A Paradigm Shift to Mine Lifecycle Management

Over the last decade, the mining industry has seen a paradigm shift in the way closure planning occurs.  It is well understood that mine closure needs to be more than the final stage in a mine’s lifecycle. Leading miners and industry organisations are recognising mine closure’s important role within the wider community, and the obligation to realise a post closure vision that adequately considers health, safety, social, environmental, legal and reputational aspects.

The Industry Challenge

The road to successfully achieving mine closure remains difficult to navigate. There appears to be a disconnect between mine planning and closure planning, where closure planning is largely compliance and approvals focused at the start of the asset lifecycle. As assets mature, closure plans are only reviewed periodically. In some instance progressive rehabilitation occurs but is never fully integrated into the strategic mine plan as the focus remains on compliance and approvals. As an operation approaches closure, the focus shifts from compliance and approvals to real closure costs and execution methodology. Unfortunately, the common reality is at this point, closure costs, schedules, and methodologies have not been appropriately integrated into the strategic mine plan. As a result, operators are left with closure scenarios that are too expensive, do not meet closure objectives, and will not achieve closure expectations for returning land use.

The Story of a Typical Life of Mine

To understand the disconnect between closure planning and mine planning we will walk through a simple hypothetical life of mine (LOM) example for a project with a 25-year mine life.

At the early stages of the project, the operation has strong initial financing (Yr 0), and a positive year over year cashflow (Yr 0 and Yr10). A preliminary, and manageable estimated closure cost results in a projected positive Net Present Value (NPV) (Figure 1).

At Yr 10 the project may undergo a re-estimate. Traditionally these result in a higher NPV compared to Yr 0 due exclusion of the project sunk costs, and minimal effort in re-estimating closure costs (Figure 1).

At Yr 20 the project undergoes a second project re-estimate. This time, the NPV decreases considerably, since the extraction potential has decreased, and the closure costs approach realisation.   During this time, the focus shifts to closure plan optimisation where the true closure costs are calculated, and operators are faced with higher than expected closure costs.

We dub this this point in time the Pivot Point. At this point higher closure costs are due to outdated, unrealistic, and unproven closure plans that no longer meet closure objective resulting in a substantial loss in project NPV (e.g. Yr 20 NPV with Realised Closure Costs; Figure 1).

Figure 1: A Typical Life of Mine

Integrated Closure Planning – Okane’s Approach

To prevent this scenario from continuing, an assessment of closure plans, their value drivers, and their integration into the mine plan must occur prior to the Pivot Point.  Okane creates integrated planning models that combine the mine plan with the closure plan to create a full Life of Asset (LOA) Plan. Integrated closure planning provides the tools to integrate closure into the strategic mine plan, optimising the whole life of asset.

When closure is integrated into the LOM plan, mechanisms that reduce closure liability and cost can be identified through leveraging the mine production schedule. Additionally, through NPV scenario analysis, Okane can identify the best plan for an operation; one that balances closure costs, operation costs, regulatory compliance, and residual risk.

The benefits of integrated closure planning can make material differences over the LOA, within 5-year plans, and 2-year budgets by limiting value destruction and facilitating easier communication between internal and external stakeholders:

• LOA Benefits:
  • The process allows Closure Teams to approach Resource Engineering Teams with potential closure scenarios using a common language.
  • Early progressive rehabilitation allows sites to test their closure methodologies and minimise the accumulated closure liability.
  • Key closure risks can be evaluated and communicated to stakeholders.
  • Compliance criteria can be clearly communicated to decision makers.
  • A portfolio of closure options can be established.
• 5-Year Plan / 2-Year Budget Benefits:
  • Increased ability to justify closure capital and studies.
  • Demonstrated link between progressive rehabilitation costs to the closure plan and the overall value to the asset.
  • Integration of closure plans into resource engineering plans.

This is Okane’s approach to integrated closure planning.  The approach locks into an operation’s mine planning system to frame risk and opportunity scenarios against closure compliance, residual risk, and cost. Our interactive value driver tree analysis provides insights into the major cost drivers and decisions that will allow your project to maximise shareholder return by selecting the most optimised closure plans. Okane’s integrated LOA Plans deliver value throughout the entire asset and mine lifecycle.