August 2016

Addressing water risks with closure in mind

By Derek Chubb

Derek Chubb

In its Global Risks Report, the World Economic Forum (WEF) identified water crises as one of the top five risks that could most impact society over the next ten years. WEF defines a water crisis as a significant decline in the available quality and quantity of fresh water, resulting in harmful effects on human health and/or economic activity. Global population growth, urbanization, economic pursuits and climate change are key contributing factors to an already complicated situation in which specific water risks vary from region to region.

Access to fresh water is a basic human right and integral for healthy ecosystems, while at the same time essential to the mining and milling process. Leading companies understand responsible stewardship is an underlying business principle and organizations such as the International Council for Mining and Metals (ICMM), have developed guidance documents in support.

Stewardship is not simply an altruistic responsibility; mining operators who do not effectively address water issues risk unacceptable returns on investment. There are many case studies where water has been oversimplified as a process consumable without adequate consideration of the potential environmental, social and regulatory risks that may occur over the life of the mine, resulting in significant consequences.

The end in mind

While all mines eventually close, closure planning is rarely top of mind. This phase, typically decades in the future, does not meaningfully influence today’s economic decisions. Discounted cash flow analysis can mask the true cost of closure. Run of mine ore generates revenue today; progressive reclamation does not. So why worry about it?

Constrained thinking during mine planning and daily operations can lead to infrastructure design that is not resilient to changing conditions and deferral of work may increase and/or complicate closure liabilities. Mines requiring perpetual water management, which therefore could not be relinquished, are costly and can create a material liability.

Environmental Resources Management recently examined 73 mine closure plans dating from 2007 to 2013. This research showed that, on average, relinquishment was proposed to be achieved in 11 years. A follow-up study showed that of 57 mines in actual closure, 91 per cent of the sites had average closure durations of 21 years and were still going. This research illustrates that miners are overly optimistic; our studies show that both the time and cost to close a mine site are often significantly underestimated.

The data are clear: ineffective planning and management of water throughout the life cycle decreases the real return on investment because of environmental, social and reputational impacts.

Turning plans into reality

Effective water stewardship requires both a technical solution and an integrated holistic strategy. To better manage this business-critical risk, consider water across the mine life cycle from concept through to closure:

• Recognize water as more than an internal operational issue. External factors such as climate change and the demands of other users, such as agriculture, can significantly influence water risk. The use of a “water risk footprint” tool can provide a good characterization of a mine within a multi-user watershed.

• Establish your organization’s ambition level and ensure alignment. Do you strive to be an industry leader or look to meet acceptable standards? Set business goals accordingly. Do not over-promise and under-deliver.

• Risks and opportunities vary geographically and temporally. Understand your local context and think long-term. Consider a broad suite of risks that span environmental, social and financial realms. A one-size-fits-all approach does not work.

• Monitor and adapt to changing conditions. Integrate water risk into established business decision-making processes. Look beyond discounted cash flow analysis to characterize closure costs.

Answer these key questions at different mining stages:

Planning: Have we considered all life stages of this project, including closure? What closure commitments are required to obtain and maintain my license to operate?

Operations: Are we proactively undertaking closure work to minimize long-term liabilities, including those related to water? Will we be able to uphold our closure commitments and are they sufficient to manage our evolving risk profile?

Closure: Can we execute our closure plan on time and on budget? Are we treating closure as a project in its own right?

Water plays a key role in mining, and its related risks are becoming more prominent. Water can no longer be viewed simply as a necessary process input. A proactive life cycle approach, where we have planned and operated for closure, needs to become the norm.

Derek Chubb, P. Eng., is a senior partner with Environmental Resources Management (ERM) and is based in Toronto. The author would like to thank Jim Chan, senior consultant at ERM, for contributions to this article.
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