Tailings Facilities - An Introduction from an Insurance Perspective

1. Risk Evaluation for Existing Tailings Facilities Tailings Facilities - An Introduction from an Insurance Perspective

2. The purpose of risk evaluation is to understand the performance of the facility. ‘IS IT SAFE’ CIM ‘99

3. Steps in Risk Evaluation • Audit the facility - collect background information, describe the system, visit the site, identify basic fail modes, compare design criteria to established standards • Qualitative Risk Assessment - identify failure modes for each component of the system, estimate probability of failure for each mode, estimate consequences of failure, bin or rate risks • Quantitative Risk Assessment - use event tree techniques to better estimate probability of failure and as a basis for remediation (decision analysis) CIM ‘99

4. Design - upgraded design standards (e.g. increasing PMF estimates) Construction - inadequate QA/QC; actual conditions differ from assumed Organization - inadequate definition of roles, responsibilities & procedures Emergency Response Plan - does not exist or is not updated Operations - lack of appreciation by operators on dam safety issues; later changes to operating rules (e.g. Adding mini-hydro would change focus) Surveillance and monitoring - deficient surveillance and monitoring programs; reasons for instruments not clear; just going through “routine” of collecting data Sources Of Risk In Tailings Dam Safety CIM ‘99

5. DEFINITION OF “AUDIT”from theCanadian Oxford Dictionary “Detailed examination or analysis, especially to assess strengths and weaknesses (environmental audit, safety audit)” CIM ‘99

6. Tailings facility audits are more complex than reviews for water-retaining dams because: • Chemical contamination is much more likely; • Tailings facilities are in a combined construction/operation phase until closure; • Tailings dam site alternatives are much more restricted; and • Closure adds additional complexities. CIM ‘99

7. REGULATION Water quality regulations - provincial and federal Dam Safety Regulations (e.g., Chile, Alberta, new regulations in Ontario); and Where regulations not in effect; regulations from other jurisdictions are adopted as standards; e.g. WHO COMMON LAW MAC Guidelines (1998); Canadian Dam Association (1999) earthquake and flood only; ICOLD tailings publications Accepted practice of jurisdiction of court, not jurisdiction of mine site; Audit Against Regulation and Good Practice CIM ‘99

8. AUDIT ELEMENTS • Review of background information; • Site visit; • Identify tailings disposal risks; • FMEA; and • Audit communication. CIM ‘99

9. Principal Methods Of Risk Analysis • Failure modes and effects analysis (FMEA) • Failure modes, effects and criticality analysis (FMEA, an extension of FMEA • Hazard and operability studies (HAZOP) • Event tree analysis • Fault tree analysis CIM ‘99

10. Risk analysis • FMEA, FMECA and HAZOP are similar in form; structured to stimulate a group of people (workshop environment) to apply foresight in conjunction with their knowledge to task of identifying “what if?” Questions • Event trees and fault trees are more complex and costly; focuses in details • FMEA/FMECA are most commonly used in pragmatic risk analysis • Event/fault trees may be used later for failure modes where further insight into failure process is considered of benefit CIM ‘99

11. Component of facility Potential problem Severity (consequence) of problems Likelihood of problem occurrence Confidence in assigned likelihood (uncertainty) Compensating factors and possible treatment measures Triggers and precursors to enact treatment measures Elements Of FMEA Table CIM ‘99

12. Typical FMEA Table CIM ‘99

13. Word Descriptor Scales For Risk Parameters • Risk parameters in FMEA treated by using four or five-level word descriptor scales (a numerical rating can be assigned if desired) • Word descriptor scales greatly assist internal consistency amongst workshop participants and external consistency between various dams (if required) CIM ‘99

14. Example Of “Likelihood” Scale CIM ‘99

15. Example Of “Confidence” Scale CIM ‘99

16. Severity (Consequence) Scale • Word descriptor scale for “severity or consequence” requires input from dam owner, to reflect specific corporate views and specific project requirements • Several categories of “consequences” may be established; such as functional performance, personnel safety, downstream damage, loss of revenue, corporate image or regulatory impacts CIM ‘99

17. Example “Consequence” Scale For Corporate Image CIM ‘99

18. Risk Characterization High Risk Low Risk E High Risk H High Risk Moderate Risk M SEVERITY/CONSEQUENCES L Low Risk Low Risk N Negligible Risk M H L N E LIKELIHOODS/PROBABILITIES CIM ‘99

19. Basic FMEA Process • COMPONENT 1 - SITE VISIT AND REVIEW • Understanding of system and function of components • Established context of FMEA and terms of reference • Interviews with operators, etc. • Establish risk parameters (especially consequence descriptors) with dam owner • Develop project specific FMEA table • Decompose system into basic components CIM ‘99

20. Basic FMEA Process..Cont’d • COMPONENT 2 - CONDUCT WORKSHOP • Risk facilitator and practitioners experienced in dam safety and, of prime importance, key staff from the owner (operators, managers, supervisors, etc.) Responsible for, & most familiar with, the facilities • Role of facilitator and external practitioners is to scrutinize expressed opinions and judgments…”facilitates” team towards aligned ranking • Workshop typically intense periods of uninterrupted review and documentation CIM ‘99

21. Basic FMEA process..Cont’d • COMPONENT 3 - DOCUMENTATION • Proper documentation is essential of any risk assessment process • Need to document not only the results, but also the methodology, rationale, available information and compensating factors which led to the judgmental “likelihood’s” assigned by the participants at the time of the workshop • Provides basis for update as new information becomes available (e.G. Implementation of risk reduction measures) CIM ‘99

22. Benefits Of FMEA Workshop • Powerful, yet simple and pragmatic • Does not dwell on numerical detailing, but still captures important essence of uncertainty/risks in easily understood format • Multi-disciplinary nature and workshop environment fosters team approach to decision making and risk management • Operators achieve better understanding of risks and related dam safety issues • Encourages “buy-in” at all levels; essential for effective risk management CIM ‘99

23. Typical Outcomes of FMEA • Provides risk profile for owner, including business risks and liabilities from all contributions (not just “extreme” events) • Allows prioritization of risk contributors, as basis for allocation of available funding • Identifies deficiencies or “upsets” in operations of the facility, so improvements can be made CIM ‘99

24. Typical Outcomes Of Fmea.Cont’d • Better understanding the major risk contributors allows optimization of surveillance and monitoring program (defensible rationale for additional devices or decommissioning of devices) • Assists in optimizing maintenance schedule for components according to vulnerability and risk contribution • Identifies gaps in owner’s organizational reporting structure and/or procedures CIM ‘99

25. Typical Outcomes Of FMEA..Cont’d • Notwithstanding any identified deficiencies in handling “extreme” events (MCE, PMF), results are useful to set priorities towards being “as safe as possible” until improvements can be made • Provides support for selection and justification of risk reduction measures (both structural and non-structural) • Paper trail of due diligence process CIM ‘99

26. Summary • Audits and formal risk assessments now in widespread use throughout mining industry; • Management involvement is key factor in success; • Single individual needs tailings responsibility; • Documentation/procedures need improvement; • Instrumentation needs upgrading; • Annual tailings report to track risk; and • Closure plans need continual updating. CIM ‘99