Cape Town - The ratings of global mining companies could be adversely affected as competition for limited water resources between mines and people intensifies, said Moody's Investors Service on Thursday.
In its ‘Global Mining Industry: Water Scarcity to Raise Capex and Operating Costs, Heighten Operational Risks’, it highlighted that mines had to comply with stringent environmental rules that could increase expenditures.
"Water scarcity is already changing the mining landscape as environmental legislation becomes more stringent", said Andrew Metcalf, an analyst for Moody's and author of the report.
"Operating in some countries increases political risk as mining companies' water supplies can be restricted if the needs of communities increase," said Metcalf.
Tighter environmental permitting requirements could add to project timelines and require mining companies to seek more complex water procurement systems.
“If, as a result, projects take longer to complete, and become costlier and riskier to execute, we would expect these factors to exert downward pressure on the ratings of the mining companies.”
The report added that this would push up the companies’ operating costs as a result of higher maintenance and energy costs.
Large, globally diversified mining companies, such as Rio Tinto, Anglo American and BHP Billiton, would continue to be adversely affected, given their global footprints and willingness to operate in the most remote and arid regions.
These companies had the expertise and financial strength to build complex water procurement systems for large-scale projects, evidence suggested that they had, to date, needed to absorb increasingly significant costs related to environmental risks.
In may last year, the department of Water affairs took legal action against four mines, including Xstrata's Onverdacht, Imbabala coal mine and Leliefontein for operating without water-use licences.
According to the United Nations climate panel 75 million to 250 million
people in Africa are projected to face increased
water stress by 2020.
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