The holiday season provided a great opportunity for things like the Mining Rehabilitation Fund (MRF) to slip from our minds. But now that the New Year is here, we thought it best to provide our readers with an update on what has been happening in the MRF space since we last wrote to you all.

New Guideline on the Administration of Mining Securities

In January 2014, the Western Australian Department of Mines and Petroleum (DMP) issued a draft guideline titled ‘Administration of mining securities’ (Guideline) for public comment. This Guideline describes the 3 main forms of mining security administered by the DMP – personal sureties, unconditional performance bonds and the mining rehabilitation levy, and their application.

MRF

As you will be aware, the Mining Rehabilitation Fund Act 2012 (WA) (MRF Act), which requires certain tenement holders to contribute annually anon-refundable levy to the State proportionate to their outstanding rehabilitation, becomes compulsory as of 1 July 2014.  For more information on the MRF and levy, please refer to our previous articles on this topic: Industry to fund rehabilitation on abandoned mine sites, Mining Rehabilitation Levy, Update on the Mining Rehabilitation Levy – Release of bonds, Mining Rehabilitation Fund Levy Update, and Proposed amendments to Western Australian mining legislation released for consultation.

However, while relevant tenement holders will be required to contribute to the Mining Rehabilitation Fund, in certain circumstances, the Minister for Mines (Minister) still retains the discretion to impose an unconditional performance bond (UPB) under the Mining Act 1978 (WA) (Mining Act). This may mean that certain tenement holders will be contributing to the Mining Rehabilitation Fund and also be required to lodge a UPB.

Unconditional performance bonds

Prior to the commencement of the MRF Act, UPBs were the main form of security applied by the DMP under the Mining Act. As the implementation of the MRF Act did not result in any amendments to the Minister’s ability to impose UPBs under the Mining Act, many tenement holders have been concerned that they may be required to pay the mining rehabilitation levy and to provide a UPB.

As UPBs are imposed at the discretion of the Minister, the DMP issued a policy guideline to provide more certainty to tenement holders as to when UPBs would be imposed, but this policy has not been updated since and does not take into account the MRF or levy. Accordingly, the Guideline was released to provide guidance on how the DMP intends to impose UPBs once the MRF Act becomes compulsory on 1 July 2014.

By way of summary, the Guideline provides that a UPB will be imposed in the following circumstances:

  1. UPBs will be imposed on tenements where the DMP considers there is a high risk of rehabilitation liability reverting to the State, including where:
  1. the tenement holder has failed to lodge production reports, royalty returns, and pay in full, royalties as calculated and owing to the DMP within the prescribed time and manner;
  2. the tenement holder has been subject to an enforcement action under the Mining Act for failure to comply with environmental obligations (e.g. Direction to Modify, Stop Work Order, fine in lieu of forfeiture or forfeiture action); or
  3. the tenement holder has breached reporting or payment obligations of the MRF Act.
  1. Where there are multiple risk factors or occurrences, the DMP may require UPBs for all tenements related to a specific tenement holder.
  2. The type of commodity or activity will not be considered when determining whether to impose a UPB.
  3. Where UPBs are imposed, the DMP will undertake a review of the bond values each year and may require a new bond(s) to be issued.
  4. A tenement holder who is required to maintain a UPB may request that the obligation is removed by providing detail of the how the risk factors that led to the imposition have been mitigated.
  5. The recommendation to impose UPBs will be made by the Executive Director Environment of the DMP. A tenement holder affected can seek a review by making a written submission to the Director General of the DMP.
  6. From 1 July 2014, where the DMP has determined to require UPBs, the value will be determined by the use of standard area-based rates to be set out in the Mining Rehabilitation Fund Regulations 2013 (WA). These rates may be varied in particular circumstances. Any proposal to vary these rates will be approved by the Executive Director Environment. Such rates are proposed to be:
  1. $50,000 per hectare (minimum) for tailings or residue storage facility (class 1), waste dump or overburden stockpile (class 1), heap or vat leach facility, evaporation pond, dam – saline water or process liquor;
  2. $30,000 per hectare (minimum) for tailings or residue storage facility (class 2), waste dump or overburden (class 2), low grade ore stockpile (class 1), plant site, fuel storage facility, workshop, mining void (with a depth of at least 5 metres)– below ground water level, landfill site, diversion channel or drain, dam – fresh water;
  3. $18,000 per hectare (minimum) for low grade ore stockpile (class 2), sewage pond, run of mine pad, building (other than workshop) or camp site, transport or service infrastructure corridor, airstrip, mining void (with a depth of at least 5 metres) – above ground water level, laydown or hardstand area, core yard, borrow pit or shallow surface excavation (with a depth of less than 5 metres), borefield, processing equipment or stockpile associated with basic raw material extraction, land (other than land under rehabilitation or rehabilitated land) that is cleared of vegetation and is not otherwise described in the table set out in the Guideline;
  4. $2,000 per hectare (minimum) for land (other than land under rehabilitation or rehabilitated land) that has been disturbed by exploration operations; and
  5. $2,000 per hectare (minimum) for land under rehabilitation (other than land that has been disturbed by exploration operations), topsoil stockpile.
  1. From 1 July 2014 when compliance with the MRF Act becomes compulsory, all tenement holders other than the exceptions listed below will have their bonds retired. Obligations for UPBs will not be removed if, at the time of the levy assessment, any of the following criteria apply:
  1. the tenement holder or controlling business entity is currently under administration, listed in liquidation, has a notice of winding up application or order, is under deed of company arrangement, scheme of arrangement under administration or deregistration; or
  2. the tenement holder has failed to lodge production reports, royalty returns, and pay in full, royalties as calculated by and owing to the DMP within the prescribed time and manner.

Personal sureties

The Guideline also states that the DMP no longer requests the lodgement of personal sureties for newly granted tenements and that the Minister has discretion to make decisions in relation to personal  sureties.

Personal sureties are, however, still required to be provided under the terms of the Mining Act and Mining Regulations 1981 (WA) for applications for and transfers of all mining tenements. Accordingly, despite the statement in the Guideline, personal sureties must be provided to the DMP in the form of Form 32 Securities in the amount of $5,000 to ensure the grant of, and to ensure the registration of any transfer of, every tenement.

Appointment of MRF panel

On 16 January 2014, the DMP published the names of the 5 experts appointed as members of the MRF panel. These members are:

  1. Michael Slight, a mine engineer with experience in mine closure planning during his 36-year career;
  2. Julie Hill, a chartered accountant with experience in financial management of exploration companies;
  3. Charmian Barton, a lawyer advising in environmental law, planning, heritage and indigenous cultural law;
  4. John Gardner, who provided expertise for the Planning for Sustainable Mine Closure Toolkit and participated in the International Council on Mining and Metals’ restoration of legacy sites round table; and
  5. Phil Scott, who has experience in project planning and implementation, rehabilitation and mine closure costing and strategies.

Each member has been appointed for 2 years and will provide advice to the State about the use of the MRF funds.

DMP’s MRF Guidance

The DMP has released a document titled ‘Mining Rehabilitation Fund - Guidance’ to assist those affected by the MRF.  You can access this document by clicking on the following link: http://www.dmp.wa.gov.au/documents/132737_MRF_Guidance_Document_Web.pdf.