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Mining sector further stressed by water supply restrictions
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23rd November 2012
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Continuing shortages in the supply of water to the mining sector have forced already challenged and water-dependent mining companies to reassess the viability of their mining investments in South Africa.

Existing operations, expansion projects at existing operations and new mining tenement development increasingly face restricted access to water supplies and are having to adopt water efficiency technologies, often at significantly increased costs.

Water shortage challenges are exacerbated by vacillating negotiations between mining companies and existing water rights holders – often large-scale commercial farming corporations – which place astro- nomical demands on surrendering these licences.

Total mining output for the year decreased by 14.5%, compared with 2011 – the most dramatic slump since March 2008 – and depressed water accessibility is applying further pressure to an industry already strained by acute production and labour challenges.

“With the sector in distress and having to shoulder the cost of lost work days through illegal strike action as well as having to miti- gate a general decline in production, the country’s water shortages have done little to alleviate the cost burden placed on South Africa’s primary employer.

“Currently, mining companies have to secure sources of water and comply with strict water-use licences, which do not guarantee sufficient water supply across the life of a mine,” explains law firm Eversheds South Africa head of mining Warren Beech.

Moreover, while it takes on average three years for an integrated water-use licence to be issued by the Department of Water Affairs (DWA), a company must comply with the mining work programme of a new-order mining right within one year of its being awarded to avoid being found to be in breach of the Mineral and Petroleum Resources Development Act.

This often threatens the viability of new mines, as they can only advance with nonwater-related developments, such as the surfacing of extractable loads, until the water licence itself is issued.

The Department of Environmental Affairs has stated that R570-billion is needed for investment across South Africa’s water value chain in the coming ten years, for which the water-dependent mining sector cannot afford to wait.

Water access issues are further aggra- vated by a growing trend of mining operations moving further away from the country’s infrastructural hubs as the mineable mineral deposits become more remote.

On the back of shrinking water supplies, mining companies have, over the last few years, absorbed the cost of water treatment technologies into their investments – as part of both their start-up costs and their operational costs.

“In some cases, mining companies have had to cancel or delay planned investment projects because the added cost rendered the projects not viable at that time. For a struggling sector that remains the heartbeat of the South African economy, this merely increases the tension that exists between maintaining a productive and profitable operation and complying with country- specific regulations and policies,” says Beech.
He adds that, while insufficient water- supply challenges are not limited to South Africa, the country presents added challenges, such as a limited government budget, poor national infrastructure in and around the areas in which new mines are established and a strained relationship with labour unions, which increase the cost burden and weaken the predictability of production output.

Despite this, mining companies operating in the country have not been apathetic towards the potentially debilitating water scarcity problem, with several pilot projects, such as waterless washing plants and water recycling technologies, being initiated by companies to reduce their local water dependence.

The DWA has also shown intent to engage with companies in the resolution of water-access challenges, with a number of cooperative projects between industry and the DWA projects under way.

“With this in mind, I suspect that the innovation being led by the sector will con- tinue to filter through to national initiatives to save and create new water, which is the only real positive consequence of the situation that the sector finds itself in,” says Beech.

Edited by: Martin Zhuwakinyu

 

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LIQUID GOLD Delays in the issuing of water licences often threaten the viability of new mines, as they can only advance with nonwater-related developments, such as the surfacing of extractable loads, until the licence itself is issued
 
Picture by: Bloomberg
LIQUID GOLD Delays in the issuing of water licences often threaten the viability of new mines, as they can only advance with nonwater-related developments, such as the surfacing of extractable loads, until the licence itself is issued
 
WARREN BEECH Water access issues are further aggravated by a growing trend of mining operations moving further away from the country’s infrastructural hubs as the mineable mineral deposits become more remote
 
Picture by: Duane
WARREN BEECH Water access issues are further aggravated by a growing trend of mining operations moving further away from the country’s infrastructural hubs as the mineable mineral deposits become more remote
 
 
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