The importance of considered stakeholder management has been the key learning in managing post-flood mining operations, according to Deloitte Partner Gary Doran who has managed the after effects of a 1 in 357 year flood for two mines in Mt Isa.

Friday, 14 January 2011: Past experience shows that prompt focus on stakeholder management will make an enormous difference to the speed of recovery of many of the mines affected by the Queensland flooding. Proactive management of key stakeholders ranging from Government departments, native title holders, employees through to community groups and effected individuals is vital.

The enormity of this problem means that many of the government departments will be stretched and by being proactive in dealing with the critical issues will mitigate delays and cost. The complexity of the solutions should not be underestimated. Management will need to develop and evaluate options and canvass these with stakeholders. Another critical issue which will need to be resolved almost immediately is access to critical equipment like water pumping equipment, evaporators, stormwater pond lining, all which will have long lead times.

Other key issues to be considered as a matter of urgency include environmental considerations, staff safety, operational viability, ASX disclosure, repairs, transport, infrastructure, customers and insurance.

Management of 1 in 357 year flood

In 2009 two Deloitte Corporate Re-organisation partners were appointed receivers and managers of two copper mines north of Mt Isa, which in 2008/09 were flooded by what is now known as a 1 in 357 year rain event.

The flooding caused considerable damage to the mine sites and contaminated the surrounding environment and brought to light a myriad of issues ranging from the various government departments (Dept of Environment and Resource Management, (DERM), Department of Employment, Economic Development and Innovation (DEEDI), native title owners, adjoining landholders, employees, mining contractors, suppliers, insurers, local, state and national press and various action groups.

Over two years, more than $20 million was spent rectifying the damage to the environment (rehabilitation of surrounding land and creek systems) and repairing damage to the mine sites (haul roads, mine pits, stormwater ponds and processing facilities).

During this period a lot of time was also spent working with the insurers to mitigate any further losses and to substantiate the insurance claim.

Key learnings

As a result of this experience, some of the key learnings include:

Communication and Stakeholder Management

Crisis reveals the importance of proactive communication with all stakeholders, understanding their issues and managing them. For example, a key focus at the time might include:

• native title holder concerns, such as consulting early with them to enable the flood remediation on their lands to proceed quickly
• neighbouring farmers whose businesses may be severely impacted from contamination carried from the mine during the flood
• if such concerns are covered by public liability insurance, then care is needed to ensure subsequent conduct does not invalidate or limit the eventual pay out.

Environment

Having the skills and credibility to enter into a constructive dialogue with DERM is vital. Those mines affected by the current Queensland flooding, for example, should be asking such questions as:

• Will there be onerous changes to the ‘Environmental Authority’? e.g. instead of 1 in 100 year standard a 1 in 1000 year standard may apply and the amount of financial assurance posted with DERM may be increased dramatically?
• Will there be significant (expensive) upgrading of catchments (at what cost and delay) to prevent a repeat / potential discharge from the site?
• Are there criminal and personal liability issues for the CEO? Access to repair, equipment, materials and contractors will be constrained. Affected mines should enter into dialogue with DERM to ensure that EPO’s issued are done with realistic timescales and appropriate requirements
• Make it a priority to clearly communicate with DERM to ensure that they will continue to support actions should the initial attempts at clean up be delayed or take longer than anticipated
• DERM assistance should be sought in helping to manage stakeholders to calm the political environment
• Operators should be aware that prosecutions for serious environment harm not only can result in a fine / penalty but also in damage to credibility, which in turn can jeopardise future negotiations on the Environment Authority or with stakeholders.
   

Operational viability

In our experience, a clear assessment about when and how to recommence operations needs to be made. Key considerations include:

• What is a reasonable budget for the entire process of getting back into production, satisfying DERM and stakeholders?
• Does the company have the financial capacity to meet its EPO obligations?
• What are the supply chain issues (bottlenecks) that mean there could be significant delays or cost increases in remediating the site and getting back into production
• Is now a convenient time to change strategy or to take time to renegotiate key arrangements – e.g. off take agreements
• Is now a good time to sell out or to buy up competitors and can the company afford to or afford not to?
• What needs to be disclosed to the ASX and key shareholders about the process and costs?

Of course, this is just a few of the lessons that have been learned. The task at hand for the Qld mining industry is a challenge, but prompt, informed and decisive action will dictate the rate of recovery and will help to drive vital revenue back into the Queensland economy at time when it is most needed.

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