Ariz. Admin. Code § 11-2-811

Current through Register Vol. 30, No. 25, June 21, 2024

Section R11-2-811 - Corporate Financial Tests

An owner or operator may satisfy the requirements of this Section upon successful completion of a financial test specified in subsection (A) or (B). Successful completion is determined by meeting the criteria of subsection (C):

A. The owner or operator shall have:

1. 2 of the following 3 ratios: a ratio of total liabilities to net worth of less than 2.0; a ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; or a ratio of current assets to current liabilities greater than 1.5;

2. Net working capital and tangible net worth each at least 6 times the costs estimated in the approved reclamation plan for reclamation;

3. Tangible net worth of at least $10 million; and

4. Assets located in the United States amounting to at least 90% of total assets or at least 6 times the costs estimated in the approved reclamation plan for reclamation.

B. The owner or operator shall have all of the following:

1. A current rating for the most recent bond issuance of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A, or Baa as issued by Moody's;

2. Tangible net worth at least 6 times the sum of the costs estimated in the approved reclamation plan for reclamation;

3. Tangible net worth of at least $10 million; and

4. Assets located in the United States amounting to at least 90% of total assets or at least 6 times the costs estimated in the approved reclamation plan for reclamation.

C. To show successful completion of the corporate financial test, the owner or operator shall submit the following to the State Mine Inspector:

1. A letter signed by the owner's or operator's chief financial officer demonstrating compliance with this Section;

2. A copy of the ICPA's report on examination of the owner's or operator's financial statements for the latest completed fiscal year; and

3. A special report from the owner's or operator's ICPA to the owner or operator saying:

a. The ICPA has compared the data (which the letter from the chief financial officer specified) as having been derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in the financial statements; and

b. No matters caused the ICPA to believe the specified data should be adjusted.

D. After the initial submission of items specified in subsection (C), the owner or operator shall send updated information to the State Mine Inspector within 90 days after the close of each succeeding fiscal year. This information shall consist of all items specified in subsection (C).

E. If the owner or operator no longer meets the requirements of subsection (A) or (B), the owner or operator shall send notice of intent to establish alternative financial assurance to the State Mine Inspector. The notice shall be sent by certified mail within 90 days after the end of the fiscal year for which the year-end financial data show that the owner or operator no longer meets the requirements. The owner or operator shall provide the alternative financial assurance that meets the requirements of the Act and this Chapter within 120 days after the end of the fiscal year.

F. The State Mine Inspector may, based on reasonable belief that the owner or operator may no longer meet the requirements of subsection (A) or (B), require reports of financial condition by written request, at any time, from the owner or operator, in addition to those specified in subsection (C). If the State Mine Inspector makes a written finding, on the basis of the reports or other information, that the owner or operator no longer meets the requirements of subsection (A) or (B), the owner or operator shall provide alternate financial assurance that meets the requirements of the Act and this Chapter within 120 days after notification of this written finding.

G. The State Mine Inspector may disallow use of this test on the basis of qualifications in the opinion expressed by the ICPA in the report on examination of the owner's or operator's financial statements. An adverse opinion or a disclaimer of opinion will be cause for disallowance. The State Mine Inspector will evaluate other qualifications on an individual basis. The owner or operator shall provide alternate financial assurance that meets the requirements of the Act and this Chapter within 120 days after notification of this disallowance.

H. The owner or operator is no longer required to submit the items specified in subsection (C) when:

1. An owner or operator substitutes alternate financial assurance that meets the requirements of the Act and this Chapter; or

2. The State Mine Inspector releases the owner or operator's financial assurance under the Act and this Chapter.

I. An owner or operator may meet the requirements of this Section by obtaining a written guarantee. The guarantor shall be the direct or higher-tier parent corporation of the owner or operator, a group of legal entities which are controlled through stock ownership by a common parent corporation, a firm whose parent corporation is also the parent corporation of the owner or operator, or a firm with a substantial business relationship with the owner or operator. The guarantor shall meet the requirements for owners or operators in subsections (A) through (I) and shall comply with the terms of the guarantee. The certified copy of the guarantee shall accompany the items sent to the State Mine Inspector as specified in subsection (C). One of these items shall be the letter from the guarantor's chief financial officer. If the guarantor's parent corporation is also the parent corporation of the owner or operator, the letter shall describe the value received in consideration of the guarantee. If the guarantor is a firm with a substantial business relationship with the owner or operator, this letter shall describe this substantial business relationship and the value received in consideration of the guarantee. The terms of the guarantee shall provide that:

1. If the owner or operator fails to perform the reclamation covered by the guarantee under the approved reclamation plan, the guarantor will do so or establish a trust fund as specified in the Act and this Chapter in the name of the owner or operator.

2. The corporate guarantee will remain in force unless the guarantor sends notice of cancellation by certified mail to the owner or operator and to the State Mine Inspector. Cancellation may not occur during the 120 days beginning on the date of receipt of the notice of cancellation by both the owner or operator and the State Mine Inspector, as evidenced by the return receipts.

3. If the owner or operator fails to provide alternate financial assurance that meets the requirements of the Act and this Chapter within 120 days after the owner or operator and the State Mine Inspector receive notice of cancellation of the corporate guarantee from the guarantor, the guarantor shall provide the alternate financial assurance in the name of the owner or operator.

Ariz. Admin. Code § R11-2-811

Adopted effective January 6, 1997 (Supp. 97-1).