BUENAVENTURA MINING CO INC | CIK:0001013131 |

 

 

		2017			2016
		US$(000)			US$(000)
Provision for closure of mining units and exploration projects (b)			200,183			206,462
Provision for obligations with communities (c)			19,376			4,710
Provision for environmental liabilities			5,534			7,324
Provision for safety contingencies			3,898			2,807
Provision for labor contingencies			2,963			3,395
Workers’ profit sharing payable			3,569			8,398
Board of Directors’ participation			1,273			1,140
Provision for environmental contingencies			1,233			753
Other provisions			3,695			1,703
			241,724			236,692
Classification by maturity:
Current portion			76,847			62,502
Non-current portion			164,877			174,190
			241,724			236,692

 

The table below presents the movement of the provision for closure of mining units and exploration projects:

 

		2017			2016
		US$(000)			US$(000)
Beginning balance			206,462			166,403
Transfer of units held for sale			-			15,851
Sale of mining units, note 1(e)			(11,770)			-
Changes and additions in estimates:
Discontinued mining units, note 1(e)			12,701			3,365
Continuing mining units, note 11(a)			10,594			34,532
Exploration projects			891			-
Accretion expense:
Discontinued operations, note 1(e)			215			970
Continuing mining units, note 26(a)			4,382			4,116
Disbursements			(23,292)			(18,775)
Final balance			200,183			206,462
Classification by maturity:
Current portion			39,826			37,405
Non-current portion			160,357			169,057
			200,183			206,462

 

The provision for closure of mining units and exploration projects represents the present value of the closure costs that are expected to be incurred between the years 2018 and 2041. These estimates are based on studies prepared by independent advisers that meet the environmental regulations in effect.

 

The provision for closure of mining units and exploration projects corresponds mostly to activities that must be carried out for restoring the mining units and areas affected by operation and production activities. The principal works to be performed correspond to earthworks, re-vegetation efforts and dismantling of the plants. Closure budgets are reviewed regularly to take into account any significant change in the studies conducted. Nevertheless, the closure costs of mining units will depend on the market prices for the closure works required, which would reflect future economic conditions. Also, the time when the disbursements will be made depends on the useful life of the mine, which will be based on future metals prices.

  

As of December 31, 2017, the future value of the provision for closure of mining units and exploration projects was US$230.9 million, which has been discounted using annual risk-free rates from minimums of 0.27 and 0.60 to a maximum of 3.55 percent in periods of 1 to 24 years, resulting in an updated liability of US$200.2 million (US$206.5 million as of December 31, 2016). The Group believes that this liability is sufficient to meet the current environmental protection laws approved by the Ministry of Energy and Mines.

 

As of December 31, 2017, the Group has constituted letters of credit in favor of the Ministry of Energy and Mines for US$109.6 million (US$117.7 million as of December 31, 2016) to secure current mine closure plans of its mining units and exploration projects up to date.