Articles tagged with: EIA

46. Tailings Disposal Method Risk

Date: March 8, 2016 Author: Ken Kuchling Comments: 4 Replies

After the Mt Polley and Samarco tailings failures, there have been ongoing conversations about the benefits of filtered or dry stack tailings as the only way to eliminate the risk of catastrophic tailings failure. Mining companies would all like to see a similar risk reduction at their own project. However what mining companies don’t like is the capital and operating costs associated with dry stacking. The dry stack tailings processing cost and the transport cost are both costlier than for conventional tailings disposal and therefore would negatively impact on the overall value of the project. Obviously this reduction in value would get offset against an improved environmental risk and a better closure condition. So what’s a company to do?

Example of a Dry Stack Tailings

In my experience when designing a new mining project, all mining companies at one point in time complete a trade-off study for different tailings disposal methods and disposal sites. Contrary to some environmental narratives, companies really do wish to know how the different tailings options compare because they would adopt the dry stack approach if it was the most advantageous method. The mining companies are fully aware of the benefits but the dilemma the company runs into is the cost and being able to somehow justify the technology. Complicating their final decision, companies also have options for reducing their tailings risk even if using another tailings disposal method and so the final decision can get very complex.

Often proponents of the risk analysis approach will use a risk-weighting approach to assign an expected economic cost to their tailings plans. For example, if the cost of a failure is $200 million and the risk is 0.1%, then the Expected Value is $200,000. The problem is that this is a theoretical calculation on an assumed likelihood of failure but in reality either the dam will fail or it won’t. So failure remediation money will be spent or it won’t be spent, it won’t be partially spent.

The degree of acceptable tailings risk therefore becomes a subjective factor. While implementing a dry stack may reduce the risk of catastrophic failure to zero, implementing a $100,000 per year monitoring program on a conventional tailings pond will reduce its risk. Implementing a $500,000 per year monitoring program would reduce that risk even further. Installing in a water treatment plant to enable periodic water releases may further lower the tailings risk. The company can look at different mitigations to keep lowering their risk, although recognizing that none of the mitigations would necessarily bring the risk down to zero. Finally the companies could compare the various risk mitigation costs against the incremental dry stack costs in order to arrive at an optimal path forward.

So the question becomes how low does one need to reduce the tailings storage risk before it is acceptable to shareholders, regulators, and the public. I don’t think the answer is that one must lower the risk down to zero. There are not many things in today’s world that have zero risk. Driving a car, flying in a plane, shipping crude oil by ocean tanker, having a natural gas furnace in your house..none of these have zero risk yet we accept them as part of living in modern society.

Environmental groups are always discussing ways of forcing regulators and mining companies to take action against the risk of tailings failure. This is commendable, however they generally fail to provide any guidance on what level of risk would be acceptable to them or to the public. It seems to be impossible for these groups to define what an acceptable risk is or provide any ideas other than the standard “shut down all mining” solution.

We know that in the long run mining is here to stay so we all should work together towards solutions. The solutions need to be realistic in order to be taken seriously and for them to play a role in redefining tailings disposal in modern mining. Dry stack may not be the only solution and we should be open to ways of improving the other tailings disposal methods so that companies have more low risk options available to them.

30. Mining Takeovers – Should Governments Be Heavily Involved?

Date: July 13, 2015 Author: Ken Kuchling Comments: 5 Replies

I have seen some on-line discussions about whether governments should be tightly regulating corporate takeovers, some of which may be outside their borders. The fear from some groups is that mine assets may be acquired by less than desirable acquirers. One specific example that I have seen is related to the disposition of foreign resource assets by both Barrick and Ivanhoe to Zijin, a Chinese company. I don’t know much about Zijin other than having seen reports that Norway’s government had directed its $790 billion oil fund to sell holdings in several companies because of environmental issues and Zijin was one of these companies. In light of the Norway decision, some groups are questioning whether Zijin should be allowed to acquire mining assets owned by Canadian or American companies.

It appears that some groups would like the government to step in and prevent an owner company from selling their mining assets to another company that may have a poor reputation or limited financial capacity. The fear is the new company would operate in a non-sustainable manner and ignore local environmental rules. Government sanctioning gets tricky in that how do they define which companies have poor reputations. Also how do they tell the public shareholders of the owner company, in some cases possibly nearing bankruptcy, that they cannot sell their assets to a certain interested party? Governments have stepped in and blocked acquisitions in the past but these were mainly related to deals involving antitrust issues or companies with unique technologies of national interest.

It will be interesting to see whether the idea of governments sanctioning the acceptability of acquirers in the mining industry will gain traction. It may be an overstep for the government in this country trying to block the acquisition of a foreign property when the current owner may not have the funds to develop the project while the acquirer does. The foreign government may want to see their own mineral assets developed but a government in another country may be directly blocking it by blocking transfer of ownership. The last thing we need is more country-to-country disputes. I presume the only option for each country is to revoke the mineral concessions and hand them over to someone willing to develop them. That then creates a series of new issues related to compensation and the attractiveness of that country as a place to invest in.

In essence, does the government of one country have the veto rights to prevent development in another country? Does the government of one country have the right to decide on the environmental standards in another country by enforcing their own standards upon them via prevention of an asset sale? This will be an interesting issue to watch in the future. Personally I think it will be difficult to advance further since each country wants to be masters of their own jurisdiction without being told what to do by outsiders.

28. Mine Approvals May Be Hinging on the Corporate Bank Account

Date: June 30, 2015 Author: Ken Kuchling Comments: 1 Reply

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.