South Africa’s mining industry may struggle over the next two decades to secure reliable sources of water, according to Moody’s.
Mining companies need millions of litres of water for processing ore, smelting and refining, dust suppression, as well as for their equipment and employees, the ratings agency said in a research report.
“While miners are getting more efficient at managing water use, they still face substantial risk when it comes to securing reliable water sources, particularly for mines in arid regions or close to populated communities,” it said.
Moody’s says SA’s mining industry is particularly at risk from water stress. Other countries falling into the same bracket are Peru, Chile, Mongolia, Australia and Chile.
According to the World Resources Institute, a Washington-based research non-profit group, South Africa will face high water stress by 2040. This means that between 40% and 80% of water available to agricultural, domestic, and industrial users is withdrawn annually.
Moody’s says mining companies have been putting measures in place to decrease water use, such as desalinating seawater, recycling water or using closed circuit systems. But this, in turn, raises the costs for projects. Higher water stress will to lead to increased capital spending and operating costs, as companies look to “lock down sustainable water sources”.
Small mining companies may be particularly at risk, said Moody’s, as they may not be able to afford increased costs associated with securing enough water.
“The length of time to bring a project into production and increasingly rigorous requirements for aspects such as water availability and management and tailing dam construction will contribute to increased project delays; requiring companies to have a stronger financial profile given the inherent volatility in the industry,” it said.