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RISK IN CONTEXT

Tailings Storage Facilities: From Design to Closure – A Liability Lifecycle

Posted by Manuela Battello August 06, 2019

Tailings storage facilities, or TSF’s, are a recognized key risk exposure in the mining sector. There are some 3,500 active TSFs around the world. These structures can be of significant size, storing tens of millions of cubic meters of tailings. They are also highly complex structures that vary depending on a host of parameters such as design, age, maintenance, and tailings characteristics among others.

There have been clear advances in Best Available Technologies and Best Available Practices in connection with mine waste management and, specifically, the design, construction, operation, and closure of TSFs. Mining associations, jointly with standard-setting bodies, have developed, implemented, and updated guidance and standards documents. Mining companies engage specialized engineering firms, hire geotechnical and other engineers, develop designs, procedures, protocols, standards. All of this with a view to improve management practices and minimize the probability, and to some extent the impact, of a catastrophic TSF failure.

Yet, catastrophic failures still occur.

If we have thoroughly implemented all available best practices and technologies, and we have robust management systems in place, how could failures still occur? This question was the genesis of the panel discussion, hosted by Marsh Canada on May 28, 2019, on the risks and liabilities associated with TSFs over their lifecycle.

The discussion benefited significantly from the insights of four guest panelists: Ross Cooper (Fraser Alexander Pty); Charles Dumaresq (Mining Association of Canada); Larry Lowenstein (Osler); and Richard Stahl (Jensen Hughes), all seasoned experts in their respective field. These panelists candidly shared their views and experiences geared towards spotlighting a fundamental, yet often overlooked, factor that nevertheless can materially increase risk exposure and, ultimately create liabilities for a mining company and its people: the human element.

The questions directed at the panelists considered a broad range of aspects related to mining projects and their associated TSFs, from pre-feasibility and feasibility, to project evaluation and financing, merger and acquisition transactions, structure construction and operation, and mine closure. We also considered the aftermath of an event.

With the benefit of hindsight, our guest experts offered key considerations in respect of planning, design and operation. Given that TSFs are a material cost with zero return on investment, is there perhaps a tendency to dedicate less analysis and valuation to this investment in project economic assessments? Do such assessments sufficiently consider worst case scenarios and their potential costs (including liabilities)? If they were to fully consider these, how might investment decisions change? How soon, to what extent, with what frequency, and over what period should stakeholder engagement take place? How might stakeholders be included in the risk discussion? How might company executive management better engage third party consultants? What questions should board directors be asking? What more could be done in the context of risk assessments that could prompt different or more questions before key decisions are made? What is appropriate public risk disclosure? How should company management scrutinize feasibility studies or technical reports beyond what may be contained in an executive summary?

Key points raised highlighted the need to give greater consideration to the risks related to human behaviors. These behaviors may be the product of: economic or scheduling pressures; the need to present a project in the most compelling light to potential investors; cultural biases or norms that influence how identified issues are presented to company management or regulators; or even cultural philosophies that preclude escalation of noted risk exposures. Regulators themselves may inadvertently contribute to risk if they are overly stretched in terms of capacity or insufficiently knowledgeable of critical aspects of TSF management. There is also a tendency to overly rely on third-party engineering reports and/or regulator sign-offs as evidence that key risk exposures are, in fact, identified, and a robust risk control plan can be or is in place to address these.

Humans are flawed. A banal statement, certainly, but true nonetheless. Yet, seldom do risk assessments consider human dynamics as a catalyst to the introduction of material risk exposures.

Perhaps in the genuine effort to get a project technically and economically correct, the impact of the human element on both technical soundness and economic value may have been underestimated or not sufficiently explored. This oversight could very well prove to be catastrophic.

To our esteemed panelists, a heartfelt thank you for so generously and passionately sharing your views and leaving us with much to ponder.

Join us in Vancouver!

Are you a mining sector stakeholder? We will be exploring TSFs at Marsh Canada’s upcoming Mining Forum in Vancouver. Please join us on September 24 at the Coast Coal Harbour Vancouver Hotel. Register now.

Related to  Mining

Manuela Battello