A Study of Rehabilitation Fund Payment Mechanisms for Small Scale Mines in Malaysia
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The purpose of this study is to investigate and identify the best financial assurance payment mechanism for mine rehabilitation in Malaysia, and to make recommendations for a practical system to be used in the Malaysian small scale mining industry. Financial assurance is a requirement for potential miners to demonstrate that they have the resources for any environmental damage correction that may be caused by their operation. Currently, the Malaysian Government has imposed on every mining company a certain fee for payment to a common rehabilitation fund in every state that already has adopted the State Mineral Enactment. This common fund is meant for rehabilitation of small scale mines. However, there is no detail or standard mechanism on how payments should be made to the fund. This thesis first examines the types of financial assurance used in four selected countries which are Canada, the USA, Australia and Ghana, reviews some of the common forms of payment currently used in these countries and presents the results. Based on the findings in this recent literature review, several criteria for establishing a rehabilitation fund and a method of collecting the fund were tested and weighted, in order to get the best method that is suitable for the Malaysian mining environment. The methods that have been tested were Upfront Full Payment, Upfront Partial Payment, Pay As You Go and No System. The results show that the Pay As You Go system scores the highest among the other methods that were tested. The Pay As You Go method is the recommended method for companies that operate small scale mines as it will not significantly harm marginal small businesses which operate on short term mining leases. These companies will deposit their payments into the funds as land disturbances increase after the mining production has started. The funds collected from this system will protect the government from liabilities, and at the same time encourage progressive land rehabilitation by the mine operators. The researcher recommended the Pay As You Go system as the best system to be applied for the mine rehabilitation fund in Malaysia.