Publication Name

MINING FOR CLOSURE

lower financial burdens to the national purse

for mine closure and rehabilitation, and

lowerrisksforsignificantliabilitiespost-closure

One additional important point is raised here in

the context of developing and restructuring econo-

mies. Where governments do

not

have sufficient

fiscal resources to deal with legacies, then even

more innovativeness and flexibility will be required

in order to protect the public and the environment

from the risks posed by mining legacies.

2.3

This section provides details of a number of de-

velopments that are acting to drive the uptake of

mining practices in line with the concept of

Mining

for Closure

. The first topic addressed is Financial

Surety (or Financial Assurance). The majority of

this discussion is derived or based upon position

papers produced by Dr. C. George Miller (1998;

2005) on behalf of the International Council on

Mining and Metals (ICMM) and its predecessor,

the International Council on Metals and the En-

vironment (ICME).

Importantly, financial assur-

ance for mine closure and reclamation is a topic

addressed in a number of the drivers listed here.

2.3.1

financial assurance for

mine closure & reclamation

Financial surety instruments can be defined as:

guarantees issued by a bonding company, an in-

surance company, a bank, or another financial

institution (the issuer is called the ‘surety’) which

agrees to hold itself liable for the acts or failures of

a third party (Miller, 1998)

At the present time, the most common use of environ-

mental surety instruments are put in place to guaran-

tee environmental performance after closure through

the funding of mine site reclamation or rehabilita-

tion. As such, financial assurance or surety is also the

amount of money available to a government entity for

closure of the mine in the case when the mine owner

is not available to perform the work, (such as bank-

ruptcy) during operations or any time thereafter. The

financial surety can be provided by a variety of finan-

cial instruments or cash deposited in a bank. However,

it is important to realise that the governmental policy

and local financial markets may determine the type

of instrument available for a specific location (Miller,

1998, 2005; van Zyl et al., 2002a; Van Zyl, 2000).

It is clear that financial assurance instruments can

be effective in promoting or enforcing environ-

mental protection and while not yet “popular”, they

are increasingly accepted by industry as perhaps

the most effective manner in which to ensure that

protection of the environment is achieved and pub-

lic expectations are met in the mining sphere.

quote Miller (2005, p13) on the topic of Environ-

mental Financial Assurance (EFA):

Mining companies accept that the major function

of EFA is to protect the government and public in

the event a mining company cannot meet its recla-

mation obligations. While several large companies

felt they were capable of fulfilling their environmen-

tal obligations without the additional discipline of a

financial assurance mechanism, they agreed that a

financial assurance instrument does provide more

certainty for the protection of the environment. …

All companies accept that government needs to

demonstrate to the community that it has received

sufficient financial protection from the holder of

mineral rights to ensure effective reclamation.

Miller also provides comprehensive reviews of fi-

nancial assurance in various regulatory regimes

and the common instruments in use in two reports

generated six years apart (Miller, 1998, 2005). It

key external

drivers for best

environmental

practice mining

37. Miller has an extensive and distinguished background work-

ing with mining and related environmental policy issues. Among

other roles he has served as Director of the Centre for Resource

Studies at Queen’s University, Canada, as Assistant Deputy Min-

ister, Mineral Policy for the Government of Canada, as President

of the Mining Association of Canada and as a Director of the In-

dustry Government Relations Group in Ottawa.

38. These views have evolved markedly. Miller (2005) indicates

that in his 1998 study (1998), industry showed a marked prefer-

ence for “soft” assurances such as: financial strength; self-funding

of the obligation while retaining control of the funds; a financial

test which determines the grade of the company; a corporate guar-

antee based on that grade; self-funding through financial reserves;

parent company guarantees and pledge of assets. By contrast, in

the 2004 survey the majority of industry respondents recognized

that harder methods such as letters of credit, bank guarantees,

deposit of securities, and cash trust funds, may best serve the

industry, as they are required to satisfy public expectations. As

to which instruments best serve the interests of the government,

the 1998 report noted that they would be those that best serve

the mutual interests of the government and the company. In the

current study, industry respondents suggested that cash deposits,

any liquid instrument, and bank guarantees would best serve gov-

ernments’ needs.

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