28. Mine Approvals May Be Hinging on the Corporate Bank Account
Date: June 30, 2015Author: Ken Kuchling
A few months ago there were some discussions on the blog site “I THINK MINING” and on a website (https://lindsaynewlandbowker.wordpress.com) regarding whether mine environmental approvals should be linked to the overall financial health of the parent company. This point was raised in regards to the Mount Polley tailing dam incident as well as other notable tailings failures that have occurred. The logic behind the idea was that the potentially high cleanup cost for tailings failures could be beyond the financial capacity of smaller mining companies and then the failure cleanup cost would need to be borne by the taxpayer.
It was recognized that closure bonds for final reclamation are common practice in current EIA approvals and part of the normal course of business. However what is being newly proposed is the requirement to have sufficient corporate funds in the bank account to pay remediation costs for some theoretical failure. This has not been part of the environmental approval process as far as I know. Depending on the type of failure scenario one envisioned, the theoretical cleanup cost could range from low to enormous.
One of the options being proposed is that the various mining companies in a jurisdiction each contribute funding to a failure reserve account that would be used to clean up for their industry colleagues when required. The ultimate goal of this approach may truly be better environmental practice or possibly this is simply being used as a means to curtail some mine development by handcuffing the smaller mining companies. Many of such deposits may be too small for the major miners so the intermediate companies may be the only companies interested in them. However if they don’t have the financial reserves in the corporate bank account, then the mine could not be approved. Goal achieved!
I am fairly certain that if the corporate bank account of the parent company does become a key part of the mine permitting process then it will impact on the ability for the smaller or intermediate miners to develop new mines. Not only would they need to finance their capital cost for construction, which is not easy these days, but they would also need to finance their tailings failure reserve fund. It will be interesting to see if this suggested permitting approach gains any traction in the future because it could have a big impact on the junior industry.
One fallout from this might be that new operators will be pushed towards using a dry stack tailings approach because the added costs for dry stacking could be offset against the need for the tailings failure reserve fund. Regardless of how it is done, this would become an added cost to the mining industry at a time when it doesn’t need more cost pressures.