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Mine closure bonds (financial assurances) – the ‘how much?’ conundrum

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Author A Bowden and G Byrne

Description

There is often a difference in opinion about the allocation of risk in the establishment of mine closure bonds or financial assurances. From the State’s perspective, protection is needed to ensure that the broader community is not left with the liability of properly closing a mine in the event of a default by the mine operator. Such a default might occur where an operator decides to abandon a site, perform incomplete rehabilitation, becomes insolvent or claims limited liability. On the other hand, mine operators who can demonstrate a strong financial position plus a record of social and environmental commitment and performance, argue that there should be some recognition of this in setting a bond that is less than the full cost of early closure. They argue that a mine rehabilitation bond based on the full cost of early closure is overly conservative and ignores the actual risk of the operator being in default.

This paper examines an approach that incorporates the risk of default into the establishment of mine closure and rehabilitation bonds.

CITATION:

Bowden, A and Byrne, G, 2018. Mine closure bonds (financial assurances) – the ‘how much?’ conundrum, in Proceedings Life-of-Mine 2018, pp 32–34 (The Australasian Institute of Mining and Metallurgy: Melbourne).