The Business Case for Prevention of Acid Drainage Paul Dowd Introduction

The Business Case for Prevention of Acid Drainage
Paul Dowd
Introduction

This paper presents THE BUSINESS CASE FOR PREVENTION OF ACID DRAINAGE: As an industry, we must first and foremost focus on the first objective of this conference:

(1) Comparing and sharing innovative approaches relating to materials characterisation, planning and design and prevent of minimise the impacts of acid drainage.

This is where we can most effectively avoid creating environmental legacy issues for our industry, for Governments and for local communities in the vicinity of our operations. The other three stated objectives of this conference, namely:

(2) better manage and treat acid drainage,

(3) examine options for closure and relinquishment of sites impacted by acid drainage,

(4) to identify knowledge gaps and the need for alternative approaches for acid drainage management and control;

become secondary if we can get this first objective of prevention right.

This imperative of PREVENTION will be illustrated using three case studies that highlight what we must do to get it right, and the implications for our companies and industry as a whole if we get it wrong. These three case studies focus on the design, operation and closure stages of the mine life cycle.

Acidic drainage from mine waste rock and tailings facilities not only impacts eco-systems, it can degrade our most precious natural resource - water. In Australia, we've seen the demand for water increase exponentially over the last decade and the Commonwealth has responded with a rejuvenated effort to formalize a National Water Management Strategy. This effort will only intensify the interest the public places on our ability to properly manage the lands that we have been entrusted with to extract minerals from in a sustainable manner.

It should also be noted that acid drainage is not a mining specific issue: the production of acid and the associated release of metals into riverine and estuarine environments from acid sulphate soils is also a significant issue for land uses such as agriculture and urban development. The area of acid sulphate soils in Australia has been estimated to be of the order of 4 million hectares (Reference 4). The estimated cost of managing the impacts of acid sulphate soils nationally is unknown, but in Queensland the annual cost in 2000 was estimated to be of the order of $180 million. The extent of problems associated with the use and development of acid sulphate soils has resulted in a number of government initiatives, some of which will be highlighted at this workshop.

But from a mining industry perspective, the acid drainage issue is very significant and we simply must get it right when it comes to properly managing our wastes and preventing acid drainage. Getting it right environmentally can be done economically with a little bit of forethought, accountability and a disciplined workforce that understands that environment is second only to safety in every decision made at a mine site.

Specific to acid drainage, this paper outlines some principles and practices that from experience show that a proactive approach to the prevention of acid drainage does pay off environmentally and economically at each stage of the mine life cycle.

Treating acid drainage once it has occurred, or mitigating environmental impact after it has occurred, is usually an admission that something has gone wrong either in the characterisation, planning, design or operation of a mine. It is Newmont’s belief that acid drainage can be prevented if some key principles are followed throughout the life of a mine, from exploration through to closure. The most important principles are:

• 
  We should be focusing most of our attention on prevention.
  
• 
  We must understand the physical and chemical characteristics of ore, waste rock and tails.
  
• 
  Getting the planning and design wrong can cause enormous cost blow-out at closure.
  
• 
  The cost of rehabilitation and closure must be rigorously estimated and accounted for at feasibility and during operation.
  
• 
  The integration of mine rehabilitation works into the day to day mine operations will minimise final reclamation costs.
  
• 
  Accurate delineation of PAF and NAF during construction and operation is essential.
  
• 
  Quality control of engineering works is essential.
  

The approaches taken by Newmont Mining Corporation (herein referred to as “Newmont”) and its subsidiary, Newmont Australia Limited (herein referred to as “Newmont Australia”), are discussed in this paper to illustrate the importance of adherence to these principles with regard to the prevention of acid drainage. The cost to the business of not heeding this advice is also highlighted through case study examples.

By way of background, Newmont, the world’s largest gold producer, is a US based mining company, with annual production of approximately 7 million ounces, a market capitalisation of US$16B, with mining operations on 5 continents. As part of its financial reporting protocols, Newmont estimates the cost of closure and rehabilitation of its operations to satisfy regulatory and accounting obligations. Newmont’s current estimated closure liability is in the order of several hundred million dollars globally. Of this, the cost associated with waste management (tailings, process water and waste rock,) accounts for approximately 2/3rds of Newmont’s closure and rehabilitation liability. A large proportion of this cost relates to the prevention of acid drainage from tails facilities, waste rock dumps, exposed pit walls or other disturbances. Given the size of this potential liability, it is immediately apparent that a well organised, planned and implemented approach to the prevention of acid drainage can have a significant economic impact on the financial performance of a company such as Newmont – just a 10% reduction in liability is worth tens of millions of dollars in direct benefit to Newmont’s global Net Asset Value (NAV).

Closer to home, Newmont Australia has 5 active mining operations, and in addition 1 site in the process of closure, 2 sites in care and maintenance, 3 sites in post closure monitoring and several exploration regions located across Australia and in New Zealand. Newmont Australia’s estimated closure costs for sites in which it maintains a financial interest is in the order of USD150M of which greater than 65% is for “waste management”. There is a mixture of underground and open pit operations, of which some are located very close to population centres, and others located incredibly remotely. One such mine is the Tanami mining operation, located 500km north west of Alice Springs. This operation is the most remote in Australia and situated on Aboriginal freehold land. The point here is that wherever Newmont has mining operations there are external stakeholders who can determine the future success of the company as much as its employees.

It’s great when we get positive responses from key stakeholders. In attempting to get the consent of the Walpiri people to approve the filling of one of our pits with tailings at our Tanami Operations, we were able to demonstrate the effectiveness of pit backfill by carefully rehabilitating the surface of a backfilled pit. On showing the Walpiri people this backfilled and rehabilitated pit and explaining the potential impacts and mitigating measures, the response was “you makum this up there like this one here”. Immediate approval was given by the Traditional Owners and the CLC. This success can be attributed to the demonstration of good practice on the ground and is an example of how good performance is increasingly a prerequisite to gaining a social license to operate.

I would like to present a simple model that can be used to present the business case for preventing acid drainage. This model outlines the opportunities for our industry if we get it right, and the risks if we get it wrong. The model also highlights the fact that we have diminishing opportunity to get it right as we move through the life cycle of a mine from discovery to final closure.

[Insert Slide of model]

Stage in Mine Life	Opportunity for getting it right	Risk of getting it wrong
Exploration	Avoid surface disturbance that could expose sulphides. Identify presence of sulphides in ore-body definition drilling.	Create liabilities on land that can tarnish the reputation of the company, even before an ore-body is discovered. This damaged reputation can cause opposition to a mining project and carry through the whole life of a project.
Feasibility and Design	Thorough characterisation of ore and waste (overburden and tailings). Effective mine design to manage PAF material during operation. Closure principles integrated into mine design and operating plan.	Poor planning and design errors can lead to major liability during operation, at closure and post closure. Experience indicates getting this wrong will lead to permitting difficulties and can cost a small mining operation tens of millions of dollars in clean-up costs and water treatment during operation and post closure
Construction	Mine site development, commissioning and operation is a seamless process. Future liabilities are minimised by constructing mine to design specifications that conform to acceptable environmental standards. Quality control of civil engineering works important.	Higher capital and operating costs during early operation if social and environmental aspects are not appropriately considered during construction phase. Good planning and design can be rendered ineffective if designs are not built to specification. Poor quality control of earthworks can lead to embankment instability, ineffective encapsulation of PAF materials and seepage problems.
Operation	Integrated pit / underground mine, waste dump and tailings management. Ongoing short and long term planning to account for changing ore-body economics and near mine discovery. Continually refine closure plan during operation. Quality control of civil engineering works important. For example, Waihi integrated waste rock and tails facility will cost less than NZ$5m to close, compared to tens of millions if separate landforms had been created.	If social and environmental implications of changing mine economics, cost cutting initiatives, mine or plant extensions are not adequately taken into account in the way the mine is operated, significant risks and liabilities can emerge. Failure to make cover materials available for waste rock dumps or tailings dams during operation can lead to cost blow-out at closure. For example, Woodcutters closure cost of $40m compared to a cost estimated at $10m if progressive reclamation had been integrated with mine planning during operation.
Closure	Do as much progressive rehabilitation as possible during operation, whilst management structure is in place, to minimise cost of rehabilitation and liability at closure.	Remobilisation of workforce and equipment post operation is expensive. Inadequate rehabilitation materials to complete closure (topsoil, cover materials). For example, Mt Leyshon closure not completed. We assumed that the scats stockpile could be used for road base by Dalrymple Sire Council. This was a false assumption and now means that the cost of rehabilitation will be much higher due to the need to cover the scats and clean-up acid drainage impacts post closure.
Post Closure	Active management up to point where landforms and eco-system become self sustaining.	View that closure is complete once earthworks is done is problematic. Without active post closure management, large liabilities can occur. e.g. landform instability due to surface erosion, damage to capping, exposure of PAF material.

Exploration

The importance of responsible environmental management at exploration stage is particularly important. We can create liabilities on land that can tarnish the reputation of the company, even before an ore-body is discovered. This damaged reputation can cause opposition to a mining project that can carry through the whole life of a project.

Paul to convey personal experience in Indonesia, re: exploration disturbance exposing PAF material.

[Insert Slide: Photo of exploration disturbance]

Feasibility and Design

This is the point in the mine life cycle where the most important decisions are made. Not adequately understanding ore and waste characteristics at the planning and design stage can have disastrous consequences for a mining project. This lack of understanding can lead to inappropriate design of tailings facilities and waste rock dumps. These issues are further compounded if ore-bodies are not well delineated and material balances have not been defined, thereby creating uncertainty in relation to material availability for slope stabilisation and landscape rehabilitation. We must also consider the long term implications of pit lakes and exposure of PAF material in pit walls.

There is a need to be innovative at this stage of project. Designers must be able to think big picture, create integrative solutions and present and evaluate a broad range of options.

Some of the options (Reference 3) that should be considered for new open pit developments are:

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  Integration of tails and WRD management to create single landform.
  
• 
  Sequential mining a backfill of multiple pits
  
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  Sequence mining of elongated pits to maximise backfill.
  
• 
  Pit backfill with tails, especially where high water table enables placement of PAF material below water level.
  
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  Understand life of mine material balances and ensure that materials are used for the most suitable applications. e.g. stockpiling of cover materials during mining of low sulphide zones of a pit.
  

There is a need to understand cost structure of all of these types of options for full life of mine, including the ongoing financial and reputation cost to the business post closure, if there are significant environmental and social implications.

There are many examples in our industry that illustrate the importance of adequate planning and design at the front end of a project.

Newmont Waihi Operations Case Study (Gold Mine, New Zealand)

The Waihi Operation in New Zealand is one of the best examples of effective planning and design to prevent acid drainage within Newmont. During the permitting process for the Martha Pit Extension Project in 1998/1999, which included a new tailings storage facility, acid drainage was a contentious issue, and measures proposed to control acid rock drainage were subject to very thorough investigations. This was a result of a potentially crippling ARD problem in the existing tailings storage facility in 1993 and 1994 which resulted in significant effects on both surface and groundwater quality. Although there was no direct regulatory action at this time, the regulators and community were acutely aware of the potential risks associated with acid drainage. This issue manifested itself during the permitting of the Martha Extended Project, and severely tested the viability of the project. Extra permitting relating to water quality added several million dollars to permitting costs and delayed the project by many months.

The key design features that were presented to the Regulator and the Public as evidence that this project could be engineered, operated and closed to high environmental standards were:

• 
  the addition of limestone to potentially acid forming (PAF) waste rock to suppress acid generation in waste rock,
  
• 
  complete integration of waste rock and tailings placement to form a single stable landform,
  
• 
  embankment and underdrainage design features that encapsulate PAF material and control seepage.
  

Construction of the embankments requires the selective use and zoning of waste rock materials and the controlled placement of waste rock fill (refer Figure 1). Embankment zoning provides for:

• 
  restriction of tailings seepage,
  
• 
  safe long-term stability under both static and seismic loads,
  
• 
  control of generation of acid drainage in the short and long term,
  
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  collection of tailings seepage and waste rock leachate for treatment,
  
• 
  rehabilitation of the downstream shoulder to pasture and native plantings.
  

Figure 1 - Aerial View of Tailings Storage Facilities and Embankment Cross Section

The design and construction costs of this facility are in the order of $??? (Jeff Ruddock). If these measures were not taken, the cost of closure and the cost of ongoing water treatment could amount to an order of magnitude more.

The cost estimate for Waihi’s closure and reclamation is NZ$12.9m. Approximately half of this cost relates to the closure of the tails facility, pit and water treatment. If the aforementioned measures had not been taken to prevent acid drainage during the course of this project, costs would certainly blow-out over time, Newmont’s reputation would suffer in the eyes of the public, regulators and investors and our social license to operate in New Zealand would be severely questioned.

[Insert Slides: Photo of Waihi mine-site and development site.]

Operation

During the operating phase of mining, there is opportunity to ensure that original planning and design objectives are met, or things can go terribly wrong. High turnover of people, changing mine economics, tightening of regulatory standards and mine upgrades or expansions are all factors that can affect the original planning and design intentions. Educating and training personnel in the proper handling and encapsulation of acid generating waste rock and tails is a must if costs for managing these waste are to be minimized. Mine sequencing and material handling plans developed during the feasibility and design phase need to be driven by Mine Operations and Geology personnel during the operating stage. Reclamation materials management (topsoil, clay, oxide waste rock) and selective handling of acid generating materials must be given the same level of consideration that tonnes mined and ounces poured do in our day-to-day activities. Remember, more often than not, the good stuff comes out of the pit first and the bad stuff is moved last.

Woodcutters Case Study (Base metal mine, Northern Territory)

The Woodcutters mine, in the Northern Territory, was worked between 1985 and 1999. Initial estimates by site personnel during the early days of operations at Woodcutters pegged closure costs at less than $AU500K. It has now been six years and some AUD35M since closure work commenced at Woodcutters. Over AUD 30M has been spent on encapsulation and control of acid generating waste rock and tails to close the mine to a standard acceptable to regulatory bodies and other stakeholders. This is an operation where progressive rehabilitation was not undertaken. Key lessons learned from our experience with Woodcutters include:

• 
  During its operation, closure criteria were not agreed to with the regulatory bodies and primary stakeholders (Traditional Land Holder groups), creating a “moving target” for what was acceptable.
  
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  To complete the closure, contractors had to be re-mobilised to the site; infrastructure for them to operate had to be established; and management and consultants had to spend a significant amount of time and money going to the site from Perth and other Australian cities.
  
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  A number of stakeholders in the area remain resentful with the way they have been treated and with the time it has taken to clean up the site.
  
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  Environmental issues developed during the rehabilitation, requiring an extension to the job and consequently an increase in the cost.
  
• 
  A considerable amount of rehandling of waste materials had to occur as it was placed in the wrong place originally, adding significantly to costs.
  

[Insert slides: Woodcutters WRD design, Tails in pit, etc]

Closure

Mt Leyshon Case Study (Open Pit Gold Mine, North Queensland)

The philosophy at Mt Leyshon was to ensure that progressive rehabilitation of waste rock dumps was done during operations. Approximately AUD 25 million was spent on closure related activities. A number of hidden rehabilitation costs resulted in spending the contingency budget allocated for the Mt Leyshon closure. The main hidden costs were related to clean up of contaminated sites and addressing structures that were not included in the closure plan budget as they were supposed to be completed during the operational phase, but were delayed until closure.

Normandy’s (previous owner) efforts at Mt Leyshon were recognized in 1998 with the Premier's Awards for Environmental Excellence in the Queensland Mining Sector. The job was thought to have been complete and the Company was proud to have been recognized for its’ excellence in planning, design and implementation of waste rock dump construction.

But, active site management was still required until the site was shown to be self-sustaining. Monitoring needed to done to determine if the landscape had reached a self sustaining state. This work unfortunately wasn’t done. The award winning rehabilitation work at Mt Leyshon was not adequately maintained for the three years after closure. The resultant financial implications of ineffective post closure management is in the order of AUD 8 million. This expenditure was required to go back and fix the work that had already been done.

The lesson here is, post closure management needs to be given the same degree of attention as operational site management. In recognition of the need to close sites effectively, Newmont Australia has appointed a General Manager of Legacy Sites to ensure that the closure process is resourced effectively and sites are actively managed post closure. This approach enables the release of bonds in an expedient fashion. Although only established in the past year, the position has achieved significant value for Newmont with authorities releasing Newmont from Bonds, and stakeholders around the sites appreciating that their “issues” are being dealt with and becoming advocates for the company in the process.

Key Challenges for Industry

The environmental and technical challenges of preventing acid drainage have been discussed, but it is also important to highlight the value of developing people to sustain our industry in the future.

Getting this aspect of our business wrong can be crippling. High turnover leads to corporate memory loss and can take years to rebuild. The inability to attract the right people into our business can adversely affect all of the preventative measures outlined in this paper.

A related question to this people risk is: how do we make sure that decisions that have long term implications are made by people who have the vision and foresight to understand the social and environmental implications of their decisions?

How can we maintain the continuity of corporate memory and more particularly the level of knowledge required at our operations to ensure that the original planning and design principles are met during the operating life? How many times do we see this requisite knowledge wax and wane as people turnover at our sites?

Some suggested approaches are to:

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  Systematise work
  
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  Integrate systems into the business, so that important decisions become institutionalised.
  
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  Ensure change management processes are followed, so that broader implications of operational changes are understood and acted on.
  
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  Build competencies throughout our business so that we all understand the importance of our roles in the context of the broader business. For example, a mine planner must understand the environmental implications of mine design. A process plant superintendent must understand the risks and longer term liability issues associated operating a tailings facility and ensure that adequate controls are in place.
  
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  Build capacity by working with education institutions as an industry and by creating links from within our companies (Importance of: INAP, ACMER, MCA, SMI, CSRP and our Universities)
  
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  Encourage a continuous improvement culture and give people the freedom to contribute beyond their core roles. Encourage innovation.
  

Reiteration of Key Messages

This paper has endeavoured to show how value can be created through effective prevention of acid drainage at the design, operation and closure stages of the mine life cycle. A few basis principles have been emphasised. If these principles are adhered to at the planning and design stage of mine development and are followed through operation, closure and post closure phases, we have a good chance as an industry to create value for our businesses and for the communities in which we operate. If we fail to meet these principles, the ensuing liabilities will burden our companies and our industry. We risk damaging our social license to operate.

The principles are to:

• 
  Focus most of our attention on prevention.
  
• 
  Understand the physical and chemical characteristics of ore, waste rock and tails.
  
• 
  Avoid getting the planning and design wrong - this can cause enormous cost blow-out at closure.
  
• 
  Rigorously estimate the cost of rehabilitation and closure and fully account for that cost at feasibility and during operation.
  
• 
  Integrate mine rehabilitation works into day to day mine operations. This will minimise final reclamation costs.
  
• 
  Accurately delineate PAF and NAF materials during construction and operation.
  
• 
  Ensure quality control of engineering works.
  

The approach that Newmont takes to the prevention of acid drainage has been discussed in this paper, together with a number of examples which demonstrate the points made. Our shareholders expect us to add value to their investment. At Newmont we deliver on shareholder expectations by applying effective prevention practices in our daily operating decisions with a view to effective low cost closure of our mine sites that meet community expectations.

References

1. 
   Brodie K M, Mason K A, Ruddock J, McLeod D I K, New landforms – A Base for Successful Rehabilitation, Environmental Management Using Soil-Plant Systems Workshop, Fertiliser and Lime Research Centre, Massey University, NZ, 2003.
   
2. 
   Clark R, Newmont Australia Limited, Economics of Mining and the Importance of Adding Value Through Effective Waste Management, Creating Cost Effective Rock-dumps and Stockpiles, Australian Centre for Geomechanics, 2005.
   
3. 
   Dow J A S and Minns A J, Newmont Australia Ltd, Translating the Challenges of Sustainability and Eco-efficiency into Improved Business Performance at Newmont Operations, Green Processing Conference, Fremantle, WA, 10-12 May 2004.
   
4. 
   National Strategy for Management of Coastal Acid Sulphate Soils, NSW Agriculture, January 2000.
   
5. 
   Newmont Waihi Gold Limited, Improving Waste Rock Management: Limestone Addition Facility, Newmont Australia Excellence Awards Submission, 2004.