British Columbia Mine Reclamation Symposium

Considerations in mine reclamation costing Brodie, John 2013

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CONSIDERATIONS IN MINE RECLAMATION COSTING   John Brodie, P.Eng.  Brodie Consulting Ltd. West Vancouver, B.C.   ABSTRACT Reclamation estimates can vary considerably for the same mine site. Owners and regulators typically have differing perspectives and assumptions concerning what should be included in the closure cost estimate.  It may be reasonable for a mine owner to carry one value on its financial statements as to their expected cost of reclamation and post a bond for a higher value assuming the government has to carry out the work.  Factors such as use of owner?s equipment versus contractor equipment, salvage value, and linkage between the mine plan and reclamation plan will significantly influence the estimated cost.   Selection of an appropriate contingency value is an item of judgment that may be the largest line item in an estimate.  The contingency value reflects a number of aspects, which add uncertainty to the cost estimate.  The linkage between uncertainty and stage of mine life is presented in the context of understanding the differences between reclamation cost estimates.  Key Words: mine life cycle, reclamation bonding, mine components, demolition, taxpayers   INTRODUCTION Clean up of abandoned mines has become a burden on governments and taxpayers.  In order to avoid this situation, governments in most jurisdictions in North America and many other countries around the world have imposed legislation requiring mine operators to prepare closure plans and to post security to ensure that funds are available to meet the anticipated mine reclamation liabilities.  In addition, stock exchange regulators in North America have increased accounting disclosure standards for ?asset retirement? of publicly traded companies.   Mine operators see both the security and the additional regulatory burden as an increased cost of doing business.  In Canada, funds set aside for reclamation security are not tax deductible, as the actual reclamation expenditure has not been incurred.  If the security is provided in the form of a letter of credit, then there is an annual fee paid to effectively ?rent? the borrowing capacity from a bank.  The fee is reflective of the credit worthiness of the mine operator.  Consequently, the assets of the company are tied up, either directly or through a reduction in borrowing capacity for other projects.  In contrast to the above, governments want to reduce the risk to tax-payers.  Although most governments probably recognize the financial benefits which mining creates, they want to ensure that the mining operator is financially responsible for the expected cost of mine closure.  It appears to be common to pursue the philosophy of more security is better.  Other stakeholders and landowners have also supported this approach. The difference in perspective between the mining company and the government often leads to different estimates of liability for the same property.     The accuracy of any reclamation cost estimate is closely tied to the quality of the closure plan, which is in turn tied to stage of the mine life.  A pre-mining plan and associated estimate cannot be as detailed as the same documents which are prepared towards the end of the mine life.   The performance of key components of the mine plan will be known (dams, control of ARD and metal leaching, effectiveness of progressive reclamation) and the actual extent of surface disturbance will be better quantified.  Some mine operators have suggested that the date of mine closure is uncertain, and that security is not needed (especially at the start of mining) until that time can be better identified or predicted.  It is true that factors such as expansion of ore reserves and global economic cycles will make it difficult to predict a distant date of mine closure.  However, the latter years of the mine life may be of low profitability, due to mining of the remaining low-grade resources.  A mine operator may be financially unable to ramp up the total reclamation security if this is not done rationally during the mine life.  It should be expected that detail and accuracy will increase and uncertainty will decrease with respect to the closure plan and cost estimate during the mine life.  For these reasons, the relative level of detail and accuracy in the closure plan and associated cost estimate climbs from lowest level at the beginning of the project in a gradual and step-wise manner through the project life.  This is shown in the Mine Life Cycle as illustrated in Figure 1.  Only at the completion of post-closure monitoring which shows that the reclamation measures are effective will there be the highest level of certainty in closure cost estimate.  The purpose of this paper is to look at types of cost estimates and some of the factors, which should be considered in preparing an estimate.  The steps involved in developing a reclamation cost estimate are described. Issues that create uncertainty in the estimate are identified and some options to address this are presented. Finally, some of the models for reclamation cost estimating are reviewed.    SuspensionTerminationExploration Detailed site investigation, design, estimating and Design for ClosureConstruction Operation and progressive reclamationFinal closure & decommissioningPost closure1 - 10 years 1 - 100 years 1 - 5 years PerpetuitySuspensionTerminationHighRelative Level of Detail & Accuracy& AssociatedCost EstimateLowStage of Mine ProjectFigure 1In Mine Closure PlanRelative Detail and Accuracy In Reclamation Cost Estimates Through The Mine Life CycleTypically 1 - 3 yearsAdapted after Gadsby, J. 2003Progressive reclamation  TYPES OF RECLAMATION COST ESTIMATES  There are many terms associated with cost estimates, such as conceptual and feasibility.  Table 1 presents a version of these terms and the level of accuracy, which may be anticipated. Table 1. Cost Estimate Terms & Descriptions Estimate Type Description Accuracy or appropriate contingency Detailed or Project Control Based upon detailed engineering take-offs and written quotes +/- 5 % Definitive or construction drawing phase Engineering mostly complete, some written quotes +/-10 % Preliminary or budget level Little detailed engineering and costs based upon verbal quotes +/- 15 % Feasibility or advanced conceptual Engineering may be 10 % complete and costs based upon typical unit costs  +/- 20 % Pre-feasibility, conceptual or trade-off study Very basic engineering only and costs based upon typical unit costs  +/- 25 %  Table 1 provides a very general description of common terms in cost estimates.  There is some standardizing of these terms, however, different organizations may modify the definitions to suit their own purposes.  Closure plans developed at the beginning of the mine life are rarely as detailed as ?feasibility or advanced conceptual?.      In the case of mine reclamation cost estimates, an additional issue arises; it is important to understand for whom the estimate is prepared.  Reclamation cost estimates could be prepared from one of four perspectives.  Each of these is briefly described as follow.  Owner?s Estimate ? Internal Use  The purpose of this type of estimate is to present the actual costs which the corporation expects to incur.  This would be considered in the business case for the viability of the mine and corporate cash flow accounting.  Certainly, the underlying critical assumption is that the mine is built and operated as planned, and without upsets or deviations from the plan.    Generally low unit costs for all work would be in this estimate because it would be assumed that the work would be conducted under the direction of the mine manager, using existing staff and  equipment as much as possible.  Contractors would conduct specialized work, such as demolition or disposal of hazardous material. Also, it would likely be assumed that there is no capital cost associated with the use of equipment as it would already have been depreciated and thus treated as a sunk cost.  Equipment productivity may be assumed to be relatively high due to familiarity with working conditions on the site.  For this reason, a relatively low contingency may also be assumed.  Any progressive reclamation is probably the lowest cost reclamation work because of available equipment, avoiding double handling and essentially no indirect reclamation costs. This estimate may also include off-setting costs from the salvage and sale of used equipment.  The owner?s internal purposes estimate will be the estimate with the lowest justifiable total cost. It is assumed here that the focus is on physical reclamation of the site.  A corporation may have to address other issues in closure of a mine, such as employee severance.  These issues are not considered here as they would not be included in the other types of estimates considered in this paper. An estimate of this type would also be appropriate for mergers and acquisitions.  Owner?s Estimate ? Bonding Purpose  This is the estimate, which a corporation may prepare and submit in support of its proposal for providing reclamation security.  Typically this includes, by regulation, costing based upon third-party contractors conducting all of the work, and no allowance for salvage value.   There may also be additional costs for equipment mobilization, project management and engineering.  This estimate would probably have the same contingency as the internal estimate, in that it would be based upon the critical assumption of the mine development proceeding as planned, and without upsets or deviations.  Regulator?s Estimate  The regulator?s estimate represents the government?s expectation of costs should the company abandon the site.  It may be that a regulator will want to address the degree of uncertainty in the closure plan, as illustrated in Figure 1.  Very few mines are developed exactly as planned and operated without any upsets or deviations from the plan.  All mine plans are based upon a data base of site specific information.  In addition, some mine plans may be based upon a new technology or a novel application of an existing technology.  Should these plans not fulfill their expectations, then the necessary closure measures may be different than envisioned in the closure plan.  For these reasons, a conservative contingency may be added to the regulator?s estimate.  In addition to the costs included in the owner?s estimate there may be a provision for site care and maintenance.  An abandoned site may exhibit problems which were not expected at the onset of mining.  Certainly this has been the case in Northern Canada at sites such as the Faro and Giant mines.  Consequently, a period of site characterization and updating of the closure plan  may be required.  This could also include a permitting phase.  For many governments, tendering and award of contracts is a much slower process than is experienced in industry.  Site care and maintenance could last from two to five years, depending upon the site.  Worst Case Estimate  NGO stakeholders, perhaps to prevent the mine development due to the financial constraint which excessive security imposes on the corporation, occasionally call for this type of estimate.  California appears to be the only jurisdiction that requires consideration of a worst-case scenario for security bonding (Kuipers, 2000).  An argument could be made that this is most protective of tax-payers.  However, doing so is akin to granting a permit for a plan which is expected to fail.  If the likelihood of a major failure of some type (dam, crown pillar, etc) is so high as to warrant security bonding, then it seems more sensible to revise the mine plan.  This type of estimate is not considered further in this paper.  COMPONENTS OF THE COST ESTIMATE  Determination of what to include in a cost estimate depends greatly upon whom the estimate is prepared for, as described in the previous section.  The following list identifies all of the activities, which could be included in a reclamation cost estimate.  Each of these is briefly described. ? Direct costs for reclamation of all mine components, ? Disposal or management of hazardous materials and contaminated soil, ? Mobilization and demobilization of equipment and supplies, ? Personnel movement and accommodation, ? Engineering and project management, ? Interim care and maintenance, ? Post-closure water treatment, ? Post-closure monitoring and maintenance, ? Contingency or recognition of uncertainty, and, ? Adjustment for salvage of materials & equipment.  Reclamation of Mine Components  This is the essence of most cost estimates.  It should include amounts for pits, underground workings, rock piles and leach piles/pads, tailings impoundments, water management structures, and, buildings, roads, and infrastructure.  A commonly overlooked component of this work is a landfill for demolition waste.  For most sites, the direct reclamation costs for the mine components is probably 50 to 75% of the total estimated cost.   Hazardous Materials & Contaminated Soil  This component of the reclamation cost is usually under-estimated or even over-looked entirely.  Even the best-managed mines will have minor problems with hydrocarbon contamination associated with fuel handling and storage of waste oil, lubricants, coolants, and hydraulic fluid.  In addition, many base-metal mines have soil contamination in the ore concentrate areas, especially if these are not protected from the wind.  It is common at older mines to encounter problems with asbestos and PCB?s.    Management of any of these problems must be addressed on an individual basis, typically involving off-site site disposal.  Some hydrocarbon-contaminated soil can be remediated on site.  Some mines produce a significant volume of special or hazardous waste, such as the arsenic wastes from the mines near Yellowknife, NWT, and Red Lake, Ontario.  These may require a hazardous waste landfill to be developed onsite.  This usually requires a sophisticated design to ensure that the wastes remain encapsulated in the long-term.  Mobilization/Demobilization  The cost of supplying and removing equipment from a site will be an additional cost to the work.  In the case of contractor-based costs, this should be assumed for every piece of equipment or machine, which is required for the work.    In the case of the owner?s internal cost, this should cover only equipment, which is not already on the site.  Personnel Movement & Accommodation  It is increasingly common for mines to be ?fly-in and fly-out? sites.  Consequently, at the time of closure, the costs for personnel movement and on-site accommodation will continue into the reclamation period.  Engineering & Project Management  It will be necessary to provide engineering services in order to progress from the reclamation plan into a scope of work that can be given to a contractor or even the owner?s site foreman.  Further engineering will be required while the work is being conducted to address unexpected problems and provide input such as material monitoring or survey control. All projects will require some general management and administration. There is no clear way as to how engineering and project management should be addressed in reclamation cost estimating.  A provision of 5% to 10% of the total project cost  for each of these activities appears to fit within the range of what many engineering firms suggest for budget planning.   Interim Care and Maintenance  Very few mines commence closure work the day after operations cease.  Although few mines, except for the high tonnage ? low grade base metal mines, re-open after closure (Brodie, 1994), most mines remain in a state of care and maintenance for several years.  In the case of abandoned mines, which reclamation security is intended to address, then care and maintenance may be required for many years, as noted in the earlier section on the Regulator?s Estimate.  Care and maintenance costs should include personnel, fuel, assorted supplies, and water treatment reagents.  Permit requirements for environmental and geotechnical monitoring will also have to be met during this period.  Post-Closure Water Treatment  Where required, post-closure water treatment falls into one of two categories; defined duration or long-term.  Defined duration may occur at sites where reagents such as cyanide or ammonia in tailings supernatant are expected to decay to non-toxic levels in a specified period of time. Long-term water treatment may involve ARD or chronic metal leaching.  Short-term water treatment is typically calculated on an annual basis.  All annual costs (direct and indirect) are totaled, and then multiplied by the number of years that treatment is required.  Long-term water treatment is calculated the same way but with recognition of the time value of money, or a discount factor.  This discount factor varies with interest rates.  In the case of very long time periods, a discount factor of 2.5 to 3% (also called the ?real rate of return?) is common in calculating the net present value of the future series of annual payments.  This is appropriate provided that the future costs are estimated on the basis of current (or end of mine life) as opposed to nominal (inflated) costs.  Post-Closure Monitoring and Maintenance  For new mines, this is a two-part problem.  The first is designing and operating the mine so as to minimize the level of post-closure care.  A walk-away closure scenario is preferred over passive care, which is in turn preferred over active care.  Generally, this must be done for each component of a mine site.  After this, evaluation of the scope and cost of post-closure activity can be carried out.  Ideally, post-closure activity is a modification of the site monitoring program for environmental and geotechnical issues which was required during operation, along with infrequent maintenance.  Commonly, the monitoring is conducted on a declining frequency at progressively fewer sampling points after closure.  In many cases, the operational monitoring protocol will be  expanded to address factors such as re-establishment of vegetation, metal up-take in vegetation or site-specific stability concerns such as crown pillars.  Post-closure maintenance is often required, not in lieu of closure measures, but to compliment them.  For example, spillways and diversions may require occasional clearing of debris and ice, rip rap may need to be repaired, covers over mine waste may require management of vegetation or repair of erosion.  In most cases, post-closure maintenance will be a minor addition to the reclamation cost, mostly because this work will be infrequent.  Uncertainty  As with any type of cost estimating process, there is potential for the actual cost to be different from the estimated cost.  This arises from a number of factors, which introduce uncertainty in the assumed scope, and effort of the work.  In the case of mine reclamation security, uncertainty really means; ?What is the likelihood that the actual cost will vary from the estimated cost??  As illustrated in Figure 1, the answer to this question should change throughout the mine life.  Factors that may introduce uncertainty into a reclamation cost estimate can be grouped into three broad areas, which are described below.  It should be recognized that this is not intended to be an exhaustive list.  Every mine is a special case and identification and evaluation of uncertainty factors should be conducted on a case-by-case basis.  Uncertainty factors pertaining to the mine plan, consider the: ? Database of geology and geochemistry (which may result in adjustment to the predicted mine life, or development of ARD or metal leaching problems), ? Characterization of critical foundations ( such as under dams and waste dumps), ? Application of a new technology or unique application of an existing technology, ? Use of optimistic control strategies (such as blending of acid generating and acid consuming rocks), and, ? Predictions concerning the effectiveness of control measures (such as cyanide degradation in tailings impoundment water). ? Uncertainty factors pertaining to the reclamation plan are: ? Variability in the extent and type of disturbance at the time of mine closure, ? Expectations for the success of reclamation measures, and, ? Potential for difficulty in implementing the closure measures. ? Uncertainty factors pertaining to the cost of the reclamation work are: ? Cost of equipment, manpower, and consumables such as electricity, lime and fuel, ? Duration of time required to complete the work (and the effect on the associated site support costs), ? Availability of qualified contractors to carry out the work.  The timing of when end of mine life occurs (or start of reclamation work) is also considered to be an uncertainty.  A best estimate as to the end of mining should be made, and the cost estimate based upon that duration and extent of mine disturbance. Periodically throughout the mine life, the estimate should be up-dated.  Timing should have little or no effect on the amount of security provide, especially if cash deposits are made.  This occurs because security deposits are typically calculated in ?today?s dollars?.  Any interest that accrues on the deposit is usually assumed to offset the effects of inflation.  Tax considerations on earned interest could alter this depending on how the funds are held because the taxes are computed on both the inflation and real return components of interest.  These refinements need to be addressed by accountants once the underlying reclamation cost has been prepared.  In cases where a letter of credit is used it should incorporate a provision for inflation adjustment according to the consumer price index or other benchmark.   Government-traded real-return bonds offer a market benchmark for expected future inflation.    Whichever the form of security provided, there should be periodic review of security requirements.  This should be between 1 to 5 years depending upon the mine plan and the rate of evolution of disturbances at the site in question.   As noted above, there are a number of factors, which can introduce uncertainty into a reclamation cost estimate.   In addition, most cost estimates that are prepared for security purposes will not be extremely detailed or based upon quoted rates.  Typically the estimates fit into the pre-feasibility or feasibility level categories shown in Table 1.  The essential question at this point is how to address the uncertainty.  Some options to achieve this are:  1. A detailed Adaptive Management Plan (AMP), which includes monitoring and reporting, thresholds for action, and sound responsive actions will greatly reduce the likelihood of significant departures from the original mine plan.  This approach should be considered for any mining plan. In essence, it avoids adding to the reclamation liability by addressing problems during the operational phase of the mine, as opposed to allowing the reclamation liability to grow.  An AMP is probably the best option to deal with use of new technologies.   2. In some cases it may be appropriate to include additional reclamation measures in the cost estimate to deal with specific problem situations or shortcomings in the mine and reclamation plan.  For example, if potentially acid generating rocks are expected to be exposed in only a portion of the pit wall, there may be a water quality issue at closure.  This timing and quality of the water when the pit overflows may be difficult to predict.  Therefore, a conservative approach to reclamation cost estimating is to assume that some  measures, such as addition of lime to the infilling pit, will be required.  The cost of supplying and metering lime into the pit water could be added to the closure cost.  If the likelihood of this being required was very low, then it may be acceptable to address the risk through a contingency, which is addressed in the next option. 3. A contingency is often added to the estimated cost.  This commonly leads to great debate about what is an appropriate contingency percentage.  Some guidance can be found in Table 1.  Even if there is high degree of certainty on the scope and effort of the anticipated reclamation work, a contingency is still appropriate.  This is because in tendering the work the lowest bid will be a blend of factors and considerations, which the contractor brings forward.  Therefore, it is unlikely that the contractor will have the lowest justifiable or expected cost for each reclamation activity. 4. It should be recognized that most reclamation security estimates are prepared early in the mine life.  As illustrated in Figure 1, the amount of detail in the closure plan is relatively low; consequently, a low contingency at this stage is not justified.  Assuming diligent efforts by the company during the mine life, the contingency should decrease during this period. 5. Another way to evaluate what is an appropriate contingency is to critically assess the quality of the reclamation plan.  It is suggested that a low contingency would be indicative of a plan based on a comprehensive data base of site specific parameters, detailed engineering, and proven reclamation measures.  In this regard, the latter point; ?proven reclamation measures? is often key.  Proven reclamation measures means that completed progressive reclamation activities on site have been shown to be effective and the effort and cost associated with that work is well understood.  In some cases, it may be appropriate to consider a different level of contingency for different components of the site reclamation.   6. Another option to address uncertainty is to use a risk-based costing methodology.   Such an approach allows recognition of uncertainty in the scope, effort and cost of the reclamation work, without defaulting to a worst case estimate.  If a risk-based methodology is used, it is key that it does not further confuse any discussion about the reclamation cost estimate.   Salvage  Mine owners may include salvage in the internal reclamation cost estimate.  Most regulators do not want to consider salvage value because of the problems associated with creditor?s rights, sale of equipment, and uncertainty as to the actual value.        Progressive Reclamation  In most cases, mine reclamation cost estimates are prepared assuming that progressive reclamation is not conducted.  It is recognized that this is financially punitive to the company.  However, until this work is completed it is still an outstanding liability just like any reclamation which is put off until final closure of the mine.  Therefore, financial security should be established to ensure that this work is conducted as proposed.  If the company carries out progressive reclamation as proposed, such as revegetation of disturbed areas during operations, then the company?s actual costs are likely to be lower than in the security provision.  STEPS IN RECLAMATION COST ESTIMATING  There are a number of steps or tasks, which must be completed in order to compile a reclamation cost estimate.  The most important part of developing a reclamation cost estimate is preparation and approval of a closure plan.  From this plan comes the first of the cost estimating steps; ? Definition of closure objectives on a site-wide and individual mine component basis, ? Characterization of the expected site condition at the time when reclamation is to commence, and, ? Description of the closure measures which are expected to achieve an acceptable post-closure condition.  In order to assemble the reclamation cost estimate, several additional steps are required.  These include: ? Determination of quantities of work for each reclamation activity, ? Sub-dividing each reclamation activity into specific tasks, ? Characterization of the level of effort or potential difficulty in carrying out the tasks,  ? Identification of appropriate unit costs for each task, and, ? Presentation of task list, quantities, unit costs and calculation of total cost.  The above steps are illustrated in the example in Table 2 involving reclamation of a waste rock pile. Table 2 presents the approach, which should be followed for major cost items in the closure plan.  For less critical items, steps 4, 5, and 6 may be merged.     Table 2. Example of Steps in Reclamation Costing For a Waste Rock Pile 1. Closure objectives Limit infiltration to protect water resources Establish vegetation for wildlife use 2. Site characterization Rock pile is acid generating, perimeter slopes are terraced at angle of repose, slopes are up to 25 m high, rock pile covers 30 ha 3. Proposed closure measures Doze perimeter slopes to 3:1 slope and flatten hummock dump areas, place multi-layer soil cover, vegetate with grass mixture 4. Determine quantities of work Dozing to involve moving 50,000 m3 of rock Cover to involve  ? 75,000 m3 of clean drain rock for capillary break ? 225,000 m3 of low permeability soil ? 150,000 m3 of vegetative substrate Supply of 6 tonnes of fertilizer and 1.2 tonnes of seed 5. Divide each activity into specific tasks Dozing ? Flatten hummocks ? 20,000 m3, very short push ? Doze slopes ? 30,000 m3, push down slope up to 10 m Cover ? Excavate granular rock from nearby gravel deposit, haul and spread ? Excavate low permeability soil from borrow area 4 km away, haul, spread into 15 cm lifts and compact ? Excavate vegetation substrate from pit overburden stripping pile, haul and loosely spread ? Borrow areas to be left in suitable condition Vegetation ? Spread seed and fertilizer using mechanical equipment 6. Identify level of effort and potential difficulties Dozing ? Few difficulties expected if large dozer is used Cover ? Granular material ? few difficulties expected ? Low permeability layer ? some waste expected in borrow area, QA/QC required to meet compaction specification ? Long haul could lead to waiting time for dozer & compactor ? Vegetative substrate ? few difficulties expected Vegetation ? Few difficulties expected, allow for revegetating 10% of area due to poor establishment of plants 7. Identification of unit costs ? typically from work on similar near-by projects Dozing ? Hummocks   $0.85/ m3 ? Slopes   $1.95/ m3 Cover ? Granular material  $5.97/ m3 ? Low permeability layer $8.95/ m3 ? Vegetative substrate $3.20/ m3 Vegetation  ? Supply and spread seed/fertilizer  $1595/ha  8. Present task list and total cost Compile information from above steps (typically only steps 4 ? 7) into a spreadsheet or costing model   Total cost = sum of (quantities x unit costs) = $3,065,000  Selection of Unit Costs  Most estimates of mine reclamation cost rely upon unit costs, as illustrated in Table 2.  Aside from concerns about the closure plan, selection of appropriate unit costs is the most common area of dispute in reclamation cost estimates.  There may also be cases where the unit cost data is lacking or these is a need for greater confidence in the unit cost.  When this occurs, unit cost data can be developed from one of three methods: 1. Discussion or quotes from qualified contractors, 2. Information provided by equipment suppliers, and, 3. First principles.    Qualified Contractors  It is important to be very clear in discussing costs with contractors.  For reclamation cost estimating, ?all in? costs excluding mobilization/demobilization are commonly used.   The contractor?s cost should include capital cost, fuel, maintenance, tires, operator and support equipment.  Ideally, the contractor should have knowledge of local conditions and how they may vary with seasons.   As more information is provided to the contractor concerning the scope of work, he will be better able to characterize his equipment productivity and therefore give a more reliable estimate of the cost to do the work.  Equipment Suppliers  Unit cost data can be obtained from equipment suppliers.  However, caution is warranted here because a supplier is likely to provide only peak or optimal performance data.     Generally this can be expressed as (after Caterpillar 2012): Lowest unit cost of operation = (Lowest possible hourly cost of operation)/(Highest possible hourly productivity)       Equipment suppliers are unlikely to have the local experience needed to adjust equipment productivity or incorporate local cost factors such as labour rate and availability or job site factors such wear and tear which affect maintenance and down-time, and fuel consumption.      First Principle Cost Estimating  First principle cost estimating means evaluating equipment productivity in terms of hourly production divided by hourly cost of operation.   This approach is basically recognizing that the lowest unit cost of operation as identified in the above equation rarely occurs.   Productivity evaluation is a series of adjustments or corrections to the peak or optimal productivity rate for a given piece of equipment.   For example, adjustment factors for an excavator would involve difficultly in digging (type and hardness of material), job geometry (side-hill or full bench), finish condition (ditch versus quarry operation), operator skill (fair, good, excellent), working time per hour and other appropriate site factors.  A similar exercise is required for building the hourly cost of operation.  An example of this type of estimating can be found in the Caterpillar Performance Handbook 42  (Caterpillar 2012).  Other sources of unit cost data are the RS Means Cost Works heavy construction data and Western Mine Engineering ? Mining Equipment Costs.  COSTING MODELS  There are a number of models available to assist in the determination of mine reclamation liability.  All models suffer from the trade-off between level of detail and accuracy.  Generally, the greater the detail; the greater the accuracy of the estimate.   However, it cannot be over-emphasized that the calculation of the cost is the last of up to eight steps in determining reclamation liability.  A lot detailed calculations will not make up for an inadequate reclamation plan or a simplistic description of the expected reclamation measures.    Reclamation costing models may serve one or more of the following purposes: ? Standardize cost estimates in a particular jurisdiction, ? Present the reclamation liability estimate in a format which mimics local regulations, ? Assist in the determination of liability through one or more of: a. Use of a pre-formatted spreadsheet, b. Provision of a checklist of potential reclamation tasks, c. Supply of a data base of unit costs for typical reclamation work, ? Assist in the re-calculation of the reclamation liability as the mine development progresses, or at the time of licence renewal, ? Present the reclamation liability estimate in a transparent and auditable format.  It is the latter point above which is one of the most important things to consider in a model.  There are two reasons for this.  If an estimate is transparent and auditable, then it is possible for both the owner and the regulator to review the estimate and identify where there may be points for discussion.  It is possible for either party to omit a reclamation task, include unnecessary tasks  or to over or under estimate the effort required to complete a particular task.  A transparent estimate will allow appropriate corrections to be made.  In this way, the interests of both parties are satisfied to the extent that local regulations will allow; namely the reclamation security is the lowest justifiable amount to address the expected liability.  Ideally, the method of calculation will be transparent even if local regulations do not require the amount of the security to be publicly available.  The second reason for a transparent and auditable security estimate is that eventually the mine operator will carry out reclamation work and request a reduction in the level of security.  A transparent estimate will allow a simple determination of the security to be refunded.  A number of models for reclamation cost estimating are can be found on the internet.  It is beyond the scope of this paper to provide a critique of each model.  However, the comments above should assist in determining the appropriateness of a model for a particular mine site.   CONCLUSIONS  This paper has reviewed a number of issues relating to preparation of a mine reclamation cost estimate.  Key points from this review include: 1. Reclamation cost estimates on the scope and effort for addressing the liability at the end of the mine life may be prepared from different perspectives.  These include: the owner?s internal estimate, the owner?s estimate for bonding, a regulator?s estimate for bonding, and a worst case estimate as may be prepared by an NGO. 2. The components of a reclamation cost estimate have been described.  Often over-looked components are interim care and maintenance, mobilization and demobilization, management of hazardous materials, and engineering and project management. 3. Uncertainty exists in all cost estimates.  Uncertainty in a mine reclamation cost estimate may arise from several sources including: the scope of work to be conducted, effort required to carry out the work, and appropriate unit cost for the work.  Methods to address uncertainty include: use of an AMP to avoid excessive or unexpected liability, addition of extra reclamation tasks to the scope of work, and a contingency.   4. There are up to eight steps in the development of a cost estimate for each reclamation area.  Some steps relating to the determination of unit costs are often skipped for non-critical components of the site reclamation.  However, all eight steps should be followed for major reclamation items.  REFERENCES  Gadsby, J. Early Project Risk Assessment, presentation at Prospectors and Developers Annual Conference, 2003  Brodie, M. J. (1994): Corporate Considerations In Mine Decommissioning. Proceedings of District 6 Canadian Institute of Mining Annual General Meeting, Vancouver, B.C., October 11 - 15.  Brodie, M. J. and Milburn, D. (2001), The ?RECLAIM? Model; Northern Latitudes Mining Reclamation Workshop, Whitehorse, Yukon, available from   Caterpillar Inc, Caterpillar Performance Handbook, Edition 42, 2012  Kuipers, J, Hardrock Reclamation Bonding Practices in the Western United States, Mineral Policy Center, Feb. 2000  


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