to the mine layout over time, extended time to closure execution, execution methodologies, rapidly changing legislation, and managing the multiple disciplines involved in creating a tailored remedial solution, often in remote locations. The concern for miners is that poor closure estimates underestimate capital investment decisions and may even lead to incomplete reporting of financial obligation (liability).Successfully financing and cost estimating closure, decommissioning, and reclamation programmes requires a strategic and collaborative approach that examines the complexities of the mine site itself, the expectations of the surrounding communities, socio-economic considerations, and regulatory requirements. Successful mine closure and related costs can be improved by using three strategies, avoiding, reducing, and correcting negative impacts (Paricheh & Osanloo 2017).The paper will focus on improving global perspectives and best practices in mine decommissioning, closure, and reclamation financing and cost estimating.Our methodology will incorporate our experiences working on global mine closure programmes for major clients, which has enabled us to amass a significant database of cost and schedule information. Additionally, our methodology will incorporate our findings from a collaborative survey, research, and interviews where we explored what it takes to deliver successful outcomes in mine closure estimating. Key insights include:• How mining companies can improve how they estimate closure costs throughout all phases of the mine lifecycle. • How to manage the interdependencies across mine closure programs at each stage to avoid delays to program execution, dissatisfied stakeholders, and the possibility of claims and disputes.• What drives cost escalation and risk across long-term closure programmes, and how to manage this given the current climate of supply chain disruption and commodity volatility.• How climate change is leading to tighter closure and financial assurance arrangements, and what impact this is having on regulatory closure planning requirements including fiscal provisions and liabilities.We will draw insights from our data and analysis and combine them with experience gained from working in mine closure for over a decade. This extends to mine types, the expectations of surrounding communities, socio-economic considerations, and regulatory requirements. Our paper will support all those looking to achieve greater accuracy in mine closure financing and cost estimation and those looking to inform the process for due diligence across all phases of the lifecycle, from setting up the ...

Effective strategies for estimating design growth in mine closure

“…This potential variation is a risk for the mining company. (ICCM 2019) As noted in our previous paper (Dunow 2022), closure estimates typically overrun the original prefeasibility estimate by between 50-100%. Challenges to accurately estimating mine closure costs include changes to the mine layout over time, execution methodologies, rapidly changing legislation, and managing the multiple disciplines involved in creating a tailored remedial solution that aligns with community and other stakeholder expectations.…”

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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.

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“…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.…”

“…The following table (Table 1) shows cost changes from prefeasibility to execution stages of closure cost development for the entire closure process. As each mine site is unique, there is not an easily referenced metric to be used as a cost basis, but the primary information is the percent increase to the cost as the closure requirements are defined and the cost impacts estimated (Dunow 2022). Typically, prefeasibility and feasibility study estimates include the disturbance footprint and planned closure strategy, whereas the forecast/ actual (execution) estimates reflect the actual end of mine closure cost.…”