Water scarcity will make mining difficult
Securing an uninterrupted supply of water is costing the South African mining industry billions of rands, with mining operations having spent a total of R8.1 billion last year – representing 3.63% of the total production costs – according to the Minerals Council South Africa (MCSA).
Commenting on the latest research report released by Moody’s Investors Service, which has cautioned that South Africa, along with Peru, Chile, Australia and Mongolia, was among countries that faced water scarcity, bound to pose a challenge to mining companies in the coming years, MCSA spokesperson Charmane Russell said the international ratings agency was “correct” in identifying water as a strategic issue for mining houses.
In the report, Moody’s senior vice-president Carol Cowan, warned that in the next 20 years:
South Africa would be among countries that would be in the “high” to “extremely high” ratio of water withdrawals to supply category, which would make it difficult for mining companies to secure reliable sources of water;
The cost of securing reliable water sources would continue to be a risk for mining companies due to stricter environmental regulations; and
Operating costs and capital expenditure were likely to increase as companies became more efficient with their water use, spending additional capital to invest in technologies like desalination plants, to secure water without disrupting resources used by local communities.
Climate change, said Russell, would be a contributing factor in raising the risk, contributing to depleting water levels.
“Access to water, along with access to energy, is often cited as one of the most significant business risks for mining companies – one that receives significant attention,” said Russell.
“Larger mining companies have historically been able to invest significant amounts in water infrastructure to ensure the operations have access to the water required.
“Smaller companies with single mine operations have been most vulnerable due to technical and financial restraints. What we have seen recently is a move by smaller companies to partner with municipalities to upgrade existing water infrastructure as a trade-off for guaranteed supply.
“This allows the mining company to secure the water they require for their operations, while also improving access for host communities.”
In terms of the breakdown of water costs per mining sector, the three biggest spenders were iron ore (R2.6 billion), platinum group metals (R2.3 billion) and manganese (just over R1 billion).