18 November 2009

Tailings dam failures and the price of commodities

Posted by Dave Petley

A couple of weeks ago the University of Alberta hosted a conference entitled “Tailings and Mine Waste 2009“. Impressively, all of the presentations from the meeting have been posted online on an FTP site here. Most of the presentations focus upon technical aspects of tailings facility design, but there is a very interesting talk from Michael Davis and Todd Martin from AMEC online as a pdf here. This presentation examines the relationship between the occurrence of tailings dam failures and the economic cycle of commodities. I should say upfront that I find parts of the presentation rather uncomfortable (especially the back-slapping aspects of the last slide regarding the oil sands industry), but the core point of the presentation is certainly thought provoking.

In the presentation they note that between 1968 and August 2009 there were 143 documented tailings dam failures worldwide. However, the occurrence of these failures appears to be cyclic with time, with peaks in the periods 1976-8, 1984-6, 1990-2, 1998-2000 and 2008-now. They compared these peaks with the cyclicity of the global copper and gold prices. The key part of the presentation is a table that compared the timing of the peaks:

The authors’ conclusion is that there is a relationship between the peak in commodities prices and the occurrence of tailings dam failures, with a lag between the two of about two years. I must admit that I am a little unconvinced by the statistics of this analysis (I would like to see a proper regression analysis to see whether this link is statistically valid – and to be fair the authors recognise that this is not a scientifically-rigorous analysis), but the central point is one that is certainly very thought provoking. Increased commodity prices drive increased exploitation. The relationship between the peak in prices an the peak in accidents is ascribed by the authors to:

  1. The rush to mine quickly means that design and construction standards may be low;
  2. Rapid turn-over of key staff as new (presumably lucrative) opportunities arise during the boom;
  3. The boom drives the development of resources in areas that are known to be difficult;
  4. after the boom there are pressures to cut costs as commodity prices decline;
  5. The boom drives the use of inappropriate designs imported from other locations;
  6. There may be a lack of independent review, presumably to avoid the time delays and costs associated with this.

The implications of all this are sobering. The most recent boom ended in 2008, and the average lag is 25 months for copper and 29 months for gold. This should mean that the peak in tailings dam failures should be expected 12 to 30 months from now.

Hat-tip to Jack Caldwell’s excellent I think Mining blog for highlighting this paper.