Minex CA 02 April Jeffrey V. Parshley

Transcription

1 Minex CA 02 April 2014 Jeffrey V. Parshley

2 Closure planning driver Financial security reporting planning Expenditure timing Long-term funds

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4 Common Terminology Mine Closure Cost Financial Assurance Cost Estimate Life-of-Mine Closure Cost (LOM) Asset Retirement Obligation (ARO) International Financial Reporting Standards (IFRS) US Generally Accepted Accounting Principles (USGAAP)

5 Mine Closure Cost Generic term often applied to any number of more specific types of mine closure cost estimates, including: Financial Security Cost Estimates Life-of-Mine (LOM) Closure Cost Estimates Asset Retirement Obligation (ARO) Estimate Without clarification or context, can be confusing or potentially misleading

6 Financial Assurance Cost Estimated cost for responsible regulatory agency to perform all of the actions required to fulfill an approved reclamation/closure plan Usually used to determine the amount of financial security required under governing regulations Typically assumes third-party costs May be subject to govt. contracting laws Current or maximum near-term cost

7 Life-of-Mine (LOM) Cost Estimated cost for mine operator to perform all of the actions required to fulfill an approved reclamation/closure plan in the context of operations Usually used for planning, financing, budgeting and cost tracking Prefeasibility/feasibility Due diligence Accrual allocation Includes all planned development Cash flow basis

8 Asset Retirement Obligation (ARO) Fair value of abandonment liabilities associated with mining and mineral processing operations for financial reporting Amount company would pay a third party to assume responsibility (including a profit margin) Includes both Legal and Constructive Obligations Only includes liability existing in reporting year Cash flow basis

9 Legal Obligations A legal obligation is an obligation that derives from: (a) a contract (through its explicit or implicit terms); (b) legislation; or (c) other operation of law. Source: Extracted from IAS 37

10 Constructive Obligations A constructive obligation is an obligation that derives from an entity's actions where: (a) by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept particular responsibilities; and (b) as a result, the entity has created a valid expectation in those parties that they can reasonably rely on it to discharge those responsibilities. Source: Extracted from IAS 37

11 Closure Cost Types Financial Assurance LOM ARO Use(s) Financial security Planning (prefeas, feas), budgeting, etc. Financial Reporting to Shareholders Rate Basis Third-party Operator & Third-party Operator & Third-party Included Development Maximum (near-term) All Planned Current Financial Year Govt. Contracting Rules Maybe No No Cost Basis Current Cash Cash Flow Cash Flow Salvage Value No (varies) Yes No

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13 Closure Cost Estimating Feasibility Studies Planning Financial Reporting Bonding

14 What We Consider Objectives Environmental conditions Social issues Laws & regulations Engineering design Standard practice

15 Cost Estimate Objectives Accurate, defensible Easy to update or modify Broad range of input alternatives Ability to use other cost bases

16 Planning for Cost Estimate Know your plan Understand plan objectives Gather the data How will the mine be built? How & when will it be closed? How often will it be updated? Realize there is more than one way

17 What information is needed? Proper closure plans Site-specific data Available equipment Fluid management requirements Additional permitting costs Long-term maintenance and monitoring Mobilization requirements

18 Cost estimating methods First-principles Specialist construction quotes Published costs & productivities Documented field data from operations

19 Direct Costs Earthworks Reshaping Cover placement Decommissioning and demolition Remedial works Closure planning General & Administration Mobilization/ demobilization

20 Indirect Costs Design Contingency Site operations Camp Water supply Administration Corporate support Insurance Performance bonds

21 Other (Post-Closure) Costs Detailed water management Often requires user calculations Water Treatment May require user/third-party calculations Socio-economic programs

22 Financial Instruments Surety bonds Certificates of Deposit Insurance policy Letters of credit Cash equivalent Certificates of Self-Insurance Annuities Trust funds

23 Things To Consider Cost estimate is only as good as the plan It is an estimate Rounding Volume calculations Productivities Level of accuracy depends on Input data Intended use

24 Questions?

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26 How long should it last? Theoretically, forever Practically, things will change Redevelopment New land users Unanticipated events Long enough to know it will be sustainable Resource Protection

27 State of the Practice Focus on stakeholder engagement Early planning Financial responsibility Realistic closure criteria Development of adaptable standards Steady incremental improvement in closure practices and technology Closing

28 Future Challenges Stakeholder engagement Managing uncontrollable post-mining land use Developing capacity of governments Re-thinking conventional wisdom of 10 years ago Pushing the envelope Closing

29 We cannot solve our problems with the same thinking we used when we created them. Albert Einstein Thank You