Closure and reclamation bonds

What closure covers

• Removing buildings and plant.
• Reshaping and covering waste dumps and tailings storage.
• Treating water, sometimes for many years after mining stops.
• Revegetating the land and monitoring it.

The cost depends on the size of the disturbance, the climate and, above all, the chemistry of the rock. Mines whose waste produces acid drainage can need water treatment long after closure, which makes their closure costs much higher.

How bonding works

Rules vary, but many jurisdictions require the owner to provide financial security before disturbing the ground:

The amount is usually reassessed as the mine grows, and may need to cover the full cost of closure if the government had to do the work itself. Some regulators do not accept a company's own balance sheet as security.

Worked example

An invented mine expects closure to cost $40M at the end of a 15-year life.

The discounted closure cost looks small. The bond is a real cost from the start, and it adds to the money that must be raised before construction.

At each stage

At exploration, bonds cover drill pads and access tracks and are small. From the studies onward, closure cost is estimated and should be in the model. At construction, the bond becomes part of the funding package. In production, it grows with the disturbance, and a buyer of an operating mine takes on its closure liability.

What to take away

Check that the study includes a closure cost, whether the jurisdiction requires security up front, and in what form. For an older or historic site, ask who is responsible for past disturbance.

All figures are invented for illustration. This is educational material, not legal or investment advice.