Closure Bonding Guidelines

Reclamation/Closure Bonding
Practices and Guidelines

by: Dr. A. Robertson and S. Shaw

For many mine sites, the requirement of long-term interception, collection and treatment of the ARD and on-going continuous care and maintenance for dam safety, spillways, diversions and covers etc. necessitates long-term custodial care, management and associated funding (i.e. closure bond).

The size of the required bond is generally the amount that the appropriate regulator(s) accept as a realistic estimate of implementation of the accepted Closure Plan by a third party contractor. If the Closure Plan indicates that water collection, treatment, and sludge disposal will be required indefinitely then the financial assurance amount should include the provision of an invested sum that will yield sufficient annual revenue to cover these costs indefinitely (in perpetuity).

Generally a real rate of return of about 3% is used for the calculation of such funds. i.e. a $10 million fund will generate $300,000 of annual (present value) dollars in-perpetuity. The basis for costing work typically assumes that work is done by a third party contractor (normal commercial rates) and allows for all overheads such as design, quality control, administration etc.

The amount of the bond is usually independent of the company size and financial strength. The nature of the bond that a regulatory agency will accept does however depend on the financial strength of the company. To date many companies have been able to 'self bond' by providing a corporate guarantee. There is increasing reluctance for regulators to accept such corporate guarantees and mostly they now insist on a bond from an independent third party financial institution (such as a Bank or bonding company) or the establishment of a separate trust fund.

Some useful links on the topic of bonding can be found below.