Quantifying and Insuring Against Mine Risks from the Changing Climate

Climate change presents risks to mine infrastructure, operations and long-term obligations to protect environmental conditions. Management strategies and design of infrastructure and containment systems based on past or current climate conditions may be inadequate in the future if changes in climate are not taken into account in planning for mine operations, decommissioning, closure and post-closure. Data-driven assessments using climate model projections of the future can be used to quantify: • Changes in site-specific risks to mine structures, access, containment facilities, operations and staff safety. • Changes in vegetation and water balance/chemistry, and potential for acid mine drainage, erosion and design failure. Climate- and weather-related risks are a serious threat to the mining industry, but risk transfer solutions can alleviate these vulnerabilities. Mining companies can protect themselves through bespoke solutions which provide operators, investors and buyers with protection against weather-related disruptions to operations by hedging to smooth revenues. Using risk transfer structures to mitigate climate risks is a mechanism that is available to all types of mining operations world-wide. In this paper, we describe methods for evaluating site-specific climate change impacts and developing risk transfer solutions to mitigate their effects. EVALUATING MINE RISKS FROM CLIMATE CHANGE The best available tool for understanding potential future changes to the earth’s climate system are global climate models (GCMs) (IPCC, 2014). GCMs are computer simulations of the climate system which include the atmosphere, ocean, land surface, cryosphere and biosphere. Because of the computational demands of running a global model for many decades, the spatial resolutions of the GCM grids are necessarily coarse, typically on the order of 100-300 km. GCM data are therefore suitable for evaluating future physical risks on global or continental scales, but may not be appropriate for evaluating location-specific risks (e.g. Kotamarthi et al., 2016). For site-specific, quantitative physical risk assessment, GCM projection data are “downscaled” or adapted for use at the local level using statistical techniques together with observed data (statistical downscaling) or using high-resolution regional climate models (RCMs) that focus on a single geographic region and have spatial resolutions of 10-50 km (dynamical downscaling). Downscaling bridges the gap between the GCM scale and regional/local scale. Through the downscaling process, new information is added to the GCM output from observations and/or RCMs, resulting in patterns for weather variables that are more consistent with local terrain and weather influences. Downscaled climate change projections for the mine site are selected considering mine location and geography, the availability of local observations, and the performance of the downscaling method and global/regional models used to develop the projection in simulating the variable under study. Where possible, we use projections from an ensemble of global and regional model runs spanning a range of future greenhouse gas (GHG) scenarios.