WATER SECURITY AND CLIMATE CHANGE:

Hubert Fleming, Ph.D., P.E.

WIM 2019

Creating A Sustainability Water Strategy

Water – A global, local and industry issue

www.icmm.com

Water supply crisis

Global Risks 2016-19

Food shortages

Mass migration

Mining regions 1850 - now

WATER MANAGEMENT: RISK FOR MINERSSTRATEGIC RISKS

4

REPUTATIONAL RISKSCreating competitive advantage for current, future growth opportunities by maintaining investment attractiveness through strong operating performance (Water is a triple bottom line metric with investors)

GROWTH POTENTIALAbility to mine new reserves is increasingly linked to responsible stewardship of water resources

SOCIAL LICENSE TO OPERATEWater related social issues are complex and highly variable;, and, Number 1 issue in social license to operate. Mismanagement results in lack of license, significant financial impact

THREE TYPES OF WATER - RELATED RISKS FOR ANGLO

Impact Examples Potential impact% of EBITDA

Pro

bab

ility

Rising operating costs

• True cost of water reflected in

prices

• Non-optimum slope

depressurization, resulting in

mineral residue costs

Lostrevenue

• Production delay or

cancellation due to lack of

access to water or too much

water

• Pit dewatering

Imp

act

Regulation/reputation

• Restricted license to operate

• Reputational damage based

on perceived misuse of

resources

20

40

70

ANGLO AMERICAN WATER MANAGEMENT

2030 GOALS:

• 50% in fresh water abstraction

• 100 m3 of beneficial use water

• With our partners, become net water contributors to our communities

• Work with innovative technology with the long-term aspiration that one day we

may mine with little / no water

VISION• Water is an asset, not liability

• Committed to achieving water security for our operations and communities

where we operate

• Recognize that access to water is a human right

• Mine with little / no water

KEY METRICS:

• 20% reduction in fresh water abstraction by 2020

• Reuse at 75% by 2020

• Water security > 1 (sufficient water at all sites to support Mine Plan)

• Zero Level 3 or greater social complaints about water

Anglo Water Management Strategy

Sustainable water management supporting

mine planO

utc

om

es

P

rogra

ms

O

bje

ctives

• Site-wide water balances

• Regional water balances

• Site-based water organization

• Integrated water management project

• Joint water projects with partners

• Water related Community projects

Water security

Recognition as responsible water stewards

Operational

Excellence: Conservation/

Demand

Management

Partnerships /

Collaborative

Action FutureSmart

ANGLO SITE WATER RISK ASSESSMENT

8

Operation / Project

**

Site Wide

Water Balance

Mine

dewatering

Water Ingress

Management

Depressurizatio

n, pit slope

water

management

Water Quality Water

Resources

(Security*,

Social, Env)

SITE 1 Understanding Understanding Understanding Understanding Understanding

SITE 2 Competence Competence Understanding Understanding Understanding

SITE 3 Understanding Understanding Awareness Awareness Awareness

SITE 4 Understanding Awareness Awareness Innocence Understanding

SITE 5 Awareness Awareness Innocence Awareness Awareness

SITE 6 Innocence Awareness Innocence Innocence Awareness

SITE 7 Awareness Innocence Innocence Awareness Awareness

SITE 8 Understanding Competence Understanding Awareness Awareness

SITE 9 Awareness Awareness Awareness Awareness Awareness

SITE 10 Understanding Understanding Awareness Awareness Awareness

WATER SECURITY

• Same amount of water in the world today as always – However, competing demands continue to grow, and climate change is altering global water flows

• Paradigm shift: Cannot engineered water supply to meet our water demand –We need to think re-engineering our water demand to meet our water supply

Basic Analysis

PLAN FOR WATER SECURITY

Understanding gap between current/ future water requirement, and sustainable supply

1. Water Efficiency/ Conservations/ Demand Management at Operations

• Optimise water use at operating sites. Reduce and Reuse.

• Build in water efficiency from the start for new operations being planned. Technology is available. Retrofitting is more difficult and expensive.

• Avoid creating additional demand on the region, reduce demand where possible

2. Water Conservation/Demand Management for Local Communities / Municipalities

• Support water conservation and demand management as part of regional integrated plan

3. New Water

• Identify additional water resources to meet regional demand , mine site demand

• Beneficial use a priority

Reporting

Company wide

water purchase

use: Investors

Water Quality

monitoring, incident

reporting

Prformance KPIs for

site, corporate

management

Capital for water

projects

Technical inputs and

assurance

Long-term water

resilience, bulk

infrastructure

Basin-wide water

management

programs

Water ingress

management:

surface runoff, mine

dewatering, slope

stabiity

Optimizing water

use, reuse, efficiency

Strategy

Development and

planning

WHY DO WE NEED WATER BALANCES?

APPROACH TO GENERATING WATER BALANCES?

Two approaches for Water Balances, different objectives

Reporting and monitoring

• Looks at historic data and compiles a static balance

• Monitors trends and performance against targets

• Used to manage the operational water balance

• Not recommended to use tools such as GoldSim for this function.

• Water Information Management System (WIMS) developed for this purpose

Predictive Water Balances

• Forecasting and planning

• Built on historic data for calibration. We use history to predict the future.

• Forward looking using stochastic modelling

• Scenario running, climate change impacts, extreme flood modelling (volumetric)

We can no longer operate in isolation

BASIN-SCALE

OPERATIONAL SCALE

REGION-WIDE WATER BALANCELOS BRONCES, CHILE

14

KEY

(Andina)

Other mines, power plants, agricultural, municipalities, etc

• Limpopo Supply Area Catchments Heat Map

Sufficient Water Resources Available

Insufficient Water Resources Available

16

Sensitivities Synthesis

Water census places site water balance in context with other users within catchment.

Surface water and groundwater resources are quantified

Key changes to system assessed, eg(abstraction licence management, population changes, industrial development plans, etc)

Water census identifies sensitivities

to water quantity and quality within

the catchment for all users.

WATER CENSUS

MODELLING & ANALYSIS

CATCHMENTWATER BALANCE

REGIONAL WATER BALANCE

17

MODELLING

AND ANALYSIS

CORPORATE DASHBOARD

Key metrics for all sites

SITE DASHBOARD

Key metrics for each site

RUN SCENARIOS

AND REVISE MODELS

Corporate-level dashboard shows all site locations and metrics for :• Abstraction• Discharge• risks

Metrics designed to understand overall water threats / opportunities, as well as to present the approach to water stewardship to stakeholders

Site-level dashboards shows a map of the site catchment(s) and metrics for:

• Real time monitoring data• Stochastic scenario model outputs• Relative importance of site operations

to overall catchment functions (egproportion of abstraction within catchment

0

20

40

60

80

100

120

140

160

2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Wat

er R

equi

rem

ents

(mill

ion

m3 /a

)

Augmentation Requirements AIP Removal

Re-use (Polokwane, Mokopane, Lebowakgomo) Flag Boshielo Dam Yield (EWR)

Water Req (WCWDM) excl De Hoop Supp Water Requirements

Water Requirements (WCWDM)

Regional Reservoir Capacity ModellingSustainable Yields

Compensation

releases removed due

to releases

Demand centres supplied

from Dam B

Deficit

Urban Re-use

Upstream Excess

Support

Potential water levels on TSF – 2017/2018

DRAFT

1,198.0

1,198.5

1,199.0

1,199.5

1,200.0

1,200.5

1,201.0

1,201.5

1,202.0

1,202.5

1,203.0

Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18

TSF

po

nd

leve

l [m

RL]

Current Reuse Forecast Historical Highest Trace

Current Reuse Forecast 50.0% confidence trace

Current Reuse Forecase Historical Lowest Trace

Proposed Increased Reuse Forecast Historical Highest Trace

Proposed Increased Reuse Forecast 50.0% confidence trace

Proposed Increased Reuse Forecase Historical Lowest Trace

Climate: Predictions and Certainty With Water

• Increase in temperature

• Variable rainfall: intensity, annual distribution and total.

• Persistent droughts with strong, intermittent flooding.

• Reduction in total rainfall in some locations, increase in others

• Glacier / icepack size / melt

Uncertainties in developing

impact scenarios for adaptation

Scenario planning to inform our view on climate risks and opportunities, and continue

to evaluate future investments with climate risks in mind.

Wilby and Dessai, 2010. Robust Adaptation to Climate Change.

How vulnerable is mining to climate change?

• A changing climate presents physical risks to mining:

– we operate in challenging geographies,

– rely on fixed assets with long lifetimes and global supply chains,

– manage climate-sensitive water and energy resources

– balance the interests of various stakeholders.

• Implications for our business:

– the demand for some of our products will change;

– climate regulation and taxation will affect our operations; and

– physical and social: water scarcity and more frequent extreme weather

events

• The mining industry already operates in extreme weather, and has always

had capacity in responding to the challenges of external environments,

developed and designed robust engineering strategies to address those

threats.

2065 2100

Change, certainty in precipitation predictions

Projected changes in annual rainfall (mm) under RCP 8.5 to 2065

Hotter and Drier• Rainfall could become

less reliable

Storms are more intense• Flooding• Property damage• Larger extreme events

2065

Surface Flooding / Dewatering Reducing wet mining costs & meeting production targets

25

Pit Mining Operations-Worst case: not meeting targets / ore sterilization, wall falls

Plant:-Reduced ore feed (high moisture)-Lack of ore, not meeting production target

Dewatering Value:-US$ – 1Ms to 100 Ms

WATER MANAGEMENT INNOVATION

26

EFFICIENCY • Thickeners in tailings• Tailings underdrainage, water recovery

MANAGED AQUIFER RECHARGE • Depleted aquifers in Chile, Africa, Australia • Surplus winter water, low demand• Growing population, decreasing resources (climate change)

EVAPORATION CONTROL• Active measurement

• Solar powered/ electricity generating pond covers

Mine Site - Integrated Water Project

Water Balance Model

Climate Change Model

Hydrology

Other Related Projects

Risk Matrix Decision Model

Selection Criteria

Environmental

Social/Community

PermitsWater Projects

Base Case

Alternatives

Scenarios

Financial

Model

Cost Estimates

CAPEX/OPEX

Production Losses

Net Present Value

(NPV)Priority Projects

OUTLOOK IN MINING

• > 50% mining investment over the next decade will

be in high to extreme water-scarce areas

• Water consumption increasing at 5%+ annually

• Water management CapEx is 10-15% of total

mining spend, or $11-17 Billion pa*, increasing

MINERS LESSONS LEARNED:

• Recognize that water is one of top 2 sustainability

drivers

• Decrease / eliminate water withdrawal

• Minimize / eliminate wastewater discharge

• Reuse can be direct, or indirect (beneficial reuse)

• Maximize partnerships- basin-wide, community,

service / delivery partners, other miners

Kicking the Water Habit:

ANGLO ASPIRATION FOR WATER FREE MINING

What if we could:

Redesign our processes

and technology to be

water-free and only use

recycled water

Consume only minimal

clean water for own

needs and the potential to

be a user of others’

waste water; help

develop new sources of

clean, potable water

Through water, create

sustainable

development

opportunities not only

for Anglo American, but

for all stakeholders