All data is delayed
See More

Water scarcity threatens mines' ratings

Feb 14 2013 16:57
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.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.

moody’s  |  xstrata  |  bhp billiton  |  rio tinto  |  water


Read Fin24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Comments have been closed for this article.

Company Snapshot

We're talking about:


With infrastructure spending having been identified as one of the key focus areas of the National Development Plan, tradesmen will continue to play a critical role in growing the South African economy through their skills..

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

A 30% a month return on investment is:

Previous results · Suggest a vote