Self Bonding For $2.7 billion in Closure Costs Could Translate to Public Liability Federal Lawmakers Fear

http://www.businessinsurance.com/article/20150625/NEWS06/150629912?tags=58|310|83|80|61

This article reports a re examination of the public liability implications of U.S. federal policy allowing “self bonded” financial closure for coal miners. The issues raised are obviously also relevant for metallic mining  under regulatory requirements for financial assurance for closure  which also  allow “self bonding”

Accoridng to this Business Insurance article:

“The country’s four largest coal companies — Peabody Energy, Alpha Natural Resources, Arch Coal and Cloud Peak Energy — together have about $2.7 billion in clean-up costs covered by self bonding, according to securities filings and regulators.”

(This is not for clean up after a failure this is for closure at conclusion on mining operations at a given site underpermit should the miner abandon or otherwise become unable to perform the closure and associated “clean up” )

Closure bond requirements for the Pebble mine would have been close to $1Billion.

Responding to the federal re examination of its “self bonding” policy, Fitch Ratings Inc. estimates that if tighter and better financial assurance for closure were required, as presently being considered by federal law makers, it could actually bankrupt or seriously impair miners and also have a de stabilizing influence on the industry possibly  precipitating a wave of failures.

“Last week, Fitch Ratings Inc. warned that tougher rules for self-bonding could push leading coal companies closer to bankruptcy. ‘Tighter self-bonding requirements for distressed coal entities would reduce liquidity and could hasten restructuring,” Fitch Ratings wrote.'”

The details of the “tighter requirements” aren’t included in the Business Insurance article  but presumably  deal with how the “self bonding” is treated “on the books” and/ or how the funding works ( trust account, segregated audited account,  other methods which encumber the “self bonded” in the same way that a formal corporate self insured retention would,  or which create a legally binding site specific encumbrance of the bonded amounts surviving bankruptcy..

In other words Fitch is saying that the  “self bonded” companies are not actually strong enough  financially to back the $2.7 billion already under approved “self fundied”bonds.

Federal lawmakers are rightly concerned that this already incurred $2.7 billion in “self bonded ” financial assurance for closure costs  may be in large part an existing unfunded unfundable public liability.

The issue when liabilities reach a level of being un fundable for something as basic and essential as having financial assurance for a stable and safe mine closure,  is not a funding problem it is a problem with the way mines are vetted in the fist place, who applications are accepted from and how financial feasibility of mine and financial viability of operator are monitored life of mine by independent experts in mine economics and mine finance.

The Federal government is looking down the same black hole on how much of this $2.7 billion is actually there as Bowker Chambers 2015 point to (1). How will this $2.7 billion be re-financed if the industry itself is not capable of funding/financing its liabilities with greater accountability to availability of the funds should they be required for closure? 

Were these companes actually financial capable of guaranteeing the availability of these funds in the event of a bankruptcy  or abandonment prior to closure at the time the applications were under review?  Every mine statute we have looked at requires a determination of the “financial and technical capacity of the applicant” but none we have seen actually have a rigorous or even reasoned set of standards for vetting that The real issue is  that the miner and the financial capacity of their mines may not have  existed when the mine permits were issued and there was nothing built into the regulatory framework to make that determination.

Although a performance bond is a fundamentally different instrument from insurance ( in that it comes into play only when the company cannot  or will not perform) there is nothing inherently wrong with self bonding just as there is nothing wrong with a formally created self insured retention program.  But there is something inherently wrong with a system that approves self bonding for companies that are actually not capable  of making good on that should the bonds have to called on. The whole nature of a “performance bond” is to guarantee performance when the  company fails to perform for any reason.  That requires a very different structure and legal mechanism to guarantee availability of the funds outside of bankruptcy or financial impacts on the company as a whole should the bonds be called.

All of this argues for independent expert panels in mine economics and mine finance to create  financial capacity, financial assurance standards in the first place ; vet  applicants and the mineralized assets pre-application, and monitor state of both mine feasibility and miner financial capacity life of mine.

To do otherwise  essentially makes the local community the ultimate underwriter .

The answer as Bowker Associates has long argued is better standrds on the financial capacity of the appliants pre mining and better vetting on the catual economic feasibility of the endeavor INCLUSIVE OF CLOSURE COSTS AND OF ALL OTHER ESSENTIAL ENVIRONMENTAL MEASURES/TECHNOLOGIES LIFE OF MINE.

Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager

Bowker Associates

Science & Research In The Public Interest

15 Cove Meadow Rd.

Stonington, Maine 04681

207 367 5145

lindsaynewlandbowker@gmail.com

lindsaynewlandbowker.wordpress.com

​1/ Bowker Lindsay Newland and Chambers David M.​ The RISK, PUBLIC LIABILITY, & ECONOMICS  of TAILINGS STORAGE FACILITY FAILURES , June 2015 ( To be Presented at  the 2015 North LatitudesMiningReclamation Workshop ,  and to be released soon, draft copies available for review)

Posted in Bowker Associates, David Chambers, mining environmental risk management, mining public liability, Mining Risk Management, self funding mine closure bonds | Tagged , , , , , | Leave a comment

TSF FAILURE BIBLIOGRAPHY: A Compilation Including Local & Regional Analysis of Consequence of Failure

This bibliography is from a draft paper (Bowker Chambers(2015)) examining the consequence of TSF Failures globally 1910 to 2010 and exploring he relationship between global economics and failure over time.   The bibliography itself is a major contribution to the understanding of TSF Failures because of its emphasis on consequence to affected communities and regions.   It also provides insights to the events leading up to failure that are not accounted for in legal and regulatory framework for mining nor in the usual dam committee reports which focus on causes of failure.  So in that sense this unique bibliography opens the door to causes and consequences not commonly part of the conversation on tailings failures.

It is our intent that this bibliography of consequence and economic causes of TSF failures grow over time both in further development of our work  and through the contributions of our colleagues and readers here for Bowker Associates ( lindsaynewlandbowker@gmail.com) and at Center for Science in Public Participation( http://www.csp2.org dchambers@csp2.org)

Bowker Associates has taken the unusual step of releasing our bibliography in advance of publication & release of our paper because tailings failures are so much in the fore of public discussion as are a result of Mt. Polley an den  bibliographies of relevant work are so complete.

Bowker.Lindsay Newland, Chambers David M (draft).The Risk Public Liability & Economics of Tailings Storage Facility Failures to be released June 2015

TSF BIBILOGRAPHY: CONSEQUENCE & ECONOMICS OF FAILURE

Advani 2011.  Advani, Sameer  “Real Historical Copper Price”, May 30,2011, Sameer Advani’s Instablog http://seekingalpha.com/instablog/946411-sameer-advani/182708-real-historical-copper-price

Azam & Li 2010.  Azam, Shahid Li, Quiran “Tailings Dam Failures: A Review of the Last 100 Years”, Geotechnical News December 2010 http://www.infomine.com/library/publications/docs/Azam2010.pdf

Bertram 2010.  Bertram, Geoff “Mining Economics & The Conservation Estate” Royal Forest & Bird Protection Society of New Zealand Inc., September 2010 accessed November 2014 http://www.geoffbertram.com/fileadmin/Mining%20Economics%20and%20the%20Conservation%20Estate%20main%20text.pdf

Boswell & Sobkowicz 2011.  Boswell, Jeremy, Sobkowicz, John  “Duty Of Care Applied To Tailings Operations”, Proceeding Tailings & Mine Waster, Vancouver B.C. Nov 6-9 2011 http://www.infomine.com/library/publications/docs/Boswell2011.pdf

BCMM 2013.  British Columbia Ministry of Mines “ Provincial Summary Exploration and Mining In British Columbia 2013” http://www.empr.gov.bc.ca/Mining/Geoscience/PublicationsCatalogue/InformationCirculars/Documents/IC_2014-01.pdf

BCOAG 2011.  British Columbia, Office of the Auditor General “An Audit of the Enviornmnetal Assessments Office Oversight  of Certified Projects, July 2011 http://www.bcauditor.com/pubs/2011/report4/audit-bc-environmental-assessment-office-EAO

Caldwell 2006.  Caldwell,Jack “British Columbia Tailings Failure at The  HB Mine Near Salmo, British Columbia”, TechnoMine July 6, 2006 http://technology.infomine.com/articles/1/8455/tailings.failure.canada/british.columbia.tailings.aspx

COAG 2014.  Canada, Office of the Auditor General “Implementation of the Canadian Environmental Assessment Act, 2012, 2014 Fall Report of the Commissioner of Environment and Sustainable Development http://www.oag-bvg.gc.ca/internet/English/parl_cesd_201410_04_e_39851.html

Chambers & Higman 2011.  Chambers, David M.,  Higman, Bretwood ”Long Term Risks Of Tailings Dam Failure,”  October 2001, accessed November 2014 at http://www.csp2.org/technical-reports

Davies et. al. 2002.  Davies, Michael, Martin,Todd  and Peter Lighthall  “Mine Tailings Dams: When Things Go Wrong,” AGRA Earth & Environmental Limited, Burnaby, BC 2002 http://www.infomine.com/library/publications/docs/Davies2002d.pdf

Davies & Martin 2009.  Davies, Michael,   Martin,Todd  “Mining Market Cycles and Tailings Dam Incidents,” AMEC Earth & Environmental, Vancouver, British Columbia, Proceeding of the Thirteenth International Conference on Tailings and Mine Waste, November 1, 2009, Banff, Alberta, Canada accessed November 2014 at http://www.infomine.com/library/publications/docs/Davies2009.pdf

EGN 2014.  Ecology Global Network “Population Estimates: Year 1 to 2050”  accessed November 2014 at http://www.ecology.com/population-estimates-year-2050/

ICMM 2012.  International Council on Mining & Metals, “Trends in the Mining & Metals Industry” Mining’s Contribution To Sustainable Development October 2012.  Accessed November 2014 at http://www.icmm.com/document/4441 M

ICOLD 1995.  International Commission on Large Dams, “Dam Failures Statistical Analysis,” Bulletin 99, 1995

ICOLD 2001.  International Commission on Large Dams and the United Nations Environmental Programme (UNEP) Division of Technology, Industry and Economics (DTIE), “Tailings Dams Risks of Dangerous Occurrences Lessons Learned From Practical Experiences,” Bulletin 121, 2001

ICSG 2014.  International Copper Study Group, Copper production statistics, November 13, 2014.

IFC 2003.  Striking a Better Balance, the World Bank Group and Extractive Industries, the Final Report of the Extractive Industries Review, International Finance Corporation, December 2003

Independent Panel 2015.  Report on Mount Polley Tailings Storage Facility Breach, Independent Expert Engineering Investigation and Review Panel, Province of British Columbia, January 30, 2015

Jakubekl et. al. 2013.  Jakubekl, Jaret ,  Clayon, Russel, Guest Alan R., “Mudrush Risk Evaluation” CIM Journal 2013 accessed November 2014 at http://www.srk.com/files/pdfs/mudrushriskevaluation_paper_cim_journal_fnl_20130322_jj.pdfailings

Jones 2014.  Jones, Sam Jordan, Editor/Compiler “Global Mining Finance Guide 2014” Aspermont Media 2013 accessed November 2014 at http://www.mayerbrown.com/files/Publication/3e2dc5e3-878a-40a2-8b06-cb75f8d632ba/Presentation/PublicationAttachment/86b233d1-beb2-4f47-9b85-cd4793b90b92/global_mining_finance_guide_jan14.PDF

Kelly & Matos 2013.  Kelly, T.D., and Matos, G.R., comps., 2013, Historical statistics for mineral and material commodities in the United States (2013 version): U.S. Geological Survey Data Series 140, accessed November 2014, at http://minerals.usgs.gov/minerals/pubs/historical-statistics/.

Knight Piesold 2011.  Knight Piesold Ltd., Mount Polley Mining Corporation Mt Polley Mine Storage Facility Report of 2010 Annual Inspection”, Prepared for Mt. Polley Mining Corporation, January 25, 2011 http://www.scribd.com/doc/241108453/Mount-Polley-Mine-Tailings-Storage-Facility-Report-on-2010-annual-inspection-by-Knight-Piesold

Kossoff et. al. 2014.  Kossoff, D. Dubbin, W.E.Porter, Edwards, S.J. , Macklin, M.G., Hudson Edwards, K.A.  “Mine Tailings Dams: Characteristics, Failure, Environmental Impacts, and Remediation”, Applied Geochemistry  V.51, 2014 PP 229-245  accessed November 2014 at http://dx.doi.org/10.1016/j.apgeochem.2014.09.010

Porter & Beliwas 2003.  Porter,Kenneth E., Beliwas ,Donald I., Physical Aspects Of Waste Storage From a Hypothetical Open Pit Porphyrry Operation, U.S. Department of the Interior, U.S. Geological Survey, 2003, accessed November 2014 at http://pubs.usgs.gov/of/2003/of03-143/of03-143.pdf

Repetto 2014.  Repetto, Robert “Silence is Golden, Leaden and Copper Disclosure of Material Environmental Information in the Hardrock Mining Industry” Yale School Of Forestry & Environmental Studies, July 2004 accessed November 2014 at http://environment.research.yale.edu/documents/downloads/o-u/repetto_report_execsum.pdf

Rico et al. 2007.  Rico, M., Benito, G., Díez-Herrero, A. “Floods From Tailings Dam Failures” Geological Hazards Unit, Spanish Geological Survey (IGME), Madrid, Spain, October 2, 2007 http://digital.csic.es/bitstream/10261/12706/3/MayteRico_10.pdf

Rico et al. 2008.  Rico, M. Benito, G., Salgueriro, A. Diez-Herrero, A. & Pereira, H.G. Reported Tailings Dam Failures: A review of the European Incidents in the Worldwide Context, Journal of Hazardous Materials 152 (2008), pp. 846–852, http://digital.csic.es/bitstream/10261/12716/3/MayteRico_08.pdf

Robertson 2011.  “Mine Waste Management in the 21st Century Challenges & Solutions Beyond Incremental Changes” Andrew Macgregor Robertson, Key Note Address Tailings & Mine Waste, Vancouver B.C., 2011, http://www.infomine.com/library/publications/docs/Robertson2011c.pdf

Samis et. al. 2012.   Samis, M., Martinez, L., Davis, G. A., and Whyte, J. B., “Using Dynamic Discounted Cash Flow and Real Option Methods for Economic Analysis in NI 43-101 Technical Reports.” in the Valmin Seminar Series 2011-12 Proceedings, The Australian Institute of Mining and Metallurgy, Publication Series No 3/2012, 149-160 accessed December 2014 at http://inside.mines.edu/~gdavis/Papers/ValMin.pdf

Schodde 2010.  Schodde, Richard “The Key Drivers Behind Resource Growth: An Analysis of the Copper Industry For the Last 100 Years”, Mine EX Consulting, 2010 MEMS Conference Minerals and Metals  Over the Long Term, Phoenix Arizona, March 3, 2010 .  http://www.slideshare.net/RichardSchodde/growth-factors-for-copper-schodde-sme-mems-march-2010-final

Stano 2011.  Stano, Maya “Rave Mine: A Regulatory & Fiscal Black Hole” Environmental Law Centre, Spring 2011 http://www.elc.uvic.ca/publications/documents/2010-02-03-RavenMine-RegulatoryandFiscalBlackhole_Stano-REVISEDJul2011.pdf

Troncosco et. al. 1993.  Troncosco, J.H. , Avendano, A. Vergara, A. “The Seismic Failure of Barahona Tailings Dam” Procedings: 3rd International Conference on Case Histories in Geotechnical Engineering, St. Louis, Missouri, June 1-4, 1993, Paper # 2.56, Accessed November 2014 at  https://mospace.umsystem.edu/xmlui/bitstream/handle/10355/33917/P%201473-%20The%20Seismic%20Failure%20of%20Barahona%20Tailings%20Dam.pdf?sequence=1

USGS 2014a.  U.S. Geological Survey “Historical Statistics for Mineral and Material Commodities in the United States” Thomas D. Kelly and Grecia R. Matos, with major contributions provided by David A. Buckingham, Carl A. DiFrancesco, Kenneth E. Porter, and USGS mineral commodity specialists.    Data Series 140, April 2014. Accessed November 2014 at http://minerals.usgs.gov/minerals/pubs/historical-statistics/#copper

USGS 2014b.  U.S. Geological Survey “Iron Ore Statistics” Compiled by T.D. Kelly (retired), W.S. Kirk (retired), J.D. Jorgenson (retired), and C.A. Tuck. Data Series 140 2014   Accessed November 2014  at http://minerals.usgs.gov/minerals/pubs/historical-statistics/#copper

USGS 2014c.  U.S. Geological Survey “Zinc Statistics” April 2014 Compiled By DiFranceso, C.A.  Plachy, J., Gabby P.N., Bleiwas,D.I., Tolcin, A.C. Data Series 140 April 2014 http://minerals.usgs.gov/minerals/pubs/historical-statistics/#copper

Utah 2011.  State of Utah, “Groundwater Quality Discharge Permit UGW350011 Kennecott Utah Copper, Magna Utah, January 2011,  Accessed November 2014 at http://www.waterquality.utah.gov/GroundWater/gwpermits/kennecott-tailings/kennecott-tailingsSOB.pdf

Valero et. al. 2011.  Valero, Alicia, Valero, Antonio and Domiguez, Adriana “Trends of Energy Costs and Ore Grade in Global Mining”, Centre Of Research Energy Resources & Consumption ( CIRCE), Spain, 2011, Accessed November 2014 at http://teide.cps.unizar.es:8080/pub/publicir.nsf/codigospub/0751/$FILE/cp0751.pdf

Vick 1996.  Vick, Steven G. Failure of the Omai Storage Dam Geotechnical News, September 1996, Accessed November 2014 at https://ejatlas.s3.amazonaws.com/docs/omai-gold-mine-tailings-dam-guyana/Failure_of_the_Omai_Tailings_Dam.pdf

Vogt 2013.  Vogt, Craig, International Assessment of Marine & Riverine Disposal of MineTailings Final Report Adopted By The International Maritime Organization, London Convention.Protocol, October 18, 2013 http://www.craigvogt.com/links/Mine_Tailings_Marine_and_Riverine_Disposal.pdf

Wei et. al. 2012.  Wei, Zuan, Yin, Guangszhi, Wang J.G, Ling, Wan, Guangzhi, Li  “Design Construction and Management of Tailings Storage Facilities For Surface Disposal In China: Case Studies of Failures” Waste Management An Research Vol 31 p 106-112 Sage Publications October 11,2012 http://wmr.sagepub.com/content/31/1/106.full.pdf+html

WISE 2014.  World Information Service on Energy Uranium Project, Chronology of Major Tailings Dam Failures, from 1960, updated 16 Nov 2014, http://www.wise-uranium.org/mdaf.html

Witt & Schonhardt 2004.  Witt, K.J. Schonhardt M. Editors  Tailings Management Facilities, Risk &Reliability, TAILSAFE September 2004 http://www.tailsafe.bam.de/pdf-documents/TAILSAFE_Risk_and_Reliability.pdf

World Bank 2006.  World Bank Group, Oil Gas  Mining & Chemicals Group, Background Paper The Outlook For Metals Markets Prepared For G-20 Deputies Meeting Sydney 2006,  September 2006 http://siteresources.worldbank.org/INTOGMC/Resources/outlook_for_metals_market.pdf

Posted in Center For Science in Citizen Participation, David Chambers, Lindsay Newland Bowker, TSF Failure Bibliography, TSF Failures Consequence | Leave a comment

JSC ENR & MAINE LEGISLATIVE LEADERSHIP PUSHING AHEAD ON HEARING OF RE SUBMITTED MINING RULE THOUGH IT HAS NO LEGAL STATUS BEFORE THE LEGISLATURE

Maine’s lobbyist/ extraction industry dictated mining rules were rejected by majority vote of the Maine legislature  last term.  In the interim new elections changed the party balance in the senate and reduced the majority in the house of its  legislature. Without authority, and contrary to the advice of Maine’s Attorney General, DEP simply re submitted the rejected rules with no changes.  This questionably legal deliberation is proceeding under LD146.
An alternative ‘”responsible mining” bill, LD750, has been advanced by physicist Ralph Chapman, a member of Maine’s legislature representing  a district which includes Maine’s only two prior mine developments both failed and one a superfund site.( The Callahan Mine, Brooksville and the Kerramerica Mine Blue Hill). The bill, as Rep. Chapman characterizes it, represents a paradigm shift from the obviously failed “punitive  model of deterrence via payment for damages to one that attempts to prevent outcomes which will likely  compromise environmental security. and/or pose challenges to environmental security that  cannot be managed by any known proven technology.
Here is Representative Chapmans  framing of his bill at a hearing before  Maine’s Committee of jurisdiction on Monday March 30 in Augusta.
IP – LD 750 Pt 1 of 3 http://youtu.be/Vxmcbldh8Ys 53m
 

..

The film was made by Eric A. Tuttle ,  one of several Maine videographers who have “Occupied Democracy” by filming public hearings sessions and posting publicly so Mainer’s unable to travel to Augusta can hear and evaluate for themselves.
At the end of his quiet professorial presentation, Rep. Chpaman in follow up questions with JSC ENR Committee members, had an an iconic exchange with Rep. John Martin that crystalizes the central issue: whether metallic mining is so valuable to the worlds economy that its pollution should be tolerated  for the “greater good” of having the metals or whether the world demand for metals should be met only through responsible  sustainable methods that insure environmental security now and in the future as closed facilities age and weather.
Representative Chapman summarizes his paradigm of repsonsible mining as founded on four common sense  principles:
(1) disallowing miners  and key consutant/sub contractors with bad track records
(2) allowing only those plans which can control or prevent contamination with known proven technology and
(3) continual acquisition of best knowledge and best guidance through  independent expert peer review ( independent of regulator and of mine proponent/operator) and
(4) a “life of mine” approach to oversight geared to  early recognition and response to contingences which fundamentally increase the level of environmental security risk.
Rep John Martin,  the original champion of Maine’s new mining statute challenged ” Aren’t you really just prohibiting mining, putting up barriers that make it impossible to mine in Maine?” ( paraphrased not transcribed)
Comfortaby, simply, non reactively, Representative Chapman replies: “Are you saying you don’t think there are responsible miners or that the mining industry is incapable of mining without pollution?  I don’t believe that.  I think the industry can attain responsible mining and I think we in Maine should frame our law to allow only that.  We should do it right if we are going to do it all” ( paraphrased)
The second part of LD750 proposes a moratorium on all mining permits until the statute can be realigned with its implementing rules,  In what may or may not have been an error in framing, the statute( Pl 2011 c.653)  provided a date certain (June 1, 2014) , for implementation of the statute but provided that its implementing rules required legislative approval before going into effect.  It stipulated that the old 1991 rules remain in effective until the new rules are legislatively approved.  This has left the old rules in effect without the law to which they refer in tact and with many areas of direct conflict between the statute and the old 1991 rules.
Bowker Associates wrote the following to Maine’s Committee of Jursidiction (JSC ENR) on the conflict in legal opinion as between DEP & Mining Lobby advocates on behalf of JD Irving and a lawyer retained by public advocate Charles Fitzgerald.to advise JSC ENR on interpretation of the statute..
Dear Members of the Joint Standing Committee on Environment and Natural Resources:
Further to yesterdays hearing on LD750, there is an obvious legal discrepancy between DEP/Irving Lobbyist interpretation of what applies under the status quo ( 1991 rules with new statute already law  as of June 1,2014) and what was opined to you by  Clifford Ruprecht, Esq. counsel to Charles Fitzgerald last term.
This alone calls for a change of planned course to insure once again that the JSC ENR seeks a clear and  legally binding alignment of the mining statute with its implementing rules as proposed in  LD750.  With this much legal uncertainty  on what would fundamentally govern any mining permit advanced, any consideration of continuing the status quo ( old rules new statute) is not an option in the public interest.
JSC ENR has no choice but to either provide a legislative cure as (proposed by LD750) or to suspend all work sessions and further consideration of the re submitted previously rejected rules until the Attorney General has ruled on this matter in a way that firmly binds DEP to a specific interpretation of law.
This letter from Portland Law Firm Roach, Ruprecht, Sanchez and Bischoff initiated by Bowker Associates(1)  opines that interpretation of the statute per normal rules of construction means the 1991 rules in their entirety ( not the mining statute that went effect June 1) now  governs any permit application. (ie any new permits would have to rely still on the pre-June1 revisions to Maine’s mining Law on which the 1991 rules rely). In the cpurse of public heraings  on March 30, 2015, Representative Duchesne wisely pointed to the circularity that would otherwise apply if this were not the case.
If Portland Attorneys are correct, this trumps Governor Le Page’s veto of proposed law in the  126th Session which sought this clear statutory alignment between the mining statute and its implementing regulations.  That is, if Mr. Ruprecht is correct,  we already have  the pre -mining statute status legally. If Mr. Ruprechts interpretation is correct that PL 2011 c.53 ( Ld 1853) is not “self implementing”  the slice and dice of the Maine’s environmental law that went into effect on June 1 cannot actually be applied to the processing and oversight of any permit.  Surely our own Attorney General can and should resolve this.  If the Ruprecht  letter is correct then we in effect already have a moratorium on implementation of PL 2011 C.653.
But given First Deputy Commissioner Heather Parents strong and repeated different interpretation, affirmed at the end by Irving lobbyist Tom Doyle of Pierce Atwood there is still uncertainty if nothing in  law actually binds DEP to the Ruprecht interpretation or even the Attorney General’s concurrence with it.
 I know you had no stenographer at yesterdays hearings but we have the video from which a transcript of exactly what both Ms. Parent & Mr.Doyle said .  My very clear memory ( this has been a key Bowker Associates issue from the outset so I pay very close attention to all that is said and written on this point) is that Ms. Parent more than once said that presently in processing a permit DEP would go by the new mining statute where there is a conflict.  Irving lobbyist Tom  Doyle  who had not planned to testify ( he said) thought it important enough  to affirm the same as Ms. Parent when he got up to  speak at the end of the hearing.  This is an untenable difference of opinion  with Maine’s environmental security and purse strings so highly at stake.
 Co-Cairs, Weslh & Savilelo , and members Harlow & Chipman know and hopefully have already shared with other committee members, how and why JSC ENR wisely decided last session not withstanding this  letter to call for the “moratorium” LD750 advcates now. ( That was also Bowker Associates advocacy)
It is on the basis of this letter that NRCM, Conservation Law  and other signatories to a 2nd  letter from the same law firm  have not, until the most recent hearing on March 30, called for the moratorium LD750 advocates ( by way of crystal clear clarification of intent).
LD750 is a certain path to legal clarity that is unambiguously binding on DEP.This alone clearly establishes that statute is the only way to resolve  this issue and avoid the chaos that will otherwise ensue.
JSCENR cannot and should not take any further action on LD146 until this issue is resolved in a way that is legally binding on DEP and all mining proponents in simple clear unambiguous language.
 
Just the existence of this conflict in interpretation is reason to adopt the the path Rep Chapmans bill LD750 urges.  To do otherwise puts Maine’s environmental security and Maine taxpayers at extraordinary and inexcusable risk.
I have copied other parties of interest to this further comment on LD750 includig Maine press who have covered mining and all official “interested parties”
Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager
Bowker Associates
Science & Research In The Public Interest
15 Cove Meadow Rd.
Stonington, Maine 04681

(1) Bowker Associates was pursuing a legal opinion of Mr. Roach of whether the BEP vote approving the rule was legal as substantive additions had been made without the MAPA required 10 day notice and also on whether a failure to reject the rules would trigger “the poison pill” and automatically make the rules legal.  Mr.Fitzgerald had agreed to fund that engagement of Roach under Bowker Associates direction and control but after conferring with NRCM and Conservation Law, Mr. Fitzgerald elected to go this route. Unfortunately there was never an official finding as to whether Mr. Roaches opinion is correct and legally binding on DEP and mining proponents.  ​

Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager
Bowker Associates
Science & Research In The Public Interest
15 Cove Meadow Rd.
Stonington, Maine 04681

Here are two additional portins of the entire hearing on LD75 on Monday March 30 in Augusta.

IP – LD 750 Pt 2 of 3 http://youtu.be/xbV_p6hFr28 1h21m
IP – LD 750 Pt 3 of 3 http://youtu.be/IgfSrnJWfbY 1h16
Posted in Bald Mountain Aroostook Maine, Bowker Associates Science & Research In The Public Interest, JD Irving, John Martin Maine Legisilature, LD146127th Maine Legislature, LD1750 Maine 126th Legislature, Lindsay Newland Bowker, Maine Mining Law, Maine Mining Rules, Mining Risk Management, Ralph Chapman, Responsible Mining | Tagged , , , , , , , | Leave a comment

From The Community Living With The Aftermath of the Mt. Polley Tailings Failure Catastrophe

Suffering ,Imperfections And Life’s Realities

By Lola Lawton

My children swam in a tailing pond for ten years before I knew the quarry was an abandoned mine tailing pond Deloro Ontario grossly contaminated with arsenic and arsenic compounds, refining slag laboratory wastes , lead, cobalt, nickel and copper, mercury and other metals. Gamma radiation hot spots were also discovered. The Ministry of Environment had taken responsibility for the abandoned mine site thirty years ago from 1988 until 1999. As a visitor to the community I had no knowledge. I asked a resident, ‘why is the water at the swimming hole that color?’ She said, “Because It is a spring fed pool.’”

Lola Lawton Lola lives in Ontraio but because of her experience  with the swimming hole that was a tailings pond felt a great  empathy with the community around Mt. Polley  and has been active with others in trying to understand what it all means for the community going forward. Her film is an expression of her personal grief and  an eloquent testament to the confusion and fear of a community living with the uncertainty of one of the greatest mine catastrophes in recorded history https://youtu.be/I-z3kbDDR1g) Once upon A Time video tribute Mount Polley Mine Disaster Lola Lawton is a parent teacher for kinetic learners. She advocates for the fair and equal treatment of all peoples, to have access to clean water, fertile soil and fresh air. She writes children’s literature and poems and has created The World’s largest Four Directional Dream Catcher. She is passionate about First Nations and Inuit, Metis childhood nutrition.

Posted in Imperial Metals, Mt. Polley Tailings Dam Failure Impacts | Tagged , , | Leave a comment

ANY HOPE THAT MAINE’S JOINT STANDING COMMITTEE WILL LISTEN TO “WE THE PEOPLE” AND THE ATTORNEY GENERAL ON RESPONSE TO UN CHANGED RE SUBMITTED MINING RULES?

To whom it may concern,

The agreement that the Environment and Natural Resources Committee chairs, Senator Tom Saviello and Representative Joan Welsh, made with me that my mining bill (LD750) would have a public hearing prior to the work session on the re-submitted rejected rules from last term (LD146) has been broken: LD750 has not yet been scheduled for a public hearing (though it is in the hands of the Committee), and LD146 has a scheduled work session this Thursday, March 19, at 2:30pm.

Representative Ralph Chapman

March 15, 2015

That was not just a promise made to you Ralph, it was a promise  made to “we the people”​.
 
Committee action on LD146, though,  requires exactly what LD750 is aiming at.
The law, MAPA 257,  requires that the JSC ENR speak specifically and clearly to how the re submitted rules align with legislative intent.
The Attorney General has advised JSC ENR of their duty in this regard.  They cannot avoid speaking to whether intent was
(1) that the same standards of environmental protection in site of development  and natural resources protection law were expected to apply in the mining irules in a way that better acknolwdged the ultra high risk and complexisties of mining or
(2) whetherthe intent was, as mining interest lobbyists intended,   to remove the insurmountable barrier these standards pose to maine’s known metal depsoits because of the high arsenic high sulfide geochemistry of these deposits and their proximity to protected surface waters.
It’s as simple as that.
That is the only clarification needed, really, and all else falls into place with perfect clarity.
This drifting off into this one’s list of 10 specific changes and that one’s additional 5 is just smoke and mirrors diverting everyone’s attention from this one core confusion.
 
To proceed on the basis that this one’s list or that one’s will “fix the rules” in a way that prevents the issuance of permits for mine plans and mine operators that will as, Dr. Moran has warned, GUARANTEEE non remediable long term ongoing breaches of environmental security at the publics sole expense is a breach of public duty to this generation and to future generations.
 
JSC/ENR has breached its public duty  three tmes  already:
(1) once in not recognizing immediately that they did not possess the technical, scientific and legal knowledge to write  mining law in a hurried last minute lobbyist paid initiative ( or at all); the legal authority to write law is not the same as the moral and ethical obligation to write law that is wise, well informed and sound with respect to the public interest.
(2) once on LD1302 a foolishly misinformed statutory fix ( instead of repealing PL 2011 c.653 and starting over);
(3) and last session in not meeting its duty under law to clarify whether or not legislative intent is for mining to be subject to the same standards and policy as govern site of development and natural resouces protection law t.
We can’t assume, and I have no knowledge that, this planning  session announced with no public notice, will be more of the same pressing along the same disastrous course.  It does not bode well, I’d agree. (  The session this Thursday is a planning session not a work session)
I still see room and opportunity for a final and workable course correction on mining but it cannot happen unless this JSC ENR finally says with perfect clarity and in plain English whether it intends that mining be held to lower standards of law viz site of develoment and natural resources protection law or whether its intent was to recognize the unique complexities and very high risks of minng  in a mining specific rule to these same standards.
 
We can still do that and we have to hope that JSC ENR finally gets that.
I have copied all 256 interestedparties and all of Maine’s journalists who have covered mining on this email.
Whatever happens, the work you, Christoper Johnnson, Ben Chipman , Geoff Gratwock and before you James Boyle have done to elevate and reframe the discussion of mining policy away from the false information of modern technology  and modern law making mining safe  viz environmental security and that mining means jobs toward the geochemical realities of sulfide mining in general and our utra high risk deposits in particular.  You are on my wall of heroes and your work has made a huge difference in the public conversation on mining.  That was the story of the 2/25 hearings.  So many speaking in heir own authentic voices beyond petitions and canned  agendas.
The law is always slow to come to terms with realties like this and often makes  fatal mistakes in both directions, too much and too little effective envionmntal security. What you all have accomplished has definitely changed public expectations and public understanding and will therefore eventually be law.
I wasn’t at the hearing but I understand a loud cheer went up wen Chris Johnson gave his eloquent testimony.  It is clear that is what the public demand of all its law makers.
UPDATE 1843 EST 3/17  There will be a public hearing on Rep Chapmans bill , LD750on the 30th .  There will be no work sessions on any other mining bill before that.  The planning session this Thursday may be attended any one.  This was co chair Welsh’s promise and she has delivered/  Thank you Co-Chair Welsh.  Thank you!!!!
UPDATE 03/27/15  It seems very clear the JSC ENR has no intention of clarifying policy as the law requires and  have pre decided an ought not to pass on Chapmans bill and its fundamental call to policy clarifications.
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Maybe JD Irving Should Have Spent $1 million Evaluating the Financial Viability of Bald Mountain Instead Of Lobbying the Maine Legislature for Sanction To Pollute Groundwater

Complex CU-Deposit Financial feasibility:Arsenic Limits In Concentrates:Bald Mountain

Interesting article on attainability of international concentrate standards on arsenic.  Another perhaps insurmountable challenge,  and certainly a great limitation on possibilities for, Maine’s Bald Mountain where arsenic levels present problems without solutions in other areas as well eg. tailings deposition & mine water management.
More and more mines are trading in concentrates ( most of chile’s market is in concentrates) which must meet certain standards in % of metals concentrate and absence of other impurities to be saleable .
Here is an example of  the penalties ( lost value) for various levels above established global standards.
Arsenic (As) 0.10% $ 5.00/0.1 % ( up to 0.5 % As) $ 11.00/ 0.1 % ( >0.5 % As)

Bismuth (Bi) 200 ppm $ 4.00/ 100 ppm (up to 1200 ppm Bi) $ 6.00/ 100 ppm ( >1200 ppm Bi)

Selenium (Se) 0.05% $ 5.00/0.01 % Se Antimony (Sb) 0.10% $ 4.00/0.1 % Sb

Cadmium (Cd) 200 ppm $ 4.00/100 ppm Cd Lead (Pb) 1% $2.75/0.5 % Pb

1/ Dry Metric Tons

( the first number is the standard(e.g. o.10% for arsenic, then the penalties per metric ton for two ranges of exceedances e.g $5.00 per metric ton for every .1% above ,o.10% up to  o,5% and $11/ton  per .1% above.5%.  With average costs per ton to produce at $20 for copper these penalties are significant.

http://digitool.library.colostate.edu///exlibris/dtl/d3_1/apache_media/L2V4bGlicmlzL2R0bC9kM18xL2FwYWNoZV9tZWRpYS8yMTE4NzY=.pdf

Coupled with the general outlook for copper and the expected emphasis away from de novo mining toward expansion mining of existing operating mines and re-mining of high-grade wastes at closed and operating mines, the JD Irving owned Bald Mountain in Aroostook County Maine faces serious financial viability problems in relation to other deposits.  It certainly is not well positioned ( or geochemically resourced) to attract quality investors or quality miners in the forseeable future even under the super relaxed environmental security standards sought by present mining interests in Maine.
 
The $1 million+ JD Irving has spent with Jim Mitchell and Tom Doyle on lobbying for relaxed environmental security standards would have been better spent hiring mining economists  and other experts to understand the deposit  itself and its possible financial and environmental viability viz world copper markets and what drives them.
 $1 million in lobbying the Maine legislature  is a lot of money for a deposit that is most likely non competitive in the present global climate and market standards for copper.
Just sayin’
If UMaine or DEP or Irving et al are interested in the actual potential financial viability of Bald Mountain, I have a long list of brilliantly well qualified mining economists I can refer them to.  $1 million spent talking to these guys would go much further and provide better results  than lobbying our legislature for the privilege of polluting groundwater under mining areas feeding multiple pristine watersheds.
Wondering whether  George Kendrick of Stantec who has been part of he lobbying tab for JD IRVING encouraged them in this direction and if not, why not?
If Irving et al had been looking first to financial viability in todays global marketplace instead of keeping our legislature and some 200+ of us actively engaged NGO’s and citizens chasing our tails over the agenda they chose instead, maybe by now we’d have the most remarkable and well thought out legal framework  for metallic mining in the world.
Just sayin’
March 8,2015 at Cove Meadow
Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager
Bowker Associates
Science & Research In The Public Interest
15 Cove Meadow Rd.
Stonington, Maine 04681
Posted in Aroostook Resources Ltd., Bald Mountain, CU-Arsenic Standards For Concentrates, George Kendrick, global copper market outlook, JD Irving, Mining Economics, Mining Financial Feasibility, Mining Risk Management, Pierce Atwood, Stantec, Tom Doyle | Tagged , , , , | Leave a comment

Toward Better Measures of Financial Feasibility : Finacial Risk=Environmental Risk

Our current work  at Bowker Associates has been a study of the relationship between mining economics and environmental risk.  We have been looking at this through the only century long compilation of adverse environmental consequence, Tailings Impoundment Failures, 1910-2010. It is well known and undisputed that environmental damages arise mostly from non revenue generating aspects of a mine: its tailings, waste rock and wastewater management.  When there are cash flow crunches, in the absence of regulatory controls which insure continuing adequate levels of mine waste management stewardship, mines that are less adequately capitalized avoid or are unable to attain “best practices”.  To my mind this is the Mt. Polley story.  The record is clear that they have been skating on a thin and vunerable balance sheet since their near bankruptcy following forced closure of the mine due to falling prices in 2001.   The record is clear that their engineer Knight Piesold had encouraged a redesign of the TSF and a reassessment of its Dam Hazard Classification Rating which would obligate the company to a set of specific practices appropriate to a its higher rating as well as requiring more frequent independent dam inspections.  ( Mt. Polley was grandfathered under new requirements because its permit was already active when new statutes were passed)The record is clear that Imperial/Mt Polley Mine Corporation, Mt. Polley resisted and avoided these recommendations and that the issue was cash flow.  In 2013, before the failure, Imperial Metals announced that it could no longer even fund production at its operating mines ( Sterling in Nevada, Huckleberry and Mt. Polley in B.C.) out of cash flow and would have to go to market keep its operations going and meet the outflow necessary to get Red Chris permitted and on line. 

 

In the course of our research we happened to stumble on an NI 43 101 technical report  filing by Avanti for its  Kisault Mine, a previously mined B.C. site with  a permit pending before the B.C. Ministry of Mines.  We were  shocked  at the very poor caliber of work in this report on “financial feasibility” and on further inquiry found what looks like, in effect, a hostile takeover by its unscrupulous only source of funding a TSX V listed venture capital company.  In effect the entity that applied for a permit no longer exists and has no capital at all.  The Board and key leadership positions were suddenly replaced on December 1, presumably all appointed by the venture capitalist .  There is nothing in the present B.C. mine permitting structure that will brinf this under review even though this mine will become, by 2080 a perpetual treatment mine.  A company that doesn’t even exist now surely can’t be relied on to eiher open and manage this mine responsibly or provide for perpetual treatment from 2080 into perpetuity.

 Few regulatory structures globally have clear or well defined financial capacity standards on entry ( issuance of a permit) and none we have seen include any recognition or understanding of how a disruption in financial viability at the company or mine level can manifest in catastophic environmental loss if left unattended.

 

British Columbia has no criteria at all which address financial viability with a view to environmental security. It apparently assumes the efficiency and quality of bank and securities markets will ensure that all operators are financially qualified to operate a mine.  They are apparently going to allow Kitsault to continue to operations.  They are apparently not concerned that Imperial Metals doesn’t have cash flow or access to capital still, by its own declarations, to even keep the mines in production.

 The following  is correspondence with a long term member of the B.C. Securities  Commission and a long distinguished engineer ( An FEC)with whom I bat ideas concerns and good papers back and forth.  This correspondence is about a superb paper that I think offeres some real touchstones for building appropriate financial capacity standards into the mine statutes and regulations.  I copied the folk at Info Mine on this, asked them to include this paper in their online library and asked them to please read the Kisault NI 43-101 in light of this brilliant paper.

 Dear Roy,

Thank you for sharing this wonderfully rich and insightful paper:

Samis, M., Martinez, L., Davis, G. A., and Whyte, J. B. “Using Dynamic Discounted Cash Flow and Real Option Methods for Economic Analysis in NI43-101 Technical Reports.” In The Valmin Seminar Series 2011-12 Proceedings, The Australian Institute of Mining and Metallurgy, Publication Series No 3/2012, 149-160 accessed December 2014 at http://inside.mines.edu/~gdavis/Papers/ValMin.pdf

And  thank you for your ongoing exchange with me on financial capacity and environmental security.  As an expert  and as a co-creator of NI 43 101 in the course of your long term tenure on the B.C. Securities Commission you have a profound understanding of the degree of reliance mine regulation places on the workings of exchanges to pre select viable mine projects and viable miners.  B.C. as you know has no financial capacity requirements in its mine permitting and oversight process relying entirely  on the posted reclamation security as satisfaction of “financial capacity” concerns.

This brilliant paper( Samis, Whyte, Davis, Martinez), which I hope has been or will be widely read and deeply considered by environmental advocates, mine regulators and most especially by those engineering firms who prepare the NI 43 101 technical reports, really crystalized and clarified my own thought on this critical “orphan issue” of environmental risk management of metallic mines, especially their TSF’s.

My notes & quotes and commentary.

“​A further requirement under NI43-101 guidelines is that the technical report must inform the investor about the economic viability of the resource given a suitable project design and using reasonable assumptions about the current and future economic environment. This is an important requirement as it underlies the actual definition of a mineral resource: a mineral occurrence can only be declared a resource if it can be demonstrated that there is a reasonable prospect of economic extraction.”

“It is notable that the analysis supporting conclusions about the possibility of economic extraction is often not performed to the same level of sophistication as the technical analysis supporting conclusions about the quantity and quality of mineral resources.. ”

This point applies in general to mining analysis ..enumerating the volumes of mineralized ore with thousands of beautifully done 3 d graphs and drill core projections and colored  block  models is not the same as “identifying a resource”  It’s not a resource if it cannot be recovered profitably and with adequate levels of environmental security.   That’s just the starting point of “viability” not the proof of viability.

The level of sophistication point is certainly true of the qualifications and caliber of analysis offered in the Kisault NI 43 101.  The “qualified person” standard” has to reach for something more like the caliber of the authors of this excellent paper or you yourself who understand mining thoroughly who are real mining economists. In addition to indepednedent  dam review committees over a mine’s life there needs to be an independent team of qualified mine economists   over the life of a mine.  A “Financial Review Committee” with the mix of skills and expertise of these three authors would seem to be ideal.  I rarely see any interdisciplinary  cross fertilization in any part of “mine vetting”  There is a sort of insular cacooned  “do it ourselves” mentality among a small group of engineering firms .  It needs and NI 43 101 should require expertise from “first source” QPs like this team, like you, like Richard Schodde and others who are “mining economists”.

Their observations on the simplest flattest least insightful tool used in what analysis is done  also has the seeds of what I hope might begin to  evolve into a set of “financial capacity” criteria for use in mine permitting and life of mine oversight..

“Static DCF ignores randomness in cash flow variables: The reliance on only the expectations of uncertain cash flow variables such as metal price excludes a more detailed description of their randomness in the cash flow analysis”

“Static DCF ignores the effects of contingent cash flows and flexibility: Projects incorporate contingencies that cause the structure of cash flow to change with variations in the project environment”

( to me as a risk manager after my deep immersion with Dr. C. on 100 years of TSF failures this is the key issue in evolving financial capacity standards for entry ( issuance of a permit)  and for ongoing risk management viz environmental security)

​”​Static DCF risk adjustments do not recognize the dynamic variation of cash flow risk through time: The use of a single discount rate implies that project cash flow uncertainty increases through time in a regular manner. However, most mine valuation professionals would agree that the cash flow uncertainty changes in a dynamic and erratic manner due to changes in metal grades and prices, operating costs, mining method, exhaustion of tax shields, and tax and royalty rates among other things. A risk adjustment method that responds to changes in cash flow uncertainty would be preferred”.

This is exactly what Dr. C. & I have mapped as the main effect of the modern mining metric on environmental security ( as indicated in manifest loss from TSF failures 1910-2010..if you start with a financially marginal permit holder and or a marginally feasible mine project the environmental risk life of mine is that much higher..”proven reserves” are not “cash in the hole”.  Cash is what is needed to weather these contingencies and continue a high level of stewardship when the crunch is on.

The author’s observations on need for a more dynamic approach to understanding the ‘sensitivities” of a particular project are also foundation seeds for  regulatory “financial capacity standards”

​​

“ single-variable sensitivity analyses superimposed on Static DCF calculations are a useful, but limited, way of describing the uncertainties surrounding a mineral project. “Other analyses” could include Dynamic DCF or RO NPV calculations that incorporate uncertainty analysis techniques such as Monte Carlo simulation or risk adjustments tuned to unique project uncertainty characteristics”

​​

MCE standards are part of the norm in mine planning and TSF design standards but as these authors affirm the range of random events that in turn affect cash flow ( and therefore “environmental security” ) is not now part of the process of entry decisions on “overall viability” ( financial+environmental security) or ongoing “contingency monitoring”( risk management)

I could not do justice to the full value of the approach these authors advocate and hope it will be widely read and deeply considered especially by mine regulators who assume  that financial markets work properly to decide which miners are going concerns and which are not.  A few highlights with greatest bearing on  adequate risk management and the maintenance of adequate financial and environmental security ( you may have gathered my premise is that without  financial security there is no environmental security.)

“Traditionally, quantitative risk assessment within a Static DCF model has been limited to scenario and sensitivity analyses.However, they do not provide any guidance on project risk since they do not define nor provide a summary measure of project risk. ”

*********************

Additional Resources On Valuation of Mining Companies & Mineralized Assets

This is a really excellent primer focused on valuation of the mining company ( or from the regulators perspective, “the applicant” The financial risk at a mine which equates to and can manifest in environmental loss  resides partly in the company itself  and partly in the mineralized asset under consideration for permitting.    Both have to be considered ( and neither is now in B.C. nor adequately considered in most regulatory structures.

Who owns and is proposing to develop a given mineralized assets can have as much bearing on “environmental risk” as the geochemistry of the assets and its proposed mine plan and plan of operation.

His paper looks at “valuation” life of mine from the investors perspective  ( or the perspective of an exchange seeking to have quality and transparency in its operations).

“Environmental Security” requires  life of mine ability of the miner to weather the swings  uncertainties and contingencies that affect all miners ( the mega factors over which no individual company has control) and an asset that is only viable in some of the market  conditions that are likely to be encountered over the mine life. ( eg mines that have had or are likely to have  a pattern of price related active and inactive periods involve higher financial risk and therefore higher environmental risk

risk.http://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf

West Australia Requirements For Availability of Adequate Financial Resources

http://www.austlii.edu.au/au/journals/AUMPLawJl/2000/54.pdf

Above is one of many cases interpreting and applying Warden decisions under the  178 Mines Act to deny or take back approvals for exploration & mining based on financial  capacity..available resources. .  In this as  a permit holder had not been able to raise exploration capital through the exchanges and another entity petitioned for repeal of the permit holders rights for failure to evidence capacity to explore the resource I accordance with its promised programme of exploration.

IN others I have read and may soo abstract in a directror of decisions on “adeaquate financial capacity” there are seeds of  better standards for “financial capacity”..ie more thna a letter from some accountant saying that resources are adequate, current resources ( ie not just the most recent annual report)..iei driving toward where is the capital for this specifc project.

Other implied standards in these is the limit of the wardens authority..iei not to certify the over all capacity of the company  just the allocation and availability of resources for the project  which is the subject of the application.

Glad of any examples of useful and appropriate standards you might share via post here

Posted in Metals Price Forcasting, mine Company Valutaion, Mine Feasibility, Mining Economics, TSX V Venture Capital | Tagged , , , , , , , , , , , | Leave a comment

Finding & Fixing At Risk TSF’s Still Permitted & Still in Operation

TSF Things Aren't Always What They Seem to be

..sometimes when the storm passes and the dust settles you find the path you have been following has left you standing at the edge of a precipice instead of in the middle of the clearing you imagined the path would lead you to. So it is with our work on TSF’s. We have arrived at a precipice of inconvenient truths and almost incomprehensibly difficult and chaotic barriers to acceptable solutions..it is not even clear that there are acceptable solutions only choices among very unacceptable but still essential inerventions …. and then what happens…?

The only way to  understand the whole of a problem, and therefore be able to pose meaningful solutions, is to conduct an inquiry that is truly open. Such an inquiry is guided by questions every step of the way that don’t contain some idea of what we think the answer is. That is the process we have applied to our inquiry about the magnitude of public/environmental liabilities in tailings storage facility (TSF) failures and whether that can be pre funded in some way. That was the work we began the day of the Mt. Polley failure.
My 30 year career is in Risk Management/Environmental Risk Management, Finance and Public Policy with a strong theme of multivariate analysis and other forms of systematic thinking applied to “social problems” and to the formation of sound workable solutions. From that framework, I started looking at Mt. Polley as a case study. My aim was to encourage leaders in policy and advocacy here in Maine to take a fresh look at our 2012 statute and the poorly informed rules that thankfully were not accepted by the Maine legislature (1). Sort of saying look at our statute and regs through the prism of Mt. Polley: here’s an example in history; here’s how it happened; here is what has happened; here is what they have in place to respond to it. What about us here in Maine? What does our statute say about TSF’s? Would our statute have prevented this? Would we have been better prepared to deal with the consequences?

In conversation with a leader in the responsible mining movement for whom I have immeasurable respect and admiration,  that evolved to looking at the issue of “polluter pays” and to exploring the possibility of funding the enormous unfunded and presently unfundable costs . Specifically we were exploring the feasibility of some sort of risk pool since historically “polluter” never pays and except for a few very large miners like Grupo, “polluter” can’t afford to pay without going bankrupt.
I knew from the outset that the established frequency rates of failure, popularly cited by “the industry” as 1.2%/TSF over the past 100 years, and 0.5%/TSF for” the modern era” were way outside the rules and conditions that would normally apply to risk pools. ( Risk pools normally have to follow the same rules as apply to insurance (events of chance, high consequence but not catastrophic  among a very large pool of “insureds/members”). By definition frequencies this high speak to a century of human error as the cause of failure and notables like Mike Davies have said as much. Every dam review committee concludes that. TSF’s fail because of human error not “Acts of God”. TSF’s fail because miners fail to apply known best knowledge and best practice in the design, construction and management of TSF’s.

I knew that the “universe”, claimed by the mining industry to be 3500 TSF’s was too small for efficient pooling even if one liberally applied the same procedures used to price insurance policies to estimating loss from TSF’s and figuring out the per participant costs. I knew that no single state or province was large enough for an efficient risk pool but forged ahead to see how many individual TSF’s it would take to achieve some tolerable level of efficiency.
To evaluate the feasibility of polling costs first requires  estimating how much loss had to be pooled.  We put that that very conservatively at  $2.5 billion for this decade.. That’s assuming a a conservative average loss of $300 million for a large failure.  In the past two deades among 12 large failures we found economic cost data on 6 that totaled $2.4 billion.  That’s an average of $400 million per large TSF failure.

Quite apart from the fact that there is no accurate updated profile of TSF’s , it makes no sense to think of loss “per TSF” with such diversity in total TSF capacity among standing TSF’s. Mt Polley was only about 59.6 million cubic meters at failure and obviously would not have the same fair share as a 1 billion cubic meter Freeport McMoran TSF. The failure rate is more appropriately expressed on a failures per million tons of mine production (5) ..

For a miner as small as Imperial, already skating on a thin balance sheet to think about financing such a large loss out of cash flow is virtually impossible.  Pre failure they had announced that they could no longer meet their production goals out of cash flow  and would be seeking $100 million in credit markets.  Their one principal investor took that debt.  There was no sign of market confidence.  Their stock plummeted and remains on watch. They announced this week that they have spent $47 million already on the Mt. Polley clean up and have budgeted for up to a $100 million total cost.  They are expecting to open Red Chris ,a much higher risk mine with only $10 million cash on hand and no access to capital markets while Mt Polley remain closed.  Even if clean up costs are $100 million as they hope it is a questionable proposition financially.

Only the very largest miners in the world can absorb the costs of large TSF failure losses. All choices are equally unacceptable. If held to full account at the original estimates of costs ( which are more in line with actual loss history and documented costs in the past two decades) Imperial would obviously have to declare its little subsidiary bankrupt.  If a miner is not held to account for natural resources damages cased by negligence then the only atlernative is that tax payers pay..either by just accepting the damage of absorbing essential remediation and clean up costs.

That production cost, $20/ton, is beginning to undermine the “the mining metric” of “growing the resource through large scale production at ever lower ore grade standards. That 30% rise in production costs mainly attributable to higher energy costs  is squeezing Chile and driving their huge capital investment in mining infrastructure and their current effort to justify deep ocean dumping of tailings ( instead of refurbishing and making safe their existing TSF’s or building new one,and squeezing even big miners like U.S. steel who just sought credtor protection on all their Canada holdings.

The margins ae thin for all primary metals.  Small miners just don’t have the cushion or access to capital  for the levels of stewardship required for TSF’s and certainly no capacity to self fund any large loss.

We know that the average spill is about 1/3 of total contents ( Rico/Benito/Diez (2011). All significant spills for which we have costs data from court documents have been over $150 million in total public costs and the average has been $400 million. So there’s no question it makes no sense as a matter of public policy to even think about financing losses. The only feasible strategy is to lower the frequency and severity of losses though application by force of law to best knowledge best practice in every phase of a TSF life..design, construction, active life, stand by life, pre closure and closure.
The risk is in standing operating already permitted TSF’s which like Mt. Polley, maybe weren’t “at risk” when they reopened in 2005 but only became at risk accommodating the greatly increased production volumes per year and exponentially greater expansion of its old TSF designed in 1992. Looking at Mt. Polley as a “case study”, looking at their pancake thin 2013 balance sheet now pushed even more by the costs of repairing the TSF alone  beginning clean up and even assuming the facility might need only minor structural improvements to be made safe for continued operations, where does Imperial get the money to do that? To make the fundamental structural corrections needed to make it safe for operations and safe for closure.?(4)

 

The one thing that seems very very clear is that we need to start by screening and identifying possibly at risk TSF’s, try to get a sense of costs to prevent failure and work it out from there. With a push from EPA  Bingham Canyon addressed its at risk south impoundment that had served since inception of the mine almost 100 years ago  The same was done at Red Dog in Alaska ( also ith a push from EPA).  But  how does a little company like Imperial do that?   Are their mineralized assets  of a quality that would attract a white knight willing to take on those liabilities?

 

Risk identification and loss prevention is clearly the best strategy but how does that get done without huge market disruptions and some public cost? .

 

The other thing that is clear is that to identify and repair at risk currently operating TSF’s will be messy, painful and complicated

 

.——– Footnotes & End Notes ——-
(1) https://lindsaynewlandbowker.wordpress.com/2014/08/15/lessons-for-maine-mining-statute-regulations-maines-bald-mountain-in-tailings-dam-failues-this-week-at-mt-polley-british-columbia-and-buenavista-del-cobre-on-the-u-s-border-in-mexico/
(2) https://lindsaynewlandbowker.wordpress.com/2014/10/27/the-calculus-of-environmental-risk-we-the-poeple-pay-180ton-of-ore-produced-miners-pay-15/
and we looked only at the frequency of large failures which we defined as more than 1 million cubic meters in outflow.
(4) working per ton of ore produced allows for a more reasonable portrayal of costs among all TSF’s of various sizes and dimensions and to look at costs across a more reasonable base not of “all TS’s) but all TSF’s likely to have a consequential loss..iei those larger than ( we included in our analysis only TSF’s greater than 1 million cubic meters in capacity. We estimate that at 38% of all standing TSF;s. In other words a more likely per TSF denominator would be 1330 and the per tsf more like $2.19 million. And that still leaves the problem that a little facility like imperial at 59.6 million cubic meters shouldn’t bear the same amount as a 1 billion million cubic meter facility. Per ton of ore produced solves that problem .
(5) we are not making any judgment here on the structural soundness of the facility, only using Mt. Polley’s spread sheet as perhaps typical of small mines and trying to make the point that at risk facilities are going to cash strapped to take on any additional costs especially for work that may require a temporary interruption in use and therefore a further impairment in revenue.

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Tailings Impoundment Failure Rates: A New Look At The WISE & ICOLD Data

In the wake of the Mt. Polley tailings Impoundment failure on August 4, 2014, we have been working with the ICOLD/WISE data (see link at end for machine readable compilation) . Our aim initially was  to assess the feasibility of risk pooling to fund the huge unfunded and presently unfundable public and environmental liability in every TSF failure. This requires reasonable predictions of the number and average cost of TSF failures for a given  large group of TSF’s.  Most within industry researchers working with this data and publishing technical reports with reference to it have looked at frequency and at causes of failure, i.e. descriptions of what has already happened. Few have worked specifically with the cost consequence of public and environmental liabilities or with predicting future failures.

Only two presentations we found in the literature spoke to prospective consequence and consequence trends. Rico/Benito/Diego (2008)  used actual ICOLD/WISE data supplemented with additional research to create a complete uniform data base. They developed regressions to predict volume of spill for a TSF of a given height and capacity and for calculation of run out in distance (size of the area potentially impacted)

“simple estimations can be performed based on generic empirical relationships. In these equations, key hydrological parameters associated with dam failures (e.g. outflow volume, peak discharge, mine waste run-out distance) can be estimated from pre-failure  physical characteristics of the dam (dam height, reservoir volume, etc.), based on reported historic dam failures. This approach has been successfully applied to estimate  peak discharge (V)and outflow(DMax) resulting from water-dam failures [8,9,10].” .

V f=0.354*Vt1.008       r2=0.86 where Vf= spilled volume  vt=Total volume

Dmax=1.612*(H*Vf).0655     R2=.057  where h=height;Dmax-= run out flow in Km”

The above equation shows, that on average, one third of the tailings and water at the decant pond is released during dam failures”

http://www.academia.edu/6662478/Floods_from_tailings_dam_failures

Using an estimate of total volume at time of failure based on verified dimensions and stated freeboard( (59.6 million cubic meters) we did the failure volume (V) calculation for Mt. Polley)   It came out very close to actual: predicted failure volume  21.9  v  24.5 actual).  As more precise data on more failures becomes available the Rico/Benito/Diego can be reclaibrated, if necessary.

Doing the D max ( run out) using 45m ht ( from Piesold 2011..we know it was actually higher at failure as three raises occurred after that but wanted to use an authoritative figure) calculated failure outflow (Dmax) is 2.5 km..  By examination of the equation it is clear that for a given total capacity of a TSF, greater height  will result in greater runout ( and a large area of damage).  This suggests that TSF’s lie Mt. Polley’s rising at unplanned rates to meet determined production scheudlues may potentially create more envionmental damage in the even of failure than a newer facility with a much larger footprint and much lower height.
Rico et.al. began with a subset  from the ICOLD/WISE with the most complete profile of key variables and then did research on those dams to fill out what was missing.  They ended up with complete enough information for only 28 failed TSF’s.  If the actual standing inventory is 3500 as Morgenstrern(1998) has estimated and other researchers have widely used , that in itself is an important statistic.  That we have a complete data set for only .8% of he worlds TSF’s when they are historically one of the most consequential sources of massive non remediable environmental impacts, and the single largest source of presently unfundable public liability gives pause. 
That we don’t even have an accurate global inventory of TSF’s with basic descriptors like construction type, year built, original design height and volume, present design height and volume number says that producing mines and keeping them in production has a higher “public value” than the responsible risk management of these facilities. The issuers of permits globally have had this information always and it is long recognized that growing waste volumes from mines sites are a key issue in assessing environmental risk  and yet we have no government agency, other than  West Australia, that is systematically compiling  this critical environmental risk management information.
The second work we found looking at consequence in a resposble way ( or at all)  was A. Mac G Robertson (2011) who  transcended the limitations of the ICOLD/WISE data presenting a theoretical model on “potential risk” using maximum achieved height and maximum achieved total volume of TSF’s which we will describe further below.

LIMITATIONS ON THE ICOLD/WISE DATA AND FAULTY PAST USE OF IT

Our search for what is needed to evaluate the feasibility of risk pools for public and environmental liabilities, which are now largely both unfunded and unfundable, lead us to some insights that also have a bearing on descriptive interpretations of the failure data.  Our findings mainly affect the interpretation of the failures per decade and the popular claim that the data show improved performance in the last two decades attributable to better knowledge and better practice.  These claims have been based on frequency data alone which is not a complete or even best indicator of potential liability   Further both the numerator and denominator of those numbers are fuzzy and frail.  The denominator “3500” is really just  an informed best guess by Morgenstern in 1998 that has been used by virtually all other users of the ICOLD/WISE data as “gospel”  even though China had more tha 12,000 TSF’s by 2008 . The numerator, # of failures per decade is not a complete inventory even post 60’s but again  its the best number available so  it too is treated as “gospel”.  In the world of the statistics that we need to rely on to give some realistic shape to public liability exposure these are very “soft and fuzzy” numbers.  Coupled with the irresponsibility of citing only frequency it’s  not much to “stake a claim” of improved industry performance on.  

Also a close examination of the ICOLD ISE Itself  refutes the industry claim of improved modern performance attributable to better practices and better regulatory system of permitting and oversight.  As our restatement below shows the trend in fact is to an increasing number of major and large failures.

 

TSF Failures Increasingly Major  and large

Of those 39 incidents cited as proof of improved environmental performance by the mining industry, 1990-2010 , 25 (64%) were major failures, 12 of those , (31%) of all  the incidents last two decades were at the scale of catastrophic. The total costs for just 6 of the 12  large failures 1990-2010 totaled $2.4 billion , an average cost of $400 million per failure.  These losses, according to dam committee reports and government accounts are almost all the result of miner failure to follow known best practice

LOOKING TO RISK PREDICTORS IN INDUSTRY WIDE DATA

Taking Dr. Robertsons lead and going beyond the limitations of the ICOLD/ WISE data to the actual numbers the industry and its investors and analysts rely on it is very clear that public liability loss exposure is  shaped by two numbers:  ore grade and production volume  which have been spreading from each other in opposite directions since about 1950.  These two numbers in turn are what is driving the characteristics of risk in the TSF’s themselves:  Height and more importantly TSF total capacity.  As dropping ore grades force more and more volume of ore production for essentially a flat line production of refined product , more waste is generated and larger TSF’s are created mostly we assume, as at Mt. Polley  through expansion of existing TSF’s..

Correlation Matrix of Key TSF Failure DescrIptors/indicators

Variables tfail lrgfail Mxpri decpro oregrd pricyc
tfail 1 0.651 -0.137 0.503 -0.675 -0.14
lrgfail 0.651 1 -0.239 0.835 -0.789 -0.496
Mxpri -0.137 -0.239 1 0.020 0.130 0.666
decpro 0.503 0.835 0.020 1 -0.907 -0.222
oregrd -0.675 -0.789 0.130 -0.907 1 0.288
pricyc -0.149 -0.496 0.666 -0.222 0.288 1

Bowker Associates Science & Research In The Public Interest  October 2014

The two variables MXPRIC and PRICYC were an exploration of price as a predictor and    our data element PRICYC does have a strong correlation, -0.496, with the number of large failures. We coded PRICYC to try and capture the character of the price climate over the decade L 0=no change, 1= 1 decade of upward price, 2 =2 decades f upward price,3 = 3 decades of upward price and -1, -2,-3 for downward trends.  MAXPRIC was the highest price per ton for ore attained in the decade. MAXPRIC had very low correlations with the non price variables explained by a line almost parallel   with downward grade of downward cost per ton for production(3) essentially nullifying  price as a factor in predicting decade trends for all TSFS’s. ( Although of course on an individual mine basis price often makes a particular mine infeasible and results in either going on standby as at Mt Polley or not going forward with a mine application.)

We were interested to see how this “maps” for the whole of failures as the price of copper ( in constant$2010) maps exactly to the failure histogram. We believe on further analysis it will prove a useful indicator of operating stage of TSF life.  Specifically, we hypothesize that the combination of price/price trend and production will define periods of intense active use of TSF’s where a higher failure rate with  higher consequence are most likely to occur. and for identifying “at risk ” TSF’s.  The 0.496 correlation of PRICYC with consequence ( LRGFAIL=# of failures gt 1 million cubic meters)suggests that as well.

The bottom line is that when both frequency & consequence are taken into account the modern era performance is lower than at any other time in history and continuing in that direction.

Data on mine production is more solid and established over the entire 100 year period whereas exact data on inventory of TSF’s is not and probably never will be historically.  More importantly there is no comparison between a typically small  pre 1950 TSF and a modern TSF like Mt. Polley. On a per TSF basis adjusted for the smaller number of TSF’s pre 1950 the frequency is actually greater in the two most recent decades.005 as compared with .001 pre-1940. Consequence has been constantly escalating since 1960 therefore overall performance either way is significantly lower.

 

BY WHATEVER MEASURE ONE CHOOSES FOR FREQUENCY ALL ARE TOO HIGH TO BE ATTRIBUTABLE TO CHANCE:ALL DESCRINE 100 YEARS OF HUMAN ERROR

By definition, by the way, failure rates over this entire history as at least one other researcher  has recognized, are well above what is considered reasonably attributable to chance.  Rates this high over the entire history of mining by definition indicate human error at work ( ie an established pattern of  failure to take reasonable precautions to control off site damages with increasingly grave consequences).  Even the overall failure rate for water dams, .0001 ,is just barely in the range of what could be considered attributable to chance.

Azam/Li (2010) arrayed the ICOLD/WISE data into this histogram  of incidents per decade from 1900 to 2000 for a total of  218 failure incidents . http://www.infomine.com/library/publications/docs/Azam2010.pdf

azamLi2010icoldwisebydecade

The stat most frequently cited is that the overall failure rate for the century is 1.2% expressed with reference to the total number of mine sites, 18401.( What that is and who chose that number 18401 is a mystery we have not yet unraveled)

By  custom the pre 1960 decades are not usually included in analysis. rates. According to TailSafe 1136 TSF’s were built before 1950 and had failure rate of .0220.  That number is probably every bit as “solid” as the “3500 and any comparisons on a per TSF basis should use 1136 as the basis. We think it is important to understand TSF failures in the context of the entire century. 1960  in fact is key.It marks the beginning of the “modern mining metric” where demand  for metals is met with ever increasing production volumes relative to final output of  refined metals. It also marks the beginning of the ever increasing spread between ore grade and total production. and a dramatic change in the profile of mines generating production from a very few large mines pre 1960 to many more mine sites of widely varying size.  We are looking to use as much reliable data over the longest term possible.

The rates (2) cited as evidence of improved performace by the industry(failures/3500) are .01467/decade for the 60’s 70’s and 80’s and .0052/decade for the two most recent decades shown on the chart  This interpretation seemed  to warrant a closer examination  First, because frequency alone does not measure outcome.  Frequency and severity together measure outcome.   ICOLD/WISE have no data on  cost of failures  and only spotty data  on the size of the failure which most agree is a good surrogate for severity of TSF failures. There is general consensus within  the industry  that pursuit of profit at ever decreasing average ore grades results in larger and larger volumes of waste and therefore larger and larger TSF’s with a greater consequence in the event of failure. It is universally recognized that impoundment size is a principal  driver/ indicator of potential consequence..

In a keynote address at a 2011 Tailings & Waste conference, A.MacG. Robertson ( 2011 )http://www.infomine.com/library/publications/docs/Robertson2011c.pdf   looked at the entire century beyond the failure incident data just in terms of changes in “potential risk” over time  as indicated in the upper limits of height and volume achieved  per decade He estimated that the volume of “potential waste” per 1/3 century had increased  10 fold accomodated by a 2 fold increase in achieved maximum  height and a 5 fold increase in achieved maximum volume of TSFs per 1/3 century.   While pointing in the right direction and framing an excellent theoretical model for looking at “consequence of failure”over the entire century, it is not useable as an actual measure of consequence over the century nor did he intend that it be used that way.

This is the formula for “expected loss” (size of group,* frequency of loss* average loss for group). So with more data on both the standing inventory of TSF’s and on failed dams  this is exactly the formula for estimating total liability in any group of dams.  We hope to be able to explore development of a Risk score for TSF’s based on that and other data not yet compiled by any known source.  We are hoping to “round out” information on at least 28 more of already failed dams and develop a data base of at least 50 dams representative of the standing inventory.

Reading  the dam committee reports at WISE / ICOLDand surveying all the literature on TSF failures available online it was apparent  that the  greatest magnitude of loss for any given TSF failure  was in periods of active production of ore as at Mt. Polley.  Errors in the deposition of tailings and in the rate and size of raises were of  concern throughout the literature indentifying active operations as the most critical period in a TSF  where “best practices/best knowledge is most important in preventing TSF failures.  So we set about looking for some published and reliable data that might provide a more complete framing of these 218 TSF failure incidents against the periods in which TSF potential consequence is highest, in periods of actual production and in periods of price upswings.

APPRPROPRIATE STATEMENT OF FREQUNCY FOR TSF FAILURES

The first issue we considered is what basis to use for frequency. The table below compares three ways of looking at frequency.  Per TSF is customary in all literature we  have located via on line search and of course the most “normal” if we actually had “census” on TSF’s which we don’t.. So we wanted to explore other approaches. The table below, compares frequencees per TSF ( with a correction for the smaller number of mines pre 60’s) with frequency per mine site and frequencies based on production volume.     Per mine site is often used to cite century performance, 1.2% is the most frequently cited number.  However this is not as sensitive to the likely inventory of TSF’s over time so shouldn’t be used as a basis for stating overall performance either.  Overall performance should be stated on the same basis as per decade analysis.With the pre 1960 adjustment the failure rate per TSF is .015 pre-1960 v..055 60-s through 2010.  Much higher post 60.  Most researchers though only cite as “modern performance as  the 90’s and 2000’s and the failure rate 0.0057.

On an  ore production basis the failure rate over the century is an atsronomical .0449 mainly determined by the extremely high rates in the 60’s 70’s and 80’s.

Comparison Of TSF Failure  Frequencies Per TSF V.Per Mine siteV.Per Unit Production
 Decade TSFincidents Per/TSF*N1=1136   N2=3500 Per/SiteN=18401  Per/10 6 tons/10a CU mine production a to create closer    nominal scale
10’s 2* .0011 .0001 .0200.
20’s 2* .0011 .0001 .0200
30’s 4* .0030 .0002 .0220
40’s 8* .0070 .0004 .0381
50s 9* .0080 .0005 .0429
60’s 48 .0143 .0026 .1122
70’s 56 .0160 .0030 .0933
80’s 50 .0143 .0027 .0641
90’s 19 .0054 .0010 .0211
2000’s 20 .0057 .0011 .0153

Bowker Associates Science & Research In The Public Interest

October 2014

 

PRICE SWINGS  PRODUCTION COST TRENDS & THE  ENVIRONMENTAL RISK ENVELOPE

Knowing that the production at mines in operation is frequently interrupted by falling prices which can affect  most of a decade we first looked to data on copper prices over the entire century 1900 to 2000 and found that it mapped exactly into the shape of the historgram suggesting that  peaks in failure incidents  in the histogram in the 60s 70s 80s were in a period of price increase and that the two decades of the 90’s and 2000’s were in a period of general price decline  where it would be expected there would be a higher proportion of mines and TSFs in standby mode, ie not actively extracting.  This was the case at Mt. Polley which was reopened in 2005 after a 4 year period of no extraction due to falling market prices.

Copper Prices In $2010 dollars 1900 -2000

These periods of long upswings and long downswings in copper prices also presumably affect inventory of standing mines and inventory of standing TSF’s with the possibility of additions to both on long periods of upswing and the possibility of permanent shifts from “active” life phase to “closed” during long downward trends in price Here in Maine a long expensive history of exploring Bald Mountain, a small, low grade, high risk VMS deposit had reached a point in 1990 where Boliden was looking at the possibility of active extraction.  As the possible operation was too small and too uncertain they passed it off to a Denison subsidiary whose application was withdrawn in 1997 again citing falling metal prices. If that deposit had been a higher grade( and not had such extreme risk characteristics) it might have shifted into the “active life” phase with a small new “TSF” adding one new mine and one new TSF to inventory. On a down swing if a deposit is close to mined out it might just go into earlier than planned permanent closure of the mine site and of the TSF.

We are now in  a period of continued sustained upswing in copper prices and as a result of that we would expect both a higher frequency of failure, exceeding those of the middle three decades (60’s,70s, 80s) and significantly greater magnitude as grade has continued to decline over the past 1/3 century and the size of the standing inventory of TSF’s has pushed to greater heights and greater volume as compared to the size of these same facilities in the middle decade.(3)

This is very much the case at Mt. Polley and in the exit letter the designer of the original TSF who had continuously served as  consulting engineer to  the mine owner expressed concern about the size of the facility.   Further specific details about their concerns were found in the recently released 2009 annual inspection report submitted by the consulting engineer to the mine owner/operator.

What this all means is that degree of risk in any given standing TSF has a tendency to increase over time if it remains in active use because as production continues,  the TSF grows in both height and total volume.

 

ENVIRONMENTAL RISK ENVEOPE IS THE SPREAD BETWWEN ORE GRADE & PRODUCTION

Looking at TSF failures against global copper production 1900-2010 yields perhaps better data and more insight on actual trends in TSF failures and consequence implications especially when taken in conjunction with the world bank graph of copper production, ore grade and ore production over this same period.  All Failures has very weak correlations with everything except major failures because it includes mostly small incidents ( rather than failures) or very minor actual spills.  Both major failures and large failures have extremely high correlations with ore grade, mine production ( whether of copper only or of all metals), dam height at failure

Variables allmetals millions copper millions tons Mxpri pricyc $us2009 mxht oregrd tfail majfail lrgfail
allmetals millions 1.000 0.586 0.064 0.029 -0.212 0.524 -0.741 0.501 0.518 0.492
copper millions tons 0.586 1.000 0.092 -0.226 -0.769 0.967 -0.956 0.447 0.900 0.969
Mxpri 0.064 0.092 1.000 0.642 0.194 0.033 -0.023 -0.061 -0.014 0.018
pricyc 0.029 -0.226 0.642 1.000 0.517 -0.396 0.234 -0.149 -0.393 -0.325
$us2009 -0.212 -0.769 0.194 0.517 1.000 -0.795 0.694 -0.164 -0.736 -0.797
mxht 0.524 0.967 0.033 -0.396 -0.795 1.000 -0.922 0.346 0.860 0.950
oregrd -0.741 -0.956 -0.023 0.234 0.694 -0.922 1.000 -0.551 -0.889 -0.904
tfail 0.501 0.447 -0.061 -0.149 -0.164 0.346 -0.551 1.000 0.725 0.382
majfail 0.518 0.900 -0.014 -0.393 -0.736 0.860 -0.889 0.725 1.000 0.882
lrgfail 0.492 0.969 0.018 -0.325 -0.797 0.950 -0.904 0.382 0.882 1.000

Looking  at the world bank graph below we see that the spread between the blue line ( ore extracted (=waste volume)) compared with the flat refined ​copper line (red line) continually increases after 1960. The blue line ( total production of ore to produce the same level of ​refined copper), in effect is the same as the magnitude of consequence and more or less graphs what Dr. Robertson was conveying in his 2011 key note tailings conference address.

worldbankgraphgradeoreproduction

​Mapping the histogram of 218 TSF failure events ​(Azam/Li (2010) onto this graph​, ex​press​ing it on an incident per ​million tonnes of production basis​, shows that the two decades pre 1960 had a failure rate of .002 per ​million tonnes produced  ( adjusted for​ China which is not reflected in the TSF failure incident data) . and almost the same for the two most recent decades.( see table above)

Given the difference in magnitude of co​nsequence over the post ’60 period ( larger and higher im​poundments to handle more and more waste ​per unit ​of final metal) this is obviously a considerably worse​ risk management performance by the industry as a whole as compared with the pre- 1960 era ( looking only at TSF’s).

The middle period​ (60s, 70s, 80s) , of maximum TSF failure incidents was at a time of frenzy chasing an almost continuous upward trend in copper prices ( in constant $2010) and as ex​pected during such a big push on production the pressure on safety of TSF’s shows in much higher failures rate of .00878 per​ million tonnes(scaled by 100).

​The big price push over this period was driven mainly by demand from China who were both stockpiling and using at very high levels and by electrical infrastructure demands in developing/modernizing nations.. By 2010 China was a significant producer  of refined  metal in its own right with 25% of the global refining production and 10% of global production through mining.(after a very bad record of TSF failures not reflected in the ICOLD/WISE data)

This preliminary analysis  does not factor in the growing trade in copper concentrate solutions(secondary refining) at about 16% of total mine production in 2009  or the increasing role .and the increasing role of SW/Ex which was almost 20% of all production in 2009. Both of these changes in the profile of “mine production” have implications for TSF utilization and expansion

********************

End Notes & Links

(1)Here is a link to Tailing.Info’s excellent codification of the ICOLD/WSE data.  It is not current with that data. ICOLD/WISE  is immediately updated and revised as each new failure occurs so does not include Mt. Polley.Its consistent codification though does significantly improve the possibilities of using the ICOLD/WISE for systematic analysis.

https://drive.google.com/file/d/0Bw0jCpuVRzgEXzdZTHp3OGJtaGM/view?usp=sharing

Thank you Eric A. Tuttle for volunteering to transfer the Tailings.Info codification into useable spread sheet form.

(2) Number of Standing TSF’s .The industry seems to have  adopted “3500” as the “semi official” inventory of TSF’s and it seems, as far as we can see to originate form this paper by Davies et. al. citing a 1998 paper by Morgenstern.

http://www.infomine.com/library/publications/docs/Davies2002d.pdf

We have not yet checked the Morgenstern to see what he intended/believed the number represents.  It is not clear whether they intend their created number  of “3500 TSF’s globally” to mean all TSF’s between “Put in service” and ” closure” or also closed TSF’s. .  Everyone cites Azam/LI (2010) as the source who in turn cite this paper.

(3)Schodde, Richard “100 Years of Resource Growth For Copper Impacts Of Cost. Grade and Technology” ( http://www.minexconsulting.com/publications/Growth%20Factors%20for%20Copper%20SME-MEMS%20March%202010.pdf) has some fascinating insights on  HOW miners continued production as grades fell and prices varied.  His main point is that costs of production went steadily down making it possible to profitably mine lower and lower grades.and that a 6 fold lowering ore grades  allowed a 3 fold output  in refined copper.  He says “price is input” . We don’t believe this is a relevant predictor of TSF failures but his analysis is compelling. His slide presentation also has fascinating  bar graph showing that pre 1960 almost all copper production was out of  a few very large mines where as post1960 there is a greater number of mines and more diversity in the size of the mines.

(4)  technically it is not correct to say copper is “post peak” as reserves have not approached 50% reduction . Nor have they reached a point where continued extraction is not economically viable,  Extraction at current low grades of about .3 are still economically viable and we have reached nowhere need 50% .  Environmentally though it is post peak.  Because as that spread increase, the public side of the risk equation grows exponentially large and we hope soon to name that.  We know it is far greater than the 3% ( the rate of production increase in copper.)  We know that is what brings us mine proposals like Pebble & Northmet and Freeport McMorans plans for 2 billion cubic meter TSF.

Posted in Analysis TSF Failures, Bowker Associates Science & Research In The Public Interest, Copper Mine Production 1900-1999, Copper Prices 1900-2000, Frequency of TSF Failures BY Decade, ICOLD, Measuring Magnitude of Consequence TSF Failures, Tailings Failure Rates, Tailings.Info, TailSafe, TSF Failure Incidets 1900-2000, TSF Risk Management, Universe of Mine Sites, Universe of Standing TSF, WISE | Leave a comment

OPTIONS & STRATEGIES FOR LOWERING AND FUNDING PUBLIC & ENVIRONMENTAL LIABILITIES OF TSF FAILURES

The following is the introduction to the summary and conclusions section of a major paper we have been collaborating on with another and far more distinguished co-author who speaks mining truths always and only with humility and quietness. So chances are if we proceed to publish our work jointly this would never pass muster. But its the language that poured out of my heart and my intellect this morning as the only moral and political compass on what the Mt. Polley TSF failure tells us about the current global management of TSF’s and the as yet unmanifested unfunded public and environmental loss exposures of current industry wide business practices. We estimate that at $2.8 billion that will be passed off to tax payers globally from the presently standing inventory of TSF’s by 2020.

The mining industry is already beginning to throw up a dust cloud of talk about dry stack as “THE SOLUTION” and resurrecting the myth of “safe” deep water disposal..that is ocean dumping and dumping in deep pristine lakes a practice that even has blessing and sanction in GARD Guide and MEND despite solid and irrefutable scientific evidence of irreversible harm( Vogt(2013 http://www.craigvogt.com/links/Mine_Tailings_Marine_and_Riverine_Disposal.pdf ) and warnings by distinguished scientists in 2009 ( Moran et. al. 2009 https://drive.google.com/file/d/0Bw0jCpuVRzgERXRfVlZiUElEUl9nX09mOEFnSjlRbDFsU2lJ/view?usp=sharing ).

The industry will agree to other fixes on which there is widespread consensus including transparency ( public access to all raw data with a bearing on public and environmental liabilities) but they will continue to call for and rely on self regulation and will continue to divert attention away from the enormous unfunded public and environmental liabilities in the world’s standing and operating TSF’s.

After two months of careful and open inquiry into the “present state” on the magnitude of public and environmental liabilities and the current available funding for that the phrase that summed it all up was from Dr. Chris Seeley via R. Buckminster Fuller.

“By “business as usual,” I mean the kind of business that is bewitched by what Dr Chris Seeley calls, in The Fool and the Great Turning, “the three impossible fantasies”: the fantasy of limitless growth; the fantasy that actions can be taken that don’t have consequences; and the fantasy that human beings are separate from, and above, the natural world”(R. Buckminster Fuller)”

In the preceding discussion we have shown that except for very large companies with big balance sheets, lots of liquidity and diversified earnings (like Grupo) few companies operating TSF’s today ( or proposing them) have the financial capacity to absorb the total public cost of environmental damage caused by “human error” and resulting in failure of a TSF. We have shown that insurance is and can be only a very tiny and insignificant part of the total cost of such a loss and that publicly ordered clean up ( eg via a compliance order, is non insurable). We have shown that no prefunding is provided via spill response programs in Canada or in most regulatory regimes and that pre funding at the level of any state or province is not actuarially possible for a TSF failure of $300 million.. In short we have shown that there presently is no funding possible for large losses despite the public expectation/demand that “polluter pays”.

All prudent and reasonable persons ( the non bewitched) would agree, we are sure. that the current situation is not acceptable and cannot continue as is.

Business as usual is not an option.

It is not in the public interest to allow the development and accrual of large unfunded public liabilities that result from human error ( ie that are as most authors have said straight forwardly, preventable). The public expectation/demand that “polluter pays“ is a fair and reasonable one, a foundational one in any democratic nation founded on common law principles. It is ordinary that individuals and corporations accept not only legal but financial responsibility for the consequences of their actions. There is nothing out of order or unreasonable in the public/expectation demand that the “polluter pays”.

The present structure in B.C. and in most political jurisdictions is that the legal structure not only tolerates but facilitates shielding of the mine operator from financial liability for the consequences of preventable losses. Otherwise, bankruptcy would be inevitable. To reduce that to its plainest truth, the present structure of mining law and regulation places a higher social value on preventing bankruptcy of mining companies than it does on environmental protection and socially and economically productive uses of tax payer dollars. The present structure of B.C. law and law in most places is that there is a de facto public subsidy for the public consequences of mining failures. The public either accepts the loss or pays for the clean up that is essential to satisfy the electorate. The present structure is not “in the public interest”.

Businsess as usual is not an option.

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Posted in bannaism of maine, corporatocracy, craig Vogt, Dr.Chris Seeley, mining truth, Mt. Polley, plutonomy, politics of mining, polluter pays, Robert E. Moran, TSF Risk Manageent | Tagged , , , , , , , , | Leave a comment