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MINING FOR CLOSURE 29
ence where Mining for Closure was launched and
was also specifically noted in the Declaration of the
High-Level Panel of the Sub-regional Conference
included as Appendix A to this report.
The governance principles are intended to apply
primarily to foreign direct investment (FDI) in in-
dustrial, mining and other activities with particular
focus upon those with significant social and envi-
ronmental impacts, especially in countries in tran-
sition, under-developed regions and developing
countries. These principles have been designed to
complement voluntary international codes of con-
duct, compacts and other instruments. Many of the
principles are relevant to the content of this work
and the reader is encouraged to examine them.56
The text for the Governance Principles is included
as Appendix D.
2.4
In closing this second chapter, it is felt necessary
to add context to discussion of financially related
barriers to Mining for Closure that the have been al-
luded to, or explicitly stated during the preceding
sections.
Having addressed the topic of investment from the
firm internal point of view, it is also necessary to
provide insights into a number of real or perceived
challenges to Mining for Closure. The first area is
related to the source of mine activity financing.
A second area is related to perceptions regarding
the potential yields of a development. This second
area has three facets, firstly perceptions of the yield
(rents) available to a miner, secondly, perceptions
regarding distribution of the economic yield avail-
able to a host government and thirdly, economic
benefits to individuals in positions of power.
An important message here is that responsible gov-
ernance is central to good environmental and social
performance in mining. It has far-reaching implica-
tions for the financing of mining, and to the distri-
bution of economic rents from mining activities.
As a first point, the absence of national require-
ments for adequate mine closure provisions and/
or integrated mine closure planning may actually
act against more responsible miners. It should be
noted that international financial institutions typi-
cally require consideration of closure related issues
– even where nation states may not. Where such
conditions exist, investors seeking finance from
such sources may be disadvantaged in their en-
deavours when compared to those potential min-
ers accessing alternative capital markets with more
limited requirements relating to closure funding
(Nazari, 1999). There is a higher likelihood that
miners seeking finance outside the realm inhab-
ited by reputable financial institutions are also
those that have substandard operational practices.
In such a scenario, it appears that an absence of ad-
equate frameworks for mine closure may actually
serve to “penalise” investors seeking financing or
political risk insurance through respectable inter-
national financial institutions.
The second area introduced is that of Mining for
Closure as a potential barrier to investment. In
particular, this is indicative of perceptions regard-
ing reduced profits for miners but it also indicates
the possibility of pollution haven scenarios being
relevant.57 A possibility here is that national en-
vironmental requirements representative of best
environmental practice in mining may result in po-
tential (and perhaps much needed) miners going
elsewhere with their investment resources. While
empirical evidence of the validity of this scenario
was not found in the review conducted in order to
generate this document, there are clearly serious
implications for countries eager to attract private
sector investment if this is the case.58 However,
this issue should be considered in the light of at
least three important points. First, is that mineral
resources are immovable. The likelihood that a po-
tential developer can choose between two compet-
ing mineral resources based upon “laxity of regu-
lation” appears small. Second is that Government
has at hand fiscal frameworks within which they
can create attractive packages for prospective min-
ing activity. As Andrews (2002) of the World Bank
Group indicates, the taxation, royalty and/or in-
real or perceived
financial barriers
56. The updated and revised governance principles are also avail-
able at:
PDF/Governance_Principles.pdf
57. Pollution havens have been described and debated by a wide
range of authors such as Bommer (1999), Brunnermeier (2004)
and Millemet (2004), to name but a few. The concept involves the
preferential movement of an industrial activity to nation states or
regions where environmental regulations are less stringent, less
well developed or where enforcement is weak. There is significant
debate whether the hypothesis regarding moves to lax regulation
actually holds.
58. Indeed, significant evidence to the contrary was found – See in
particular the citation from the Government of Ontario in Section
2.3.1.