Managing the Risks
The nature of our operations means we face many potential risks and hazards that could have a significant impact on our business. We have comprehensive systems and procedures in place to manage them, but there is no assurance we will be successful in preventing the harm any of these risks and hazards could cause.
Below we list the regulatory, environmental and operational risks that generally apply to all of our operations, development projects and projects under evaluation. We also talk about how we manage specific risks in each operation or project update. These risks could have a material impact on our business in the near term.
We recommend you also review our annual information form, which includes a discussion of other material risks that could have an impact on our business.
A significant part of our economic value depends on our ability to:
- obtain and renew the licences and other approvals we need to operate, to increase production at our mines and to develop new mines. If we do not receive the regulatory approvals we need, or do not receive them at the right time, then we may have to delay, modify or cancel a project, which could increase our costs and delay or prevent us from generating revenue from the project. Regulatory review, including the review of environmental matters, is a long and complex process.
- comply with the conditions in these licences and approvals. In a number of instances, our right to continue operating facilities, increase production at our mines and develop new mines depends on our compliance with these conditions.
- comply with the extensive and complex laws and regulations that govern our activities, including our growth plans. Environmental legislation imposes strict standards and controls on almost every aspect of our operations and the mines we plan to develop, and is not only introducing new requirements, but also becoming more stringent. For example:
- we must complete the environmental assessment process before we can begin developing a new mine or make any significant change to our operations
- we may need regulatory approval to make changes to our operational processes, which can take a significant amount of time because it may require an extensive review of supporting technical information. The complexity of this process can be further compounded when regulatory approvals are required from multiple agencies.
We use significant management and financial resources to manage our regulatory risks.
We have the safety, health and environmental risks associated with any mining and chemical processing company. Our uranium, fuel services and electricity segments also face unique risks associated with radiation.
Laws to protect the environment are becoming more stringent for members of the nuclear energy industry and have inter-jurisdictional aspects (both federal and provincial/state regimes are applicable). Once we have permanently stopped mining and processing activities at an operating site, we are required to decommission the site to the satisfaction of the regulators. We have developed conceptual decommissioning plans for our operating sites and use them to estimate our decommissioning costs. Regulators review our detailed decommissioning plan on a regular basis and, as the site approaches or goes into decommissioning, carry out the required regulatory approval process. This can result in further regulatory process, as well as additional requirements, costs and financial assurances.
At the end of 2012, our estimate of total decommissioning and reclamation costs was $698 million. This is the undiscounted value of the obligation and is based on our current operations. We had accounting provisions of $553 million at the end of 2012 (the present value of the $698 million). Since we expect to incur most of these expenditures at the end of the useful lives of the operations they relate to, our expected costs for decommissioning and reclamation for the next five years are not material. We are in the process of updating the preliminary decommissioning plans and cost estimates for Cigar Lake, McArthur River, Key Lake and Rabbit Lake, which will be reviewed by all of the regulatory authorities in 2013. As part of that process, we expect that the preliminary decommissioning cost estimates for these facilities will increase.
We provide financial assurances for decommissioning and reclamation such as letters of credit to regulatory authorities, as required. We had a total of $672 million in letters of credit supporting our reclamation liabilities at the end of 2012. All of our North American operations have letters of credit in place that provide financial assurance in connection with our preliminary plans for decommissioning for the sites.
Some of the sites we own or operate have been under ongoing investigation and/or remediation and planning as a result of historic soil and groundwater conditions. For example, we are addressing issues related to historic soil and groundwater contamination at Port Hope.
We use significant management and financial resources to manage our environmental risks.
We manage environmental risks through our safety, health, environment and quality (SHEQ) management system. Our chief executive officer is responsible for ensuring that our SHEQ management system is implemented. Our board’s safety, health and environment committee also oversees how we manage our environmental risks.
In 2012, we invested:
- $117 million in environmental protection, monitoring and assessment programs, or 19% more than 2011
- $30 million in health and safety programs, or about the same as 2011
Spending for health and safety programs in 2013 is expected to be similar to 2012, while spending for environmental programs is expected to decrease slightly.
Other operational risks and hazards include:
- environmental damage
- industrial and transportation accidents
- labour shortages, disputes or strikes
- cost increases for labour, contracted or purchased materials, supplies and services
- shortages of required materials, supplies and equipment
- transportation disruptions
- electrical power interruptions
- equipment failures
- non-compliance with laws and licences
- catastrophic accidents
- blockades or other acts of social or political activism
- natural phenomena, such as inclement weather conditions, floods and earthquakes
- unusual, unexpected or adverse mining or geological conditions
- underground floods
- ground movement or cave ins
- tailings pipeline or dam failures
- technological failure of mining methods.
We have insurance to cover some of these risks and hazards, but not all of them, and not to the full amount of losses or liabilities that could potentially arise.