Closure modelling: reaping the benefits of forward planning

Traditionally, mining companies have based their budgets for closure and rehabilitation on unconditional performance bonds lodged with the Department of Mines and Petroleum (DMP), Western Australia. This can leave companies unprepared for the cost of closing a mine site, as bonds only provide for a portion of rehabilitation costs. In July 2011, the DMP and the Office of the Environmental Protection Authority (OEPA) jointly issued Guidelines for Preparing (A) Mine Closure Plan. These guidelines describe the new standards required for closing mine sites, which will apply to both existing and new mining operations in the future. Among the key changes is a requirement to include estimates of mine closure costs as part of the Mine Closure and Rehabilitation Plan to be submitted to Government in support of the project approvals process. The closure cost estimates must be supported by information on the costing method and assumptions on the financial processes used. The Standardised Reclamation Cost Estimation (SRCE) model, developed by SRK, has proved to be an invaluable tool in this respect, useful to consider various “what if” closure scenarios and for the estimation of closure costs.

Karara Mining Limited (KML) engaged SRK Consulting to develop a preliminary cost estimate for establishing and managing rehabilitation and mine closure for the Greater Karara Project. Conceptual reclamation and closure methods were used to evaluate the various components of the mining operations and the SRCE was used to estimate closure costs. KML mine personnel provided user input data describing the physical layout, geometry, dimensions of the project components, AutoCAD and GIS information. Along with this data, the model used first principle methods to estimate quantities, productivities, and work hours required for various closure tasks, and cost data based on 2011 standardised industry unit costs for labor, equipment and materials. The model is reviewed and updated on a 6-monthly basis. By using this methodology, KML developed an increasingly accurate estimate of closure costs that will reflect changes over the life of the project and will help the company fulfill the requirements of the new Closure guidelines.

Luke Esprey: lesprey@srk.com.au

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