The Mining Industry: An Architect of its Own Downfall?

Miners are feeling thirsty!

 

Climate change has been caused by several different factors. The Environmental Protection Agency estimates that 8 to 10 percent of all man made methane emissions are a result of coal mining [1]. Other forms of mining would only cause this number to increase. It would be safe to say that mining has been a significant contributor to climate change.

 

Now lets look at the impacts of climate change. The United Nations Intergovernmental Panel on Climate Change: “Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts” [2]. Not surprisingly one of these “pervasive” impacts is that if we continue on our current trajectory we will only have 60% of the water we need by 2030 [3]. Funnily enough mining is a water intensive activity. For instance in 2006 the copper mining industry alone used 1.3 billion cubic meters of water [4].

 

So when the Financial Times says, “the [mining] industry’s spending on water has increased from $3.4 billion in 2009 to nearly $10 billion in 2013” it is hard to shed a tear [5]. In fact turning to BHP Billiton’s (one of the largest mining companies in the world) 2015 Sustainability Report we can see that 85% of its water input was from water that is not drinkable. A significant amount, 30%, of the water was seawater [6]. Looking at the Sustaibility Reports of other mining companies it is the same story. How have they done this?

 

 

Using Water Efficiently

 

Exhibit A: Pressure on BHP Billiton

 

In Adelaide, Australia, BHP Billiton has in its copper, gold and uranium mine has initiated a water savings project. The project “reduces the consumption of Great Artesian Basin (GAB)water by optimizing water recovery and recycling and by substituting poor-quality local groundwater in some areas”. First BHP Billiton looked at existing data to examine how water is flows to GAB’s springs. Then some of the steps it undertook were “replacing high-quality water with hypersaline groundwater for dust suppression on roads, implementing a lockout system for water valves to ensure water is recycled from storage ponds and implementing advanced process controls to reduce water losses to tailings dams that store waste”. Further steps included covering open water storages to mitigate evaporation, increasing reuse of wastewater and replacing high-quality water with hypersaline ground water in several processes. This saved around 3000 Megalitres a year of water [7].

 

 

Using Lower-Quality Water Sources

 

Minera Esparanza in its copper and gold mine in Antofagasta, Chile required 20 million cubic meters a year, but was located in the Atacama Desert. So it designed its processing plant to use untreated seawater. Following a pilot project, supply pipe network was built to carry the seawater 145 km from the Pacific coast to the mine.

The process of transporting the seawater involves filtering it for suspended solids, adding a corrosion inhibitor reagent, and passing through four pumping stations. Its final destination is the concentration plant [7]. In general these are very uncomplicated process and the key is in the design of the plant.

 

 

Desalination

Exhibit B: How Desalination Works

 

BHP Billition, in its Escondida joint venture with Rio Tinto, invested in $3 billion dollar desalination plant that has a capacity of 2,500 liters per second [6],[8]. “Apart from the coastal desalination plant itself, the project includes two pipelines, four high-pressure pump stations, a reservoir at the mine site and high-voltage infrastructure to power the system.[9]” In fact there are 16 other such similar desalination projects underway or in discussion in Chile itself.

 

It is clear to see that the mining industry has, in essence, bought their way out of their water problem. High capital expenditure projects have been their solution. Is this enough though? Ultimately mining companies must also concentrate on the root cause of their problem. Reducing their methane and CO2 emissions is the next step. While there are regulations in place, the mining industry must look at the emission reductions as an investment that will pay off in the future. (678 words)

 

 

[1] http://www.c2es.org/energy/source/coal

[2] https://www.washingtonpost.com/national/health-science/effects-of-climate-change-irreversible-un-panel-warns-in-report/2014/11/01/2d49aeec-6142-11e4-8b9e-2ccdac31a031_story.html

[3] http://time.com/3752643/un-water-shortage-2030/

[4] http://www.sciencedirect.com/science/article/pii/S0959652611003283

[5] https://www.ft.com/content/8e42bdc8-0838-11e4-9afc-00144feab7de

[6] http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonsustainabilityreport2015_interactive.pdf

[7] http://hub.icmm.com/document/3660

[8] http://www.law360.com/articles/460157/bhp-rio-to-sink-3b-into-chilean-water-desalination-plant

[9] http://www.bnamericas.com/en/news/waterandwaste/spotlight-chiles-biggest-desalination-project1

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Student comments on The Mining Industry: An Architect of its Own Downfall?

  1. Really cool article and one that poses some difficult questions. In reading through all the (expensive) ways the mining industry has figured out how to get water from Point A to Point B, I kept asking myself: but why are we mining in the first place and why is our mining, if necessary, so energy-intensive? I can’t help but wonder if BHP Billition could have invested its $3 billion in alternative technologies to find greener ways of extracting minerals. Or, better yet, develop initiatives to reduce our overall demand for mined materials in favor for synthesized materials, the processes for which companies like BHP could still own and profit from.

  2. Great article. Having spent some time in the energy investing industry, I certainly agree that water conservation and recycling is top of mind for these businesses. Like you mention above, many mining and unconventional oil & gas companies now recycle a majority of the water used in their operations, but I agree that more should be done. Given general sentiment that mining companies need to develop more sustainable practices, and that demand should in some cases shift away from these unsustainable resources (e.g., in the case of met coal), I think we’re seeing mining companies develop more comprehensive programs. For example, Gold Fields has announced a requirement that all of it’s new projects draw 20% of their energy needs from sustainable sources. I think it will be interesting to see whether these companies can stick to such initiatives in a prolonged commodity downturn, or whether they revert back to previous practices in an effort to cut costs.

  3. Very interesting article about an industry that obviously has a very negative image when it comes to climate change. Many believe that at the end of the day the most important resource that is going to drive economies across the world is going to be water. So it is very interesting to me how water plays a crucial role in the mining industry. It baffles me that drinkable water would ever be used for such purposes when it could be used for nutrition of human beings. The move the use other types of water sources is one that makes a lot of sense and I’m sure will continue in the future. I’m interested to learn a bit more about the emissions side of what mining companies are doing. It’s good to see that they are focusing on water but is that enough?

  4. Interesting article which clearly lays out some of the largest costs associated with mining, that many (including myself) outside the industry are unaware of. As the other readers above, I have to wonder why these companies are not allocating capital to research water reduction in the mining process instead of building desalinization plants. Can we turn the government as a way to enforce stricter regulation around mining practices, as we have in other industries such as power generation? This can be difficult in the many emerging economies – including Africa and South America – where many of the world’s natural resources lie. However, this is a reason why global climate pacts like the recent Paris Agreement are so crucial to combat climate change. Additionally, shareholders need to force these companies to implement better practices.

  5. Very interesting article Shiv. Having worked in the mining industry before coming to HBS I understand the constraints and innovations that the mining industry have done to succeed in a changing environment. I know the Minera Esperanza case from very near, as I worked in Antofagasta Minerals, its parent company.
    As you can see in my post (https://digital.hbs.edu/platform-rctom/submission/antofagasta-minerals-lets-change-the-mining-industry/) we addressed some of the same issues, regarding the innovations in the water uses and the new energy approach taken by miners to reduce CO2 emissions. Although “buying their way out of the water problem” sounds correct, I would argue that this is a simplification of what is going on. Miners have made enormous amount of research to look for the best options, in fact Antofagasta using untreated seawater is just an example of that, but in some cases even that is not possible. The case of Minera Escondida is very different from Minera Esperanza as for them is not possible to adapt their process and actually there are no more alternatives. The place where mines like Minera Escondida are located is the driest desert in the world and there is actually no water. Not doing that desalination project would lead to the shut down of the biggest copper mine in the world, which due to its size would inevitably rise copper prices.
    Still, I completely agree with you that there are much more things to do. The mining industry is an industry with a very high impact to the environment and therefore things need to be taken seriously. Decisions taken today will last for decades. Every year new technologies are arising and the industry needs to be constantly attracting them and work to implement them so that they reduce their negative effects as much as possible and therefore the world can benefit from resources with the smallest possible impact.

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