–
can it help boost exploration funding?
Nicole Roocke
Director
Chamber of Minerals
and Energy of WA
Extensive collaboration between the Western
Australian government and mining industry
representatives has meant the development of
a new system of securing monies for post-mine
rehabilitation. Due to become compulsory by
next July, the freshly styled Mining Rehabilitation
Fund has met mixed responses from the industry,
depending on the scale and stage different mining
operations are at. To explain the Fund’s pros and
cons further, and to explore the important potential
benefit that the Fund could have on the industry’s
reducing exploration investment, is the Chamber of
Minerals and Energy WA’s Director, Nicole Roocke.
Many people outside the mining industry would be surprised to
learn preparation for a mine’s rehabilitation commences very early
in the examination of a mine’s life. Return of the landscape to the
surrounding ecosystem continues to be at the forefront of resource
companies and government’s minds.
To ensure this rehabilitation work is completed, all Mining Act
tenement holders have been required to have financial institution-
held bonds as security against them fulfilling their environmental
obligations. Much like a bond put forward on a rental property, this
money is held until the lease is relinquished.
This model has a number of disadvantages, including tying up
significant funds for operators during the initial exploration stages
and restricting the government’s use of the bond money to the
particular mine for which the security is held.
Over the past four years the state government and industry have
been investigating ways in which this system could be improved.
After a long consultation and development period the new
Mining Rehabilitation Fund (MRF) officially commenced in July
with a 12 month voluntary opt-in period for Mining Act tenement
holders. From 1 July 2014, participation in the fund becomes
compulsory with the only exception being those companies covered
by state agreements.
Revenue will be directed into a pooled government-administered
fund and ensure sufficient revenue is available to government to
rehabilitate abandoned mine sites in the event operators do not
fulfill their mine rehabilitation and closure obligations.
Where this new model is different to environmental bonds is
the MRF is a pay-as-you-go system – security in the form of fund
payments are made annually based on actual disturbance rather
than bonds being required at the granting of the mining approval,
which in many cases is years before mining takes place.
While the introduction of the MRF has come at the right time
for some of the smaller companies in the sector, for other larger
companies the imposition of additional costs has not beenwelcomed.
CME is working with government to address these additional costs
prior to contributions becoming compulsory on 1 July 2014.
The state government estimates more than $1 billion in
financial institution-held environmental bonds will be returned to
companies in the WA mining industry once they have committed to
the alternative arrangements.
CME’s June 2013 edition of
WA Resources and Economics Report
,
prepared in conjunction with KPMG, highlighted an ongoing
decline in exploration expenditure. The report saw total mineral
and petroleum exploration decline by 22% to $1.14 billion from
the previous quarter. This is the third consecutive quarter mineral
exploration has declined.
Notwithstanding the transition underway in many major
projects from construction to operational phase, the future pipeline
of projects relies upon increasing the current level of exploration
activity here in Western Australia.
Once a company has made its first contribution to the MRF, the
environmental bond is released to the company, freeing up capital
for future exploration.
Pilbara Sunset
Simon Phelps Photography
The Mining Rehabilitation Fund
Minesite 2013
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