The growing political risk to miners posed by water shortages – by Will Thomson ( – July 9, 2013)

In response to the growing global demand for metals and minerals, the mining industry has stepped up exploration and development of mines in various inhospitable places the world over. Though this trend has recently reversed in the wake of softening global demand, 136 new projects were announced in 2012, according to Ernst & Young. Despite the soft medium-term global economic outlook and rapidly decreasing capital expenditures by major miners, the long-term demand expectations of the developing world remain high, and thus so too does the need to continue exploration for metals and minerals in the world’s far-flung places.

Unsurprisingly, the development of difficult resource deposits has occurred in increasingly sensitive environments, far from the infrastructure necessary to meet the immense challenges of large-scale mining operations. One of the most common risk factors mining firms are faced with, in the frontier and emerging economies where these new deposits have been found, is a lack of the rivers, lakes, and water sources that are so important to a successful mining operation.

Access to a secure and stable water supply is essential for most mining operations, as water plays a vital role in every step of the mining process, from initial extraction to the refinement of ore. Water is often used to separate high value metals and minerals from the rock that ore is found in, is used to cool drill bits, and is essential for dust control. For mines that focus on the some of the world’s most important resources, such as gold and copper, water is a necessity. As the easy-access deposits of such valued resources have become increasingly scarce, and reliance on low-quality ores has increased, so too has the demand for water for the mining and refinement process.

Significant Risk to Asian Mines

Water risks are particularly significant in Asia, a continent rife with water scarcity issues and rich underdeveloped mineral resources. Asian governments, like those of China and India, are becoming increasingly aware of the need to steward water resources for agricultural and municipal purposes more carefully. As Asian governments seek to husband limited resources better, mining firms will find it increasingly difficult to source the water necessary for effective green field operations.

Countries that currently have extensive mining and exploration, such as Mongolia, India, China; countries thought to have great potential, such as Afghanistan and the Baluchistan region of Pakistan; and regions of Asia that remain underdeveloped, such as Central Asia, all suffer from significant limited water availability and a rapid growth in population consumption.

Mining and water issues are converging in a dramatic fashion in Afghanistan. Assessments of water resources conducted by the UN in 2008 suggest that Afghan groundwater levels have decreased by 4 to 10 meters throughout the country, and 50% of groundwater sources have been lost and are not expected to be rehabilitated in the near future. A 2004 US Army Corps of Engineers white paper on Afghan water usage anticipate that a modest population growth rate of 1% would likely lead to a dangerously arid future for Afghanistan. Afghanistan’s annual renewable water resources are estimated at 55 km3 a year; by comparison, US renewable water resources are estimated to be 2,818 km3.

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