TAILINGS GOVERNANCE A CORPORATE AND SITE SPECIFIC ASSESSMENT

by

Adolfo A. Lopez

Civil Engineer, Pontificia Universidad Catlica de Chile, 2005

AN ENGINEERING PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENTS FOR THE DEGREE OF

MASTER OF ENGINEERING IN MINING ENGINEERING

in

THE FACULTY OF APPLIED SCIENCE

(Program Name: Master of Engineering)

THE UNIVERSITY OF BRITISH COLUMBIA

(Vancouver)

June 2017

Adolfo A. Lopez, 2017

Executive Summary

This report presents a literature review of the drivers, the concepts and challenges regarding some

of the recent initiatives to assure a better level of governance associated to tailings management

within mining companies. Specifically, this report reviews the governance aspects, at a corporate

level and at the mine site level, that would be deemed necessary to assure that good governance

forms an integral part of how a mining company approaches the high-risk elements of tailings

management. A checklist of elements was developed, drawing from a recent commitment to

tailings governance by the members of the International Council on Mining and Metals (ICMM).

The checklist was later used to assess the level of compliance of the El Mauro tailings storage

facility (Minera Los Pelambres, a subsidiary of Antofagasta plc), using publicly available

information. The results of the assessment found that disclosure, the apparent lack of a visible

corporate head of tailings and the apparent lack of an approach to change management were the

main issues in verifying that the company follows good governance practices. The assessment

observed elements of a sound and through risk assessment program and a high level of awareness

and actions toward tailings management. Nonetheless, tailings were not found to be specifically

addressed within the risk management program.

The main challenges in moving forward in implementing and assuring good governance of tailings

facilities are: disclosure at the company level and at the regulatory agency level; the approach to

change management and the evolution of the risk profile throughout the life of the facility; the lack

of a transnational and multi-stakeholder collaborative standard, code of conduct or equivalent; and,

importantly, the governance challenges of developing countries, including policy making,

collaboration and partnerships, incentives, and monitoring.

ii
Preface

This report is the final deliverable for the course MINE597 Engineering Report for MEng students.

The faculty advisor and reviewer for the report is Dr. Dirk van Zyl.

The review and assessment presented in this report is based primarily on the work submitted by

Golder Associates Africa (Pty) Ltd. on December 2016 for the International Council on Mining

and Metals (ICMM), titled Review of Tailings Management Guidelines and Recommendations for

Improvement. I completed the assessment of a specific mine site and corporate systems based on

publicly available or open access information.

iii
Table of Contents

Executive Summary ...................................................................................................................... ii

Preface ........................................................................................................................................... iii

Table of Contents ......................................................................................................................... iv

List of Tables ..................................................................................................................................v

List of Abbreviations ................................................................................................................... vi

Acknowledgements ..................................................................................................................... vii

Dedication ................................................................................................................................... viii

Chapter 1: Introduction ................................................................................................................1

Chapter 2: Governance and tailings management systems .......................................................3

2.1 Catastrophe as a catalyst for change ............................................................................... 3

2.1.1 The Mount Polley effect ............................................................................................. 5

2.1.2 The Samarco effect ................................................................................................... 11

2.1.3 ICMM response ........................................................................................................ 14

2.2 The concepts of stewardship and governance applied to tailings management............ 19

2.3 Best practices in tailings governance ............................................................................ 23

2.4 Challenges for improving the governance aspects of tailings management systems ... 26

Chapter 3: Assessment of tailings governance aspects at MLP ...............................................31

3.1 Methodology ................................................................................................................. 31

3.2 Findings......................................................................................................................... 34

3.3 Discussion ..................................................................................................................... 37

Chapter 4: Conclusion .................................................................................................................40

References .....................................................................................................................................42
iv
List of Tables

Table 2.1 Checklist for good practice of governance aspects for tailings management ............... 24

Table 3.1 List of documentation reviewed as part of assessment ................................................. 32

v
List of Abbreviations

APEGBC The Association of Professional Engineers and Geoscientists of

British Columbia

BAT Best available technologies

CEO Chief Executive Officer

COO Chief Operations Officer

EOR Engineer of Record

FSE Forestry Stewardship Council

FTSE Financial Times Stock Exchange

ICME International Council on Metals and the Environment

ICMM International Council on Mining and Metals

ITRB Independent Tailings Review Board

MAA Multiple accounts analysis

MAC Mining Association of Canada

MLP Minera Los Pelambres

MMSD Mining, Minerals and Sustainable Development Project

NGO Non-Governmental Organization

OMS Operation, Maintenance and Surveillance

SERNAGEOMIN Servicio Nacional de Geologa y Minera

TSF Tailings storage facility

TSX Toronto Stock Exchange

UNEP United Nations Environment Programme

vi
Acknowledgements

I thank Dr. Dirk van Zyl for his guidance and expert opinions.

I thank my loving wife and children, who inspire my life and have supported me through my

graduate studies.

vii
Dedication

To my wife, Carolina, and my children, Nicolas and Belen.

viii
Chapter 1: Introduction

The purpose of the work was to complete a literature review of the governance aspects of tailings

management systems and assess the challenges faced by mine operators and regulators,

considering some of the recent initiatives, commitments and regulatory changes developed in the

last three years. The assessment examines the systems and complexities at a specific mine site and

corresponding company headquarters as related to the governance aspects of the tailings

management system. The mine site selected for the assessment is the Los Pelambres mine, located

in central-northern Chile, owned and operated by Antofagasta Minerals SA.

Publicly available information has been used in completing the literature review and site-specific

assessment, including that from mining industry organizations, corporate reporting and mining

regulations.

The scope of work of this engineering project includes the following:

A discussion of the recent catastrophic failures of tailings storage facilities as drivers for

improvement of tailings management practices, as well as a summary of how regulatory

agencies and the mining industry have responded in the last three years following the

Mount Polley and Samarco tailings release incidents. Change and initiatives reviewed

include updated guidelines developed by the Mining Association of Canada (MAC), and

regulatory changes in British Columbia and Montana State;

A review of the use of the concepts of stewardship and governance to tailings management.

The use of these concepts for water management is also discussed in connection with the

operation of tailings storage facilities. The concept of robustness is also discussed as a tool

for risk management and the application to tailings management systems;

1
 A review of best practices in tailings governance aspects, based primarily on Golder

Associates (Golder) review of tailings management practices developed for ICMM titled

Review of tailings management guidelines and recommendations for improvement, and

the subsequent Position Statement issued by the International Council on Mining and

Metals (ICMM) related to tailings governance, both issued in December 2016;

A discussion of the challenges in implementing better practices in tailings governance and

moving toward a higher level of robustness of tailings storage facilities

An assessment of the tailings governance aspects of the tailings management system at the

selected mine site and at the corresponding corporate systems. The assessment includes a

list of gaps and a discussion of the findings and challenges. The assessment is based on a

checklist of items defined for the purposes of this assessment; and

A discussion on the challenges related to the implementation of the industry commitments

for improving the governance aspects of tailings management, from a regulatory and

industry perspective.

2
Chapter 2: Governance and tailings management systems

2.1 Catastrophe as a catalyst for change

Governments and industry swing into action following environmental catastrophes in an attempt

to understand the root causes of such tragedies and ascertain how to increase control and reduce

risk. A simple review of the regulatory changes and industry initiatives, aiming at reducing the

risk of high-volume industries like mining, shows these follow an unequivocal pattern of

catastrophe and learning. In 2001, ICOLD reported a rate of 2 significant TSF failures per year;

although the rate may appear to have dropped over the last 15 years, two significant failures shook

the industry enough to drive commitments aimed at providing a higher level of assurance that the

risk profile is maintained sufficiently low. Guidelines and regulations have been reviewed and

compared once again, and the current set of international best practices has been benchmarked by

industry representatives. Additional assurance measures have been incorporated in regulations of

some mining jurisdictions; conversely, industry commitments have been adopted to raise the

importance of tailings management in the business decision-making processes, under a so-called

tailings governance framework.

The catastrophic failures of the tailings storage facilities at Imperial Metals Mount Polley mine

(British Columbia, Canada) and BHP Billiton & Vales joint venture Samarco mine (Minas Gerais,

Brazil) have been globally recognized as two of the worst of its kind caused by the mining industry.

The consequences of the sudden structural failure of the retaining structures caused immediate and

severe impact to the environment and to the surrounding inhabitants from the uncontrolled

discharge of impounded tailings material and water. The severity, extent and long-term damage

varies among these two catastrophic events and is a consequence of a complex function of the

3
impounded material and water quality, the climate, the geography, and the land use and inhabitants

downstream of the sites.

The concepts of geotechnical engineering judgement that Ralph Peck described in his 1980 Laurits

Bjerrumm lecture (Peck, 1980) are still applicable today in approaches that attempt to address

uncertainty and variability, such as reliability and robustness; in his lecture, Peck stated that

designers and regulatory bodies tend to place increasing reliance on analytical procedures of

growing complexity and to discount judgment as a non-quantitative, undependable contributor to

design. Remarkably, some of the key aspects of recent regulatory changes and industry-led

initiatives pursue an increased standard of care in applying better judgement through the life cycle

of tailings storage facilities through increased or explicit requirements for independent review

boards, resources and procedures.

The recent TSF failures briefly described below have seriously hindered the already fragile public

perception of the mining and metals industrys ability to commit to the protection of the

environment and the surrounding communities, and to implement sustainable practices.

Industry organizations and regulators have subsequently placed significant efforts into discussions

on what type and extent of changes and controls would have the most impact on preventing

catastrophic failures of TSFs.

4
2.1.1 The Mount Polley effect

Located in the Province of British Columbia, Canada, the Mount Polley Mine1, became known

worldwide following the catastrophic breach of its tailings storage facility on August 4, 2014. The

incident represented a major environmental incident caused by the release of tailings material and

supernatant water to the surrounding land. The flood material caused extensive damage and

erosion and entered two lakes located close to the mine. Fortunately, there were no reported third-

party damages to infrastructure nor fatalities. In the words of the president of the Society for

Mining, Metallurgy, and Exploration (SME), John Marsden (2014) , the Mount Polley spill posed,

once again, a credibility issue on the mining industry, noting the event as frustrating, great

harm, a huge setback, and anticipating escalating regulatory controls in the short term that are

likely not to improve the risk profile and overall safety under the current state-of-practice.

Thorough investigations were conducted by a designated Independent Expert Engineering

Investigation and Review Panel (the expert panel) appointed by the British Columbia Ministry of

Mines to assess the causes of the dam breach and provide recommendations for improved practice.

The cause of the failure of physical stability was investigated by the designated expert panel and

1
The Mount Polley Mine, owned by Mount Polley Mining Corporation (MPMC), is a copper-gold

mine located in south-central British Columbia, approximately 8 km from the town of Likely, 60

km northeast of Williams Lake and 50 km east of the Gibraltar mine. MPMC has been in operation

since 1997; production stopped on account of the TSF failure and was restarted about one year

after the incident. MPMC is a subsidiary of Imperials Metals Corporation (III-TSX), a Vancouver-

based mine developer and operator.

5
by several consultants retained by MPMC and the Ministry of Mines. The scope of those

investigations was limited to physical causes that led to the failure mechanism; other root causes,

such as the risk management approach, systems and resources, as well as legal responsibilities,

were not within the scope of the expert panel. The cause of the failure mechanism was reported to

be the increased stress level on an unidentified clay layer in the foundation of the dam. The

complexity of the geological environment had not been sufficiently taken into consideration in the

design of the foundation of the perimeter embankment, where the breach occurred.

On a purely geotechnical perspective of the immediate cause, if the foundation materials and their

stress-strain behavior had been fully assessed and taken into consideration in the initial design

and/or the subsequent changes throughout the operation, the failure mechanism could have been

mitigated or eliminated altogether. A contributor to the failure mechanism was the increased stress

level within the foundation materials caused by a raise of the embankment with a steeper

downstream slope of the embankment than that originally planned.

Water management was also a relevant contributing factor in the extent of the consequences of the

breach of the embankment dam. As may be observed through publicly available footage of the

disaster, the extensive impact to the landscape immediately downstream of the dam breach and

along the flow path of the Hazeltine Creek (a small tributary creek to Quesnel Lake) showed

evidence of significant amounts of natural sediments that had been eroded by action of a very fluid

slurry. The fluid material that made its way into Quesnel Lake, conceivably the most publicized

impact and matter of public concern, was therefore a mix of tailings, process water, contacted run-

off from the mine site, and eroded natural sediments. The extent of erosion downstream of the dam

breach, as well as the volume of tailings material released from the dam breach, could have been

significantly reduced if the size of the reclaim water pond (also termed supernatant or decant pond)
6
had been maintained at the lowest level possible. It is important to note that the water management

practice at the mine was to divert the contact and run-off water streams into the tailings

impoundment; consequently, the TSF was also a critical component for site water management. A

permit for the discharge of water from within the impoundment had been requested by the mining

company but had been rejected. At the time of the dam breach, the volume of water stored within

the impoundment was significant. As noted by the BC Chief Inspector of Mines in the investigation

report on the Mount Polley breach (Mount polley mine tailings storage facility breach.2014), there

was no qualified individual responsible for the water balance at the mine, and there was no

evidence of an adequate assessment of the risks of operating with a surplus of (or significantly

higher than what would be accepted as good practice) supernatant water within the tailings

impoundment, a consistent condition since the mine reopened in 2005.

Another significant contributing factor to the incremental loss of redundancy and robustness was

the successive changes in the design that had been introduced throughout the years of operation,

mainly aiming to optimize construction materials and reduce costs. Although the embankment dam

had been constructed following an approved design, it may be reasonably alleged that the sum of

changes and optimizations had significantly decreased the level of redundancy and robustness of

the original design. Although SME president John Marsden stated that the risk profile of tailings

facilities will likely be unvaried by future strengthening in regulations, it is necessary to recognize

the challenges of maintaining a risk profile of a tailings facility throughout the successive changes

that normally occur during the design, construction and operation phases of a facility.

The Mount Polley expert panel delivered seven (7) recommendations within its report, covering

areas from design standards to guidelines, management systems and assurance. The Chief

Inspector of Mines of BC also delivered an investigations report including a set of 19

7
recommendations, 5 of which specifically discuss governance aspects: (1) designation of a

qualified person to manage dam safety; (2) site-wide water management by a qualified person; (3)

operations, maintenance and surveillance manual; (4) emergency response plan; and (5) risk

management (Mount polley mine tailings storage facility breach.2014). The other

recommendations of the Chief Inspector of Mines target the mining industry (including

independent technical review boards), professional organizations, and the role and organization of

the regulatory body.

Following the release of the expert panel report, the BC Chief Inspector of Mines ordered mines

to assess the risk of their tailings storage facilities in terms of foundation material, drainage

capability, and water management. The Ministry of Energy and Mines of BC initiated a series of

changes to regulations; these have included:

- A revised BC Mines Act, enacted in March 2016 (about 1 year and 7 months after the TSF

failure), incorporating:

o administrative monetary penalties;

o increasing existing penalties; and

o requiring the assessment of best available technologies (BAT)

- Changes to the Health, Safety and Reclamation Code for Mines in British Columbia (the

BC Mining Code), effective as of July 20, 2016, including:

o new standards and design criteria including slope requirements, minimum static

factor of safety and new seismic and flood design criteria;

o new requirements for water balance and water management plans;

o the requirement of an Independent Tailings Review Boards (ITRB);

o the definition of roles and responsibilities for the engineer of record; and
8
 o requirements for a TSF management system and audits

o requirements for risk management

The BC Ministry of Mines now requires mines to submit an annual report that includes an overview

of its Independent Tailings Review Board activities, which will be made electronically available

to the public.

The BC Minister of Mines also called on the cooperation of the industry to address additional

recommendations by the Mount Polley expert panel, specifically regarding the development of

guidelines for conducting subsurface geotechnical investigations, taking into consideration the

local settings known to exist in the Province. The expert panel noted that the development of such

guidelines as one of the best applicable practices that may be implemented. In response to the

panels recommendation, APEGBC, the licensing and regulatory body in British Columbia for

professional engineers and geoscientists, published the professional practice guidelines for site

characterization for dam foundations in BC, in September 2016. The guidelines complemented the

existing guidelines titled Legislated Dam Safety Reviews in BC (APEGBC, 2016).

The Mining Association of Canada (MAC), in response to the Mount Polley incident, set up an

independent task force to assess the potential for improvement of the tailings components of the

Towards Sustainable Mining (TSM) program, which consists of the tailings management protocol

and accompanying guidance documents. MACs TSM initiative was endorsed in the expert panels

report, acknowledging that such a set of commitments, management system, procedures and

resources represents good practice and adherence should be a minimum requirement at any tailings

storage facility. MACs tailings documentation includes a Tailings Management Protocol with

three associated guides: the Tailings Guide; the OMS guide; and the Audit & Assessment guide.

MACs protocol and accompanying guides provide a management focus that goes beyond a set of
9
standards for design and operation and furtherly requires evidence of assurance and accountability

by means of performance indicators. The history of these documents dates to 1996, when MAC

first established a Tailings Working Group (TWG) in response to several major international dam

failures that raised the awareness in the industry. The TWG published one of the first guidance

documents of its kind in 1998, titled A Guide to the Management of Tailings Facilities. MACs

Towards Sustainable Mining (TSM) program, established in 2004 and mandatory for MAC

members, updated the Tailings Protocol and produced or updated the accompanying guidance

documents. MACs task forces final report included 29 recommendations to strengthen the

protocol and guides, and aim at raising the performance bar of the local industry to the current

level of recognized best practices of many mines. The recommendations have been progressively

incorporated into the tailings protocol during 2016, and the modifications to the guides will

continue through 2017. A summary of some of the key recommendations included in the report

call to (TSM Tailings Review Task Force, 2015):

- increase the level of assessment of the performance indicators included in the Tailings

Protocol;

- incorporate a risk-based and critical controls approach in the Tailings Guide that is verified

through the life of the facility; and

- include the assessment of best available technology and best available practices (BAT and

BAP, respectively) using multiple accounts analysis (MAA)

In the United States, response to the alarm posed by the Mount Polley incident was spearheaded

by the local industry through the Montana Mining Association and sponsored by Montana State

senators, enacting a bill that revised the mining laws (An act revising metal mine reclamation laws,

10
2015), including most importantly the requirement of an independent review panel to review the

dams every five years, as well as:

o new standards;

o new fees;

o additional reviews and inspections; and

o increased enforcement

2.1.2 The Samarco effect

The Fundo tailings storage facility, one of three tailings facilities at the Samarco mine2 in the

Minas Gerais state in Brazil, collapsed on 5 November, releasing more than 30 million cubic

meters of tailings material, causing 19 fatalities, 14 of which were workers at the mine site, and

extensive impact to the ecosystem and communities along the flow path of 650 km into the Atlantic

Ocean (Phillips, 2016) (Samarco, 2017). Hundreds of peoples homes were destroyed by the flow

of sediments and water. The collapse of the TSF, also known as the Mariana disaster, was

described by government officials as the worst environmental disaster in Brazils history

(Denuncia samarco.2016). The magnitude of the damage has been compared to the Deepwater

Horizon oil rig explosion and spill that occurred in the Gulf of Mexico in 2010 that killed 11 people

and dumped 500,000 cubic meters of crude into the ocean (Phillips, 2016).

An Expert Review Panel (the Panel) was constituted by a law firm, retained by Samarco and parent

companies, to determine the immediate cause of failure. As reported by the Panel in the report of

2
The Samarco mine is an iron ore operation owned by Samarco Minerao S.A., a 50/50 joint venture between BHP
Billiton Brasil Ltda. and Vale S.A. The mine is located in the State of Minas Gerais, Brazil, about 2 km from the town
of Bento Rodrigues.
11
its review (Report on the immediate causes of the failure of the fundo dam.2016), the tailings dam

collapsed due to the liquefaction of a weak zone of material within the foundation of the upstream

slope of the tailings dam. A minor earthquake, known to have occurred prior to the collapse, may

have accelerated the failure mechanism, according to the Panel. The key immediate factors leading

to the collapse was the existence of a weak layer or zone within the foundation of the upstream

shoulder of the dam, and the degree of saturation within this weak zone. Successive modifications

to the original design of the dam section had been implemented throughout the life of the facility

to mitigate the impact of unexpected changes, including the issues with the underdrain or basal

drain system observed following initial construction and the failure of other water conveying

structures near the left abutment. The modifications to the design provided the grounds for an

unusually high phreatic surface within the upstream shoulder, as well as the likeliness of building

the dam raises over weak, liquefaction-susceptible slime materials. Water management at the TSF

was a significant contributing factor in providing the grounds for the failure mechanism, as the

water pond surpassed the safe distance to the upstream face of the dam for some time, allowing

weak slimes to settle within the zone that would later become the foundation of the dam raise.

The approach to the modifications of the design and the regulatory approval process have been

questioned, claiming negligence, as well as lack of regulation and enforcement from government

an industry. Samarco was initially fined $265 million by the Brazilian government but the fine was

later increased to $5 billion, and the mine joint-venture owners Vale and BHPs assets in Brazil

have been blocked (Phillips, 2016). Samarcos initial response to the disaster was largely criticized

for being slow and lacking transparency regarding the health risks posed by the released tailings,

as well as for the condition of the other tailings facilities operated by the mine (Gormezano, Protti,

& Cowie, 2016).

12
Government response to the incident has been largely focused on administrative penalties and

prosecution. Samarco was fined 250 million Reais by the Brazilian federal environmental

protection agency, Ibama, and 112 million Reais by the Minas Gerais state environment agency,

Semad. In March, Samarco, Vale and BHP Billiton signed an agreement with the federal

government for socioeconomic and environmental recovery work, estimated to cost a total of about

20bn Reais over 15 years; only after more than 6 months after the dam failure, Samarco, Vale and

BHP Billiton created a foundation, named Renova Foundation, to conduct those programs.

However, the agreement is now threatened after a high court judge suspended the settlement.

Separately, in May 2016, federal prosecutors in Minas Gerais made legal actions for 155 billion

Reais in damages (more than 45 billion US dollars), claiming the company was negligent in its

responsibilities for failures in planning, control and risk management (Denuncia samarco.2016).

Brazils federal police also conducted an investigation, concluding that the Company knew that

the tailings dam was at risk, and recommended pressing charges against Company executives

(Phillips, 2016).

A local coalition of local communities impacted by dam projects in Brazil, called Movimento dos

Atingidos por Barragens (MAB), made four key demands to Samarco and parent companies BHP

Billiton and Vale following the collapse of the tailings dam, including: eliminating the S4 dam;

restructuring of the Renova foundation; recognition of a larger number of affected families; and

expedited general repair work (Barrington-Bush, 2016) .

13
2.1.3 ICMM response

The International Committee on Mining and Metals (ICMM) released a Position Statement in

December 2016 in response to the two tailings dam breach disasters occurred in the last two years,

addressing the concerns for better assurance in tailings management (ICMM, 2016).

The ICMM was created in 2001, transforming and expanding the mandate of the International

Council on Metals and the Environment (ICME), as an industry-led initiative to catalyze change

and organize efforts of the member companies in achieving the principles for sustainable

development that were established as an agenda for change from the outcomes of the Mining,

Minerals, and Sustainable Development (MMSD) project (ICMM, 2017a). The ICMM is currently

composed of 23 member companies, representing about one-third of the global metals production.

The ten principles that constitute ICMMs sustainable development framework aim at improving

the social and environmental performance of the mining and metals industry. The MMSD project,

completed between 2000 and 2002, was a wide- ranging research and consultation project,

managed by the World Business Council for Sustainable Development (WBCSD) and the

International Institute for Environment and Development (IIED), with a total of over sixty

representatives and specialists involved in planning, budgeting, reviewing and making decisions.

The project was planned through the Global Mining Initiative (GMI) led by a handful of leading

mining companies and the WBCSD to understand and address the growing community unrest,

criticism from civil society, broader public opposition and increased scrutiny. The project involved

four regional partnerships, twenty national-level projects, twenty-three workshops, and 175

working papers, with contributions from more than 5,000 participants (Globalization and self-

regulation: The crucial role that corporate codes of conduct play in global business2011).

14
For many, the ICMM is recognized as a valid contributor to improving global standards within the

mining and metals industry. For others, the ICMM is not more than a self-serving institution

conducting public relations to improve the image of its members, and maintain the status quo of

the industry (Bowker, 2016).

In addition to the ten principles of ICMMs sustainable development framework, a series of

position statements have been developed to accompany and strengthen those principles. The

December 2016 Position Statement provides a specific focus on tailings governance aspects of

tailings management (ICMM, 2016) , drawing from the conclusions of the review of standards and

best practices at the corporate level, commissioned to Golder Associates Africa (Pty) Ltd.

(Golder). Members are expected to implement the commitments by November 2018 (ICMM,

2016). The Golder review, and subsequent position statement, limit the objectives to prevention of

sudden structural failure from surface impoundments; however, the elements for better governance

may well be applicable to any other type or configuration of tailings management and storage

system.

In parallel, ICMM released a separate position statement in January 2017 regarding water

stewardship. The January 2017 position statement on water management requires member

companies to apply strong and transparent water governance(ICMM, 2017b). Water management

and tailings management are closely related elements at any mine site; thus, benefits should be

expected from making consistent changes of water and tailings management systems.

Golders review (Golder, 2016) looked at some of the most notable or recognized national

standards/guidelines, and corporate level documentation of the member companies regarding

tailings management. The objective of the review was to produce a benchmark set of good practice,

based on Golders recognized experience in tailings consulting and engineering, and compare that
15
against the standards, guidelines, and corporate systems. The review looked at standards, critical

control strategies, risk management, change management, governance elements, emergency

preparedness, assurance and continuous improvement systems, among others.

Golders review found that only a minority of member companies did not fully follow good

practice, as defined in the Golder report. The report also identified the following space for

improvement within the set of corporate and national standards or guidelines:

Failure consequence classification system and safety standards

Change management system

Communication protocol between the engineer of record (EOR) and the operator or owner

Risk assessment system, with assurance that mitigation measures are taken into

consideration in the design and operation

Independent technical review

Golders conclusions highlight the benefit of implementing the improvements within a tailings

governance framework embedded within the management framework to provide better means for

assurance and decision-making. The report also highlights the relevance of assigning qualified

persons to key responsibilities.

An element that appears to be highlighted as a common denominator in Golders review is the

apparent lack of or shortcoming of a process or system for change management, and with it the

management of risk throughout the life of a TSF. The recommendation, in Golders report, is to

explicitly incorporate the requirement for a change management system, endorsed and driven by

an executive commitment, to assure that the implications of potential material changes throughout

the life of the facility, whether internal or external, are fully adopted, communicate and embedded

into the operations manuals, into budgets and into training at all levels. In addition, the review
16
recommends prescriptions for formal communication between the engineer of record and the

operator or owner of a mine, to transfer and confirm shard understanding of the intents and the

constraints of the design during construction and operation.

The member companies of the ICMM, taking into consideration the review and recommendations

developed by Golder, committed to including 6 specific areas related to management and

governance aspects of tailings management systems. The areas are:

Accountability, Responsibility and Competency, from executive management to facility

management, to support the risk management process including: definition of roles,

definition of competencies and experience requirements for key positions, communication

processes, and training

Planning and Resourcing, meaning the right people and the budget necessary for effective

implementation, with the associated capital and operating costs explicitly forming part of

business planning processes.

Risk Management, requiring not only the identification but also the definition of a risk

control regime and the performance of the risk controls. This requires a process for

identifying the appropriate risk controls and defining their performance criteria, a process

to be completed by qualified personnel with expert review, as well as a process for

monitoring and verification, and reporting to executive management.

Change Management, to explicitly include the assessment, control (by means of risk

controls), and communication of potential material changes in the risk management

process. The purpose, as stated in the position statement, is to avoid introducing uncertain,

unacceptable and/or unmanaged risks arising from internally-driven or externally-driven

change. The documents and records are committed to be maintained suitably current and
17
 accessible, as stated. The acceptable level of risk or the evolution of the risk profile is not

discussed in the position statement.

Emergency Preparedness and Response, including processes to recognize and respond

to impending failure, where action thresholds and response actions are established. An

explicit requirement of emergency response plans is established, with roles,

responsibilities, and procedures for communication and for testing.

Review and Assurance, requiring regular external review is conducted in addition to

internal control and monitoring of effectiveness, including following through and

communicating the outcomes and action plans of such reviews to executive management.

The commitment, however, does not specify the frequency of the external reviews.

The commitments made by the ICMM members represent a set of good practices in terms of

processes for risk management, organization, resources and communications related to

maintaining the safety of TSFs. The commitments are broad and do not specific elements such as

frequency, performance or assessment criteria for compliance. The commitments also do not

require making any of the information publicly available or accessible.

One reasonable critique to the review process and subsequent specific commitments released by

the ICMM, is the lack of engagement of a broad range of communities of interest in understanding

the root causes and changes required to significantly reduce the likelihood of occurrence of

disasters from TSF failures. A broad review (both internal to the industry and external to it) of the

root causes, or specifically the causes rooted in management, such as policies, procedures,

resources, were not addressed by the recent effort by the ICMM. Unlike the original approach of

multi-stakeholder engagement and agenda for change that became the foundation for the work of

the ICMM and has been used in other publications by the ICMM, understandably the basis behind
18
this position statement appears to be a self-assessment by the industry. Nonetheless, a key

acknowledgement and commitment regarding assurance systems, risk and change management,

and the resources to effectively implement the systems.

2.2 The concepts of stewardship and governance applied to tailings management

Stewardship

The concept of stewardship for tailings management has been used for at least 15 years. The

concept of tailings stewardship was the title of one of the MMSD reports published in 2002

(Martin, Davies, Rice, Higgs, & Lighthall) and was defined by the authors as the act of taking

care of the tailings facility in all aspects, from concept to closure, and including the mill process

where the tailings materials originate. Good stewardship elements that were discussed to be critical

to ensure the safety throughout the life cycle of a TSF include checks and balances and procedures

for quality assurance, as well as definitions of responsibilities and competency (Martin et al.,

2002). The concept of stewardship dates back several centuries and has evolved in modern times

to the use in myriad ways, from a biblical perspective to many elements regarding environmental

conservation such as water use. Water stewardship within the mining industry has become a

common subject in assessing a mining operations commitment to contributing to sustainable

development.

Governance. The concept of governance is broad and dependent on the context, referring broadly

to the act of governing, whatever the institution. Merriam-Webster's Dictionary defines

governance simply as "the challenges of national governance and so refers specifically to

authoritative direction and control. The concept of governance may be taken broadly as the

19
collection of efforts and processes to set the rules and make decisions in line with a shared purpose

consistent with the mission, intent or policies of a certain group of individuals.

Governance has been used assess the level of effectiveness of governments; the performance or

the effectiveness of governments of assuring a countrys needs are fulfilled is associated with a

level of governance, either representing good governance or a poor governance. The significance

and implications, as well as the expected elements of good governance may be regarded as being

more explicit for governments. Expected elements of good governance, in a national government

context, will therefore aim at providing efficient public services, stable politics, strengthening civil

society and assuring access to sustainable welfare and economic growth. Poor governance, on the

other hand, has been associated with corruption, abuse, arbitrary decisions, and other elements

holding countries back from rising from the developing world.

In a broader sense, the work presented in this report expands on the concept of governance as the

set of rules and processes for decision-making and implementation of an organization or key

elements of an organization, in this case the management of tailings material. The concept of

governance may also be used to assess the efficacy of any group of people in reaching their intent

by the articulation of interests, power, legitimacy, formal and informal rules, control and

accountability.

The practices and systems that lead to a good level of governance need to occur at all levels in an

organization, or in other words, become recognized as the legitimate way. The responsibility of

delivering on the practices should not rely exclusively on the role of a regulating agency or

executive management, but should call on the benefits of participatory partnerships, each sharing

their share of accountability.

20
Industries, governments, NGOs and social movements have attempted to create systems or ways

that encourage good behavior including certified rules, labelling and monitoring systems so that

consumers, shareholders and regulators are provided with a certain level of assurance. One such

example of a transnational collaborative initiative that has strengthened the governance aspects of

mining operations is the International Cyanide Management Code For the Manufacture, Transport,

and Use of Cyanide In the Production of Gold, also known as the Cyanide Code, which has been

recognized by the industry and by regulators to represent a set of best practices in a commitment

to improving the management of cyanide used in gold and silver mining and to assist in the

protection of human health and the reduction of environmental impacts (The cyanide code.2017).

The Cyanide Code was finalized in 2002, as a two-year effort by a multi-stakeholder steering

committee formed at workshop hosted by the United Nations Environment Programme (UNEP)

and the International Council on Metals and the Environment (ICME), in response to the Baia

Mare incident in 20003. The Cyanide Code has been fully implemented since 2005, with 45

signatory mining companies and operations (among producers, transporters and mines) in more

than 50 countries as of the first quarter of 2017 (The cyanide code.2017); it is recognized globally

for the transparency and validation of the risk based management approach and compliance

process. The systems and practices that form the Cyanide Code have been successful in reducing

or eliminating the incidence of cyanide-related impacts, non-compliance, as well as community

3
The Baia Mare incident (Aurul gold mine, northwestern Romania), known as one of the worst environmental
damages in Europe, was a tailings dam failure and subsequent release of cyanide and metals-containing sediments and
water. The tailings material flowed into the Some River, consequently affecting the Tisza and Danube rivers, outside
of the Romanian border. The incident caused severe damage to the ecosystem within the course of the affected rivers
and prompted the neighboring Hungarian government to ban the use of cyanide in gold processing. The Baia Mare
incident was a driver for a global-scale discussion regarding the safe management of cyanide, led by the UNEP and
ICME in 2000.
21
resistance (Cyanide management2008) and has been adopted or otherwise accepted as the standard

to which operations and projects are generally expected to adhere to for financing and approval.

Such a code of practice is an excellent example of a process of global partnerships between a wide

range of stakeholders at a global scale to develop the systems, rules and means for a shared purpose

(albeit with presumably diverse interests), thus representing a substantial improvement in setting

the standard of care in the management of a high-risk materials or elements such as cyanide.

Adherence to the Cyanide Code, therefore, is illustrated here as an example of the commitment to

elements of good governance, such as: the acknowledgement of the multi-stakeholder nature of

management of a high-risk element; formal risk-based impact assessment and mitigation;

ownership of accountability; processes for decision-making, implementation and control; and

lastly, an established process of third-party, independent, and transparent audit process.

The concept of a governance framework for tailings management, represented by commitments

to risk-based processes to ensure the adequate definition of policies, rules, systems, people, and

improvement, was presented by Golder (2016) and ICMM (2016) as a key element to improve the

efficacy of the overall goal of a sustainable mining business. The review completed recently by

Golder (2016) reiterates some of the reflections stated almost 15 years earlier in Tailings

Stewardship report for the MMSD project (Martin et al., 2002): a review of the standards and best

practices reveals a reasonably adequate level of the state of knowledge and the available

technology to provide for the safe management and storage of tailings materials. Despite the

advancements of technology and improvements of design standards and regulations, recent

catastrophic failures provide evidence of the implementation issues across the industry. The

checkered scorecard of environmental protection of mining operations does not appear to make

consistent improvements, greatly caused by the varied approach to risk management in terms of
22
the people and resources committed, and the processes for developing policies and making

decisions.

2.3 Best practices in tailings governance

The reviews of some of the leading guidelines, regulations and practices, commissioned recently

by the ICMM (2016) and reported in (Martin et al., 2002), although spaced about 15 years apart,

agree on the acknowledgement that the shortcomings lie in the efficacy of the implementation of

the state of knowledge and on the verification process of the controls that are put in place to assess

the operating conditions. These elements constitute the set of good practices and assurance

systems. Good practice, in this regard, is regarded as the set of policies, standards, limits,

thresholds, and procedures or methods that agree with the current state of knowledge and global

consensus of the practices that enable a common ground for sustainable development.

International best practice is also a term used to represent a global consensus or convergence on

the ground rules among the industry, governments and international finance institutions, by means

of policies, norms, procedures and protections (Williams, 2008); in this report, the concept of good

practices and international best practices are equivalent.

Golders review of standards, guidelines and practices, commissioned by the ICMM (Golder,

2016), compiled a set of elements representing good practice in tailings management, with input

from ICMM members. Table 2.1 defines a checklist of criteria for good governance in tailings

management, both at a corporate level and at the site level, based on Golders review and adjusted

or expanded where deemed necessary.

23
Table 2.1 Checklist for good practice of governance aspects for tailings management

Source/comments

1 There is a corporate tailings management framework or Expanded from

system with accompanying guidelines and/or standards and Golder, 2016
mandatory processes

1.1 The corporate tailings management framework (or equivalent) is Golder, 2016
explicitly endorsed by the Board of Directors

1.2 The corporate tailings management framework (or equivalent) is Expanded from
mandatory for its subsidiaries and joint venture operations, Golder, 2016
whether the company acts as operator or not

1.3 The corporate tailings management framework is explicitly Beyond Golder, 2016
committed to by executive mine management.

1.4 The corporate tailings management framework explicitly refers to Expanded from
the principle of appointing suitably qualified individuals and Golder, 2016
sufficient resources to lead the management and assurance
processes. The framework identifies a corporate head of tailings
(or similar), although not replacing accountability of the CEO or
COO

1.5 The tailings management framework explicitly calls on a risk Golder, 2016
management system

1.6 The tailings management framework explicitly calls on a formal Golder, 2016
change management system (either associated with the risk
management system, the assurance program or other)

1.7 The tailings management framework defines accountabilities (of Golder, 2016
which the CEO or COO ultimately accountable), responsibilities,
roles and authorities.

1.8 The tailings management framework specifies regular executive Golder, 2016
oversight (CEO/COO and/or Board of Directors)

2 An assurance program or system applicable to tailings Adapted from Golder,

management is explicitly embedded or referenced in the tailings 2016
management framework for all phases of projects with a tailings
component

2.1 The assurance program specifies the milestones, frequency and Adapted from Golder,
scope of the inspections, audits and reviews for each project phase 2016
24
 Source/comments

2.2 The assurance program specifies the competence requirements for Golder, 2016
the person responsible for the program

2.3 The assurance program requires independent review, specifying Golder, 2016
the milestones and frequency

2.4 The assurance program requires that the outcomes of the Adapted from Golder,
assurance program, including but not limited to the independent 2016
review, are submitted to the accountable party (CEO/COO and
Board of Directors), as part of their oversight role of the tailings
management system. There must be evidence that the outcomes
are elevated and acknowledged by the corporate executive and the
Board.

2.5 The assurance program includes change management within the Adapted from Golder,
elements that are audited and reviewed. A formal change 2016
management process is required to be maintained through the life
of the facility.

3 Operation of the tailings storage facility explicitly adheres to the

corporate management framework or system for tailings
management

3.1 The organizational structure at the mine site clearly identifies the
responsible position for tailings management

3.2 An operation, maintenance and surveillance manual (OMS

manual), or equivalent, is developed, reviewed and updated on a
regular basis

3.3 The OMS manual, or other organizational document, clearly Adapted from Golder,
states the roles and division of responsibilities, specifies the 2016
protocols for communication of events, and specifies the decision-
making authorities

3.4 The OMS manual provides a comprehensive and updated source Adapted from Golder,
of information regarding the design and operating constraints, 2016
assumptions, applicability of constructions methods, and
allowable operating ranges. Also, the OMS manual provides
detailed information on the applicable critical controls, thresholds
and actions required upon specific observations or events.

25
 Source/comments

3.5 The OMS manual defines the minimum training required for Adapted from Golder,
personnel involved in tailings management. 2016

Each of the elements detailed in the above list should be defined in the corresponding system,

procedures and protocols, in such a way that eliminates ambiguity and allows for consistent

practices throughout the company.

In addition to explicit requirements set forth in a corporate management system for tailings, or a

system in which the tailings components are required to adhere to, a transparent and effective

assurance program is a key aspect to achieve good governance. An effective assurance program

will ensure that good governance practices will be carried out; it will also provide proof that all

the recurring elements of assurance are carried out on a regular basis. The assurance program

should, furthermore, represent the means to adapt and improve the policies, systems, procedures

and controls. The level of legitimacy of such an assurance system may be further strengthened by

means of participation of external experts, stakeholders, industry-level standards or codes of

conduct (such as the Cyanide Code) and multi-industry benchmarking. The latter requires

extensive partnerships and cooperation among professional associations, owners, and possibly

national governments.

2.4 Challenges for improving the governance aspects of tailings management systems

Implementing change that steepens the cost for tailings management is a difficult challenge with

myriad barriers; like many of the changes and improvements to reduce the risk of failure that the

largest industries have undergone, catastrophes have been the triggering event driving action from

26
governments to industry. Tailings management is perhaps the highest risk component of many

mines due to the extent of the consequences of uncontrolled release of tailings and water. On the

other hand, the cost of implementing physical changes to an operating TSF could, in some cases,

be prohibitive, leading to no changes implemented at all. The paragraphs below elaborate on some

of the challenges related to implementing improvements in governance aspects of tailings

management throughout the industry.

Lack of corporate-level tailings leadership or stewardship. Perhaps the first step in

implementing effective management of tailings is to appoint that has the technical capacity and

the resources to lead the development of a tailings management framework, and steer the

implementation of the processes, controls and reviews. Unfortunately, this leadership role is too

often unrecognized as a critical component of the organization and has a secondary priority. The

lack of corporate steering in tailings management may be observed in large and small mining

companies and throughout the developed and developing world; it is a clear indication of a

companys acknowledgement of the business risks involving tailings management.

Resources need to be made available, not only for appointing the right person to a position of

leadership of tailings management, but as importantly for developing and implementing the

systems, processes and regular audits and reviews, as well as the subsequently elevating the

outcomes of reviews and changes to executive management and the accountable CEO/COO and

Board of Directors for informed decision making. Consequently, assigning a corporate leadership

for tailings management cannot be regarded as guarantee by itself for successfully assessing nd

controlling the risks of catastrophic failure. Formally allocating resources for monitoring, for EOR

involvement and for independent technical expert review is a key step to assessing and acting on

the risk profile of tailings operations.

27
Risk and change. Invariably, any project will undergo unexpected and expected changes. The

capacity to manage change and its consequences will affect people, teams, projects, corporations

and ultimately the industry. Change may be driven by internal or external events, such as

regulatory changes, political pressure, conflict with communities of interest, commodity cycles,

increasing reserves, unprecedented natural events; many of these can effectively be assessed and

quantified, and subsequently mitigated. The challenge is maintaining focus on the critical goals of

tailings management: managing the risk profile to assure human safety, environmental protection

and continuity of business. Performance metrics of critical risk controls and design criteria must

be meaningful to this goal and must be carefully assessed and reviewed as potential changes are

analyzed and material changes are implemented. The risk profile may be regarded through several

perspectives, such as the level of robustness or the level of resilience, the latter representing a

broader capacity of being able to recover from damage. Methodologies to assess and manage the

risks, such as those involving risk assessment by means of bowties and critical risk controls,

represent tools for good practice that have shown to be successful in developing and

communicating a better understanding of what the critical failure modes and controls are in each

phase of a project. Bowties first appeared in the oil and gas industry in the 1990s and are currently

widely being used in the mining industry to characterize the dynamics of complex and high

consequence events and to define the risk controls that may be implemented and monitored to

prevent or mitigate catastrophic events (Mills, Andrew, & Reynolds, 2016). A risk management

approach that incorporates a sophisticated quantitative approach would be well suited to assess the

implications of change in the risk profile of a TSF. The outcomes of such a methodology may

further be used for quantifying the cost/benefit of improving the safety of a TSF or to better inform

decision making for operational cost optimization. Consequently, elevating the outcomes of the
28
change management process within a risk management program to the executive and board level

is critical in assuring the accountable parties are informed and involved in establishing the goals

and monitoring performance.

Consistency throughout mine sites in other jurisdictions. What seems basic to achieving standard

systems and processes can be jeopardized by forms of bad governance of transnational

corporations and governments, including: arbitrary decision-making and political; weak or lacking

regulation and enforcement, executive incentive. Strong company commitment and executive

involvement, as well as industry-wide self-regulation, have shown to be successful in assuring safe

practices and communicating transparency and responsibility in managing high risk operations.

Disclosure, the key to legitimacy, is perhaps the most challenging of all. The ICMM position

statement on tailings governance solely states internal communication and review to the

accountable executive and the board. Public disclosure to a meaningful extent is not discussed in

the list of commitments. However, public disclosure is not unheard of in the mining industry; such

is the case of the Cyanide Code.

Partnership and collaboration, among industry, national governments and NGOs. Mining is a

unique industry of macro-impacts and transnational supply/demand chain, yet bound to very local

settings of site-specific features and regulations. Mines are subject to the rules of local jurisdictions

and the business and work culture, and consequently, transnational corporations find themselves

challenged in the means and standards in which they conduct business and execute mine

development. On the other hand, local jurisdictions are likewise challenged in defining the

approach to policy-making and setting the rules of the game, as well as setting the resources for

monitoring and enforcement. At times, the impact of mining operations can become a transnational

concern and governments are faced with the challenge of setting common standards. Nevertheless,
29
developing agreements among mining jurisdictions and implementing international rules or codes

of conduct, as well as a legal mechanism for compliance has proved problematic (Morgan, Peinado

Gomes, & Perez-Aleman, 2016), or otherwise slow and driven by political priorities. Codes of

conduct, or certification systems, such as the Forestry Stewardship Council (FSC) or the Cyanide

Code are good examples of transnational cooperation initiatives that have proven to be reasonably

successful. However, significant challenges persist in moving forward in a large list of elements,

including tailings management. One of these challenges is the level and means of enforcement,

due to significant variations in local practices and organization of regulatory agencies, challenging

the set of broad standards that comprise global partnerships. Another important challenge is the

interaction and subsequent legitimacy of national states or mining jurisdictions with transnational

and local NGOs, particularly if national state priorities are driven by the need for rapid

development and are drawn to obstruct or object the involvement of transnational NGOs. Morgan

et at. (2016) further discuss this challenge as faced by the developing nations of the Global South

that strive to fuel development and reduce poverty. The developing nations, but not limited only

to those, are also faced with the issues of corruption or other subtler forms of political influence,

further preventing moving forward with changes and updates to laws and regulation. The

challenge, therefore, is to foster the development of transnational governance systems to

complement the role of national states, created as a collaboration between multiple stakeholders

to achieve private/public forms of governance driven by reputation and market

advantage/disadvantage.

30
Chapter 3: Assessment of tailings governance aspects at MLP

The mine site selected for the assessment is the Los Pelambres mine, located in central-northern

Chile, owned and operated by Antofagasta Minerals SA, a subsidiary of Antofagasta plc, the

largest privately-owned Chilean copper mining group and the eighth largest copper producer

worldwide. Antofagasta plc is listed on the FTSE 100 index, with a market capitalization of $9.7

billion USD as of May 10, 2017 (Atucha, 2017).

Antofagasta Minerals has been a member of ICMM since 2014 and is the first private company

based in Chile to become a member of the organization. As such, Antofagasta Minerals committed

to implementing the commitments under the tailings governance framework, released in December

2016 by the ICMM members.

Los Pelambres is a sulphide copper mine with gold and copper credits, located in central-northern

Chile, 240 km northeast of Santiago. Los Pelambres has a remaining life of 21 years (as of end of

2016). The concentrator has a throughput capacity of 175,000 tpd and the tailings are currently

delivered to the El Mauro tailings dam, located 50 km from the mine, which started operating in

2008. The TSF is a cyclone tailings sand type dam with downstream raise construction method; it

has an authorized storage capacity of 1,700 million tonnes of tailings. The ultimate height of the

tailings dam is currently authorized at 237 m and is currently at 163 m as of end of 2017 (Mayne

Nicholls, R., 2016). The TSF is located 12 km upstream of the town of Caimanes.

3.1 Methodology

An assessment of a list of governance aspects of the tailings management system was completed

for the El Mauro TSF based primarily on the best practices in tailings management described by

Golder (2016) and the ICMM member commitments of December 2016 (ICMM, 2016), further
31
expanded and/or modified by the author of this report and presented in Table 2.1. The company

information review included publicly available information on the company website and the open-

access information available through the regulatory agencies of Chile. Comments regarding the

information made available by the company and the regulatory agencies, as well the compliance

of specific aspects, is discussed in greater detail in Chapter 3.3.

The following documentation was reviewed as part of the assessment:

Table 3.1 List of documentation reviewed as part of assessment

Document/Presentation Title Source

Annual Report 2016 Antofagasta plc

http://www.antofagasta.co.uk/media/3245/ant001_2016-
annual-report_bookmarked.pdf

Chairman's Annual Statement Antofagasta plc

2016 http://www.antofagasta.co.uk/investors/annual-report-
2016/chairmans-statement/

CEO's Annual Statement 2016 Antofagasta plc

http://www.antofagasta.co.uk/investors/annual-report-
2016/ceo-statement/

Sustainability Report 2016 Antofagasta plc

(Spanish version) http://www.antofagasta.co.uk/media/3247/antofagasta-
minerals_rs16.pdf

Corporate Risk and Compliance Antofagasta plc

Management
http://www.antofagasta.co.uk/investors/corporate-
governance/risk-and-compliance-management/

Audit and Risk Committee. Terms Antofagasta plc

of Reference (Revised and adopted http://www.antofagasta.co.uk/media/2900/audit-and-risk-
on 10 March 2015) committee-tor.pdf

32
 Document/Presentation Title Source

Chairman's comments at the 2017 Antofagasta plc

Annual General Meeting http://www.antofagasta.co.uk/investors/news/2017/chair
mans-comments-at-the-2017-annual-general-meeting/

Informe de revisin. Expediente Departamento de Administracin de Recursos Hdricos,

VC-0403-9. Construccin del
depsito de relaves El Mauro,
presentada por Minera Los
Pelambres, de acuerdo a lo
dispuesto en el artculo 294 del
Codigo de Aguas
Departamento de Hidrologa, Departamento de
Conservacin y Proteccin de Recursos Hdricos, y
Direccin Regional de Aguas IV Regin. 2005
http://documentos.dga.cl/PROY4407.pdf

Bank of America Merrill Lynch Antofagasta plc

Global Metals, Mining & Steel http://www.antofagasta.co.uk/media/3246/antofagasta_b
Conference 2017. amlconference_presentation_may2017.pdf
Antofagasta plc half-year results.
Presentation by Alfredo Atucha
CFO Antofagasta plc. May, 2017

MLP Site Visit Presentation, by Antofagasta plc

Robert Mayne Nicholls Dec 2016 http://www.antofagasta.co.uk/media/3142/mlp-site-visit-
presentation-dec-5-2016.pdf

Consolidado de solicitudes, Biblioteca del Congreso Nacional de Chile. 2010.

aclaraciones, ampliaciones y http://www.bcn.cl/
rectificaciones al Estudio de
Impacto Ambiental del Proyecto
Integral de Desarrollo de Minera
Los Pelambres.
Elaborado para la Comisin
Permanente de Recursos
Naturales, Bienes Nacionales y
Medio Ambiente de la Cmara de
Diputados.

33
3.2 Findings

This section presents a review of the governance checklist items of Table 2.1 against the documents

listed in Table 3.1. Findings and comments are included within the review checklist and further

comments and a discussion of the findings is presented in Chapter 3.3.

Findings/comments

1 There is a corporate tailings No evidence found

management framework or system
with accompanying guidelines and/or
standards and mandatory processes

1.1 The corporate tailings management No evidence found

framework (or equivalent) is explicitly
endorsed by the Board of Directors

1.2 The corporate tailings management No evidence found

framework (or equivalent) is
mandatory for its subsidiaries and
joint venture operations, whether the
company acts as operator or not

1.3 The corporate tailings management No evidence found

framework is explicitly committed to
by executive mine management.

1.4 The corporate tailings management No evidence found in corporate documentation

framework explicitly refers to the regarding suitably qualified individuals or
principle of appointing suitably commitment of resources for assurance
qualified individuals and sufficient processes. Furthermore, there is no evidence of
resources to lead the management and a corporate head of tailings management.
assurance processes. The framework
identifies a corporate head of tailings
(or similar), although not replacing
accountability of the CEO or COO

1.5 The tailings management framework No evidence. However, there is a corporate

explicitly calls on a risk management Audit and Risk Committee that oversees the
system assurance and compliance of the risk
management approach and reviews the risk
controls; there is no specific mention to tailings

34
 Findings/comments
within the terms of reference of the said
committee.

1.6 The tailings management framework There is no evidence of a corporate change

explicitly calls on a formal change management approach or system nor anything
management system (either associated specific to tailings management.
with the risk management system, the
assurance program or other)

1.7 The tailings management framework No evidence found regarding accountabilities

defines accountabilities (of which the related to tailings.
CEO or COO ultimately accountable),
responsibilities, roles and authorities.

1.8 The tailings management framework No reference found to tailings system oversight
specifies regular executive oversight by executive management at corporate level
(CEO/COO and/or Board of Directors)

2 An assurance program or system There is only evidence of an extensive corporate

applicable to tailings management is
explicitly embedded or referenced in the
tailings management framework for all
phases of projects with a tailings
component
assurance program, with a focus on financial
reporting; there is no explicit reference of
applicability to tailings management

2.1 The assurance program specifies the No evidence found

milestones, frequency and scope of the
inspections, audits and reviews for each
project phase

2.2 The assurance program specifies the No evidence found

competence requirements for the person
responsible for the program

2.3 The assurance program requires No evidence found

independent review, specifying the
milestones and frequency

2.4 The assurance program requires that the No evidence found

outcomes of the assurance program,
including but not limited to the
independent review, are submitted to the
accountable party (CEO/COO and
Board of Directors), as part of their
35
 Findings/comments
oversight role of the tailings
management system. There must be
evidence that the outcomes are elevated
and acknowledged by the corporate
executive and the Board.

2.5 The assurance program includes change No evidence found related to change
management within the elements that management
are audited and reviewed. A formal
change management process is required
to be maintained through the life of the
facility.

3 Operation of the tailings storage facility No evidence found

explicitly adheres to the corporate
management framework or system for
tailings management

3.1 The organizational structure at the mine
site clearly identifies the responsible
position for tailings management
Yes. The manager for the concentrator (and
other processing facilities) is also the manager
for the tailings system. There is a tailings and
water superintendent. The manager of plants
and tailings reports to the operations manager.

3.2 An operation, maintenance and There is evidence of the existence of an OMS

surveillance manual (OMS manual), or manual or equivalent, but the document is not
equivalent, is developed, reviewed and publicly available, nor is there information
updated on a regular basis regarding regular review and update of it.

3.3 The OMS manual, or other No evidence found

organizational document, clearly states
the roles and division of responsibilities,
specifies the protocols for
communication of events, and specifies
the decision-making authorities

3.4 The OMS manual provides a No evidence found

comprehensive and updated source of
information regarding the design and
operating constraints, assumptions,
applicability of constructions methods,
and allowable operating ranges. Also,
the OMS manual provides detailed
information on the applicable critical
36
 Findings/comments
controls, thresholds and actions required
upon specific observations or events.

3.5 The OMS manual defines the minimum No evidence found

training required for personnel involved
in tailings management.

3.3 Discussion

The main issue in conducting the assessment was the lack of disclosure of specific documentation

related to the tailings management system. The corporate documentation related to risk

management and assurance processes, although apparently well documented and implemented,

has no reference to tailings, whether in the terms of reference or in review records to demonstrate

that the risks associated with tailings management have been adequately assessed and the controls

are reviewed.

Information publicly available through regulatory agencies in Chile is limited and broad-based for

informational purposes of the overall operation and operational data. There is no evidence of

disclosure of information relative to monitoring or surveillance of tailings storage facilities.

Although the transparency law of Chile, that came into effect in April 2009, contains a principle

of access to information that provides citizens the right to make information requests to public

organisms with a guaranteed turnaround time, the information that is made available is limited. A

request for disclosure of operational information of the El Mauro TSF including the OMS Manual,

was made by the author of this report to the Geology and Mines Service (SERNAGEOMIN)

through the web-based information request system; however, no information relevant to this report

was received. It can be consequently considered that a significantly higher level of disclosure could

be achieved without causing misleading interpretation or infringing confidentiality rights or

37
disclosing sensible information. Furthermore, is the impression of the author of this report that the

regulators do not generally reference the OMS manual of a TSF for regular monitoring and

reviews, but rather develop a checklist of items established based on the approval document for

operation of the TSF.

Although not explicit within the documents reviewed, the risk profile of the tailings management

components at the Los Pelambres mine may be deemed to have been extensively reviewed. The

El Mauro TSF, located only 12 km upstream from the town of Caimanes, has received significant

media coverage and involvement from local and national NGOs in the last ten years due to claims

made by the local community concerning water quantity, quality and the risk of physical

instability. Only in 2016, the Supreme Court ruled in favor of the company, but most importantly,

a benefits agreement was signed with the local community, paving the way for better

understanding and increased security for business continuity and mine expansion. The agreement

with the community was made possible, in part, by assuring involvement in the development of a

Contingency Plan for a potential dam breach event, which complements the current Emergency

Preparedness Plan. The latter forms part or is otherwise referenced in the OMS Manual for the

TSF. None of the mentioned documents have been found to be available to the public upon request

(other than the community members involved in the development of the Plan).

Clear evidence and description of the corporate audit and risk assessment practices and assurance

process was found within the documentation of the London-based Antofagasta plc headquarters.

Regular reviews, risk assessment and monitoring procedures and risk control reviews form part of

the corporate approach to control the business risks. Although there is no evidence of the findings

and risk priorities, a substantial emphasis on tailings management at the Los Pelambres mine

38
suggests that tailings risks are a priority risk and concern for the company executives and the board

of directors.

There was evidence found that tailings management and innovation plays a key role at a corporate

level for the continuity and expansion of the operating mines and the project developments. Risk

prioritization and risk control performance was seen to have an active aspect of governance at the

board level. Consideration and current implementation of innovation and reduction of risks

associated with tailings management was found to be relevant in the business decisions at a

corporate level, as evidenced by the high-throughput thickened tailings deposition method at the

Centinela mine.

39
Chapter 4: Conclusion

The review of governance aspects for tailings management systems that was presented in this

report is based on a literature review of the relevant aspects to develop and implement good

governance, drawing from ICMMs position statement on tailings governance and from a wide

range of sources. The corporate and mine site assessment of a checklist of items related to

governance of the tailings management system is based on publicly available information;

limitations of the findings are therefore inherent to the level of disclosure of the company and

regulatory agencies.

The most significant challenge and obstacle in assessing the governance aspects within the selected

company was the lack of information publicly available, or in other words, the disclosure of

information of the corporate management systems, the mine site operations manuals and the

outcomes of the review processes. A very limited amount of information is made available to

would allow a clear confirmation that a set of governance aspects are comprised within the

company systems and practices.

There are aspects that are inferred to exist and good practices are evidenced by a recently improved

relation with local communities, made possible by disclosing information with these communities

in a collaborative process to address the concerns regarding public safety and water availability.

By this evidence, good practices and a good level of governance may therefore be reasonably

presumed to be followed, driven by a corporate acknowledgement that tailings management is a

key risk priority in securing continuity and paving the way for the planned mine expansions at

several of the operating sites.

40
Change management, or the change and evolution of the risk profile associated with potential or

material changes to the tailings system throughout the life of the facility, was not found to be

addressed within the documentation that was reviewed.

A rather significant evidence of the lack of awareness of the relevance of good tailing management

is that there is no outward-facing tailings head at the corporate level. Many of the largest mining

companies worldwide have an established and authoritative tailings group that provides the means

for implementation of an assurance program. Antofagasta plc does not show evidence of such a

group, at least one that is publicly visible to shareholders and the public.

Transnational partnerships to develop a standard approach, systems, protocols and practices, was

reviewed in this report as a means to facilitate the achievement of good governance aspects of

corporations and national states with regards to tailings management. Many valuable insights can

be learned from an international standard such as the Cyanide Code, which considers far more

specific terms than general commitments. Nevertheless, the case of tailings presents more complex

challenges because of the intrinsic site-specific nature of tailings and the interaction with local

settings (physical, social and political), as well as because of the reluctance of facing extremely

high costs of implementing changes, should they be deemed necessary.

41
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