Corporate considerations in mine decommissioning

"The decision to proceed with mine decommissioning, generally involves a number of complex and independent factors. These factors, including potential for re-opening, legal requirements, contingent liability, asset depreciation, due diligence, and public relations are discussed in the context of the financial implications on a net-present- value basis. It is concluded that the decision to delay mine decommissioning is commonly not in the best financial interests of the mine operator. Some measures to reduce decommissioning costs and expedite the process are presented.IntroductionThe primary audience for this paper is mining executives, although it should be of interest to all professionals involved in the planning and carrying out of mine decommissioning. Historically, mines were abandoned, not decommissioned. Then, as decommissioning became required, it was assumed that salvage revenue would pay for decommissioning. During the I980s, it became apparent that mine decommissioning costs would exceed salvage revenue for nearly all sites, and that a substantial net cost for decommissioning would be realized for some sites. Throughout this period, the approach to decommissioning has evolved through the sequential addition of measures to meet the increasing regulatory burden. This has resulted in a process in which the elements of decommissioning may not be optimized with respect to each other for the most favourable net present value to the corporation. Additional considerations which are not specific to mine decommissioning, such as environmental policy, due diligence and public relations, may now come to bear on the decision-making process.This paper addresses the issue of mine decommissioning as a three-step process. The first step involves identification and evaluation of all of the issues that relate to mine closure, the most importantof which is the potential for re-opening of a mine. Assuming that it is decided that a mine is unlikely to re-open, the second step is to determine when to carry out the decommissioning work. This aspect is examined through a net present value (NPV) approach. Finally, details regarding who does the work and how the various tasks are divided up must be resolved.Every mine is a unique concentration of minerals at some specific location, hence the development, operation and closure of a given mine must be regarded as a special case. Superimposed on the site-specific considerations are the size, history and financial status of the associated corporation."