138
AES/RE/10‐02 ALLUVIAL MINING OPERATION: A SUSTAINABLE GUIDELINE AND CASH FLOW EVALUATION MODEL Implementation in Gold Sands Project, Peru March, 2010 R.G. Harskamp
AES/RE/10‐02 ALLUVIAL MINING OPERATION: A SUSTAINABLE GUIDELINE AND CASH FLOW EVALUATION MODEL
Implementation in Gold Sands Project, Peru
March, 2010 R.G. Harskamp
Title : Alluvial Mining Operation: a Sustainable Guideline and Cash Flow Evaluation Model
Author : Robert Gijsbert Harskamp Date : March 2010 Supervisors : Ir. J.J. de Ruiter (TU Delft, CiTG) Prof.dr.ir. C. van Rhee (TU Delft, 3ME) Prof.dr.ir. R.J. Arts (TU Delft, CiTG) Ir. H. van Muijen (MTI Holland B.V.) Ir. P.M. Vercruijsse (MTI Holland B.V.) TA Report number : AES / RE / 10‐02 Postal Address : Section for Resource Engineering Department of Applied Earth Sciences Delft University of Technology P.O. Box 5028 The Netherlands Telephone: (31) 15 2781328 (secretary) Telefax: (31) 15 2781189 Electronic‐mail : [email protected] Copyright ©2010 Section for Resource Engineering All rights reserved. No parts of this publication may be reproduced, Stored in a retrieval system, or transmitted, In any form or by any means, electronic, Mechanical, photocopying, recording, or otherwise, Without the prior written permission of the Section for Resource Engineering
ii
Executive Summary The past five decades an unparalleled growth in societal demand for raw materials occurred which led to sometimes‐irreversible negative impacts on the earth’s ecological system. Consequently sustainable issues are of growing importance in the world and this awareness is present among customers of IHC Merwede B.V. (IHC), their customers start to demand sustainability to be incorporated in products and services. IHC intends to anticipate to this growing future demand and to invest in building up knowledge and implementing sustainability in their products and services. An Alluvial Mining Operation (AMO) has an inevitable impact on the complex ecological (environment, landscape) and social (local communities) systems. To understand such systems and implement sustainability into practice, more knowledge is required. This defines the research question: “What are the key indicators that need to be taken into account to develop a sustainable alluvial mining operation?” An extensive review of literature on sustainability currently in use by the mining industry, specific characteristics in the alluvial mining industry, and improvement opportunities for a more sustainable approach have led to a sustainable guideline for AMOs. The following main conclusions concerning the sustainable guideline were identified: The International Finance Corporation stakeholder engagement process and performance standards are very functional tools during the exploration and feasibility study phases. The framework of the International Council on Mining & Metals is globally most utilized and can be applied during all mining phases. Sustainable issues in the mining industry can be applied very well in AMOs. During the operation phase material handling and water management are key parameters for a sustainable AMO. The projects operated by Richards Bay Minerals and Mineros are good references of practiced examples for respectively dune and rain forest ecosystems. WM Mining Company’s social and environmental impact assessment and its management and monitoring program are useful tools for a sustainable alluvial mining feasibility study. Improvement opportunities are: A better understanding of the ecological and social system is required. Notice that relevant data collection about the system is time consuming. Initiatives such as Building With Nature will help to gain more knowledge and insight in the (eco)system; A corporate mind of sustainability for all related stakeholders, on and off‐site, is essential during the whole mine life; Backcasting is a useful method to road‐map community projects to maximize societal value; Land‐based AMOs alternative, self‐generating energy sources are very
iii
interesting opportunities; For dredge mining equipment opportunities as essential sustainable parameters are reduction and minimization of emissions, turbidity, material stewardship and improved energy efficiency; and in every country with the potential for placer mining it is recommended to establish specific SD guidelines for each specific ecosystem that occurs. Due to the continuous and concurrent reclamation method only a small amount has to be reclaimed for complete closure. The South African department of minerals and energy developed a useful guideline to estimate closure costs. There are 21 key sustainable indicators and to obtain a structured overview for these indicators a Sustainable Impact – Indicator – Tool guideline is developed. For further research the Gold Sands project in Peru is chosen to verify the validity of Sustainable Development issues in AMO. The main conclusions concerning the sustainable cash flow model are: Data collection to valuate sustainable indicators that affect the cash flow is difficult. The required social related data is eventually only applicable for Peruvian mining operations. Despite the difficulties for sustainable data collection, a sustainable cash flow model has been developed successfully. The mining systems selection tool serves both integrated investment analysis and production planning. The effect of alterations in the selection tool is clearly visualized in the plotted graphs. Project’s economic viability is positive within the sustainable case and the sensitivity analysis shows that sustainability is not a key parameter that influences the viability of the project. Based on the conclusions of this research it is recommended to: Develop a sustainable platform and database with guidelines, best practices and tools for all AMOs and companies to address key priorities within this sector. Continue detailed research into environmental and social impacts of dredge mining operations on land as well offshore, to understand the whole system. Detailed sustainable data collection for further research in sustainable AMO projects allow the update of guidelines and sustainable cost estimations. The development of the cash flow model for alluvial gold operations was successful. However, further research and development is required to optimize the sustainable cash flow model for other alluvial mining operations: by enlarging the equipment selection options; integrating soil characteristics; making residual revenue alter automatically; and make it applicable for operations with other minerals.
iv
Acknowledgments This report is the result of my thesis project for the Master of Science degree of Resource Engineering, at Delft University of Technology. The project was carried out at MTI Holland B.V., the Research and Development section of IHC Merwede B.V. First of all I would like to specially thank Henk van Muijen for giving me the opportunity to do my thesis at MTI Holland B.V. Willem Kramer, Paul Vercruijsse and Bart Hogeweg thank you very much for sharing your knowledge and expertise with me. Joop Broer of Smals Group thank you for your time and effort during the company visit. At Delft University of Technology I would like specially thank Hans de Ruiter for being chairman of the committee and his enthusiasm and effort during my mining engineering study. Professor Cees van Rhee (Offshore and Dredging Engineering) and Rob Arts (Applied Geophysics and Petrophysics) are acknowledged for their interest to this project. All the people who helped me in the final phase on this project for their “helicopter view” and by helping me with reading and commenting my report. Last, but not least, I would like to thank my family for their support throughout my life and studies. Bob Harskamp, March 24th, 2010
v
Table of Contents Executive Summary .......................................................................................................................... ii Acknowledgments ........................................................................................................................... iv Table of Contents ............................................................................................................................. v Table of Figures ............................................................................................................................. viii List of Tables .................................................................................................................................... ix List of abbreviations ......................................................................................................................... x 1. General Introduction ............................................................................................................... 1 1.1. Background ...................................................................................................................... 1 1.2. Significance of Research .................................................................................................. 1 1.3. Problem description ........................................................................................................ 2 1.4. Method of approach ........................................................................................................ 3 1.5. Structure of Report .......................................................................................................... 4
2. Introduction in Sustainable Development .............................................................................. 5 2.1. What is sustainability? ..................................................................................................... 5 2.2. What is sustainable development? ................................................................................. 6 2.3. Why is sustainability valuable? ........................................................................................ 7 2.4. Sustainability in IHC Merwede ........................................................................................ 8
3. SD in mining industry ............................................................................................................... 9 3.1. Brief history ..................................................................................................................... 9 3.2. ICMM SD Framework .................................................................................................... 10 3.3. Stakeholder Engagement .............................................................................................. 12 3.3.1. Identification and Analysis .................................................................................... 13
3.3.2. Engagement with Stakeholders ............................................................................. 14
3.4. Integrating sustainability in mining ............................................................................... 16 3.4.1. Organizational structure in mining ........................................................................ 16
3.4.2. Integrating SD into mining operations .................................................................. 17
4. Specific Characteristics in AMOs ........................................................................................... 18 4.1. Brief overview of an AMO ............................................................................................. 18 4.1.1. Alluvial Deposits .................................................................................................... 18
4.1.2. Comparison of dry and wet mining ....................................................................... 19
4.1.3. Alluvial mining operation ...................................................................................... 20
4.1.4. Review of Dredge Mining Equipment .................................................................... 21
4.1.5. Processing plant..................................................................................................... 24
4.2. Impact Assessment for AMO project ............................................................................ 27 4.3. Environmental Management Plan for AMOs ................................................................ 28 4.4. Water Management ...................................................................................................... 29
5. Good Practices illustrated by case study ............................................................................... 31 5.1. Richards Bay Mineral in South Africa ............................................................................ 31 5.2. Mineros in Colombia ..................................................................................................... 33 5.3. Smals in the Netherlands............................................................................................... 36 5.4. WM Mining Company in Mongolia ............................................................................... 37
6. Improvement Opportunities ................................................................................................. 42 6.1. Cultural Innovation ........................................................................................................ 42
vi
6.1.1. Understanding the System .................................................................................... 42
6.1.2. Corporate mind of sustainability ........................................................................... 43
6.2. Technology Innovations ................................................................................................ 44 6.3. Structural Innovation ..................................................................................................... 45
7. Implement Sustainability in AMO ......................................................................................... 47 7.1. Define the objectives to reach ...................................................................................... 47 7.2. Assess the status quo with selected indicators ............................................................. 47 7.3. Identify practicable measure to reach the objectives ................................................... 48 7.3.1. Construction phase ................................................................................................ 50
7.3.2. Operation phase .................................................................................................... 55
7.3.3. Closure and Legacy ................................................................................................ 58
8. Sustainable Guideline for AMO ............................................................................................. 60 8.1. Sustainable Impact Indicator Tools ............................................................................... 60 8.2. Social Impacts ................................................................................................................ 61 8.3. Socio‐Economic Impacts ................................................................................................ 63 8.4. Economic Impacts .......................................................................................................... 64 8.5. Eco‐Economy Impacts ................................................................................................... 65 8.6. Environmental Impacts .................................................................................................. 67 8.7. Socio‐Environmental Impacts ........................................................................................ 69
9. Cost estimates of SD Indicators in AMO ................................................................................ 70 10. Gold Sands case ................................................................................................................. 73 10.1. Location and Access .................................................................................................. 73 10.2. Climate and Vegetation ............................................................................................. 73 10.3. Peru regulation and guidelines .................................................................................. 73 10.4. Community Relationships .......................................................................................... 74 10.5. The Proposed AMO ................................................................................................... 74 10.6. Base Case Cash Flow Description .............................................................................. 76 10.6.1. Operational Expenditures ...................................................................................... 76
10.6.2. Capital Expenditures .............................................................................................. 76
10.6.3. Cash Flow Analysis ................................................................................................. 77
10.6.4. Cash Flow Analysis Evaluation ............................................................................... 78
11. Cash Flow Model methodology ......................................................................................... 79 11.1. Existing Cash Flow Model .......................................................................................... 79 11.2. Structure of Sustainable Cash Flow Model ............................................................... 79 11.2.1. Components of SCFM ............................................................................................ 79
11.2.2. Output ................................................................................................................... 79
11.2.3. Sustainability Data ................................................................................................. 80
11.2.4. Limitations ............................................................................................................. 80
11.3. General Data .............................................................................................................. 81 11.4. Capital Costs Data ...................................................................................................... 81 11.5. Operational Costs Data .............................................................................................. 82 11.6. Revenue Estimation ................................................................................................... 82
12. SCFM Result ....................................................................................................................... 83
vii
12.1. Assumptions and Constraints .................................................................................... 83 12.2. Cash Flow Overview .................................................................................................. 85 12.3. Cumulative Cash Flow ............................................................................................... 85 12.3.1. Sustainable Case .................................................................................................... 85
12.3.2. Base Case ............................................................................................................... 86
12.3.3. Evaluation .............................................................................................................. 86
12.4. Cumulative Gold Production ..................................................................................... 87 12.5. Sensitivity Analysis ..................................................................................................... 88
13. Conclusions and Recommendations ................................................................................. 89 13.1. Conclusions ................................................................................................................ 89 13.2. Recommendations ..................................................................................................... 91
Appendices Guideline .................................................................................................................... 92 A. Sustainable Mining Organizations & Tools ........................................................................ 92 B. ICMM Principles and Elements .......................................................................................... 94 C. IFC Stakeholder Engagement for each mining stage ......................................................... 96 D. Environmental and Social Impact for Alluvial Mining Operations .................................... 97 E. Sustainable Challenges for Exploration and Feasibility phase ........................................ 100 Exploration phase ................................................................................................................ 100
Feasibility study phase ........................................................................................................ 102
Appendices Cash Flow Model...................................................................................................... 106 F. Scope of SD indicator that affect cash flow ..................................................................... 106 G. Cash Flow Preliminary study Gold Sands project, Peru ................................................... 109 H. Sustainable Data OPEX .................................................................................................... 110 I. Closure Cost Calculations according to DME ................................................................... 111 J. Assumptions for Sustainable Case Cash Flow ................................................................. 112 Capital Expenditures Overview ........................................................................................... 112
Operational Expenditures Overview ................................................................................... 114
K. Results Cash Flow Analysis .............................................................................................. 120 Capex Results ....................................................................................................................... 121
Depreciation ........................................................................................................................ 122
OPEX Summary and Results ................................................................................................ 123
Residual Revenue ................................................................................................................ 124
Revenue Results .................................................................................................................. 125
Cash Flow Analysis ............................................................................................................... 126
viii
Table of Figures Figure 1‐1: Significance of this research for IHC .............................................................................. 2 Figure 1‐2: Structure of report ........................................................................................................ 4 Figure 2‐1: Sustainable Development key and sub‐aspects ............................................................ 6 Figure 2‐2: The Funnel Metaphor .................................................................................................... 7 Figure 3‐1: Typical flowchart of functional organization of small company ................................. 16 Figure 3‐2: Modified structure for integration of sustainability into mining ................................ 17 Figure 4‐1: Global distribution of major placer deposits .............................................................. 18 Figure 4‐2: Potential sites of alluvial formation ............................................................................ 19 Figure 4‐3: Schematic representation of a typical stripping/mining operation ............................ 21 Figure 4‐4: Bucketladder dredger of Mineros ............................................................................... 22 Figure 4‐5: IHC Beaver CSD ............................................................................................................ 23 Figure 4‐6: IHC BWD ...................................................................................................................... 23 Figure 4‐7: IHC Equipment Selection Procedure ........................................................................... 23 Figure 4‐8: IHC Treatment plant with jigs and CSD ....................................................................... 25 Figure 4‐9:Flowsheet and Massbalance of IHC treatment plant ................................................... 26 Figure 4‐10: Structure of Best Practice Guidelines for Water Management for mining projects . 29 Figure 5‐1: RBM Sustainable Filters ............................................................................................... 31 Figure 5‐2: Overview of RBM dredging operation ........................................................................ 33 Figure 5‐3: Overview of Mineros Operation ................................................................................. 34 Figure 6‐1: The sustainable triangle with the right balance .......................................................... 42 Figure 6‐2: Backcasting method .................................................................................................... 43 Figure 6‐3: Banff taxonomy of asset valuation methods .............................................................. 45 Figure 7‐1: Summary of Sustainable Indicators for AMOs ............................................................ 48 Figure 7‐2: Studies and plans to obtain a sustainable AMO ......................................................... 49 Figure 7‐3: EMS model for ISO 14001:2004 .................................................................................. 51 Figure 7‐4: Integrating biodiversity into the mining project cycle ................................................ 52 Figure 7‐5: Relationship between the EMS Elements ................................................................... 54 Figure 7‐6: Overview of Alluvial Mining Pond ............................................................................... 56 Figure 8‐1: SIT indicator based guideline for Alluvial Mining Operations ..................................... 60 Figure 10‐1: Schematic topview of full scale dredge system ........................................................ 75 Figure 10‐2: Format for Cash Flow Calculations ............................................................................ 77 Figure 11‐1: Structure of Sustainable Cash Flow Model ............................................................... 80 Figure 12‐1: Cash Flow Overview .................................................................................................. 85 Figure 12‐2: Cumulative Cash Flow of Sustainable Case ............................................................... 85 Figure 12‐3: Cumulative Cash Flow of Base Case ......................................................................... 86 Figure 12‐4: Effect of Discount Rate on the NPV .......................................................................... 87 Figure 12‐5: Depletion Planning of Mineral Resources ................................................................. 87 Figure 12‐6: Cumulative Gold Production ..................................................................................... 88 Figure 12‐7: NPV Sensitivity Analysis to Key Parameters .............................................................. 88
ix
List of Tables Table 3‐1: potential stakeholders of a mining project .................................................................. 13 Table 3‐2: typical roles and responsibilities of stakeholders ........................................................ 14 Table 4‐1: comparisons of dry and wet mining systems ............................................................... 19 Table 4‐2: Equipment selection in relation with soil conditions and site location ....................... 24 Table 4‐3: Environmental and Social Issues for AMOs .................................................................. 27 Table 4‐4: Water Management requirements through the mining phases .................................. 30 Table 5‐1: Mineros Social Intervention model for local development .......................................... 36 Table 5‐2: Key Project Statistics of Big Bend gold mining project ................................................. 38 Table 6‐1: Impacts of uniform discount rate on project selection ................................................ 46 Table 7‐1: Principles for Alluvial Mining Operations ..................................................................... 47 Table 8‐1: SIT‐Guidance for Social Impacts ................................................................................... 61 Table 8‐2: SIT‐Guidance for Socio‐Economic Impacts ................................................................... 63 Table 8‐3: SIT‐Guidance for Economic Impacts ............................................................................. 64 Table 8‐4: SIT‐Guidance for Eco‐Economy Impacts ....................................................................... 65 Table 8‐5: SIT‐Guidance for Environmental Impacts ..................................................................... 67 Table 8‐6: SIT‐Guidance for Socio‐Environmental Impacts ........................................................... 69 Table 9‐1: Exploration Phase ......................................................................................................... 70 Table 9‐2: Feasibility Study ............................................................................................................ 70 Table 9‐3: Construction Phase ....................................................................................................... 71 Table 9‐4: Operation Phase ........................................................................................................... 71 Table 9‐5: Closure Phase ............................................................................................................... 72 Table 10‐1: Expanding Sequence of dredge systems .................................................................... 75 Table 10‐2: Summary of the OPEX ................................................................................................ 76 Table 10‐3: Total CAPEX per dredge system ................................................................................. 76 Table 10‐4: Input Parameters of the cash flow analyses .............................................................. 77 Table 11‐1: Additional CAPEX data ................................................................................................ 81 Table 11‐2: Input data for Revenue Estimation ............................................................................ 82 Table 12‐1: Assumptions in General Input .................................................................................... 83 Table 12‐2: Retained assumptions for the sustainable cash flow calculations ............................. 84
x
List of abbreviations AMO Alluvial Mining Operation ASM Artisanal Mining BTS Brazilian Tensile Strength BWD Bucket Wheel Dredger CAPEX Capital Expenditures CCP Concept Closure Plan CDP Community Development Plan CEDA Central Dredging Association CSD Cutter Suction Dredger DME Department of Mining and Energy (South Africa) EIA Environmental Impact Assessment EIS Environmental Impact Statement EITI Extractive Industries Transparency Initiative EMP Environmental Management Plan EMS Environmental Management System FCP Final Closure Plan FSP Floating Separation Plan g/m3 grams per cubic meter GMI Global Mining Initiative ha Hectares ICMM International Council on Mining & Metals IFC International Finance Corporation IRR Internal Rate of Return MMSD Mining, Minerals and Sustainable Development NPV Net Present Value OHSMS Occupational Health & Safety Management System OPEX Operational Expenditures OPEX A Expanded Operational Expenditures with IHC Beaver 5020W OPEX B Expanded Operational Expenditures with IHC Beaver 6520W OPEX C Expanded Operational Expenditures with IHC Beaver 6540W OPEX P Initial (Pilot) Operational Expenditures with IHC Beaver 5020W PDAC Prospectors & Developers Association of Canada QMS Quality Management System RBM Richards Bay Minerals RCM Reliability Centered Maintenance RQD Rock Quality Designation SCFM Sustainable Cash Flow Model SD Sustainable Development SEAT Socio‐Economic Assessment Toolbox SEIAMM Plan Social and Environmental Impact Assessment and its Monitoring and Mitigation Plan SIT‐guideline Sustainable impact ‐ Indicator ‐ Tool guideline SME Small and Medium Enterprises Tr.oz. Troy ounces UCS Uniaxial Compressive Strength
1
1. General Introduction
1.1. Background The global society consumes natural resources much faster than that they are created by nature. The growing population and economics enhance this. Especially in the BRIC countries (Brazil, Russia, India and China) the rapid industrialization and urbanization, resulted in a mining boom and an increasing demand for energy and materials. The occurrence of ore materials is becoming scarcer and this resulted in greater awareness within the global society. This awareness asks for a sustainable approach for mining operations. Alluvial mining becomes more and more used mining method because recent developments in dredge mining and processing technologies improved the feasibility for this type of mining operations.
1.2. Significance of Research A recent analysis reported that according to the views of 282 global investment analysts, concluded that “companies failing to look after their reputational aspects of performance will eventually suffer financially”.1 This shows that sustainable development (SD) issues have vital influence over key drivers of profitability for mining companies. They influence, for example how acceptable their products will be to consumers and clients in the marketplace and whether alluvial mining companies gain access to additional land and resources. The use of sustainable principles and guidelines will assist the alluvial mining industry by having a common vocabulary and corporate mindset for sustainability. Mining companies made substantial steps towards becoming more sustainable as it uses numerous initiatives, tools to assess, monitor and report achievements. Most sustainability reports of mining companies emphasize on continual improvement for sustainable performances on a year‐by‐year base. IHC Merwede, the designer and builder of several different types of dredge vessels and a consultant in dredging and alluvial mining operations (AMO’s), is very much interested to be able to advise alluvial mining companies on sustainable issues. Whereas sustainable issues are of growing importance in the world and this awareness is visible among customers of IHC Merwede, they start to demand sustainable products and services. IHC wants to anticipate this future customer demand and to invest in their knowledge for implementing sustainability in their products and services.
1 Cameron, H. and Goldsmith, T., Mine Riding the wave [Report] – (London, Pricewaterhouse Coopers LLP, 2007) ‐ pp. 72
Figuremarkechalle(eitheand frto rea The pdevel
1 IHC itechnsubje Nowasustaiemplohas thenviro An AM(local into p
e 1‐1 shows et. This evoluenges and maer equipmentrom the markalize this.
purpose of thiopment and
1.3. Pr
ntends to pnology; miningcts.
adays the miinable issuesoyees and cohe ability to ponmental lice
MO has an inecommunities
practice, more
Figur
the significaution in the warket demandt, services or ket. To fulfill t
is research is cash flow mo
roblem de
play an impog and minera
ining industrs such as polommunity; anprovide the reensing regulat
evitable impas) systems. Ine knowledge
re 1‐1: Signific
ance of this rworld situatiod. To define a knowledge) tthe demand f
to contributeodeling in AM
scription
ortant role ial processing;
y have madellution; climand human rigequired ore attions and opt
act on the comn order to unis required.
2
ance of this re
research. Then results in nsustainable dthere is alwayfor a product
e to the knowO’s.
n offering k soil investiga
e substantialate change; lghts. A current the least cotimizing the in
mplex ecologderstand suc
esearch for IHC
e market becnew solutionsdemand and ys some feed, IHC uses its
wledge and un
knowledge anation and ana
l efforts to rand reclamant project is jost while at thnterests of th
ical (landscapch systems an
C
comes a mos to answer furequirementsdback from thknowledge a
nderstanding
nd services, alysis; and dr
reduce advertion; health udged to be he same time e local comm
pe, environmend implement
re sustainabuture changes for a produche company tand experienc
of sustainab
like dredginedging relate
rse effects oand safety osuccessful if complies wit
munities.
ent) and socit sustainabilit
le s, ct to ce
le
ng ed
on of it th
al ty
3
The thesis attempts to address the following research questions: “What are the key indicators that need to be taken into account to develop a sustainable alluvial mining operation?” The main goal is to establish a sustainable guideline for AMO’s and a cash flow model with sustainable issues and apply this model into a case study. The objectives of this thesis are:
• Gain an understanding of sustainable development guidelines that are currently used by mining companies and evaluate specific characteristics in the alluvial mining industry;
• Analyze if there is place for improvement opportunities for a more sustainable approach and establish a sustainable guideline for AMO’s;
• Define and estimate sustainable development costs that affect the cash flow; and establish a sustainable cash flow model (with resettlement; reclamation and closure; and environmental and social costs) and apply to a case study.
1.4. Method of approach The thesis has been divided in three steps, related to the three described objectives. The initial part consists of evaluation of sustainable methodologies, framework, and guidelines that are currently used by mining companies. Evaluation of good practices of AMO case studies is conducted. This part is largely based on an extensive literature review. The second part consists of an analysis to establish improvement opportunities to become more sustainable and establish a sustainable guideline for AMO’s. The guideline entails sustainable impacts and indicators. Each indicator is provided with a tools or good practices. This part is based on extensive literature studies, brain‐storm sessions and meetings with TU Delft and IHC. The final part is an “in depth” economic analysis on sustainable topics of the guideline for AMO’s to define and estimate sustainable indicators that affect the cash flow. Eventually these indicators are used to establish a sustainable cash flow model and applied to the Gold Sands project in Peru. The model is based on investment and production planning; and operational, environmental, social and economical characteristics. This part is based on meetings with senior alluvial mining consultant, Willem Kramer, and mathematical modeling by using Excel with visual basic.
4
1.5. Structure of Report The structure of this report is shown in Figure 1‐2; according to the method of approach.
Figure 1‐2: Structure of report
5
2. Introduction in Sustainable Development
2.1. What is sustainability? The key element to achieve a sustainable AMO is to create a culture within the organization that recognizes the value of sustainability by effectively integrating socio‐cultural justice, environmental quality and economic development. These considerations are also known as the 3 pillars of sustainability: people, planet and profit. In the next paragraphs these three considerations will be treated in more detail. Environmental sustainability emphasizes maintaining the ability of the natural environment to provide the life‐sustaining services and the qualities it provides to human (e.g. clean air and water, biodiversity or scenic landscapes). This view of sustainability also represents the belief that the natural environment should be sustained and maintained for its own sake, independent of how human beings use and interact with the environment. 2 Economic sustainability emphasizes sustaining or enhancing human living standards. A starting point for assessing economic sustainability is a measure of well‐being at present, such as per capita income. Broader starting points incorporate other less purely economic determinants of human well‐being, such as medical care, education levels, sanitation, life expectations and income distribution. The United Nations Human Development Index is an example. Sustainability requires that these indicators of well‐being be at least sustained if not enhanced. 3 Social and cultural sustainability focuses on social justice and emphasizes how the benefits and liabilities of economic activities are distributed. Most commercial activities yield benefits and liabilities that are not shared equally across society. However the extent of which parties affected by a new commercial development should have a role in deciding whether the development occurs and under what term. This is for every project different. 4 Each form of sustainability (environmental, economic, and socio‐cultural) can be thought of as one‐dimensional in that the objective is to sustain or maintain something that is either environmental (e.g. maximum allowable rate of pollution), economic (e.g. measure human living standards), or social (e.g. fair distribution of wealth).
2 Sutton, P., A perspective on environmental sustainability? [Online Doc] – http://www.ces.vic.gov.au (s.l., Green Innovations, 2004) – pp. 2 [Accessed February 5, 2009] 3 United Nations Development Programme, Human Development Index [Online] – http://hdr.undp.org (2008) – [Accessed February 9, 2009] 4 International Finance Corporation (IFC), Social Responsibility [Online] –www.ifc.org (2009) – [Accessed February 9, 2009]
6
2.2. What is sustainable development? In 1987 the World Commission on Environmental and Development, chaired by the prime minister of Norway, Gro Harlem Brundtland, published a report, Out Common Future, in which they connected the environmental problems the world faced at that time with the strive for the alleviation of poverty.5 This was the formal birth of the concept ‘sustainable development’ (SD). The commission formulated SD as…: …a development which meets the needs of the present without compromising the ability of future generations to meet their own needs. This implies a concern for the environment and leveling of the welfare, healthcare, development and education experienced by people globally. The report suggested that international governments should meet to look at how to best reduce the effects of human activities on the environment for future generations. Sustainability is one‐dimensional whereas SD is multi‐dimensional. Figure 2‐1 illustrates SD key aspects: environmental, economic and social as well as sub aspects: socio‐economic, eco‐economy and socio‐environmental.
Figure 2‐1: Sustainable Development key and sub‐aspects
5 Peek, Dirk‐Jan, Geotechnology and Sustainable Development [Lecture notes] – (Delft, Technical University of Delft, 2008) ‐ pp. 6
7
2.3. Why is sustainability valuable? The past five decades an unparallel growth in societal demand for fresh water, food, energy and raw materials occurred, this may result in such significant environmental damage and social disruption that the future generations will be worse off than the current generations. 6, 7, 8
Although these increased demands have resulted in economic growth and prosperity, it also led to sometimes‐irreversible negative impacts on the earth’s ecological systems. The ecosystems provide services to sustain life such as clean water and air, climate regulation, agricultural productivity and forests continue to be degraded to the point that they are no longer sustainable. These negative developments are reaching a threshold where the non‐linear affects of ecological degradation cannot be adequately predicted.9 This offers an opportunity for business to identify and invest in sustainability driven innovation. The funnel is a metaphor that illustrates the global trend of resource availability and functional capacity and limits of our global system. As societies demand increases and the capacity to meet this demand declines, society moves into a narrower portion of the funnel. As the funnel narrows there are fewer options and less room available to successfully plan and maneuver towards a sustainable society.
Figure 2‐2: The Funnel Metaphor10
6 United Nations Environment Programme, Vital Water Graphics [Online] – www.unep.org (Nairobe, UNEP, 2008) [Accessed February 2, 2009] 7 Olejarnik, Pawel, World Energy Outlook 2008 [Online Doc] – www.oecd.org(s.l., International Energy Agency, 2008) – pp. 13 [Accessed February 4, 2009] 8 Organization for Economic Co‐operation and Development, Environmental Outlook to 2030 [Report] (Paris, OECD Publlications, 2008) – pp. 202 & 240 9 Millennium Ecosystem Assessment Panel, Ecosystems and Human well‐being: Biodiversity Systems [Report] (Washington, World Resources Institute, 2005) – pp. 21 10 Lydiatt, T. et al., Sustainable Mining? [Figure] – (Karlskrona, Blekinge Institute of Technology, 2008) – pp. v
8
2.4. Sustainability in IHC Merwede IHC Merwede, acknowledges that sustainability issues are becoming more important in the world, because the human activities become more visible and the environmental awareness is increased. Therefore customers are demanding more sustainable services and products. IHC invested and keeps investing a lot of R&D efforts into sustainable parts, equipment and/or services to anticipating on the future demand of the customers. A long term project “Sustainable and Dredging” started in January 2008 to investigate all sustainability issues within the dredging industry from their equipment supplier perspective and investigate what the consequences are for the requirements of their future products. To define this IHC organized a 2‐day seminar about ‘sustainability’ with their different business units, customers, suppliers and consultants. The results of this seminar, as presented during the CEDA Dredging Days (October 2008, Antwerp), substantiate that IHC is investing a lot in sustainability and that they are putting great value in a sustainable dredging future. The sustainability department of IHC concluded that the design principles of Cradle to Cradle are not totally applicable in the design and construction of dredging vessels but it inspired them.11 In chapter 6.2 technical innovations are explained which are researched and are being developed by IHC.
11 Goncalves Castro, M.B., Seminar Sustainable Dredging [Report] (Kinderdijk, MTI Holland, 2008) – pp. 5 (confidential)
9
3. SD in mining industry
3.1. Brief history Around the millennium a group of major mining companies took a remarkable initiative called Global Mining Initiative (GMI). The Initiative was intended to identify the relationship between SD and mining. The GMI had two lasting outputs. The first was a final report Breaking New Ground of the Mining, Minerals and Sustainable Development (MMSD) project. This report identified 9 key challenges faced by the minerals sector:12
• Viability of the Minerals Industry;
• The Control, Use and Management of Land;
• Minerals and Economic Development;
• Local Communities and Mines;
• Mining, Minerals and the Environment;
• An Integrated Approach to Using Minerals;
• Access to information;
• Artisanal and Small‐scale Mining; and
• Sector Governance; Roles, Responsibilities, and Instruments for Change. The second output is the creation of the International Council on Mining and Metals (ICMM) based in London. ICMM is an industry association (17 largest mining and metals companies and 30 association members: e.g. BHP Biliton; Rio Tinto; Anglo American) charged with carrying out the work investigated by MMSD and more generally to promote mining that is viable for companies and contributes to broader SD.13 Between 2000 and 2004, the Extractive Industries Review was performed. The conclusions of the review was that while extractive industries investments can contribute to SD, the World Bank should further enhance its efforts in several areas. The world bank should identify and track several social and environmental issues like poverty reduction associated with its projects, the overall quality of governance in host countries, broader inclusion of local stakeholders, transparency of revenue management and project documents, and the promotion of renewable energy and cleaner fuel alternatives.14 The following initiative, according to this review, was the IFC Performance Standards. These standards are a voluntary set of guidelines for banks and other financial institutions to sue in managing projects.15 In 2003, the Extractive Industries Transparency Initiatives (EITI) promotes
12 World Business Council for Sustainable Development, Summary Breaking New Ground [Report] (London, Earthscan Ltd., 2002) pp. xvii‐xviii 13 ICMM, ICMM History [Online] – Website ICMM ‐ History (London, ICMM, 2009) [Accessed January 30, 2009] 14 IFC, Extractive Industry Review [Online] Website IFC ‐ EIR (2004) [Accessed May 16, 2009] 15 IFC, Performance Standards on Social & Environmental Sustainability [Online Doc] (s.l., IFC, 2006) pp. i [Accessed February 26, 2009]
10
full disclosure and independent verification of company payments and government revenues from oil, gas and mining. This initiative aims to improve private and public governance in resource‐rich nations by making it more difficult for companies and governments to undertake activities that the public find inappropriate.16 To improve the transparency the Global Report Initiative (GRI) established guidance for sustainability reporting with environmental, social and economic indicators. The GRI has published a Mining and Metals Sector Supplement that was developed in cooperation with ICMM.17 This supplement contains new indicators that are relevant for the Mining and Metals Sector. Each indicator has a certain goal, for example no casualties, or a certain amount of fossil fuel emissions etc. To accomplish its purpose, a sustainability report must be credible and generally accepted by all stakeholders and potential investors. Mining companies have undertaken several initiatives to improve their SD issues relating social, environmental and economic aspects. These frameworks outline principles to set up corporate and project strategies for sustainability. Appendix A lists some sustainable mining organizations and standards; and pre‐existing tools that are currently used in the mining industry.
3.2. ICMM SD Framework The ICMM SD‐Framework is the most well‐known and used strategic framework in the mining industry of today. This SD Framework compromises three elements – 10 Principles for SD, which companies are required to implement; Public Reporting, companies are committed to report their performance against the 10 principles in accordance with GRI guidelines; and Independent assurance to audit that companies meet their commitments to the 10 principles. Below the 10 principles are listed and Appendix B lists the sub‐elements of these 10 principles.18
01. Implement and maintain ethical business practices and sound systems of corporate governance.
02. Integrate sustainable development considerations within the corporate decision‐making process.
03. Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and others who are affected by the activities.
04. Implement risk management strategies based on valid data and sound science. 05. Seek continual improvement of health and safety performances. 06. Seek continual improvement of environmental performances. 07. Contribute to conservation of biodiversity and integrated approaches to land use
planning. (to be continued)
16 EITI, What is EITI? [Online] Website EITI ‐ What is the EITI? [Accessed April 8, 2009] 17 GRI, Mining & Metals [Online] Website ‐ GRI Mining & Metals [Accessed March 20, 2009] 18 ICMM, 10 Principles [Online] Website ICMM 10 principles [Accessed January 30, 2009]
11
08. Facilitate and encourage responsible product design, use, re‐use, recycling and disposal of products
09. Contribute to the social, economic and institutional development of the communities in which the operation takes place.
10. Implement effective and transparent engagement, communication and independently verified reporting arrangements with the stakeholders.
According to ICMM, extensive work programs will help its members to meet their SD commitments and drive performance improvement by establishing toolkits or guidelines. The work programs are19:
• Environmental Stewardship
• Health and Safety
• Materials Stewardship
• Socio‐Economic Development
• Resource Endowment Initiative
• Reserves and Resources Environmental Stewardship work program has the purpose to enhance the industry’s performance and commits to principles 4, 6 and 7. Much of the operations that are globally carried out are in rich natural resources and these are often natural sensitive, so it is essential that the industry acts in a sustainable manner to minimize the impact on the sensitive ecosystems. Alongside this aim it is essential to work effectively with governments and local communities so that improved environmental behavior helps to ensure the ‘social license to operate’. Current toolkits are ‘GPG for mining and biodiversity’ and ‘Planning for integrated mine closure’. Health & Safety (H&S) work program is based on managing and assessing the risks and hazards to human H&S. Commits to principles 4 and 5 and supports companies to be open and transparent sharing of information and collective actions on health and safety issues in their drive to ‘zero harm’. Health Risk Assessment (HRA) is a structured and systematic identification of workplace hazards to assess potential health risks. Besides the HRA there is done a Health Impact Assessment, this assessment is focused on health, safety and wellbeing issues of the communities living near mining operations. Current useful toolkits are the ‘GPG on Occupational Health Risk Assessment’ and ‘Leadership Matters – the eliminating of fatalities’.
Materials Stewardship (MS) strategy has got an incredible focus within the mining industry the past decade, resulting in much deeper understanding of material life cycles and how to effectively capture materials mined from the lithosphere in the technosphere. The ICMM has defined MS as ‘the responsible condition of materials and supervision of material flows towards the creation of maximum societal value and minimum impact on human and the environment’.
19 ICMM, Work Programs [Online] Website ‐ ICMM Work programs [Accessed April 26, 2009]
12
It is vital for mining companies to promote responsible design, use, re‐use, recycling and disposal of the materials it produces, see principle 8. ‘Maximizing Value: Guidance on implementing materials stewardship in the minerals and metals value chain’ is a useful tool to achieve this. Socio‐Economic Development (SED) work program has the purpose to maximize the contribution of the industry to the communities and countries where companies operate. The SED depends on strong relationships between mining companies, governments, communities and multi‐lateral agencies, such as World Bank and UNEP. Building good relationships with communities and leaving a lasting positive impact is essential for the continuing success of mining operations. There is a detailed ‘Community Development Toolkit’ worked out by ICMM that helps to improve the quality of people that are affected by the mining operation. Principles 3, 4 and 9 are related to this work program. Resource Endowment Initiative have the objectives to identify the factors that have allowed some countries to benefit from their available resource endowments through economic growth and poverty reduction and avoid the so‐called ‘resource curse’. This work program is related to the principles 1 and 9. The ‘Resource Endowment Toolkit’ provides a consistent and systematic approach to documenting the impacts (both bad and good) of individual mining projects on a local, regional and national level. Reserves and Resources (R&R) are the economic basis on which sustainable principles and responsible resource development can be based. The estimation of R&R involves social, environmental and institutional aspects that relate directly to SD, such as the ‘license to operate’ and thereby enabling the value of the minerals to be released. The function of this work program is to promote international transparency and consistency in the way that R&R are estimated and reported. The CRIRSCO (Committee for Mineral Reserves International Reporting Standards) is coordinating and have established an international reporting template for exploration results. There are several reporting standards, e.g. the Australian JORC Code, that are in accordance with the principles of the CRIRSCO template. This work program manages principle 10.
3.3. Stakeholder Engagement Developing and sustaining a good relationship with affected communities and other stakeholder throughout the mine life is essential for every AMO and especially for new ones. The so called ‘social license to operate’ is obtained by getting acceptance by society of company operations without social opposition or protest. This is largely determined by the company’s overall ability
13
to meet stakeholder expectations for social and environmental performance.20, 21 In the next section the stakeholder identification and analysis is described in more detail.
3.3.1. Identification and Analysis The first step in the process of stakeholder engagement is stakeholder identification; determine who the project stakeholders are, and their key groupings and sub‐grouping. From this flows stakeholder analysis, a more detailed look at stakeholder group interests.22 Lists of potential stakeholders, not necessarily in order of importance, with direct or indirect interest in a mining project are shown in Table 3‐1.23
Table 3‐1: potential stakeholders of a mining project
The Company’s directly related people, business, and investor institutionsShareholders Financial and lending institutions and financial analysts/ the World Bank Employees (and employees’ families Contractors, suppliers, and customers Government, from local to national to international levelsInternational level: e.g. United Nations bodies (i.e. focused on corporate responsibility, human rights, environment, labor)National level: e.g. Department of environment, infrastructure, health, welfare, family services, trade and industry Provincial level: e.g. local councils, provincial or district offices District/Local level: e.g. local councils, regional governments Traditional authorities: e.g. councils of elders, family heads, community leaders Society and interested parties Directly affected parties: host and surrounding communities; landownersIndirectly affected parties: agriculture, private business, tourism, competitors, etc. General public and broader society: local to global NGOs and Community Based Organizations (CBOs): environment, human rights, etc. Religious institutions Media (press and opinion leaders) Political groups Labor unions Professional associations and scientific/technological bodies and universities Indigenous people and individuals Minorities and other historically marginalized groups
There are broad principles for the role and responsibilities of stakeholders. The precise roles of the various participants depend on local circumstances and change during the course of both the mine and the community development process. See table 3‐2 below.24
20 Prospectors and Developers Association of Canada (PDAC), Social Responsibility Toolkit [Online Doc] (Toronto, PDAC, 2009) ‐ pp. 12 [Accessed March 14, 2009] 21 IFC, Environmental, Health and Safety Guidelines for Mining [Online Doc] (s.l, IFC, 2007) ‐ pp. 9‐10 [Accessed April 3, 2009] 22 IFC, Stakeholder Engagement [Online Doc] (Washington, IFC, 2007) – pp. 14‐26 [Accessed April 16, 2009] 23 Samuel, J., Socio‐Economic Assessment Toolbox (SEAT) [Online Doc] – pp. 14‐15 [Accessed April 6, 2009] 24 ICMM, Community Development Toolkit [Online Doc] – pp. 10 [Accessed March 13, 2009]
14
Table 3‐2: typical roles and responsibilities of stakeholders
Stakeholder group Roles & ResponsibilitiesGovernment Strategic leadership
Strategic coordinationProvide policy and regulatory framework for construction, operation, closure & legacy phases Support capacity building at local level including monitoring capabilities Deliver local servicesLeverage state and external resources Monitoring and evaluation
Companies Manage exploration, construction, operation and closure of mine in accordance with regulatory requirements Catalyst for action at the community level Stakeholder coordination around project site Financial, material and facilities support for local communityTransfer of technical and management skills and expertise to local community Monitoring and evaluation
NGOs & CBOs Local needs assessmentLocal capacity building and institutional strengthening Community project design and implementation Leverage external funding for community support Monitoring and evaluation
Community Groups Local needs definition and prioritizing Local knowledge and valuesCommunity planning and mobilization Mobilization of local assets and resources Internal organization and conflict resolution Monitoring and evaluation
3.3.2. Engagement with Stakeholders According to IFC the key components for a good stakeholder engagement are:25
• Stakeholder Identification & Analysis: invest time in identifying and prioritizing stakeholders and assessing their interests and concerns.
• Information Disclosure: communicate information to stakeholders early in the decision‐making process, in ways that are meaningful and accessible, and continue this communication throughout the project life.
• Stakeholder Consultation: plan out each consultation process, consult inclusively, document the process, and communicate follow‐up.
• Negotiation and Partnerships: for controversial and complex issues enter into good faith negotiations that satisfy the interests of all parties. Add value to impact mitigation or project benefits by forming strategic partnerships.
• Grievance Management: establish accessible and responsive means for stakeholders to raise concerns and grievances about the project throughout its life.
(to be continued)
25 IFC, Stakeholder Engagement [Online Doc] (Washington, IFC, 2007) – pp. 12 [Accessed April 16, 2009]
15
• Stakeholder Involvement in Project Monitoring: involve directly affected stakeholders in monitoring project impacts, mitigation and benefits, and involve external monitors where they can enhance transparency and credibility.
• Report to Stakeholders: report back to stakeholders on environmental, social and economic performance, both those with more general interests in the project and parent company.
• Management Functions: build and maintain sufficient capacity within the company to manage processes of stakeholder engagement, track commitments, and report on progress.
The IFC Stakeholder Engagement provided good practice pointers for each mining stage, from the exploration stage till the closure and legacy phase, see Appendix C.
3 This smininintegr
The sthe stconceefficiefactorreporflexibcomp Small compmanafigurefunctiservic
The fusimplemanalevel.
26 Ward
3.4. In
section focuseng companiesration.
3.4.1. Or
tructure of atructure can berned with mently excavatrs come intorting relationility. The orpanies to glob
alluvial minpanies operatigers report te below shoional areas (mces, and finan
Figu
unctional mae and cost‐gers often la
d, M.H.; Britton
ntegrating
es on the inte, the organiza
rganizational
company shbest assist in
minimizing cape mining opeo play – incnship, and mrganizational al mining gia
ning companing one or twto the CEO (ws for exammine productnce and admin
re 3‐1: Typical
nagers repor‐efficient strck overall bu
n, S.G., SME Mini
sustainabi
egration of suational struct
structure in
hould focus oachieving th
pital requiremeration. How luding size ominimizing dstructure onts. Alluvial m
nies: functionwo mines in a (Chief Executmple an orgation, environnistration).
l flowchart of f
ting to the CEructure. Howsiness vision,
ing Engineering
16
ility in min
ustainability dture and man
mining
on correct balese principlements, wherecan this besof entity, fuduplication wof mining comining compa
nal segmentasingle geogrative Officer) oanizational fmental healt
functional org
EO are speciawever, being, so the impo
Handbook [Boo
ning
down to the oagement role
lance on entes. The alluviaeby effectivelst be done? Mnctions requwhile maximompanies difanies are mos
ation is a saphical area. or COO (Chieflowchart thah & safety, h
ganization of sm
alists in their g specialized ortant decisio
ok/Figure] (Littlet
operational lees and system
erprise objecal mining comy explore theMany organizuired, span oizing commufferences of stly small‐size
standard for In this structuef Operating at is segmenhuman resou
mall company
fields, therebprofessiona
ns tend to be
ton, SME Inc., 19
evels of alluvims required fo
ctives and howmpany must be orebody anzational desigof monitoringunication ansmall minin
ed. 26
small mininure, functionOfficer). Thnted into fivrces, technic
by allowing foals, functione taken on to
992) pp. 645‐64
al or
w be nd gn g, nd ng
ng al he ve al
or al op
9
17
3.4.2. Integrating SD into mining operations Integration of SD strategy into corporate structure and down to operational level must start with a corporate vision about sustainable development. The mining industry has made considerable efforts in various sustainability issues, such as land degradation and rehabilitation, mine closure, climate change, pollution, health & safety and human rights. Although these efforts it is a very complex system.
Figure 3‐2: Modified structure for integration of sustainability into mining27
Figure 3‐2 illustrates a framework to structure this complexity and to ensure a sustainable mine management. In this framework, sustainability must be vertically integrated at three functional levels (strategy, planning and implementation) and three organizational levels (corporate, divisional and operations). In addition, the implementation of sustainability requires an organizational structure with a business culture and adequate integration measures in which sustainability is a high value.
27 Botin, J.A., Sustainable Management of Mining Operations [Book/Figure] (Littleton, SME Inc. 2009) ‐ pp.3
18
4. Specific Characteristics in AMOs
4.1. Brief overview of an AMO
4.1.1. Alluvial Deposits Alluvial deposits have a tabular‐flat geometry but also can be deposited on a hillside, the genesis is a surface‐stream action deposition, such as fans, deltas, meanders, braided rivers, lakes, beaches or shallow marine and are defined as deposits of detrital material with the valuable mineral liberated and recoverable as discrete grains. The global distribution of major placer deposits is shown in Figure 4‐1.
Figure 4‐1: Global distribution of major placer deposits28 Usually the valuable heavy minerals, precious metals and stones occur in unconsolidated and loosely cohesive sediments, such as sands and gravel or alluvium.29 Placer deposits can contain: gold, tin (cassiterite), magnetite, lead, diamonds or heavy minerals sand (zircon, ilmenite and rutile). However there are also consolidated sediments like evaporites or tertiary‐cemented gravels, which can be excavated by alluvial mining.30 Deposits in tropical regions contain in general a lot of silt and clay. Figure 4‐2: Potential sites of alluvial formation shows potential sites of alluvial formation.31
28 SordMiner, Location of Major Mineral Fields Ameanable to Exploitation [Figure] [Accessed: January 30, 2010] 29 Lacy, W.C. and Lacy, J.C., SME Mining Engineering Handbook [Book] (Littleton, SME Inc., 1992) pp. 32 30 Hogeweg, A., Email conversation August 3, 2009 [Conversation] 31 Macdonald, E.H., Handbook of gold exploration and evaluation [Figure] (Cambridge, Woodhead Publishing, 2007) pp. 240
The cdifficumininissuesof waillustr
Dry Minin
Wet Minin
32 Macpp. 412
4.1.2. Co
choice betweeulties of acqung operation. s and the seleaste disposal rates the diffe
Applications
ng Shallow surfdeposits, tigcompacted sirregular geometry, hlevel dunes, desert environmen
ng Ample wateavailable formining and treatment oshallow surfdeposits, higlevel dunes, marine environmen
cdonald, E.H., H2‐413
Figur
omparison of
en wet and duiring volumeA combinatioected methodand of slurryerent aspects
Table 4‐1s Equipme
system iaround
face ghtly sands,
igh‐
t
Bulldozearticulatend loaddraglinehydrauliexcavatobucket wexcavato
r r
f face gh‐
t
Pumps amonitorbucket dbucket wdredgersshell drelift dredghydrauliexcavato
Handbook of gol
re 4‐2: Potenti
dry and wet
dry mining syes of water, on of practicad will usually ying and tran and compare
: comparisonsent is built
ContSele
ers, ted front ders, s, c ors, wheel ors
Propmindistrlocacharand floobedof wposi
and s, suction, dredgers , wheel s, clam‐edgers, jet gers, c ors
Propmingradphysslopmingeomsupppurp
ld exploration a
19
ial sites of allu
mining
ystems is usuand of drainal and econombe that whic
nsporting the es dry mining
of dry and wetrolling Factors foection
posed scale of ing minerals ribution and valuetion and physical racteristics, slope texture of miningr, surface and rock geometry, lacwater for wet minintion of water tablposed scale of ing deposit size ande, location and sical characteristicpe and texture of ing floor. Bedrock metry, adequate plies of water for aposes
nd evaluation [
vial formation
ually made oning the grounmic factors heh offers the mmined mate
g with wet mi
et mining systeor Advantage
e,
g
ck ng, e
Ability to hgroup of smposits, consrate under different mconditions,mining leadoptimizatiograde cont
nd
cs,
all
Mining & pincorporateunit. Low ucosts, closesupervisioncontrol, onmethod in water cond
Book] (Cambrid
n
n the basis ond prior to aelps to resolvmost cost‐efferial to the plning.
ems32
es Dis
andle mall de‐ stant feed widely
mining , selective ds to on of feed rol
Higcohaof firmmolarwoanpa
process‐ing ed in one unit mining er n and ly possible excess ditions
Mitimselhighiglarreqlogaffen
ge, Woodhead
f cost and thand during the any doubtfective metholant. Table 4‐
sadvantages
gh unit operating sts, inability to ndle large volumewater, re‐ quires m base for vehicleovement, requiresrge on‐site orkshop facilities d stock of spare rts ining losses some‐mes high, less lectivity in min‐inggh relocation costsgh capital costs, rge water quirements, eco‐ gical problems mafect large sectionsvironment
Publishing, 200
he he ul od ‐1
es
e s
‐
g, s,
y of
7)
20
4.1.3. Alluvial mining operation Alluvial mining is an aqueous excavation method intended for the recovery of valuable minerals from alluvial or shallow marine deposits, using water to excavate, transport, and/or concentrates the mineral. In this type of mining there are two methods namely hydraulic mining and dredging. Hydraulic mining utilizes a high‐pressure stream of water to undercut a deposit on a hillside, e.g. dunes, to cause it to collapse. Dredge mining accomplishes extraction of the ore minerals mechanically or hydraulically, normally from floating vessels. In both of these methods the valuable mineral constituent, generally heavier than the waste material, is removed from a water‐base slurry by concentration. Both of these methods find widest applications in mining fields other than alluvial and for many purposes other than mineral extraction (e.g. tailings transport, ore slurrying, overburden stripping, and land reclamation).33 Alluvial mines usually have relatively high‐volume, low‐unit‐cost excavation and mineral separation. These relatively large orebodies have a relatively low ore‐grade. Therefore it is essential that the excavation of a low‐grade deposit has a low‐unit‐cost for mining. Alluvial mining affects a disproportionate area of surface for the volume of material mined (and is highly visible), environmental and social considerations are therefore essential.34 AMOs has several key points that need to be considered to establish a sustainable legacy: Topsoil stripping and storage: Prior to the removal of overburden, suitable topsoil from all areas to be dredged will be stripped and stockpiled or directly hauled to reclamation areas. Also the topsoil from the area where embankments will be created is stripped and stockpiled. In a later stage the stockpiled topsoil will be used as a final cover material on reclaimed sites once the mining is completed. The topsoil in a mining area can differ, thus a good assessment is essential. Mining process: Figure. 4‐3 presents a schematic representation of a typical stripping/mining operation that uses two dredgers that work independently of one another, one that removes the overburden and the other that excavates the placer deposit. The overburden can have a different grain size distribution than the placer deposit; usually the overburden is finer than the placers. During production the overburden is moved first and then the finer dredged materials is deposited on top of the coarser mined placer tailings. The majority of dredged placer deposit and overburden will be replaced within the dredging pond; however, due to the swell factor (approximately 1.3) some of the overburden will be over. The left overburden material can be placed for dikes and mounds purposes if needed or gently spread over the reclaimed area.
33 Hartman, H.L., SME Mining Engineering Handbook [Book] (Littleton, SME Inc., 1992) pp. 32 34 McLean, C. A., SME Mining Engineering Handbook [Book] (Littleton, SME Inc., 1992) pp. 1454
21
Continuous and Concurrent Reclamation: Good mine planning is needed to allow reclamation as a part of the other annual activities on site. A mining operation that is reclaiming land disturbed by past activities, while continuing to develop the mineral resources in other parts of the mining areas, is called concurrent reclamation. This manner of reclamation will reduce the amount of disturbed area present on the site at any time during the project. For each ecosystem (steppe, forest, etc.) there are different optimal periods for a successful required re‐vegetation. For example in a steppe area the required re‐vegetation can best be done from spring to mid‐summer in order to take advantage of the growing season to allow optimal establishment of replanted areas. Figure 4‐3 shows a cross‐section of a sustainable manner and phases of the continuous and concurrent reclamation to obtain a positive ecological legacy in a dredging pond.
Figure 4‐3: Schematic representation of a typical stripping/mining operation35
4.1.4. Review of Dredge Mining Equipment A bucketladder dredger is a complete mining/treatment unit comprising pontoon, excavating mechanism, treatment plant and supporting structures. These dredgers are massive structures, because great strength is needed. Factors affecting the design of such dredger are mainly: deposit volume, width, depth and the range of depths to be dredged, sediment type and bedrock type. Parameters most affected are hull and ladder dimensions, bucket size and speed and the system of mooring. A bucketline dredger can be used in onshore as well as in offshore operations. There are few conditions that are required for a smooth and economic operation, namely: a gently sloping bedrock, absence of large boulders that might obstruct the whole process, a bedrock that can be cut by the buckets and adequate reserves to make the operation economically feasible to justify the high capital expenditures.36
35 Constitution Mining Corp., Gold Sands FAQ [Online, Figure] Website ‐ Constitution Gold Sands FAQ [Accessed: February 10, 2010] 36 Macdonald, E.H., Handbook of gold exploration and evaluation [Book] (Cambridge, Woodhead Publishing, 2007) pp. 447 & 463
An ofdredgpropeopera Hydrabuckedimensedimor cutbladewatervolumsedimparticvariabin des Cuttethe msystemin beavariat5000k
37 Hoge38 Macpp. 474
ffshore operaging depths elled. Wind, ations.
aulic dredgeetladder drednsions, and thment that cantter heads; fs of pump; ar. Constraintsmes of water ments are abcle type and bles demandssign.38
r suction drematerial and sm of dredgingach and offshtion in the sizkW. Their ope
eweg, A., Presendonald, E.H., H4‐476
Figur
ation faces ge(e.g. maximuwaves, curre
rs offer, undgers. Furtheherefore are be easily cutfreedom frombsence of exts to the use owith solids thrasive; pipelisize; and digs a high degre
edgers (CSD) slurryfied. Theg has its mainhore sand deze of CSD is cerational max
ntation IHC MerwHandbook of gol
re 4‐4: Bucket
enerally simium ~ 50 m)ents and co
nder certain rmore these suitable in smt and fed intom any buried tensive rootsof hydraulic dhat are transines transporging conditioee of compro
are stationare slurry is pun applicationsposits. It is nconsiderable ximum depth
wede [Figure] (Kd exploration an
22
ladder dredge
lar constraint. Differencesrrosion due
conditions,dredgers aremaller channeo the dredge timber that
s; availability dredgers incluported; pipelrt is materiaons change coomise and th
ry dredgers thmped by thes in the mininot suitable inwith cutter hrange is abo
Kinderdijk, MTI Hnd evaluation [
er of Mineros37
ts as onshores are that oto seawater
a lower ce more maneels. Suitable cpump suctiocannot be bof very substude: high powlines and pumally affected onstantly. The application
hat use a rote waterflow tong of free‐flown clay deposithead power vut 30m.
Holland, 2009) pBook] (Cambrid
7
e dredgers wffshore dredr effect offsh
capital cost euverable andconditions arn pipe using broken up bytantial volumwer usage bemps wear rapby changing he unpredicta of generous
tating cutter o the treatmwing sands wts because ofvarying betwe
p. 4 &10 ge, Woodhead
with regards tdgers are selhore dredgin
compared td have smallee provided bybucket wheey the cutter oes of make‐uecause of largpidly when thconditions o
ability of thess safety facto
head to breaent plant. Thhich are founf clogging. Theen 20kW an
Publishing, 200
to f‐ng
to er y: els or up ge he of se rs
ak is nd he nd
7)
For cgenermaterdensitweigh
EquipFor alsuch provid
Projec
•
•
• •
Table and si
39 IHC M40 Muij41 Verh
lay deposits rally preferrerials; they clety to the treaht of the whe
Figure 4‐
pment Selectilluvial and shas bucketladdes an equipm
ct constraintsOperating depth andSoil condistrengths mineralogSite enviroProject con
4‐3 represenite location.
Merwede, Beavjen, H. van, EMChoek, P.N.W., Dr
the bucket ed to CSDs fean up moreatment plant.el and ladder
‐5: IHC Beaver
ion Process hallow marinedder dredgerment selectio
Figure
s are: conditions: t accessibility tions and th(UCS and ical compositonment: weatnditions: accunts a rough in
er 5014 C [OnlinC course Alluvial redging of Rock
wheel dredgfor productioe effectively Their use is r.
CSD39
e mining thes, hydraulic on procedure
e 4‐7: IHC Equi
type of projec
he dredgeabBTS) and mtion (to deterther conditionuracy, selectivndication for
ne, Figure] WebsMining: Introdu[Lecture notes]
23
gers (BWD) aon dredging.at bedrock acurrently lim
re are severadredgers (cuwith specific
ipment Selecti
ct, project siz
ility of the m‐ratio (for mine hardnens, current, swvity, environmequipment s
site IHC ‐ Beaveruction in dredgin(Papendrecht, R
are more sui. BWDs are and deliver tited to a dep
Figure
al types of mutter suction project cons
ion Procedure4
e, available t
rock: RQD, fdetermine
ss, importantwell and tidamental impacselection in re
r 5014 C [Accesseng [Lecture noteRoyal Boskalis W
itable. Thesemore able t
the slurry at th of ~ 50m b
e 4‐6: IHC BWD
mining equipmand wheel dtraints, see F
40
ime, water de
fracture indeductility/bri
t factor in abrl differences ct, pre‐dredgielation with
ed February 11, s] (Delft, IHC Me
Westminster nv, 2
e dredgers arto cut hardea higher pubecause of th
D
ment availabledredgers). IHigure 4‐7.
epth, dredgin
ex, block sizeittleness) anrasive wear)41
ng activities. soil condition
2010] erwede, 2008) 2007) pp. 37
re er lp he
e, HC
ng
e, nd 1
ns
24
Table 4‐2: Equipment selection in relation with soil conditions and site location
TYPE OF EQUIPMENT
SOIL SITE SILT CLAY GRAVEL ROCK OFF SHORE ON SHORE
TRAFFIC NO‐TRAFFIC BUCKET LADDER DREDGER
G/R G/R G/R G/R NA/R NA G
PLAIN SUCTION DREDGER
R NA G NA G/R NA G
CUTTER SUCTION DREDGER
G G G R R NA G
TRAILING SUCTION HOPPER DREDGER
G R G NA/R G G G
GRAB DREDGER
G/R R G NA NA NA/R G
BACK HOE R G G R R R G G = GOOD R = RESTRICTED NO = NO APPLICATION
4.1.5. Processing plant The separation method to disintegrate the valuable minerals from the waste material in AMOs is gravity separation. The key to good performance of a treatment plant is the amount of attention given to scrubbing, screening, and size‐classification in the feed preparation section. The hypothetical balance between solids and water entering into, in each stage of the process and leaving the treatment plant is an important design factor, illustrated in figure 4‐9.42 The purpose of scrubbing is to separate clay from the clay‐bound materials. Screening is done to separate the undersize and oversize, the screen apertures are different for each project. Screens are used normally for coarse size separation down to 6 mm and classifiers are used for finer separation even below 10 micron.43 The slurry is pumped to the size classification stage, the jigs in figure 4‐9. The purpose of slurrying is to liberate free valuable minerals from the matrix in which it occurs and to produce a water‐solids mixture in which all of the particles can move freely. The jigs have a pulsating water bed, whereby the relatively heavy gold particles settle quicker than the waste material of equal particle size. Hereby are the valuable minerals separated from the bulk material. The jig plants of IHC have a proven recovery of 98% and the particle size range for recovery is 50 micron to 12mm.44 Devices such as sluices, jigs, tables and more recently spirals, cones and centrifugal separators are developed for the separation. Each type of separator has a particular size range of valuable mineral particles within which it operates economically, but there are constraints for the recovery. A major constraint are clay minerals that cause problems during the liberation of the valuable minerals from the excavated material during the processing, because the clay is clogging to the minerals and forms slurry slime. Besides the slime handling the clay minerals can
42 Macdonald, E.H., Handbook of gold exploration and evaluation [Book] (Cambridge, Woodhead Publishing, 2007) pp. 488 43 Knelson, FAQ Batch [Online] Website Knelson ‐ FAQ Batch [Accessed February 12, 2010] 44 IHC Merwede, IHC jigs Floating Separation Plant [Online Doc] ‐ pp. 2 [Accessed February 12, 2010]
25
cause problems during the tailings disposal. Flocculants can be used to accelerate thickening of the waste slurry to increase the settling speed. The main advantage of the ore separation of an alluvial mining operation is the use of gravity and that there is no use of chemicals. Furthermore an excellent match between dredge equipment and treatment plant will result in high operation efficiency and low operating costs. Therefore material handling, availability and reliability are essential constraints for the operation. Figure 4‐8 shows an IHC jig Floating Separation Plant and CSD.
Figure 4‐8: IHC Treatment plant with jigs and CSD
Figure 4‐9 illustrates a flowsheet and mass balance of a potential IHC jig.
26
Figure 4‐9:Flowsheet and Massbalance of IHC treatment plant45
45 Clement, W., Flowsheet and Massbalance of IHC treatment plant [Figure] (Kinderdijk, IHC, 2009)
27
4.2. Impact Assessment for AMO project In order to understand the system, in which an alluvial mining project is operating, it is necessary to understand the ecological services on which the community depends and how the mining project will impact upon the community’s access, utility and maintenance of these services.46 The exploration, extraction and processing of natural resources is globally regarded as one of the most social and environmentally disruptive activities undertaken by organization.47 AATA International Inc. made a detailed social and environmental impact assessment for the Big Bend Placer gold mining project in Mongolia. This impact assessment is in detail described in chapter 5.4. In Table 4‐3, are the major potential social and environmental issues of AMOs summarized.
Table 4‐3: Environmental and Social Issues for AMOs
Environmental Issues Social IssuesLoss of biodiversity through destruction of habitats and essential ecological services.
Large volumes of excavated material.
Catastrophic consequences of dams failure of pond.
Production of greenhouse gases from reliance on fossil fuels for mining and infrastructure operations.
Leakage of substances in the water that not belong there, such as fossil fuel.
Excessive use of water.
River or offshore water quality
Health related impacts from air & water pollution.
Inadequate rehabilitation of mined out areas.
Turbidity pollution in open waters.
Loss of indigenous rights and access to traditional lands.
Large disparity between income levels of mine and non mine workers.
Social tension and violence over land disputes, compensation.
Influx of significance of migrants into the area looking for opportunities.
Health and social problems: Health care and education
Loss of ecological requirements such as to clean water, traditional hunting grounds, cultural landforms.
Loss of traditional livelihood and culture
Displacement and relocation.
Noise pollution in settled areas (not exceed 30 dB)
A good understanding of the above‐described impacts is relevant for alluvial mining operations. The access to information about the whole project and the sustainable challenges and achievement is essential for the alluvial mining companies in order to get transparency and a ‘social license to operate’.
46 Millennium Ecosystem Assessment Panel, Ecosystems and Human well‐being: Biodiversity Systems [Report] (Washington, World Resources Institute, 2005) – pp. 31 47 Peck, P. and Sinding, K., Environmental and Social Disclosure and Data‐Richness in the Mining Industry [Report] (Esbjerg, IME, 2002) – pp. 7
28
4.3. Environmental Management Plan for AMOs The Environmental Management System is maintained, updated and improved based on its Environmental Management Plan (EMP). According to Best Available Techniques for Placer Gold Mining an EMP should contain:48
• Site description: location, boundaries, setting, access;
• Legislative Framework: relevant to placer mining and location – laws, regulations, and standards;
• Mine‐site Permissions: Mining license, EIA approval, planning consent, water abstraction consent, discharge consent (air, effluent etc.), access consent, noise consent etc.;
• EIA Summary: main impacts, mitigation on‐site and off‐site;
• Mine Description: site plan, site layout, site services, water flowsheet, seasonal planning chart, timetable of main phases;
• Sampling points: Air quality, noise, water (upstream, at mine, downstream) etc.;
• Environmental Management: company Environmental Policy Statement signed by all directors, management responsible (director answerable to Board, senior site manager, shift manager), written Environmental Compliance Rules (for managers, employees, contractors, suppliers and visitors), Environmental Training Program, schedule of inputs of external environmental advisors/trainers;
• Environmental Inspection: a) by company management –fortnightly Environmental Site Inspection Report, Annual Summary, b) by company’s External Advisors – annual visit plus unscheduled, report to Board, c) by Governmental Officials – notes on visits (advice, instructions, fines etc.);
• Environmental Monitoring: air (including dust and noise), water (drinking, processing, surface water, groundwater), heavy metals, soil, waste, indicator species, protected species etc.;
• Environmental Equipment Resources: maps, plans, camera, PC, weather station, dust monitor, noise meter, water sampling kit, sample bottles, chemical protective clothing (if necessary), freshwater invertebrate sampling net and identifications books, mammals, birds, native plants, etc. ploughs etc.;
• Environmental Monitoring Budget: quarterly. Also contributions of time from management, operation costs, mine equipment (trucks, excavators etc.)
48 Grayson, R., Best Available Techniques for Placer Gold Miners [Book] (Ulaanbaatar, Eco‐Minex International Ltd., 2006) – pp. 270
4 The eis crucripariaSouthminin
AccorUndein Tab
49 SoutManag
4.4. W
excavation ancial to have aan and aquath Africa estabng sector. Figu
Figure 4‐10: St
rding to all rground Mineble 4.4.
th African Depagement [Online D
Water Mana
d processing a good water tic) habitats ablished Best ure 4‐10 illust
tructure of Bes
these best es) the water
artment of WatDoc] (Pretoria, D
agement
of placer depmanagementand ecosystemPractice Gu
trates the stru
st Practice Gui
practice guir managemen
ter Affairs andDWAF, 2008) – p
29
posits need et to mitigate ms. The Depaidelines (BPGucture of the
idelines for Wa
idance (excent requireme
Forestry, Best pp. 22 [Accessed
excessive amonegative impartment of WGs) for the wse BPGs Serie
ater Managem
ept BPG A6:nts through a
Practice Guide July 16, 2009]
ounts of wateacts on the (e
Water Affairs awater manages.49
ment for minin
Water Maall mining ph
eline H1: Integra
er, therefore e.g. terrestriaand Forestry ogement of th
g projects
nagement foases are liste
ated Mine Wat
it al, of he
or ed
ter
30
Table 4‐4: Water Management requirements through the mining phases
Mine phase Baseline information and evaluation requirements Links to other information not forming part of the Integrated Water Management Plan (IWMP)
Outputs
Regulatory Mine Management
Exploration • Background data categorizing the receiving water environment (water monitoring data and programs, meteorological data etc.)
• Catchment description, catchment management plan and water availability
• Information on existing mining in the region
• Geology reports • Preliminary mine plan • Strategic Environmental Assessment • Socio‐economic impact assessment • Confirmation of the legal entity for water use
authorization
• Mine risk classification • Mapping of the integrated regulatory process • Project specific requirements and constraints for
water supply, source management and water resource quality objectives
• High level mine water management plan that can practically be implemented
• Confirmation of adequate water for the mine over the full mine life
(Pre‐)Feasibility • Baseline data (surface water, groundwater and process water) required to assess the impact on the receiving water environment
• Monthly time‐step water management model • Preliminary sizing of water management infrastructure • Baseline data for impact assessments and feasibility
study • Data water management model (daily time‐step
modeling) • Mine water demand and source of reliable water supply • Waste discharge charges • Water quantity and quality monitoring • Hierarchy of water management • Discharge quantity and quality
• Mine closure objectives • Preliminary groundwater model • Catchment model • Pre‐feasibility level mine plan • Initial waste management concepts • Stakeholder / water users database for the
catchment • Groundwater modeling and assessment • Geochemical modeling • Waste management plan • Feasibility level mine plan
• Initial discussions on project specific water requirements and water allocations
• Fatal flaw analysis • Request for details on the Reserve from the
Regulatory Authority • Discussion on water supply and mine water
requirements, including potential supply sources and other water user requirements
• Input to EIA • Identified mine water uses • Agreed terms of reference for required
information • Submission of Integrated Water Use License
Application (IWULA) • Input to documents on EIA, EMP and IWMP • Input to socio‐economic impact assessment
• Monthly time‐step mine water plan • Affordability of water management
measures • Detailed water management plan
(infrastructure sizing and operating rules) • BFS cost estimate for water management • Input to mine water management plan
covering mitigation of water impacts
Design, Construction and Commissioning
• Water Use License • Model updates • Design of water management infrastructure • Closure planning and costing • Water infrastructure construction details • Water quantity and quality monitoring • Audits and model revisions, using collected data
• Mechanical and electrical design • Instrumentation design • Process and instrumentation diagrams (PIDs) • Other construction activities
• Submit IWMP in support of IWULA • Approval for the design of water supply and
pollution control dams • Reporting to verify that the construction is
completed in accordance with the approvals
• IWMP for the mine • Water management and monitoring plan • Monitoring and audit requirements for
construction phase • Water management system enabling
requirements • Model updates to confirm that water
quantity and quality objectives can be met with required level reliability
• Requirements for reporting against IWMP and IWUL
Mine Operation • Regular water management data collection and assessment
• Recalibration and revisions to water management model, according to water monitoring results
• Ongoing operational management • Update to closure plan and costing
• Operations mine plan • Rehabilitation schedules • Mine Closure plan
• Reporting and monitoring in terms of compliance against water use authorization conditions
• Annual update of IWMP (continual improvement)
• Monitoring and audits • Non conformance follow up and mitigation • Model updates to confirm validity of IWMP • Reporting against IWMP and IWUL
Closure, post‐closure and legacy
• Design of sustainable water management measures for closure
• Maintenance of water quantity and quality monitoring • Implement closure
• Catchment level water management plan • Mine closure plan
• Approved Closure and Rehabilitation Plan • Reporting and Monitoring against Closure plan
• Reporting against IWMP and IWUL • Closure plan for water aspects • Closure certificate
31
5. Good Practices illustrated by case study
5.1. Richards Bay Mineral in South Africa Project Description: Richards Bay Minerals (RBM) AMO is located to the north of Richards Bay in Zululand, South Africa and is extracting heavy minerals from the dune sands. It produces rutile, zircon, titania slag and high purity pig iron. RBM is committed to SD to meet global and community needs and aspirations, either social, environmental or economical. RBM’s vision to SD is to be a sustainable business for their shareholders, employees, communities and environment in which they operate. SD is reflected as a three‐legged pot, where each leg represents an aspect of sustainability: social, environmental and economic. If one leg is missing, the pot is not balanced and the spoon inside the pot represents corporate governance, used to mix the contents and to make sure that everything is in balance. Before any decisions are finalized, they are tested through the following filters, shown below. 50
Figure 5‐1: RBM Sustainable Filters RBM is guided by the Rio Tinto SD policy, business integrity guidelines and the group’s document, “The way we work”. Furthermore they support the ten principles of the sustainable framework of the ICMM, and have them incorporated into their philosophy. Corporate governance This encompasses the principles for business conduct and includes business integrity, corporate policies, internal control and reporting and external communications as well as respect for human rights, speaking out and the safety measurements
50 Howden, F., RBM Sustainable Development Report 2007 [Online Doc] (Richards Bay, RBM, 2008) – pp. all pages [Accessed March 10, 2009]
32
on the workplace. The Department of Minerals and Energy (DME) established a Mining Charter and is responsible for the submission of the mining rights. RBM closely cooperates with the DME to realize the vision of a non‐racial South Africa. The Black Economic Empowerment is fully embarked by RBM and has the purpose that RBM divest 26% of its shares (10% communities, 14% strategic partners, 2% employees). This is in line with the current legislation, that all mining companies must have transferred a minimum of 26% ownership by 2014. Furthermore they will review their mine closure plan in 2010 again. Social Impact is required on the employees and on the community. RBM requires safe and effective working relationships at the operation at all levels and respecting different traditions, cultures, and employment practices, in particular the elimination of injuries. Also they are committed to good corporate values and ethical behavior. Different programs are used to obtain a sustainable human capital. There is empowerment in the staff, training and careers to obtain, retain and develop skilled and competent personnel. For the occupational health and safety management system they obtained OHSAS 18001 certification. RBM support the Aids awareness campaign. Their comprehensive SD program for the community focuses on four main areas: health; education; agriculture; and job creation. In addition to these focus points there are organized sport activities and campaigns to raise awareness of relevant social issues: like the aids pandemic; fighting crime; and community road safety. Through these programs, RBM is determined to leave a positive legacy of human capital that will endure into a bright future for the local communities. Collaboration and partnerships with government departments; municipal, regional and traditional authorities; environmental agencies; educational institutions; and employee organizations are key components of the way RBM conducts its daily business. Environmental Impact is a high standard of RBM and where possible the company commits to prevent pollution and to minimize, mitigate and remediate harmful effects of the operation on the environment. They try to achieve this by:
• Maintain an environmental management system with standards and procedures to identify, monitor and control the potential risks
• Evaluate the environmental issues associated with its activities and products, and take action to minimize potential risks
• Transparency to interested and affected parties about environmental issues and contribute to the development of sound regulation and legislation
• Ensure that environmental considerations are embedded in all aspects of the business
• Establish programs to conserve resources, minimize waste, protect and rehabilitate the environment where it is unavoidably disturbed by the alluvial mining operation
• Conduct regular environmental audits and maintain ISO 14001 accreditation The process of rehabilitation starts with the clearance of vegetation. The topsoil is removed for later use. Behind the plant the tailings (mined sands) are stacked and reformed to original shape that nature created. The minerals removed from the sands are about 5% of the total volume of these dunes. After reshaping the dunes a thin layer (10 to 15 cm) of topsoil is spread over the
33
bare sand to provide a startup for the indigenous seeds and vegetation. Eventually this will develop naturally and the vegetation will help with the stabilization of the dunes. To minimize negative risks, RBM continuously monitors and evaluates ecological processes to adapt existing rehabilitation techniques where needed, or develop new ones as the situation demands it.51
Figure 5‐2: Overview of RBM dredging operation
Economic Impact: RBM is a key contributor to the local, regional and national economies and has substantial impact on social development; job creation; capital utilization; balance of payments; and economic growth. The company paid around 760 million rands (100 million US$) on tax in 30 years. In recent years RBM has focused on creating jobs locally by helping local businessmen gain access to lucrative new markets and assist entrepreneurs to form neighboring rural areas as viable suppliers to the company. Examples are metallurgical cleaning and maintenance service; fire protection services; security of the mining lease area and smelter site and a company that is specialized in dune reclamation and restoration.
5.2. Mineros in Colombia Project Description: Mineros mission is to be a private company dedicated to mine precious metals with the aim to create the greatest value to shareholders with growth of its mining operations through an integrated management system and framed corporate social responsibility. Their AMO uses a bucketladder dredger and a CSD. Mineros moved in 2008 a bulk volume of 19 million cubic meters and produced 2534 kilos of fine gold, equivalent to 81,495 ounces.52 Corporate Governance: Mineros produces gold at a competitive cost and using mineral resources rationally. They are maximizing economic performance, by working only with reliable suppliers; motivated and talented workers; staff that is highly qualified and focused on customer satisfaction. Moreover by fulfilling the legal requirements; preventing and controlling risks to
51 Richards Bay Minerals, home [Website] Website RBM ‐ home [Accessed May 25, 2009] 52 Mineros S.A., Informe Financiero 2008 [Report] (Medellin, Mineros, 2009) – pp. 4
34
workers, facilities and environment; promoting social development in neighboring communities; and maintaining a continuous improvement process.53 Social Impact: Their Social Policy is to encourage local developments in the area where it performs its activity and contributes to the society by creating wealth. Mineros established a guide for social management for the exploration, feasibility and construction stages and pinpointed that community consultation and the social sustainability are the key components. Community consultation is a key aspect in managing the social and political development and is the basis for a stable relationship of trust and understanding between the local communities, the mining operation, and other organizations and institutions that interact in the affected area. Social sustainability is the social development that is sustainable and is promoted by the company, i.e. to keep the license to operate by working with the communities on sustainable projects, which will ensure continuity on behalf of their own development. Mineros Employment Policy is to favor the local workforce in equal conditions of competition and fitness, provide training (for all staff) in the technical and human development. They are also committed to the fundamental principles of human rights, safety and worker protection, no child labor, prevention of discrimination at the workplace, and ensuring equal employment opportunities and treatment regardless of race, gender and religious or political beliefs. The Communication Policy is to maintain an effective internal and external communication, which considers the essence and strategy of the mining operation, to facilitate better interaction and relationship with its stakeholders. In regard to the communication they present this by yearly Financial and Social reports and a detailed Environmental Management Plan (EMP).
Figure 5‐3: Overview of Mineros Operation
53 Mineros S.A., Informe Social 2008 [Report] (Medellin, Mineros, 2009) – pp. 4‐8
35
Environmental Impact: Mineros strongly commits to the EMP: monitoring all processes to prevent, mitigate and compensate any potential environmental impacts. For this reason, the environmental policy sets out in the following principles:
• Compliance with legal environmental regulations enforced by the country;
• Protection and monitoring of environmental components (actions, incidents or accidents);
• Accountability at all levels of management to maintain a healthy environment, through programs, procedures and methodologies, which emphasize the environmental responsibility of each individual worker;
• Perform inspections and environmental assessment of operations to measure progress and ensure compliance with environmental policy.
The Land Policy is that the land property and possession rights of land, which is no longer of interest for prospecting, exploration and mining, is given back to the rightful owners (farmers) after rehabilitation or even more improved way. Economic Impact: the company has a Policy for Cost Management to maintain control on their production costs and expenses and investment on assets, under terms of the current Colombian laws for all transactions. The Mineros operation is in a conflict zone, so for this operation it is essential to have a good Security and Risk Management Policy. I.e. there has to be commitment to the society and government to maintain good relationship, contribute to the welfare of local communities by dialogues and consultation before any potential risk may occur. Mineros approach to Corporate Social Responsibility contributes to improve the quality of life and welfare of the local community. The company understands the necessity to make decisions together with government, community and job‐organizations. It takes actions in an effective and efficient way on issues related to poverty, inequity, employment, governance and environmental sustainability. Table 5‐1 illustrates their model of social intervention for local development:53
36
Table 5‐1: Mineros Social Intervention model for local development
Areas Strategic Lines Components Local Governance Strengthening Local Governance • A local government for the exercise o
good governance • Citizen participation for political,
economic and social development. Environment Basic Sanitation • Drinking water
• Liquid waste • Solid wastes
• Mining sustainable and cleaner production • Rural development in areas degraded by
mining • Strengthening of municipal environmental
management Social Development Health Public Health
Education • Quality of the education system at different levels
• Improving institutional resources • Generating more and better
opportunities for the development oyoung people
Economic Development • Structure and dynamics of the local economy
• Strengthening the institutional framework to support growth and economic diversification
Support Local Business Entrepreneurship initiatives (promote culture Economy)
5.3. Smals in the Netherlands Project Description: Smals is a major producer and supplier of 3 to 4 million tons of raw materials (high quality industrial gravel and sand, special sand, ‐clay and fill sand) for the building industry. The operation at Cuijk is producing 1 to 2.5 million tons per year.54 In order to produce the raw materials, Smals has to obtain excavation and dredging permits. Besides these essential permits there are potential ones, e.g. demolish, timber cutting or archeological permits, which have to be obtained. Smals realizes with 125 employees a turnover of approximately 40 million euro. They try to maintain their leading position through creativity and research efforts on topics like changing demands of the market; the area of product innovation; quality standards and the environment. The philosophy of the company is to be a reliable partner that delivers high‐quality products and services, with a proper balance between quality and price. Furthermore they are aware of its social responsibility, according to the interest of their employees, clients, and surroundings. In all their operations the main goal is to realize a safe and environmental‐friendly production processes and products.55 Social Impacts: During the initial phases of the project (1970‐1978), three bridges are constructed and between 1978 and 1990 new roads are built to start and continue the dredging operation. Transparency is created, by offering company visits and the possibility to look at the environmental impact assessment for all interested stakeholders. Ultimately this operation will
54 Broer, J., Company visit Smals October 13, 2009 [Company visit] Cuijk, the Netherlands. 55 Smals, welkom [Website] Website Smals [Accessed October 15, 2009]
37
finish around 2010; 450 hectares of recreational area will be developed. Besides the local social development, Smals also disputes charity globally to less fortuned societies. Environmental Impacts: Smals considers the landscape design prior to and after actual excavation and dredging activities as one of its main tasks, and pays thorough attention to this aspect with concerned parties from the early planning stage. The excavation and dredging permits for the Cuijk project will finish at the end of 2010. To foresee that the estimated environmental effects of the rehabilitation are attained, are has been established an Environmental Impact Assessment, every two years. The overall results are positive, in particular, to prevent negative effects of a declined groundwater level. The dredging‐slopes are finalized with finer sands. In terms of flora and fauna a considerable improvement is established compared to the situation before the operation. The Kraaijenbergse Lakes is a major breeding area for rare bird species. When this operation will be finished around 2010, 200 hectares of nature area will be developed. Economic Impacts: After 2010, Smals will continue to offer the possibility of temporary underwater storage of elsewhere produced sand and gravel that needs to be processed. The recreational area will provide opportunities for entrepreneurships, to develop recreational activities; campsites; and a bungalow‐park.
5.4. WM Mining Company in Mongolia WM Mining Company (WMMC) is pursuing the development of the Big Bend Placer Gold Mining Project in the Tuul river mining area, north central Mongolia. The Social and Environmental Impact Assessment and its Monitoring and Mitigation Plan (SEIAMM) consists of several management plans, that are treated in detail the next paragraphs.56 Compared to the three previous cases, is this case treated in more detail. The SEIAMM Plan illustrates important social, environmental and economic aspects that are very useful for sustainable feasibility study research.
56 AATA International Inc., Social and Environmental Management and Monitoring Plan [Report] (Denver, AATA, 2008) – pp. 19‐24
38
Table 5‐2: Key Project Statistics of Big Bend gold mining project
Proven & Probable Reserve Gold – 196750 ouncesValue: US$800/oz = $157.4Million
Project Design Elements Modern placer mining, cutter‐suction dredge floating processing plant with IHC jigs
Production Data Daily ore production 12000 tonsAnnual production: 16,200 oz of gold
Mine Life Construction: 6 monthsOperations: 10+ years Followed by Mine Closure
Employment (Local, national, international) Construction: 65+Operations: 65 (6 locals, 6 expats and 53 national)
Total Operating Costs Life of Project: Labor US$ 13 millionEquipment Leasing: US$ 2.2 million Fuel: US$ 36 million Maintenance: US$ 3 million General and Administrative: US$ 6.7 million TOTAL: US$ 60.9 million
The Public Consultation and Disclosure Plan (PCDP) contains the manner in which WMMC will inform stakeholders about project activities, potential impacts, and social and environmental management and monitoring measures. Stakeholders are encouraged to provide feedback, raise issues of concern, and identify opportunities for improvement. The project consultation and community liaison process is done by open meetings, focus groups or on the local’s request. The Community Development Plan (CDP) outlines the needs and priorities of local communities; provides mitigation measures information; identifies collaborative opportunities to leverage positive impacts; outlines specific activities; and fosters strategic and transparent community development. The following intervention emerged as key priorities for the 5000 individuals of the community:
• Watershed protection, erosion control and sediment control: the community has access to good quality groundwater, however this water is untreated and due to poor water management, mining and grazing disturbance leads to diseases. Water infrastructure is needed for the community.
• Education and youth programs: it is proposed to support the educational sector by funding needs within the system (e.g. the purchase of school equipment, repair school infrastructure and providing a permanent supply of bottled drinking water). Other financial supports could be scholarships for student associated with mining and agriculture. Other projects that are sponsored are awareness training to illegal artisanal mining (ASM) for toxic metals, health and the environment; projects for STDs, risk youth and teen pregnancies; and projects for cultural programs and sports.
• Community health: WMMC will support efforts to improve community health issues by support local health clinics, contribution to the government’s preventive health campaigns and an ambulance for emergency transportation. It considers financial assistance for transport of critically ill patients of the area to the capital, support of anti‐drug and alcohol control, creation of an outpatient clinic at the site, staffed by certified medical personnel, and support red cross activities.
39
• Employment and professional training and Economic and SME opportunities: WMMC will predominantly use local sourcing of goods and services. However the transition of exploration to construction will be accompanied by a significant surge in time‐critical and quality assured demand, so the most of the materials and labor will need to be sourced from the capital. For the operation stage the labor will be sourced locally. In addition to the project needs, the company will assist in building a sustainable income by developing the tourism sector for that region.
• Working with government regarding illegal ASM: WMMC will work together with the Mongolian government to reduce and control the ASM population. In the past 5 years the ASM population in the region reduced from over 5000 to less than 300, the Mongolian government has achieved this impressive result.
• Nature (biodiversity) conservation: WMMC is committed to work with recognized Mongolian and international conservation organizations and scientists in collaboration with the Ministry of Nature and Environment to develop suitable intervention opportunities to support nature conservation and a biodiversity offset program.
• Institutional capacity building: WMMC considers matching external resources for institutional capacity building initiatives, which are designed to support local government institutions.
The Cultural Resources Management Plan (CRMP) identifies the plan to identify, preserve and mitigate potential impacts of the project to prehistoric and historic cultural resources in the project area. To preserve these resources certain activities will be undertaken:
• Consultation with local residents and users of the project area;
• Intensive field inventory and site assessment;
• Mitigation of Impacts: measures will be established and implemented before mining operations start;
• Monitoring: depends on the scale and significance of the sites; and
• Data Analysis and reporting: detailed procedures for data analysis (recovered artifacts and non‐artifactual remains will be reposited properly.
The Environmental Management and Monitoring Plan (EMMP) identifies the mitigation measures that WMMC plans to conduct during alluvial mining activities, as well as the environmental monitoring that will be established to detect, observe potential impacts during operations for which mitigation measures can then be developed and implemented. The Occupational Health and Safety Plan (OHSP) outline the health and safety procedures that will be implemented during the construction and operation stages. The objectives of the Occupational Health and Safety are:
• Minimize unsafe conditions. Accidents are caused by unsafe physical conditions of equipment or mechanical exposure to the working environment;
40
• Minimize unsafe acts by providing competent supervision to ensure workers use proper techniques and methods;
• Taking advantage of every opportunity to correct unsafe acts or conditions before an injury occurs;
• Implementing procedures to prevent any abuse via filing of false claims of injury and illness;
• Training of personnel in safety and promote a culture of safety on site. The Emergency Response Plan (ERP) outlines the emergency plans, organizational responsibilities, reporting procedures, specific plans for responding to emergencies and emergency response training. To ensure that this project is performed in compliance with all prevailing regulations and requirements the supervisorial positions have been created and defined:
• Chief Operating Officer (COO): will oversee the overall project activities.
• On‐site Manager: will oversee all operations at the project area.
• ESHS Manager: will be present at the project area to coordinate environmental, social and health and safety activities.
• Dredge Supervisor: will oversee all dredging and processing operation in the field together with the chief geologist.
• Safety Officer: one person at each dredge and floating process plant will be the safety officer, who will be responsible for all safety issues during the shift. This person will be responsible to ensure that the ERP is implemented at the assigned dredge.
The Waste Management Plan (WMP) outlines the project commitment to taking all necessary steps to ensure that the collection, storage, transport and disposal of all wastes generated during all project operations will be conducted in a safe, efficient and environmentally responsible manner. Alluvial mining and processing does not involve the usage of chemicals or explosives and therefore a very small amount of hazardous wastes will be generated over the project life. Hazardous waste will be generated mainly in the maintenance shops by fuel and oil spills and used batteries.
41
The Mine Reclamation and Closure Plan (MRCP) outlines the measures that WMMC plans to intend to return the mine area to functioning ecological communities. Reclamation will conducted by:
• use continuous reclamation approach with mining to ensure rapid reclamation and re‐vegetation of disturbed sites;
• support reclamation with modern soil conservation, erosion control, and contouring practices as required;
• maximize use of natural re‐vegetation and native species with the goal of improving the biodiversity and quality of the environment;
• use designated access routes, avoiding multi‐tracking impacts;
• employ the field environmental checklist during reclamation to mitigate operational impacts;
• mark reclaimed areas and prevent their disturbance;
• conduct weekly impact mitigation briefings as part of the regular operational meetings for workers in order to maintain a high level of awareness on re‐vegetation efforts;
• apply principles of SD and improved environmental biodiversity qualities; and
• emphasize natural wildlife habitat improvements instead of agricultural uses. The SEIAMM with the mitigation measures and potential net impact of this project are listed in Appendix D. The environmental and social impacts are listed respectively in the tables D‐1 and D‐2.
6. Im With obtain
Wher
• • •
6
Obtaiunderalluviadegrawhich The iknowto the
57 Kem[Access58 Ecos2009]
mprovem
the help of ned improvem
reby:
Culture is a
Technolog
Structure ito achieve
6.1. Cu
6.1.1. Un
ning relevantrstanding shoal mining proade the naturh an AMO exis
nitiative by ledge for suse ecosystem a
mp et al., Evolutised September shape, Ecoshape
ment Opp
instruments,ment opportu
Figure 6‐1:
about the nee
gy is about the
is about the s this.
ultural Inn
nderstanding
t data about tould be provoject can addral resources,sts.
Dutch dredgstainable coasare the follow
ionary theorisin13, 2009] e – Building Wit
portunitie
, like technounities and a
: The sustainab
eds that have
e resources th
social and ec
novation
g the System
the system isvided for in td value to soc, it is require
ging industrystal developmwing:58
g on technologi
th Nature [Onlin
42
es
ology, structuright balance
ble triangle wi
e to be reache
hat are neces
onomic organ
s time consumthe project pciety and mined to underst
y, BWN (Builment for ever
ical change and
ne Doc] (Dordre
ural and cultue.57
ith the right ba
ed to be susta
ssary to achie
nization and
ming. Enough phase. In ordnimize ecologand the ecol
ding With Nrywhere in th
d sustainable de
cht, Ecoshape,
ural aspects,
alance
ainable;
eve that;
the structure
time for the der to undergical risks, whogical and so
Nature)‐Ecoshhe world. Th
velopment [Onli
2009) – pp. all
there can b
e that will hel
collection anstand how ahile systematocial system i
hape, providee aims relate
ine Doc] – pp. 2
pages [March 2
be
lp
nd an ic in
es ed
23
20,
43
• gain more knowledge and insight in the (eco)system;
• gain expertise in how to deal with these kind of systems;
• develop tools: like measuring and monitoring methods, data processing methods and collect all the date in databases;
• increase in competence: establish a network of researcher and innovative appliers that form the base for further innovation.
The new insights from BWN mean that policy and regulations can be based on more in‐depth knowledge and insights than is nowadays the case. This will result eventually in a more effective policy and regulations with as final result more opportunities for the ecology and economy for the alluvial mining industry as well.
6.1.2. Corporate mind of sustainability At all mining phases it is necessary to provide an awareness of the stated sustainable principles to obtain a sustainable project on‐ and off‐site. Developing a vision for “success” for alluvial mining projects is more than determining best practice methods to ensure a sustainable mining operation but also to ensure the economic viability of the community after the project and minimize negative impacts. The community and relevant stakeholders should be involved in the design of the alluvial mining project to provide an opportunity to benefit from their knowledge and to ensure transparency throughout the development process. A positive trend is that community development plans and projects have been developed. Backcasting the legacy of the project area will provide a road map to plan community projects to maximize societal value. Due to this will the community participate in the future of their own community, once the alluvial mining project is ceased. Moreover it will provide a useful understanding how to sustain itself. Therefore in planning community development projects the emphasis should be to enhance the economic and social issues of the local community in a way that promotes environmental sustainability.
Figure 6‐2: Backcasting method59
59 The Natural Step, Backcasting [Website] Website The Natural Step ‐ Backcasting [Accessed March 20, 2009]
44
6.2. Technology Innovations An AMO has a major need for energy; however energy shortages become a major risk worldwide. Uncontrollable increases in energy costs, increased regulations for diesel fuel emissions and energy intermittence (e.g. South Africa energy blackout in January 2008) are costing mining companies more time, money, and man‐power, which enhance the financial result. There are practicable energy solutions available, which can be implemented in a cost‐effective manner and will increase profitability and save energy security as well as shareholder values. The majority of the natural resources industry has not considered clean, sustainable, alternative energy forms yet. Alternative energy sources ‐ solar, wind, hydro and geothermal ‐ whatever is the best choice for that area, are reliable energy sources and are not dependent on the national grid or fuel prices.60 The main benefits to use alternative, self‐generating energy solutions for mining include:
• It can enhance the financial results;
• Reliable power generation – reduce the risk of power grid outages;
• Extra power generation that can be sold back to the grid and generate revenues;
• Attracts capital to the company for power projects using alternatives that are appealing to investors with money on the sidelines right now;
• Long‐term sustainability provides power when a project ends and can be left behind for the local communities;
• Long‐term, it pays for itself and becomes a money earner;
• Good citizen awards and social license to operate;
• Decreases the carbon footprint of the company; Several initiatives of the transition of fossil fuels to alternative energy sources have been conducted: Barrick Gold in 2007: In Chile (Punta Colorada area) 10 windturbines (2MW): cost US$ 40 million and in Tanzania (in the remote Mara region) a hydro‐electric power station: cost US$ 28 million.61 In 2006 BHP Biliton: published a case study CAT Alliance. This study is conducted in corporation with Caterpillar to consider alternative fuels for their off‐road mining equipment to reduce GHG emissions.62 According to Professor C. van Rhee are fossil fuels the primary energy source for dredging equipment.63 Thus for offshore alluvial mining equipments this is also the case, however for operations in dredging ponds alternative energy sources are very interesting opportunities.
60 Ashby, M., Is the Mining Industry ready to go green? [Journal] Mining Engineering Magazine, Vol. 60 No. 11 (Littleton, OneMine.org, 2008) – pp. 33 61 White, N.J., Beyond Borders December 2007 [Online Doc] (Toronto, Barrick Gold, 2007) – pp. 4 [Accessed, October 13, 2009] 62 BHP Biliton, CAT Alliance [Online Doc] (s.l., BHP Biliton, 2006) – pp. 2 [Accessed October 13, 2009] 63 Professor Rhee, C. van, Sustainable Dredging [Conference] (s.l., IHC Merwede, 2008)
Other
•
•
•
•
6 Real Ogainetechnhighe First oalternhorizoTraditaccor
Seconcash f
64 Stam(confid65 Laug2007) ‐
r technology i
Emissionsvibrations
Turbidity: of more de
Material sand/or en
Energy Effpropulsion
6.3. St
Options (RO) d increasing nique that cost NPV, it diff
of all puts ROnative, illustron that varietional NPV ading to that s
ndly uses RO fflows that are
m, N. and Holtkadential) ghton, D., The Ba‐ pp.2
innovation op
: Reduce theand noise to
Reduce turbiemanding law
stewardship: ergy‐consum
ficiency: Redn of dredging
tructural In
is the state‐acceptance iompares altefers from trad
Os analysis paated in Figurs as prices vanalysis tendsscenario.65
financial theoe realized wh
amp, M., Doelst
anff Taxonomy o
Figure 6‐
pportunities r
e emissions keep ahead
idity to mitigaws and regula
Reduce anding materials
uce and minvessels.
nnovation
‐of‐the‐art men the miningrnative coursditional NPV a
articular empre 6‐3. This ary, derived s to assume
ory to correcten the option
tellingen Sustain
of Asset Valuatio
3: Banff taxon
45
related to the
of the vessof more dem
ate the impacations;
d minimize ts in dredging e
imize the am
ethod for ass world. Althoses of actionanalysis in 3 i
phasis on dynresults in mifrom a dynama single pric
tly price the rn is exercised
nability program
on Methods [Co
nomy of asset v
e dredging eq
els, besides anding laws a
cts on the en
he amount aequipments;
mount of ene
set managemough ROs is an and selectsmportant wa
namic decisioine plans thamic “mine noce scenario a
risk associated. It is how th
mma [Report] (K
nference] (Banff
valuation met
quipment are:
fossil fuel eand regulatio
vironment an
and volume
ergy that is n
ment and valualso a discouns that which ays:
n making, theat have an uow or mine land plans a f
d with the fuhe true presen
Kinderdijk, MTI H
f, David Laughto
hods
:64
emissions alsons;
nd keep ahea
of toxic, rar
eeded for th
uation and hanted cash flowproduces th
e now‐or‐lateuncertain timater” analysifixed mine lif
ture uncertaint value of th
Holland BV, 200
on Consulting Ltd
so
ad
re
he
as w he
er me s. fe
in he
9)
d.,
46
cash flows in table 6‐1 are known. As is clear in that example, this pricing of risk is needed whether or not the option is developed now or later. NPV analysis attempts to do this with a single risk‐adjusted discount rate. In real options, the risk discounting is done within the cash flow elements, rather than at the level of the net cash flows. The result is an “effective” time‐varying net cash flow discount rate rt that is an output of the valuation process. It is the exactly correct discount rate. This effective discount rate takes into account not only the inherent riskiness of the asset as it varies through time but also any modeled risk‐mitigation actions; such as cut‐off grade changes or temporary closure, that are likely to be undertaken by mine management.
Table 6‐1: Impacts of uniform discount rate on project selection
Investment Decision Factors Project A Project B
1. Present value of cash flows @ 10% € 70 million € 70 million
2. Present value of cash flows using correct risk adjustment € 40 million € 90 million
3. Development cost € 50 million € 75 million
Measured NPV(1 – 3) € 30 million ‐ € 5 million
Decision taken Develop Abandon
Actual NPV (2 – 3) ‐ €10 million € 15 million
Correct decision Abandon Develop
Finally ROs analysis correctly estimates future cash flows when there is uncertainty surrounding those cash flow estimates. Some changes, such as increased royalty rates, appear to be easily recognized and studied within conventional valuation models, while others, such as the imposition of a windfall profit tax (windfall taxes are a means for governments to capture additional mineral revenue when mineral prices are considerable higher than some historical level), have been much harder to assess because of their contingent nature.66 The primary valuation challenge confronting mineral economists is to recognize the contingent nature of these new taxes and the impact these taxes have on the cash flow uncertainty characteristics of existing project participants. ROs lends itself perfectly to correct valuation of uncertainties and their impacts on the value of a project. Real option is a very advanced method that needs further research. In the sustainable cash flow model that is treated later in this report is the simple Discounted Cash Flow scenario method used. In every country with a potential for placer mining it is recommended to establish specific SD guidelines or each specific ecosystem that occurs in the country. The guideline for AMOs should contain potential environmental impacts, all national, regional and local regulations and required permits and demands for these operations. A good practice guidance example is the water management guideline of South Africa. Besides the environmental impacts the social impacts should be regulated in a transparent honest manner; by establishing guidance for well‐organized distribution (local, regional and national) of the mining tax.
66 Samis, M.R. et al., Using Stochastic Discounted Cash Flow and Real Option Monte Carlo Simulation [Conference] (Melbourne, AMEC Mining and Metals, 2007) – pp.1
47
7. Implement Sustainability in AMO To obtain SD in the alluvial mining industry it is essential to:67
1. first step: define (and quantify) the objectives to reach 2. second step: assess (quantify) the status qua with selected indicators 3. third step: identify practicable measures to reach the objectives.
7.1. Define the objectives to reach The first step “defining the objectives to be reach” can be implemented as the previously described 10 Principles of ICMM. In Table 7‐1 these principles modified to AMOs:
Table 7‐1: Principles for Alluvial Mining Operations
1. Implement and maintain ethical business practices and sound systems of corporate governance 2. Integrate sustainable development considerations within the corporate decision‐making process 3. Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and
others who are affected by alluvial mining activities4. Implement risk management strategies based on valid data and sound science
5. Seek continual improvement of health and safety performance
6. Seek continual improvement of environmental performance
7. Contribute to conservation of biodiversity and integrated approaches to land use planning 8. Facilitate and encourage responsible product design, use, re‐use, recycling and disposal of the products from
the alluvial treatment plant 9. Contribute to the social, economic and institutional development of the communities in which the alluvial
mining operation is located 10. Implement effective and transparent engagement, communication and independently verified reporting
arrangements with our stakeholders
7.2. Assess the status quo with selected indicators Furthermore it is essential to take into account the general sustainable impact issues for the AMOs:
• Social;
• Socio‐Economic;
• Economic;
• Eco‐Economy;
• Environmental;
• Socio‐Environmental.
67 Professor Martens, P., Sustainable Development (EMC 2007‐2008) [Lecture notes] (Aachen, RWTH‐Aachen, 2007) ‐ pp. 18
48
The next step is taken by means of these general sustainable impacts for an alluvial mining operation. A subdivision is made that contains key performance indicators with the help of the existing indicators of the Global Reporting Initiative and the sub‐elements of the ICMM principles, the specific characteristics in the alluvial mining industry and stakeholder engagement. The sustainability indicators that are relevant for an alluvial mining operation are summarized in the figure below:
Figure 7‐1: Summary of Sustainable Indicators for AMOs
7.3. Identify practicable measure to reach the objectives Figure 7‐2 shows that during each mining stage, alluvial mining companies have to conduct several studies and management plans to establish a sustainable project. Social, Environmental and Economic data is generated to obtain a permit under regulatory and management structures obliged by national, regional and local governments; financial institutions; and companies own policies.
49
Figure 7‐2: Studies and plans to obtain a sustainable AMO
The management plans, mitigation action plans and sustainable challenges with their practicable measures are conducted to keep the permit of the project during the exploration, feasibility, construction, operation, and closure stages. The sustainable challenges and good practice measurements and tools of the last three stages are treated in detail in the next three sections. The sustainable challenges for the exploration and feasibility phase are treated in Appendix E.
50
7.3.1. Construction phase When the final feasibility study shows that the operation is social and environmental, financial and technical viable the construction phase can start. A good project management team or owner’s representative should be appointed. The project leader should participate in human resources to negotiate with the construction contractor, know which downstream construction permitting approvals are required, and be aware of which reports are expected and which startup responsibilities the owner has. Mines are expensive to build and payouts (generally) are slow compared to many other businesses. It will only be possible to know what the final capital costs, operating costs, recoveries, and achievable ore grades will actually be after the mine has operated successfully for a complete year. There are many unknowns at the start of any mining project so it is important to give maximum attention to the details right from the start and hope that any mistakes will be compensating errors, both positive and negative. The management of a mining project actually starts even before exploration begins, when the company decides where to do its exploration. When the exploration stages lead to a discovery which eventually turns into a mining project, countless situations of, new or unidentified impacts, and stakeholders may appear. The sustainable challenge to manage a mining project is present in almost all project areas and tasks. This challenge relates to management problems associated with sustainability such as:68
• Permitting, mining regulations and standards
• Environmental risks
• Social risks and benefits from mining
• The issues of social license and corporate social responsibility
• Management of H&R, contractor, suppliers and other stakeholders Permitting, mining regulations and international standards: Permitting is a complex and time‐consuming management process and depends on how many different permits are required. A good and detailed understanding of the mine regulations is essential to minimize potential compliances and IFC Performance Standards should be obeyed to carry out project financing. Environmental risks: Once the EIA is finished during the feasibility phase it is time to start‐up a Environmental Management System (EMS). Many companies incorporate risk management systems, e.g. ISO14001, to integrate a range of environmental health and safety issues in their operations. The EMS is not only applicable in the processing but also during all the other activities on site. The EMS is best designed around existing processes and procedures as the development of new systems require additional resources and this might delay the implementation process. Figure 7‐3 illustrates the EMS elements and requirements and Figure 7‐5 shows the relationships between the EMS elements .
68 Anderson, M.N., Sustainable Management of Mining Operations [Book] (Littleton, SME Inc. 2009) – pp. 221‐227
51
Figure 7‐3: EMS model for ISO 14001:200469
The EMS is maintained, updated and improved upon based on its EMP; see Environmental Management Plan for AMOs. For coastal‐dune ecosystems is RBM, for steppe wetland ecosystems is WMMCs, and for jungle ecosystems is Mineros the best case example. RBM and Mineros obtained and maintained the ISO14001 certification for the EMS. Construction during the alluvial mining project often represents the period of greatest environmental and social disruption. The main aspects caused by interaction with construction and the environment, are:
• Access for construction and infrastructure
• Land clearance and resettlement
• Construction related infrastructure
• Construction of impoundment The ICMM developed a ”good practice guidance for mining and biodiversity” that describes handy systems, tools and processes, e.g. Social and Environmental Impact Assessment (SEIA), EMS, Stakeholder Engagement Tools and Processes and Mitigation and rehabilitation tools for biodiversity in relation with mining.
69 Euromines, The ultimate SME implementation guide for QMS and EMS [Online Doc] (s.l., Euromines, 2005) – pp. 24 [Accessed August 5, 2009]
52
Figure 7‐4: Integrating biodiversity into the mining project cycle70
Social risks and benefits from mining (Stakeholder Engagement): Many social risks are associated with the mining industry: operations located in remote, often underdeveloped, regions of the world; changes in land use, are inherent in mining, regardless of social environment. Potential risks are health and safety; land use and management; surface and groundwater resources; immigration and ASM in project areas; and economic dependency on alluvial mining. Best case studies to mitigate these risks are treated by RBMs comprehensive sustainable development program, Mineros model for social intervention for local development and the mitigation measures and management plans of WMMC. Issues of social license and corporate social responsibility: there is a strategic perspective and project finance perspective. The strategic perspective is the access to mineral and human resources. As it applies to corporate strategy, the concept of social license can be extended to an alluvial mining company’s achievement of a positive public reputation on ethics and social responsibility issues. The company perceives a positive reputation as an advantage when gaining access to mineral resources and also to human resources, two key strategic advantages in mining. RBMs Black Economic Empowerment (26% of shares are divested) and partnership with local SMEs is a good example of corporate social responsibility. Also Mineros promotes sustainable projects to keep the social license to operate by favoring local workforce and local suppliers.
70 Johnson, Sally, Good Practice Guidance for Mining and Biodiversity [Online Doc] (London, ICMM, 2005) – pp. 17 [Accessed August 6, 2009]
53
According to ICMM Closure Toolkit stakeholder engagement is needed to update the Conceptual Closure Plan (CCP), for potential sudden closure. Framework for a CCP:
• Risk / opportunity assessment and management
• Target closure outcome and goals
• Monitoring and evaluation
• Closure costs
• Updating the conceptual closure plan A detailed example for an alluvial mine closure plan is the “Mine Reclamation and Closure Plan” of WMMC. Management of H&R, contractors, suppliers and others: the project leader should participate in H&R to negotiate with the construction contractor(s). Investigate the labor market in the hosting and nearby communities to involve the local community in the project, during the whole lifetime of the operation. Early consultation with labor unions, H&R, and employment agencies will help to obtain information required and will foster the interest and cooperation of these stakeholders during all stages of the project.
54
Figure 7‐5: Relationship between the EMS Elements
55
7.3.2. Operation phase The operation phase plays an important role in the success of the project and in meeting the production targets at an optimum point, while mitigating the undesirable side effects of AMOs on the environment and communities. Mining is an interdisciplinary operation that consists of many different units of operation. In the next part of this section are the units: grade control; mine planning; ground control and pond management; environmental and H&S issues; equipment and plant selection; and maintenance discussed. Grade control: is a decision‐making process on a day‐to‐day basis and depends on the type of resource and mining method. For a wet mining method the ore grade control focuses on the following issues: (re)calculate minable reserves; define the ore‐waste boundaries; control dilution; and the mine planning and design changes in annual production plans. The long‐ and short‐term mine production planning: is a primary influencing factor for sustainability in AMOs. A sustainable mining plan should minimize the effects to the mining business process caused by variability in commodity prices, inflation of mine costs, declining ore grade, and declining mining conditions such as increased depth. Design factors with the capacity to increase sustainability include layout, application of new technology, mine infrastructure, proactive communications, and interfacing with land, water, socio‐economic forces, and reclamation. The main function of the mine design and planning team is to provide the necessary technical support to ensure the optimum operational efficiency and sustainability of the AMOs. However the long‐term planning process determines the production and economic objectives, the short‐term planning and control processes are key to the efficient use of resources, performance evaluation and control, and the timely implementation of corrective actions.71
• Long‐term planning: is concerned with the development of an optimum mining sequence for ore and waste required to sustain production. The production schedule takes into account operating constraints, blending requirements, economic considerations, reclamation, and other operational and sustainability constraints.
• Short‐term planning: is concerned with schedules on a daily, weekly, or monthly basis, as well as grade control and mine geology functions. The goal is to provide requirements of the operating plant with ore of uniform quality to ensure its operating efficiency. This is not required for a wet mining treatment plant. The short‐term plans have to comply with the long‐term plan. The daily, weekly, and monthly short‐term plans are required at a mining operation for sustainability; these plans are derived from the yearly plan. A robust short‐term planning process with a good follow‐up provides the feedback that planners need to correct long‐range plans.
71 Castanon, C., Sustainable Management of Mining Operations [Book] (Littleton, SME Inc. 2009) – pp. 263‐265
56
Integrated mine planning software can be used to process and evaluate iterations of geologic interpretation and geostatistical routines efficiently, optimize mine layouts to identify major expansions and mid‐life development, and essentially evaluate all alternatives and identify the most cost‐effective mine plan. These integrated software packages are powerful tools for efficient, interactive evaluation of different production plans and schedules and mining scenarios. Surpac™, Minex™, Whittle™ and MineSched™ of Gemcom are well known examples. Ground control and pond & water management: is an integral part of the planning and production of the AMO. Ground control is a major component of the design and operations of alluvial mines. The stability of the embankment, which isolates the dredge pond from other surface water resources, is crucial to prevent mixing of these waters. The dredge ponds will be maintained as a zero‐discharge, closed circuit system and no surface discharge from the operation is anticipated. Water management is essential and an important component to minimize the probability that water used in alluvial mine activities will enter the river or groundwater or that the alluvial aquifer will be severely depleted. Water supply for the dredge ponds should be from the river (and if applicable from an aquifer). The process water from alluvial mining should be sourced from the dredge ponds. During the operation occasionally, additional water can be needed, especially in the early phases of mining. Another key mitigation measure is the recycling of mine process water. For dredging operations, wash water is discharged directly back into the dredge pond for reuse for the dredges. The dredge pumps the overburden as slurry from the dredge pond to the slurry settling areas. The placer deposit is dredged and pumped in slurry to the floating treatment plant that separates the valuable minerals and pumps the tailings as slurry tot the slurry settling areas initially at start‐up, and then later discharge tailings at the back of the dredge pond over the oversized fraction of tailings for reclamation. The South African Department of Water Affairs and Forestry established best practice guidelines for mining water management, see page 29.
Figure 7‐6: Overview of Alluvial Mining Pond
57
Environmental issues: The EMS is maintained, updated and improved upon based on its environmental management plan, see page 28. The main environmental issue in mineral processing is the management of the very large volumes of water and tailings that must be handled in the process (e.g. tailings disposal, tailings water and water recycling). Another important issue is the level of biodiversity. Health & Safety: Sustainable management of H&S for employees that work on site (on dredger, treatment plant or in maintenance shops etc.) requires safety precautions to protect personnel. Major challenges are safety and health regulations; safety training; safety equipment; industrial hygiene; potential dust and air pollution control; and maintenance and housekeeping. According to the AS/NZS 4801:2001, the Australian National Association of Testing Authorities, NCS International established the OHSAS18001:2007 for implementing the Occupational Health and Safety Management System. This Management System is recognized as the international OHS benchmark.72 The implementation process flow chart is similar to the EMS. RBM and Mineros obtained and maintained the OHSAS 18001 certification. Equipment selection: IHC developed an equipment selection procedure with specific project constraints: operation conditions (type of project, project size, available time, water depth, dredging depth and accessibility), soil conditions and dredgeability of the rock (RQD, fracture index, strength, mineral composition); site environment conditions (weather, current, swell, tidal etc); and project conditions (accuracy, selectivity, environmental impact, pre‐dredging activities). See chapter 4.1.4. Maintenance Management: The most sustainable maintenance management strategy is Reliability Centered Maintenance (RCM). RCM is a systematic approach to quantitatively assess the need to perform or revise preventive maintenance tasks and plans on the basis of safety, environmental and economic consequences of the related failures. The key conceptual difference between conventional preventive maintenance (PM) and RCM is that although PM methodology focuses in avoiding failure, RCM focuses on avoiding failure consequences (not necessarily by avoiding failures). RCM analysis is a powerful analytic methodology for optimizing maintenance strategies by the systematic assessment of management risks derived from failure consequences and determining the best maintenance policy to mitigate risks. Any RCM process is based on answering seven questions satisfactorily and in the sequence shown below: 73
72 NCS International, Safety and OHS Certifications [Website] Website NCS International ‐ OHSAS 18001 [Accessed August 16, 2009] 73 Kumar, Uday, Reliability Centered Maintenance [Lecture notes] (Helsinki, Luleå University of Technology, 2007) – pp. 2 & 7
58
1. Equipment Functions: What are the functions and associated desired standards of
performance of the asset in its present operating context? 2. Functional Failures: In what ways can it fail to fulfill its functions? 3. Failure Modes: What causes each functional failure? 4. Failure Effects: What happens when each failure occurs? 5. Failure Consequences: In what way does each failure matter? 6. Proactive Tasks and Task Intervals: What should be done to predict or prevent each
failure? 7. Possible Corrective Actions: What should be done if a suitable proactive task cannot be
found? Responsible mine maintenance management is critical to AMOs. Alluvial mine and gravity separation mineral processing equipment can fail in many different ways and in some cases failures may have a negative impact on safety, environment and equipment. In this regard, maintenance management should be based on the analyses of equipment functions, aiming to identify safety, environmental, and economic priorities, and concentrate on the maintenance strategies for those pieces of equipment and systems that are critical from the reliability, safety, environment, and production point of view. IHC Merwede developed a RCM methodology for their equipment. The conceptual closure plan: should be developed further in cooperation with stakeholders (for sudden closure) until the final closure. The year before the final closure a detailed closure planning (final closure plan) should be developed. A detailed example for an alluvial mine closure plan is the “Mine Reclamation and Closure Plan” of WMMC.
7.3.3. Closure and Legacy Mine closure consists of all the activities following the end of operations, including decommissioning of processing plants, removal and disposal of equipment (reselling, recycling metal, re‐using) demolition of buildings (if necessary), recontouring of the land to create positive site drainage, placement of topsoil/growth medium, and revegetating the land. Ongoing monitoring and maintenance of post closure is necessary to make sure that physical, chemical and biological stability is maintained in the long term. In chapter 4.1.3 is the continuous and concurrent reclamation method discussed. Post‐Mining Reclamation & Legacy: Because of the concurrent reclamation method; a small amount of reclamation still has to be done after mining activities. For example (e.g. remaining dredge pond, mine site decommissioning, and roads). The intent of reclamation and the core of restoration is that the initiation of ecological processes will result eventually in the original state, which existed prior to mining. The restoration is successful if the amount of various plant and animal species and cycles of mined area will develop similar to nearby unexcavated areas. It is
59
easier to achieve this onshore in dredge ponds than in open systems onshore or offshore because the ecosystem is directly affected by the mining operation and it takes time to restore to its original state. To manage the closure planning ICMM developed the toolkit “Planning for integrated mine closure toolkit”. The opportunities and risks that define the steps to closure are many and varied, and a disciplined, knowledgeable approach to closure planning is required to successfully negotiate these steps. The final closure plan is similar to the concept one, but only more detailed. The closure planning process for a mine site typically consists of the closure designs for the various facilities (mine site, accommodations, tailings dam facilities etc.). The overall cost estimates for mine closure should be based on the facility‐specific designs and best estimated unit costs. Mine closure cost estimates form the basis for financial assurance required by many jurisdictions. Financial assurance is the amount of money available to a government entity for closure of the mine in case that the mine owner is not available to perform the work (bankruptcy), during operations, or any time thereafter. The ICMMs Financial Assurance for Mine Closure and Reclamation presents an extensive review of the different types of financial assurance instruments.74 The ICMM Financial Assurance does not provide a quantum for the costs, whereas the Department of Minerals and Energy (DME) of South Africa developed a guideline and risk‐based cost estimation model for financial provision for environmental rehabilitation and closure requirements for mining operations with a quantum.75 In consultation with senior alluvial mining consultant Willem Kramer concluded that these closure requirements are essential for AMOs:76
• Rehabilitation of access roads
• Demolition of housing and/or administration facilities
• General surface rehabilitation, including grassing
• River diversion
• Water monitoring
• 2 to 3 years of maintenance and aftercare
74 ICMM, Financial Assurance for mine closure and reclamation [Online Doc] (London, ICMM, 2005) – pp. 6 [Accessed March 6, 2009] 75 Department of Minerals and Energy of South Africa (DME), Guideline document for evaluation of the quantum of closure‐related financial provision provided by a mine [Online Doc] (Pretoria, DME, 2005) [Accessed June 12, 2009] 76 Kramer, W., Consultation in January 2010 [Consultation] (Kinderdijk, Alluvial Dredging & Mining Services, 2010)
60
8. Sustainable Guideline for AMO The 10 ICMM principles are the basis of the sustainable guideline. During all the mining stages of an alluvial mining project these Principles and Elements should be included and verified continuously. With the help of the stakeholder engagement, integrating SD in mining operations, specific characteristics of AMO, case studies and sustainable challenges for each mining phase previously treated in this report and the indicators, the sustainable guideline for AMO is established.
8.1. Sustainable Impact Indicator Tools The Sustainable Impact‐Indicator‐Tools (Good Practice) Guideline for Alluvial Mining Operations is established to obtain a structured overview and guidance:
Figure 8‐1: SIT indicator based guideline for Alluvial Mining Operations
The general sustainable impact issues for the alluvial mining operations are listed below:
• Social;
• Socio‐Economic;
• Economic;
• Eco‐Economy;
• Environmental;
• Socio‐Environmental. In the next sections these impacts are treated separately in detail and practicable measures by tools and good practices are given.
61
8.2. Social Impacts Table 8‐1: SIT‐Guidance for Social Impacts
Indicator Key Performance Indicator Tools/Good Practice / [Reporting]
Corporate Governance Company Statements: develop and implement company statement of ethical business principles and practices that management is committed to enforcing
‐ RBM Corporate Governance
Integration of SD Principles: integrate sustainable development principles into company policies and practices
‐ SD Framework from PDAC‐ IFC Performance Standards ‐ ICMM SD Principles ‐ SD Principles for Alluvial Mining Operations
Human Rights Diversity and Equal Opportunity: quantify diversity and equal opportunity by e.g. employee category (staff & workforce), gender, age, minority groups etc. This provides an insight into the human capital of the organization
‐ RBMs Diversity and Equal Opportunities Policy[Number of incidents recorded]
Non‐discrimination: implement policies and practices designed to eliminate harassment and unfair discrimination in all aspects of the companies activities
[Number of incidents of discrimination]
Forced and compulsory labor: ensure fair remuneration and work conditions for all employees and do not forced, compulsory or child labor
‐ Continuously improve occupational health and safety conditions
Security Practices: ensure that all relevant staff, including security personnel, are provided with appropriate cultural and human rights training and guidance
‐ Security training and guidance with respect to culture and human rightsMineros Guide for Social Management
Indigenous Rights: respect the culture and heritage of local communities, including indigenous peoples
Workshops, discussion groups, press and local and regional radio/tv with local community and indigenous peoples Mineros Guide for Social Management ICMM: Mining and Indigenous Peoples Issues Roundtable
Corruption: implement policies and practices that seek to prevent corruption and bribery
[Number of convictions/incidents]
Community Engagement Stakeholder Engagement: engage at the earliest practical stage with likely affected parties to discuss and respond to issues and conflicts concerning the management of social impacts
IFC Stakeholder EngagementSocial Management guide by Mineros
Grievance mechanisms and procedures: provide grievance mechanisms to resolve certain relationships with local communities or indigenous peoples, that are put under strain through an incident or any other cause.
[Report these incidents and procedures as well their outcomes]
Grievance Mechanism with Community: assess the extent to which grievance mechanisms were used to resolve disputes relating to land
ICMM Community Development Toolkit[Number and description of significant incidents that affect or involve
62
use, customary rights of local communities and indigenous peoples, and their outcomes
communities and how these disputes are resolved ]
Artisanal and small‐scale mining (ASM): assess the risk and mitigation measurements for operation sites where ASM takes place on, or adjacent to, the site
‐ Programs for handling with ASMThe Mongolian Government approach by crackdown or according to the Community and Small‐scale Mining [Number and percentage of ASM operations that take place on or adjacent to AMO]
Resettlement: minimize involuntary resettlement, and compensate fairly for adverse effects on the community where they cannot be avoided
‐ number of households that had to resettle and how livelihoods were affectedMineros: resettlement action plan; lease ground, let people work for 3 years in project and meanwhile learn a job (e.g. as farmer, bee‐master etc.).
Access to Information Reporting: report the social, environmental and economic performances and contributions to sustainable development
‐ Annual Report‐ Financial Report ‐ Sustainability Report (GRI)
Accuracy: provided data should be accurate, relevant and recent Good monitoring system according to social, environmental, financial and technological issues.
Engagement: engage with and respond to stakeholders through open consultation processes
‐ IFC Stakeholder Engagement‐ Community Development Toolkit
63
8.3. Socio‐Economic Impacts Table 8‐2: SIT‐Guidance for Socio‐Economic Impacts
Indicator Key Performance Indicator Tools/Good Practice / [Reporting]Human Resources Training and Education: provide sustainable development training to
ensure adequate competency at all levels among our own employees and those of contractors
‐ Human Capital Investment (training and education)‐ Average of hours of training per employee per employee category RBM Adult Basic Education and Training (ABET) programme
Investment and procurement practices: screen and train employees and significant suppliers and contractors for policies and practices concerning aspects of human rights that are relevant to operations
Amount of people and investment that is spend to local Small or Medium Enterprises with objectives and targets for the procurement.
Employment rehabilitation: rehabilitate and reintegrate employees into operations following illness or injury, where feasible
Number of people that are reintegrated into the operation
Community Development Contribution to community: contribute to community development from project development through closure in collaboration with host communities and their representatives
RBM Broad Based Black Economic Empowerment (BBBEE) pathMineros: Social Intervention Model (Support Local Business Entrepreneurship Initiative)
Poverty: enhance social and economic development by seeking opportunities to address poverty
Working towards poverty‐related targetsRBM Partnerships with local community focus on education, health, agriculture and job creation
Local Enterprise Market Presence: support public policies and practices that promote open and competitive markets, by the use of locally‐based suppliers and hire of employees and senior management from the local community near the operation
‐ % of local workforce:Richards Bay Minerals foster motivated and skilled local workforce Mineros Guide for Social Management: Employment Policy ‐ Proportion spend on local suppliers: RBM Broad Based Black Economic Empowerment (BBBEE) path Mineros Government‐community‐company policy
Partnership: encourage partnerships with governments and NGOs to ensure that programs (e.g. education, community health, local business development) are well designed and effectively delivered
RBM Partnerships with local community focus on education, health, agriculture and job creation
64
8.4. Economic Impacts Table 8‐3: SIT‐Guidance for Economic Impacts
Indicator Key Performance Indicator Tools/Good Practice / [Reporting]Risk Assessment Consultation with interested and affected parties: consult with
interested and affected parties in the identification, assessment and management of all significant social, health, safety, environmental, institutional and economic impacts associated with the project
‐ Consultation‐ Identify risks ‐ Analyse risks ‐ Evaluate risks ‐ Treat risks Good Practice Guidance on Occupational Health Risk Assessment Australian/New Zealand Standard: Risk Management (AS/NZS 4360: 2004)
Regular Review: ensure regular review and updating of risk management systems
Monitor and review risksAustralian/New Zealand Standard: Risk Management (AS/NZS 4360: 2004)
Economic Viability Economic Performance: estimate direct economic value generated and distributed, including revenue, operating costs, employee compensation, donations and other community investments, retained earnings, and payment to capital providers and government
‐ Direct Economic Value added‐ Contribution of alluvial mining operation to GDP expressed in US$ (or national currency) and in percentage ‐ First Job Wage compared to national minimum wage [US$]
Indirect Economic Impacts: develop and assess the impact of infrastructure investments and services provided primarily for public benefit through commercial engagement
‐ Ratio of actual exports versus capacity of the country’s infrastructure to support the total export
65
8.5. Eco‐Economy Impacts Table 8‐4: SIT‐Guidance for Eco‐Economy Impacts
Indicator Key Performance Indicator Tools/Good Practice / [Reporting]Environmental Stakeholder Engagement Inform parties: inform parties of significant risks from the alluvial mining
operations and of the measures that will be taken to manage the potential risks effectively
Organize public participation programs for environmental and social impact assessment Managing Risk and Maintaining License to Operate: participatory planning and monitoring in the extractive industries
Overall environmental investment: total environmental protection expenditures and investments by type (e.g. personnel employed for education and training, external services and certification for EMS, R&D, personnel for general environmental management activities)
‐ Investment for implementation of an independent panel of experts to review environmental applications in the alluvial mining operation [US$] ‐ Number of environmental Training days/hours per staff member [# d/h per staff]
Sustainable Alluvial Mining Operation Ore Grade Control: determine the decision‐making process for grade control and assess the ore‐waste boundaries and control of dilution
‐ (re)calculation of minable reserves (tonnage, grades and spatial distribution) during feasibility and operation ‐ define ore‐waste boundaries ‐ control dilution
Ground Control: ground control will provide safety and no failure that can cause (temporarily) shutdown
‐ Geology and ground conditions‐ Hydrologic conditions ‐ Production rate ‐ Shape and size of the excavation
Mine Planning: determine the production and economic objectives for the long‐term planning and the efficient use of resources, performance evaluation and control and the timely implementation of corrective actions for the short‐term planning
Long term planning:‐ Production objectives ‐ Economic objectives Short term planning: ‐ Efficient use of resources ‐ Performance evaluation ‐ Control actions
Equipment and plant selection: determine and select the most applicable excavation equipment(s) and search for a suitable treatment plant for the operation
‐ Economic investment cost‐ Production rate ‐ Maximum output and minimum cost
Overburden and Tailings: assess total amount of overburden, rock, tailings, and sludges presenting potential hazards.
Risks assessment and management and minimizing measures [tonnes]Information on quantities will be available from site production data. Hazard identification from site risk assessments
Maintenance Management Maintenance Management: assess which approach to maintenance allows operating the minimum cost
The most sustainable Maintenance Management Strategy is Reliability Centered Maintenance (RCM), this is an optional application for equipment from IHC Merwede
Material Stewardship Understanding Properties: Enlarge understanding of the properties of metals and minerals and their life‐cycle effects on human health and the environment
IHC Merwedes objective for Material Stewardship is to minimize the amount and volume of toxic, rare, energy‐consuming and other detrimental materials in dredging equipment
Encourage partners: Encourage business partners, customers and suppliers of good and services to adopt principles and practices that are comparable to the company ones
‐ Mineros partnership with local contractors and suppliers‐ IHC Merwede provides training for the dredge and maintenance
personnel
66
Support Research: Conduct and support research and innovation that promotes the use of products and technologies that are safe and efficient in their use of energy, natural resources and other materials
IHC Merwedes sustainability program is investigating:‐ Emissions reduction ‐ Turbidity reduction ‐ Materials Stewardship ‐ More efficient propulsion‐process (energy, fossil fuel efficiency)
IHC corporate in the research of Ecoshape BWN. Product standards: support the development of scientifically policies, regulations, product standards and material choice decisions that encourage the safe use of mineral products
Euromines established a guide for ISO 9001: 2000 quality management systems
Energy Efficiency Energy consumption: fossil fuels (oil, gas, coal, biofuels) and renewable (solar, wind, geothermal, hydro‐energy, nuclear) energy consumption by whole operation
[Giga Joules] in remote areas an alternative energy source is advisable ‐ solar, wind, geothermal, hydropower – whatever the best choice for that area. Barrick Gold: In Chile (Punta Colorada area) 10 state‐of‐the‐art 2MW windturbines: costs US$ 40 million. Barrick: In Tanzania (remote Mara region) hydro‐electric power stations. Costs US$ 28 million.
Energy savings: energy saved due to conservation and efficiency improvements
[Giga Joules] Caterpillar and BHP Biliton were assessing the potential of using alternative fuels to diesel for their off‐road mining equipment. Using alternative fuels, such as biodiesel, to reduce the GHG emissions.
Initiatives: initiative to provide energy efficient or renewable energy for the whole operation
‐ ISO (International Organization for Standardization) an ‐ IEC (International Electrotechnical Commission) has energy efficiency standards and relevant testing procedures [report]
67
8.6. Environmental Impacts Table 8‐5: SIT‐Guidance for Environmental Impacts
Indicator Key Performance Indicator Tools/Good Practice / [Reporting] Biodiversity Amount of land: amount of land disturbed and/or rehabilitated ‐ Land owned, leased, and managed for the AMO in, or adjacent to, protected
areas and areas of high biodiversity value (terrestrial, freshwater, or maritime ecosystem) [hectares or km2] ‐ Assess that status, size and location of the all habitat protected areas and/or restored areas [hectares or km2]
Environmental Impact Assessment: assess the positive and negative, the direct and indirect, and the cumulative environmental impacts of new projects
‐ assess impacts of activities, products and services on biodiversity (e.g. on mine site, transport infrastructure, pollution, sediment quality for offshore, reduction of species, invasive species etc.) ‐ Changes in groundwater level, salinity and quarantine for offshore (MARPOL) ‐ Assess this from exploration through closure and beyond [extent of affected areas, affected species, duration of impact, and (ir)reversibility of the impacts] WMMC ‐ Environmental Impact Assessment
Environmental Management System: implement an EMS focused on continual improvement to prevent, mitigate, review or improve adverse environmental impacts
Euromines established a guide for ISO 14001: 2004 environmental management systems
Biodiversity Management Plan: identify if required a BMP according to stated criteria, and plans and places.
BMP should cover:‐ scale of impact; ‐ sensitivity of the area; ‐ local community use of biodiversity; ‐ ecosystem services provided by the local environment; ‐ cultural relevance; ‐ protected areas; ‐ special or red list species; ‐ potential post closure use; ‐ business case/risk aspects
Regulations and Strategies: the regulations and strategies for biodiversity should be implemented and reported to obtain a integrated approach to land use planning, biodiversity, conservation and mining
‐Report with environmental site impact assessment, method for establishing risk exposures, monitoring processes, objectives and targets
Water Management Water availability: total water available and withdrawal by source, e.g. surface‐, groundwater‐, rainwater collected, municipal water supply
‐ Water availability [m3]‐ The department of Water Affairs and Forestry established several Best Practice Guidelines for the Water Management, for all key performance indicators.
Significant affects: water sources significant affected by withdrawal of water
Withdrawals [m3]:‐ with 5% or more of the annual average volume of a certain water body ‐ from water bodies that are recognized to be sensitive due to relative size, function, or status of threatened or endangered system ‐ from a Ramsar‐listed wetland or any other national or international proclaimed conservation area regardless of the rate of withdrawal (size of
68
water source); whether or not the source is protected area; and has biodiversity value (amount of flora and fauna)
Water recycled and reused: percentage and total water recycled and reused
IHC Treatment plant with jigs[m3/year and % of total water withdrawal]
Pond Control Dam (PCD): design a sustainable and for the whole life time of the AMO
Best Practice Guidance A4 Pollution Control Dam covers the full life cycle of a PCD, including design, construction, operation and closure.
Water quality: the affect on the water quality by the operation (especially offshore)
‐ assess the epipelagic zone and the effect of the decrease in degree of lightpenetration on the underwater habitat. ‐ Measure turbidity caused by the operation [mg/m3] ‐ Turbidity in Nephelometric or Formazin Turbidity Unit [NTU/FTU]
Emissions, Effluents and Waste GHG emissions: assess total direct and indirect GHG emissions by weight.
‐ Direct emissions are from sources that are owned by company‐ indirect emissions are from sources of contractors, suppliers, employees and business trips [tonnes of CO2 equivalent]
Water discharge: total water discharge by quality and destination (especially in offshore operations)
‐ Planned and unplanned water discharge [m3/year] ‐ Report water quality from treatment plant in terms of Biochemical Oxygen Demand (BOD) [mg/L], Total Suspended Solids (TSS) [mg/L], Turbidity in Nephelometric Turbidity Unit [NTU]
Initiative GHG reduction: Initiate to reduce GHG, NOx, SOx, and other significant air emissions and reductions achieved
IHC Merwede has the initiative to reduce emissions of their vessels and treatment plants [Targets and in % the achievement]
Safe storage and disposal: provide safe storage and disposal of residual wastes and process residues
‐ Report total amount of waste [tonnes] for each disposal method (composting; reuse; recycling; recovery; incineration; landfill)
Significant spills: total number and volume of significant spills (chemicals, oils, fuels)
Identify and report: location, volume and material of spill on soil or water surface
69
8.7. Socio‐Environmental Impacts Table 8‐6: SIT‐Guidance for Socio‐Environmental Impacts
Indicator Key Performance Indicator Tools/Good Practice / [Reporting]Regulations, Permit and License Compliances
National Regulations and Permits: comply with or exceed the requirements of host‐country laws, regulations and permits
‐ Establish Social and Environmental Impact Assessment (WMMC ‐Mongolia)‐ Monitor Environmental Management Plan (EMP of Mineros) ‐ Performance Awards (ISO 9001 and14001, OHSAS 18001)
Compliance: assess monetary value of significant fines for non‐compliance with social, environmental and economic laws, and regulations concerning the provision and use of product and services
‐ Number [#] and amount [US$] of fines
Public Policy: work with government, industry, and other interested stakeholders to achieve appropriate and effective public policy, laws, regulations and procedures that facilitate the alluvial mining sector’s contribution to SD within National SD‐strategies
Participate in international policy dialogue concerning social and environmental issues Mineros Guide for Social Management and Environmental Management Plan
Health & Safety Health and Safety: implement a health and safety management system to improve this aspect for your employees, contractors and communities where the operation takes place
‐ Take all practical and reasonable measures to eliminate workplace fatalities, injuries and diseases among the employees and contractors ‐ Provide all employees with H&S training and require contractors to do the same OHSAS 18001 (occupational health and safety management system
Closure Planning Closure Planning: plan, design, operate and close operation in a manner that enhances SD. Restore land disturbed or occupied by the operation in accordance with appropriate post mining land use. Design and plan all operations so that adequate resources are available to meet the closure requirements
‐ Rehabilitation plan with evidence of monitoring (RBM SD report)‐ Rehabilitation success: check chemical and physical stability and acceptable water quality ‐ Ratio of area rehabilitated per year versus area disturbed per year ICMM ‐ Planning for Integrated Mine Closure Toolkit; and WMMC – Reclamation and Closure Plan
Emergency Management Emergency Preparedness: develop, maintain and test effective emergency response procedures in collaboration with potentially affected parties
‐ Description and number of incidents with employees, communities or environment in which emergency preparedness procedures were activated ‐ Percentage of employee that have undergone first aid training ICMM: Good practice in emergency preparedness and response (with a model emergency plan) United Nations Environment Programme (UNEP): Guidance for the Mining Industry in Raising Awareness and Preparedness for Emergencies at Local Level
70
9. Cost estimates of SD Indicators in AMO To verify if a mining project can meet SD requirements the most important validation is the financial feasibility check. Consequently all SD activities in the project can be presented in financial SD indicators. This chapter identifies the SD indicators in AMO that have the potential to affect the proven and probable reserves, dredging operation; mineral processing and production; and therefore the (operating) cash flow. Key steps for the translation of SD into financial figures are to:
• Identify the SD indicators to be analyzed;
• Establish the scope of the indicator;
• Gather data and attempt to quantify as many elements of the SD indicator as possible;
• Estimate the costs per SD indicator; Tables 9‐1 to 9‐5 illustrate the estimated SD indicators in the different mining phases that can affect the cash flow. Appendix F lists the scope of each indicator.
Table 9‐1: Exploration Phase
Indicator Cost Estimation (US$) Quantity
Environmental Baseline Study 150,000 Once
Social Baseline Study 150,000 Once
Preliminary Technical Study 300,000 Once
Permitting for Drilling 200,000 Once
Drilling Operation and Data Analysis (Total) 5,000,000 Once
Security 100,000 Once
Table 9‐2: Feasibility Study
Indicator Cost Estimation (US$) Quantity
Socio‐Economic Impact Assessment 100,000 Once
Environmental Impact Assessment 200,000 Once
(Pre)‐Feasibility Study 650,000 Once
Permitting for Mining 200,000 Once
71
Table 9‐3: Construction Phase
Indicator Cost Estimation (US$) Quantity
Resettlement Management 2,200 Per hectares
Stakeholder Engagement 10,000 Per year
Social Welfare Program 100,000 Per year
Reporting 100,000 Per year
Human Resources 50,000 Once
Training & Development 60,000 Per dredger
Community Development Program % of gross profit
Charitable Giving 5,000 Per year
Security 50,000 Once
Start‐up QMS for ISO9001 Certification 50,000 Once
Start‐up EMS for ISO14001 Certification 50,000 Once
Start‐up OHSMS for OHSAS18001 Certification 50,000 Once
Health & Safety (community) 10.000 Per year
Emergency Preparedness 50,000 Per year
Concept Closure Plan (1x) 100,000 Per time of update CCP
Table 9‐4: Operation Phase
Indicator Cost Estimation (US$) Quantity
Resettlement Management 2,200 Per hectares
Stakeholder Engagement 10,000 Per year
Social Welfare Program 100,000 Per year
Reporting 100,000 Per year
Community Development Program (0%) % of gross profit
Charitable Giving 5,000 Per year
Security 50,000 Per year
QMS for ISO9001 Certification 25,000 Per year
EMS for ISO14001 Certification 50,000 Per year
OHSMS for OHSAS18001 50,000 Per year
Health & Safety (community) 10,000 Per year
Emergency Preparedness 50,000 Per year
Concept Closure Plan (3x) 100,000 Per time of update
Final Closure Plan (1x) 200,000 For update FCP
72
Table 9‐5: Closure Phase
Indicator Cost Estimation (US$) Quantity
DME (SA) Quantum Closure Cost estimation 2,400,000 Once
Mainly the cost estimations are obtained by consultation with Willem Kramer.76 The social related issues are collected and estimated according to previous social project investments in the Peruvian mining industry.77 Note that for the estimated social related costs: the efforts can be carried out in co‐operation with government or other institutions (NGOs) and therefore only the portion of costs borne by the operation must be included.
77 Ministerio de Energia y Minas de Peru (MINEM), Mineria Sostenible en el Peru [Online Doc] (Lima, MINEM, 2009) – pp. 90‐97 [Accessed December 15, 2009]
73
10. Gold Sands case
10.1. Location and Access A good example to verify the validity of SD issues is the Gold Sands project of Constitution mining. Constitution Mining has the intention to implement a large‐scale multi‐dredger AMO, named the Gold Sands Project, along the Rio Maranõn river in northeastern Peru. It comprises an area of 382 km2 with overly gold rich sands and gravels of the Rio Maranõn system, which are deposited from the high‐energy waters of the upper reaches of the Rio Maranõn and Rio Santiago along the Manseriche Gorge onto the flat Amazon flood plain. The project area is located 470 km west of the Amazon river city of Iquitos (population 400,000) and 240 km north of Tarapoto (population 108,000). This area can be reached by charter flight from Lima while supplies and heavy equipment can be barged in from either Yurimaguas (455 km) or Iquitos. In addition, heavy loads can be trucked from Bagua (280 km) on a fair‐weather road to the village of Saramiriza, in the center of the project Area.35
10.2. Climate and Vegetation The area has a microclimate with no defined wet and dry seasons, as is the case in much of the Amazon. The monthly average rainfall ranges from 24 to 33 cm, most of which occurs in the afternoon. River levels are controlled more by precipitation and melting snow in the Andes rather than local rainfall. Temperatures are relatively stable with a variation between 22°C and 30°C, and a monthly average of 25°C throughout the year. The local vegetation includes species suited for tropical rain forest.
10.3. Peru regulation and guidelines The Ministry of Energy and Mines of Peru requires three authorizations to complete the development of a mine: 35, 78
• An application for an Environmental Impact Statement for initial exploration. The EIS implies a maximum disturbed area of 10 hectares.
• An application to undertake extensive exploration and development activities a Semi‐Detailed Environmental Impact Assessment: the semi‐detailed EIA contains besides detailed environmental information also social data of the area where exploration activities will be carried out. Furthermore data on the project and work to be performed, and the measures to control and mitigation for environmental impacts have to be implemented in this report. During the preparation of this EIA at least one informative workshop should be carried out.
(to be continued)
78 Sociedad Nacional de Mineria, Petroleo y Energia (SNMPE), Peru Mining Investment manual [Online Doc] – Section 5 pp. 2‐5 (Lima, SNMPE, 2008) [Accessed January 30, 2010]
74
• The last requirement to initiate mining exploitation is a full EIA, which entails studies for
activities in mining, processing, general work and mining transport concessions; they must assess and describe the physical‐natural, biological, socio‐economic and cultural issues corresponding to the project’s area of influence. The prevention, mitigation and control measures are indicated to achieve a balance between the environment and the alluvial mining operation. During the preparation and evaluation of the EIA at least three informative workshops and one public hearing should be carried out.
During these environmental studies it is required to prepare a Mine Concept Closure Plan (CCP) during the exploration phase. During the construction phase the CCP should be prepared for the AMO. This plan has the objective to prevent, minimize and control effects on and risks to health and safety, the environment and property that could derive from the closing of the mining operation. When this plan is approved, after 3 year it has to be updated and followed by 5 years.79
10.4. Community Relationships During the Operation phase Constitution will implement a Citizen Participation Plan: which consists of participation measures during the project. This plan and the EIA will be evaluated and approved by the qualified authority. Priority should be given to the establishment of a Permanent Information Office and/or Participatory Environmental Surveillance and Monitoring Committee. Constitution currently employs only two non‐Peruvians on this project and the technicians and dredge masters will be trained at IHC’s dredge training facility in the Netherlands. The Community Relations Plan (CRP): The findings of the initial social baseline study indicated a need in general infrastructure (water, sanitary installations), housing, education, medical services and employment opportunities. In general, the expectations of the communities are with employment possibilities in an environmentally friendly project, while the authorities showed a deep interest in the development potential that the project may have for the district as a whole.80
10.5. The Proposed AMO In May 2009 IHC undertook a preliminary master plan (technical scoping study) for Constitution Mining.81 There is suggested to start pilot mining by a dredger which has a capacity of 5 million cubic meters per year with a maximum dredging depth of 20 meters with suitable floating separation plant (FSP) (dredge system 1). Subsequently the operation will expand with a 10 million cubic meters, 20 meter depth dredger with gold producing FSP (dredge system 2a). Afterwards a dredger with a similar dredger is added; however with 40 meter dredging depth (dredging system 2b). The suggestion is to expand the operation with those two dredgers two more times, according to the expanding sequence shown in Table 10‐1, to a total of 7 dredgers.
79 Garcia, D.H., Overview of International mine closure guidelines [Conference] (Flagstaff, SRK Consulting Inc., 2008) – pp. 6 & 9 [Accessed October 20, 2009] 80 Fuchter, W., Constitution Mining completes initial social baseline study in Gold Sands District [Website] Website Constitution ‐ Social Baseline Study [Accessed May 13, 2009] 81 Kramer, W. et al., Preliminary Master Plan Peru Gold Sands Dredging [Report] (Kinderdijk, MTI Holland BV, 2009) ‐ pp. all
75
Table 10‐1: Expanding Sequence of dredge systems
Dredger system System No.
Building Year
First Operating Year
Dredging Depth [m]
Production of dredger [m3]
Cumulative Annual Production [m3]
Wheel dredger with FSP (pilot)
1 2011 2012 20 5,000,000 5,000,000
Wheel dredger with FSP
2a 2013 2014 20 10,000,000 15,000,000
Wheel dredger with FSP
2b 2014 2015 40 10,000,000 25,000,000
Wheel dredger with FSP
3a 2017 2018 20 10,000,000 35,000,000
Wheel dredger with FSP
3b 2018 2019 40 10,000,000 45,000,000
Wheel dredger with FSP
4a 2021 2022 20 10,000,000 55,000,000
Wheel dredger with FSP
4b 2022 2023 40 10,000,000 65,000,000
Prior to mining, the vegetation will be stripped at a width of 600 m by earthmoving equipment. The topsoil will moved and stockpiled to the sides for later reclamation and rehabilitation measures. Figure 10‐1 illustrates a schematic topview of a full scale dredge system (in three months). The tailings of the FSP are deposited into the mined out dredging pond. The restored area is covered with the stored topsoil and eventually re‐vegetated with the original flora.
Figure 10‐1: Schematic topview of full scale dredge system
76
10.6. Base Case Cash Flow Description
10.6.1. Operational Expenditures The operational expenditures (OPEX) are based on rough information and experience of IHC with similar projects. The annual OPEX of the different dredge systems is summarized in Table 10‐2 and given in US$ per year and per cubic meters.
Table 10‐2: Summary of the OPEX
Mining System Dredge system 1 Dredge systems 1 and 2a Dredge systems 1, 2a and 2b
Total mine output [m3] 5,000,000 15,000,000 25,000,000
Operation Year year 1 – Year 2 year 3 year 4 – year 5
US$/y US$/m3 US$/y US$/m3 US$/y US$/m3
Management and labor 3,800,000 0.76 6,900,000 0.46 10,250,000 0.39
Fuel and lubricants 4,200,000 0.63 10,050,000 0.61 16,000,000 0.58
Maintenance 4,150,000 0.83 10,050,000 0.67 15,750,000 0.63
General Costs and overheads 850,000 0.17 2,100,000 0.14 2,800,000 0.08
Totals: 13,000,000 2.39 29,100,000 1.88 44,800,000 1.68
10.6.2. Capital Expenditures The capital expenditures (CAPEX) are rough estimates based on experience of IHC with similar operations and have spreading of +/‐ 25% accuracy. The CAPEX budgets for the projected mining operation are shown in Table 10‐3. The initial exploration, feasibility and construction costs are not taken into account. The CAPEX for systems 3 and 4 are considered similar to system 2.
Table 10‐3: Total CAPEX per dredge system
Price in US$ Operation with Dredge system 1 Total budget operational at the mine site with dredge system 1 [5020W and FSP] 47,000,000 Camp etc. 2,000,000 Earth Moving Equipment 3,000,000 Vehicles, busses, etc. including spare parts 300,000 Working capital and contingencies 1,700,000
Total capital investment operation with dredge system 1 54,000,000
Operation with Dredge system 2a (3a and 4a) Total budget operational at the mine site with dredge system 2a (3a and 4a) [6520W and FSP] 81,000,000 Camp etc. 1,000,000 Earth Moving Equipment 3,000,000 Vehicles, busses, etc. including spare parts 300,000 Working capital and contingencies 1,700,000
Total capital investment operation with dredge system 2a (3a and 4a) 87,000,000
Operation with Dredge system 2b (3b and 4b) Total budget operational at the mine site with dredge system 2b (3b and 4b) [6540W and FSP] 85,000,000 Camp etc. 1,000,000 Earth Moving Equipment 2,000,000 Vehicles, busses, etc. including spare parts 300,000 Working capital and contingencies 1,700,000
Total capital investment operation with dredge system 2b (3b and 4b) 90,000,000 All equipment operational at the mine site; no import duties taken into account
77
10.6.3. Cash Flow Analysis Besides the OPEX and CAPEX numbers, the other input project parameters are, shown in Table 10‐4.
Table 10‐4: Input Parameters of the cash flow analyses
Parameters Amount Unit
Gold price 800 US$/ozt Gold grade 300 mg/m3 Recovery of the processing plant 95 % Interest rate 8 % Theoretical life of project 16 years Amortization period per unit 10 yearsCorporate Tax rate 35 %Royalty 3 %Depreciation for tax 2 years
Based on these numbers, a first rough cash flow analysis for the project is set up according to the format shown below in Figure 10‐2.82 The analysis for a 7 dredger operation, are given in Appendix G.
Figure 10‐2: Format for Cash Flow Calculations
GROSS INCOME REVENUE CALCULATIONS Production in cubic meters [m3] + Price Product [US$/ m3] ‐ Royalty [US$] + Salvage Revenue [US$]
Gross Revenue [US$] COST DEDUCTIONS OPEX + Operating Expenditures [US$] + Depreciation [US$]
‐ Total Operating Costs [US$]
Earnings before interest and tax [US$] ‐ Interest [US$] ‐ Carried Forward Loss [US$]
Income Before Tax [US$] ‐ Tax [US$]
+ Net Income [US$] NON‐CASH EXPENDITURES + Depreciation [US$] + Interest [US$] + Carried Forward Loss [US$]
+ Net Cash In [US$] CAPITAL EXPENDITURES CAPEX + Equipment and Plant, incl. spare parts [US$] + Camp etc. [US$] + Supporting Earth Moving Equipment [US$] + Vehicles, busses etc. spare parts [US$] + Working Capital and contigencies [US$]
‐ Net Cash Out [US$]
NET CASH FLOW [US$]
82 Kennedy, B.A., Surface Mining [Book] (Baltimore, SME Inc. 1990) ISBN 0‐87335‐102‐9
78
10.6.4. Cash Flow Analysis Evaluation The OPEX calculations, while expanding the operation with one or more dredger(s), are not done in a correct manner. As shown in Table 10‐2, the operating costs are divided in a one, two and three dredge operation system. Therefore the OPEX rates calculations of 2.39 US$/m3, 1.88 US$/m3, and 1.68 US$/m3 for respectively the systems 1, 2a and 2b are done correctly. IHCs manner is that it adds each new system on its previous. However for further operational extensions these OPEX rates are not suitable. In the scoping study that IHC undertook the OPEX rates for 2a and 2b were multiplied for 3a,b and 4a,b, which resulted in a higher OPEX rate. The OPEX rate is higher because the pilot system is also multiplied by factor two or three. In the CAPEX calculations are beside the exploration, feasibility and construction costs, also the resettlement and closure costs missing. To develop a sustainable CAPEX it is essential to take these issues into account. The results of the cash flow of a 7 dredger system operation shows a very healthy Net Present Value (NPV) of 585 million US$ and an Internal Rate of Return (IRR) of 46%. Besides the 7 dredgers option there are developed cash flow analyses for 3 dredgers and 1 dredger. The three cash flow analyses are developed independent of each other. In other words each extension is changed manually. This way of working is time‐consuming and inefficient. The 7 dredger option is token as base case scenario, therefore are the 1 and 3 dredge options irrelevant for this research. The social baseline study indicated the need for infrastructure (water and sanitation), housing, medical services and education. Other sustainability costs that are not taken into account are:
• The initial capital expenditures for closure management and the resettlement action plan.
• The engineering costs to manage continuous and concurrent reclamation (including re‐vegetation); H&R and training development; the Quality; Environmental; and Occupational Health and Safety Management System.
• The general site and administration costs to manage the emergency preparedness, security, reporting, stakeholder engagement and specialized consultation to audit the QMS, EMS and OHSAS.
• The other sustainable costs like social welfare, charitable giving and health and safety of community.
In the next chapter the description of the cash flow model as developed for IHC, is corrected for above shortcomings.
79
11. Cash Flow Model methodology
11.1. Existing Cash Flow Model Sherpa for placer mining is an engineering‐based menu‐driven program that uses production and deposit data supplied by the user to calculate a series of engineering parameters, to estimate equipment, labor and supply costs. Besides these costs the program considers ancillary costs, such as preproduction stripping; project road construction; power generation and transmission; and reclamation costs.83 Initially it was the plan to use this program to develop a sustainable cash flow. The limitations of this program are that new mining and mineral processing machinery and other social and environmental issues cannot be added to develop a sustainable cash flow model (SCFM). The shortcomings of this program led to the development of the SCFM for AMOs.
11.2. Structure of Sustainable Cash Flow Model
11.2.1. Components of SCFM The model is split into four input datasets: General‐, CAPEX ‐, OPEX‐, and Revenue‐input data. The general data is mainly a selection tool for the CAPEX, OPEX and Revenue datasets. The data is processed by the model and results in a capital‐, operational‐ and revenue component. Its description and the required data are discussed in sections 11.3 to 11.6. These components together form a spreadsheet, which provides a discounted cash‐flow model. Finally, it consist a Sensitivity Analysis, which shows the impacts of relative changes in grade, commodity price, capital and operational expenditures, tax, royalty and Community Development Plan (CDP) on the economic viability and operations profitability. Figure 11‐1, illustrates the structure of the model.
11.2.2. Output The general output of the model results in the cash flow model overview, the Net Present Value (NPV), Internal Rate of Return (IRR) and the year that the Breakeven Point is reached. The output data is plotted in different graphs:
• Cash Flow Diagram: illustrates the cash inflow versus the cash outflow during the project;
• Cumulative Cash Flow: presents the net cash flow and the cumulative cash flow of the project;
• CAPEX & OPEX versus Revenue: shows the expenditures compared to the revenue;
• Cumulative Gold Production: shows the total amount of gold that is produced;
• Depletion of Mineral Resources; shows the decrease of mineral resources over time;
• Effect of Discount Rate the NPV: illustrates when the IRR is reached;
• Sensitivity Analysis: shows financial impact of relative changes on project.
83 Aventurine Engineering, Sherpa Placer Mining [Website] Website Aventurine ‐ Sherpa Placer Mining [Accessed October 23, 2009]
80
Figure 11‐1: Structure of Sustainable Cash Flow Model
11.2.3. Sustainability Data The sustainable data is distributed over the general, capital and operational components. Most of the sustainable data are implemented in the OPEX. A list of the sustainable OPEX data is shown in Appendix H. The share of the Community Development Plan (CDP) over the gross profit of the project is implemented in the general data sheet. The CDP is related to the gross profit and therefore assumed as general data. The closure and resettlement data is implemented in the capital expenditures component. Before the operation can start, a financial assurance is necessary for these kinds of costs. On that account it is assumed as a capital expenditure.
11.2.4. Limitations This model is not built to present the results of different scenarios simultaneously. To be able to compare different scenarios the layout of the general input sheet shows also the chart results of the cash flow model, next to the selection tool. Every alteration in the selection tool boxes will result in a visual change in the plotted charts. As previously described in chapter 9, data collection for social and environmental costs is difficult. The social costs are only valuable for Peru mining projects and therefore cannot be applied to projects in other countries.
81
The residual revenue of the mining systems investments are calculated, but must be adjusted manually by the engineer. The data series of the plotted graphs have to be adjusted manually for each project to retrieve a good visualization.
11.3. General Data The mining systems selection tool is designed to perform an investment planning as well as a production planning. As such the pilot is fixed and it has the option to expand the operation by 3 different types of dredging vessels. Besides the system type, the amount, first year of production and year of production stop has to be selected. The closure management plan has 3 options: A concept closure plan; a final closure plan; and the total definitive closure costs. The resettlement plan selection is given in the amount of hectares. Eventually the year of implementation for these sustainable plans can be selected. Other data that can be inserted are the closure year, corporate tax rate, community development plan share over gross profit and NPV discount rate.
11.4. Capital Costs Data The CAPEX for the mining system is calculated according to the format of IHC. Additional parts are an integrated depreciation calculation and input data for resettlement in US$/ha and the closure plan costs in US$. For the final closure costs the Closure Quantum Calculation model by DME is used and provides a master rate weighting factor for each relevant factor, see Table 11‐1. Only the relevant requirements for the closure of AMOs are implemented in the calculations. An adjustment is made for the option “Demolition of housing and/or administration facilities”. These costs are assumed to be 5% of the CAPEX of the total camp. The closure cost calculation can be found in Appendix I.
Table 11‐1: Additional CAPEX dataRESETTLEMENT MANAGEMENT PLAN
Resettlement Costs US$/ha
Resettlement Action Plan (RAP) 2200
CLOSURE MANAGEMENT PLAN
Closure Costs US$
Concept Closure Plan 100.000
Final Closure Plan 200.000
Closure Quantum Calculation by DME Amount Unit
Rehabilitation of access roads 125.000 m2
Demolition of housing and/or administration facilities 5,0% %
CAPEX camp 4.000.000 US$
General surface rehabilitation, including grassing 24 ha
River diversions 0 ha
Water monitoring 806 ha
2 to 3 years of maintenance and aftercare 806 ha
82
11.5. Operational Costs Data The OPEX calculation for each mining system expansion is improved with respect to the IHCs preliminary study. Only the OPEX P(ilot) consist of a full management squad whereas the expansion versions have a need for additional necessary management assistants. The sustainability data are now part of the general costs and overheads in US$. The annual OPEX rate is calculated by the summation of the annual operational costs and divided by the annual production.
∑ $
∑
11.6. Revenue Estimation To estimate the total gross revenue, the parameters below are necessary. The revenue per excavated cubic meter of valuable resources is calculated by:
$/ $/ . . 31.1 . ./ /
The formula above and the annual production in cubic meter will result in the annual production revenue. The royalty rate is subtracted from the production revenue and in the last production year is the residual revenue added. The residual revenue contains the rest value of the total mining system. An additional feature is the overburden ratio and a maximum for the mineral resources.
Table 11‐2: Input data for Revenue Estimation REVENUE INPUT Gold Price 800 US$/oz
Average Grade 0,200 g/m3
Processing Plant Recovery 0,95
Royalty 3,0%
VOverburden/Vbulk Ratio 0,0%
Interest Rate 8,0%
Period of Amortisation 10 year
Mineral Resources 650.000.000 m3
83
12. SCFM Result The SCFM as built, is able to present the financial data in the various stages of a SD mining project. It is important to understand where the model can or cannot be used as well as understand the interpretation of the results.
12.1. Assumptions and Constraints Assumptions Tables 12‐1 and 12‐2 present respectively the assumptions in the general input and the additional restructuring assumptions for the sustainable cash flow calculations. The detailed assumptions for capital and operational expenditures are listed in Appendix J.
Table 12‐1: Assumptions in General Input
SELECT MINING SYSTEMS INVESTMENTS
System Amount Prod. Year
Stop Prod. Year
Pilot 1 2012 2028
B 1 2014 2028
C 1 2015 2028
B 1 2018 2028
C 1 2019 2028
B 1 2022 2028
C 1 2023 2028
SELECT CLOSURE MANAGEMENT PLAN
Closure Year
Concept 2011
Concept 2014
Concept 2019
Concept 2024
Final 2026
Closure Cost 2027
SELECT RESETTLEMENT [HECTARES]
Resettlement [Ha] Year
260 2010
190 2011
170 2012
Constraints The modeling of the cash flow requires certain constraints in the input and output data. Constraints Input data:
• The general input data has a selective optional limit of three dredging (bucket wheel) vessels • In the general input data is the maximum year 2040. • The revenue input data is only applicable for gold operations.
Constraints Output data:
• The output data of Residual revenue have to be manually adjusted, according to the given example in the model.
• The time‐frame of the operation in the charts are not alternated automatically. The values can be adjusted by a right click on the particular graph and select “Source Data”. In this window, the values of the data series and time‐frame can be selected and alternated.
84
Results of Model Appendix K lists the results of the CAPEX, depreciation, OPEX, residual revenue, gross revenue and final cash flow. Note for these results: due to the quantity of data it is recommended to use the model in Excel beside the results shown in this chapter and appendix K.
Table 12‐2: Retained assumptions for the sustainable cash flow calculations
ANNUAL PRODUCTION
Pilot dredge system 5.000.000
Dredge system A 5.000.000 Dredge system B 10.000.000 Dredge system C 10.000.000
INCOME
Price US$/tr.oz. 800,00
Average grade (g/m3) 0,20
Recovery 0,95
Overburden Ratio ‐
CALCULATED REV PER CUBE
US$/m3 4,89
ANNUAL OPEX US$
Pilot dredge system 13.079.738
Expand with system A 11.186.738
Expand with system B 17.027.280
Expand with system C 16.926.000
CAPEX Mining US$
Pilot dredge system 53.696.500
Dredge system A 51.696.500
Dredge system B 87.000.000
Dredge system C 92.050.000
CALCULATED RESIDUAL VALUE
US$ 90.030.000
CAPEX Resettlement US$/ha
Resettlement Action Plan 2.200
CAPEX Closure US$
Concept Closure Plan 100.000
Final Closure Plan 200.000
Final Closure Budget 2.371.651
OTHER
VOverburden/Vbulk Ratio 0,0%
Royalty 3,0%
Interest Rate 8,0%
Period of amortisation (y) 10
CDP share over gross profit 0,5%
Corporate Tax Rate 35%
Closure Year 2028
Mineral Resources (m3) 650.000.000
Depreciation period (yr) 2
NPV Discount Rate
NPV Discount Rate 10%
85
12.2. Cash Flow Overview The graph shows the yearly in and out flow of the cash in the sustainable base case. The cash outflow presents clearly the capital expenditures that are made during the project.
Figure 12‐1: Cash Flow Overview
The figure illustrates as well that the initial phase of the operation is delicate and therefore a sustainable approach is essential to avoid potential threats.
12.3. Cumulative Cash Flow
12.3.1. Sustainable Case Figure 12‐2 shows the net cash flow (yearly discounted) and the cumulative cash flow curve. The curve shows a cumulative net cash flow of 1,029 million US$.
Cash Flow Diagram
-150,0
-100,0
-50,0
0,0
50,0
100,0
150,0
200,0
250,0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Time [year]
Cas
h In
/Out
[Mill
ions
US$
]
Cash In Cash Out
Figure 12‐2: Cumulative Cash Flow of Sustainable Case
-$400.000.000
-$200.000.000
$0
$200.000.000
$400.000.000
$600.000.000
$800.000.000
$1.000.000.000
$1.200.000.000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Net Cash Flow Cumulative Cash Flow
86
For this sustainable cash flow analysis it can be seen that based on the made assumptions the whole project could generate a healthy NPV @ 10% of 226 million US$ and an IRR of 26.1%. The breakeven point is reached in the year 2019, seven years after the projects starts.
12.3.2. Base Case The original base case used an average grade of 300 mg per m3, however recent exploration results indicated an average grade of 0.2 g/m3. The input data of the base case is inserted into the SCFM, and all extra sustainability expenditures are neglected. The curve indicates a cumulative net cash flow of 1,041 million US$.
Figure 12‐3: Cumulative Cash Flow of Base Case
For this sustainable cash flow analysis it can be seen that based on the made assumptions the whole project could generate a healthy NPV @ 10% of 231 million US$ and an IRR of 26.5%. The breakeven point is reached in the year 2019, seven years after the projects starts.
12.3.3. Evaluation According to the cumulative cash flow is in 16 years 12 million US$ invested in sustainable development issues and projects. On average this is 750,000 US$ annually. The relative change in the NPV between the old base case and the new sustainable case is calculated by:
–100% 1.9%
Therefore, is the NPV of the sustainable case reduced with approximately 2% in relation to the base case. Figure 12‐4 presents the NPV compared to its discount rate. The graph shows clearly the
-$400.000.000
-$200.000.000
$0
$200.000.000
$400.000.000
$600.000.000
$800.000.000
$1.000.000.000
$1.200.000.000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Net Cash Flow Cumulative Cash Flow
87
relationship between NPV and IRR: when the NPV is zero, the discount rate is around the 26.1 percent. This value represents the Internal Rate of Return.
Figure 12‐4: Effect of Discount Rate on the NPV
The IRR value decreased from 26.5 to 26.1% of the sustainable case, nevertheless that value represents a viable project, since a typical mineral industry project should be 15 to 25 percent.84
12.4. Cumulative Gold Production In the cash flow model is added the feature ‘mineral resources’, hereby is stated a maximum of
resources that can be mined. Figures 12‐5 and 12‐6 present respectively the depletion of the mineral resources and the cumulative gold production of the whole Gold Sands project.
Figure 12‐5: Depletion Planning of Mineral Resources
84 Millar, D., Case Study EMC 2007‐2008 course notes [Lecture notes] (Delft, Technical University of Delft, 2008)
Effect of Discount Rate on the NPV
-$50.000.000
$0
$50.000.000
$100.000.000
$150.000.000
$200.000.000
$250.000.000
$300.000.000
$350.000.000
$400.000.000
0% 5% 10% 15% 20% 25% 30% 35%
Discount Rate
NPV
NPV
Depletion of Mineral Resources
0
100.000.000
200.000.000
300.000.000
400.000.000
500.000.000
600.000.000
700.000.000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Time [year]
Min
eral
Res
ourc
es [m
^3]
Mineral Resources
88
Figure 12‐6: Cumulative Gold Production
According to an assumed mineral resource of 650 million m3, a grade of 200 mg/m3; and an ore recovery of 0.95, this results in a cumulative gold production of almost 4 million troy ounces.
12.5. Sensitivity Analysis The sensitivity analysis is executed to evaluate the operations profitability and economic viability given changes in ore grade, gold price, capital and operational expenditures, corporate tax, royalty as well as the share of the Community Development Program. These key parameters alterations were set against the change in Net Present Value, see Figure 12‐7.
Figure 12‐7: NPV Sensitivity Analysis to Key Parameters
The spider plot illustrates that both ore grade and gold price are key parameters. The plot also identifies that a relative change in the OPEX has a greater impact on the profitability of the project than the CAPEX. Moreover it shows that an alteration to the share of the CDP has a minimum impact on the profitability.
Cumulative Gold Production
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
3.500.000
4.000.000
4.500.000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Time [year]
Gol
d Pr
oduc
tion
[tr.o
z]
Cumulative Gold Production
NPV (@ 10%) Sensitivity Analysis to Key Parameters
0,050,0
100,0150,0200,0250,0300,0350,0400,0450,0
70% 80% 90% 100% 110% 120% 130%
Change in Parameters
NPV
[Mill
ions
US
$]
Ore Grade Gold Price CAPEX OPEXTAX Royalty CDP
89
13. Conclusions and Recommendations
13.1. Conclusions The purpose of this research was to identify key indicators that need to be taken into account to develop a sustainable alluvial mining operation. The following conclusions are structured according to the three parts of the project. The evaluation of sustainable development guidelines that are currently used by mining companies and the evaluation of specific characteristics in the alluvial mining industry:
• Sustainability in relation to mining is a very complex system and therefore needs a structured framework to integrate sustainability into mining.
• The financial and mining industries have made substantial efforts to reduce adverse effects on sustainable issues.
• The International Finance Corporation stakeholder engagement process and performance standards are very functional tools during the exploration and feasibility study phases.
• The framework of the International Council on Mining & Metals is globally the most utilized and can be applied during all mining phases.
• Sustainable issues in the mining industry can be applied as well in Alluvial Mining Operations.
• During the operation phase material handling and water management are key parameters for a sustainable AMO.
• The operating projects Richards Bay Minerals and Mineros are good references of practiced examples for respectively dune and rain forest ecosystems.
• WM Mining Company’s social and environmental impact assessment and its management and monitoring program are useful tools for sustainable alluvial mining feasibility study.
The analysis for improvement opportunities for a more sustainable approach and the development of a sustainable guideline for AMO’s:
• A good understanding of the ecological and social system is required. Notice that relevant data collection about the system is time consuming. Initiatives such as Building With Nature will help to gain more knowledge and insight in the (eco)system.
• A corporate mind of sustainability for all related stakeholders, on and off‐site, is essential during the whole mine life.
• Backcasting is a useful method to road map community projects to maximize societal value.
• For land‐based alluvial mining operations alternative, self‐generating energy sources are very interesting opportunities.
• Reduce and minimize emissions, turbidity, material stewardship and improved energy efficiency are essential sustainable parameters for dredge mining equipment.
• Real Options is a state‐of‐the‐art method for asset management and valuation, but is very advanced and difficult to manage due to changing fuel prices.
• In every country with the potential for placer mining it is recommended to establish specific SD guidelines for each specific ecosystem that occurs.
90
• The exploration phase represents the initial interaction between the local community and the alluvial mining company, in this regard is a good stakeholder engagement crucial.
• To reduce the risks, all feasibility studies should be done by competent engineering contractors.
• During the construction phase important sustainable challenges are: permitting; environmental risks; social risks and benefits; issues of social license and corporate social responsibility; and H&R management.
• During the operation phase the main sustainable challenges are: long‐ and short‐term planning; grade control; ground control and water management; environmental issues; health & safety; equipment selection, maintenance management.
• Due to the continuous and concurrent reclamation method only a small amount have to be reclaimed for complete closure.
• The South African department of minerals and energy developed a useful guideline to estimate closure costs.
• There are many key sustainable indicators and are best summarized in Figure 7‐1. To obtain a structured overview for these indicators a Sustainable Impact – Indicator – Tool based guideline is developed.
The estimation of sustainable development costs which affects the cash flow and the development of a sustainable cash flow model and the implementation into the Gold Sands case study:
• Data collection to valuate sustainable indicators that affect the cash flow is difficult. The required social related data is eventually only applicable for Peruvian mining operations.
• The OPEX calculations are improved in the sustainable cash flow model compared to the preliminary study for the Gold Sands case.
• Despite the difficulties for sustainable data collection, the development for the sustainable cash flow model is successful. The mining systems selection tool functions as an integrated investment and production planning. The effect of alterations in the selection tool is clearly visualized in the plotted graphs.
• Comparison of the base and sustainable case show that the cumulative net cash flow is decreased with 12 million US$ to 1,029 million US$ in the proposed 16 year (sustainable) operation. The NPV at 10 percent discount rate and the IRR are changed respectively with 5 million US$ to 226 million US$ and 0.4% to 26.1%.
• Nevertheless represents the sustainable economic analysis a viable project, since a mineral industry project should be between the 15 and 25 percent.
• The sensitivity analysis shows that the key parameters that influence the profitability and viability of the project are the ore grade and gold price.
91
13.2. Recommendations Based on the conclusions of this research it is recommended to do further investigation in:
• Develop a sustainable platform and database with guidelines, best practices and tools for all alluvial mining operations and companies to address key priorities within this sector. The countries with placer deposits can use this platform also to submit their mining guidelines and regulations.
• Continue detailed research into environmental and social impacts of dredge mining operations on land as well offshore, to understand the whole system. The BWN‐Ecoshape is a good initiative but it is just the beginning.
• Detailed research in alternative energy sources for land based operations. Especially hydro‐power should be investigated to offer potential customers a more sustainable advice.
• Detailed sustainable data collection for further research in sustainable alluvial mining operating projects, to update the guideline and sustainable cost estimations.
• Optimization in the sustainable cash flow model. In the equipment selection tool other dredging and mineral processing equipment should be added and can be combined with soil characteristics to complete the equipment selection process. The residual revenue should alternate automatically.
• Improvement and adjustment of the cash flow model that it can be applied for other operations with minerals such as tin; titanium; and diamonds.
92
Appendices Guideline
A. Sustainable Mining Organizations & Tools Table A‐1: Sustainable Mining Organizations, Standards and Initiatives
Organization, Standard & Initiatives
General Description Stage of Mine Project Development
Exploration
Feasibility
Construction
Ope
ration
Closure
&
Legacy
Prospector and Developers Association of Canada (PDAC)
The PDAC is engaged in fostering high international standards of technical, environmental, safety and social practices. The PDAC has generated a number of useful publications and a well‐designed website containing best practices for organizations involved in the early phases of mine exploration and development
X
International Finance Corporation (IFC) Performance Standards
IFC is a World Bank Group that safeguard policies and procedures and are supported by the IFC’s Performance Standards on Social and Environmental Responsibility. In 2007 the IFC published a Environmental, Health and Safety Guideline for mining ( a technical reference document)
X X
International Council on Mining and Metals (ICMM)
The 17 largest mining and metals companies and 30 related associations working to promote sustainable business practices. ICMM established the most used sustainable development framework with principles and elements, reporting and independent assurance guidance
X X X X X
Minerals Council of Australia (MCA)
The MCA has developed an industry‐focused framework for sustainable development, as well as a set of implementation guidelines. This framework is linked with the ICMM Principles and Elements
X X X
Mining Association of Canada (MAC)
Towards Sustainable Mining (TSM) is initiated by the MAC. TSM is a strategy for improving the mining industry performance and a process with communities to build a better mining industry
X X X
Global Report Initiative (GRI)
A reporting tool that provides guidance and reporting standards for the mining sector on sustainability challenges within the phases of exploration, feasibility, construction, operation and closure
X X X
93
Table A‐2: Tools and Guidance for Sustainable Mining
Tools & Guidance Purpose Stage of Mine Project Development
Exploration
Feasibility
Construction
Ope
ration
Closure &
Legacy
Environmental and Social Impact Assessment (ESIA)
ESIA is a tool used to identify the social, environmental and economic impacts of a project prior to decision‐making. It aims to predict impacts at an early stage in project planning and design, find ways for mitigation and shape projects to suit the local environment and present the predictions and options to decision‐makers
X X
Environmental Management System (EMS); ISO 14001
An administrative tool that addresses “environmental management” for an organization and helps to minimize harmful effects on the environment caused by its activities, and to achieve continual improvement of its environmental performance
X X X
ICMM Community Development Toolkit
Toolkit to support government, industry and community efforts to realize more sustainable community development around mining operations. It contains 17 tools which cover the assessment, planning, management, and evaluation phases of community development as well as stakeholder relationships
X X X X X
Anglo American’s Socio Economic Assessment Toolbox (SEAT)
The aim is to identify and manage (positive and negative) social and economic impacts and establish sustainable partnership and obtain a long‐term economic and social sustainability for the surrounding communities
X X X X X
ICMM Guidance for raising Awareness and Preparedness
The purpose of this guidance is to help mining companies and its affected communities to be aware and response on emergencies adequately
X X X
ICMM Resource Endowment Initiative Toolkit
A toolkit to assess the local, regional and national socio‐economic impacts that mining projects have on their host communities and countries
X X X X X
ICMM Planning for Integrated Closure Toolkit
The toolkit provides a guidance for site practitioners and their support groups to make sustainable decisions to obtain and maintain a positive legacy
X X X X X
SA Department of Minerals and Energy (DME) Guideline for the evaluation of the quantum of closure related financial provision provided by a mine
The purpose is to improve the understanding of the financial and legal aspects pertaining to the costing of remediation measures as a result of prospecting and/or mining operations and guide DME for acceptance of closure methods
X X X
94
B. ICMM Principles and Elements 01. Implement and maintain ethical business practices and sound systems of corporate governance.
• Develop and implement company statements of ethical business principles, and practices that management is committed to enforcing.
• Implement policies and practices that seek to prevent bribery and corruption. • Comply with or exceed the requirements of host‐country laws and regulations. • Work with governments, industry and other stakeholders to achieve appropriate and effective public
policy, laws, regulations and procedures that facilitate the mining, minerals and metals sector’s contribution to sustainable development within national sustainable development strategies.
02. Integrate sustainable development considerations within the corporate decision‐making process.
• Integrate sustainable development principles into company policies and practices. • Plan, design, operate and close operations in a manner that enhances sustainable development. • Implement good practice and innovate to improve social, environmental and economic performance
while enhancing shareholder value. • Encourage customers, business partners and suppliers of goods and services to adopt principles and
practices that are comparable to our own. • Provide sustainable development training to ensure adequate competency at all levels among our own
employees and those of contractors. • Support public policies and practices that foster open and competitive markets.
03. Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and
others who are affected by our activities. • Ensure fair remuneration and work conditions for all employees and do not use forced, compulsory or
child labour. • Provide for the constructive engagement of employees on matters of mutual concern. • Implement policies and practices designed to eliminate harassment and unfair discrimination in all aspects
of our activities. • Ensure that all relevant staff, including security personnel, are provided with appropriate cultural and
human rights training and guidance. • Minimise involuntary resettlement, and compensate fairly for adverse effects on the community where
they cannot be avoided. • Respect the culture and heritage of local communities, including indigenous peoples.
04. Implement risk management strategies based on valid data and sound science.
• Consult with interested and affected parties in the identification, assessment and management of all significant social, health, safety, environmental and economic impacts associated with our activities.
• Ensure regular review and updating of risk management systems. • Inform potentially affected parties of significant risks from mining, minerals and metals operations and of
the measures that will be taken to manage the potential risks effectively. • Develop, maintain and test effective emergency response procedures in collaboration with potentially
affected parties. 05. Seek continual improvement of our health and safety performance
• Implement a management system focused on continual improvement of all aspects of operations that could have a significant impact on the health and safety of our own employees, those of contractors and the communities where we operate.
• Take all practical and reasonable measures to eliminate workplace fatalities, injuries and diseases among our own employees and those of contractors.
• Provide all employees with health and safety training, and require employees of contractors to have undergone such training.
• Implement regular health surveillance and risk‐based monitoring of employees. • Rehabilitate and reintegrate employees into operations following illness or injury, where feasible.
95
06. Seek continual improvement of our environmental performance • Assess the positive and negative, the direct and indirect, and the cumulative environmental impacts of
new projects – from exploration through closure. • Implement an environmental management system focused on continual improvement to review, prevent,
mitigate or ameliorate adverse environmental impacts. • Rehabilitate land disturbed or occupied by operations in accordance with appropriate post‐mining land
uses. • Provide for safe storage and disposal of residual wastes and process residues. • Design and plan all operations so that adequate resources are available to meet the closure requirements
of all operations. 07. Contribute to conservation of biodiversity and integrated approaches to land use planning
• Respect legally designated protected areas. • Disseminate scientific data on and promote practices and experiences in biodiversity assessment and
management. • Support the development and implementation of scientifically sound, inclusive and transparent
procedures for integrated approaches to land use planning, biodiversity, conservation and mining. 08. Facilitate and encourage responsible product design, use, re‐use, recycling and disposal of our products
• Advance understanding of the properties of metals and minerals and their lifecycle effects on human health and the environment.
• Conduct or support research and innovation that promotes the use of products and technologies that are safe and efficient in their use of energy, natural resources and other materials.
• Develop and promote the concept of integrated materials management throughout the metals and minerals value chain.
• Provide regulators and other stakeholders with scientifically sound data and analysis regarding our products and operations as a basis for regulatory decisions.
• Support the development of scientifically sound policies, regulations, product standards and material choice decisions that encourage the safe use of mineral and metal products.
09. Contribute to the social, economic and institutional development of the communities in which we operate
• Engage at the earliest practical stage with likely affected parties to discuss and respond to issues and conflicts concerning the management of social impacts.
• Ensure that appropriate systems are in place for ongoing interaction with affected parties, making sure that minorities and other marginalized groups have equitable and culturally appropriate means of engagement.
• Contribute to community development from project development through closure in collaboration with host communities and their representatives.
• Encourage partnerships with governments and non‐governmental organizations to ensure that programmes (such as community health, education, local business development) are well designed and effectively delivered.
• Enhance social and economic development by seeking opportunities to address poverty. 10. Implement effective and transparent engagement, communication and independently verified reporting
arrangements with our stakeholders • Report on our economic, social and environmental performance and contribution to sustainable
development. • Provide information that is timely, accurate and relevant. • Engage with and respond to stakeholders through open consultation processes.
96
C. IFC Stakeholder Engagement for each mining stage In the exploration stage a company should:
• Refer to any past stakeholder information and consultation; • Disclose and consult selectively in the very early stages; • Disclose information on alternatives and design or location options; • Where possible, engage with government during strategic planning; • Review adequacy of any existing grievance procedures; • Review potential legal, regulatory, and lender requirements for stakeholder engagement; • Ensure that any project risk analysis includes stakeholder issues; • For complex projects, consider forming a stakeholders; planning forum.
In the feasibility stage a company should:
• Systematically identify project stakeholders and their interests; • Review regulatory and financing requirements for stakeholder engagement on projects; • Involve stakeholders in the “scoping” phase of Environmental Social Impact Assessment (ESIA) studies; • Seek input from stakeholders on how they wish to be consulted; • Prepare a stakeholder engagement plan commensurate with project impacts; • Provide information ahead of consultations on environmental and social impacts; • Employ good practice in meeting or exceeding ESIA requirements on consultation; • Use consultation to enhance mitigation and agree compensation and benefits; • Maintain involvement with government‐led consultation; • Gauge the level of stakeholder support for their project; • Keep partnerships short‐term prior to the investment decision; • Facilitate access to community liaison staff; • Revisit prior consultation if it may become a source of grievance; • Report changes in the evolving project design to stakeholders on a regular basis; • Document the process and results of consultation; • Accompany your ESIA consultants and stay involved in the process; • Integrate stakeholder information across the project planning functions.
In the construction stage a company should:
• Identify stakeholders most likely to be affected by construction; • Notify local stakeholders of construction activities and changes to schedules; • Get community liaison staff on the ground quickly; • Aim for rapid response times in resolving grievances; • Report to stakeholders on progress of social and environmental management programs; • Choose contractors with the capacity to engage effectively with stakeholders; • Manage risks to stakeholder relations from contractors.
In the operation stage a company should:
• Manage the transition from construction to operations; • Periodically review and update your stakeholder information; • Consider ways to assess stakeholder perceptions; • Continue to disclose, consult, and report to stakeholders as needed; • Ensure integration of ongoing stakeholder commitments into operations management systems; • Communicate emergency preparedness and response plans on a regular basis; • Keep your grievance mechanism operational; • Consider establishing a participatory or third‐party monitoring program; • For controversial projects, consider establishing an independent monitoring panel.
In the closure & beyond stage a company should:
• Revisit stakeholder analysis in light of proposals for closure and beyond legacy; • Communicate with stakeholders early to allay fears and uncertainty; • Provide regular updates and progress reports to stakeholders; • Plan and execute stakeholder consultation as though it were at the project feasibility stage; • Consult on transfer and management of assets and liabilities; • Gear up to manage grievances; • Review the capacity of future management systems to deliver stakeholder engagement on decommissioned or removed assets.
97
D. Environmental and Social Impact for Alluvial Mining Operations Table D‐1: Environmental Impacts for Alluvial Mining Operation (according to OPIC project) Environmental Parameter
Potential Gross impacts Mitigation Measures Potential Net Impact
Topography and Landscape
Construction of access roads and camp‐site;Removal and stockpiling of topsoil; Excavation of overburden and placer; and Disposal of overburden and tailings; New landforms created (pond).
Concurrent Reclamation of disturbed areas, including overburden and tailings; recontouring of dredge pond and creation of wildlife habitat by re‐vegetation to stabilize new landforms; Utilizing existing roads
Short‐term changes can be significant with newly constructed ponds, topsoil and overburden stockpiles, camp and other facilities on site Long‐term changes in topography and landforms with net beneficial habitat (according to the existing habitat: dunes; wetlands; forest; jungle and open waters)
Surface Water Increased sedimentation in the river from dredging operations; Contamination with polluted (diesel, fuel, oil) surface runoff; Contamination with sewage
Dredge pond isolated from river by protected embankment, concurrent reclamation of dredged materials; Secondary containment of all fuel storage facilities and Spill Prevention Control and Countermeasure program; Septic system for Mine camp sewage
No significant impacts anticipated
Groundwater Change in groundwater level due to dredge pond;Contamination from fuel/lubricant spills; Contamination from sewage
Monitor cone of depression by groundwater wells; these wells can be used eventually for water supply community; Secondary containment of all fuel storage and lined bottom to protect groundwater; SPCC program; Septic system for Mine camp sewage
No significant impacts anticipated
Air Quality Dust from roads, camps and other disturbed areas; Emissions of SOx, NOx, CO, soot, hydrocarbons from diesel engine dredges and equipment
Implementation of dust control (water spraying) if needed; Routine maintenance of equipment
Short‐term: slight increases in dustLong‐term: no significant from dust and emissions
Soils Large areas/volumes of soils removed during mining (sediment ponds, roads, operational sites and topsoil stockpiles); Potential wind and water erosion
Strip topsoil and stockpile, for use in reclamation; Erosion and Sediment Control Plan; Reclamation of soils / overburden while mining progresses (concurrent reclamation) with re‐use of topsoil
Short‐term: significant direct impact from soil displacement;Long‐term: no significant impact due to reclamation
Vegetation Direct vegetation removal from roads, power supply and mined and riparian areas
Re‐vegetation of disturbed areas;Use of native plants for re‐vegetation; On‐site nursery program
Short‐term: significant impact to vegetation from removal or conversion to altered habitat Long‐term: no significant impacts; Net positive impact for riparian vegetation due to an increase of aquatic habitat from reclaimed dredge pond
Wildlife Removal of some habitat; Displacement and destruction of some species of terrestrial wildlife; Localized disturbance from noise; Introduction of exotic or invasive species
Plan operations to minimize impacts to terrestrial species; Reclamation and re‐vegetation of disturbed habitats.
Short‐term: possible reduction in some terrestrial wildlife populations in areas of disturbance; Long‐term: no significant impacts; Net positive impact for wetland wildlife due to an increase in habitat form the reclaimed dredge ponds
Aquatic Ecology Indirect impacts of increase sediment on aquatic life Erosion and sediment control program to eliminate No significant impact net positive impact for aquatic species due to
98
population sediment inputs to the river;Concurrent reclamation of overburden and tailing to prevent sedimentation to river; No discharge of process water to the river (it will be recycled)
an increase in habitat from the reclaimed dredge pond
Cultural Resources Disturbance of archaeological site(s) in the proposed mining area
Cultural Resource Management Plan Excavation of Archaeological site(s) and analysis; Improve anthropological understanding of the project region
Social Conditions – related to environmental issues
A small reduction in high quality ecosystem services from the open‐water and wetland habitat; Risks associated with transport of hazardous materials
Concurrent, continuous reclamation and re‐vegetation of disturbed habitats from construction to closure; Decrease the visibility of the operating area; Installing groundwater wells; Sponsor to develop emergency preparedness program
Short‐term: no significant impact as reduction is small in magnitude;Increased valuable habitats, biodiversity from open water, wetland etc.
Cumulative Impacts Increased traffic, dust, noise, air pollution, water pollution, and stress to local infrastructure. Loss of some flora and fauna habitat. Water pollution form erosion and sediment transport to the river
Social program designed to support local infrastructure, education etc. Seeking opportunities for partnership with stakeholders including other mining companies and the government. Communication and cooperation regarding shared resources and other mining companies. Modern mining and Reclamation Plan, SEMMP as example to others
Positive impact: identification and control of adverse cumulative impacts. Serving as model to the national mining industry a positive step toward reduction in social and environmental impacts.
Table D‐2: Social Impacts for Alluvial Mining Operation (according to OPIC project) Social Parameter Potential Gross impacts Mitigation MeasuresProject infrastructure development and subsequent operational activities
Physical and/or economic relocation of persons living, working or otherwise using the project property and access roads
Develop and implement a Resettlement Action Plan (RAP) in line with World Bank standards, provide voluntary resettlement opportunities and improve the livelihoods of resettled individuals; Develop a Public Access Plan which: • Discourages new in‐migration • Employs surveillance (monitoring by guards) at key locations • Provide checkpoints at main roadways leading to project area • Includes minimizing and decommissioning of infrastructure
In‐migration (planned and spontaneous) due to real and perceived increased economic opportunities
Increased pressure on natural resources.Anthropogenic impacts on terrestrial, riparian and aquatic resources
• Develop and communicate Employment and Contracting Policies and Procedures (ECPP) that discourage spontaneous migration through preference to local hires and regional recruitment centers
• Develop policies, procedures and training for employees and contractors related to clearing, fire protection and safety, security, agriculture etc)
• Develop Public Access Plan
Social services and social needs • Develop and communicate ECPP
• Work with affected communities and government agencies to develop a priority list of actions/investments • Develop new partnerships including with NGOs, to strengthen the institutional capacity of local government to provide
social services and needs • Encourage additional government investments and co‐finance of social services and needs projects identified as
priorities by local communities through the Community Development Program Health and social problems: health care, education and social services (violence, alcoholism, illegal activities etc.)
• Develop and communicate ECPP • Develop new partnerships and promote alternative livelihood and project‐related and unrelated economic opportunities
(including through CDP and leveraging ecotourism opportunities)
99
• Partner with organization that can provide and/or improve effectiveness for community health workers, education workers and other preventive and integrated (health) education programming
• Develop/improve where needed and monitor baseline health statistics in the Direct Local Area of Influence (including employees and contractors)
• Encourage and co‐finance investments in potable water and wastewater • Encourage local and regional institutional strengthening, especially human health and education
Unplanned settlement and growth. A large scale influx of additional migrants could further contribute to this problem
• Develop and communicate Employment and Contracting Policies and Procedures • Develop new partnerships with NGOs and others to strengthen the institutional capacity of local governments in the
areas of urban planning, housing, zoning, cadastre and finance • Encourage additional official investments to support planned urban development
Impact on culture and identify communities
Locals have their own social environment, codes and traditions; It is unlikely that they will experience any significant loss of traditional cultures, customs and languages
• Build schools and promote native language and cultural education • Select community involvement and other staff with native language skills • Provide community outreach, monitoring report summaries, public consultation and other materials in native language.
Increased tensions from perceived preferential employment and procurement policies and CDP, access/control over land and other natural resources, presence of non‐local workforce, and government removal of artisanal miners
Increase of existing ethnic, cultural and social tensions and conflicts between and among groups, recent migrants, labor unions and project workforce; Cultural clash and economic disparities between non‐local workforce and residents
• Implement a “closed camp” policy to minimizes conflicts • Ensure participatory development implementation of CDP and report outcome • Collaborate with government to develop and implement technical assistance program for artisanal miners • Provide voluntary exit opportunities for artisanal miners through vocational training, employment and supply chain
opportunities
Time/task limited employment and associated planned layoffs at the end of the construction phase, and after end of operation
If high unemployment rate: at the end of different phases of the project again high level of unemployment
• Provide training opportunities to local people to improve their employability and transition to other projects and/or sectors
• Support the establishment of local financial services to promote personal savings and allow employees to bridge employment and income gaps
• Support the development of micro‐enterprise and alternative income generating projects • Create a “job bank” in cooperation with other employers in the region • Develop a consistent message “Project jobs are not work for life” • Give preference to local outsourcing, include small‐scale suppliers • Develop partnerships and provide technical assistance to accelerate scale‐up of local supply chain
Visual and aesthetic impacts associated with excavation, noisy operation, light pollution, the tailings ponds, and other facilities which will be visible from other areas
Deterioration in landscape quality with possible economic, environmental and socio‐cultural consequences
• Limit project footprint, height of facilities, and visual impacts as feasible • Develop a Decommissioning and Reclamation Plan which alters mine site into its surrounding • Expand forest, wetland, riparian, and open water habitats according to reclamation plan
100
E. Sustainable Challenges for Exploration and Feasibility phase
Exploration phase The initial phase of a mining operation is the Exploration, which is a process for the discovery of mineral deposits. Exploration of minerals basically consists of a number of sequential and interlinked stages, which involve material expenditures, financing, and risks. Each successive stage involves more time and money. But before starting with exploration it is necessary to have access to the land. The required licenses in the different exploration stages vary, depending on the country regulations and area to explore. Table E‐1 illustrates the potential access requirements for different exploration activities.85
Table E‐1: Potential Land Access Requirements
Activity Access RequirementsBasic exploration Exploration licenseAirborne Survey Generally only civil aviation flight approval requiredExploration rights Record of the rights depending on the legal requirementsDrilling exploration Landowner permissionTree cutting Permit from local environmental authorityConstruction/Excavation Regional/Local government permit and agreement with landowners
The exploration process does not require any major alteration of the land or any major developments where it takes place; therefore its environmental and social impact is rather limited. However, exploration represents indirect the initial interaction between the local community and the alluvial mining company. In this regard, the business perspective of social license as a strategic advantage in gaining access to mineral resources is crucial. In the other mining phases, after the exploration phase, is it also essential to keep a good scope of the stakeholders. The Prospectors and Developers Association of Canada has developed an excellent draft SD Framework for exploration activities. The PDAC has developed principles and guidance and online tools to assist companies in developing their own sustainable policies in exploration. The different toolkits are listed below: 86
• Social Responsibility
• Environmental Stewardship
• Health and Safety During the exploration phase an environmental‐ and social baseline study (EBS and SBS) should be undertaken. The EBS is an investigation aiming to establish the baseline level of potential contaminants in soils, surface water, and groundwater, and to evaluate the initial status of other
85 Espi, J.A., Sustainable Management of Mining Operations [Book] (Littleton, SME Inc., 2009) – pp. 194 86 PDAC, Toolkits [Website] Website PDAC e3Plus ‐ Toolkits [Accessed May 10, 2009]
101
environmental risk factors, such as air quality, dust levels, gases, noise and vibration levels, terrestrial and fresh‐water ecosystems. 87 Another essential part of the exploration is the ore resource inventory, as mentioned before in the Resource and Reserve work program of ICMM, this is the economic pillar. The main principles governing the operation and application of the Template of CRIRSCO are transparency, materiality and competence. Transparency is required to provide sufficient information for the interested stakeholders. Materiality is required to provide relevant information and competence requires that the information is based on the responsibility and expertise of suitable qualified and experienced persons, who are subject to an enforceable professional code of ethics and rules of conduct. Figure E‐1 sets out the framework for classifying tonnage and grade estimations to reflect different levels of geological confidence and different degrees of technical and economic evaluation. 88
Figure E‐1: General relationship between Exploration results, Mineral Resources and Ore Reserves
87 Newmont, Conducting Environmental Baseline Study [Website] Website Newmont ‐ Conducting Environmental Baseline Study [Accessed May 15, 2009] 88 Joint Ore Reserve Committee, The JORC Code 2004 [Online Doc] Online Doc JORC ‐ JORC Code 2004 (s.l, AUSIMM, 2004) – pp. 6 [Accessed April 24, 2009]
102
Terrain and orebody databases used in combination with commercial mine planning and design software can help in sustainable management. The exploration management can make different exploration scenarios with the help of this data.89 The following data should be obtained from field geology, geochemistry, and exploration drilling:
Table E‐2: Necessary data from field geology, geochemistry and exploration drilling
Geological data Stratigraphy, Petrology and Structural data
Topography data Position of the holes, depth, dip, direction, deviation measurements, ground surface survey point
Geotechnical data Core sample, ore type, RQD (rock quality designation) and joint sets
Ground‐ and surface water hydrology data Water table, permeability rates, and water quality
Soils and sediments data Performed on core samples, including element that may be of economic importance or may have a negative impact on the environment
Land and river management data Land ownership and uses, soil type, surface (river) water quality
Environmental baseline data Data required for an environmental baseline study
Feasibility study phase The next phase after the exploration is the feasibility stage. The management of a feasibility phase of the mining project can be seen as a stepwise risk reduction process, where increasingly more capital is invested through time to reduce uncertainty and financial risk. This process can last few years and at the last level, the project reaches a level of financial risk at which it is acceptable to stakeholders to proceed to the construction stage. After a project is identified, it is necessary to assess its worth; this can be a preliminary quick look, with rough numbers as to tonnage, grade, recovery, costs, and prices; if encouraging this should lead to a scoping study. The accuracy of such a study is around the 25‐40%. This study covers all the topics in a final study (e.g. tonnage, grade, geology, mine plan, metallurgy, flow sheets, capital costs, operating cost, environmental and social considerations, and economics). The scoping study is followed by a pre‐feasibility study, less money than a final study and therefore less accurate. The final study will be expensive and will be very detailed and if the results are positive it will be bankable. Hiring a competent engineering contractor to prepare the feasibility report is essential. Furthermore it is equally important to appoint experienced, senior people to be the owner’s representatives, to manage the whole operation. These experienced people should know the history of the project, the company’s management philosophy and goals, and the financial and technical resources that are available within the company. This representative should have sufficient authority to move the project forward and also needs to know when and how to inform senior management of progress and to get them involved in decision‐making and approvals.90
89 GEMCOM, Exploration [Website] Website Gemcom ‐ Exploration and Resource Modelling [Accessed May 20, 2009] 90 Anderson, M.N., Sustainable Management of Mining Operations [Book] (Littleton, SME Inc., 2009) – pp. 208, 217 & 218
103
Table E‐3 illustrates the data requirements for the feasibility study. Hereby is outlined some of the pertinent variables that must be studied, considered, and analyzed when evaluating mining properties. All these variables should be assessed during the preparation phase of the final feasibility study.91
Table E‐3: Salient Factors requiring consideration in mining feasibility study
Information on Deposit GeologyGeometryGeographyExploration
Information on General Project Economics MarketsTransportationUtilities (power)Land, Water and Mineral RightsWater (potable and mine water)LaborGovernment Considerations (e.g. reclamation and taxation)Financing
Mining Method Selection Physical ControlsSelectivity (dilution, ore recovery estimates and waste disposal)Pre‐production requirementsProduction requirements
Processing Methods MineralogyAlternative processesProduction quality vs SpecificationsRecoveries and Product QualityPlant layout
Capital and Operating Cost Estimates Capital costsOperating costs
Technical Considerations: the table above shows the consideration and few of the more technical considerations necessary for a good report. Following the geology, mining and mineral processing are described in more detail. Geology. Few problems can arise when a final feasibility study is completed. The geologist that was present during the drilling, studied the mineralogy, cataloged the reserves and resources and identified the areas that require more exploration have to work now together with the mining and mineral processing engineer. If these engineers do not know that much about geology, this can lead to mistakes. In conclusion it is important to include a well‐written geology/mineralogy report in every feasibility study. Readers of these reports should ask for help if they encounter something they do not understand. For example some secondary minerals like clay can cause serious problem during the mineral processing by clogging. Representatives of each discipline working on these studies must develop an “antennae” to search for potentially fatal shortcomes that, left untreated, can kill the project. Mining. Mining method selection and design are important issues during the feasibility study. The considerations that are relevant for an alluvial mining method instead of a dry method are the availability of water; accessibility; stripping and slimes handling; and dilution. 91 Hrebar, M.J., SME Mining Engineering Handbook [Book] (Littleton, SME Inc. 1992) – pp. 1299
104
Mineral Processing. The key to good performance of a treatment plant is the amount of attention given to the feed preparing and gravity separation section. Each type of separator has a particular size range of valuable mineral particles within which it operates economically. Environmental and Social Considerations: IFC applies the performance standards to manage environmental and social risks and impacts and to enhance development opportunities and define clients roles and responsibilities for managing their projects and the requirements for receiving and retaining IFC support. Once the EBS and SBS have been completed, the social and environmental impact assessment (SEIA) should be launched. The objective of an SEIA is to evaluate the social and environmental risks and impacts associated with mining operations. In addition to the social and environmental factors of the SBS and EBS, the SEIA should evaluate other impacts derived from mining, such as water and energy use, tailings, and waste dump management. Furthermore it is required to assess decommissioning and reclamation plans and the post‐closure monitoring and control requirements. The SEIA should include conservative estimates of all environmental costs, including those associated with regulatory oversight, reclamation, closure, and post‐closure monitoring and maintenance. For important environmental risks, it is advisable to analyze best‐case and worst‐case scenarios and to develop appropriate response strategies in consultation with potentially affected communities. Governmental regulations generally require mining companies to submit the EIS as part of the permitting process. The SEIA process is an important part of sustainability management and is subject to public debate regarding its efficiency as a sustainable development tool. Financial Considerations: A view of sustainability for mining is the view that a finite resource is excavated. Thus if these resources are to be extracted, it should be extracted efficiently. Economists define an efficient mining plan as one that extracts the maximum social value from the resource. NPV technique involves forecasting the cash flows associated with an activity or decision, discounting those cash flows (DCF) to the present value using a risk‐adjusted discount rate and then summing the resultant discounted values. The discount rate is:92
11
Where t is the year in which the cash flow occurs to get the NPV (t = 0,1,2,…,T) and R is the risk‐adjusted discount rate.
92 Ruiter, J.J. de, Mineral Economics [Lecture notes] (Delft, Technical University of Delft, 2007) pp. 23
105
Contractors doing feasibility studies, e.g. SRK Consulting93, have data on capital and operating costs from around the world and are able to factor this data intelligently into new projects as they arise. The owner and banker’s consultants must judge the validity of this factoring. When the owner continues to drill after the official reserves have been set, new results can best be addressed in the sensitivity or conclusions sections of the final report. Commodity price and long term pricing: large companies might have in‐house annual pricing committees to study and recommend long‐term pricing to be used in budgeting and feasibility studies. Bankers, contractors, and smaller companies (e.g. alluvial mining) will depend on investment and commodity consulting houses, e.g. MTI Holland, to be advised. As the conclusion of work on the feasibility report approaches, it is wise to take a moment to consider the risks listed in Table E‐4 below.94
Table E‐4: Mine Site‐specific risks
Country risk Financial riskPermitting risk Marketing riskExploration risk Commercial riskGeotechnical and Geological risks
Mining and Mineral Processing risks
Social risk Environmental riskTechnical risk Operational risk
93 SRK Consulting, Mining Feasibility Studies [Website] Website SRK ‐ Mining Feasibility Studies [Accessed June 18, 2009] 94 Bowden, A.R., Triple Bottom Line Risk Management [Book] (New York, John Wiley & Sons, 2001) – pp. 3‐4
106
Appendices Cash Flow Model
F. Scope of SD indicator that affect cash flow
Table F‐1: Scope of SD indicators that affect CF in Exploration phase
Indicator Scope of work in Exploration Phase
Environmental Baseline Study
A report according to a series of individual and community meetings held with local residents, governments and NGOs; which identified the environmental realities of developing the Gold Sands district.
Social Baseline Study A report according to a series of individual and community meetings held with local residents, governments and NGOs; which identified the social and economic realities of developing the Gold Sands district.
Preliminary Technical Study
A report that describes required type of equipment and defines expected budgetary capital and operational costs. The size of the deposit and mine life is estimated according to viable data and is used to generate a base cash flow analysis with NPV and IRR estimation for the project
Permitting for Drilling Costs to establish an exploration permit in cooperation with governments
Drilling Operation and Data Analysis (Total)
Overall exploration costs that contains CAPEX and OPEX of drilling project and costs for data analysis during the exploration phase
Security Security guards will be employed to patrol operations on a 24 hour per day basis.
Table F‐2: Scope of SD indicators that affect CF in Feasibility Study
Indicator Scope of work in Feasibility Study
Socio‐Economic Impact Assessment
The SEIA reports a detailed Socio‐Economic Impact Assessment of the affected regions around the project area according to affected and interested stakeholders
Environmental Impact Assessment
The EIA reports a detailed Environmental Impact Assessment of the affected regions around the project area according to affected and interested stakeholders
(Pre)‐Feasibility Study
The costs for a pre‐feasibility and final bankable feasibility study that considers topics, e.g. reserve and resource estimation; grade; geology; mine plan; metallurgy; flow sheets; capital costs; operating costs; socio‐economic considerations and costs; environmental considerations and costs; and total cash flow with NPV and IRR.
Permitting for Mining
Costs to establish a mining permit in cooperation with governments
107
Table F‐3: Scope of SD indicators that affect CF in Construction phase
Indicator Scope of work in Construction
Resettlement Management
Resettlement Action Plan (RAP) in line with World Bank standards, provide voluntary resettlement opportunities and improve the livelihoods of resettled individuals
Stakeholder Engagement Consultation meetings, workshops to enhance fast‐tracking project approvals/expansions Social Welfare Program Programs for general infrastructure (water, sanitary installations), housing, education and medical
services Reporting
Enhance transparency and local acceptance by annual financial report; annual sustainable development report; policies, standards and guidance notes; operations review.
Human Resources Employee recruitment and training in environment, health and safety and SD awareness – e.g. enhance worker productivity
Training & Development
20000 US$/wk for a group (1 ‐ 20 person(s)) and the training duration is 3 wks. The training is for the operation and maintenance of one dredging equipment. (TiD Taco 19‐01‐2010)
Community Development Programs
Programs to establish an independent of mining, self‐sustaining community and during mining for employment opportunities and partnerships.
Charitable Giving enhance worker productivity, fast‐tracking project approvals/expansions
Security The mine office complex will be secured by fencing. Security guards will be employed to patrol operations on a 24 hour per day basis.
Start Up Quality Management System for ISO 9001 Certification
The quality system is internally and externally audited at least once a year. Various areas of the quality system may be audited more frequently based on importance, e.g. treatment plant and the gold room. The quality is sufficient if it meets the planned arrangements, including effective implementation and maintenance system.
Start Up Environmental Management System for ISO 14001 Certification
The environmental management system is internally and externally audited at least once a year. Various areas of the environmental management system may be audited more frequently based on importance, e.g. water management and biodiversity. The EMS is sufficient if it meets the planned requirements and targets, including effective implementation and monitoring and measurements system with a continuous improvement philosophy.
Start Up Occupational Health & Safety Management System for OHSAS 18001 Certification
The occupational health & safety management system is internally and externally audited at least once a year. Various areas of this management system may be audited more frequently based on importance, e.g. water management and biodiversity. The OHSMS is sufficient if it meets the planned requirements and targets, including effective implementation and monitoring and measurements system with a continuous improvement philosophy.
Health & Safety (community)
Community Health & Safety mitigation measures such as Crime Fighting and Humanitarian Health Campaigns (fighting alcoholism, drugs, malnutrition, and STDs) to enhance worker productivity and fast‐tracking project approvals/expansions.
Emergency Preparedness
The Emergency Prepardness contains the emergency plans, organizational responsibilities, reporting procedures, specific plans for responding to emergencies and emergency response training.
Concept Closure Plan CCP: Risk/Opporunity assessment and management; target closure outcome and goals; monitoring and evaluation; closure costs.
108
Table F‐4: Scope of SD indicators that affect CF in Operation phase
Indicator Scope of work in Operation phase
Resettlement Management
Resettlement Action Plan (RAP) in line with World Bank standards, provide voluntary resettlement opportunities and improve the livelihoods of resettled individuals. Resettled people are working for a couple of years in the mining operation and meanwhile learn a job to sustain themselves in the future.
Stakeholder Engagement Consultation meetings, workshops to enhance fast‐tracking project approvals/expansions Social Welfare Program Programs for general infrastructure (water, sanitary installations), housing, education and medical
services Reporting
Enhance transparency and local acceptance by annual financial report; annual sustainable development report; policies, standards and guidance notes; operations review.
Community Development Programs
Programs to establish an independent of mining, self‐sustaining community and during mining for employment opportunities and partnerships.
Charitable Giving enhance worker productivity, fast‐tracking project approvals/expansions
Security The mine office complex will be secured by fencing. Security guards will be employed to patrol operations on a 24 hour per day basis.
Quality Management System for ISO 9001 Certification
The quality system is internally and externally audited at least once a year. Various areas of the quality system may be audited more frequently based on importance, e.g. treatment plant and the gold room. The quality is sufficient if it meets the planned arrangements, including effective implementation and maintenance system.
Total Shareholder Return
When will dividends start, and what proportion of after‐tax income will be paid to shareholders and retaining funds for reserves, contingencies, cash flow and reinvesting?
Environmental Management System for ISO 14001 Certification
The environmental management system is internally and externally audited at least once a year. Various areas of the environmental management system may be audited more frequently based on importance, e.g. water management and biodiversity. The EMS is sufficient if it meets the planned requirements and targets, including effective implementation and monitoring and measurements system with a continuous improvement philosophy.
Health & Safety (community)
Community Health & Safety mitigation measures such as Crime Fighting and Humanitarian Health Campaigns (fighting alcoholism, drugs, malnutrition, and STDs) to enhance worker productivity and fast‐tracking project approvals/expansions.
Emergency Preparedness
The Emergency Prepardness contains the emergency plans, organizational responsibilities, reporting procedures, specific plans for responding to emergencies and emergency response training.
Concept Closure Plan Updating CCP: Risk/Opporunity assessment and management; target closure outcome and goals; monitoring and evaluation; sudden closure; and closure costs.
Final Closure Plan FCP: Updating Closure plan; Target closure outcome and goals; Action plans; Social requirement long and short‐term and final closure costs estimation
Table F‐5: Scope of SD indicators that affect CFM in Closure phase
Indicator Scope of work in Closure phase
DME South Africa Risk Based Closure costs estimation tool according to the Department of Mining and Energy of South Africa (Dismantling of camp; rehabilitation of access roads; rehabilitation of surface; river diversion; water monitoring; and 2 to 3 years of maintenance and aftercare).
109
G. Cash Flow Preliminary study Gold Sands project, Peru
110
H. Sustainable Data OPEX
General and overheads; and extra sustainable costs for dredge system P
$ per year
General Site
General Costs and overheads 1,230,000
Emergency Preparedness 25,000
Security (e.g. gunpost; guns and ammunition; cars etc.) 25,000
Total general site 1,280,000
Administration
Reporting (Annual, Financial and Sustainability reports) 50,000
Stakeholder Engagement 5,000
Specialized consulting services, e.g.auditting ISO9001; ISO 14001 and OHSAS 18001 50,000
Total Administration 105,000
Engineering
Human Resources and Training Development 15,000
Quality Management System ISO9001 13,500
Environmental Management System ISO14001 25,000
Occupational Health & Safety Management System OHSAS 18001 25,000
Total Engineering Costs 78,500
Sustainability
Social Welfare Program (Infrastructure; Housing; Education & Health) 5,000
Charitble Giving 2,500
Health & Safety of Community 5,000
Total sustainability Costs 12,500
Total yearly general costs and overheads for dredge system P: 1,476,000 $/yr
Total general costs and overheads per m3 for dredge system P @ 5,000,000 m3/yr: $0.30 $/m3
NB Labour in costs for management and labour
111
I. Closure Cost Calculations according to DME
112
J. Assumptions for Sustainable Case Cash Flow
Capital Expenditures Overview
113
114
Operational Expenditures Overview
115
116
117
118
119
120
K. Results Cash Flow Analysis
121
Capex Results
122
Depreciation
123
OPEX Summary and Results
124
Residual Revenue
125
Revenue Results
126
Cash Flow Analysis
127
