by: Dr. A. Robertson and S. Shaw

For many mine sites, the requirement of long-term interception, collection and treatment of the ARD and on-going continuous care and maintenance for dam safety, spillways, diversions and covers etc. necessitates long-term custodial care, management and associated funding (i.e. closure bond).

The size of the required bond is generally the amount that the appropriate regulator(s) accept as a realistic estimate of implementation of the accepted Closure Plan by a third party contractor. If the Closure Plan indicates that water collection, treatment, and sludge disposal will be required indefinitely then the financial assurance amount should include the provision of an invested sum that will yield sufficient annual revenue to cover these costs indefinitely (in perpetuity).

Generally a real rate of return of about 3% is used for the calculation of such funds. i.e. a $10 million fund will generate $300,000 of annual (present value) dollars in-perpetuity. The basis for costing work typically assumes that work is done by a third party contractor (normal commercial rates) and allows for all overheads such as design, quality control, administration etc.

The amount of the bond is usually independent of the company size and financial strength. The nature of the bond that a regulatory agency will accept does however depend on the financial strength of the company. To date many companies have been able to 'self bond' by providing a corporate guarantee. There is increasing reluctance for regulators to accept such corporate guarantees and mostly they now insist on a bond from an independent third party financial institution (such as a Bank or bonding company) or the establishment of a separate trust fund.

Some useful links on the topic of bonding can be found below.

• Cost Data Center
  and other costing services by Western Mine Engineering Inc.
• Environmental Guidelines for Mining Operations, including a small section on financial assurance, prepared by United Nations Department of Economic and Social Affairs (UNDESA) and United Nations Environment Programme Industry and Environment (UNEP) , undated.
• Financial Assurance Guidelines.
  Steps in reviewing and approving financial assurances from the Office of Mine Reclamation, California.
• Financial Assurance for Mining Activities.
  Part of a series of publications related to environmental management of mining activities prepared and distributed by the Environmental Protection Agency, Queensland Governement in Australia. , written December, 2003.
• Financial Assurance for Mining Activities.
  Part of a series of publications related to environmental management of mining activities prepared and distributed by the Environmental Protection Agency, Queensland Governement in Australia. , written December, 2003.
• Financial Provisioning for Mine Closure: Developing a Policy and Regulatory Framework in the Transition Economies, a paper written by M. M. Nazari with the European Bank for Reconstruction   Development, May, 1999.
• Hardrock Reclamation Bonding Practices in the Western United States.
  A report prepared by J. Kuipers for the National Wildlife Federation, February, 2000.
• Nevada Mining Bonding Task Force Report.
  Hosted on the Mining Life-Cycle Center website, written March, 2003.
• Research on Mine Closure Policy, including a section on Economic and Financial Considerations, prepared by the Mining, Minerals and Sustainable Development (MMSD), January, 2002.
• Mining and the Vanishing Surety Bond Market
  An article by Lisa A. Kirschner and Edward B. Grandy posted on the FindLaw website, written October, 2003.