Adapting to a Changing Climate -130402

8/13/2019 Adapting to a Changing Climate -130402

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Adapting to a changing climate:

implications for the mining andmetals industry

Report

Climate ChangeMarch 2013


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ContentsForeword 3

Executive summary 4

SECTION 1

Enhancing resilience in the mining and metals sector 5

1.1 A changing climate in context 6

1.2 Emerging drivers for adaptation 10

1.3 Road map to this report 10

SECTION 2

Implications of a changing climate for the mining and 11metals sector

2.1 A framework for assessment 13

2.2 The impacts of a changing climate 15

2.3 Business implications 19

SECTION 3

Focus areas 21

3.1 Focus area 1: Arid or water-stressed environments 22

3.2 Focus area 2: Tropical climates 29

3.3 Focus area 3: Coastal regions and areas likely to 33become wetter in the future

SECTION 4

Framework for adapting to a changing climate 39

SECTION 5

Conclusions 47

SECTION 6

References 51

Appendix A: Climate change projections 59Appendix B: Glossary 60Appendix C: Checklist of potential climate change impacts 61

Acknowledgements 62

Front cover image: Aerial view of Rio Tinto Alcans Shipshaw hydroelectric plant in theSaguenayLac-Saint-Jean region of Quebec, Canada.

Courtesy of Rio Tinto


3/64Adapting to a changing climate: implications for the mining and metals industryClimate Change 3

Foreword

In October 2010, ICMMs Council of CEOs approved the establishment of a newprogram of activities aimed at the climate change issue. The program wouldhave at its core the idea of championing a principle-based approach to guidedeveloping climate change policies, regulations and laws. In addition, it wouldestablish ICMM as a thought leader in certain key topics. The following year,the council approved a set of seven principles for climate change policydesigned to guide the development of effective and efficient national andsub-national climate change approaches that contribute to sustainabledevelopment while remaining competitive in a low carbon economy.

Adapting to a changing climate: implications for the mining and metals

industryis one of a series of three reports that describe our work in thoseareas over the last two years. The other publications examine options forrevenue recycling out of carbon pricing policies and the impacts of carbonprices on the competitiveness of commodities in four regions.

There is a growing awareness that a changing climate and its impactsrepresent a physical risk to mining operations and installations. Investmentfunds and reporting regimes such as the Carbon Disclosure Project areseeking information on how companies are planning for impacts such asrising sea levels or water scarcity associated with a changing climate.

This report addresses three key issues. Firstly, it explains why it is importantfor the mining and metals sector to understand the impacts from a changingclimate and to develop strategies to adapt. It then looks at relevant climateimpacts and how mining and metals companies can evaluate risks andopportunities associated with those impacts. And finally, it examines theavailable options for adapting to climate change impacts.

ICMM and its members are committed to playing a constructive andsubstantive role in the ongoing climate change policy dialogue. This report isa demonstration of that commitment.

Ultimately, our aim is to ensure that we strengthen our contribution tosustainable development by playing our part in addressing the climatechange challenge, while at the same time securing the continuedcompetitiveness of the mining and metals industry.

R Anthony HodgePresident, ICMM


4/64Adapting to a changing climate: implications for the mining and metals industry Climate Change4

Much of the existing assessment in the public domain ofthe impacts of a changing climate and strategies foradaptation has focused at community or national levels.This reports objective is to elaborate on these risks forthe physical operations of the mining and metals industry.It also initially explores how mining and metals companiesmight begin to design and develop coping strategies toaddress those risks. While there are critical opportunitiesfor the mining and metals industry to develop and designadaptation strategies in ways that work to complementother priorities, such as community relations, the focus ofthis work is on impacts and adaptation for the mining andmetals industry more narrowly. This report advances thepublic understanding of climate change impacts on the

mining and metals sector and options for adaptation byaddressing three central questions:

1. Why is it important for the mining and metals sectorto understand the impacts from a changing climate and todevelop strategies to adapt?

A changing climate presents physical risks to mining andmetals operations because these industries are oftenlocated in challenging geographies, rely on fixed assetswith long lifetimes, involve global supply chains, manageclimate-sensitive water and energy resources, and balancethe interests of various stakeholders.

Increasingly, external stakeholders are asking companiesto identify, disclose and plan for the risks and opportunitiespresented by a changing climate. By taking steps to

adapt, mining and metals companies can also achievecomplementary sustainable development goals relatedto local community engagement, social development,biodiversity enhancement, protection of sensitiveecosystems and natural resource stewardship.

2. What are the relevant climate impacts and how canmining and metals companies evaluate risks andopportunities?

The mining and metals sector is already very experiencedat identifying and managing risks. Increased temperatures,

changes in precipitation, sea level rise and extreme eventsmay become additional stressors with the potential toexacerbate existing risks managed by mining and metalscompanies. As shown in Figure 2.2 (see page 13), this reportuses a risk-based approach to develop a framework forevaluating potential climate-related impacts throughoutthe mining and metals cycle.

3. What are the options available to the mining and metalssector for adapting to climate change impacts?

This report also develops a framework (see Figure 4.1 onpage 40) for helping mining and metals companies respond

robustly to the challenges and opportunities of a changingclimate a process commonly referred to as adaptation.Many companies already have the approaches, tools, data,resources and people necessary for identifying andadapting to risks and opportunities. In fact, not dissimilarto farmers, one could say that the mining and metalsindustry has always had capacity in responding to thechallenges of external environments, and developed anddesigned robust engineering strategies to address thosethreats. This is not so much about reinventing the wheelas it is about integrating these additional climate impactstressor scenarios within existing risk management andplanning procedures.

Executive summary

This is not so much aboutreinventing the wheel asit is about integrating theseadditional climate impactstressor scenarios withinexisting risk managementand planning procedures.

Linhares, Esprito Santo (ES),Brazil, Vale Nature Reserve.

Courtesy of Vale


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1Enhancing

resilience inthe mining

and metalssector

SECTION



1.1 A changing climate in context

The mining and metals sector plays a critical role in drivingglobal economic growth (World Economic Forum 2011).The development of mineral resources is a pillar of manynational economies, both in terms of contribution to grossdomestic product and tax revenues, and also as an industrythat directly employs millions of workers. The closelyconnected upstream supply sector of the mining andmetals industry, which provides construction services,manufacturing, wholesale and retail trade, as well astechnical, scientific and professional services, providesfurther employment and delivers significant additionaleconomic benefit. The extraction and processing of minerals

and metals has brought huge benefits to society. These vitalcommodities are used to construct communication andtransportation networks, consumer electronics, vehicles,buildings, and many other items that serve as a foundationfor societys material quality of life (ICMM 2012).

The mining and metals sector faces a number ofsustainable development challenges, including the impactsof a changing climate.1 This report focuses on managingthe risks associated with a changing climate for the miningand metals sector. ICMM and its members, however,recognize the role that the industry has in helping tomitigate climate change by reducing greenhouse gas (GHG)

emissions. ICMMs Council of CEOs has outlined fourcommitments to which all members subscribe in order toaddress GHG emissions. These are to:

introduce emissions reduction strategies

ensure the efficient use of natural resources

support R&D of appropriate low GHG technologies

measure and report on progress.

The industry recognizes the need for collective action toaddress this global challenge.

Under a changing climate, companies will face risks both

from the policies and regulations aimed at controlling GHGemissions which could affect companies competitiveness as well as from the actual physical impacts of changesin climate. This report focuses on the latter risk.

While the exact nature of climate change impacts will belocation-specific and dependent on regional characteristicsand ecosystems, it is possible to come to some broadconclusions regarding climate-related risks andopportunities in the mining and metals industry. Highertemperatures, changing patterns of precipitation andhigher sea levels, or conversely, lower freshwater lake orriver levels, will affect the mining and metals industry in avariety of ways, including physical risks to assets and

infrastructure arising from flood or storm damage, supplychain risks arising from disruption to transport networks

and increased competition for climate-sensitive resourcessuch as water and energy. These and other impacts mayaffect asset values and require additional maintenance orupgrades; they may reduce efficiency, increase the risksof regulatory non-compliance and necessitate changesin operating practices; they may also reduce or increasedemand for specific products or services. On the otherhand, a changing global climate may enable access to newreserves in previously inaccessible areas, and efforts toplan and prepare for changes in climate can createopportunities to engage communities and advancesustainable development objectives.

Our climate is already changing, as evidenced by

observations of increases in global average air and oceantemperatures, widespread melting of snow and ice, and therising global average sea level (IPCC 2007a). As the climatecontinues to change, we will experience further changes inaverage temperature, precipitation, sea level and extremeevents. Climate change is also expected to increasevariability, resulting in climatic fluctuations beyond thosethat we are used to dealing with.

Mining and metals companies already operate inenvironments that experience extremes in weather; asthe climate changes, these companies will need to copewith both gradual increases in temperature, changes in

precipitation, increases in sea level, changes in freshwater levels as well as increased frequency or intensityof extreme events, such as droughts, floods, heatwavesand storms. Since mining and metals companies alreadymanage extremes in shorter-term weather patterns,responses to long-term changes in the climate of a givenregion can build on conventional approaches to riskmanagement and planning.

Some expected changes in climate are more certain thanothers. It is expected that global and regional temperatureswill continue to increase at a rate of at least 0.2 degreesCelsius per decade for the next two decades (IPCC 2007a).It is also very likely that heatwaves and extreme precipitation

events will become more frequent. Changes in precipitationpatterns are more uncertain, however: while it is verylikely that the amount of annual precipitation will increasein high latitudes, and likely that it will decrease in mostsub-tropical regions, global climate models disagree on themagnitude and often the direction of change in manyregions (IPCC 2007a). Global sea levels are expected to rise,but the extent of rise is highly uncertain.2 Finally, beyondthe uncertainties in our ability to model, or project, changesin climate, the magnitude and rate of future change willalso depend on the amount of additional GHGs emitted intothe atmosphere.

SECTION 1

Enhancing resilience in the miningand metals sector

1 This refers to a changing physical climate, including changes intemperature, precipitation, sea level and the frequency or intensity ofextreme events such as storms, floods and drought.

2 In 2007, the IPCC estimated that global sea level rise could range from

0.18 to 0.59 metres by 20902099 (relative to 19801999 levels) under arange of future GHG emission scenarios based on physical climate models(IPCC 2007). More recent studies that have looked at past levels of sealevel rise in response to warming have projected higher levels of globalsea rise, ranging from 0.3 to over 2 metres by 2100 compared to 1990levels, although sea level rise at the high end of this range is unlikely.(Rahmstorf 2010).



For the purposes of this report, we have focused on climatechange projections that result in a 5C increase in globalmean temperature by the end of the century. This isconsistent with higher GHG emission scenarios3 (ie A1FIor A2 scenarios) developed by the Intergovernmental Panelon Climate Change (IPCC) in its Special report on emissionsscenarios(SRES) (IPCC 2000). The emissions trajectoriesassociated with these scenarios are also consistent withcurrent observed trends in global GHG emissions (ie theyrepresent a business as usual future). Detailed riskassessments at the local scale, however, should employ arange of climate change scenarios to capture the range ofpotential future trajectories of global GHG emissions, aswell as future impacts (IPCC 2007b).

Some particular characteristics of the mining and metalssector may increase the industrys exposure to climaterisks, for example:

The sector relies on large fixed assets with long designlifetimes, and makes long-term planning decisions thataffect both the mine site and the surroundingenvironment. Unless the potential impacts of a changingclimate are considered at the outset, design and planningdecisions may not be resilient and may actually increaseclimate risks to operations and the local environment inthe future.

The sector is dependent on long global supply chains,such that a climate-related disruption can havesignificant impacts across operations in multiplelocations.

Mining and metals companies operate in some verychallenging geographies and climates, particularly asmore readily accessible ores are mined, often in uniqueand fragile environments with ecosystems that arehighly sensitive to a changing climate, or in frontierlocations where isolation and lack of capacity and localinfrastructure make it much more challenging to recoverfrom any climate-related disruption.

Companies work with local communities that maythemselves be vulnerable to climate change risks fromhuman health impacts, water availability and impactson climate-sensitive industries such as agriculture.Climate change risks may impact workforce availability,economic growth and social development in localcommunities, and this can in turn jeopardize mining andmetals companies operations and reputations in areasthat are sensitive to a changing climate.

The mining and metals sector is heavily reliant on waterand energy for processing, both of which can be highlyclimate sensitive.

In addition to these direct climate risk exposures, manyof the other sustainable development pressures faced bythe mining and metals sector are also climate sensitive.For example, gaining and maintaining a social licence tooperate, which is critical to preventing disputes that delayprojects or cause existing operations to be halted, may bemore challenging when a changing climate has a negativeeffect on local communities.

At the same time, the implications to land and water useof the mining and metals industry both of which areimportant to management of risks from a changing climate are distinct from other climate-sensitive industries.Importantly, for any mining operation the actual footprint

of alienated land and volume of water withdrawals areboth small in comparison to such activities as agricultureand urban development. At the same time, the miningindustry recognizes that implications of any human activitycan ripple out across an ecosystem, and effective riskmanagement as well as realization of stewardshipopportunities to positively contribute to ecosystem healthdemands an ecosystem perspective that is inevitablyunique to every location. Box 1.1 and Box 1.2 highlightsome of these issues by providing a summary of relevantinformation on the mining and metals sectors contributionto land and water use.

Finally, the mining and metals industry is very experiencedat identifying and managing risks arising from bothsustainable development requirements and generaloperations. In order to deal with volatile geopoliticalsituations, unpredictable price environments, toughregulatory requirements and the highest health and safetystandards, global mining and metals companies are placingincreasingly higher priority on the need for effective riskmanagement, and are publicly reporting on adoption ofgood practice in annual sustainable developmentpublications this has become part of mining and metalscompanies corporate culture. In order to best utilize thisexisting expertise, it makes the most sense to incorporateclimate risks within existing corporate strategic plans, risk

management processes and engineering practices.

1

3 Higher emission scenarios corresponding to A1FI or A2 SRES scenarios,which are consistent with an approximate carbon dioxide equivalentatmospheric concentration of 850 and 1,250 parts per million (ppm) byend of century, respectively (IPCC 2007a, p 12).

As the climate continues tochange, we will experiencefurther changes in averagetemperature, precipitation,

sea level and extreme events.



SECTION 1


Source: ACLUMP (2006).

Mining and metals sectors use of land and water isoften misunderstood, and thought to be much largerthan actually is the case, particularly when compared toother sectors. In fact, although the mining sector owns,manages and uses substantial quantities of land andwater, the relative share of water withdrawals and landuse by mining activities is a relatively small portion oftotal use by other large users of these resources, suchas agriculture and irrigation, urban land uses andother industrial users.

As an illustration, the figure and chart show information

from the Australian Collaborative Land Use MappingProgram that provides national land use information forthe 20012002 time period (ACLUMP 2006). Over thistime, mining accounted for 1,370km2, or 0.02% ofnational land use. In comparison, urban intensive usesand irrigated pastures and cropping accounted for14,000km2 and 26,000km2, respectively, or 0.18% and0.34% of total land available. Further research in othercountries would prove useful as similar land use data isnot available for the United States (EPA 2008, pp 419),and was not located for other countries with largemining sectors, such as South Africa and Canada.

Land use in Australia

Map of land use in Australia

Source: ACLUMP (2006).

Grazing naturalvegetation 55.0%

Minimal use 15.0%

Other protectedareas, includingindigenous

uses 13.0%

Other 10.0%(mining 0.02%)

Natureconservation 7.0%

No data

Nature conservation

Other protected areas

Minimal use

Grazing nativevegetation

Production forestry

Grazing modifiedpastures

Plantation forestryDryland cropping

Dryland horticulture

Irrigated modifiedpastures

Irrigated cropping

Irrigated horticulture

Urban intensive uses

Intensive animal andplant production

Rural residential

Mining and waste

Water

Box 1.1: Land use in context



1

Sources: NRT 2012, DGA 2008b, DWAF 2003, USGS 2009.

Box 1.2: Water use in context

Share of total consumptive water use by sector in four countriesCanada shows water use in natural resource sectors only

With respect to water use, several countries haveestimated total water withdrawals (ie water inputs)at a level of detail that distinguishes mining fromother large users, as shown in the chart.

In Canada, mining accounted for 1.3% of the42 billion m3 of water inputs to residential,commercial, institutional and industrial sectorsin 2005. Between 1981 and 2005, water intake bythe mining sector dropped by 50%, while thevalue of production increased by 48% (NRT 2012,pp 46-47, 60).

In Chile, the mining sector is responsible for 4% ofconsumptive water use, compared to 78% in thefarm and forestry sectors, 12% in the industrialsector and 6% for drinking water (DGA 2008b).

In South Africa, mining and large industryaccounted for 8%, or 1.6 billion m 3, of total wateruse in 1996. In comparison, domestic and urbanuse was 11% of total water use, and the irrigationand agroforestation sector used 61% (DWAF 2004,citing DWAF 2003).

In the United States, the mining sector withdrewwater at a rate of 4,020 million gallons (15.2 cubicmetres) per day in 2005, yet this only represented1% of total water withdrawals; thermoelectric

power production accounted for 49%, followed byirrigation and public supply at 31% and 11%,respectively (USGS 2009, p 5). Forty-three per centof water withdrawn was from saline groundwaterand surface water sources (USGS 2012b).

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Canada Chile South Africa United States

Shareoftotalconsumptivewateruse

Mining

Industrial

Electricity generation

Agriculture and agroforest

Mining 1.3% Mining 4.0% Mining 8.0% Mining 1.0%

Public water supply

Environment

Other



1.2 Emerging drivers for adaptation

Although the main drivers for adaptation in mining andmetals companies are understanding and managing theimplications of a changing climate for their businesses,companies are also responding to the changingexpectations of external financial stakeholders in relationto climate risks and other corporate social responsibilityand sustainable development considerations.

Several investor initiatives, such as the Carbon DisclosureProject (CDP),4 the Investor Network on Climate Risk,5

and the Institutional Investors Group on Climate Change,6

have begun to put pressure on companies to disclose

climate-related risks. Each of these initiatives bringsinvestors together to use their collective influence toengage policymakers, companies and other investors toaccelerate public disclosure and management of risksassociated with a changing climate. The CDP voluntaryinformation request, which is sent to public companies,asks specifically about the business risks and opportunitiesarising from climate change impacts. Company responsesto information requests have risen steadily over the years,as have the number of investor signatories and assets.The significant expansion of reporting schemes for theprivate sector, such as CDP, may herald the introductionof mandatory reporting on climate risk management.

Section 2 of this report presents a structure within whichthe mining and metals sector can assess the risks that itfaces as a result of a changing climate, and it is hoped thatthis will provide a useful framework for responding toclimate risk management reporting requirements likethose described here.

Shareholders and investors are beginning to consider theimplications of climate risks for the long-term financialperformance of investee companies (IFC 2010). Norwayssovereign wealth fund, which manages US$582.7 billion inassets, offers an example of a large institutional investorassessing the risks of investing in climate-sensitive assets.The Norwegian Ministry of Finance has released an

extensive study showing the specific impact of climatechange on the Government Pension Fund Global portfolioof investments, showing that climate change could reducethe funds value by up to 10 per cent over the next 20 years(Mercer 2012).

There are indications that project financiers are alsobeginning to alter lending criteria to take account of climaterisks. The group of private sector banks that developedthe Equator Principles (a set of standards for determining,assessing and managing social and environmental riskin project financing) has established a Climate ChangeWorking Group. This group engages with the InternationalFinance Corporation (IFC) on the implementation of itsclimate change strategy into the Performance Standards,on which the Equator Principles are based, in order toshare good practice in climate risk management practices.Recent revisions to IFCs Performance Standardsunderscore the importance of managing environmentaland social performance throughout the life cycle of a

project, and specifically point to risks associated with achanging climate (IFC 2012). Development banks are alsobeginning to explore investment risks associated with achanging climate. The European Bank for Reconstructionand Development, for example, is integrating climate riskmanagement into investment appraisals.

1.3 Road map to this report

This report consists of four additional sections. Section 2discusses the implications of a changing climate for themining and metals industry. It establishes a framework for

evaluating climate change risks to the mining and metalsbusiness and provides an overview of physical risks forinputs to mining and metals operations, supply chains,markets and operations along the mining and metals cycle.

Section 3 applies this framework to three focus areas toexplore the implications of a changing climate in furtherdetail. The three focus areas are: arid or water-stressedareas, operations in tropical regions, and coastal areas orlocations that may become wetter under future climatechanges. Each focus area discusses the key financial andreputational business implications of potential impactsfrom a changing climate.

Section 4 develops a framework for developing anddesigning adaptation strategies to a changing climate.Within each step of the framework, the section providesexamples of existing functions in mining and metalscompanies that can be harnessed to respond to climatechange impacts. Conclusions from the report aresummarized in Section 5.

SECTION 1


4 www.cdproject.net

5 www.incr.com

6 www.iigcc.org

Rehabilitation of post miningarea into Green Area, Soroako,South Sulawesi, Indonesia.

Courtesy of Vale
http://www.cdproject.net/http://www.incr.com/http://www.iigcc.org/http://www.iigcc.org/http://www.incr.com/http://www.cdproject.net/


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2Implications of

a changingclimate for the

mining andmetals sector

SECTION



A changing climate presents a wide range of risks andopportunities for the mining and metals sector. Highertemperatures and sea levels, shifting patterns ofprecipitation and water levels, and increased frequency andintensity of extreme weather events will create site-specificrisks, as well as risks to the broader network within whichthe mining and metals sector functions, as summarized inFigure 2.1. Primary impacts present direct physical risksto core operations, including the health and safety ofemployees, physical assets, processes, and operations andmaintenance activities.

Climate change can also pose physical risks to the miningand metals value chain, including risks to production inputs,

the workforce and market demand for goods. Finally, thebroader economy or infrastructure (eg third-party energy or

water services, supply chains, government services andmarket access) will experience climate change impacts(Freed and Sussman 2008). Communities and ecosystemsnear mining and metals operations will also be affected bya changing climate. The surrounding community andenvironment may experience secondary climate changeimpacts if their ability to cope with a changing climate isconstrained by mining and metals operations for example,through competition for water in arid or water-stressed areas or by companies efforts to adapt to a changing climate.

Taken cumulatively, these impacts may have significantimplications for the continued operation and profitability ofassets. This section provides a high-level overview of the

ways that a changing climate may affect the mining andmetals sector.

SECTION 2

Implications of a changing climate forthe mining and metals sector

Figure 2.1: Categories of climate change impacts on businesses

Source: Freed and Sussman 2008.

... public/private electricand water utilities andother infastructure

... supplies ofnatural resourcesand raw materials

... customers anddemand for goodsand services

... government-supplied services

... customeraccess to

product

... disruptionsto supply

chain

... otherinputs into

production

... workforceand changing

lifestyles

... physical assets,productionprocesses,health and safety,operations andmaintenance

Effects of climate on ...

Core

opera

tion

sVa

lue

cha

in

Bro

adernetwo

rk



2.1 A framework for assessment

Figure 2.2 provides a framework for determining how achanging climate can impact mining and metals operations.The objective of this framework is not only to provide astructure to discuss the potential impacts of climatechange on the mining and metals sector, but also to enablecompanies to assess the risks to their own operations in aconsistent manner. There are three components to theframework:

Impact areas denotes the points in the mining andmetals cycle where impacts can occur. Core operations(shown in blue boxes) are: exploration and discovery

of a mineral deposit, construction and development of thenecessary infrastructure for mining a deposit, operationof the asset over its life, and reclamation of the site atclosure and post-closure. The impact areas that refer toinputs, supply chains and markets are related tothe value chain and broader network surrounding amining and metals companys core operations. Theserelate to climate change impacts on inputs to mining andmetals operations such as energy and water supplies,supply chains that transport materials to and from themine site and end-use markets for metals produced frommining operations.

Impact evaluation involves assessing the possibleimpacts of a changing climate in terms of who is affected,the timeframe over which impacts are expected to occur,whether the impacts could directly affect mining andmetals activities (ie primary impacts) or are expected totrigger other secondary impacts, and the likelihood thatthe impact will occur.

Business implications refer to the consequences ofclimate change impacts; they involve either financialconsequences from higher operating costs or unplannedcapital expenditures, or reputational costs from litigation,regulatory non-compliance and negative publicperception. Climate change impacts may also result in

opportunities that lower the cost of doing business incertain areas, or that enable companies to engagecommunities and achieve sustainable developmentobjectives.

2

Figure 2.2: Framework for evaluating climate change risks to the mining and metals sector

Impact areas Impact evaluation Business implications

Inputs

Supply chains

Markets

Exploration

Construction

Operation

Closure

Post-closure

FinancialHigher operating expenditure orunplanned capital expenditure

ReputationalIncreased risk of litigation, regulatorynon-compliance, inability to operate

DescriptionWhat is the impact?

TimeframeWhen will the impact occur?When is action necessary?

StakeholdersWho is impacted?

Primary/secondaryDoes the impact directly affect activitiesor does it trigger other impacts?

LikelihoodHow certain is the impact?How much more often is it likely to occur?

Climate change impacts may

also result in opportunitiesthat lower the cost of doingbusiness in certain areas.



SECTION 2


4. We then used this information to develop the frameworkaccording to the following principles:

a. The impact areas correspond to standard stages inthe mining and metals cycle and distinguish betweensteps that mining and metals companies directlycontrol (the blue boxes in Figure 2.2) and activities thatinvolve other actors (eg material inputs, supplychains and markets).

b. The impact evaluation elements are consistentwith categories in CDP investor information requests.Consequently, implementing the framework willprovide mining and metals companies with informationthat can be directly applied to existing climate riskreporting activities.

c. The output of the framework is an evaluation ofbusiness implications in terms of financial orreputational risks. Using a risk-based approach helpsprioritization of potential climate change impacts andprovides results that are likely to be compatible withexisting risk management and planning activities usedby mining and metals companies.

To demonstrate how the framework can be applied usinginformation on projected changes in climate and currentand historical events, we applied the climate change

impacts framework in Figure 2.2 to evaluate three focusareas in Section 3 of this report. These three focus areashelp to illustrate how mining and metals companies canuse the framework to evaluate potential risks andopportunities.

Each of the eight impact areas is explored broadly inSection 2.2. Companies can use this framework to exploremore specific impacts on their operations, as thesenecessarily depend on location and site-specific conditionsand activities. Potential impacts on-site and off-site arealso summarized in a checklist in Appendix C.

The framework is not an entirely new or novel structure;it was informed by existing methods of assessing andreporting risks and opportunities in the mining and metalssector. The framework was developed using the followingapproach:

1. We conducted a review of mining and metalscompany responses to CDP requests for information.The risks and opportunities identified in these reportswere compiled by location, climate change variable(eg temperature, precipitation, sea level), stressor(eg sea level rise, flooding, drought) and potential impact.This provided an initial global and cross-sectoralperspective of the potential risks posed by a changing

climate to mining and metals companies.

2. We incorporated secondary literature on climate-relatedimpacts in the mining and metals sector.7 This stephelped to validate the risks identified in CDP reports,established where impacts occurred along mine andmetal cycle stages, and provided real-world examples ofthe business implications of potential climate changeimpacts.

3. We consulted mining and metals companies andreviewed existing approaches to risk assessment andhow adjustments are being made to deal with climate

change impacts (ADB 2005, Freed and Sussman 2008,Tiempo 2012, UKCIP 2008). This research provided insightinto existing procedures, functional groups, riskmanagement structures and planning approaches thatare already used in the mining and metals industry.We applied this in developing both the climate changeimpacts framework in Figure 2.2 as well as theadaptation framework in Section 4.

7 The secondary literature review included sector-wide assessments of

impacts (Acclimatise 2010, BSR 2011, CCSP 2007, CSIRO 2011, ICMM 2011,NRT 2012, TRB 2008, Vliet et al 2012), design guidelines and technicalassessments of mining operations and management practices (ASCE 2000,Clarkin et al 2011, Meintjes 2010, MEND 2011, Mining Magazine 2012,Murphy and Caldwell 2012) and case studies of current and past climate-related impacts on mining and metals companies (Moskvitch 2012,Munson 2009, Queensland Floods Commission of Inquiry 2012).

Research provided insightinto existing procedures,functional groups, riskmanagement structures andplanning approaches thatare already used in the mining

and metals industry.



Transmission pathways for energy (whether electricity oroil and gas) are also vulnerable to disruption by extremeclimatic events, like severe flooding or storms. Demand forenergy for cooling and other processes (including watertreatment) is clearly linked to climatic conditions, withepisodes of higher temperature increasing demand andplacing greater strain on local energy transmission anddistribution facilities. During these episodes, while demandfor energy increases, higher temperatures simultaneouslyreduce the capacity of thermal generators and transmissionlines. Although many sites are equipped with back-uppower generators, these have limited capacity, and anyclimate-related damage to transmission lines andsubstations can potentially interrupt operations.

There are often few substitutes for existing sources ofenergy and water, making assessment and managementof climate-related impacts vital. The cumulative effect ofthese and other climate risks is disruption and downtime atmining and metals operations. For some processes, workcan be disrupted when a specific operational temperatureis exceeded. Heavy precipitation may also present risks tooperations that result in interruption to production, forexample when underground pumping systems haveinsufficient capacity to cope with particularly intenserainfall events.

22.2 The impacts of a changing climate

This section explores the broad impacts of a changingclimate across each of the impact areas identified inFigure 2.2. Although efforts have been made to limitrepetition of climate impacts across each area, there arecertain impacts that affect more than one area of themining and metals cycle and related services or activities.Rather than exclude duplicate impacts, we have discussedtheir implications at each relevant stage. Our objective isto discuss climate impacts from a business perspective,identifying where these impacts are most relevant alongthe mining and metals cycle.

Inputs

WaterMining and metals operations are reliant on highly climate-sensitive inputs and processes. Water is critical for miningand metals operations (eg for cooling, crushing, grinding,milling ore, slurry transport and tailings storage), and anyclimate-related impacts on the quality and availability ofwater resources will have implications for efficiency andcost. In areas where water resources are currently understress, any further reduction will likely constitute risks toproduction. In coastal areas, as sea levels rise in parallel

with increased drawdown of wells, the potential for salt-water intrusion in freshwater supplies poses a risk towater quality. Water is an essential input in thermal andhydroelectricity generation, creating important linkages anddependencies between energy and water inputs (see theEnergy section).

EnergyMining and metals operations, faced with the challenge ofbreaking, moving and processing vast amounts of ore, arealso large consumers of energy. As indicated above, thereare important linkages between energy and water inputs.For example, a changing climate has the potential to affecthydroelectric power production through water availability

if the estimated basis for design river flow ranges is nolonger valid because of shifts in seasonal precipitationpatterns or earlier and more rapid glacier melt.Conventional power facilities are also vulnerable to climatechange if temperature changes reduce the water resourcesneeded for cooling water or turbine inefficiencies.

A changing climate hasthe potential to affecthydroelectric powerproduction through water

availability if the estimatedbasis for design river flowranges is no longer validbecause of shifts inseasonal precipitationpatterns or earlier andmore rapid glacier melt.



SECTION 2


PeopleThe health and safety of employees and the widercommunities on which businesses depend can be affectedboth directly and indirectly by a changing climate, as shownin Figure 2.3. Higher temperatures directly increase therisks of heat stress for outdoor and underground workers.Heat exposure can also exacerbate chronic diseases,including cardiovascular and respiratory disease, throughindirect microbial and vector-borne pathways.8 Over a

longer time period, higher temperatures may affect regionalfood production and related ecosystems through impactssuch as drought or competition from invasive species, whichin turn can affect staff health. Clean water scarcity in timesof drought may concentrate contaminants that negativelyaffect the chemistry of surface waters in some areas (CDC2012). Health risks are also influenced, or modulated, bydemographics and social aspects of vulnerability, as wellas by systems put in place to prepare for extreme heat orweather events, prevent the spread of microbial diseaseand limit vector-borne disease pathways.

A changing climate can also affect the incidence,geographic extent and potential for the transmission ofvector-borne diseases. As temperature rises, the malariaparasite reproduces more quickly, and mosquitoes feedmore frequently. Higher temperatures and changingpatterns of precipitation could introduce new (or result inthe re-emergence of) water-related illnesses and otherdiseases. Finally, extreme weather events (eg storms andfloods) that temporarily impact the ability to do business

will have negative consequences for mining and metalsemployees. Local workers whose homes, communities ortransport links are affected will be unable to work, andcompanies can experience difficulty in recruiting andretraining staff following a major natural hazard, such asa hurricane or flood.

8 Vector-borne diseases are infections transferred to humans by arthropodssuch as mosquitoes, ticks, triatomine bugs, sandflies and blackflies(Confalonieri et al 2007, p 403).

Figure 2.3: Climate change pathways and effects on human health

Source: McMichael et al 2003, p 10.

Climatechange

Regional weatherchanges

Heatwaves

Extreme weather

Temperature

Precipitation

Microbial contaminationpathways

Transmission dynamics

Health effects

Temperature-relatedillness and death

Extreme weather-relatedhealth effects

Air pollution-relatedhealth effects

Water and food-borne

diseases

Vector-borne androdent-borne diseases

Effects of food andwater shortages

Mental, nutritional,infectious and otherhealth effects

Agro-ecosystemshydrology

Socioeconomicdemographics

Modulating influences



2Supply chains

In addition to the direct physical risks to mining andmetals infrastructure, a changing climate can impact theassociated transport that is critical to mining and metalsoperations. Several ICMM members highlighted risks toport facilities during extreme weather events and fromgradual sea level rise.

The reliability of transport routes and infrastructure ishighly vulnerable to climate change impacts that haveconsequences for supply chains and logistics. Climate-related disruption to supply chains can occur throughflooding and intense storms, changes to snow and ice,

and ground instability leading to landslides or avalanches.In some subarctic operations, the timely delivery of inputsand products is vulnerable to the thawing of critical winterice roads. Operations that are dependent on rail transportare vulnerable to speed restrictions, the potential for railbuckling and even derailment during extremes of hightemperature. Damage to road and rail bridges is also apotential impact during intense precipitation events, stormsurges and hurricanes.

Marine transport is highly vulnerable to the impacts of achanging climate. Rising sea levels may affect portoperations and support facilities. Tropical cyclones and

storm surges have the potential to disrupt coastal shippingroutes and port operations, and to damage stockpiles ofore at port. Storm conditions that increase the flow ofsediment into the port may require more frequent dredging.As sea levels rise, coastal ports may see an increase in saltlevels in freshwater wells. Some operations in the Arcticand subarctic depend on a short shipping season to bringall resources and materials to site and take all productsto market; in the event of climate-related disruption totransport, these operations will be severely affected.

These risks are particularly acute when mining andmetals operations are critically dependent on a singletransportation link that is owned and operated by an

external body over which the mining or metals companydoes not have direct control. The potential disruption and

delay in deliveries can cause operational losses as well asimpacts on the entire value chain. Secondary impacts likethese highlight the complexity of managing operationsacross widespread geographic regions, each of which isexpected to experience different climate change impacts.

Markets

A changing climate may affect customer demand for goodsand products. For example, a carbon-constrained economymay result in a different demand profile for metals andminerals. Demand may increase for materials used in theproduction of renewable energy, water recycling and

harvesting, and diverse energy sources (eg uranium)(Acclimatise 2010). A detailed treatment of marketinteractions and the effects of a changing climate arebeyond the scope of this report, but mining and metalscompanies that assess the opportunities as well as therisks of climate change may be well placed to takeadvantage of these changes.

Exploration

If ground stability risks can be managed, a changing climatemay open access to new reserves in previously inaccessible

areas. For example, the Arctic, due to rapidly declining icelevels, does appear to be opening up itself up to a veritableresource rush. The sensitivity of the local environmenttowards such incursions is acute, requiring careful designfeatures that can effectively manage such risks

Construction

Established approaches to environmental impactassessment are typically based on the assumption thatthe climate is static and tend to use historical observationsof climatic and environmental conditions as a baseline.Engineering standards and building codes also tend to

reflect an assumption that climate will remain static.As climate change impacts increasingly affect mine sitesand mining and metals operations, the assumption of astatic climate may become less valid and the long-termenvironmental sustainability and built resilience of projectsmay be reduced. This may require changes in engineeringstandards and guidelines, and in turn in facility or minesite design, including changes in design assumptions,operating thresholds, functional performancespecifications, material selection and factors of safety.For example, basing mine site water balances on currentor historic conditions may not necessarily guarantee thatdiversion ditches, water storage ponds, treatment facilities

and other water management structures are sufficient tohandle future seasonal water flows.

The reliability of transportroutes and infrastructure ishighly vulnerable to climatechange impacts that have

consequences for supplychains and logistics.



SECTION 2


Operations

Mine site conditions can be affected as precipitationpatterns change and as sea levels rise, through increasedrisk of flooding, subsidence, landslides, soil erosion,changing groundwater levels, as well as permafrostinstability in some locations. Although it is not possible tolink a particular event to climate change, widespreadflooding in Queensland, Australia, in 2010 demonstratedhow extreme changes in precipitation can impact themining and metals sector. The floods severely limitedaccess to mines, resulting in a rapid decline of exportstocks at port and financial losses in excess of US$1 billionfor the state coal industry.

Mining and metals operations are dependent on substantialfixed assets and infrastructure, which are vulnerable todamage as a result of flooding, subsidence, erosion andstorms. The performance and value of existinginfrastructure can be affected by a changing climate inseveral ways:

Increased temperatures can reduce the efficiency ofmajor equipment and cooling or water treatmentprocesses.

Equipment operating thresholds may be exceeded duringepisodes of extreme high temperature or wind speed.

Intense precipitation events and storms can jeopardizethe integrity of surface impoundments, and couldnecessitate development of additional water storagefacilities to contain process solutions and capture rainfallfor operational use.

Changes in permafrost can threaten the land stabilityrequired to maintain secure tailings ponds, dams, mineaccess roads, haul roads, building and plant foundations,and other geotechnical structures.

In the event of climatic disruption due to storms andfloods, emergency response procedures can becompromised by poor ground conditions and lack ofsite access.

If the structural integrity of assets is compromised, thismay require additional and unplanned capital expenditure toimplement engineering safeguards. In the case of structuraldamage, downtime can temporarily affect operation at asite. Unless new assets are designed with a future climatein mind (ie using projected climate data as a design basis toensure resilience against increased climatic variability),they may not perform as intended over their lifetime.9

In dry areas and seasons, hotter temperatures mayincrease the risk of wildfires that can affect access tooperations and damage communications and powerinfrastructure. Higher temperatures and a longer ice-freeseason in Arctic waterways may also lengthen the

operating season in some areas.

In addition to minimizing any negative impacts on thecommunity, good sustainable development practice in themining and metals industry necessitates broaderenvironmental sustainability targets. Mining and metalsoperations generate significant amounts of waste waterand rock debris, which is contained and managed throughdams, waste rock piles, impoundments and tailings ponds.The changes in seasonal rainfall and temperature that areprojected to occur in a changing climate will affect groundtemperature, hydrology and soil moisture, and thesechanges may have an impact on the ability of waste

containment structures to prevent contamination of land,surface water and groundwater that can harm species,habitats and ecosystems. Increased precipitation and highertemperatures may accelerate the weathering of potentiallyacid-generating waste rock, causing earlier onset andincreased volume of acid mine drainage (MEND 2011).Arctic operations, which rely on frozen ground but are atrisk of permafrost degradation as the climate changes, maysee pollutant effects as mine tailings structures weaken.If the infrastructure is not sufficiently robust to limit minewaste spillage into the environment, operations mayincreasingly be in breach of environmental regulations(Shepherd 2012).

9 This does not necessarily mean that assets will fail when exposed to futurechanges in climate: assets are often designed to accommodate a factor ofsafety, or buffer, to ensure they can withstand extreme events. If changesin climate remain within this margin, the asset may continue to operatenormally. If changes exceed this buffer, however, the asset may fail or notperform as expected under future climate conditions. For example, tailingsponds or waste storage structures are designed to certain flood return

periods, such as a 1-in-100-year flood event. In this case, assetsdesigned to higher return periods will be more likely to endure futureincreases in flood risk better than assets designed to a lower returnperiod. The actual performance of the asset will depend upon thestandards to which it is designed, assumptions about the climate in whichthe asset is expected to operate and the future changes in climate towhich the asset is exposed.



2Closure and post-closure

Mine operators are required to calculate the costs of mineclosure at the project outset and to post closure bonds thatwill redress any impacts a mining and metals operationcauses to wildlife, soil and water quality over its lifetime.A changing climate will result in environmental impactsthat are potentially quite large particularly in the Arcticand in other highly climate-sensitive ecosystems and thismay increasingly factor into the regular reassessment ofclosure bonds as the risks of climate change are betterunderstood and quantified. The potential for contaminationand environmental impact are particularly important givenmining and metals companies roles in helping to manage

large landholdings, and the long lifetime of mining andmetals sector assets, which are often designed to inperpetuity levels. For example, tailings dams andstructures designed to accommodate Probable MaximumFlood events may be built to withstand flooding eventslikely to occur once in 10,000 years (Clarkin et al 2011)based on current climate and hydrological conditions.If heavier rainfall events contribute to increased frequencyand severity of flooding, companies will need to ensure thattheir long-term closure plans incorporate additional waterstorage to contain excess precipitation. In other areas(particularly those already experiencing water stress),seasonal water scarcity can lead to temporary changes in

mine site water balances, which can reduce the long-termeffectiveness of tailings covers.

2.3 Business implications

Taken cumulatively, the wider business risks arising fromthe climate impacts outlined above can include:

Risks to business continuity from both extreme events(eg floods, droughts, storms) and availability of climate-sensitive energy and water inputs, with consequences forthe ability to meet customer demand and competitionwithin the local community for goods and services.

Health and safety risks to employees and the localcommunities on which businesses depend.

Reputational risks, and risks to a companys ability to

gain and maintain social licence to operate, if mining andmetals operations exacerbate the climate change impactsthat a local community is facing. Reputational risks canalso arise if the actions undertaken by a mining andmetals company in response to climate change impactshave a negative impact on local environments orneighbouring communities.

Risks of liability and litigation, if foreseeable impacts arenot avoided and have a negative impact on others.

Financial risks, including reduced access to projectfinancing, higher insurance and operating costs, the needfor unplanned capital expenditure and pressure from

shareholders to disclose climate risks.

A changing climate also brings opportunities. For example,there may be opportunities to increase production andmarket share through the opening of new areas toexploration and development, as a result of a longerice-free shipping season in the Arctic. Expanded operationswill, at the same time, need to account for the ecologicalsensitivity of these areas.

Beyond the individual climate change impacts identifiedabove, operations and assets will also be affected bycoincident impacts or sudden events triggered by achanging climate. Accounting for these impacts is verychallenging, given the high levels of uncertaintysurrounding when and how they might occur, and whatthe impacts will be. This is an area where knowledge iscurrently evolving, and that requires further research.Mining and metals companies, however, need to ensurethat they are aware of the ways that climate risks canmultiply and exacerbate existing challenges, as outlinedbelow:

Aggregate impacts. The compounded risk of severalseparate climate change impacts occurring in tandemmay be greater than the risks associated with individualimpacts. For example, less-developed local communities

in areas prone to flooding and coastal impacts facemultiple weather-related stressors that can affect humanhealth and security, economic development and social

A changing climate also bringsopportunities. For example,

there may be opportunitiesto increase production andmarket share through theopening of new areas toexploration and development,as a result of a longerice-free shipping season inthe Arctic.



SECTION 2


benefits. Changes in climate that increase the risk ofinland or coastal flooding, erosion, periods of extremeheat and the incidence of disease will result in aggregatestressors that are more severe than the additional stressof any one of these changes alone.

Cascading impacts. One impact resulting from a changingclimate may in turn trigger other impacts on mining andmetals companies. For example, decreased wateravailability, reduced precipitation or runoff (the flow ofexcess water over saturated land) in dry or water-stressed areas will affect both mining and metalsoperations, as well as the thermal or hydroelectricitygenerating facilities that rely on these resources. Impacts

on electricity generation will further affect mining andmetals operations that source electricity inputs fromthose facilities.

Tipping points. A tipping point refers to a threshold inthe climate system where a moderate, incrementalchange to the system triggers an abrupt transition to anew state.10 There is a high level of uncertaintysurrounding how and when tipping points could bereached, but current research indicates that global meantemperature increases of 1 to 3C could risk crossingcertain thresholds. Increases above 3C increase the riskof triggering large-scale tipping points, and the riskincreases with higher levels of warming.11 Consequently,

the climate change scenario of a 5C increase in globalmean temperature by 2100 considered in this report iswithin the range at which tipping points may be crossed.Specific tipping points are not addressed in this report,but could result in large-scale impacts on human societythat affect fundamental assumptions in mining andmetals sector business models. This is an active area ofresearch; a better understanding of the likelihood ofspecific tipping points and the range of impacts theyimply will aid in scenario analysis and risk assessmentof these highly uncertain, high-consequence events.

10 Crossing tipping point thresholds could cause rapid, unexpected changes

that human systems such as settlements, energy systems,transportation networks and industry would have difficultyaccommodating. For example, large, rapid losses from the Greenland andWest Antarctic ice sheets from increased temperatures could increase sealevel significantly (IPCC 2010).

11 See Lenton 2011, Lenton and Schellnhuber 2011, Lenton 2012 andLevermann et al 2011 for more information.

Changes in climate thatincrease the risk ofinland or coastal flooding,erosion, periods of extremeheat and the incidence ofdisease will result inaggregate stressors that

are more severe than theadditional stress of any oneof these changes alone.

Making adjustments to the reverseosmosis filters at the EmalahleniWater Reclamation Plant whichis part funded by Anglo Americanand purifies 25 megalitres of watera day.

Courtesy of Anglo American


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3Focus areas

SECTION



SECTION 3

Focus areas

This section builds on the diversity of risks andopportunities that were discussed in Section 2 by focusingon three topic areas and evaluating the physical impactsand business consequences of future climate changes.These three areas were selected because they are exposedto some of the most relevant climate risks that mining andmetals companies currently face, demonstrate actionstaken by companies to respond to and mitigate climate-related impacts and may experience climate changes thataffect mining and metals operations in the short ormedium term. The three topic areas are:

arid or water-stressed areas, such as in Chile, Peru,the southwestern United States or Australia

tropical regions such as Brazil, the west coast of Africa,Central Africa or Indonesia, where a changing climatepresents potential risks to human health that may affectoperators ability to meet social and environmentalperformance objectives

coastal areas or locations that may become wetter orface increased frequency of flooding or extremeprecipitation events under future climate changes.

Drawing from the framework established in Section 2,each topic includes a description of the climate risks andimpact areas, an evaluation of the climate change impacts

and the subsequent implications for the mining andmetals business.

3.1 Focus area 1:Arid or water-stressed environments

Description of climate risks and impact areas

Mining and metals companies operate in many regions thatare already water stressed, such as Australia, northern andsouthern Africa, Chile, Peru and the southwestern UnitedStates. Water is a necessary input for various processes inmining and metals operations and for electricity generationat thermal combustion and hydroelectric power plants.Long-term water quality issues and management of minesites particularly the management of acid-generatingmaterials can also be affected by long-term changes inwater balances. In water-stressed areas, reductions inwater availability resulting from higher temperatures andincreased evapotranspiration,12 changes in precipitationand demand from other water users place additional stresson the water available for the following operations andservices related to mining and metals activities:

Mining and metals operations that require relatively largeamounts of high-quality water. A direct implication ofincreased water stress is that mining and metalscompanies will not be able to access a sufficient supplyof water for operations either in terms of physical limitson water availability, or due to restrictions that regulatethe volume of water that may be withdrawn by a givenuser in a watershed. The highest demands for wateroccur at the extraction, beneficiation13 and processingstages of the mine and metals cycle. At the extractionand beneficiation stage, major water uses include dustsuppression, product separation and crushing,concentrate and waste transport, and further processing(Hansen Bailey 2009, pp 1117; IFC 2007, pp 25;Australian Department of Resources, Energy and Tourism2008, pp. 5468; ICMM 2012a, p 7). Dust suppression isalso a large source of water consumption in surfacemining operations. Following beneficiation, water isadded to the ore to form a slurry that can be transportedin pipelines. Water inputs at the processing stage are

process-specific and depend on the required operations,such as slag treatment, solvent extraction andelectrowinning.14 A significant amount of water can berecycled after transport and in the processing stage foradditional use (COCHILCO 2008, p 34; Geraldton Iron OreAlliance 2012, p 2); typically, only what evaporates, waterlost through seepage or water that remains stored intailings is lost in the process.

12 Evapotranspiration refers to water transfer from the surface of the Earth tothe atmosphere by evaporation (ie transfer of water to the air from landand water bodies) and transpiration (ie transfer of water to the air fromplant leaves).

13 Beneficiation is the name given to the variety of processes used to crushand separate ore into valuable substances or waste.

14 Electrowinning is a process used to extract metals from ore by dissolvingthem and passing an electric current through the solution to deposit themetal.

Mining and metals operationsrequire relatively large

amounts of high-qualitywater. A direct implication ofincreased water stress is thatmining and metals companieswill not be able to access asufficient supply of waterfor operations.



Energy inputs. The potential for a drier climate in areascurrently facing water stress will also affect the operationof thermal and hydroelectric power plants, which mayindirectly affect the availability and reliability of electricityprovided to mining and metals operations. The electricpower sector shares characteristics with mining andmetals operations that make it vulnerable to climatechange stressors: a reliance on climate sensitiveinputs chiefly, water for cooling or power generation athydroelectric operations, sensitivity and exposure toextreme weather events and reliance on supply chainsfor the delivery of fuels at thermal combustion andnuclear power plants.

There are also important links between a changingclimate and demand for electricity. Sourcing water fromalternative sources may increase energy requirementsfor additional treatment or pumping water from furtherdistances. A warmer climate will also increase the overalldemand for power for space cooling not only at miningand metals operations, but also from other users,potentially increasing competition for power in areaswhere companies import electricity from shared grids.

Post-closure activities including reclamation and long-term water quality monitoring. For example, to preventthe chemical reaction that causes acid rock drainage(ARD),15 companies may separate acid-generating rock

from oxygen by covering these materials with water.Increases in temperature, changes in precipitation andrunoff, and an increased incidence of drought in thefuture could affect the performance of these water coversby increasing the risk of exposure of waste rock andtailings to air. Mining and metals companies may beresponsible for preventing ARD post-closure over longtimeframes, exceeding hundreds of years, and in somecases, perpetually, meaning that these structureswill very likely be exposed to future climate changes(MEND 2011, Murphy and Caldwell 2012).

3

15 Acid rock drainage, or acid mine drainage, is the formation of highly acidicwater from a chemical reaction involving oxygen, water and rockscontaining sulphur-bearing metals (EPA 2012).

The potential for a drierclimate in areas currentlyfacing water stress will alsoaffect the operation ofthermal and hydroelectricpower plants, which may

indirectly affect the availabilityand reliability of electricityprovided to mining andmetals operations.



SECTION 3

Focus areas

Figure 3.1: Global baseline water stress17

17 Baseline water stress represents the share of total annual waterwithdrawals as a percentage of total annual available flow. Values above40 per cent indicate high levels of competition for water resources thatmay lead to business risks (WRI 2012).

Source: WRI 2012.

Low (80%)

Arid and low water use (NA)

Missing data (no data)Mediumhigh (2040%)

High (4080%)

In many of these areas, annual precipitation is projected todecrease, as shown in Figure 3.2. The figure representschanges under a scenario where global temperature islikely to increase by between 1.7 and 4.4C by the end ofthe century; stippled areas show where there is a high levelof agreement in the direction of the change in precipitationacross climate change models.

Impact evaluation

Global regions that currently experience water stress areshown in Figure 3.1. In particular, the volume of annualwater withdrawals as a percentage of the total availableflow is extremely high (ie greater than 80 per cent) in thesouth-western United States and Mexico, Chile, northernand southern Africa, the Middle East, Central Asia andAustralia. Projected changes in temperature andprecipitation are likely to increase the severity of existingwater stress in these areas.16

16 The IPCC, in its assessment reports and special reports on climatechange, adopts a specific terminology for assessing the likelihood of anoutcome. For example, the terms virtually certain, very likely andlikely are associated with probabilities of 99100%, 90100% and 66100%, respectively. Due to the range of data sources consulted in thisstudy, it is not possible to adopt a similar treatment of likelihood and

uncertainty throughout this report. We have, however, maintained IPCCassessments of likelihood wherever possible based on IPCC guidance.Note that the IPCC refined its guidance on the treatment of uncertaintiesfollowing the Fourth Assessment Report (IPCC 2007a), makingcomparisons between that report and the latest Special Report onManaging the Risks of Extreme Events (cited in this document as IPCC2012) difficult if not impossible (IPCC 2012, p 21).



3

Figure 3.2: Projected changes in global precipitation by end of century18

18 Multi-model results are shown for an A1B scenario (ie approximately acarbon dioxide equivalent atmospheric concentration of 850 ppm by end ofcentury) for the period 2080 to 2099 relative to 1980 to 1999. Stipplingindicates regions where 80 per cent of the models agree on the directionof the change in precipitation.

Source: Meehl et al 2007, p 769.

-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 mm/day

In Chile, scenarios consistent with a 5C increase in globalmean temperature by end of century project that annualprecipitation could decline by 10 to 40 per cent in someareas by end of century, although smaller decreases ormoderate increases in rainfall in some areas cannot beruled out (Brcena et al 2009).

The World Resources Institutes (WRI) Aqueduct databaseexamines projected changes in water stress globally.Aqueduct maps baseline water stress, reuse and socio-economic drought conditions globally, and projects changesin water stress over the next century under different climatechange scenarios.19 Aqueduct develops a water stress indexbased on 14 indicators in three categories: water quantity,quality and regulatory and reputational risk.20

19 Projections for the years 2025, 2050 and 2095 are based on IPCC scenariosB1, A1B and A2, which are approximately consistent with carbon dioxideequivalent atmospheric concentrations of 600, 850 and 1,250 ppm by endof century, respectively (IPCC 2007a, p 12).

20 Aqueduct evaluates water risk within the three categories of waterquantity, quality and regulatory and reputational risk, using data onbaseline water stress, inter-annual variability, seasonal variability, floodfrequency, upstream storage, water reuse, water quality (eg BOD, CODand other pollutant loadings), monitoring station coverage and mediacoverage. Indicators for groundwater supply trends and ecosystemservices are under development.


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The current level of water stress in Chile, and the projectedchange in water stress in each region in 2095 (WRI 2012), isshown in Figure 3.3. The northern regions of Antofagastaand Atacama already face extremely high stress and areprojected to face conditions that are at least twice as severein the future.

Similar trends are expected in already water-stressedregions in Australia, southern Africa and the southwesternUnited States. In southern Africa, areas of Namibia,Botswana, northern South Africa and Free State provincein South Africa currently experience medium to extremelyhigh water stress.21 Areas of Namibia and Botswana areprojected to face increased water stress by 2095, but the

direction and magnitude of change is less certain along theborder between Botswana and South Africa. Australia isprojected to experience moderate to exceptional increasesin water stress (ie 1.7 to 8 times above baseline stress),particularly in the west, where iron, nickel, zinc, bauxiteand gold mining operations are located. In the United Statesand northern Mexico, gold and copper mines operate inareas of extremely high water stress predominantlysouthern California, Nevada, Arizona and northern Sonora.These areas are projected to become severely or extremelymore stressed by the end of the century (ie 2 to 2.8 timesabove current water stress levels); there is uncertainty inthe magnitude of these changes in regions in the southern

United States, and in both the magnitude and direction ofchanges in northern Mexico (WRI 2012).

Chile provides a useful example of how mining operationshave responded to water stress. Water issues areparticularly acute in northern Chile as the Atacama Desertis the driest on Earth. Chile is characterized by largedifferences in climate due to its long and narrow extensionacross latitudes, which cross several climate systems:desert, tropical, subtropical, temperate and polar. Themining sector directly contributes 8 per cent of Chileannational gross domestic product (GDP), of which coppermining represents the largest share (CEPAL 2009, pp 23,36), and provides a much larger share of indirect economic

benefits. Mining operations are primarily located in thenorth and central regions of Chile (CEPAL 2009, pp 15, 17).Many of the worlds largest mining companies operate inChile, including Anglo American, Barrick, Teck, BHPBilliton, Freeport-McMoRan Copper & Gold, K+SAktiengesellschaft, Rio Tinto and Xstrata as well asleading Chilean-owned companies including Antofagasta,CAP, Codelco, Molymet and SQP (USGS 2012c); several ofthese companies operate in the arid northern regions ofChile.

The northern region is very dry, receiving runoff from snowmelt in the Andes. Companies in this area have, over thelast 10 years, operated under acute water scarcity, focusingon efficiency and a high level of reuse and recycling to meetwater requirements (as outlined in Section 2.1). It isestimated that 78 per cent of copper production is located inbasins with a water deficit (ie where annual precipitation isbelow 100 mm) (CEPAL 2009, pp 15, 17). The availability ofwater for operations, however, is increasingly insufficient,and companies are developing desalination plants to meetfreshwater requirements. For some processes, such ascopper flotation or oxide leaching, companies are beginningto source raw seawater to meet water requirements, butcertain processes require the use of desalinated water that

is free of chlorine and sulphates, such as freshwater fordrinking, sanitation, cooling, concentrate washing andelectrowinning (Mining Magazine 2012, ICMM 2012a).

Further south, in the Atacama region and central Chile,mining and metals companies operate in areas withestablished agricultural sectors and larger urbanpopulations. Water supply remains limited in these areas,and must be carefully managed. To meet theirrequirements, mining and metals companies purchasewater rights from the agricultural sector, or use treatedwater from urban areas (Mining Magazine 2012). Operationsmaintain high rates of water reuse to maximize efficiency:

mining accounts for 4 per cent of consumptive use in Chile,and in concentrating copper, freshwater consumptionwould be seven times higher per tonne without waterreuse (DGA, 2008a).

21 Ie annual water withdrawals are 20 to 80 per cent of total annual availableflows.

Adapting to a changing climate: implications for the mining and metals industry Climate Change26

SECTION 3

Focus areas

The availability of water foroperations, however, isincreasingly insufficient, andcompanies are developingdesalination plants to meetfreshwater requirements.


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Figure 3.3: Baseline and projected change in water stress in Chile by 209522

22 Results are shown for the A2 climate change scenario (ie a carbondioxide equivalent atmospheric concentration of 1,250 ppm by endof century).

Adapting to a changing climate: implications for the mining and metals industryClimate Change 27

3

Source: WRI 2012.

Atacama

Antofagasta

Atacama

Antofagasta

Low (80%)

Arid and low water use (NA)

Missing data (no data)

Baseline water stress

Exceptionally less stressed (1.7 x and baseline water stress (2095) 8 x)

Missing data (no data)

Uncertainty in magnitude

Uncertainty in direction

Projected change in water stress (2095)


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Business implications

Key business consequences related to climate change risksin arid or water-stressed areas include the following:

At construction and operation stages, there are financialrisks from increased capital and operating expenses tosecure new sources of water for expansion of existingoperations in water-stressed areas. The level ofinvestment in desalination plants, pumping andtransportation infrastructure can be substantial, rangingfrom several hundred million to billions of dollars.Sourcing water from longer distances also increasesoperating costs: in Chile and Peru, pumping seawater

from sea level to elevation and hundreds of miles inlandcan account for 60 per cent of the total operating costsof a desalination project. Direct use of raw seawaterrequires additional investment in coatings and anti-corrosion materials (Mining Magazine 2012). There arealso research and development costs associated withdeveloping technologies for alternative water sourcingand treatment. To the extent that these investmentsenable profitable expansions of capacity, they become ashare of the cost of doing business in water-stressedareas.

At construction and operation stages, there are alsoreputational risks arising from competition for scarce

water resources and from conflict with other large usersor local communities, which can affect a companys sociallicence to operate. Companies operating in water-stressed areas must already carefully managerelationships with local stakeholders particularly inareas where there is competition for water, such as foragricultural use or demand from urban centres.

For example, water availability issues in Quillagua andCopiap in northern Chile have caused tension betweenmining, agricultural and local community stakeholdergroups (Barrionuevo 2009, Moskvitch 2012). Annual waterrights in the Copiap valley range from US$80,000 to

US$120,000 for a litre per second of flow, high enoughthat many local fruit growers have sold their rights tomining operations (Bitrn et al 2011, Moskvitch 2012).Historical regulation of water resources in Copiap,dating back to 1981, has led to over-exploitation of thebasin, placing further strain on available resources(Bitrn et al 2011). Mining and metals companies haveresponded by engaging with government and localstakeholders in the region, but may face business risksfrom increased conflict with agricultural and urbanstakeholders, regulatory changes in provisional waterpermits and requirements to source water fromalternative supplies, such as desalinated seawater(Bitrn et al 2011, Moskvitch 2012).

There may also be opportunities to enhance reputation byengaging stakeholders in water resource managementdecisions at the construction and operation stages.Through investments in alternative water supplies,mining and metals companies have created partnershipswith local water authorities and municipalities to supplypotable water back to local communities. For example, inconsultation with the city of eMalahleni in South Africa,Anglo American is supplying the city with treated waterfrom its eMalahleni water reclamation plant, built to treatwater from four coal mines in the area (ICMM 2012a).

There are secondary financial risks from the possibility ofreduced reliability in electricity supplied by third parties.

Mining and metals companies may face higher costs fromhaving to rely on back-up generators or on-site facilities,or from production shortfalls. Both hydroelectric andthermal power production facilities are susceptible towater availability shortages. For example, in the UnitedStates, water shortages are likely to constrain electricityproduction from thermal power plants in Arizona, Utah,Texas, Louisiana, Georgia, Alabama, Florida, California,Oregon and Washington by 2025. Concerns over watersupply have already affected permitting for new andexisting power plants in the United States (CCSP 2007,USGCRP 2009). In 2011, high water temperatures on theTennessee River shut down the Browns Ferry nuclearpower plant in Alabama, and regulators in Texas warnedthat drought conditions in the state could contribute topower cutbacks or plant shutdowns (Fowler 2012, Koch2012). A recent study found that lower summer river flowsand higher river water temperatures could reduce powergeneration capacity by 4 to 16 per cent in the UnitedStates and 6 to 19 per cent in Europe, while tripling thelikelihood of complete or almost total shutdowns in powergeneration (Vliet et al 2012).

At closure and post-closure stages, there are bothfinancial and reputational risks from a changing climatein water-stressed areas. Companies face the potential forhigher costs associated with long-term monitoring andmanagement of closed mine sites increased rates ofevapotranspiration or reduced levels of precipitation mayaffect the water cover depth or the supply of waterrequired to maintain a sufficient cover depth. Changes inclimate may also affect vegetation used to stabilize coversto prevent erosion. In Canada, a recent report on theimpacts of climate change on acid rock drainage foundthat risks of exposure could likely be managed throughminor adjustments to water cover depth (MEND 2011);in water-stressed areas, companies may need tore-evaluate estimates of the water that will be required inorder to ensure adequate long-term management underfuture climate change.

Adapting to a changing climate: implications for the mining and metals industry Climate Change28

SECTION 3

Focus areas


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3.2 Focus area 2:Tropical climates

Description of climate risks and impact areas

Mining and metals companies operate throughout thetropics in Central America, northern South America, Westand Central Africa, Southeast Asia and the Pacific. Theyhave a significant presence in the national economies oftropical countries such as Brazil, Democratic Republic ofthe Congo, Indonesia, Mali and Mozambique, among others(CountryMine 2012). These countries tend to be low- tomedium-income states and may face challenges related tohuman health, nutrition, population migration and deliveryof social services. Human health risks are influenced byclimate, and are particularly acute in areas that face othersocial development challenges.

As a result, a changing climate in these regions has thepotential to impact the mining and metals sector in thefollowing areas:

Human resources. Increases in temperature, changes inprecipitation and extreme weather events such asflooding can influence the spread of vector-bornediseases and health issues, leading to direct impacts onproductivity, workforce availability, absenteeism andworker morale, and the ability to source materials andsupplies from local vendors. In hot climates includingtropical areas an increase in periods of extreme heatwill directly affect worker productivity, ranging fromneeding more frequent rest periods to shifting workinghours into the evening to avoid heat stress duringextended periods of extreme heat (CSIRO 2010, BSR2011).

Mining and metals operations also face indirect impactsrelated to the lack of resilience or adaptive capacity incommunities that are vulnerable to vector-borne diseaseimpacts (IPCC 2012, p 10). For example, Table 3.1 showsthat people in isolated and low-income areas are

vulnerable to multiple health stressors related to vector-borne disease, nutritional deficiencies, HIV/AIDS anddiarrhoeal disease. They may also live in areas likely toface other risks from extreme weather events, such astropical cyclones and flooding.

Tropical areas of regions such as Brazil, Central Africa,Southeast Asia, and the Pacific are also characterized byrich biodiversity. Mining and metals companies operating inthese environmentally sensitive areas can ma

Adapting to a Changing Climate -130402

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