Financial Assurance for Strongman Mine

After 60 years of operation, coal extraction at Solid Energy New ZealandÆs (SENZ) Strongman Mine, near Rapahoe is scheduled to end in early 2005. Up until 2003 the closure bond for Strongman Mine was only $930, and both SENZ and the West Coast Regional Council (WCRC) agreed that a more realistic level of bonding was required.   A conceptual closure plan has been developed by Golder Associates, and the cost of the work estimated. Closure includes decommissioning of equipment and facilities, rehabilitation and replanting of all disturbed areas and a period of maintenance and monitoring to verify that closure objectives have been met. Significant maintenance allowances are included to cover management of underground fire, subsidence and slope instability. These make up much of the potential ongoing environmental liability at the Strongman. All costs incurred beyond year 1 of closure are discounted to present value. Uncertainty in costs is addressed by Monte Carlo simulation, with an 80 % confidence level adopted.   A bond quantum of $3.0 million has been calculated for the first year of closure at Strongman. A three-year ærollingÆ bond is proposed. Progress will be reviewed annually, with the bond adjusted up or down accordingly. It is then renewed for a further three years. This allows for progressive return of the bond as rehabilitation objectives are met and verified. Similarly, if there are delays in meeting objectives, a proportion of the bond may need to be kept in place for a longer period than assumed. The level of bonding in place for the Strongman operation at any time in the future will therefore reflect the cost to complete the closure work programme.