Study of four catastrophic dam collapses — including one at B.C.’s Mount Polley mine — finds bonus schemes encourage managers to take more risks in the name of short-term profits
Mount Polley Mine’s tailings pond and tailings pile. Production was ramped up at the Mount Polley mine before a tailings pond breached in 2014, causing one of B.C.’s worst environmental disasters. Photo: Louis Bockner / The Narwhal
Generous bonuses for mine managers, rewarding them for cutting costs or increasing production, are linked to tailings dam failures, a new research paper has found.
The paper, published in the journal Resources Policy, pulled on a previous 2015 study that found a relationship between dam collapses and ramped up production or cost-cutting measures and carried the idea to the next level by looking at bonus schemes.
The new study, which documents four catastrophic collapses, including the failure of the Mount Polley tailings dam in B.C. in August 2014, found that all four companies had increased production or reduced operating costs prior to tailings dam failures.
Imperial Metals ramped up production before dam collapse
Imperial Metals, which owns the Mount Polley copper and gold mine, increased production by 23 per cent in the second quarter of the year over the previous financial quarter.
The first quarterly report for Imperial Metals in 2014 showed average daily production was 18,791 tonnes, which was lower than usual because of snowfall and mechanical issues, while the second quarterly report shows production increased by 23 per cent to 23,930 tonnes a day “significantly over the budgeted throughput rate.”
Imperial Metals, in common with many mining companies, did not disclose incentives offered to middle managers, but two companies out of the four case studies showed hefty bonus schemes for managers and the practice is believed to be widespread in the mining industry.
“We believe that the bonus system used to recompense middle management encourages managers to take more risks in order to generate short-term profits at the risk of serious long-term accidents,” said the paper, authored by Margaret Armstrong, Renato Petterd and Carlos Pettard.
Advances in mining technology have made it possible to exploit lower grade deposits, despite decreasing commodity prices, which means disposing of more rejects and putting more pressure on tailings facilities.”
“Year after year, managers keep taking risks with a low probability of occurrence, but with potentially catastrophic consequences. These risks are compounded by shortages of experienced staff, due to the cyclical nature of the industry and the retirement of the baby-boomer generation,” it says. MORE