Major funding available in China’s mine closure market

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A4   |   Letter


SRK News | Issue 58
Mine Closure: Can closure create opportunities?

Andy Li, Principal Consultant (Environmental) 
Yonglian Sun, Managing Director and Corporate Consultant (Geotechnical Engineering)    

 

SRK China focuses on mine closure business development in China, and visited potential business partners and clients, together with SRK South Africa and SRK North America. Two types of funding for mine closure in China have been identified: 

  • Type 1: funding from the central government with taxpayers’ money; and 
  • Type 2: funding from project finance through Public Private Partnerships (PPP), mainly from banks, debts markets, or other financial markets. 

Type 1 funding: According to the Contaminated Soil Remediation Action Plan (also known as China’s Soil Ten) prepared by the State Council in May 2016, one of the key targets is to curb worsening soil pollution and is considered a milestone by the environmental industry in China. The equivalent of USD 50 billion in taxpayers’ money has been budgeted in soil remediation annually. In the first few years, the majority of the funding will be allocated to the regions adversely contaminated by heavy metals from the mining industry or other industries, including pollutants leaching from waste rock dumps and tailings storage facilities. The money must be used to solve urgent pollution issues with reliable and cost-effective technologies. For most projects funded by this type of funding, SRK, as the consultant, needs to identify local construction firms and build a team to tackle these pollution issues through a design-bid-build process. Based on visits SRK made to various clients in recent months, it is understood that SRK’s international mine closure experience is highly valued in China.

Type 2 funding: Normally the contract period lasts about 30 years. Since the funds are more focused on investment, the location of the mine site, the future land use and the growth of the post-closure land value are considered critical. Each PPP project carries various risks, such as plans for changes in zoning or replacing key local government officers. The reputation and skills of the environmental consultants are essential for the mine closure and post-closure development. SRK will join forces with financial institutions, local governments, and construction companies, contributing our capability in mine closure design and land development services. However, sometimes a consultant may be required to share the financial risk associated with PPP by establishing a joint venture, a vital concept to be carefully evaluated.

One good piece of news surfaced recently for all international consulting firms. A company licence is no longer required to prepare an EIA or a feasibility study report, which was a major marketing hurdle in China. SRK China will continue to market its worldwide mine closure experience in China and differentiate itself from others based on technical excellence and cost effectiveness.

Andy Li: yhli@srk.cn
Yonglian Sun: ysun@srk.cn

 

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