4
mining companies to eliminate what otherwise would be a
chronic drag on the balance sheet.
Assumptions about inflation, appropriate discount
rates, annual cost requirements, and unexpected site devel-
opments present challenges when forecasting far into the
future. Using NPV is an imperfect tool precisely because
of these uncertainties, but the alternative is to assume,
wrongly, care and maintenance requirements will be short-
lived, and risk a crushing future financial burden.
The financial benefits of using a trust fund for a com-
pany should be evident, and it provides the regulator with
more confidence than counting on a company’s year in, year
out financial wherewithal to fulfill its reclamation obliga-
tions. Some jurisdictions have developed additional incen-
tives for companies to fund LTCM trusts. The Province of
Saskatchewan has developed a program where a company
can establish a LTCM fund and relinquish the site to the
management of the regulatory authority (Saskatchewan,
2009), an attractive proposition for a company wanting to
remove this liability altogether from its balance sheet.
CLOSING REMARKS
In summary, what appears at times to be a company’s singu-
lar focus on developing and operating a mine overlooks the
significant financial liability a mining operation presents on
the back end, a time when there is limited positive cash
flow to off-set reclamation costs. There is no expiration date
on reclamation integrity and mining companies should rec-
ognize their post-closure care and maintenance obligations
may last far longer than they have currently planned for,
and in some instances may be a forever proposition. As the
Moody’s report highlighted, the AROs of mining compa-
nies are becoming an ever-increasing liability and could sig-
nificantly handicap a company’s financial viability. Finding
a means to lighten this financial burden while ensuring a
company’s commitment to reclamation should be of inter-
est to all parties. Funding future reclamation obligations
in advance using trust funds is one approach that could
provide a measure of relief.
REFERENCES
[1] Australian National Committee on Large Dams,
2012, Guidelines on Tailings Dams, Hobart.
[2] B.H.P. Billiton Brazil Ltda., et al., 2016, Report on the
Immediate Causes of the Failure of the Fundão Dam,
Melbourne.
[3] Canadian Dam Association, 2013, Dam Safety
Guidelines, Toronto.
[4] Government of Alberta, 2020, Manual 019:
Decommissioning, Closure, and Abandonment of
Dams at Energy Projects, Calgary.
[5] Government of British Columbia, 2015, Report on
Mount Polley Tailings Storage Facility Breach, Victoria.
[6] Government of Saskatchewan, 2009, Institutional
Control Program, Post Closure Management of
Decommissioned Mine/Mill Properties located on Crown
Land in Saskatchewan, Saskatoon.
[7] International Commission on Large Dams, 2013,
Sustainable Design and Post-Closure Performance of
Tailings Dams (Bull. 153), Paris.
[8] International Council on Mining and Metals 2019,
Integrated Mine Closure Good Practice Guide, London.
[9] Mining Association of Canada, 2019, A Guide to the
Management of Tailings Facilities (v. 3.1), Ottawa.
[10] Moody’s Ratings, 23 September 2024, Reclamation
obligations at $78 billion and rising, posing credit risk
for miners, New York.
[11] Vale S.A., 2019, Report of the Expert Panel on the
Technical Causes of the Failure of Feijão Dam I, Rio
de Janeiro.
mining companies to eliminate what otherwise would be a
chronic drag on the balance sheet.
Assumptions about inflation, appropriate discount
rates, annual cost requirements, and unexpected site devel-
opments present challenges when forecasting far into the
future. Using NPV is an imperfect tool precisely because
of these uncertainties, but the alternative is to assume,
wrongly, care and maintenance requirements will be short-
lived, and risk a crushing future financial burden.
The financial benefits of using a trust fund for a com-
pany should be evident, and it provides the regulator with
more confidence than counting on a company’s year in, year
out financial wherewithal to fulfill its reclamation obliga-
tions. Some jurisdictions have developed additional incen-
tives for companies to fund LTCM trusts. The Province of
Saskatchewan has developed a program where a company
can establish a LTCM fund and relinquish the site to the
management of the regulatory authority (Saskatchewan,
2009), an attractive proposition for a company wanting to
remove this liability altogether from its balance sheet.
CLOSING REMARKS
In summary, what appears at times to be a company’s singu-
lar focus on developing and operating a mine overlooks the
significant financial liability a mining operation presents on
the back end, a time when there is limited positive cash
flow to off-set reclamation costs. There is no expiration date
on reclamation integrity and mining companies should rec-
ognize their post-closure care and maintenance obligations
may last far longer than they have currently planned for,
and in some instances may be a forever proposition. As the
Moody’s report highlighted, the AROs of mining compa-
nies are becoming an ever-increasing liability and could sig-
nificantly handicap a company’s financial viability. Finding
a means to lighten this financial burden while ensuring a
company’s commitment to reclamation should be of inter-
est to all parties. Funding future reclamation obligations
in advance using trust funds is one approach that could
provide a measure of relief.
REFERENCES
[1] Australian National Committee on Large Dams,
2012, Guidelines on Tailings Dams, Hobart.
[2] B.H.P. Billiton Brazil Ltda., et al., 2016, Report on the
Immediate Causes of the Failure of the Fundão Dam,
Melbourne.
[3] Canadian Dam Association, 2013, Dam Safety
Guidelines, Toronto.
[4] Government of Alberta, 2020, Manual 019:
Decommissioning, Closure, and Abandonment of
Dams at Energy Projects, Calgary.
[5] Government of British Columbia, 2015, Report on
Mount Polley Tailings Storage Facility Breach, Victoria.
[6] Government of Saskatchewan, 2009, Institutional
Control Program, Post Closure Management of
Decommissioned Mine/Mill Properties located on Crown
Land in Saskatchewan, Saskatoon.
[7] International Commission on Large Dams, 2013,
Sustainable Design and Post-Closure Performance of
Tailings Dams (Bull. 153), Paris.
[8] International Council on Mining and Metals 2019,
Integrated Mine Closure Good Practice Guide, London.
[9] Mining Association of Canada, 2019, A Guide to the
Management of Tailings Facilities (v. 3.1), Ottawa.
[10] Moody’s Ratings, 23 September 2024, Reclamation
obligations at $78 billion and rising, posing credit risk
for miners, New York.
[11] Vale S.A., 2019, Report of the Expert Panel on the
Technical Causes of the Failure of Feijão Dam I, Rio
de Janeiro.