In its latest report on the mining and metals industry, EY (formerly Ernst & Young) has named access to water and energy as one of the top ten risks facing companies. Competing water demands and increasing energy costs, especially in South America and Africa, are affecting companies’ ability to operate.
“Water and energy has risen into our top ten risks this year not because it is a new risk, but because it is becoming more critical in many parts of the world,” says Mike Elliott, Global Mining & Metals Leader at EY. “In some parts of the world, like Chile and Peru, it is a question of access, and in other parts of the world it is a question of cost, where mining and metals companies are competing against domestic and other users or energy and water.”
According to the report, mining companies in 2014 spent $11.9 billion on water infrastructure globally – a 250 percent increase from $3.4 billion in 2009. Similarly, global energy prices have increased by 260 percent since 2000.
“Because energy and water are such major components of cost structure, this is a real challenge,” says Elliott. “Mining and metals companies are going to have to think of more creative solutions.”
The EY report recommends that companies implement an efficient water management framework that includes all development and operational processes. Due to increasing water scarcity, companies that treat water risks as a strategic challenge will be far better positioned in the future. EY states that companies should assess dependence on water and future supplies, and develop plans to cope with increased prices and possible shortages.
“As the costs rise, it brings a lot more potential alternatives to the table,” says Elliott. “Not the least of which is the way in which renewables can be both a source of energy and solve part of the water problem. If you are able to desalinate seawater or use other non-potable water, like reprocessed wastewater, then this provides potential opportunities.”