Type and Amount of Security
Types of Securities
BC Mining Issue:BC law does not provide adequate guidance regarding what form security should be held in (for example, bonds, cash, treasury bills) or how accessible the security deposit must be.
Fair Mining Best Practice:Consider a miner’s past performance when selecting security instrument and make sure that security is easily and quickly convertible into cash.
The term “security instrument” refers what form security will be held in. Bonds, cash, treasury bills and guaranteed investment certificates could all be referred to as a “security instrument” in this context.
Access to the money needed to carry out site remediation depends on the type of security instrument used. The preferred type is an AA (double “A”) security instrument, which includes bonds, insurance and sureties. High-risk instruments, such as self-bonding and corporate guarantees, should be avoided because they require careful management and back-up strategies in case of bankruptcy.
Remediation means the removal, reduction, or neutralization of substances, wastes or hazardous material from a site so as to prevent or minimize any adverse effects on the environment now or in the future.
However, despite provincial security policies, the ultimate decision on what constitutes an acceptable instrument is left to the discretion of the Chief Inspector. This level of discretion is higher than other jurisdictions and leads to the increased likelihood that high-risk forms of security will be accepted.
Selection of an appropriate security instrument is based on the level of assurance it provides that the miner with take all necessary measures to protect the environment, balanced with the need to minimize typing up capital required for progressive reclamation.
Requiring specific factors in determining appropriate security instruments, such as a miner’s past performance, may provide the needed guidance for the regulatory authority.
Requiring Adequate Amounts of Security
BC Mining Issue:BC’s law on setting security amounts does not ensure that adequate funds are secured to cover remediation costs.
Fair Mining Best Practice:Require that security amounts based on independent contractor rates, and require professional certification of reclamation cost estimate.
Although most mines currently operating in BC have had to post security, BC sets no mandatory legal requirements for mines to post security. Instead, this decision is left to the discretion of the Chief Inspector.
In contrast, Saskatchewan and the Yukon have enacted laws that require the mandatory posting of mine securities.
In BC, the amount of security required is negotiated between the miner and the government, and is based on the miner’s reclamation estimate. BC’s current laws do not ensure that an adequate amount of security is required.
BC law does not specify a minimum amount of security. This differed from other areas, such as New Mexico, which require a minimum security of $10,000.
Shutting out local communities, especially First Nations communities who have local knowledge on specific sensitive areas, may further hamper successful remediation costing.
Setting security based on issues identified in consultation with local communities is required in Victoria (Australia).