The sector is facing increasing demand to supply raw materials needed for the energy transition, but its license to operate is threatened by increasing water demand and pollution. Catherine Early reports
Mining is crucial to the global low-carbon transition. To achieve a future where temperature rise is kept below 2C, more than 3 billion tonnes of minerals and metals will be needed to deploy wind, solar and geothermal power, and energy storage. The production of minerals, such as graphite, lithium and cobalt, could increase by nearly 500% by 2050 to meet these needs, according to a World Bank report in May.
But mining is also on the front line of water security risk. The sector is a major user of water, which is needed to get the raw material from the ground, to extract the desired element from the raw material, and in transport and storage of excess slurry.
Many countries where mining is located are exposed to decreasing water availability, including Peru, Chile, Australia, South Africa and Mongolia, a 2019 report by Moody’s pointed out. In the next 20 years, all of these countries are predicted by the World Resources Institute to become more water-stressed, making mining more difficult and costly, it says.
The industry is increasingly turning to desalination to secure supply. For example, BHP now secures more than 40% of its water from desalinated seawater, Moody’s says. But desalination is expensive, energy-intensive and might not be practical, depending on the location of the mine, it points out.
91% of CDP mining sector respondents reported exposure to water-related risks, with an estimated financial impact of $24.9bn
The mining sector is also exposed to risk from water pollution since it produces significant volumes of water, either through “dewatering” mines to access minerals below the water table, or as a by-product of extraction or processing. This water can be highly acidic and contains toxic amounts of metals or other pollutants. The sector’s potential to pollute both ground and surface water is high, according to CDP’s analysis of the sector last year.
Given that mining operations are tied to locations where the resources exist, companies do not have the option to transfer operations to less risky environments. CDP notes that they must adapt their practices with the environmental constraints and needs of the communities around them or risk losing their licence to operate.
The majority (91%) of respondents from the mining sector reported exposure to water-related risks, with an estimated financial impact totalling $24.9bn. Not only that, but respondents expected nearly two-thirds (61%) of these risks to materialise over the next three years. Just under half of respondents (44%) had already suffered water-related financial losses amounting to $11.8bn in the previous five years, compared with an average across all sectors of 27%.2
In spite of this awareness, CDP has found that the number of mining companies disclosing this risk has stagnated, with just 21 more companies releasing data to CDP than five years earlier. More than half of those CDP contacted chose not to disclose in 2018, including major companies BHP, Imerys and Rio Tinto.
Some companies reported water-related data in their corporate sustainability reports, using guidelines issued by industry body the International Council on Mining and Metals (ICMM), but this data is rarely comparable, complete or consistent, says Cate Lamb, global director of water security at CDP.
“There’s a risk … that the information disclosed is far from the complete story. Water issues can be very complicated and present a very severe risk for this sector. Comprehensive data of the type collected by CDP is therefore necessary for stakeholders, including institutional investors, to make informed decisions,” she said in an interview.
Pascua-Lama is one of the clearest examples yet where a country has prioritised people and freshwater resources above its desire for economic return
Another risk to mining companies is a trend for governments to step up implementation of regulations against irresponsible behaviour, she says. The Chilean government in 2018 ordered Canadian mining company Barrick Gold Corp to close down its Pascua-Lama gold and silver mining project. The $8.5bn project had been on hold since 2013 due to community concerns about groundwater pollution and other environmental and social issues.
“This is one of the clearest examples yet where a country has prioritised people and freshwater resources and the long-term sustainability of its natural environment and resources above its desire or need for economic return. The mine is now a stranded asset,” Lamb says.
CDP assessed the sector’s awareness of the risks associated with tailings dams for the first time. “Tailings” are the residue from mining processing, comprising a mixture of finely ground rock and fluid effluents, as well as often toxic chemical reagents used to extract commodities, in a reservoir held behind a dam. They can be huge, spanning several square kilometres.
The environmental and social risks of these dams have been brought dramatically to the fore in recent years, particularly in Brazil. In November 2015, a tailings dam collapse at Mariana in eastern Brazil killed 19 people when 60 million cubic metres of iron waste spilled into the environment, displacing numerous communities and devastating the river environment. Just three years later, another collapse at the Brumadinho mine took the lives of 270 people.
CDP data from 2018 reveals that the issue did not have senior-level oversight in the sector, with just 26% of mining companies reporting risk management procedures for tailings dams that required sign-off by the highest-ranking senior executives in a company.
However, the Brumadinho disaster catalysed action from the investor community. Vale, the Brazilian mining company that owned the Brumadinho mine and had a 50:50 stake in the operations at Mariana, was removed from the investor-led Corporate Human Rights Benchmark within a week of the disaster.
The ICMM is requiring all members to implement the tailings dam standard. Facilities rated as high risk need to conform within three years
Less than two months later, the ICMM came together with the United Nations Environment Programme (UNEP) and investor members of the Principles for Responsible Investment (PRI) to develop a global standard for the management of tailings dams to prevent future tragedies, following calls for intervention from the Church of England Pensions Board, institutional investors from Sweden and several other countries with assets of more than $1.3tn.
The standard was launched in August 2020, and can be applied to existing and future tailings facilities, irrespective of location and ownership. It covers site selection, design and construction, management and monitoring, closure and post-closure, as well as emergency procedures should a dam collapse.
The ICMM is requiring all members to implement the standard, which will include site-level validation and third-party assessments. All facilities rated as high risk need to conform within three years, and all other facilities within five years.
“The transparency associated with our disclosure requirements will make it clear if companies are not in conformance and what they intend to do to address this,” Aidan Davy, chief operating officer of ICMM, said in an email.
The ICMM counts around one-third of the world’s mining companies among its membership, but is promoting the standard to non-member companies. It is in the process of developing a good practice guide to tailings management that will be available on its website for anyone to use, alongside a protocol to support companies with either self-assessments or third-party assessments of implementation, according to Davy.
The Church of England Pensions Board is adding pressure by writing to all mining companies with tailings facilities asking them to confirm support for the standard, according to Adam Matthews, director of ethics and engagement. He believes that the standard is a “significant step” towards addressing the threat of tailings dams, though several other interventions would also be needed.
I think the days of lax corporate governance of tailings dams issues is over, certainly for the large publicly listed companies
UNEP and the PRI are taking forward work on an independent institute to audit and certify facilities against the standard, using independent assessors. Other oversight needs include round-the-clock independent monitoring capacity, which Matthews says can be achieved using a combination of satellites and on-the-ground sensors.
The most dangerous dams should be removed, particularly ones that have effectively become “lost”, Matthews says. These are dams that have moved ownership several times, and become overgrown and merged into the landscape, so that local communities might not even be aware of their existence. These can also be found using satellites, Matthews says.
Though there is much work to be done, Matthews believes that the tide has turned on the issue of tailings dams. The response to the Brumadinho disaster was completely different to that taken after Mariana, he says. “With Mariana, investors engaged with individual companies, this time it’s the whole sector. Investors are very much at the table driving this issue, there’s a link-up with banks and insurers, it’s a completely different dynamic,” he says.
Lamb concurs: “I think the days of lax corporate governance of tailings dams issues is over, certainly for the large publicly listed companies. Investor interest in this issue is so high now, companies have very few places where they can hide, and I think we’ll see a change in the disclosure on governance of these issues this year.”
Anglo-American aims to go waterless
Anglo American, which scored A- in CDP for water risk, has around 75% of its global operations in water-stressed areas. As part of its sustainable mining plan, the company has a target to reduce the abstraction of freshwater by 50% by 2030 and a vision of operating “waterless” mines, though there is no target date for that.
There are several elements to its strategy. Most mines recycle some water to reduce the draw on new resources, but Anglo American wants to fully close the loop on its system. It is innovating with new technologies to reduce evaporation, enable dry processing and dry separation.
Evaporation losses from the company’s dams account for 10-25% of total water lost at a mine, costing it approximately $200m annually to replace. In South Africa it is trialling technologies that produce much more accurate data on evaporation, twinned with fibre optics to measure water flows, which enable it to target efficiency efforts in the most impactful areas.
In water-stressed areas the priorities for water are people first and agriculture second
Water disposed of in typical tailings dams often represents the largest water loss at a mine, so Anglo American is also innovating to create dry tailings. Course-particle flotation concentrates the mineral, after which water is removed from residual waste. It is also exploring innovative methods for dry separation of ore, with early estimates showing the potential for a 30-40% reduction in water used per unit of mineral production.
More importantly, it is working to help to help boost water catchments and preserve access rights and water quality for the communities living near its operations. In South Africa, it says it is exploring the feasibility of using excess mine-water discharge and water stored on operational mines as a water source for the Limpopo province. In Peru, it is constructing a dam to create a water-supply reservoir to serve the Quellaveco mining project, the local community and agricultural industry in the future.
“In water-stressed areas the priorities for water are people first and agriculture second; if we truly want to become partners in society then we need to find ways of removing our water needs from the equation,” a spokeswoman for Anglo American says.
Catherine Early is a freelance journalist specialising in the environment and sustainability. She writes for Business Green, China Dialogue and the ENDS Report among others. She was a finalist in the Guardian’s International Development Journalism competition.
This article is part of our in-depth Water Risk briefing. See also:energy transition mining sector tailings dams CDP water pollution icmm Brumahinho Mariana dam collapse CHRB UNEP PRI Church of England Pensions Board