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Advisor told NT minister reducing McArthur River Mine security bond could be 'inappropriate', court documents show

The McArthur River Mine's security bond was reduced by about $120 million in 2020. (ABC News: Michael Franchi)

Court documents show the Northern Territory's mining and industry minister slashed the environmental security bond at one of the world's largest lead and zinc mines despite being sent formal advice that doing so could be "premature and inappropriate".

A coalition of environmental groups and traditional owners are challenging Nicole Manison's decision to cut the McArthur River Mine's $520 million security bond by $120 million in late 2020.

The decision was made at the same time the minister approved an expansion of the waste rock dump and open-cut pit at the mine in the territory's remote gulf region, which has been the site of several major environmental scandals.

Security bonds are a financial deposit mine operators pay to governments to cover the clean-up cost of potential environmental harm, and the plaintiffs are concerned the reduction could cost taxpayers and tarnish important sites if the mine operator walks away.

Court documents released to the ABC have now revealed an advisor recommended she consider holding off reducing the bond in the weeks before her November 2020 decision.

The mine is about 970 kilometres south-east of Darwin, near Borroloola, in the Northern Territory. (Australian Mining: McArthur River Mine)

In a memo from early October, the advisor warns reducing the bond could be "premature and inappropriate" given the mine was yet to demonstrate compliance with some conditions of the mine's authorisation to operate.

Specifically, the document questions whether half a dozen recommendations made in a key report by environmental watchdog the NT Environment Protection Authority (NT EPA) had been met.

The recommendations mainly relate to strengthening oversight of the mine's waste rock dump by the project's own independent monitor, its closure plan and a type of waste material disposal site called a tailings storage facility, which the memo said had not been established.

As revealed in court last week, the memo also raises concern that part of the mine's new management plan was inconsistent with the NT EPA's recommendations.

Nicole Manison says the public can have confidence in the mine's level of environmental scrutiny. (ABC News: Kaiden Reid)

A spokeswoman for Ms Manison declined to comment while the court case was underway, but the minister told reporters at a press conference on Tuesday that the mine was being closely scrutinised.

"The public can have confidence in the level of environmental scrutiny that's there," the minister said.

Government arguing bond amount could be increased in future

Gavin Mudd, an associate professor from RMIT's engineering school, said the sheer scale of the mine and volume of its waste products should invite extra caution about its security bond.

"The scale of McArthur River far exceeds any sort of problem or problem site we've had like this in Australia before," he said.

"In my mind, that's why we have to be extremely careful. The risks are extremely large."

Last week's two-day hearing was described as nationally significant by the plaintiffs because of the level of scrutiny it would bring to security bond calculations.

The court heard the calculating tool only factored in 10 years of post-closure monitoring and maintenance for some parts of the mine site when they could require up to 1,000.

But government lawyers argued the security bond was designed to be updated according to emerging risks each year, and was not intended to cover all activity across the life of the mine.

An EPA spokesman said the agency would not comment while the matter was before the courts.

The Department of Tourism, Industry and Trade (DITT), which regulates the mine, said the first of the oversight panels would be established by November this year.

The ABC previously revealed DITT initially calculated an even lower security bond than the one ultimately set at the end of 2020

The mine's security bond has since been increased to $476 million.

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