March 14, 2018 Stonington, Maine
contact: Lindsay Newland Bowker LNBowker@BowkerAssociates.org
Bowker Associates has not been able to piece together much of the history leading up to this failure nor much about the details of the two impoundments, the only tailings storage facilities for the Cadia Project which comprises 62% of Newcrest’s revenue. In our tailings management focused work we often cite the exemplary national and provincial policies of Australia and in particular the regulatory framework of New South Wales (NSW). While all that excellence didn’t prevent quite a large slump in the south wall of the north impoundment, perhaps the forensics will show that NSW and national law and regulations for mining did work to effectively minimize public consequence viz the immediate surrounding down slope community.
These are both impoundments of upstream construction. Australia and ANCOLD have adamantly resisted any call for any form of prohibition on upstream construction or on adoption of all the Mt Polley panel recommendations as international standards.
A picture is worth a thousand words. A big breach but a nice neat slump of thick material. It looks like perhaps a paste thickened deposition and clearly no water cover.
Aerial Photo Released By Newcrest
There was no runout or big slide so perhaps investigation will show that even without the south impoundment the tailings would have made a nice neat slump with no run out, no liquefaction, no slide threatening or harming the downstream community.( NSW law and Newcrest business practices are insuring there is no risk of that and so far have detected no further movement in the wall)
So perhaps, hopefully, the forensics on this failure will ultimately bear out the wisdom that, as the Mt Polley panel urged, no large tailings facility should be conventional slurry and no large TSF should have a water cover during operation or have a wet closure.
Excellence in law and policy, we shall perhaps confirm, cannot achieve “zero failure” but it can perhaps consistently attain “zero public consequence”, zero risk of harm to the surrounding community, zero public liability.
In our four tier severity rating system we have provisionally included this in the failures data base as a “3”..a minor failure meaning a runout less than 0.5k, a release of less than 100k, no deaths. It has a tentative public consequence score of “0” and that should be the aim of all practice and law. Even if it turns out that the loss was preventable and forseeable, that will not change the severity designation nor the public consequence score.
There are questions that hopefully will be answered with full transparency through NSW’s exemplary investigation process as to whether this failure was preventable and the risk of breach discernible. How did Newcrest with everthing riding on the successful extension of mine life from 2013 to 2030 come to still be relying on these two upstream impoundments with an original design life ending in 2013. Was an increased rate of deposition a cause of failure. ( Even paste needs time to settle and drain). Newcrest apparently knew it had a tailings capacity problem and was looking at the feasibility of using the mined out Cadia Hill open pit for tailings deposition ( and is now looking to that as a way to get back into production as quickly as possible).
Whether it was preventable and foreseeable should matter in consequence to Newcrest and in the best of all possible worlds might have prevented the big 5% hit Newcrest has taken on its stock which will effect its entire portfolio until Cadia is back in production.
In Risk Management this would be an insurable loss ( business interruption) and therefore a loss that could be covered through a reciprocal risk pool. In a situation where a revenue interrupting loss occurs through no fault of, and beyond the control of the miner, there can and should be no interruption in revenue and if needed should provide funding for repair or complete closure of the damaged facility as well as for all cleanup. There wouldn’t need to be a hit to investors or the associated portfolio wide impacts Newcrest may be facing. ( We have no information on what part of this may be insured .)
My advocacy, as a risk manager who has designed and managed a high risk owner controlled insurance program , OCIP, ( for NYC’s Water Tunnel construction) is that miners who actually are following best practice portfolio wide should have complete and low cost coverage for lost earnings and recovery when events that are actually accidents happen. ICMM could provide a useful leadership role or any group of miners ( eg those in the International Responsible Mining Assurance program) could form such an owner controlled insurance program.
In an OCIP the package of coverages are conventional with manuscript modifications suitable to the unique aspects of the exposure. It can extend to all contractors and consultants as well lowering their overhead costs and thereby lowering overall costs of production . It can include all portfolio projects which are also operated under the strict underwriting of the experience rated OCIP .
It could include as well the full costs of an unplanned closure necessitated by the failure or impairment.
Four years ago Bowker Asssociates took up this work in tailings secifically to assess whether the losses were insurable and therefore “poolable” or good candidates for an OCIP. It became quickly apparent that the third party ( and most of the first party losses like business interruption did not meet the requirements of insureable risk”..they were all preventable, none of them acts of god or true “accidents”.
It also became apparent, because insurers are not actively “partners” in big mine projects that there is no underwrting ..none of those monthly independent inspections and meetings with the insureds involved. An OCIP would build that essential underwriting oversight into all covered projects.
If the OCIP ( whether as a reciprocal or through a global carrier) were large enough..covered enough of global minerals production then the participation in the OCIP would have other cost reducing , confidence inspiring benefits e.g. in issuing bonds for expansion on good terms and meaning something in investment and investor analysis.
This is how financial assurance can and should work with respect to the liabilities, first and third party , from high consequence tailings failures.
Obviosuly the other side of the coin is that miners and project which don’t meet OCIP standrds shouldn’t be eligible for permits in the first place. A project or a miner that can’t meet “insureable/bondable standards” can’t possibly provide any meaningful assurance to the local community or to investors .
Financial assurance isn’t a meaningful or sensible expectation of miners and projects that are not economically sound.
The OCIP could give an extra discount for mines in jurisdictions like NSW with exemplary responsible permitting and oversight but it could still provide coverage and sound practices whether or not the government regulatory structure is up to par.” The OCIP could also influence governance by disallowing coverage in jurisdictions where provisions directly conflict with sound underwriting.
Back to Cadia, it is nor clear yet that this failure was unpreventable and unforseeable but investors and the local community can have confidence that ANCOLD, Australian Law and NSW law and regulations will arrive at a fully evaluated responsible conclusion and insure a safe ultimate disposition for these impoundmets and for Cadia’s long term tailings management.
That can’t be said of failures in most government jurisdictions.