Restoring Mine Lifecycle Value

  • February 10, 2021

Okane Consultants mine closure blog

Restoring Mine Lifecycle Value

Historically, mine closure has remained a component of the Life of Asset Plan that has been given far less consideration than it deserves. There are a number of contributing factors for this. Primarily, the industry practice of applying Net Present Value (NPV) as a means of determining when and how to invest money into an asset is counter-productive to the process of progressive reclamation. It has been widely accepted that delaying non-urgent costs as long as possible, represents the best return on investment. The second most prevalent contributing factor is that closure has typically remained an issue for ‘the future’. An issue exacerbated by few mines having progressed to full closure and relinquishment, as demand for minerals has remained high.

It’s About More Than NPV

In recent times, this scenario has changed. More mines are now facing the reality of closure within the next 10 years. Mine closure regulations are progressively tightening as a systematic response to poor closure outcomes and a gap between expectations and performance of planned reclamation. In addition, developments in planning techniques and increased understanding of closure processes have led to a realisation of the ‘value’ of progressive, well planned closure outside of the usual financial assessment methodologies.

Social value, reduced residual risk, and company reputation are now all key considerations in determining not only how a mine should close, but at what point in the asset life cycle this should occur. While NPV optimisation may lead mines to delay closure costs as long as possible, the various other value additions of progressive reclamation are completely excluded from this calculation. For many companies in the modern mining industry, these value additions are every bit as important as the bottom line.

Reducing Closure Liability

Modifying latter year mine production plans can directly reduce closure liability. In certain circumstances, a reasonably minor increase to operating costs in the latter years of the asset life may actually lead to an improvement in project NPV through closure cost and liability reduction.

Most operational mining projects are currently without a fit for purpose, designed, scheduled, and fully costed closure plan. Executable closure plans are not being generated or critically reviewed until the end of the mine life is imminent, at which point any optimisation is next to impossible. When these plans are assessed in detail, often the closure costs are far greater than what had previously been estimated and budgeted for, resulting in miners potentially missing the opportunity to mitigate closure risk through comparing and analysing fully integrated and costed closure scenarios. If these challenges are not addressed, more mining companies may be forced into receivership or liquidation due to the realisation of ‘true’ closure liability at a point where no revenue is available to maintain a positive NPV.

Okane’s Approach in Support of Mine Lifecycle Value

Okane’s approach to Integrated Closure Planning presents the best available technology in determining how to maximise an assets value with respect to closure. The integration of progressive closure planning can be achieved through design and scheduling of closure activities in tandem with the mine production schedule. This allows miners to make informed strategic and operational decisions by assessing both the short- and long-term impacts of different material placement and reclamation options on the overall value delivered by the project. This process represents the only proven method of fully identifying the maximum value that can be generated from an asset. Within this integrated model, a host of other important post-closure outcomes can be assessed such as alternate land use options for the closed and reclaimed landform which can have a material impact on final closure liability and the overall mine lifecycle value.

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