How Much Does Poor (or no) Mine Rehabilitation Cost?

Found in: News

In the case of the Ellendale diamond mine owned by the Kimberley Diamonds (who called in the administrators on 30 June 2015), it is looking like costing:

  • its liquidators any chance of finding a buyer for the company’s assets
  • its creditors and employees a reduced chance of getting paid
  • the State Government potentially at least $28 million.

The West Australian has reported that liquidators have been unable to find a buyer for Ellendale with the major sale barrier being the “estimated $28 million environmental rehabilitation cost at the Kimberley mine”. The liability was exacerbated by Kimberley Diamonds “failure to set aside rehabilitation money after it cashed out its $12.1 million environmental bonds in mid-2013 after signing up to the State Government’s Mining Rehabilitation Fund." Anyone interested in taking over the mining leases is likely to have to commit to site rehabilitation. If such a buyer can’t be found then “it is almost certain the costs of remediating the site will be transferred to the MRF."

Since the MRF was started in 2012, $30 million had been paid into it up to February 2015. Over the same period over $1 billion in Unconditional Performance Bonds were returned to the industry.

This example highlights the importance of doing progressive rehabilitation on mine sites. Doing rehabilitation early in the life of a mine has many advantages including:

  • Rehabilitation techniques can be trialled and improved based on the outcomes of early rehabilitation.
  • Work can be conducted while the operation is producing cash instead of leaving it to the end of operations when there is no (or limited) money being made to spend on activities which may be viewed as non-essential, such as rehabilitation. 
  • Sign off can be received early for sites that meet completion criteria and annual payments into the Mining Rehabilitation Fund can be reduced or stopped altogether. 

Although it might seem like a waste of money, investing in good rehabilitation trial design, implementing high quality rehabilitation and conducting ongoing monitoring to track rehabilitation performance will result in lower risk of failure and minimise costs in the long term.

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