Tailings Management

Management Approach

Following recent tailings dam failures in Brazil and Canada – including our own pond failure at the Obed Mountain mine in Alberta in October 2013 – Sherritt began drafting an enterprise-wide Tailings Management Standard in 2017, which was finalized in 2018. The standard aligns with TSM’s Tailings Management Protocol, and supports our operating sites in fulfilling our commitment to designing, constructing, operating, decommissioning and closing all tailings facilities in such a manner that all structures are stable, all solids and water are managed within designated areas, and all management practices conform with regulatory requirements, sound engineering principles and good practice. This standard also takes into account lessons learned from a post-mortem review of the Mount Polley tailings pond failure conducted by the Mining Association of Canada and the latest guidance from the International Council on Mining & Metals. Sherritt continues to review and evaluate monitoring systems and risk assessments to ensure our approach is robust and current.

Tailings facilities exist at each of Sherritt’s two active Joint Ventures – Moa Nickel in Cuba and Ambatovy in Madagascar. In both cases, the tailings facilities are managed by the Joint Venture’s management, reporting to their respective boards. Both Joint Ventures employ a geotechnical engineer to provide oversight of design, construction and operation of the tailings facilities. Third-party engineering firms are utilized in the design and monitoring of tailings facilities at both sites. The design and operation of these tailings facilities meet or exceed all applicable regulatory requirements.

At the Ambatovy JV, a centreline design is used. Here, the tailings management facility was also designed to meet the requirements of the Canadian Dam Association, the International Commission on Large Dams, and the Mining Association of Canada’s Towards Sustainable Mining (TSM) Tailings Management Protocol. Ambatovy has a Tailings Management Advisory Board consisting of three technical experts to provide recommendations to management which are acted upon promptly. All monitoring of the dams indicate that the facility is stable.

At the Moa JV, an upstream design has been used throughout the mine life. Stability is monitored as per the operating practices manual. Based on internal and third-party reviews of structural integrity and management systems, the facility is operating to design specifications and is stable. Sherritt continues to work with the Cuban Partners, GNC, to move tailings management closer to international best practices, including implementation of the Mining Association of Canada’s Tailings Management Protocol.

As well, at Moa, a rehabilitation plan has been developed and is underway in a section that is no longer active.

Performance

2018 Ambatovy Fort Saskatchewan Moa Oil & Gas and Power
Total amount of overburden, rock, tailings and sludge
(tonnes)
23,314,833 Not applicable 15,243,595 Not applicable

At our mining operation in Moa, we continued to work with our Cuban partners and industry experts to improve tailings and water management to better align with international best practice. As a new member of the Mining Association of Canada, we have begun implementing MAC’s Tailings Management Protocol at Moa and at Ambatovy.

The tailings management facility (TMF) at Moa is regularly reviewed internally and by third parties for structural integrity and effectiveness of management systems. Based on 2018 assessments, the facility is currently operating to design specifications. We continue to work with our joint venture partners to ensure employees have the required skills to manage the facility effectively. As it is nearing capacity, we have retained an internationally respected engineering firm to design an extension that will ensure we can continue to store tailings there until 2022. Permitting and detailed design work for the first stage of the extension was approved in 2016. Construction began in 2017, and in 2018 the first stage was completed. The extension is also subject to the Tailings Management Protocol.

We also began investigating options for tailings management so that we can continue to support mining operations in Moa in 2022 and beyond. Throughout this process, we will strive to minimize environmental impacts and meet international good-practice standards in tailings management.

At Ambatovy, the tailings management facility is a long-term construction project that involves the continuous raising of the perimeter dams to meet capacity needs. In 2018, engineering was completed on increasing pumping capacity. Once construction is complete, the TMF will provide sufficient storage capacity for the remaining mine life, which is approximately 30 years.

As are many mining companies globally, due to recent dam failures in Brazil and elsewhere, Sherritt is reviewing and evaluating monitoring systems and risk assessments to ensure our approach is more than robust. This work will continue into 2019.

There are no tailings produced at the Fort Saskatchewan or Oil & Gas and Power sites.

Update on Remediation of Obed Containment Pond Breach

As we reported in previous sustainability reports, on October 31, 2013, a breach occurred, due to a geotechnical slump, in an on-site water containment pond at the Obed Mountain mine, then owned by Sherritt, which resulted in a significant release of mud, clay, coal particles and approximately 670,000 m3 of water into nearby creeks and the Athabasca River. We quickly mobilized our response team, working with regulatory bodies, and began engaging extensively with First Nations and local stakeholders to keep them informed and to address their concerns. After the sale of our coal operations to Westmoreland Coal Company in April 2014, we retained the environmental remediation and financial obligations associated with the breach, and have continued to work co-operatively with the Alberta regulator to address the impacts of the incident.

In 2018, approval of the final remediation design was received from the Alberta Energy Regulator (AER) in April and Department of Fisheries and Oceans (DFO) in July. Remediation of the upper reaches began in mid-July; because of a shorter construction season due to the approval date, the remainder of the remediation works will be completed in 2019.

During 2018 we continued environmental monitoring of water quality, fish habitat, wildlife and vegetation. The region is showing high levels of natural restoration and dense vegetation growth. The data collected in 2018 continues to demonstrate that the breach and the resulting release of water and sediments had short-term physical impacts on water quality and fish habitat, and that there are no residual effects on water, aquatic habitat or fish in any of the nearby creeks or in the Athabasca River. The approved remediation design will provide aquatic habitat enhancements and stabilize reaches of the nearby creek that were physically impacted.

A more detailed account of our response and remediation activities can be found on www.obed.ca.

Biodiversity and Land

Management Approach

Sherritt’s operations are found in diverse locations, ranging from primary forests to island environments to industrial zones. Our approach to managing biodiversity is tailored to the context of each operating site. At assets found in highly sensitive ecosystems, such as our Ambatovy mine in Madagascar, we follow a strict mitigation hierarchy designed by the Business and Biodiversity Offsets Programme (BBOP), a multi-stakeholder initiative that seeks to develop best practice in biodiversity protection for developers of large greenfield projects. Ambatovy has been an active supporter of BBOP since its inception in 2006.

Ambatovy’s approach to conservation also conforms to the requirements of Madagascar’s regulator, the National Environment Office, and to the International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability (2012 version), which includes a discrete standard on biodiversity conservation and sustainable natural resources management.

In 2009, Ambatovy established a Scientific Consultative Committee on biodiversity as part of its commitment to apply international conservation expertise and bring transparency to its biodiversity management activities. In 2018, the Committee included 13 national and international independent scientists renowned for their expertise in biodiversity, conservation and environmental management. The Committee convenes at least every two years – most recently at the end of 2017 – to facilitate an external evaluation of Ambatovy’s implementation of the biodiversity management program and make recommendations for conserving Madagascar’s unique biodiversity.

In Canada and Cuba, Sherritt conducts environmental baseline studies and impact assessments and implements biodiversity management plans as required by regulation. As a member of the Mining Association of Canada, we are working to implement the Towards Sustainable Mining Biodiversity Conservation Management Protocol at our operations. In addition, we are developing a minimum standard for biodiversity and land management as part of our Sustainability Framework that aligns with TSM and provides additional guidance to Sherritt’s divisions. It will be practical and risk-based, and will provide us with a consistent set of requirements for identifying and managing biodiversity impacts.

Land Management

We recognize that the land entrusted to us is a valuable resource. We work with authorities and other organizations to manage and reclaim disturbed land during active mining and post operation. This is demonstrated by our longstanding record of reclamation and remediation activities, which have been covered in previous sustainability reports. Our active mining properties in Cuba and Madagascar progressively rehabilitate land and regularly monitor progress against rehabilitation plans with the regulatory authorities in both jurisdictions.

The Fort Saskatchewan site manages land issues within its government-approved operating permit, which includes discrete requirements for soil management. Our Oil & Gas and Power operating sites in Cuba routinely mitigate impacts of oil exploration and recovery activities when operations have ended. Drill sites are cleaned, topsoil is replaced and the land is returned to conditions similar to those that existed before drilling commenced. In accordance with the requirements of our operating permits, the land will be returned to the Cuban state after expiry of the term of the contract.

Performance

Ambatovy’s Biodiversity Management System

Ambatovy has a robust Environmental Management System (AEMS), including the Biodiversity Management System (ABMS) – which operationalizes many of the principles mentioned in the preceding description of our biodiversity management approach – and is externally audited to assess whether the plans are being implemented according to their original design criteria. The last audit was conducted in 2017 and data collection and validation were found to be acceptable; additional focus will now be on data integration and dissemination for the AEMS. In 2018, Ambatovy focused on the implementation of the AEMS mitigation process.

Species of Concern

Ambatovy has commitments to protect and conserve species of concern (SOC) within the lands under its direct control. Our mining operation is located within the Ambatovy-Analamay forest, and our mine lease is subdivided into the mine footprint, which contains our active operations, and the surrounding conservation zone.

The Ambatovy-Analamay forest area is within the Torotorofotsy Ramsar Convention site, which is an internationally significant wetland. The forest area forming our lease comprises 21.5 km2 of high biodiversity value, featuring 1,700 species of vascular plants and 336 species of vertebrates. Over 53 plant species were classified as critically endangered (CR) or endangered (EN) following the International Union for the Conservation of Nature (IUCN) red listing in 2017–2018, of which 22 are orchid species and 31 non-orchid species. Ambatovy supports monitoring and mitigation activities for those identified species.

In 2018, we continued to introduce SOCs into the mine zone, and salvaged SOCs from the clearing zone directly in the mine footprint. Thanks in large part to this type of work, we were awarded the Syncrude Award for Excellence in Sustainable Development at the Canadian Institute of Mining, Metallurgy and Petroleum’s annual convention in 2015.

Invasive Species

One of the most significant potential threats to areas of high biodiversity is the introduction of non-native, exotic and invasive species, which can rapidly adjust to new conditions and have an adverse effect on native biodiversity.

We have processes in place to monitor and control invasive species at the Ambatovy mine, plant and port sites. The following occurred in 2018:

  • Norway rats: Extensive capture activities started in 2016; however, the program was put on hold in 2017 due to the outbreak of the pneumonic plague coinciding in timing and location with the planned program. After analyzing safety concerns, the program was relaunched in 2018.
  • Crayfish: Crayfish control occurred during the year. Apart from capturing the crayfish in collaboration with local villagers, who are trained as capturers, we also organize campaigns to raise awareness about the crayfish and its impacts on agriculture, habitat and biodiversity.
  • Invasive and exotic plants: An exotic species removal program took place over 7 hectares (ha) at the mine site, followed by ecological restoration of the cleared area in addition to the 11 ha cleared in 2017.
  • Asian toads: There was a continued effort to remove Asian toads within the site footprint and the surrounding area. The toads are believed to have been introduced via an unidentified container from Southeast Asia at the Port of Toamasina, which is located near our plant site.
Response to Concerns over the Introduction of the Asian Toad

In 2015, two international non-governmental organizations approached Sherritt about the introduction of invasive Asian toads to Madagascar. They suggested that Ambatovy’s shipping activities through the port may have inadvertently introduced the species and requested that we take a leading role in the overall response. We have examined this issue critically, and while our assessment does not support their conclusion, we have responded to their queries formally and have had several constructive discussions on this topic with representatives from these and other concerned organizations and institutions.

During the timeframe that the toad is speculated to have arrived in Madagascar, Ambatovy accounted for less than 5% of the Port of Toamasina’s total traffic – and that percentage is even lower for shipments coming from the toad’s zone of origin, according to our records and those we obtained from Madagascar’s customs office.

Nevertheless, as a responsible actor that cares deeply about biodiversity management, we are committed to supporting the Government of Madagascar’s leadership in addressing this significant threat. We have joined the government’s national committee, which is composed of several stakeholders, to mitigate the impacts of the Asian toad. We also entered into a memorandum of understanding (MoU) with Madagascar’s National Environment Office to carry out a joint eradication program that goes well beyond the scope of our own efforts to date. We appreciate the growing urgency to take broader measures and are hopeful that our contributions will lead to lasting results.

In 2017, eradication efforts were focused on the mine and plant sites, as well as the surrounding area. Ambatovy’s staff also supported communication efforts and education regarding toad eradication to nearby communities.

In 2018, the NGO Madagascar Fauna and Flora Group was engaged and an MoU is currently under review to develop, manage and coordinate activities to support eradication the Asian toad. On the recommendation of Ambatovy’s Scientific Consultative Committee, the company plans to contract an invasive species specialist to better advise how Ambatovy can support broader eradication efforts of the Asian toad population. In the interim, the University of Antananarivo’s Department of Biology commenced toad collecting activities at the plant site, accommodation camps and surrounding areas.

Conservation Partnerships and Collaboration

We believe that there are material topics best addressed in partnership with experts and civil society who bring both credibility and additional expertise. Conservation at Ambatovy is one in particular where we have established mutually beneficial partnerships with leading organizations. For example, Ambatovy is involved with civil society organizations to assist in managing the offsets we have created to compensate for our disturbances. We engaged Conservation International (CI) to manage the Ankerana forest – our 5,715 ha offset located some 70 km northeast of the mine site. In 2018, Ambatovy continued to support CI’s work financially and technically for conducting site patrols, developing income-generating activities, and carrying out awareness campaigns – all of which are necessary to maintain the habitat quality of the sites.

The Analamay-Mantadia Forest Corridor (CFAM) will be part of a proposed new protected area that will ensure habitat connectivity between existing conservation areas in the region including forests around the mine managed by Ambatovy, the Ankeniheny-Zahamena Corridor (CAZ), the Mantadia National Park and the Wetlands of Torotorofotsy. Formal protection of this corridor, spanning approximately 8,000 hectares, will result in the creation of one of the largest continuous tracts of protected forest in Madagascar. Ambatovy continues to support the establishment of this larger, new protected area.

Refer to this case study for more information about Ambatovy’s partnership with Mitsinjo Association regarding a breeding program for a threatened, endemic frog species.

Biodiversity Management at Moa

Our open pit nickel mine near Moa, Cuba, is located approximately 15 km north of Alejandro de Humboldt National Park, a UNESCO World Heritage Site particularly known for its extensive suite of endemic species of flora. Moa Joint Venture has long partnered with the Cuban authorities for the restoration and protection of these lands. For more information, refer to this case study.

In 2017, the reforestation program in the park concluded and Moa received recognition from the environmental regulator, CITMA, for its achievements. In 2018, Moa supported the government by undertaking ecological monitoring activities of the reforested area. Early results showed a favourable evolution of rehabilitated areas; abundant species of flora and fauna inhabiting these areas under recovery were identified.

Biodiversity Management Elsewhere

In Canada, our refinery’s impacts on biodiversity are minimal, given that it is located in an industrial zone within the city limits of Fort Saskatchewan. Our energy operations in Cuba also have minimal impacts on biodiversity, given the small footprint and nature of our activities. In 2017, no significant conservation activities were required or undertaken at these sites.

It is worth mentioning that our Block 10 oil drilling program, which began in 2016, is taking place adjacent to a protected mangrove site. To minimize our impacts, we are conducting the program from a previously disturbed footprint, while working in close consultation with Cuba’s environmental regulator.

Land Management

In 2018, both Ambatovy and the Moa site practised progressive reclamation in accordance with their operating permits and commitments. The total amount of newly disturbed land in 2018 was lower than 2017 and rehabilitated land during the year was about 68% higher. This was mainly due to increased rehabilitation efforts at both Ambatovy and Moa. There were no changes to the operational footprint of the Fort Saskatchewan refinery or at our Oil & Gas and Power operations in Cuba.

The table below shows the amount of land (owned or leased, and managed for production activities or extractive use) disturbed or rehabilitated.

2018 Ambatovy Fort Saskatchewan Moa1 Oil & Gas and Power Total
Total amount of land newly disturbed within 2018 (ha) 157.38 0 48.18 0 205.56
Total amount of land newly rehabilitated within 2018 to the agreed end use (ha) 11.87 0 20 Not applicable 31.87
1 Data reported for Moa represents land disturbance that occurred from 1994 onwards – or the years that the Moa Joint Venture between Sherritt and the Cuban state has been in place. The data do not reflect any mining activity at the site that pre-dates the joint venture.

Water

Management Approach

The growing global population is putting pressure on fresh water availability and quality, and these concerns are expected to increase due to climate change. We understand and share these emerging concerns. Water is central to our metallurgical process for producing nickel, and we manage it carefully. Where feasible, process water is recycled or reused within the process itself. Runoff is controlled through diversions and catchments to minimize any release to the environment. For each operating site, we conduct baseline studies, assess risks and engage stakeholders to inform them of our water management planning.

Pumping water for use in our processes takes a considerable amount of energy, and we are continually taking steps to identify how we can optimize our practices and minimize the amount of water and energy we use.

We also conduct monitoring to help ensure that we are not unduly contaminating surface water or groundwater resources with our process discharges. Stringent regulatory water quality limits apply to our discharges to protect the receiving environment, and our monitoring programs are designed to comply with the emission limit values in each jurisdiction, and to help detect any unanticipated problems and manage risk beyond regulatory obligations.

Our approach to water management varies across our operations, depending on technical requirements, local climate, water bodies and stakeholder interests. Building on the range of water management practices and initiatives in place, we are working towards the development of a corporate Water Standard that will apply across the company.

Performance

Water Use

2018 Ambatovy Fort Saskatchewan Moa Oil & Gas and Power Total
Total water withdrawal (m3) 25,718,190 2,650,000 15,078,280 4,524,316 47,970,786

Ambatovy reported 25.7 million m3 of water consumption in 2018, which is comparable to prior years. Water for our processes is withdrawn from a variety of sources at the mine, plant and port facilities, including the Ivondro River, the Mangoro River, Antsahalava Creek and groundwater wells. Potable water for the plant site originates from wells at the facility. Our water withdrawal is monitored quarterly by the regulator. In 2018, Ambatovy launched a water usage reduction project to optimize water usage on site but also to improve water management at the tailings facility. Weekly water balances are performed to track water consumption and outflow.

Erosion and silting of the Mangoro River unrelated to Ambatovy’s mining activities, from which Ambatovy draws water for mining operations, is a risk we take seriously. It is in our interest to ensure the long-term viability of the river. The PRODAIRE project funded by JICA (Japan International Cooperation Agency), reported in 2017, promoted an integrated approach to rural development and environmental protection. When the project concluded, Ambatovy continued the reforestation activities along the banks of the Mangoro River with the support of a local NGO called Ezeka Vaovao.

Our Fort Saskatchewan site withdraws water from the North Saskatchewan River under provincial licenses for use in our processes. We purchase potable water from the local municipality. The total water withdrawal for the Fort Saskatchewan site in 2018 was slightly lower than previous years: 2.6 million m3, including 2.5 million m3 taken from the river and 0.1 million m3 of purchased potable water. We report our water withdrawal monitoring results to the provincial regulator on a monthly basis. Process effluent and stormwater (snowmelt/rainwater) that we collect on our site are treated to meet the contractual water quality guidelines. This water is then transferred to the municipal wastewater collection system, where it is treated further and then discharged into the surrounding environment along with wastewater from the wider municipality.

Our Moa site in Cuba withdrew approximately 15 million m3 of water for its processes in 2018. This is slightly higher than the previous two years and was due to processing requirements. Water is collected in our adjacent reservoir and treated before use.

Oil & Gas and Power reported a total water withdrawal in 2018 of 4.5 million m3, which is lower than that of 2017 mainly due to a decrease in production. Water is drawn primarily from saltwater sources and some municipal sources. Oil & Gas service rigs use recycled water only, resulting in a net effect of zero on the water supply.

Water Quality

In 2018 at Ambatovy, there continued to be elevated concentrations of manganese (Mn) in water that we discharge from our tailings management facility that sometimes exceeded the World Health Organization (WHO) criteria of 0.4 mg/l being used for Mn for Ambatovy’s tailings management facility. Manganese at low concentrations poses only aesthetic concerns; that is, it imparts a discolouration to drinking water. At higher concentrations, it can have adverse health effects. To safeguard public health, we commissioned installation of a permanent potable water supply system. This was completed in 2017 and handed over to the local community. We also provided regular water quality updates to residents and the regulator. Based on the findings of a root cause analysis of the issue, we continued to implement corrective actions – as per the externally reviewed Manganese Action Plan – including building up tailings beaches to reduce the manganese before discharge and installing a permanent pumping house in order to regain compliance with our permit requirements.

At Fort Saskatchewan, we monitor water quality at several locations within the site’s treatment system, and review the results to ensure compliance before the release of water into the municipal collection system. We reported our water quality results to the municipality monthly and to the Alberta regulator on an annual basis. There were no non-compliance events sourced to Sherritt during the year.

In 2018, Sherritt continued to participate in the Capital Region Water Management Framework’s Steering Committee through the Northeast Capital Industrial Association (NCIA). The goals of the framework are to maintain or improve the quality of the water in the North Saskatchewan River, manage the impact on water quantity, and implement a water management framework that is science-based and world-class.

When we invested in Moa more than 20 years ago, we inherited a legacy water management issue, which has affected water quality in a nearby river. Over the years, we have been working with our Cuban partners and the regulatory agency to address this issue. In 2017, we agreed to a phased approach to developing long-term treatment options for water management. During the year, the first phase, relocating the effluent discharge to support the rehabilitation of the river and diminish impacts on the local community, was completed. In addition, Moa focused on erosion control in 2018 in areas around the mine to prevent some 6,500 m3 of sediments from reach the rivers and the bay of Moa. Some of the river works had positive impacts for the nearby community of La Veguita, too, as work completed in 2018 will help with flood control and prevent the loss of a bridge in the event of flooding.

There were no significant water quality issues recorded at Oil & Gas and Power in 2018. OGP is currently investigating a program to reduce its use of potable water.

Waste

Management Approach

Sherritt produces two broad types of waste: mining waste and solid waste. Mining waste generally includes waste rock and tailings, produced as by-products. Solid waste consists of hazardous waste and non-hazardous waste. Hazardous wastes are identified by their chemical and physical properties, and their classification, handling, disposal and storage requirements are prescribed in regulations. Non-hazardous solid waste consists of materials that we use and produce that can be disposed of in municipal landfills, and is not considered material for the purposes of this report.

Regulations around waste management vary across jurisdictions and can be quite dependent on the supporting infrastructure in the region or country. Sherritt is currently developing a management standard to set minimum expectations for all operations regarding waste management, including disposal and recycling.

In the interim, we have included GRI waste indicators in the Performance section of this report, reflecting the tracking and management of waste occurring at Sherritt’s sites.

Performance

Waste production

2018 Ambatovy Fort Saskatchewan Moa Oil & Gas and Power
Total waste 63,730 m3 + 49,870 tonnes 8,479 tonnes 20,082 tonnes 381 tonnes
Waste recycled – includes recyclables sent off site (batteries, plastics, electronics, etc.) 1,016 m3 + 49,523 tonnes 205 tonnes 954 tonnes 380 m3 + 418 tonnes + 650 kg
Batteries: 528 units
Fluorescent bulbs: 294
Tires: 840
Waste sent to landfill 59,965 m3 8,274 tonnes 13,558 tonnes 4,004 m3 + 11 bins
Hazardous waste 82 m3 + 1,300 pieces 5,501 tonnes 5,570 tonnes nil

2018 is the first year that waste is included in Sherritt’s Demonstrating Environmental Responsibility pillar for the purposes of reporting. It is expected the quality of disclosure on this topic will improve over time with the implementation of the forthcoming Waste Management Standard.

In Fort Saskatchewan, an increase over 2017 in both hazardous and total waste was observed in 2018. The increase in total waste was largely due to an increase in the number of capital projects, and associated demolition, at the Fort Site over the previous year. Much of the infrastructure at the Fort Site was constructed in the 1950s and has been dutifully maintained since, but as equipment and buildings reach the end of their useful life, phased demolition and reconstruction is taking place. Depending on the origin of the material within the site, some is treated as hazardous waste.

At Moa, the increase in hazardous waste is due to the increase in sulphur that leached from contaminated soil extracted from the sulphur manipulation area. Waste sorting improved, increasing the amount of recyclable waste collected. The overall quantity of waste sent to landfill increased due to an improvement in the control and quantification of waste at the site.

Energy and Climate Change

Management Approach

We operate an energy-intensive business. Energy consumption is a major input to our processes across the company, and energy-related costs constitute one of our largest unit operating costs. These realities mean that we are motivated to reduce energy consumption and maximize efficiencies at every stage of our production cycle, from mining and oil recovery through to processing, refining and shipping finished products, and generating electricity. Concerns about the possible impacts of climate change on the planet increase the urgency of this issue for us, and affirm our role in contributing to global efforts to reduce greenhouse gas (GHG) emissions.

We are implementing the Mining Association of Canada’s Towards Sustainable Mining Energy and Greenhouse Gas Emissions Management Protocol across our operations and, in 2018, developed a corporate standard in alignment with TSM.

Air Quality

Managing air quality around our operations is an important element of our environmental programs company-wide. We are conscious of the potential impacts of our operations and take great care to ensure that all applicable air quality regulations are properly followed.

Air emissions generally comprise two types of sources. The first type includes specific discharges of gases from our process stacks and vents – such as sulphur oxides (SOx), hydrogen sulphide (H2S) and nitrogen oxides (NOx). When emitted into the air, these compounds can pose risks to human health and lead to environmental degradation. The second type of air emission includes small airborne particles generated from activities in the open environment, called particulate matter (PM). PM is predominantly produced as a result of traffic on unpaved roads at our facilities, excavation activities at our mines, and fertilizer production at our refineries. We have strict safeguards in place at all sites to minimize the risk of air releases and regularly review and revise processes to minimize the release of PM through our activities.

In recent years, Sherritt has made continuous improvements in the management of air emissions. Investments have been made in aging infrastructure, engineering projects have been launched to eliminate identified point sources, and initiatives have been put in place across the business to ensure exceedances are properly managed and mitigated. Continuous emissions monitoring is in place at the Fort Site and emissions reporting continues to improve at Ambatovy and in Cuba. Efforts are underway to implement ISO 14001 and process safety management systems to ensure that significant emissions risks are identified and controlled and air quality management continues to improve. In 2019, Sherritt will launch an Air Standard as part of our Sustainability Framework.

Performance

GHG Emissions and Energy Consumption

2018 Ambatovy Fort Saskatchewan Moa Oil & Gas and Power Total
Scope 1 GHG emissions(kt CO2e) 1,716 317 606 1,418 4,057
Scope 2 GHG emissions(kt CO2e) 0 58 52 0 110

GHG emissions at Ambatovy, for the mine, plant and port facilities, were estimated at a combined total of 1,716 kilotonnes (kt) of CO2 equivalent during 2018, representing a 5% decrease over 2017 emissions. As there is a lack of large-scale power available in Madagascar, the use of coal for power generation at Ambatovy accounts for the majority of the GHGs produced. Ambatovy consumed 14,517,981 gigajoules (GJ) of energy in 2018 from a mix of coal-fired power plant and fossil fuel burned. The large increase over previous years is the result of improved reporting around coal and fossil fuel consumption for plants and mobile equipment. In 2018, Ambatovy continued to take steps to reduce the use of light vehicles on site and optimize the use of electric vehicles as a means of reducing emissions. Refer to this case study to learn more.

The Government of Alberta’s Carbon Competiveness Incentive Regulation came into effect on January 1, 2018. This new regulatory framework impacts the management of emissions related to climate change. Prior to 2018, greenhouse gas (GHG) emissions were regulated under the Specified Gas Emitters Regulation. Currently, under this regulation, GHG emissions that exceed an Output Based Allocation (OBA) set by the Government of Alberta are subject to the purchase of credits (either fund credits, offset credits, or emission performance credits) in order to meet compliance. Fund credits have been set at a cost of:

  • 2019 and 2020 emissions = $30/tonne CO2e;
  • 2021 emissions = $40/tonne CO2e; and
  • 2022 emissions and thereafter = $50/tonne CO2e.

In 2018, Fort Saskatchewan site reported GHG emissions of 317 kt of CO2 equivalent, which is slightly lower than 2017 emissions. Additionally, Fort Saskatchewan purchased 10 kt of credits for its 2018 emissions to comply with provincial regulations. Fort Saskatchewan recorded total energy consumption (including purchased electricity) of 4,972,800 GJ in 2018, which is a slight decrease over previous years.

At Moa, we produced 606 kt of CO2 equivalent during 2018; this amount is comparable to the previous year. We consumed a total of 5,942,357 GJ of energy in 2018, including generated and purchased electricity. This represents a 10% reduction over the previous year. Moa was able to achieve these reductions due to the completion of a 2,000 tonnes/day sulphuric acid plant in 2016, which allows us to produce more of our own acid as an input to our process and reduce the amount of acid we need to import. 2018 was the second full year of operation for the acid plant.

Oil & Gas and Power (OGP) reported the production of 1,418 kt of CO2 equivalent during 2018 from its Boca de Jaruco, Puerto Escondido and Varadero facilities. This is historically consistent with what was reported in previous years. Our Oil & Gas and Power operations reported a decrease in energy usage of 18% compared to 2017, totalling 25,739,140 GJ; this reduction can be attributed to a decrease in production as production sharing contracts in our oil and gas business ended and natural reservoirs declined. OGP also flared 56,393.3 e3m3 of hydrocarbons associated with its oil production processes during the year, representing almost half of that flared in 2017. OGP’s preventative maintenance program ensures optimal operation of our equipment, and we conduct quarterly monitoring of any emissions from our key sources to verify proper combustion. Our Oil & Gas operations have additional reporting metrics under the Global Reporting Initiative; please refer to the Performance section for this information.

Since 2007, Energas has generated well over one million Clean Development Mechanism (CDM) credits at the Varadero combined cycle power generation facility in recognition of its low GHG emissions relative to other sources of electricity in Cuba. While there are many benefits to the program, the relative administrative costs are significant and, due to Sherritt’s financial constraints, our participation has diminished in recent years. Read this case study for more information on our efforts to obtain CDM credits over the last few years.

Scope 2 emissions refer to indirect emissions generated from the purchase of electricity. The majority of power consumed by Sherritt is generated on site, due to the remote nature of our operations and/or the limited availability of grid power in host jurisdictions. Therefore, Scope 2 emissions will always be of a lower order than those of Scope 1.

Air Quality

In 2018, Sherritt experienced nine reportable air quality–related incidents: eight at Ambatovy and one at Fort Saskatchewan, all of which were low severity with no lasting impacts. No employees or community members were harmed while these incidents occurred or while they were addressed. Both Moa and Ambatovy were focused on reducing fugitive emissions in 2018.

2018 Ambatovy Fort Saskatchewan Moa Oil & Gas and Power
Air emissions – NOX (tonnes) 1,990 1,205 1,571 6,147
Air emissions – SOX (tonnes) 6,010 66 13,424 28,800
Air emissions – TPM (tonnes) 12,881 84 Not reported Not reported

Our sources of emissions to the atmosphere are regulated under requirements in the various jurisdictions where we operate. In Madagascar, we improved reporting parameters in 2018 so as to be able to report emissions as total mass rather than a concentration. Ambatovy emissions include: SO2 from the acid plant, ammonia from refinery scrubbers and vents, H2S from the mixed-sulphide and hydrogen sulphide plants, NOx from fossil fuel use (from gensets, the coal-fired power plant and mobile equipment), and PM with a diameter of less than 10 microns from stockpiles, the power stacks and roads. Several transformation plan projects are currently ongoing at the plant site that focus on safety, reliability and production improvements but that will also have important impacts on air emissions.

Our 2018 emissions at Fort Saskatchewan are consistent with historical levels. Most of the NOx and SOx emissions come from our utility generation (natural gas combustion) and fertilizer production (ammonia and sulphuric acid production). Ammonia is released primarily from ammonia scrubbers in the metals refinery, which uses an ammonia-based leaching process. The PM is generated primarily from the production of ammonium sulphate fertilizer and from traffic on unpaved roads. Additional information on air quality in Fort Saskatchewan can be found on the Fort Air Partnership website.

In Cuba, Moa’s NOx and SOx emissions are generated from the sulphuric acid plant and the powerhouse. The 2018 volumes represented an increase from 2017, due to an increase in the amount of fuel used. During the year, a new Operating Standard was approved by the Environment Ministry for Moa Nickel which includes limits around air emissions. OGP’s NOx and SOx emissions also showed an increase from the previous year which is partly attributed to the gas turbine at Puerto Escondido, which ran double the number of hours compared to 2017.

Environmental Liabilities, Closure and Reclamation

Management Approach

We take seriously our responsibility to provide adequate financial resources to address the closure of our properties once reserves have been depleted.

As part of the permitting process, mining and energy companies are now required to prepare closure plans with associated cost estimates, and to provide host governments with financial assurance to cover the costs of environmental remediation in case the company is no longer able to complete the work. In addition to these regulatory requirements, international accounting and securities exchange rules require public companies to account for the reasonably expected liabilities associated with the closure of mining and energy properties. These estimates, like those provided to host governments, are based on the closure plans and assumptions contained therein.

We comply with regulatory requirements regarding closure planning and related environmental rehabilitation obligations, cost estimates and financial assurance in each of the jurisdictions where we operate. We also meet the requirements of the Ontario Securities Commission, which obliges publicly listed companies in Ontario to estimate and disclose their environmental rehabilitation provisions. We review these provisions on a quarterly basis. Whenever possible, we engage in the progressive reclamation of our properties over the life of the operation, rather than initiate such activities at the time of closure.

Performance

The current estimate of Sherritt’s share of total anticipated future closure and reclamation costs to be incurred over the life of the company’s various assets and investments is approximately $145.5 million (excluding operating expenses). The increase in anticipated costs over 2017 is mainly a result of changes in estimates rather than the completion or expansion of rehabilitation obligations.

In 2018, we continued to carry out our environmental liability obligations related to the containment pond breach at the Obed Mountain mine, a non-operational coal mine in Alberta that we owned at the time of the incident in 2013. Our remediation work is described under Tailings Management.

Closed Properties

As part of our acquisition of Dynatec Corporation in 2007, we inherited three now-closed assets from Highwood Resources Ltd.:

  • Mineral King, a former lead-zinc and barite mine and processing facility near Invermere, British Columbia. In 2014, Sherritt completed the reclamation work plan as required by the provincial regulator. Portals for accessing the mine were covered and secured, coverage of the tailings pond with topsoil was completed, access roads were pulled back, and designated areas were seeded and fertilized. A 2015 inspection by British Columbia’s regulator required additional work on the portals and closure of the glory hole. The work was originally planned for 2017 but was delayed due to weather. It was completed in 2018. Once the completion of all closure plan requirements is verified by the government, Sherritt intends to sell the property.
  • Parsons, a former barite mine and processing facility near Parson, British Columbia. In 2014, we completed the regulator’s reclamation work plan, which involved a general clean-up, monitoring, seeding and the removal of an invasive species. Once vegetation is re-established and land certification requirements are met, we will take steps to release the property to the provincial government. We expect the release of the bond and the return of the property to the government to occur in 2019.
  • Canada Talc, a former talc mine in Madoc, Ontario, and processing facility near Marmora, Ontario, and associated claims areas. In 2012, remediation of the mine was completed and the processing facility was sold. The Ontario regulator retained a security deposit for further surface and groundwater sampling and geotechnical monitoring, which occurred in 2017; however, in early 2019, further sampling and monitoring was requested and so the planned request to release security will be delayed until completion and approval by the regulator.

Current Operations

All of our mining assets that are currently operational have more than 20 years of resources and production capacity in their lifecycles. Each has up-to-date closure plans that meet host jurisdiction regulations and cost estimates that we believe reasonably and appropriately address the liabilities at each site.

In 2018, Ambatovy continued its work on a mine restoration strategy, including developing comprehensive cost estimates. The operation also engages in planning discussions on a quarterly basis with our finance department about projected environmental rehabilitation obligation costs. External consultants supported the development of cost liability estimates during 2018; those estimates will be finalized in 2019.

At Fort Saskatchewan, our closure plan incorporates a set of robust considerations accounting for both likely and unlikely obligations that we may need to address, and our current cost estimates cover the reasonable obligations.

For our OGP operating sites, all assets will revert back to the Cuban state for closure, as outlined in our permits and related agreements.

For information on our reclamation activities in 2018, please refer to Performance in Biodiversity and Land.