The mining sector is constantly innovating to respond to water issues, finding creative ways to avoid competing with other users for water. In many cases, the industry has shown its resilience and ability to turn water-related risks into opportunities.
1. Innovating in water management
The types of infrastructure that mining companies are investing heavily in include water treatment plants, wastewater treatment plants, reservoirs, pipelines and desalination plants. Desalination plants in particular use innovative technologies such as reverse osmosis and microfiltration that are highly effective, making more than 90% of mine water usable.
Companies are also making real efforts to minimise water losses and maximise recycling. For example, Xstrata’s Lomas Bayas mine in the water-scarce Atacama Desert in Chile, which receives annual rainfall of approximately 1mm, has taken effective steps to reduce evaporative losses in the heap leaching process. In another example, BHP Billiton carried out a successful water savings project at its Olympic Dam mine in Australia to reduce the volume of water used in its processes.
Jeff Beatty, who has worked in the mining industry for more than 30 years says that dry washing technology for coal is another useful approach for saving water. The dry washing process involves using compressed air – instead of water – to blast coal to remove impurities. “It is requires less capital and better for the environment as it creates no tailings that need to be managed,” says Beatty. “However, it is new technology and further work is required to improve yield and operational effectiveness. However, I’m very in favour of it – I think it’s the future and we just need to make it work.”
In mines with excess water, some companies are saving water and then putting it through a sprinkler system to help with dust suppression. Beatty says that another growing trend for dealing with wastewater is to use it for a bio plant – for example, creating a garden area instead of an open pit.
2. Relations with local communities
Mining companies are increasingly investing in infrastructure that can also be of benefit to communities. Dan Phebus, Director, Global Risk Management, Newmont Mining, says: “Responsible mining companies seek a partnership with their local stakeholders and water is an area where we can do something tangible and visible for these local communities. In the example of our Conga Project in Peru, we are building several reservoirs that will give the community the benefit of increased volume of water, as well as consistency of their water source.”
In another example, AREVA’s Trekkopje uranium mine in Namibia is the first seawater desalination plant supplying both a mine and the local region with water. The Freeport-McMoRan Cerro Verde Mine in Peru is constructing a potable water treatment plant to ensure that the city of Arequipa will have access to clean drinking water. The eMalahleni Water Reclamation Plant in South Africa (operated by Anglo American in partnership with BHP Billiton) treats mine-affected water from its own and other mining operations and delivers the water directly into the local drinking water supply.
3. Complying with regulations
Mining companies have grown used to operating within strict rules around water usage and pollution, and often exceed what is expected of them. Phebus says: “In every situation where water is reintroduced back to the environment, it must first meet strict quality standards .”
Phebus adds: “In one instance we also cool the water as we don’t want the temperature to vary significantly from the original source as we could upset the ecology – in this case, by causing algae to grow.”
Mining companies are also getting better at assessing their potential impact on the environment. “For the last project I worked on, we spent nearly AUD 1 million on water bores and monitoring to understand our potential water impact, so we could go to the government and say hand on heart that we would not negatively impact the environment – and we could prove it,” says Beatty.
4. The importance of getting insurance right
While mining companies are making good progress in managing their water-related risks through innovation and technology, not all risks can be eliminated, so companies also need to ensure they have appropriate cover in place.
“Incidents involving water – such as a pit flooding – can lead to very costly claims,” says Hugh Sparks, Energy Consultant at Charles Taylor Adjusting. “So an important issue for mining companies to consider is the indemnity period they select for property damage and business interruption (usually the biggest part of any loss). Mining companies often choose 12 months’ cover for business interruption, which in the case of a catastrophic loss can be woefully inadequate.”
Underinsuring can be down to miscalculation – but it is often about saving money. “In the mining world, you’re always dealing with a commodity where the price goes up and down,” says Sparks. “Therefore, a company will take how much their commodity is worth at the time into account when they are choosing their indemnity period.
It is crucial to get this right – because getting it wrong could mean going out of business. “It really is that fundamental,” says Sparks. “This is partly because other factors will affect an insured’s decisions after an event. For example, if the price of the commodity they are producing is low, it may not make economic sense to reinstate now – or ever. So they might abandon the pit, mothball it or sell it.”
Reputable mining companies understand the risks involved at all stages of the life cycle and manage them as best they can, but even with top quality risk management, things can and do go wrong. Insurance will respond to certain events but large or complex claims will take a considerable period of time to be settled. The insurance industry is taking steps to improve its response times, but for some this will be too late if cash flows are tight. Furthermore, a serious event could lead to withdrawal of licence to mine with obvious catastrophic consequences.
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For further information, please contact Simon Delchar, CEO, Property, Casualty, Mining & Power on +44 (0)20 7466 6226