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					Western Australia’s
Mining Security System




 Preferred Option Paper
     30 March 2011
  Submissions
The Department of Mines and Petroleum invites comments and
feedback on this Preferred Option Paper. Submissions can be made:

•	 by	email:	mining.securities@dmp.wa.gov.au	
•	 by	mail:	Mining	Securities	Review,	Environment	Division,	
   Department	of	Mines	and	Petroleum,	Mineral	House,	
   100	Plain	Street,	EAST	PERTH	WA	6004.

Project	contact:	Jenny	Oosterhof,	Principal	Policy	Officer,	Environment	
Division,	Department	of	Mines	and	Petroleum	(phone:	9222	0563,	
email	jenny.oosterhof@dmp.wa.gov.au)

The closing date for submissions is close of business 13 May 2011.

Submissions	will	be	placed	on	the	Department	of	Mines	and	
Petroleum’s	website	unless	they	are	marked	“confidential”.	The	
department	will	also	publish	a	summary	of	all	feedback	provided	on	
its	website,	which	will	not	directly	attribute	comments	made	by	an	
individual	or	organisation	where	their	comments	have	been	identified	
as	confidential.	
                   Executive Summary
                In	December	2010,	the	Department	of	Mines	and	Petroleum	released	
                for public comment the Preliminary Discussion Paper on Policy Options
                for Mining Securities in Western Australia. This paper described three
                possible	mining	security	options	as	part	of	the	department’s	review	of	
                mining	securities:	a	full	cost	environmental	bond	system,	a	government-
                administered	fidelity	fund	and	an	insurance-based	system.

                The	department	has	now	reviewed	the	submissions	received,	and	has	
                completed further research and investigations into the various options.

                The	department	has	concluded	that	a	fidelity	fund	approach	offers	the	
                best option for the State’s future mining securities system. It is proposed
                that	the	Mining	Rehabilitation	Fund	be	established	within	three	years	as	
                the primary tool to manage the risk of any company operating under
                the Mining Act 1978 not meeting its mine rehabilitation and closure
                obligations.

                If	a	fidelity	fund	is	not	pursued,	the	department	considers	that	the	only	
                other	effective	alternative	will	be	to	progress	to	a	full	cost	unconditional	
                performance	bond	system,	as	was	recommended	and	adopted	following	
                a	previous	review	in	2008.	It	is	acknowledged	that,	if	this	was	to	occur,	
                the	mineral	resources	sector	would	press	for	a	thorough	reassessment	
                of the administration of unconditional performance bonds in Western
                Australia.

                This paper presents the basis for the recommendation of the Mining
                Rehabilitation	Fund,	including	detail	on	the	structure	and	governance	
                of	the	fund,	the	sum	of	money	required	to	cover	the	government’s	
                contingent	liability	and	the	contributions	to	the	fund	required	from	
                industry. A sensitivity analysis has also been applied to compare the key
                advantages	and	disadvantages	of	the	fund	with	a	full	cost	unconditional	
                performance	bond	system.	For	example,	a	comparison	is	made	between	
                the	estimated	annual	costs	for	the	fund	with	the	current	bond	system	
                incorporating bank risk ratings and total rehabilitation and closure
                liabilities.	This	comparison	indicates	that	the	fidelity	fund	is	the	lowest	
                cost option for the mining industry.

                In	addition,	the	implications	of	each	option	for	the	government,	mining	
                industry,	financial	institutions,	the	wider	economy,	community	and	the	
                environment	are	also	discussed.	While	this	also	shows	the	fidelity	fund	
                was	overall	the	best	option,	its	preference	as	a	new	mining	security	
                arrangement	will	depend	on	a	number	of	requirements	to	ensure	it	
                meets the principles described in the Preliminary Discussion Paper.
                The	likely	requirements	are	summarised	in	the	final	chapter	and	detailed	
                in	Appendix	2.

                The	department	is	now	seeking	comment	on	these	findings	to	
                advance	its	review	of	mining	securities	in	Western	Australia.	Following	
                consideration	of	the	feedback	on	this	paper,	the	department	will	be	
                making	its	final	recommendation	to	the	State	Government.




Department of Mines and Petroleum Western Australia’s Mining Security System                    1
2   Department of Mines and Petroleum Western Australia’s Mining Security System
   Contents

1. Introduction ........................................................................................................................4

2. Current review of mining securities ...................................................................................4

    2.1.	Preliminary	Discussion	Paper ........................................................................................4

    2.2	Current	focus	of	the	review ............................................................................................5

    2.3	Purpose	of	this	paper .....................................................................................................5

    2.4	Relationship	to	mine	closure	plan	requirements ..............................................................5

3. Statement of the issue .......................................................................................................6

    3.1	Application	of	mining	securities	in	Western	Australia.......................................................6

    3.2	Risk	to	the	State ............................................................................................................7

          3.2.1	Industry	growth	and	expansion.............................................................................7

          3.2.2	The	number	of	mining	operations	on	care	and	maintenance .................................7

          3.2.3	Transfer	of	mining	projects	to	smaller,	less	financially	secure,	companies ..............7

          3.2.4	Summary	of	the	risk	to	the	State ..........................................................................8

4. Objectives of mining securities..........................................................................................9

5. Options to address the issue .............................................................................................9

    5.1	Full	cost	unconditional	performance	bonds ....................................................................9

    5.2	Mining	Rehabilitation	Fund ...........................................................................................10

6. Evaluation of policy options.............................................................................................12

    6.1	Evaluation	criteria .........................................................................................................12

    6.2	Evaluation	of	the	options ..............................................................................................12

          6.2.1	Financial	impact	on	the	State’s	mining	sector .....................................................13

          6.2.2	The	extent	to	which	mining	securities	encourage	good	environmental	practice...16

          6.2.3	Using	a	risk-based	approach	in	applying	mining	securities .................................16

7. Impact Assessment ..........................................................................................................17

    7.1 Affected stakeholders ..................................................................................................17

    7.2	Impact	analysis	of	the	potential	options ........................................................................17

8. Preferred option................................................................................................................19

9. Implementation and evaluation strategy .........................................................................19

Appendix 1 ............................................................................................................................20

Appendix 2 ............................................................................................................................21

Appendix 3 ............................................................................................................................25




  Department of Mines and Petroleum Western Australia’s Mining Security System                                                              3
    1. Introduction                                                                                                         2. Current review of mining securities
    The Department of Mines and Petroleum is currently in                                                                   In	identifying	options	for	a	future	mining	securities	system,	
    the	process	of	conducting	a	major	review	into	the	future	                                                               the	department	has	reviewed	the	history	of	the	State’s	
    operation of the State’s mining securities system for                                                                   environmental bond system and considered systems
    Mining Act 1978 activities1.                                                                                            in	place	in	other	jurisdictions.	Throughout	this	process,	
                                                                                                                            the department has sought input from key stakeholders.
    The principal objective of mining securities is to ensure                                                               An	industry	liaison	committee	was	established	and	
    that	sufficient	funds	are	available	to	the	government	                                                                  consultation	has	occurred	with	other	interested	parties	
    to rehabilitate mine sites in the event of operators not                                                                such	as	financial	institutions,	other	government	agencies	
    fulfilling	their	mine	rehabilitation	and	closure	obligations.	                                                          and non government organisations.
    In	doing	so,	they	represent	an	important	regulatory	
    mechanism	that	provides	confidence	to	both	the	                                                                         2.1. Preliminary Discussion Paper
    government and the community that satisfactory                                                                          The	first	significant	milestone	for	the	review	was	
    rehabilitation	and	closure	will	be	achieved.                                                                            publication of the Preliminary Discussion Paper on Policy
                                                                                                                            Options for Mining Securities in Western Australia2 in
    It	is	of	significant	concern	to	the	government	that	the	                                                                December	2010	(available	on	the	department’s	website).
    ability of the current system to provide a reasonable                                                                   The	aim	of	this	paper	was	to	present	a	range	of	policy	
    level	of	financial	security	has	decreased	significantly	                                                                options,	including	an	overview	on	how	the	department	
    since	environmental	bonds	for	the	mining	industry	were	                                                                 considered each option could operate in practice. The
    originally	introduced	in	the	late	1980s.	Bond	rates	have	                                                               policy options proposed in the paper included:
    not	kept	pace	with	the	rising	costs	of	rehabilitation,	                                                                 1.	 retaining	the	current	environmental	bonds	system,	
    resulting	in	a	situation	where	bond	levels	are	now	well	                                                                    but increasing bond amounts to cover the full cost of
    below	the	actual	cost	of	rehabilitation	and	mine	closure.	                                                                  rehabilitation and mine closure;
    Additionally,	the	current	system	is	inflexible,	in	that	bonds	                                                          2.	 replacing	the	current	system	with	a	mining	securities	
    are	tenement-based,	which	means	that	bonds	can	                                                                             fidelity	fund;	and
    only	be	used	for	rehabilitation	works	on	specific	mining	
                                                                                                                            3.	 an	insurance-based	system.
    tenements.
                                                                                                                            Feedback	from	industry	and	relevant	stakeholders	
    A	review	into	the	State’s	mining	securities	system	was	
                                                                                                                            was	sought	on	these,	or	any	other	options,	in	order	
    also conducted by the Department of Industry and                                                                        to	assist	in	identifying	further	work	to	develop	robust	
    Resources	in	2008,	which	recommended	the	retention	                                                                     recommendations for mining securities reform. The
    of	an	environmental	bond	system	with	rates	increased	to	                                                                feedback has been used to formulate the structure and
    levels approaching the full cost of rehabilitation and mine                                                             detail	of	this	document,	as	well	as	that	of	the	preferred	
    closure.	Such	a	system	would	have	brought	Western	                                                                      fidelity	fund	model.
    Australia’s	mining	securities	generally	in	line	with	other	
    jurisdictions in Australia and other developed countries.                                                               Overview of submissions
                                                                                                                            Submissions on the Preliminary Discussion Paper closed
    The government’s implementation of the recommendation                                                                   on	15	February	2011.	A	total	of	19	submissions3	were	
    to	increase	bond	rates	was	put	on	hold	in	response	to	                                                                  received:	nine	from	industry,	two	from	other	government	
    the	global	financial	crisis,	resulting	in	the	current	Minister	                                                         agencies,	two	from	non-government	organisations	and	
    for	Mines	and	Petroleum	placing	a	two	year	moratorium	                                                                  six	from	other	interested	parties.	A	brief	overview	of	the	
    on the raising of bond rates.                                                                                           key	issues	raised	in	the	submissions	is	provided	below.

    It is recognised that moving to a full cost bond system                                                                 I. Unconditional Performance Bonds
    could	have	a	significant	financial	impact	on	the	industry	                                                              The	Department	of	Environment	and	Conservation	
    and,	therefore,	the	wider	community.	For	this	reason,	                                                                  gave clear support for the use of full cost unconditional
    during	the	period	of	the	moratorium,	the	department	                                                                    performance bonds in order to offer the best outcome
    commenced	a	review	to	determine	alternatives	to	a	full	                                                                 for	government,	as	did	several	consultants.	The	
    cost	bond	system	that	would	provide	an	equivalent,	or	                                                                  Department of State Development noted that full cost
    better,	outcome	for	the	State	at	a	lower	cost	to	industry.                                                              bonds	would	provide	industry	with	more	consistency,	
                                                                                                                            whilst	the	Pastoralists	and	Graziers	Association	were	of	
    While	the	moratorium	expired	at	the	end	of	2010	and	                                                                    the	view	it	would	provide	greater	certainty	that	industry	
    bond	rates	have	since	been	increased	by	25%	and	a	                                                                      would	meet	its	obligations	towards	mine	closure.
    schedule	set	for	bond	rates	to	reach	50%	of	full	closure	
    costs	by	2014,	the	government	is	fully	supportive	of	the	                                                               Most industry submissions did not support full cost
    department’s efforts to investigate suitable alternatives to                                                            unconditional	performance	bonds.	Companies	were	
    the environmental bond system and this paper represents                                                                 concerned	that	this	option	significantly	overstated	the	
    an important milestone in the development of such a                                                                     risk	of	failure,	would	result	in	unreasonably	high	costs	to	
    potential option.                                                                                                       the	industry	and	was	not	a	justifiable	position.
    1
      Western Australia’s current mining securities system applies to all mining operations and higher risk prospecting and exploration activities that are subject to the mining security provisions of the Mining Act 1978. Mine sites
    operating under State Agreement Acts that are not subject to the mining security provisions of the Mining Act 1978 are not the subject of this review.
    2
      Further detail on the history of Western Australia’s mining securities system, previous reviews of the system and a comparison with other jurisdictions is provided in the Department of Mines and Petroleum’s Preliminary
    Discussion Paper on Policy Options for Mining Securities, available at http://www.dmp.wa.gov.au/miningsecurities
    3
      For more detail on the submissions received, refer to www.dmp.wa.gov.au/preferredoptionpaper which details all comments and the Department of Mines and Petroleum’s response.


4                                                             Department of Mines and Petroleum Western Australia’s Mining Security System
One	submission	noted	the	difficulties	new	operators	                      V. General Comments
faced	in	fully	comprehending	the	commitment	required	in	                  Most stakeholders called for clarity in relation to the
achieving	closure	and	retiring	a	bond.	The	relinquishment	                application of mining securities to State Agreement
process	under	the	performance	bond	system	was	also	                       Act	projects.	Whilst	one	submission	was	of	the	view	
raised	as	an	issue	requiring	attention.                                   State	Agreement	Acts	provided	the	government	with	an	
                                                                          adequate	measure	of	discretion	should	obligations	not	
II. Fidelity Fund                                                         be	met,	several	submissions	viewed	this	as	inequitable.
The key issue raised by industry stakeholders in
providing	feedback	was	that	a	greater	depth	of	analysis	                  Submissions	from	non-government	organisations,	
was	needed	through	further	research	and	investigation,	                   pastoralists	and	those	working	in	the	industry	included	
in order to form a clear opinion on the most effective                    general comments on issues and concerns relating to
option for reform.                                                        the current system. Industry submissions also made
                                                                          comment on the Minister’s decision to cease the
Several	submissions,	including	the	submissions	from	                      moratorium on bond rate increases under the current
the	Department	of	Environment	and	Conservation	                           bond	policy.	Whilst	these	issues	have	been	noted,	the	
and	Cement	Concrete	&	Aggregates	Australia,	were	                         department considers them to be a separate matter from
not	supportive	of	the	fidelity	fund	option	as	the	sole	                   this	review,	which	is	focused	on	options	for	reforming	the	
mechanism	for	mining	securities,	citing	it	as	a	weaker	                   State’s mining securities system.
system	with	respect	to	encouraging	companies	to	
meet their rehabilitation obligations. The Department of                  2.2 Current focus of the review
Environment	and	Conservation	provided	support	for	the	
fund only on the basis that it be used in combination                     As	a	result	of	this	consultation,	the	department	
with	unconditional	performance	bonds.                                     considered	that	the	focus	of	the	review	should	be	limited	
                                                                          to	the	development	of	the	fidelity	fund	model	to	a	stage	
Industry members and the insurance companies                              where	it	could	properly	be	considered	as	a	suitable	
that	made	a	submission	(Assetinsure	and	Swiss	Re	                         alternative	to	the	environmental	bonds	system.	The	work	
International)	raised	concerns	regarding	the	potential	                   conducted by the department to date indicates that
for environmentally responsible companies to effectively                  the	fidelity	fund	option	provides	a	viable	mining	security	
pay for the rehabilitation costs of irresponsible                         system	for	the	State,	and	introduces	flexibility	that	is	not	
companies.	Cement	Concrete	&	Aggregates	Australia	                        available under the unconditional performance bond
also	cited	experience	with	the	South	Australian	fund	                     system. The department is seeking to consolidate the
for	the	extractive	industry	as	being	overly	bureaucratic,	                detail	on	such	a	fidelity	fund	system	through	stakeholder	
complex	and	not	encouraging	companies	to	meet	their	                      consultation	(i.e.	through	the	release	of	this	paper)	prior	
rehabilitation obligations.                                               to	making	a	final	recommendation	to	government.

The establishment of the fund’s structure and                             It	is	anticipated	that	the	government	will	be	provided	with	
governance	arrangements	were	raised	as	key	areas	                         a	final	recommended	policy	position	by	June	2011.	
requiring	further	clarification.	Industry	was	particularly	
concerned regarding the protection of the fund                            2.3 Purpose of this paper
moneys	for	the	specific	purpose	of	mining	securities.	                    The purpose of this paper is to present the department’s
The department also received several comments from                        preferred	fidelity	fund	option	for	a	future	mining	securities	
industry regarding the absence of consideration of an                     system,	based	on	research	and	consultation	conducted	
incentive	system,	stating	it	did	not	promote	enhanced	                    to	date.	Feedback	on	this	paper	will	inform	the	
rehabilitation outcomes.                                                  preparation	of	a	final	recommendation	to	government.	
                                                                          The department therefore encourages all interested
III. Insurance-based Securities System                                    parties	to	provide	feedback,	particularly	in	relation	to	
It	was	generally	accepted	that	an	insurance-based	                        perceived	impact	of	the	model,	and	suggestions	for	
system is not a viable option and that this should not be                 improvement.	To	assist	in	assessing	the	financial	impacts	
pursued further.                                                          of	the	model	described	in	this	paper,	the	department	has	
                                                                          developed	a	cost	calculation	tool	which	is	available	on	
IV. Risk                                                                  the	department’s	website	at	
Risk	was	a	major	issue	commented	on	by	both	industry	                     http://www.dmp.wa.gov.au/preferredoptionpaper
and	government	organisations.	Industry	requested	that	
a thorough and transparent assessment of the risk to
                                                                          2.4 Relationship to mine closure plan
government	and	industry	be	carried	out.	It	was	further	
requested	that	the	flow	on	impacts	be	calculated	on	                      requirements
potential losses in royalties and jobs versus potential                   The	2010	amendments	to	the	Mining Act 1978	require	
mine	closure	liability	incurred	by	the	State	Government.	                 all	mining	operations	(excluding	those	administered	
Beyond	a	high	level	risk	review,	many	of	the	industry	                    under	State	Agreement	Acts)	to	submit	mine	closure	
submissions	requested	that	options	for	a	risk-based	                      plans	by	1	July	2014.	These	are	required	to	be	drafted	in	
system	should	be	investigated	whereby	each	company’s	                     accordance	with	guidelines	currently	being	prepared	by	
risk	of	failure	to	meet	rehabilitation	obligations	is	reflected	          the	Department	of	Mines	and	Petroleum	and	the	Office	
in the level of mining security contribution.                             of	the	Environmental	Protection	Authority.


                              Department of Mines and Petroleum Western Australia’s Mining Security System                                 5
    The	aim	of	mine	closure	planning	requirements	is	to	                   3. Statement of the issue
    ensure	that,	for	every	mine	in	Western	Australia,	a	
                                                                           At	present,	Western	Australia’s	mining	securities	system	
    planning	process	is	in	place	to	close,	decommission	
                                                                           exposes	the	government	to	an	unacceptable	level	of	
    and rehabilitate the mine in an ecologically sustainable
                                                                           financial	risk.	
    manner,	consistent	with	agreed	post-mining	outcomes	
    and	land	uses,	and	without	unacceptable	liability	to	the	
                                                                           Under	the	current	system,	if	a	company	fails	to	fulfil	their	
    State.
                                                                           rehabilitation	obligations,	the	government	may	call-in	
                                                                           the	bonds.	The	government	is	limited,	however,	to	only	
    The	government	views	mine	closure	plans	as	a	valuable	
                                                                           spending	the	bond	moneys	specifically	on	the	tenement	
    tool,	in	addition	to	mining	securities,	in	minimising	
                                                                           in	which	the	bond	was	lodged.	Any	shortfall	in	funding	
    closure liability to the State and community. These plans
                                                                           for the rehabilitation on a tenement must therefore be
    will	provide	summaries	of	the	best	available	data	on	
                                                                           met by the government.
    aspects of the physical and biological environment that
    can challenge or compromise mine closure outcomes.
                                                                           The	department	estimates	that	current	bonds	cover,	
    The completion criteria and performance indicators
                                                                           on	average,	less	than	25%	of	rehabilitation	and	closure	
    identified	in	closure	plans	will	be	used	to	form	a	basis	
                                                                           costs,	potentially	leaving	at	least	a	75%	shortfall	in	
    on	which	mine	closure	performance	is	measured	and	
                                                                           expenditure	on	each	tenement.	While	there	is	around	
    reported.
                                                                           $860	million	currently	established	as	unconditional	
                                                                           performance	bonds	for	Western	Australia,	this	is	not	a	
    As	part	of	the	mine	closure	planning	process,	companies	
                                                                           single	‘pool’	that	can	be	drawn	upon	by	government.	
    will	be	required	to	demonstrate	that	financial	provisions	
                                                                           On	any	one	tenement,	the	difference	in	the	bond	and	
    have	been	made	to	ensure	that	adequate	funds	will	be	
                                                                           the actual closure costs currently needs to be met by
    available at the time of closure and that the community is
                                                                           government from general revenue.
    not	left	with	a	liability.	
                                                                           Whilst the introduction of the mining securities system in
    Cost	estimates	conducted	for	the	purpose	of	
                                                                           the	1980s	intended	to	cover	the	full	cost	of	rehabilitation,	
    demonstrating	financial	provisioning	for	mine	closure	
                                                                           a regulatory drift in the implementation of the mining
    plans are not intended to be applied in the calculation of
                                                                           securities	policy	has	been	experienced,	resulting	in	a	
    mining	securities.	The	financial	provisioning	requirements	
                                                                           system that no longer meets the government’s principal
    in mine closure plans are for tenement holders to
                                                                           objective.
    demonstrate	that	they	will	have	funds	available	in	the	
    future	to	address	their	financial	obligations	for	mine	
                                                                           The environmental bond system presently in place is
    rehabilitation.	Quite	separately,	the	cost	estimate	
                                                                           similar to models in other jurisdictions in Australia and
    for calculating an appropriate mining security is to
                                                                           internationally. It is the government’s intention to maintain
    determine	the	actual	cost	of	government	being	required	
                                                                           this system and increase bond rates to the full cost of
    to	rehabilitate	mine	sites.	Cost	estimates	for	mining	
                                                                           rehabilitation and mining closure if a suitable alternative
    securities	will	therefore	need	to	be	calculated	assuming	
                                                                           cannot	be	determined.	Whilst	this	would	ensure	the	
    mines	require	closure	in	their	current	state	and	would	
                                                                           State’s	financial	risk	is	addressed,	there	could	be	
    need	to	be	re-assessed	on	an	annual	basis.	
                                                                           significant	impacts	on	the	mining	industry	and,	therefore,	
                                                                           the	wider	economy.	Maintaining	the	status	quo,	however,	
    The	questions	are	therefore	different,	with	financial	
                                                                           not	only	has	the	potential	to	impact	the	government,	but	
    provisioning	being	to	answer	the	question	of	“Will the
                                                                           the	environment	and	the	wider	community	as	well.	
    tenement holder have enough money to rehabilitate
    the mine site at the end of the project?”,	and	the	cost	
    estimate for mining securities being “How much would it                3.1 Application of mining securities in
    cost to rehabilitate the mine site if it shut down now?”.              Western Australia
                                                                           State Agreement Act projects
    There	is	an	obvious	relationship	between	the	two	                      The current system applies to those mining operations
    processes	and,	in	fact,	the	maintenance	of	the	integrity	              that are subject to the mining security provisions of the
    of	the	fidelity	fund	requires	that	there	is	improved	                  Mining Act 1978.	This	excludes	most	State	Agreement	
    demonstration	from	tenement	holders	that	they	will	                    Act	projects	that	specifically	limit	the	application	of	the	
    have	adequate	access	to	money	to	close	and	rehabilitate	               Mining Act 1978.	State	Agreement	Acts	are	project-
    their	mine	site	(and	not	be	encouraged	to	view	the	fidelity	           specific	legislation	passed	by	the	Parliament	of	Western	
    fund	as	a	substitute	for	financially	provisioning	                     Australia	and	can	only	be	changed	with	the	consent	
    for	closure).                                                          of both parties as they constitute a bilateral agreement
                                                                           between	the	government	and	the	company.

                                                                           Most	of	the	State’s	large	projects,	such	as	the	main	iron	
                                                                           ore	producers,	operate	under	State	Agreement	Acts,	
                                                                           leaving	them	outside	the	scope	of	this	review.	They	
                                                                           can,	however,	be	subject	to	securities	applied	under	the	
                                                                           Environmental Protection Act 1986.



6                                   Department of Mines and Petroleum Western Australia’s Mining Security System
Environmental Protection Act 1986                                         There	are,	however,	240	tenements	which	have	
The Environmental Protection Act 1986 provides for                        been forfeited by the government or surrendered by
a range of securities to be applied to implemented                        companies,	most	commonly	as	the	result	of	an	inability	
proposals,	work	approvals,	and	other	licences	and	                        to	maintain	rent	and	expenditure	obligations.	These	
notices issued under the Environmental Protection                         tenements have environmental disturbance that has
Act 1986. The amount of the security is based on                          not been addressed by the mining operator and have
the	estimated	total	costs	required	to	undertake	the	                      environmental bonds currently in place amounting to
remediation	work.	                                                        nearly	$6	million.	

It	is	generally	accepted	between	the	department	and	                      In	addition	to	these	factors,	there	are	a	number	of	other	
the	Office	of	the	Environmental	Protection	Authority	                     risk factors of concern to the government that have the
that,	where	a	project	is	subject	to	the	Mining Act 1978,                  potential	to	increase	the	State’s	actual	liability:	the	extent	
mining	securities	will	be	imposed	only	by	the	Department	                 of	industry	growth	and	expansion;	the	increasing	number	
of Mines and Petroleum.                                                   of mines on care and maintenance; and the incidence
                                                                          of	smaller,	less	financially	secure,	companies	taking	on	
Prospecting and exploration activity                                      mature	projects	with	large	environmental	liabilities.
As	is	the	case	with	the	current	environmental	bonds	
system,	it	is	not	the	intention	of	the	department	to	                     3.2.1 Industry growth and expansion
apply	mining	securities	to	exploration	and	prospecting	                   While	the	global	financial	crisis	of	2008	did	appear	to	
activities,	except	in	those	circumstances	in	which	                       have	a	negative	impact	on	development,	the	number	
there	is	a	history	of	non	compliance;	when	exploration	                   and area of mining tenements is continuing the strong
activities are undertaken in environmentally sensitive or                 growth	path	of	recent	years.	Figure	1	illustrates	that,	over	
conservation	estate	areas;	or	where	such	activity	would	                  the	last	six	years,	the	number	of	mining	tenements	in	
result in high levels of disturbance.                                     force has increased by a third and the area of the State
                                                                          under active mining tenement has almost doubled.
The	extent	of	variability	in	proposed	exploration	and	
prospecting	activities	means	that	the	department	will	be	                 There	are	now	more	than	4,000	tenements	which	have	
required	to	assess	eligibility	for	exemption	from	mining	                 mining	securities	held	against	them.	Figure	2	shows	that	
security	requirements	on	a	case-by-case	basis.	In	the	                    the	number	of	tenements	requiring	bonds	has	doubled	
interest	of	providing	certainty	to	industry,	however,	it	                 in the last ten years and the total value of the bonds has
is	intended	that	guidelines	to	indicate	when	mining	                      tripled over the same period.
securities	might	apply	will	be	developed.
                                                                          The increased investment and activity in the State’s
3.2 Risk to the State                                                     mining industry has resulted in an increase in both the
The	operational	life	of	mines	can	extend	for	many	years,	                 scale and number of operations.
typically	from	five	to	20	years,	and	in	some	cases	more	
than	50	years.	Mine	site	rehabilitation,	closure	works	and	               3.2.2 The number of mining operations on care and
post-closure	monitoring	can	then	take	some	years	to	                      maintenance
complete.                                                                 The	recent	growth	in	mining	activity	has	occurred	at	the	
                                                                          same time as there has been an increase in the number
In	the	minority	of	cases	where	operators	are	unable	to	                   of	inactive	mine	sites	where	the	tenements	are	placed	on	
fulfil	their	mine	rehabilitation	and	closure	obligations,	this	           care	and	maintenance	by	companies	(see	Figure	3).	
may be attributable to a range of factors including:
	 financial	difficulties,	brought	on	by	circumstances	                    There is also anecdotal evidence from pastoral
  such	as	lower	than	expected	commodity	prices,	                          lease holders that some mines placed on care
  higher operating costs or an unanticipated decrease                     and	maintenance	are,	to	all	intents	and	purposes,	
  in	the	grade	or	size	of	the	mineral	reserve;                            abandoned.
	 technical	or	environmental	issues,	such	as	adverse	
  geotechnical conditions or a catastrophic natural                       3.2.3 Transfer of mining projects to smaller, less
  event; and                                                              financially secure, companies
    social or community pressures.                                        The history of mining in Western Australia demonstrates
                                                                          that	often	another	company	will	take	over	a	failed	
While the State’s total contingent liability for mine                     (or	closed)	site	and	assume	the	previous	operator’s	
rehabilitation and closure represents a substantial                       environmental obligations.
amount	of	money,	the	State’s	actual	liability,	at	this	
point	in	time,	is	much	lower.	Instances	of	companies	                     Many smaller companies purchasing mature mining
going	into	administration	or	otherwise	failing	to	fulfil	their	           projects	do	not	always	fully	comprehend	the	financial	
rehabilitation	obligations	resulting	in	bonds	being	called-               commitment	that	is	required	in	order	to	satisfactorily	
in	by	the	government	are	low.	This	has	only	occurred	                     achieve mine closure. Smaller companies also may
with	59	of	the	more	than	4000	tenements	currently	                        not	have	the	financial	or	technical	capacity	to	deal	with	
bonded,	and	represents	$2.5	million,	or	0.3%,	of	the	                     unanticipated	or	complex	environmental	impacts.
total value of bonds held by the government.


                              Department of Mines and Petroleum Western Australia’s Mining Security System                                  7
                                                                                                     60                                                                                                                                                                         20000
    Reliance	on	new	tenement	holders	agreeing	to	assume	
    control and accept rehabilitation and closure liabilities
    resulting from previous mining is considered by the                                              50
                                                                                                                                                                                                                                                                                16000
    department to have the potential to lead to a large
    number of abandoned mines.




                                                                           Area (millions of ha.)
                                                                                                     40
                                                                                                                                                                                                                                                                                12000




                                                                                                                                                                                                                                                                                            Number
    3.2.4 Summary of the risk to the State                                                           30
    The risk to the State relates to the government having to                                                                                                                                                                                                                   8000
    bear the costs to rehabilitate mine sites. The department                                        20
    is	of	the	view	that,	because	the	government	would	
    be	required	to	meet	at	least	75%	of	the	rehabilitation	                                          10
                                                                                                                                                                                                                                                                                4000
    costs	if	a	company	defaults,	it	is	currently	exposed	to	a	
    potentially ‘catastrophic’ consequence, in that the cost
                                                                                                      0                                                                                                                                                                         0
    to	government	could	amount	to	a	huge	financial	loss	in	




                                                                                                             2000–01


                                                                                                                            2001–02


                                                                                                                                             2002–03


                                                                                                                                                                2003–04


                                                                                                                                                                                       2004–05


                                                                                                                                                                                                           2005–06


                                                                                                                                                                                                                                  2006–07


                                                                                                                                                                                                                                                    2007–08


                                                                                                                                                                                                                                                                     2008–09
    the	case	of	a	large	and	complex	mine	site	failure.

    Determining likelihood	is	more	complex.	While,	                                                                    Area of Tenements in Force                                                Number of Tenements in Force
    historically,	there	has	been	a	limited	call	on	bonds	to	
    fund	mine	site	rehabilitation,	this	figure	is	distorted	                                               Figure 1. Increasing tenements in Western Australia Source: DMP
    because government is not likely to call in a bond
    when	the	bond	moneys	available	for	each	tenement	
    are	inadequate	to	complete	rehabilitation.	Fortunately,	                                        1000                                                                                                                                                                        5000
    the failure to rehabilitate immediately can generally be
    managed,	considering	that	many	previously	worked	
    mine	sites	are	subsequently	reopened	for	further	                                               800                                                                                                                                                                         4000




                                                                                                                                                                                                                                                                                        Number of Tenements with Bonds
    mining,	thus	providing	another	opportunity	to	undertake	
                                                                        Value of Bonds ($m)




    rehabilitation. This has given a sense that the likelihood
                                                                                                    600                                                                                                                                                                         3000
    of the government having to take control to rehabilitate a
    mine site is ‘rare’ or ‘unlikely’.
                                                                                                    400                                                                                                                                                                         2000
    The	global	financial	crisis,	however,	brought	the	prospect	
    of	the	potential	for	the	government	to	be	required	to	
    pay for rehabilitation to light. A number of companies                                          200                                                                                                                                                                         1000
    approached	the	government	for	bond	relief,	while	others	
    were	placed	on	care	and	maintenance	(the	number	of	                                               0                                                                                                                                                                         0
    inactive	sites	has	continued	to	increase;	see	Figure	3).	
                                                                                                             2000–01


                                                                                                                           2001–02


                                                                                                                                       2002–03


                                                                                                                                                          2003–04


                                                                                                                                                                             2004–05


                                                                                                                                                                                                 2005–06


                                                                                                                                                                                                                     2006–07


                                                                                                                                                                                                                                        2007–08


                                                                                                                                                                                                                                                         2008–09


                                                                                                                                                                                                                                                                      2009–10
    This	experience,	coupled	with	changing	community	
    attitudes	towards	environmental	management	and	
    the	rapid	expansion	in	exploration	and	mining	activity	                                                            Total Value of Bonds                               Total Number of Bonds
    (Figures	1	and	2),	suggests	the	likelihood	for	the	
    government having to take control and rehabilitate a                                                   Figure 2. Increasing mining securities held against tenements in
    mine site should be raised to ‘moderate’.                                                              Western Australia Source: DMP

    In	summary,	the	risk	to	the	government	of	having	to	bear	
    costs	to	rehabilitate	a	large	and	complex	mine	site,	or	a	                                      250
    number	of	smaller	mine	sites,	would	be	at	least	medium	
    using	a	standard	risk	assessment	framework.	This	is	
                                                                                                    200
    considered to be an unacceptable level of risk to be
    borne by the government.
                                                                         No. of Projects




                                                                                                    150
    It	is	recognised	that	past	frequency	may	not	be	an	
    accurate	prediction	of	the	future,	and	consideration	
    was	given	as	to	whether	it	would	be	achievable,	as	part	                                        100
    of	this	review,	to	undertake	a	predictive	assessment	
    of	the	likely	number	of	companies	(and	therefore	                                                50
    resulting	tenements)	that	may	fail	in	the	future.	It	is	
    the	department’s	position,	however,	that	it	cannot	
    be	involved	in	assessing	the	financial	position	of	                                               0
                                                                                                             2000

                                                                                                                          2001


                                                                                                                                      2002

                                                                                                                                                       2003

                                                                                                                                                                      2004


                                                                                                                                                                                         2005

                                                                                                                                                                                                           2006

                                                                                                                                                                                                                               2007

                                                                                                                                                                                                                                             2008


                                                                                                                                                                                                                                                              2009

                                                                                                                                                                                                                                                                        2010




    companies	in	this	manner	as	such	an	exercise	would	
    have	the	potential	to	impact	on	the	financial	standing	of	
    companies.                                                                                             Figure 3. Cumulative number of mining projects made inactive each
                                                                                                           year in Western Australia since 2000 Source: DMP



8                                   Department of Mines and Petroleum Western Australia’s Mining Security System
4. Objectives of mining securities                                      As	a	result,	the	department	has	further	investigated	
                                                                        and	refined	the	fidelity	fund	option.	Progression	to	a	
The principal objective of mining securities is to
                                                                        full cost unconditional performance bond system has
ensure	that	sufficient	funds	are	immediately	available	
                                                                        been	retained	if	the	fidelity	fund	option	is	found	to	be	
to government to rehabilitate mine sites in the event
                                                                        unachievable.
of	operators	not	fulfilling	their	mine	rehabilitation	and	
closure obligations. The government’s position is that
it	expects	the	costs	for	mine	rehabilitation	and	closure	               5.1 Full cost unconditional performance
to	be	borne	by	industry	and	that,	accordingly,	the	State	               bonds
should	not	be	held	financially	responsible	in	cases	where	              This option involves the retention of a mining securities
companies	either	cannot,	or	are	unwilling	to,	address	                  system	based	on	unconditional	performance	bonds,	
their environmental obligations.                                        with	bond	rates	raised	to	cover	full	rehabilitation	and	
                                                                        closure	costs	(i.e.	the	cost	of	a	third	party	conducting	
While	the	degree	to	which	the	current	system	has	failed	                the	rehabilitation	works	and	additional	funds	to	cover	
to	meet	its	principal	objective	is	debatable,	it	is	widely	             contingencies,	and	administrative	and	monitoring	costs	
accepted by government and the mining industry that                     for	government).	
current bond levels represent only a small percentage
(i.e.	in	most	cases	less	than	25%)	of	the	full	cost	of	                 Increasing the current bonds so that they represent the
rehabilitation and mine closure.                                        full	cost	of	rehabilitation	and	closure	would	bring	Western	
                                                                        Australia’s	mining	security	system	broadly	in	line	with	
Mining securities may also have secondary objectives or                 other Australian jurisdictions in terms of methodology
impacts such as encouraging acceptable environmental                    and level of security provided to government.
outcomes or affecting the ability of the State to attract
mining investment.                                                      As	bonds	would	only	be	triggered	(or	called-in)	in	the	
                                                                        case	of	mining	companies	being	unable	to	fulfil	their	
5. Options to address the issue                                         obligations,	they	must	be	based	on	full	third-party	
The	department	has	reviewed	the	submissions	received	                   closure	costs.	If	not,	the	government	could	be	liable	
on the Preliminary Discussion Paper and conducted                       for	part	closure	costs.	For	this	reason,	the	government	
additional research to evaluate options considered as                   would	not	be	considering	a	discount	system	for	bonds.
worthy	of	further	investigation.	
                                                                        In	determining	the	level	of	bonds	required,	it	would	be	
There has been support from industry to further                         necessary to obtain a reasonably accurate estimation
investigate	the	fidelity	fund	option	as	a	possible	                     of	rehabilitation	and	closure	costs,	as	this	will	directly	
alternative to the current environmental bond system.                   impact	both	the	amount	of	money	it	will	cost	the	
Other	interested	parties,	such	as	environmental	                        company	and	the	degree	to	which	the	government’s	
consultants,	non-government	organisations	and	other	                    financial	risk	is	addressed.	There	are	many	sources	
government	agencies,	were	generally	in	favour	of	                       of	uncertainty	that	can	affect	closure	costs,	including	
implementing a full cost bond system.                                   unexpected	site	conditions,	the	presence	of	acid	mine	
                                                                        drainage,	and	the	costs	of	labour	and	equipment.	
While	the	concept	of	an	insurance-based	securities	
system	was	proposed	in	the	Preliminary	Discussion	                      Industry	stakeholders	have	expressed	a	preference	for	
Paper	(and	was	considered	by	some	stakeholders	to	                      project based bonds rather than the current system of
be	worthy	of	further	investigation),	no	insurance	policy	               tenement based bonds. Project based bonds may not
or	cover	in	global	markets	could	be	identified	that	                    be	appropriate	for	all	projects,	however,	an	ideal	system	
would	provide	the	government	with	the	level	of	security	                might	allow	operators	the	choice	of	either	tenement	or	
required.	Work	on	further	developing	an	insurance-                      project based bonds.
based	securities	system	was	therefore	not	progressed.	
The provision of unconditional performance bonds by                     The implementation of project based bonds could also
insurance	companies,	however,	has	been	presented	                       reduce	the	administrative	burden	for	the	department,	
as an option in the event of a bonding system being                     financial	institutions	and	companies,	whilst	supporting	
retained.                                                               better environmental outcomes through a holistic
                                                                        approach to encouraging greater progressive
The department also considered the possibility of a                     rehabilitation.
combination	system,	whereby	companies	would	be	
required	to	provide	unconditional	performance	bonds	                    Industry has previously highlighted the issue of bond
for a portion of the full cost of rehabilitation and mine               reviews	not	being	timely.	Under	this	model,	the	financial	
closure,	supplemented	by	a	fidelity	fund	contribution	on	               burden	on	industry	will	be	significantly	increased,	in	
the remaining portion of liability. While such a system                 comparison	to	the	current	level	of	bonding,	and	the	issue	
may encourage progressive rehabilitation to a greater                   of	timely	bond	reviews	will	be	even	more	important.	The	
extent	than	the	fidelity	fund	model	and	also	provide	                   department	would	therefore	need	to	provide	adequate	
funds	for	the	rehabilitation	of	abandoned	mine	sites,	                  prioritisation	to	conduct	these	bond	reviews.
these	benefits	would	be	outweighed	by	the	increased	
costs	to	maintain	two	distinct	systems.



                            Department of Mines and Petroleum Western Australia’s Mining Security System                               9
     In	reviewing	options	for	improving	the	application	of	                  industry	approved	claims	on	its	funds,	government	
     a	bonds	system,	the	department	is	proposing	the	                        approved	claims	on	its	funds).	Approval	to	determine	the	
     capacity for bonds to also be provided by insurance                     level	of	contribution	to	the	funds,	however,	was	required	
     companies as an alternative instrument. Such bond                       by	a	Minister	for	the	industry	operated	funds,	whilst	the	
     arrangements	would	have	the	advantage	of	requiring	                     departmental	CEO	determined	contribution	levels	for	
     less	up-front	collateral,	possibly	allowing	companies	                  the	government	funds.	All	four	fidelity	funds	allowed	for	
     that	would	currently	be	required	to	cash-back	bank	                     an	extraordinary	levy	to	be	imposed	if	the	balance	was	
     guaranteed bonds to have access to more investment                      considered	insufficient	to	satisfy	the	liabilities	of	the	fund.	
     capital.	Bonds	provided	by	insurance	companies	could	                   Transparency	was	provided	by	all	funds	through	the	
     also have the advantage of the insurance company                        publication of activities in their annual reports.
     working	with	mining	companies	to	ensure	that	they	are	
     complying	with	rehabilitation	requirements.                             The department proposes incorporation of similar
                                                                             structural	components	into	the	Mining	Rehabilitation	
     As	the	State’s	current	Bond	Policy	includes	a	schedule	                 Fund	following	evaluation	and	consultation	with	
     for	the	progression	to	bonds	reflecting	50%	of	total	                   representatives of some of these funds.
     closure	costs	by	2014,	the	financial	comparisons	
     presented in this paper have included the current                       The	key	difference	between	the	fidelity	funds	examined	
     bond	situation	(based	on	the	assumption	of	bonds	                       and	the	Mining	Rehabilitation	Fund	proposed	in	this	
     representing	25%	of	actual	closure	costs),	50%	bond	                    paper	is	the	claimant.	In	all	four	fidelity	funds	a	member	
     rates	as	well	as	full	cost	bonds.                                       of	the	public	is	the	party	who	has	suffered	a	loss	and	
                                                                             is seeking reimbursement or compensation. In the
     5.2 Mining Rehabilitation Fund                                          case	of	mining	securities,	if	a	company	defaults	on	its	
     Establishing	a	Mining	Rehabilitation	Fund	would	                        rehabilitation and closure obligations the government
     represent	a	new	approach	to	mining	securities	in	                       would	suffer	the	loss	and	is	therefore	the	claimant.	The	
     Western	Australia.	Such	a	fund	would	accumulate	                        department	has	reviewed	the	various	management	
     over time and be used by the government to meet                         models	for	the	fund	and	considers	that	while	the	
     the occasional failure by a company to meet its mine                    government	is	the	beneficiary	of	the	fund,	it	will	also	
     rehabilitation	and	closure	obligations,	more	closely	                   need to be ultimately responsible for the management
     reflecting	the	overall	industry	risk	to	government	of	failure	          of the fund. It is therefore proposed that the government
     to rehabilitate a mine site.                                            administers	the	fund	and	approves	all	expenditure.

     The	framework	for	the	Mining	Rehabilitation	Fund	(as	                   It	should	be	noted	that	this	approval	provision	will	
     recommended	in	this	paper)	has	been	substantially	                      be subject to further consultation. If the Mining
     altered from that proposed in the Preliminary Discussion                Rehabilitation	Fund	is	to	be	implemented,	the	
     Paper as a result of further research and stakeholder                   government	will	prepare	an	amendment	bill	to	
     input.                                                                  establish	the	fund	which	will	also	clarify	the	approval	
                                                                             responsibilities	for	the	fund’s	operation	(i.e.	the	
     Objective                                                               contribution	rate	and	size	of	the	balance).	The	bill	will	
     The objective of the fund is to ensure that there is                    entail	its	own	consultation	process	in	which	stakeholders	
     sufficient	money	available	to	government	to	manage	                     will	be	invited	to	participate	and	provide	feedback.
     the	reasonably	foreseeable	financial	liability	arising	from	
     mining projects operating subject to the Mining Act                     It	is	acknowledged	that	independent	expert	advice	is	
     1978.	It	will	only	finance	closure	on	those	mine	sites	                 beneficial	in	operating	such	a	fund.	It	is	proposed	that	
     where	all	reasonable	compliance	options	have	been	                      the	department	will	be	supported	by	an	independent	
     explored,	and	another	operator	cannot	be	found	to	take	                 advisory	panel,	comprising	of	non-government	
     over the liability.                                                     members,	which	would	provide	expert	guidance	
                                                                             on	issues	relating	to	the	fund’s	operation	as	well	as	
     Structure and governance                                                prioritising mine sites eligible for rehabilitation.
     Following	requests	from	industry,	the	department	
     reviewed	several	fidelity	funds	in	considering	the	most	                Industry highlighted in its submissions the need for
     suitable	structure	for	the	Mining	Rehabilitation	Fund.	                 stringent controls to be applied to the use of money
     Two	government-established	fidelity	guarantee	accounts	                 out	of	the	Mining	Rehabilitation	Fund.	This	would	also	
     operating	in	Western	Australia	for	settlement	agents,	real	             be addressed through the legislative amendments for
     estate	and	business	agents	were	examined,	in	addition	                  the	funds	operation.	The	legislation	would	ensure	that	
     to	two	industry-established	legal	funds	operating	in	New	               the money from the fund can only be spent on those
     South	Wales	and	New	Zealand.	Each	of	these	funds	                       activities	for	which	it	was	established.	Public	reporting	
     has been established to enable a member of the public                   requirements	for	such	a	fund	would	also	ensure	that	the	
     to make a claim for losses resulting from a solicitor's                 industry’s	environmental	performance	will	be	open	to	
     settlement	agents,	or	real	estate	or	business	agent’s	                  public scrutiny.
     fraudulent	actions	(see	Appendix	1	for	further	details).
                                                                             Size of the fund
     In	each	of	these	fidelity	fund	models,	the	operator	of	                 As discussed in the ‘summary of the risk to the State’
     the	fund	was	also	the	party	to	approve	the	claims	(i.e.	                (section	3.2.4),	the	department	considers	there	is	a	


10                                    Department of Mines and Petroleum Western Australia’s Mining Security System
moderate risk of government having to bear the costs to                 4.	 Once	established,	the	expenditure	out	of	the	fund	
rehabilitate	mine	sites.	This	assessment	has	influenced	                    will	be	constrained	so	that	the	capital	of	the	fund	
the	basis	for	determining	the	appropriate	size	of	the	                      is	predominately	preserved,	and	that	scheduled	
fund.                                                                       rehabilitation	expenditure	equates	to	the	growth	of	
                                                                            the fund above the target amount. This ensures that
For	the	fund’s	establishment,	the	target	balance	will	be	                   the capital of the fund is available for ‘emergency’
based	on	ensuring	there	is	sufficient	money	available	                      expenditure.
to government to cover the cost to fully rehabilitate the
Mining Act 1978 project	with	the	largest	rehabilitation	                Contributions
liability.	This	is	currently	estimated	at	approximately	                The	Mine	Rehabilitation	Fund	proposes	that	mining	
$300	million	based	upon	modelling	undertaken	by	the	                    tenement holders operating under the Mining Act 1978
department. Whilst the likelihood of the largest project                would	contribute	a	non-refundable	amount	to	a	central	
defaulting	is	considered	low,	adopting	this	target	                     fidelity	account	administered	by	the	department.	The	
means	that	the	fund	would	effectively	cover	any	Mining                  Preliminary Discussion Paper proposed to base the fund
Act 1978	site	failing.	It	would	also	provide	coverage	                  contribution	for	each	mining	operator	on	8	to	10%	of	a	
for	several	projects	defaulting	which	have	a	smaller	                   company’s	total	rehabilitation	and	closure	costs,	paid	
closure	liability.	Had	the	risk	been	deemed	greater	than	               over	a	period	of	four	to	six	years.	Additional	research	
‘moderate’,	consideration	would	have	been	given	to	                     and	modelling,	however,	has	resulted	in	the	basis	of	the	
increasing	the	target	fund	balance	beyond	the	size	                     fund	contributions	being	modified.	
of	the	liability	of	the	largest	project.	However,	the	risk	
assessment indicates that because the likelihood is no                  It	is	considered	that	a	model	based	on	a	flat-rate	annual	
greater	than	‘medium’,	a	fund	which	will	adequately	                    contribution according to each company’s environmental
cover the largest site is appropriate.                                  liability	will	be	more	appropriate	as	it	would	reduce	
                                                                        administrative	complexity	for	both	the	operator	and	
Upon	the	implementation	of	mine	closure	planning,	an	                   the	department,	and	align	better	with	the	principles	
accurate assessment of the total liability for Mining Act               sought	from	this	review.	Modelling	undertaken	by	the	
1978	operations	will	be	determined,	as	self-assessed	                   department	shows	that	a	likely	rehabilitation	fee	of	1.5%	
by	the	industry.	Following	several	years	of	operation,	                 applied annually to the total cost of rehabilitation and
sufficient	historical	data	will	be	generated	to	enable	the	             mine site closure for Mining Act 1978	sites,	would	result	
target	size	of	the	fund	to	be	kept	under	review	each	year	              in	the	minimum	fund	balance	being	achieved	within	5	to	
to	ensure	it	is	commensurate	with	the	financial	risk	to	                7	years	(provided	no	major	drawdowns	occurred).	The	
government.                                                             fee	will	be	set	by	regulation	and	reviewed	each	year.

It	is	acknowledged	that	to	set	the	target	of	the	fund	at	               Annual	contributions	will	be	payable	based	upon	an	
anything less than the combined closure costs of all                    operator’s	actual	rehabilitation	liability,	in	accordance	with	
mine sites means that there remains a potential residual                the	following	formula:
financial	exposure	to	government.	However,	it	is	not	                        Annual payment ($) =
considered reasonable to suggest that all mine sites in                      current rehabilitation liability ($) x rehabilitation fee (%)
Western	Australia	will	fail,	and	certainly	not	fail	at	the	
same time. The department is proposing that the fund                    Annual	payments	will	be	self	assessed.	Companies	will	
include	the	following	key	components	which	will	mean	                   calculate their current liability based upon the cost that
that it is able to be reactive to the performance and                   would	be	borne	by	that	operator	for	rehabilitation.	Whilst	
financial	environment	of	the	industry.                                  the	department	did	consider	requiring	third	party	costs	
1. The fund is proposed to be established and build up                  of	rehabilitation	to	be	used	in	the	formula,	following	
   to	the	target	amount	within	a	relative	short	period	of	              feedback	from	industry	stakeholders	it	was	decided	
   time	(5	to	7	years).	Therefore,	once	established	the	                company costs made the calculation of the payment
   fund	will	continue	to	receive	contributions	and	will	be	             simpler	and	more	equitable.	Third	party	costs	will	be	
   able	to	respond	to	the	anticipated	drawdown.                         applied,	however,	by	the	department	in	calculating	the	
                                                                        fund’s	target	balance	(i.e.	they	will	be	applied	to	the	
2.	 The	establishment	of	the	fund	will	provide	for	an	                  largest	project’s	rehabilitation	and	closure	liability	costs).	
    extraordinary	levy	to	be	imposed	on	Mining Act                      Annual payments may also be subject to a third party
    1978 tenement holders if a major event occurs and                   audit.
    the	target	fund	balance	does	not	provide	sufficient	
    coverage.	This	will	provide	comfort	to	both	the	                    As	noted	above,	annual	contributions	will	be	non-
    community and government that such a risk can be                    refundable.	It	will	be	the	role	of	the	department	to	
    managed appropriately.                                              effectively	manage	the	fund,	(with	advice	from	the	
3.	 It	is	proposed	that	the	rules	for	the	fund	will	minimise	           advisory	panel)	ensuring	that	the	balance	is	reflective	
    drawdowns	during	the	build	up	of	the	fund	to	ensure	                of	the	State's	risk	and	that	an	excessive	balance	is	
    the	target	balance	is	reached	within	a	period	of	time	              therefore	not	generated.	However,	in	the	preparation	of	
    that	limits	the	government’s	exposure	to	no	more	                   the	legislation	the	department	will	investigate	whether	
    than the current level.                                             there	is	a	need	to	include	an	equitable	mechanism	to	
                                                                        credit	moneys,	if	the	balance	of	the	fund	significantly	



                            Department of Mines and Petroleum Western Australia’s Mining Security System                                     11
     exceeds	the	requirement	to	meet	the	State’s	foreseeable	                                                                 3.	 The	mining	security	is	secure	and	immediately	
     financial	liability.	The	flexible	nature	of	the	proposed	                                                                    accessible	by	the	government,	and	its	administration	
     model	does	provide	the	government	with	the	ability	to	                                                                       is cost effective.
     alter	the	rehabilitation	fee	annually,	where	required,	to	                                                               4.	 The	mining	securities	framework	is	clear	and	
     control the balance.                                                                                                         workable,	and	is	supported	by	a	robust	compliance	
                                                                                                                                  system to ensure operators do not avoid their mine
     The department proposes that any interest earned on                                                                          closure obligations.
     the	Mining	Rehabilitation	Fund	will	be	returned	to	the	
                                                                                                                              5.	 The	calculation	of	a	mining	security	is	flexible,	being	
     fund.
                                                                                                                                  commensurate	with	environmental	risk.
     Fund contributions and rehabilitation costs                                                                              6.	 The	application	and	relinquishment	processes	for	
     A	key	concern	raised	by	many	stakeholders	was	                                                                               mining	securities	are	transparent,	predictable	and	
     ensuring that operators contributing to the fund did                                                                         applied	equitably.
     not	perceive	it	as	payments	which	will	go	towards	their	
     own	rehabilitation,	in	that	an	operator	could	default	on	                                                                A summary of an assessment of the proposed models
     closure	and	rehabilitation	requirements	and	expect	the	                                                                  against these evaluation criteria is provided in Table 1.
     fund	to	cover	the	costs.	The	requirement	for	each	mining	                                                                A	more	detailed	discussion	is	provided	in	the	following	
     operator	to	finance	their	own	rehabilitation	and	closure	                                                                sections.
     works	in	accordance	with	their	mine	closure	plans	
     remains in force. To ensure progressive rehabilitation                                                                     Table 1. Summary of evaluation of proposed mining security
     is	undertaken,	it	is	proposed	that	the	implementation	                                                                     options
     of	the	fund	would	be	accompanied	by	an	enhanced	
                                                                                                                                                                                                  Mining
     compliance system under the Mining Act 1978. This                                                                                                                             Full cost
                                                                                                                                Evaluation criteria                                            Rehabilitation
     will	include	the	ability	to	impose	full	cost	unconditional	                                                                                                                    bonds
                                                                                                                                                                                                  Fund
     performance	bonds	on	non-complying	operators.
                                                                                                                               Principal Objective
     Secondary application of funds                                                                                                  To ensure that sufficient funds
     Moneys	from	the	fund	would	also	be	used	to	carry	                                                                               are immediately available to
     out	approved	rehabilitation	works	for	abandoned	mine	                                                                           government to rehabilitate mine
                                                                                                                                                                                   333            333
     sites4,	but	does	not	include	the	rehabilitation	of	State	                                                                       sites in the event of operators not
     Agreement	Acts,	or	other	sites	which	are	not	subject	to	                                                                        fulfilling their mine rehabilitation
                                                                                                                                     and closure obligations
     the mining security provisions of the Mining Act 1978.
     Controls	would	be	implemented	to	ensure	expenditure	                                                                      Evaluation Principles
     on abandoned mines did not result in the fund balance                                                                     1     Investment in the State’s mining
     falling	below	the	target	amount.                                                                                                sector is not unnecessarily                     3            333
                                                                                                                                     deterred
     Appendix	2	contains	a	detailed	description	of	the	                                                                        2     Encourages good environmental
     model’s	operation,	with	Appendix	3	providing	a	                                                                                 practice, including progressive
     proposed	legal	framework	for	the	governance	of	the	                                                                                                                           333              3
                                                                                                                                     rehabilitation, and compliance with
     fund.                                                                                                                           legal obligations
                                                                                                                               3     Security is secure and immediately
     6. Evaluation of policy options                                                                                                 accessible by the government, and             333            333
     6.1 Evaluation criteria                                                                                                         administration is cost effective.
     The principal objective of mining securities is to                                                                        4     Cost calculation is flexible and
     ensure	that	sufficient	funds	are	immediately	available	                                                                         commensurate with environmental                 3              3
     to government to rehabilitate mine sites in the event                                                                           risk
     of	operators	not	fulfilling	their	mine	rehabilitation	and	                                                                5     Framework is clear and workable
     closure obligations.                                                                                                            and supported by a robust                     333            333
                                                                                                                                     compliance system
     The	suitability	of	the	proposed	options	was	also	based	                                                                   6     Application and relinquishment
     on	principles	listed	below:	                                                                                                    processes are transparent,                    333              *
     1.	 The	quantum	of	mining	securities	does	not	                                                                                  predictable and applied equitably
         unnecessarily deter investment in the State’s
         mining	sector,	ensuring	Western	Australia	remains	                                                                   6.2 Evaluation of the options
         competitive in attracting investment to the resources                                                                The key criterion in considering any option for a future
         exploration	and	development	sector.                                                                                  mining	securities	system	is	that	it	provides	for	sufficient	
     2.	 Mining	securities	continue	to	encourage	operators	                                                                   funds to be made available to government to rehabilitate
         to	apply	good	environmental	practice,	including	                                                                     mine	sites	in	the	event	of	operators	not	fulfilling	their	
         progressive	rehabilitation	and	reporting,	and	to	                                                                    mine	rehabilitation	and	closure	obligations.	In	doing	so,	
         comply	with	all	legal	obligations	under	the	Mining Act                                                               the	new	system	will	address	the	unacceptable	financial	
         1978	for	exploration,	mining	and	mine	closure.                                                                       risk currently faced by the government.
     4
         Mines where reasonable responsibility for rehabilitation cannot be allocated to any individual, company or organisation responsible for the original mining activities.



12                                                               Department of Mines and Petroleum Western Australia’s Mining Security System
While	the	two	options	are	principally	designed	to	meet	                   Even	large	companies,	that	are	not	required	to	provide	
this	criterion,	it	is	expected	that	the	fidelity	fund	option	             direct	cash	or	asset	security	for	bonds,	are	adversely	
would	not	meet	this	objective	until	the	fund	has	been	                    affected in that the full value of the bond is allocated
operating for a number of years.                                          as	credit	utilisation	by	the	banks	and	capital	markets,	
                                                                          effectively reducing their capacity to raise debt to fund
There	would	always	be	a	difficulty	in	balancing	between	                  existing	and	new	operations.
minimising government’s risk and applying too great a
financial	penalty	on	companies.	In	this	sense,	both	the	                  In	general,	large	companies	operating	profitable	projects	
options	in	this	paper	will	present	a	degree	of	financial	risk	            are	considered	to	be	low	risk	by	the	banks	and	are	
to	the	State	(directly	and	indirectly).                                   required	to	pay	the	lowest	direct	costs	to	service	bonds	
                                                                          (around	0.6%),	which	would	be	unlikely	to	change	in	a	
Some of the evaluation principles applied to the                          full cost bond scenario.
assessment	of	the	proposed	options	provide	context	
for	the	best	practice	administration	of	whichever	system	                 For	companies	with	a	medium	level	of	financial	risk	(as	
is	implemented.	Ensuring	that	the	mining	securities	                      determined	by	the	banks),	the	level	of	security	required	
framework	is	clear	and	workable,	and	is	supported	by	                     depends	upon	the	company’s	financial	position.	Where	
a robust compliance system to ensure operators do                         banks	determine	that	bonds	can	be	provided	without	
not	avoid	their	mine	closure	obligations,	is	a	priority	for	              security,	a	higher	annual	service	fee	(around	2%)	will	
the government. Once a decision has been made on                          be	applied	in	comparison	with	lower	risk	companies.	
the	actual	mining	securities	system	to	be	implemented,	                   Companies	that	provide	either	asset	or	cash-backing	
the	legislative	framework	will	be	reviewed	to	ensure	that	                receive	lower	annual	service	fees.	The	requirement	
the	legislative	compliance	framework	is	appropriate.	                     to	post	full	cost	bonds	would	be	likely	to	result	in	the	
(although	suggestions	are	included	for	the	fund	in	                       majority	of	medium	risk	companies	being	required	to	
Appendix	2).	Similarly,	a	clear	and	workable	compliance	                  cash-back	the	full	value	of	their	bonds,	considerably	
system	is	required,	and	this	will	also	be	addressed	prior	                increasing	the	level	of	indirect	costs	associated	with	
to	the	implementation	of	the	new	system.                                  bonds.

Likewise,	the	administrative	procedures	for	application	                  Higher	risk	companies	will	continue	to	be	required	to	fully	
and	relinquishment	processes,	not	only	for	a	future	                      cash-back	their	bonds	if	bond	rates	are	increased.	There	
mining	securities	system,	but	for	the	present	system,	                    is	the	potential	however,	that	some	of	these	companies	
need	to	be	addressed	to	ensure	they	are	transparent,	                     will	not	be	able	to	do	so	unless	they	can	raise	the	funds	
predictable	and	applied	in	an	equitable	manner.                           through	a	capital	raising	exercise.

Determining the most appropriate mining securities                        Estimating the financial impact of the proposed
system	for	Western	Australia,	therefore,	essentially	                     models
comes	down	to	the	following	key	factors	(noting	the	                      Table	2	provides	a	summary	of	the	estimated	annual	
principle	objective	is	met	by	each	of	the	options):	the	                  costs	for	the	proposed	options	in	comparison	with	
financial	impact	on	the	State’s	mining	sector;	the	degree	                the	current	bond	system.	Figures	are	provided	for	a	
to	which	the	government	can	be	assured	that	the	                          number	of	different	levels	of	liability	in	accordance	with	a	
desired	environmental	outcomes	will	be	achieved;	and	                     hypothetical bank risk rating approach.
the	extent	to	which	the	mining	securities	system	can	be	
applied	in	an	equitable	manner	across	the	industry.                       In	assessing	the	relative	cost	of	the	proposed	options,	
                                                                          the	key	determining	factor	is	not	the	direct	costs,	but	
6.2.1 Financial impact on the State’s mining sector                       the	indirect	costs.	The	comparison	exercise	applies	
In	reforming	the	State’s	mining	securities	system,	a	                     opportunity	cost	factors	of	8.8%	for	cash-backed	bonds	
key consideration of the government is to ensure that                     and	5.5%	for	asset-backed	or	unsecured	bonds,	derived	
Western Australia remains competitive in attracting                       from	the	Capital	Asset	Pricing	Model,	which	describes	
investment to the mining sector. Many companies are                       the	relationship	between	risk	and	expected	return	(refer	
operating on a global level and each mining jurisdiction’s                to	the	assumptions	attached	to	Table	2	for	more	detail).	
policy climate has therefore taken on increased
importance in attracting investment.                                      Any	tenement	holder	can	calculate	the	financial	impacts	
                                                                          of	the	two	options	described	in	this	paper	by	using	
Costs of maintaining bank-guaranteed unconditional                        the	cost	calculation	tool	which	is	available	on	the	
performance bonds                                                         department’s	website	at	http://www.dmp.wa.gov.au/
The main criticism from industry of bank guaranteed                       preferredoptionpaper. Both	the	cost	calculation	tool,	and	
unconditional performance bonds is that they can                          the	examples	in	Table	2,	are	derived	from	the	following	
require	considerable	set	up	and	maintenance	costs	for	                    formulas:
operators.	Companies	may	also	be	required	to	provide	
either cash or asset backing for the full amount of the
bond,	representing	significant	indirect	costs	for	the	
companies.



                              Department of Mines and Petroleum Western Australia’s Mining Security System                                13
     Calculating costs for full cost bonding:                                         assumed	in	this	comparison	exercise	if	the	interest	on	
        Annual cost to tenement holder ($) = (L x A) + B                              the	term	deposit	securing	the	bond	is	lower	than	the	
     where:                                                                           assumed	rate	of	6%.
         L is the current rehabilitation liability for the site ($)
                                                                                      Summary
         A is the annual service charged by the bank (%), plus the cost of
                                                                                      In	summary,	the	fidelity	fund	option	would	result	in	the	
         equity (Re) (%) minus the interest which is paid by the bank to
                                                                                      least additional cost to companies compared to the
         the tenement holder for any cash used to cash-back a bond (%)
                                                                                      current	bond	rates,	regardless	of	their	bank	risk	ratings,	
         B is the annualised cost ($) of other charges required to set up             and	may	actually	result	in	cost	reductions,	as	the	cost	is	
         the bank guaranteed bond (such as lawyer fees or set-up fees                 limited to the direct cost of the annual fund contributions.
         charges by the bank)                                                         The	cost	of	full	cost	bonds,	on	the	other	hand,	would	
                                                                                      be	much	higher,	generally	at	least	four	times	the	current	
     Calculating costs for the Mining Rehabilitation Fund:                            cost across the board.
        Annual cost to tenement holder ($) = L x R
     where:                                                                           Nevertheless,	it	can	be	surmised	that	the	cost	of	
         L is the current rehabilitation liability for the site ($)                   implementing	full	cost	bonds	would	be	expected	to	have	
         R is the annual contribution rate set by the government                      a	significant	impact	on	the	industry,	and	therefore	the	
         (proposed to be 1.5%)                                                        wider	economy.	The	Mining	Rehabilitation	Fund	would	
                                                                                      have	a	much	lesser	adverse	impact	while	still	having	the	
     Comparing the financial impact of the proposed                                   capability	of	addressing	the	government’s	financial	risk.
     models
     In comparing the relative costs of the proposed options
     to	current	costs,	implementation	of	the	full	cost	bond	
     option	would	see	costs	rise	by	a	factor	commensurate	
     with	the	degree	to	which	current	bonds	reflect	the	actual	
     cost to government of completing mine rehabilitation and
     closure	works.	Assuming	current	bond	rates	represent	
     25%	of	total	environmental	liability,	moving	to	full	cost	
     bonds	would	result	in	an	increase	in	annual	costs	by	
     a factor of at least four for all companies. Medium
     risk	companies	required	to	move	from	an	unsecured	
     or	asset-backed	bond	arrangement	to	cash-backing	
     would	be	the	most	adversely	affected	in	a	full	cost	bond	
     scenario.

     Assuming	that	current	bond	rates	represent	25%	of	
     total	environmental	liability,	the	fixed	rate	contributions	
     for	the	Mining	Rehabilitation	Fund	would	be	roughly	
     equivalent	to	the	cost	of	maintaining	current	bonds	rates	
     for	low	(financial)	risk	companies.	Companies	that	would	
     obtain	the	greatest	benefit	from	the	implementation	of	
     this	option	would	be	those	that	are	currently	required	to	
     cash-back	bonds,	with	estimated	annual	costs	reducing	
     by	40	to	50%.

     Variable costs
     In	attempting	to	compare	the	relative	costs	of	the	two	
     options,	there	are	many	other	variables	to	consider,	
     including	the	method	of	calculating	third-party	costs	for	
     full rehabilitation and closure costs.

     There	are	also	significant	differences	in	the	method	
     companies employ to raise capital. The cost of raising
     debt is traditionally regarded as a cheaper source of
     capital	than	raising	equity,	and	tends	to	disadvantage	
     smaller,	less	financially	secure	companies.	This	is	largely	
     due to the transaction costs involved in the raising of
     equity	capital,	such	as	management,	underwriting,	
     selling,	legal	and	accounting	fees.	

     The	opportunity	cost	to	companies	required	to	cash	
     back their securities can also be much higher than



14                                             Department of Mines and Petroleum Western Australia’s Mining Security System
 Table 2. Estimated annual costs for the Mining Rehabilitation Fund in comparison to the bond system

                                                                                                                Mining
 Bank risk rating (financial and                Total rehabilitation and                                     Rehabilitation
 environmental perspective)                      closure liability ($M)        Current bond system              Fund                  50% bonds                Full cost bonds
 Low
   large, global company                                  300                4.6 (unsecured)                       4.5           9.2 (unsecured)           18.3 (unsecured)
   good financial history
   operating profitable projects
   environmentally low risk commodity
                                                          150                2.3 (unsecured)                       2.2           4.6 (unsecured)           9.2 (unsecured)


 Medium                                                                      7.2 (cash backed)
   mid cap company                                        300                5.6 (unsecured)                       4.5           14.3 (cash backed)        28.6 (cash backed)
   sound balance sheet                                                       5.2 (asset backed)
   proven financial history
   operates a single project or multiple                                     3.6 (cash backed)
   operations in single commodity                         150                2.8 (unsecured)                       2.2           7.2 (cash backed)         14.3 (cash backed)
                                                                             2.6 (asset backed)

                                                                             2.4 (cash backed)
                                                          100                1.9 (unsecured)                       1.5           4.8 (cash backed)         9.6 (cash backed)
                                                                             1.8 (asset backed)

 High
    relatively new borrower                               100                2.7 (cash backed)                     1.5           5.4 (cash backed)         10.8 (cash backed)
    single asset company
    developing new project
                                                           50                1.4 (cash backed)                     0.8           2.7 (cash backed)         5.4 (cash backed)
    mid-cap company, environmentally
    riskier commodity
                                                           5                 0.1 (cash backed)                    0.08           0.3 (cash backed)         0.6 (cash backed)


Assumptions:
1.  Rates for the current bond system assumes only minimum rates are applied.
2.  Bond facility establishment fees are assumed to be zero.
3.  Current bond rates represent 25% actual liability.
4.  Annual service fees for low risk bank guarantees: 0.6%.
5.  Annual service fees for medium risk bank guarantees 2% (unsecured), 1.5% (asset-backed), 0.75% (cash-backed).
6.  Full cost bonds result in all medium risk companies being required to cash-back, with 0.75% annual service fee.
7.  High-risk companies will be required to cash-back and pay 2% annual service fees under both the current system and in a full cost bond scenario.
8.  The cost of equity (Re) is estimated to be equal to the current return on government bonds (5.5%), plus the average risk premium on a market portfolio scaled by a risk factor
    for a typical junior mid-cap company (7.5%). The cost of equity of 13% indicates the return that a company could have earned by investing in its next best investment. Hence,
    the opportunity cost factor for cash-backed bonds would be the difference between this cost of equity and the interest after tax on the term deposit securing the bond (at 6%
    interest, this is calculated to be 4.2% after tax), which returns an overall opportunity cost of 8.8%. Similarly for asset-backed or unsecured bonds, the opportunity cost factor
    would be the difference between the cost of equity and the cost of borrowing (7.5% is used in this impact analysis), which results in a figure of 5.5%.
9.  Fidelity fund contribution – calculated as 1.5% of total rehabilitation and closure costs.




                                        Department of Mines and Petroleum Western Australia’s Mining Security System                                                                    15
     6.2.2 The extent to which mining securities                             its ability to satisfactorily address its environmental
     encourage good environmental practice                                   obligations.
     The full cost bond option clearly has the greatest
     potential,	from	a	price	incentive	point	of	view,	to	ensure	             A mining security system comprising solely of
     compliance	with	environmental	obligations.	This	is	                     environmental bonds must necessarily consist of bonds
     particularly the case if bonds are responsive to the level              applied	which	will	cover	the	full	cost	of	rehabilitation	and	
     of	environmental	disturbance,	providing	companies	with	                 mine closure. This is not a position of ‘risk elimination’
     direct incentives to practice progressive rehabilitation.               on	the	part	of	the	government,	as	there	will	always	be	an	
                                                                             element of risk for the government in any security system
     In	a	full	cost	bond	scenario,	mining	companies	would	                   employed.	Applying	a	risk-based	approach	to	the	
     be	required	to	demonstrate	that	rehabilitation	has	been	                application of bonds for individual projects is considered
     performed satisfactorily in order to decrease the level of              to	be	likely	to	result	in	an	elevated	cumulative	risk,	and	
     bonds.	This	means	that	companies	are	required	to	prove	                 therefore	financial	liability,	for	the	government.	
     to the regulator that environmental standards have been
     met,	rather	than	the	regulator	having	to	demonstrate	that	              The principal objective of the future mining securities
     standards are not being achieved.                                       system	is	to	ensure	that	the	government	will	not	be	
                                                                             held	financially	responsible	for	mine	site	rehabilitation.	
     A	full	cost	bond	system	can	also	encourage	finalisation	                This	is	addressed,	to	a	certain	extent,	through	the	
     of	closure	works	through	a	relinquishment	process.	The	                 assessment	process	conducted	by	financial	institutions	
     difficulty	with	this	process,	however,	is	that	the	length	of	           when	determining	whether	or	not	to	provide	a	bond	
     time	required	to	provide	the	regulator	with	a	reasonable	               facility	(and	thus	allowing	a	project	to	proceed)	and	in	the	
     degree	of	certainty	that	future	problems	will	not	occur	                setting	of	annual	fees	and	security	requirements.	
     can take many years.
                                                                             It is the government’s position that it cannot be involved
     It	is	acknowledged	that	a	mining	securities	system	                     in	assessing	the	financial	position	of	companies	for	the	
     based	on	a	fidelity	fund	arrangement	would	not	provide	                 purpose of determining either the contribution rate for a
     the	same	price	incentive	of	the	full	cost	bond	option,	                 fidelity	fund	or	unconditional	performance	bonds.	Such	a	
     although	the	contribution	would	be	linked	directly	to	the	              practice	has	the	potential	to	impact	the	financial	standing	
     level	of	environmental	liability.	The	extent	to	which	the	              of	companies,	in	the	event	of	such	assessments	being	
     Mining	Rehabilitation	Fund	option	could	encourage	good	                 made	public,	and	would	also	add	to	the	complexity	of	
     environmental	practice	would	be	much	more	dependent	                    the administrative process.
     upon increased compliance activity.
                                                                             The	nature	of	the	Mining	Rehabilitation	Fund	option	
     The	transparency	and	accountability	requirements	for	                   allows	for	less	than	the	full	cost	of	rehabilitation	and	
     a	fidelity	fund	arrangement,	however,	would	provide	an	                 closure	provided	for	each	operation,	essentially	as	
     important	incentive	for	compliance	with	environmental	                  such	a	fund	could	be	used	for	any	mine	site,	rather	
     obligations for both the industry and the department.                   than contributions being tied to individual projects or
                                                                             tenements.	The	approach	taken	to	fund	contributions,	
     6.2.3 Using a risk-based approach in applying                           however,	treats	all	companies	as	having	the	same	risk	
     mining securities                                                       of	non-compliance,	with	contributions	under	the	current	
     Regardless	of	the	mining	security	option	decided	upon	                  model	based	on	a	flat	percentage	applied	to	each	
     by	the	government,	industry	has	requested	that	options	                 project’s total environmental liability.
     for	a	risk-based,	incentive	focussed	system	should	be	
     investigated.	It	is	argued	that,	without	the	use	of	risk	               Comments	received	from	industry	on	the	fidelity	fund	
     management	methodologies,	all	mines	are	effectively	                    model	(as	described	in	the	Preliminary	Discussion	Paper)	
     treated	as	having	the	same	risk	of	non-compliance,	                     suggested	the	rate	of	contributions	should	reflect	each	
     irrespective of the characteristics of individual mining                company’s	risk	of	non-compliance,	taking	into	account	
     operations,	and	the	financial	standing	and	environmental	               both	financial	and	environmental	performance	factors.	
     performance of the company.
                                                                             It	is	acknowledged	that	a	flat	rate	method	of	
     It	has	been	suggested	that	the	best	way	of	achieving	                   calculating fund contributions based solely on the
     this outcome is for the department to assess each                       level of environmental liability does not account for the
     company’s risk of failure to meet rehabilitation obligations            differences	in	risk	between	individual	companies	and	
     and	ensure	that	this	probability	is	reflected	in	determining	           that	it	could	be	seen	as	a	system	where	environmentally	
     the security rate set for each company.                                 responsible	companies	will	effectively	be	subsidising	
                                                                             environmentally	irresponsible,	or	less	financially	
     Determining	the	risk	that	a	mining	company	will	default	                capable,	companies.	For	the	same	reason	as	detailed	
     on	its	mine	rehabilitation	and	closure	obligations,	                    above,	it	is	not	appropriate	for	government	to	conduct	
     however,	would	be	an	extremely	complex	task.	A	                         risk	assessments	on	individual	companies,	and	the	
     company’s	past	environmental	and/or	financial	record	                   department’s	position	is	that	a	flat	rate	is	the	most	
     is	of	no	assistance	to	the	government	if	external	factors	              suitable method for determining fund contributions.
     outside the company’s control suddenly impacts


16                                    Department of Mines and Petroleum Western Australia’s Mining Security System
7. Impact Assessment                                                                             Financial institutions
                                                                                                 The current environmental bonds system represents
7.1 Affected stakeholders                                                                        a revenue stream for banks.
The	following	stakeholders	have	been	identified	by	the	
department	as	being	impacted	by	the	review	of	mining	                                            A future mining securities system that retains the
securities reform:                                                                               use of environmental bonds provides insurance
                                                                                                 companies	with	the	prospect	of	a	potential	source	of	
       Government                                                                                revenue.
	      An	effective	mining	securities	system	would	address	
       the	government’s	current	level	of	financial	risk	from	                                    Wider economy
       exposure	to	the	mining	industry’s	environmental	                                    	     Any	system	that	has	the	potential	to	financially	
       liabilities	but	would	also,	preferably,	not	unnecessarily	                                impact current operations and future investment in
       deter investment in the State’s most economically                                         the	State’s	most	economically	important	industry	will	
       important industry.                                                                       have	a	corresponding	effect	on	the	wider	economy.

       Mining industry                                                                           Community
	      An	effective	mining	securities	system	would	                                        	     An	effective	mining	securities	system	would	ensure	
       accommodate the risk of companies failing                                                 that the costs of mine site rehabilitation and closure
       to	meet	their	environmental	obligations,	while	                                           are	borne	by	the	industry	and	is	always	completed	to	
       ensuring	satisfactory	environmental	outcomes,	thus	                                       an acceptable standard.
       maintaining the industry’s ‘social licence to operate’.                                   Environment
                                                                                           	     An	effective	mining	securities	system	will	ensure	that	
                                                                                                 funds are available for the government to complete
                                                                                                 mine site rehabilitation and closure to an acceptable
                                                                                                 standard in the event of mining companies being
                                                                                                 unable to do so.


7.2 Impact analysis of the potential options
The	following	tables	provide	an	analysis	of	the	impact	of	each	option	on	affected	stakeholders.
    Table 3. Advantages and disadvantages of the full cost bond option
    Affected
                             Advantages                                                             Disadvantages
    stakeholders
    Government               Existing legislative and administrative processes in place.            Underestimating the real cost could leave the government with
                                                                                                    significant environmental liabilities, even if the intent is to set them
                             Provides for immediate access to funds for rehabilitation and          at a level that would fully cover rehabilitation and closure.
                             closure if required.
                                                                                                    Implementation may result in a number of companies entering
                                                                                                    administration, effectively resulting in an increased environmental
                                                                                                    liability being transferred to the State.
    Mining industry          For compliant companies – knowledge that non-compliant                 High cost (both direct and indirect) to industry. Financial burden
                             companies are much more likely to be held accountable.                 would be inequitable and onerous.
                             Good for industry’s reputation (‘social licence to operate’), access   All companies are treated as if they have the same potential for
                             to industry by non-compliant/less financially capable operators        non-compliance with environmental obligations.
                             limited, thereby minimising bad publicity for the rest of the
                             industry.                                                              Costs would not be seen to be commensurate with environmental
                                                                                                    risk.
                                                                                                    Some companies would not be able to obtain additional guarantees
                                                                                                    from financial institutions.
    Financial institutions   Increased fees adding to bank profits.                                 Adverse impact on credit availability (banks).
                             Possible creation of a new market for the insurance sector in the      Increased administrative burden (full cost bonds may result in an
                             provision of surety bonds.                                             individual company’s bonds being spread between more than one
                                                                                                    financial institution).
    Wider economy            Market stability arising from certainty of obligations.                A significant amount of investment capital would be unable to be
                                                                                                    accessed by the industry, thereby reducing economic activity.
                             Reduced likelihood that government expenditure on services
                             needs to be redirected to mine site closure.
    Community                Model is seen as holding companies fully accountable for their         Funds cannot be used to rehabilitate abandoned mine sites.
                             environmental impacts.
    Environment              Inherently encourages progressive rehabilitation (assuming the         The costs of maintaining bonds are not used for rehabilitation
                             ability of the department to adjust bond rates on time).               (payment to financial institutions only).
                             The financial impact on a company of defaulting on a bank              Funds cannot be used to rehabilitate abandoned mine sites.
                             guaranteed bond provides a significant incentive for compliance
                             with tenement obligations.

                                       Department of Mines and Petroleum Western Australia’s Mining Security System                                                            17
     Table 4. Advantages and disadvantages of the Mining Rehabilitation Fund option
     Affected
                              Advantages                                                               Disadvantages
     stakeholders
     Government               Addresses the government’s financial risk (assuming appropriate          Inherently weaker in encouraging industry compliance with
                              legislative and administrative processes are in place to                 environmental requirements than the full cost bond option thus
                              ensure industry meets its environmental obligations) while not           requiring more resources to ensure compliance.
                              unnecessarily deterring investment in the State’s mining industry.
                                                                                                       Different to other States.
                              Funds can be utilised for the rehabilitation of any Mining Act
                              1978 site and are not restricted to the tenement upon which the          Implementation would require significant legislative and
                              contribution was paid.                                                   administrative amendments (although there are existing
                                                                                                       precedents).
                              Funds could be used to rehabilitate abandoned sites.
                              Flexible system allowing the contribution rate to reflect risk profile   Government will continue to experience financial risk in the early
                              (of the industry overall).                                               years of the fund.
                                                                                                       Increased exposure to government in the case of significant and
                                                                                                       widespread failure across the mining industry.
     Mining industry          The most cost effective option for all sectors of the mining             Different to other States.
                              industry (from high risk to low risk operators).
                                                                                                       Perceived ‘free rider’ effect. Potential for environmentally
                              Industry image enhanced as funds will be used to rehabilitate            responsible companies to effectively pay for the rehabilitation costs
                              abandoned mines.                                                         of irresponsible companies.
                              Liability is self assessed on an annual basis (waiting on bond
                              reviews by the department are not required).
                              Contributions remain current as it is directly linked to the amount
                              of actual disturbance.
                              A bond relinquishment process is no longer required.
     Financial institutions   Credit availability would be increased (banks).                          Banks – decreased profit.
                                                                                                       Insurance companies – loss of potential source of revenue.
     Wider economy            State’s investment attractiveness impacted favourably.                   No disadvantages identified.
     Community                Funds will primarily be used for mine site rehabilitation, rather        May not be sufficient to cover liabilities generated through an
                              than contributing to bank profits.                                       extended and severe economic downturn scenario which may
                                                                                                       result in a large proportion of the industry defaulting on their
                              Reporting requirements of the fund will enable community                 closure obligations.
                              scrutiny of the industry’s compliance with environmental
                              requirements.
     Environment              Funds could be used to rehabilitate abandoned sites.                     Inherently weaker in encouraging industry compliance with
                                                                                                       environmental requirements than the full cost bond option thus
                              Compliance costs contribute to remediating environmental                 requiring more resources to ensure compliance.
                              damage.




18                                            Department of Mines and Petroleum Western Australia’s Mining Security System
8. Preferred option                                                      b. Administration
In recommending a policy position for the State’s future                         	 Administrative	requirements	for	the	fund	
mining	securities	system,	the	challenge	is	in	balancing	                           will	be	formalised	including	the	governance	
the advantages and disadvantages of each policy option                             arrangements,	reporting	requirements,	
so	that	it	will	satisfactorily	take	into	account	a	number	of	                      determination of the resourcing needs of a
different,	and	sometimes	competing,	considerations.                                departmental	fund	management	unit,	and	
                                                                                   establishment of an advisory panel.
Ideally,	a	mining	securities	system	would:
                                                                                  An appropriate fund target level and a structure
   provide	a	system	that	maximises	the	State’s	                                   for	review	and	indexation	will	be	determined.
   attractiveness for investment due to factors such as
   administrative simplicity and cost minimisation;                              	 Procedures	will	be	developed	to	determine	which	
                                                                                   sites	are	the	State’s	liability.	An	assessment	will	
   ensure that all mine sites achieve acceptable closure
                                                                                   be	undertaken	and	rehabilitation	priorities	will	be	
   without	requiring	government	funding;
                                                                                   set.
   treat	all	companies	in	an	equitable	manner;	and
   minimise government administration and compliance                     c. Transitional Arrangements
   costs.                                                                      	 Transitional	arrangements	will	be	finalised.	It	is	
                                                                                 currently envisaged that as companies submit
The	Mining	Rehabilitation	Fund	is	the	recommended	
                                                                                 their	Mine	Closure	Plans	and	commence	
option as it:
                                                                                 paying	into	the	fund,	their	bank	guaranteed	
    substantially addresses the government’s
    financial	risk	(assuming	appropriate	legislative	and	                        unconditional	performance	bonds	will	be	retired	
    administrative processes are in place to ensure                              in full.
    industry	meets	its	environmental	obligations)	while	                         	 Guidelines	for	estimating	closure	costs	will	be	
    not unnecessarily deterring investment in the State’s                          established	which	will	include	a	self-calculation	
    most important industry;                                                       tool.	The	tool	will	be	developed	and	made	
   is	a	flexible	system	allowing	the	contribution	rate	to	                         available	by	the	end	of	2011	and	may	also	be	
   reflect	risk	profile;                                                           used for mine closure cost estimates.
   is the most cost effective option for all sectors of the                      	 All	operators	will	be	transitioned	into	the	fund,	
   mining industry;                                                                subject	to	any	exemptions	from	the	requirement	
   enhances the State’s investment attractiveness;                                 to pay a mining security.
   enables greater community scrutiny of the industry’s                          	 It	is	envisaged	the	fund	will	be	established	by	1	
   compliance	with	environmental	requirements;	and                                 July	2013.
   would	be	used	to	rehabilitate	abandoned	sites.
                                                                         d. Associated Issues
Whilst	it	is	recognised	that	the	Mining	Rehabilitation	                            Procedures for managing sites on care and
Fund	is	not	inherently	as	strong	in	encouraging	industry	
                                                                                   maintenance	will	be	established.
compliance	with	environmental	requirements	as	the	full	
                                                                                 	 Working	arrangements	with	other	agencies	who	
cost	bond	option,	this	will	be	addressed	through	the	
implementation of a robust compliance system through                               administer	legislation	which	includes	securities	
legislative amendments.                                                            will	be	developed.

                                                                         e.	 Communications	Strategy
9. Implementation and evaluation
                                                                               	 	 A	communications	strategy	will	be	developed	
strategy
                                                                                   for	industry,	the	community,	private	land	holders	
The	implementation	of	the	preferred	option	will	                                   and government agencies in order to educate
commence upon government’s approval. On the basis
                                                                                   stakeholders	on	the	new	system	and	provide	
that	the	Mining	Rehabilitation	Fund	is	supported,	the	
                                                                                   certainty	in	relation	to	the	new	processes	that	will	
implementation	strategy	will	be	undertaken	as	follows:
                                                                                   be introduced and their timing.
a.	 Legislation	and	Regulations
      	 The	legislative	framework	for	the	fund’s	                        f.	 Fund	Evaluation
        establishment	and	operation	will	be	reviewed	and	
                                                                                 	 Actuarial	principles	will	be	used	to	evaluate	and	
        determined.
                                                                                   monitor the target fund balance and contributions
      	 The	compliance	mechanisms	required	for	the	
                                                                                   to the fund.
        effective	operation	of	the	fund	will	be	assessed.
                                                                                 	 Evaluation	of	the	implementation	and	operation	
       Departmental compliance policies and
       procedures	will	be	reviewed	and	amended	where	                              of	the	fund	will	occur	in	line	with	the	department’s	
       required.                                                                   current strategic planning process.




                             Department of Mines and Petroleum Western Australia’s Mining Security System                                  19
20
                                                                                                                                                                                                                                                                                                                                  Appendix 1




                                                                               Examples of Fidelity Fund Governance Arrangements
                                                                                                                                           Legislation                                                                                                        Interest                                 Cap on the
                                                                                                                        Administrator      governing                                   Contributions      Extraordinary                     Claim decision    returned to   Investment                 contributions        Fund can   Audited
                                                                               Fidelity Fund                            of the fund        the fund           Account set-up           determined by:     levy             Claimants        maker             the fund      of moneys                  paid                 be insured annually
                                                                               WA Settlement Agents                     Government         Settlement Agents As an agency special CEO, Department         Levy can be      Members of the   CEO, Department   Yes           Yes in same manner No                           Yes        Yes
                                                                               Fidelity Guarantee Account*              (Department        Act 1981 (WA)     purpose account under of Commerce            imposed by the   public           of Commerce                     as trust funds may be
                                                                               Provides financial reimbursement to      of Commerce)                         s16 Financial                                CEO                                                               invested in                                                (WA Auditor
                                                                               people who suffer pecuniary loss or                                           Management Act 2006                                                                                            accordance with                                            General)
                                                                               loss of property through the criminal                                         or with the approval of                                                                                        Part III of the Trustees
                                                                               or fraudulent actions of a licensed                                           the Treasurer at a bank.                                                                                       Act 1962                                                   Financial
                                                                               settlement agent                                                                                                                                                                                                                                        statements
                                                                                                                                                                                                                                                                                                                                       published in the
                                                                               (*as at 1/7/11)                                                                                                                                                                                                                                         annual report
                                                                               WA Real Estate and Business              Government         Real Estate and    As an agency special CEO, Department        Levy can be      Members of the   CEO,              Yes           Yes in same manner         Yes                  Yes        Yes
                                                                               Agents Fidelity Guarantee Ac-            (Department        Business Agents    purpose account under of Commerce           imposed by the   public           Department of                   as trust funds may
                                                                               count*                                   of Commerce)       Act 1978 (WA)      s16 Financial                               CEO                               Commerce                        be invested in             Exemptions apply                (WA Auditor
                                                                               Provides financial reimbursement to                                            Management Act 2006                                                                                           accordance with            for existing fund               General)
                                                                               people who suffer pecuniary loss or                                            or with the approval of                                                                                       Part III of the Trustees   members once a
                                                                               loss of property through the criminal                                          the Treasurer at a bank.                                                                                      Act 1962                   minimum fund                    Financial
                                                                               or fraudulent actions of a licensed                                                                                                                                                                                     balance is reached              statements
                                                                               real estate or business agent or their                                                                                                                                                                                                                  published in the
                                                                               employees.                                                                                                                                                                                                                                              annual report

                                                                               (*as at 1/7/11)
                                                                               NSW Law Society – Legal                  Industry           Legal Profession   As a separate account,   Law Society        Levy can be      Members of the   NSW Law Society Yes             Yes in accordance       No                      Yes        Yes (accountants
                                                                               Practitioners Fidelity Fund              (NSW Law           Act 2004 (NSW)     operated in the manner   Council with the   imposed by the   public           Council                         with Division 2 of Part                                    approved by the
                                                                               Provides compensation to members         Society Council)                      determined by the Law    approval of the    Law Society                                                       2 of the Trustee Act                                       Attorney General)
                                                                               of the public who successfully claim                                           Society Council          Attorney General   Council                                                           1925 as if the money
                                                                               financial loss due to a solicitor’s or                                                                                                                                                       were trust funds, or                                       Financial
                                                                               firm’s dishonest failure to pay or                                                                                                                                                           on deposit with the                                        statements




Department of Mines and Petroleum Western Australia’s Mining Security System
                                                                               deliver trust money or property.                                                                                                                                                             Treasurer.                                                 published in the
                                                                                                                                                                                                                                                                                                                                       annual report
                                                                                                                                                                                                                                                                                                                                       submitted to the
                                                                                                                                                                                                                                                                                                                                       Attorney General
                                                                                                                     Appendix 2


Mining Rehabilitation Fund                                                     project	with	the	largest	rehabilitation	liability.	The	
                                                                               commencement fund balance target currently is
Introduction                                                                   estimated	at	approximately	$300	million	based	upon	
The	fidelity	fund	model	proposed	in	the	Preliminary	                           modelling undertaken by the department.
Discussion	Paper	has	been	modified	to	reflect	further	
investigations and research undertaken by the depart-                     9.	 Upon	the	implementation	of	mine	closure	planning,	
ment.	This	new	model	proposes	operators	contribute	a	                         an accurate assessment of the total liability for
flat	percentage	of	their	current	rehabilitation	liability	on	an	              Mining Act 1978	operations	will	be	determined,	
annual basis into a government managed fund. The fund                         as	self-assessed	by	the	industry.	Following	several	
will	be	called	the	Mining	Rehabilitation	Fund	(the	fund).	                    years	of	operation,	sufficient	historical	data	will	be	
                                                                              generated to enable the fund balance to be more
The	following	description	summarises	the	proposed	                            rigorously determined.
structure	and	operation	of	the	fund	which	will	be	used	                   10.	The	fund’s	income	will	comprise	of	operator	
in the development of recommendations for legislative                         contributions. Interest that is generated from
amendments	as	well	as	changes	to	the	department’s	                            investment	of	fund	moneys	will	be	returned	to	the	
administrative	processes.	Appendix	3	provides	more	                           fund.
specific	detail	on	the	potential	framework	of	the	fund.
                                                                          11.	Expenditure	from	the	fund	will	include:
The Model                                                                      a. Approved Rehabilitation Claims
1. Mining tenement holders operating under the Mining                              i.	 	Rehabilitation	claims	that	have	been	reviewed	
   Act 1978 contribute a non refundable amount                                          by the fund advisory panel and approved by
   to	a	central	fidelity	account	administered	by	the	                                   the	Director	General	in	accordance	with	the	
   department.                                                                          fund operating guidelines.
2.	 Tenement	holders	remain	responsible	for	ensuring	                              ii.	 	Rehabilitation	claims	are	deemed	to	have	
    that	they	maintain	separate	finance	provisioning	                                    occurred if:
    to	fund	their	rehabilitation	and	closure	works	in	                                    	 	 it	is	an	existing	rehabilitation	claim	
    accordance	with	their	mine	closure	plans.                                                 i.e.	mines	in	which	responsibility	for	
                                                                                              rehabilitation cannot reasonably be
Objectives of the Fund                                                                        allocated	to	any	individual,	company	or	
3.	 The	aim	of	the	fund	is	to	maintain	adequate	                                              organisation responsible for the original
    provisioning	to	meet	the	State’s	financial	risk	arising	                                  mining activities; and
    in	the	event	that	operators	which	are	subject	to	the	                                     a tenement holder subject to the Mining
    Mining Act 1978,	do	not	fulfil	their	mine	rehabilitation	                                 Act 1978	does	not	fulfil	their	mine	
    and closure obligations.                                                                  rehabilitation and closure obligations.This
                                                                                              is only on the basis that all reasonable
4.	 The	fund	will	only	finance	closure	on	those	sites	
    where	all	reasonable	compliance	options	have	been	                                        compliance	options	have	been	explored	
    explored	and	another	operator	cannot	be	found	to	                                         and another operator cannot be found to
    take over the liability.                                                                  take over the liability.
                                                                                   iii.	 	Rehabilitation	claims	will	only	include	State	
5.	 The	fund	will	also	provide	money	to	government	                                       Agreement Act mines for those State
    to	rehabilitate	those	mines	where	responsibility	for	                                 Agreement Acts subject to relevant Mining
    rehabilitation cannot be reasonably allocated to any                                  Act 1978 conditions.
    individual,	company	or	organisation	responsible	for	
    the original mining activities.                                                iv.	 	To	preserve	the	capital	of	the	fund,	scheduled	
                                                                                         annual	expenditure	on	rehabilitation	claims	
Fund Balance                                                                             will	be	limited	in	any	year	to	the	following	
                                                                                         amount:
6.	 The	fund	balance	will	be	structured	to	ensure	that	
    there	is	sufficient	money	available	to	government	to	                                   Fund Contributions ($) + Interest ($) LESS
    manage	the	reasonably	foreseeable	financial	liability	                                  Fund Administration Costs ($)         LESS
    arising from mining projects operating subject to the                                   The growth required in the Fund Target Balance
    Mining Act 1978.	This	rehabilitation	claim	will	include	                                to take into account CPI and escalation costs of
    provision for third party costs so that government                                      rehabilitation (%)
    will	not	be	required	to	meet	any	of	the	costs	through	
                                                                                   v.	 	The	capital	of	the	fund	will	be	available	for	
    general revenue.
                                                                                        expenditure	in	circumstances	deemed	as	an	
7.	 Fund	contributions	will	initially	allow	the	target	fund	                            ‘emergency’ upon approval by the Director
    balance	to	be	reached	within	approximately	five	to	                                 General	(‘emergency	claim	events’	to	be	
    seven	years	(assuming	no	significant	drawdowns	are	                                 defined	in	the	operating	guidelines).
    made).	                                                                    b. Administration
8.	 The	fund	balance	will	be	based	on	ensuring	there	is	                          Administration	costs	will	include:
    sufficient	money	available	to	government	to	cover	                             i.	 	Salaries	and	operating	costs	for	a	small,	
    the cost of fully rehabilitating the Mining Act 1978                                dedicated unit to administer the fund. The


                              Department of Mines and Petroleum Western Australia’s Mining Security System                                     21
                    unit’s	activities	will	include:                                  18.	Payments	will	be	calculated	on	tenements	but	can	
                        managing the operation of the fund                               be	spent	on	any	approved	expenditure	item.
                     	 	 carrying	out	the	reporting	requirements	                    19.	The	department	will	make	a	self-calculation	tool	
                                                                                         and guidelines available to assist operators in
                        providing a secretariat to the advisory
                                                                                         calculating their current rehabilitation liability. This
                        panel
                                                                                         tool	will	be	subject	to	periodic	benchmarking	with	
                     	 	 administering	rehabilitation	works	                             other jurisdictions to ensure the liability is accurately
                         including the development of a rolling                          calculated.
                         three	year	rehabilitation	work	plan,	
                         coordination of tenders and contract                        20.	Contributions	to	the	fund	will	be	non-refundable.	
                         management.                                                     Once a payment has been made the record of the
                                                                                         payment	will	remain	with	the	tenement	regardless	of	
             ii. Operating costs of the advisory panel.                                  whether	a	change	in	corporate	ownership	occurs.	
             iii.		 Expenditure	to	develop	and	maintain	
                    computer systems to manage:                                      21.	If	the	fund	balance	significantly	exceeds	the	
                                                                                         requirement	to	meet	the	State’s	foreseeable	financial	
                     	 	 fund	contributions	and	expenditure;	and                         liability,	credits	may	be	considered	for	future	
                        rehabilitation risk assessment. This                             scheduled	payments.	This	will	be	further	investigated	
                        system	will	maintain	a	database	of	                              during the preparation of the legislation for the fund.
                        new	and	existing	claims	to	assist	in	
                        the systematic prioritisation of sites for                   22.	The	Director	General	may,	with	the	consent	of	the	
                        remediation.                                                     Minister,	set	and	impose	on	tenement	holders	an	
                                                                                         extraordinary	levy	for	payment	into	the	fund,	if:
             iv. Publication costs to produce fund guidance
                                                                                         a.	 the	amount	in	the	fund,	following	the	deduction	
                 and information material.
                                                                                             of the target fund balance and administration
     12.	Income	from	the	fund	can	be	expended	on	any	                                        expenses,	is	insufficient	to	rectify	any	actual	and	
         approved	expenditure	item	(listed	at	paragraph	11),	                                prospective rehabilitation claims; or
         and	is	not	attached	to	a	specific	tenement.                                     b. an emergency event occurs and the balance of
                                                                                            the	fund	is	not	sufficient	to	meet	the	requirements	
     Contributions                                                                          for	rehabilitation	required	on	the	mining	tenement.	
     13.	The	fund	will	receive	contributions	from	all	mining	
         operators	who	are	required	to	provide	a	mining	                             Rehabilitation Fee
         security under the Mining Act 1978.	The	following	                          23.	The	rehabilitation	fee	is	the	percentage	of	the	
         exceptions	are	proposed:                                                        State’s	total	closing	liability,	which	when	applied	to	
             i.      Prospecting and Exploration: operators                              each	operator’s	current	rehabilitation	liability,	will	
                     carrying	out	prospecting	or	exploration	                            generate and maintain the target fund balance. The
                     activities	will	not	be	subject	to	the	fund	                         rehabilitation fee is applied to an operator’s current
                     except	in	circumstances	in	which	there	is	a	                        liability	as	set	out	in	the	contribution	formula	(see	
                     history	of	non-compliance,	or	when	activities	                      paragraph	16).
                     are assessed as environmentally high risk.
                                                                                     24.	It	is	proposed	that	the	rehabilitation	fee	will	initially	
                     For	example,	in	environmentally	sensitive	or	
                                                                                         be	set	at	1.5%.	The	rehabilitation	fee	will	be	set	by	
                     conservation	estate	areas	or	where	activities	
                                                                                         regulation	and	reviewed	each	year.
                     involve	high	levels	of	disturbance.	This	will	
                     be	assessed	on	a	case-by-case	basis.	
                                                                                     Review of the Fund
                     Guidelines	to	inform	the	application	of	the	
                                                                                     25.	It	is	currently	proposed	that	the	fund	balance	and	
                     fund	to	these	activities	will	be	developed	
                                                                                         the	rehabilitation	fee	will	be	reviewed	and	set	as	
                     as part of the implementation process to
                                                                                         part of the normal government budget process and
                     provide greater certainty.                                          published	prior	to	the	start	of	each	financial	year.	
     14.	Uranium	operators	will	be	treated	in	line	with	all	other	                       This	annual	assessment	will	take	account	of	
         commodities	and	will	be	subject	to	the	fund.                                    operators	entering	and	exiting	the	fund,	changes	in	
     15.	Contributions	will	be	payable	annually,	based	upon	                             the State’s total Mining Act 1978 rehabilitation liability
         an operator’s actual rehabilitation liability.                                  and	drawdowns	on	the	fund.	

     16.	Contributions	will	be	made	in	accordance	with	the	                          26.	In	order	to	establish	the	fund,	the	government	will	
                                                                                         prepare	an	amendment	bill	which	will	also	include	
         contribution formula:
                                                                                         clarification	of	the	approval	responsibilities	for	the	
                  Annual payment ($) =                                                   operation	of	the	fund	(i.e.	who	will	approve	the	
                  current rehabilitation liability ($) x rehabilitation fee (%)          rehabilitation	fee	and	size	of	the	balance).	This	bill	
     17.	The	current	rehabilitation	liability	will	be	self	assessed	                     will	entail	its	own	consultation	process	in	which	
         by individual companies based on that company’s                                 stakeholders	will	be	invited	to	comment.
         rehabilitation	costs	(i.e.	it	will	not	be	based	upon	third	
                                                                                     27.	Increases	to	the	target	fund	balance	will	not	exceed	
         party	estimated	costs)	and	may	be	subject	to	audit.
                                                                                         5%	per	year	i.e.	the	rehabilitation	fee	in	the	second	
                                                                                         year	cannot	exceed	1.6%	if	the	previous	year’s	fee	


22                                            Department of Mines and Petroleum Western Australia’s Mining Security System
   was	1.5%.	The	cost	of	inflation	will	be	applied	to	                   37.	The	department	will	be	the	government	agency	
   the	balance	to	ensure	the	fund	keeps	pace	with	                           responsible	for	carrying	out	the	rehabilitation	works	
   any	changes	in	costs.	There	will	be	no	limit	to	the	                      for approved claims.
   magnitude of reduction in the rehabilitation fee in any
                                                                         38.	Transparency	will	be	maintained	through	the	
   one year.
                                                                             publication	of	an	annual	review	of	the	fund’s	
Governance                                                                   activities.	Financial	statements	will	also	be	published	
28.	It	is	proposed	that	a	special	purpose	account	                           in the department’s annual reports and the State’s
    be	established	in	accordance	with	section	16	of	                         budget papers.
    the Financial Management Act 2006	which	will	
    specifically	hold	moneys	for	the	purpose	of	the	fund.	               39.	Objections	regarding	payments	into	the	fund	will	be	
                                                                             heard	by	the	Director	General	of	the	department.	
29.	Regulations	will	set	out	the	governance	
    arrangements for the fund.                                           Legislative Amendments
30.	The	fund	will	be	administered	by	the	irector	General	                40.	The	department	will	propose	amendments	to	the	
    of the department.                                                       Mining Act 1978	to	establish	the	fund.	These	will	
                                                                             include:
31.	An	independent	advisory	panel	will	be	established	
                                                                              a. the establishment of an agency special purpose
    upon the commencement of the fund. The
                                                                                 account	under	section	16	of	the	Financial	
    government	will	appoint	up	to	four	advisory	panel	
                                                                                 Management	Act	2006;	and
    members,	independent	to	government,	to	provide	
    expert	advice.	In	appointing	the	members,	the	                            b. provision for regulations to be made.
    government	will	ensure	that	the	members	of	the	                      41.	The	regulations	may	deal	with:
    panel	collectively	possess	suitable	skills,	expertise	or	
                                                                              a. the governance arrangements for the fund;
    knowledge	relating	to:
                                                                              b.	 the	reporting	requirements;
   a. mine rehabilitation;
                                                                              c.	 the	circumstances	in	which	liability	to	pay	the	
   b. mining industry management;
                                                                                  contribution is imposed;
   c. the environment; and
                                                                              d.	 how	the	liability	is	to	be	assessed	including	the	
   d.	 financial	and	legal	matters.	                                              calculation	of	the	fund	balance,	rehabilitation	fees	
32.	The	role	of	the	advisory	panel	will	be	to	provide	                            and the contribution formula;
    expert	advice	to	the	Director	General	on	matters	                         e.	 the	review	mechanism	which	details	the	
    including:                                                                    government’s ability to adjust the fund balance
   a.	 rehabilitation	claim	priorities	and	scope	for	on-                          and	the	rehabilitation	fee,	in	addition	to	the	
       the-ground	rehabilitation	works;                                           maximum	increases	allowable	and	extraordinary	
                                                                                  levy provisions;
   b. the target fund balance and rehabilitation fee;
                                                                              f.	 on	whom	the	liability	is	imposed	to	pay	the	
   c.	 expenditure	on	existing	rehabilitation	claims;	and
                                                                                  fund	contribution	including;	when	the	payment	
   d. administrative issues.                                                      becomes	due,	how	the	payment	is	to	be	made,	
33.	The	advisory	panel	will	meet	at	least	biannually.                             if	and	when	relief	from	payment	may	be	applied,	
                                                                                  and	the	circumstances	in	which	a	credit	for	
34.	The	Mining	Industry	Liaison	Committee	will	be	the	                            payments may occur;
    forum	for	industry	to	raise	general	issues	with	the	
                                                                              g.	 who	is	exempt	from	liability	to	pay	a	fund	
    department regarding the performance of the fund.
                                                                                  contribution	and	the	conditions	to	which	an	
35.	Mines	approved	for	rehabilitation	will	be	rehabilitated	                      exemption	is	subject;
    with	moneys	from	the	fund.                                                h.	 rights	to	object	and	how	the	objection	is	to	be	
36.	Operating	guidelines	will	be	developed	by	the	                                dealt	with;
    department,	and	reviewed	by	the	advisory	panel,	to	                       i.	 circumstances	in	which	the	State	will	use	moneys	
    specify:                                                                      from the fund to rehabilitate mines;
   a.	 the	criteria	by	which	claims	will	be	assessed	for	                     j.	 fund	income	and	expenditure	including	the	
       rehabilitation,	including	consideration	of	the	level	                      treatment of interest and provision of the
       to	which	they	will	be	rehabilitated;                                       investment of money held in the fund; and
   b.	 the	process	by	which	claims	will	be	selected	for	                      k. transitional arrangements including the retirement
       rehabilitation	works,	including	recommendations	                          of current bank guaranteed unconditional
       from the advisory panel;                                                  performance bonds.
   c.	 the	requirement	to	develop	and	maintain	a	rolling	                42.	To	underpin	the	operation	of	the	fund,	the	following	
       three	year	rehabilitation	work	plan;                                  amendments to the Mining Act 1978	will	be	
   d.	 the	process	for	awarding	contracts	to	manage	                         recommended:
       and carry out rehabilitation projects; and                             a.	 Change	penalty	provisions	to	incorporate:
   e.	 reporting	requirements.                                                    i.	 penalties	for	non-payment	of	fund	
                                                                                      contributions;


                             Department of Mines and Petroleum Western Australia’s Mining Security System                                 23
            ii. penalties for providing false or misleading                           misleading	rehabilitation	costs	to	the	department,	
                information; and                                                      or	underestimating	the	extent	of	rehabilitation	
            iii. increased penalties for the breach of                                work	required.
                 conditions	of	a	lease	(as	an	alternative	to	the	                c.	 The	department	will	be	able	to	request	third	party	
                 forfeiture	of	a	lease).                                             audits of calculated rehabilitation costs.
        b.	 Changes	to	mine	closure	requirements	so	that:                        d.	 Penalties	will	apply	to	operators	who	are	failing	
            i.	 it	is	clear	mine	closure	plans	are	required	for	                     to meet their rehabilitation obligations. Ongoing
                miscellaneous and general purpose leases;                            non-compliance	may	result	in	the	department	
                                                                                     issuing	a	direction	to	stop	work,	or	direction	that	
            ii.	 the	department	can	request	an	audit	of	
                                                                                     the tenement holder is to lodge a unconditional
                 closure costs;
                                                                                     performance bond to cover the full cost of mine
            iii. provision of mine closure costs can be                              rehabilitation.
                 required	of	a	tenement	holder;
                                                                             45.	The	department	will	be	able	to	determine	whether	an	
            iv. mine closure plans and/or details of all
                                                                                 operator	can	self-assess	their	liability	or	whether	the	
                environmental	impacts	requiring	closure	are	
                                                                                 department’s	calculation	tool	will	be	utilised.
                provided	to	a	new	lease	holder	at	the	time	of	
                transfer;                                                    46.	When	a	tenement	is	transferred	or	sold,	a	copy	of	
            v.	 orders	for	closure	works	can	be	issued;                          the	company’s	mine	closure	plan	will	be	required	to	
                                                                                 be	provided	by	the	seller,	to	ensure	the	new	lease	
            vi.	 access	is	allowable	to	third	parties	to	
                                                                                 holder	is	aware	of	the	existing	liability.
                 undertake	rehabilitation	works	even	if	land	is	
                 repegged; and
                                                                             Transitional Arrangements
            vii.	 tenement	holders	are	required	to	report	                   47.	A	transition	period	will	occur	to	implement	the	
                  abandoned mines on their tenements if they                     fund,	with	the	introduction	of	a	self-calculation	tool	
                  become	aware	of	them.                                          occurring	by	the	end	of	2011,	with	the	fund	being	
        c.	 Change	forfeiture	provisions	to:                                     established	by	1	July	2013.	
            i.	 provide	the	Minister	powers	to	forfeit	                      48.	As	companies	submit	their	mine	closure	plans	
                tenements at any stage of a mining lease if a                    and	commence	paying	into	the	fund,	their	bank	
                tenement holder is deemed unsuitable; and                        guaranteed unconditional performance bonds
            ii.	 provide	the	Minister	powers	to	prevent	a	                       will	be	retired.	
                 director of a company from holding any
                                                                             49.	The	powers	to	require	bank	guaranteed	
                 tenements once a tenement has been
                                                                                 unconditional	performance	bonds	will	remain	in	
                 forfeited.
                                                                                 the Mining Act 1978,	with	bonds	being	able	to	
        d.	 Change	liability	provisions	enabling:                                be demanded of tenement holders if they fail to
            i.   proceedings to be taken against a parent                        progressively rehabilitate their tenements.
                 company for the liability of a subsidiary; and
                                                                             50.	A	communications	strategy	will	be	developed	
            ii. directors to be liable for offences committed                    for	industry,	the	community,	private	land	holders	
                by the body corporate under the Act or                           and government agencies in order to educate
                Regulations.                                                     stakeholders	on	the	new	system	and	provide	
            e.	 Change	compliance	provisions	so	that:                            certainty	in	relation	to	the	new	processes	that	
            i.	 directions	(i.e.	a	stop	work	order)	can	be	                      will	be	introduced	and	their	timing.
                issued for failing to rehabilitate.

     Compliance Process
     43.	An	enhanced	compliance	system	will	be	established	
         by	the	department.	This	will	be	developed	through	
         amendments to the Mining Act 1978 and the
         establishment of regulations as outlined above. It
         will	be	supported	through	the	department’s	current	
         Enforcement	and	Prosecution	Policy.
     44.	The	department	will	manage	these	new	compliance	
         provisions	in	the	following	manner:
        a.	 Fund	contributions	by	all	operators	will	be	
            collectively	reviewed	on	an	annual	basis	by	the	
            department.	Analysis	will	ensure	that	estimated	
            rehabilitation	costs	for	operations	which	
            significantly	deviate	from	average	costs	are	
            identified	and	addressed.	
        b.	 There	will	be	penalties	for	providing	false	and	



24                                    Department of Mines and Petroleum Western Australia’s Mining Security System
                                                                                                  Appendix 3



                  FRAMEWORK FOR GOVERNANCE
                 OF A MINING REHABILITATION FUND
Introduction
The obligation on the part of tenement holders as a class to contribute to a Mining
Rehabilitation Fund needs to be established by statute. The legislation then imposes an
obligation on tenement holders to contribute to the fund and unambiguously sets out what
the fund can be used for. The operation of the fund will benefit from an advisory panel which
is independent of government and comprises people with relevant industry and financial
skills. It will provide advice to the department on a range of issues including the balance of
the fund, the fee structure and priority mine sites for rehabilitation.

Introducing new legislation is a time consuming process and the suggestion is to amend the
Mining Act 1978 so that the fund provisions can be bolted into an existing framework which
uses some similar concepts and definitions. The framework below is only intended to show
examples of key provisions dealing with governance. The specific wording of the necessary
legislative amendments will be prepared through the appropriate legislative drafting process
of government and subject to a separate consultation process. This appendix is however
provided as an indication of the potential form of any changes.

A summary of examples of governance provisions which may be covered in legislation are set
out below. Explanations of some of the key concepts which would need to be defined in detail
in any legislation follow at the end of the provisions. Those key concepts are in italics.

New parts to the Mining Act 1978
The purpose would be included in the legislation and would look something like this:
   The purpose of this amendment is to allow the Minister to establish and maintain, by a set of
   operating rules, a fund to provide financial recourse to the government in circumstances where
   a tenement holder has caused (directly or indirectly) the occurrence of a claim event.

The legislation would prescribe what the funds held could be used for. An example follows.
A claim event:
1. is deemed to have occurred if it is an existing claim event; and
2. otherwise arises when a tenement holder has failed to meet its environmental rehabilitation
   obligations under the provisions of the Mining Act 1978 requiring the rehabilitation of relevant
   tenements disturbed by mining operations to the satisfaction of the Minister.

If the legislation was embodied in the Mining Act itself, the existing concept of 'tenement
holder' could be used. For example:
The mining security requirement applies to every tenement holder that is (or as the case may be
was) at the relevant time the owner of a mining tenement other than an excluded tenement. For
the avoidance of doubt this does not include any tenement holder in its capacity as holder (past or
present) of a tenement held under a State Agreement.
Any legislation would need to provide for the establishment of the trust fund and a mandate to
make rules for the operation of the fund. An example would be:
1. The fund is to be the property of the government and is to be held on trust for the purposes
   specified above.
2. The government must ensure that operating rules are made for the establishment, maintenance
   and management of the fund.




                   Department of Mines and Petroleum Western Australia’s Mining Security System                25
     Provisions will need to be included in order to impose a legal obligation on tenement holders to
     pay levies. For example:
     1. Every tenement holder to which this requirement applies must pay to the fund the appropriate
        annual contribution as is from time to time prescribed.
     2. Every tenement holder to which this requirement applies must pay to the fund any amount
        levied against that tenement holder as an extraordinary levy in accordance with the Act.
     3. A resolution under subsection (1) and (2) above may provide for the amounts of the
        contributions to differ as between different classes of tenement holders.
     4. The amount of every contribution payable under subsection (1) or (2)–
        (a) is payable on such date or dates and in such manner as approved by the Minister;
        (b) is recoverable on behalf of the trust fund as a debt due to the fund.

     The funds held can only be applied for the purposes stipulated. In addition, it is proposed that
     the legislation will require that a minimum fund balance (inflation adjusted) will always be
     maintained except in extraordinary circumstances. Therefore, interest earned plus contributions
     made in each year (less expenses and an inflation proof adjustment) will be the maximum
     amount that could be spent on rehabilitation in that year. The operating rules will establish an
     order of priority for application of available funds and a timeline for any spend. A suggested
     legislative framework for this would be:
     1. The fund must be held and applied for the purpose of providing funds to the Department to:
        (a)   rectify a claim event in accordance with the operating rules; or
        (b)   if sufficient cash surpluses are held, to make credits against future payments to entities
              which have carried out their rehabilitation activities in a timely manner and in accordance
              with best industry practice and in accordance with the Act.
     2. The department will be entitled (but not obliged) to apply the maximum annual claim amount
        for any claim year in accordance with the operating rules.
     3. If any claim event occurs in any claim year and the maximum annual claim amount for that
        claim year has already been applied in full then the department may make application to apply
        sufficient funds from the fund to rectify that claim event to the extent.

     The fund will grow rapidly until it reaches the target balance of $300,000,000 in approximately
     6 years. If an extraordinary event occurred before that balance was achieved, the department
     might seek to borrow funds, through the Minister, from treasury on a temporary basis. The
     interest expense for any funds borrowed would be an expense of the fund. The legislation would
     need to contain provisions empowering the fund manager to borrow from Treasury for this
     purpose. For example:
     1. The department may borrow monies at any time prior to the time when the fund reaches the
        minimum principal balance. Any funds borrowed for this purpose must be applied to the
        existing fund balance.
     2. Funds may be borrowed on an interest bearing basis but the department may not provide any
        security over the assets of the fund to the lender of those funds.
     It is proposed that there is an advisory panel established to provide advice to the Director
     General on matters relating to the management of the fund. The advisory panel could be
     established by legislation, for example:
     1. The Director General may appoint up to four members to an advisory panel.
     2. The four members of the advisory panel must not be employees of the department.
     3. The Director General may also appoint an ex officio member to the advisory panel.
     4. The Minister may set in regulation the roles and functions of the advisory panel.

26                      Department of Mines and Petroleum Western Australia’s Mining Security System
5. The Director General will ensure that the members of the panel have expertise in:-
   (a)   mine rehabilitation;
   (b)   mining industry management;
   (c)   the environment; and
   (d)   financial and legal matters.
Although the legislation will make it clear that funds can only be applied for the purposes
described in the legislation (see above), the detail of the way the fund operates within the
confines of those purposes will need to be confirmed in detail (‘operating rules’). The
legislation would put parameters around those rules. For example:
1. Operating rules will be made for the establishment, maintenance, management and application
   of the fund for all or any of the following purposes:
   (a)   establishing, maintaining and managing the fund;
   (b)   providing for the payment out of the fund of the costs of establishing, maintaining,
         managing and administering the fund;
   (c)   providing for the minimum size at which the fund is to be maintained;
   (d)   providing for the annual contribution amount for tenement holders (which may vary
         between prescribed classes of tenement holders);
   (e)   providing for the investment of the money held in the fund;
   (f)   determining the parameters for determining whether or not a tenement holder is carrying
         out acceptable low risk exploration or prospecting activities in relation to certain
         tenements and (where relevant) excluding those tenement holders from contributing in
         relation to those excluded tenements for any claim year;
   (g)   monitoring on an annual basis whether or not any excluded tenements should lose their
         excluded status;
   (h)   providing for the exemption of a tenement holder from being a fund contributor (totally
         or in relation to some tenements only) for such time as that tenement holder is required to
         provide performance bonds in relation to one or more individual tenements;
   (i)   prescribing rules for the consequences of the failure by any tenement holder to comply
         with its obligations to pay to the fund;
   (j)   prescribing rules for determining the priority of application of fund monies as between
         eligible existing claim events and the allocation of funds available across more than one
         claim year;
   (k)   prescribing rules for the awarding contracts to carry out rehabilitation work in relation to
         a claim event;
   (l)   determining requirement for rehabilitation work plans and reporting requirements;
   (m) determining the amount of any extraordinary levy that may be imposed and making any
       determination of as to whether or not an extraordinary claim event has occurred for that
       purpose; and
   (n)   prescribing the terms and conditions on which application of the funds may be made to
         rectify claim events in the event that the maximum claim amount for any claim year has
         been exhausted.
An extraordinary levy can be imposed in response to a significant mine site failure which
requires immediate rehabilitation works in order to protect the environment, public and/or
public infrastructure. Examples of how this could be structured are:
1. The department may, with the consent of the Minister, impose on tenement holders an
   extraordinary levy, for payment into the fund if, at any time:

                   Department of Mines and Petroleum Western Australia’s Mining Security System         27
        (a)   it has reason to believe that the balance in the fidelity fund may be insufficient in any
              claim year to rectify any actual and prospective claim events for that claim year, after the
              application of the maximum annual claim amount for that claim year; or
        (b)   an emergency claim event occurs and the balance of the fidelity fund is not sufficient to
              meet the requirements for rehabilitation required on the mining tenement; and
        (c)   the management committee may approve both the imposition of an extraordinary levy
              and the amount of such a levy.
     Relevant definitions to include in any amendment may include:
     An existing claim event will include tenements which have been/will be abandoned (but not
     tenements under State Agreements). These will need to be identified on at least an annual basis.
     If there is any surplus left in any claim year after preserving the minimum principal balance of the
     fund (indexed in accordance with inflation) then the department may apply those excess funds to
     rectify one or more of those existing claim events.
     An excluded tenement would cover a tenement that either:
        (a)   qualifies as being exempt by reason of the tenement holder carrying out prospecting or
              exploration activities (exclusively) provided that:
              (i) the tenement holder is not in breach of existing environmental obligations in relation
                  to mining operations; and
              (ii) the activities carried out in relation to that tenement are not determined to be
                   'environmentally high risk'; or
        (b)   is determined to be exempt because it is determined that the relevant tenement holder will
              be obliged to provide performance bonds as security for its reclamation obligations in
              relation to that tenement.

     Any tenement deemed to be an exempt tenement may subsequently lose that status.

     The minimum principal balance is set each year in regulation.

     The maximum annual claim amount for any claim year will be the amount arrived at by taking
     the balance held in the fund (net of running costs but including contributions made in that claim
     year) and deducting the applicable minimum principal balance for that year.




28                      Department of Mines and Petroleum Western Australia’s Mining Security System
Department of Mines and Petroleum Western Australia’s Mining Security System   29
 Government of Western Australia
Department of Mines and Petroleum

  Mineral House, 100 Plain Street
       East Perth, WA 6000
       Tel: +61 8 9222 3333
      Fax: +61 8 9222 3862
       www.dmp.wa.gov.au


         Published March 2011
          DMPMAR11_1250

				
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