Tighter ESG standards set to transform mine closures

A global group of mining investors is making environmental, social, and governance (ESG) criteria for mining and standards for mine closure plans stricter.

These issues are increasingly falling under the scrutiny of communities, regulators and other stakeholders through mining standards such as the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC).

The World Bank predicts that by 2050, demand for metals and minerals such as lithium, nickel and graphite will surge by 500% due to increased production of clean energy technologies to decarbonize economies.

JORC, which provides rules for reporting exploration results, mineral resources and mineral reserves, is collecting comments until October 31 on a revised draft, available here, which seeks to promote better ESG practices in the mining sector.

The aim is to ensure that mine closures are no longer seen as a final phase but rather as an integral part of projects' life cycles. It also seeks to guarantee greater transparency and outline specific measures for restoring and rehabilitating mining sites.

The final code will be presented at the end of 2025 and is expected to strengthen sustainability practices throughout the mining process, from exploration to the post-closure stage.

In the latest ranking by consultancy EY on the main risks and opportunities for mining in 2024, mine closures were listed as even bigger dangers than social inequality, fraud and corruption.

Given this background, the Global Investor Commission on Mining 2030, a UN-backed initiative consisting of representatives of civil society, trade unions, companies and investors, is looking to form an independent institute to support mine audits.

The commission wants to ensure that the mining industry's social license is not jeopardized and that it implements practices such as reversing biodiversity loss, monitoring mine closures, managing legacies and accounting for impacts in company reports.

Meanwhile, a group of leading companies that make up the International Council on Mining and Metals (ICMM) has a plan with urgent measures to make operations and supply chains nature-positive by 2030.

One of its goals is to achieve zero net loss of biodiversity at all mine sites by the time of closure, compared with 2020.

Mining companies increase spending

Thirteen leading companies in the sector have set aside more than US$50 billion over the past year for decommissioning activities, said Elanne Almeida, EY's mining and sustainability leader partner, in a webinar held in late August.

Rio Tinto tops the list with a provision of US$17.2bn at the end of 2023, up from US$15.8bn the previous year.

BHP reported US$9.8bn in such provisions this year, similar to the figure it did last year. Its Cerro Colorado mine in Chile is in a temporary shutdown phase, where it is evaluating technologies to use latent capacity and allow an eventual restart early next decade.

Meanwhile, Glencore has formed a provision of US$8.18bn, after having recorded US$6.96bn last year.

Freeport McMoran's provision is US$3bn, according to Almeida, and in Chile it has estimated US$106mn by the end of 2023 for reclamation and closure costs at its El Abra operation.

Chile's state-owned firm Codelco, meanwhile, plans to spend US$2.26bn on closures of tailings dams, mines and other assets. It is also managing the closure of its Ventanas smelter after 58 years of operations, which, according to local media, could take 10 years and cost US$250mn.

Keys

To ensure that investments in mine closures yield a good return, Nadim Moummar, EY manager and mining exploration expert, suggests the following for mining companies:

1. Plan closure at the earliest stage of the project, alongside operational decisions.
2. Provision costs regularly. This is especially true as closures take place 10, 30 or 60 years after the start of operations.
3. Manage risks throughout the life of the mine.
4. Engage with stakeholders, indigenous peoples, communities, regulators and investors. “Their perceptions and concerns can guide companies towards more sustainable and accepted closure practices,” he said.

Asked by BNamericas about the differentiators between closures of copper mines and lithium operations in salt flats, Bjorn Weeks, senior mine closure advisor at Teck Resources, underscored the importance of implementing technologies, since ESG and sustainability goals should be the same for everyone, as well as ensuring good planning.

“The biggest risk in a closing process is not having a good plan in place from the start,” Weeks said at the event.