Environmental Impact Assessment - Mining and the Environment: From Ore to Metal - page 104

Hence, contrary to the prevailing thinking in project management or in the management of
most commercial endeavours, the real costs of delay are not related to capital cost increases in
developing the mine but in the loss of mine value (and sales). Only if the value of the mining
project greatly exceeds its cost at the planning stage it is worth pursuing. It has been esti-
mated by Jorgensen et al. (1996) that the costs of delay range from US$ 38 million to US$ 110
million for a US$ 240 million project, when i nanced with a debt/equity ratio of 50/50 at 9%
on debt and a 15% rate of return on equity for delays between 6 months and 1.5 years.
The biggest i nancial impact will be felt in the early months of a project delay. Investors
look at actual cash l ows discounted to their present value. The value of money over time
is a key consideration, as are interest payments on drawn loans. But there are other costs
of regulatory delay. Equipment may have been ordered (an important consideration given
the long delivery times for some items) and delivered, but cannot be installed. Financial
guarantees may have been paid to suppliers to ensure that equipment is available when
needed. In addition the estimated costs of external consultants and lawyers involved in a
company's regulatory application can exceed US$ 100,000 per month.
There is, of course, the argument that costs associated with project delay are factored
into the project i nancing of a mining company that has already made the decision to pro-
ceed with a project. This assumes that approval timelines can be reasonably predicted. If
uncertainty is too great a factor, or if timelines are felt to be unreasonably long, mining
companies may well decide to invest elsewhere.
The above costs do not account for the loss of economic benei ts to the host country for
the duration of the regulatory delay. Foregone income to project employees, contractors,
and suppliers could amount, for some projects, to more than US$ 100 million for one year
of delay, not accounting for loss in royalties, taxes, and dividends. A loss of benei ts of that
magnitude is a signii cant cost to any host country and community.

The biggest fi nancial impact will
be felt in the early months of a
project delay.

2.10 ENVIRONMENTAL MANAGEMENT AND MONITORING
IS IMPORTANT

Accurate predictions of impacts and well-planned design of mitigation measures are
important, but alone they are not sufi cient. Until it is implemented, the EIA is merely
a paper report. Implementation is fostered by establishing an adequate environmental
management system and by integrating environmental budgets, including allocation of
social investment funds, into the mine development budget. Then, specii cally trained
staff are needed to implement programmes and put to use allocated environmental bud-
gets. Monitoring and reporting requirements, and milestones and spot checks all support
implementation and help ensure that the EIA recommendations are fully implemented
(Goodland and Mercier, 1999; IFC 2006).

Until it is implemented, the EIA is
merely a paper report.

Environmental Management - More a Question of Company
Culture than Systems

A systematic approach to environmental management from the outset of the mine project
helps to avoid or to minimize key negative impacts, while maximizing positive contributions
to sustainable development. Formal environmental management begins at the explora-
tion stage, but management efforts increase to a much higher level when mine operation
commences.