Industry Trend Analysis - Water Supply Concerns To Shine Spotlight On Mining Practices - MAY 2017

BMI View: Water scarcity and contamination in Latin America will drive increasingly stringent environmental regulations in the region over the coming years. In addition to raising costs for miners and delaying certain projects, the focus on water usage in the mining industry will exert social pressure on firms to increase investment in reducing water usage and protecting community water sources.

The usage and treatment of water in the mining industry will come under increasing scrutiny in Latin America, as droughts or arid environments in key regions heighten tension between miners and local communities and previous incidents lead to additional regulations. In Chile, the environmental regulatory body (SMA) has been more aggressively pursuing and fining water mismanagement in the mining sector, levelling charges against Antofagasta Minerals' Los Pelambres copper mine and effectively suspending Kinross Gold's Maricunga gold mine in 2016. In Argentina, Barrick Gold paid a USD9.8mn fine for a cyanide spill at the Veladero gold mine in 2016, agreeing to increase water monitoring at the operation in response. In March, a provincial government suspended operations at the mine due to a pipeline issue and in April Barrick announced the sale of a 50% stake in the Veladero mine to Chinese firm Shangdong Gold Group for USD960mn. In Brazil, following the 2015 tailings dam burst at the Samarco iron ore mine which killed nearly 20 people and polluted hundreds of miles of rivers, parent firms Vale and BHP Billiton face a USD50bn lawsuit for damages. In March, a Brazilian judge suspended the lawsuit as the firms negotiate with prosecutors.

We highlight Chile, Argentina and countries in Central America as particularly likely to enforce stricter water regulations due to scarcity, contamination or a combination of both issues. While Chile boasts above-average water resources per capita, according to the latest UN Water data from 2012, the country's mining industry is concentrated in the Atacama desert, where freshwater scarcity is much more acute. Argentina, meanwhile, registers only 21,325 cubic metres of annual renewable water resource per capita, compared to a regional average of 53,004 cubic metres per capita, according to the UN.

Poor Water Quality, Limited Access To Fuel Regulations
Select Countries - Total Renewable Water Resources Per Capita (annual cubic metres per capita) 2012
Source: UN Water, BMI

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