A Big Industry

Until the 21st century, mining companies measured success in profits, stock prices, and dividends. Mining nations measured success in jobs, investment, exports, growth, and revenue. The industrial mining industry— companies that are publicly traded or state-owned— employs roughly 2.5 million people worldwide. The formal gold mining industry alone employed nearly one-quarter of that, or 527,900 people in 2012.

By 2014, companies and nations added another measure of success or failure—the supply and quality of fresh water. One reason is that rural communities are much more sensitive to their water supplies than they were, and much better connected by smart phone and the Internet to information and global institutions to support their concerns.

A second reason is that limiting the risks to water and the environment from mining has been shown to add to economic and social performance. A 2014 study by the World Bank found that countries with strong mining industries and credible regulatory sectors, such as Botswana and Chile, have outperformed their non-mining neighbors in measures of human health and education.

Mining companies and their host countries also know that the contest for water will steadily grow more severe with the rise in global temperatures. The anticipated lifespan of a typical new mine is upwards of four to five decades. But by 2060, the water availability for mining projects will be radically diminished, say climate scientists, if the world does not reduce its carbon emissions. Such a risk now merits serious attention from the industry’s top executives.

Water Is Focus of Conflict

Community concerns about water pollution, supply, and access are increasingly at the root of economic and social turmoil in the global mining industry. Mining requires exceptionally large quantities of water. But droughts, floods, and pollution are more intense, and seasonal variability in water supplies has become much more erratic globally, weakening the industry’s water security. Fully 77 percent of the annual economic value of global mining, representing $US 770 billion in revenue, is in countries with moderate to extremely high water risk, according to assessments by the World Resource Institute.

The Conga mine is the second big project to close in South America in recent years over water stress. Community opposition to Barrick Gold’s Pascua Lama gold project on the Chile-Argentina border led to a series of delays, cost increases, and the indefinite abandonment of the project—one reason Moody’s Investors Service downgraded the company’s debt rating in 2013. The Chilean government fined Barrick $US 16 million for water management failures and other environmental problems at the project in May 2013, shares in the company dropped 5 percent after the announcement of the project’s delay in June 2013, and Barrick had spent $US 5 billion before shuttering Pascua Lama indefinitely in October 2013.

“This isn’t just about a set of technological processes and agreements,” said Nancy Langston, professor of environmental history at Michigan Technological University. “Responsibility and sustainability have to mean consultation with the communities. In the past, that has meant telling the community what is about to happen them. That’s not really consultation. Communities have to be a part of the decision-making process and have a right to veto.”

The threats are real. Out of 50 cases of mining conflict examined in the 2014 National Academy of Sciences study, half involved a project blockade, one-third led to at least one fatality, and about one-quarter led to the damage of property and eventual abandonment or suspension of the project. Two more high-profile projects that were suspended, closed, or rejected due to community conflict and water concerns in the past five years include the Toromocho mines in Peru, and the Rosia Montana mine in Romania.

“The mining sector has seen first-hand—the Newmont mine in Peru, for example—the tremendous amount of value that can be lost because of community opposition to expansion,” said Brooke Barton, director of the water program at Ceres, a sustainable development organization. “Closing that mine affected the company’s stock price and long-term financial health.”

The mining industry is getting the message. Barton wrote a report for Ceres in 2010, Murky Waters, that looked at the disclosure and transparency of eight industrial sectors. The mining industry ranked best for water risk disclosure and transparency.

Not all conflicts escalate to protests and blockades, and much depends on the underlying relationship between the companies and the communities, according to Rachel Davis, a fellow at the Corporate Social Responsibility Initiative at Harvard Kennedy School and managing director of the non-profit business and human rights organization Shift.

“Many extractive projects involve impacts on local water supplies,” Davis said. “It’s a difference between—if there is a spill from a tailings dam and if something goes wrong—does the community trust the company to take action and respond or are they feeling like, ‘They didn’t listen to us when we had small problems, so now we need to make a big noise because there is a big problem’?”

Water Use in Peru’s Mines Foster Discord

Arguably no place in the world better reflects the economic and social turmoil caused by the confrontation between large-scale mining and risks to a region’s freshwater supply than Cajamarca, a city of 225,000 residents at the center of Peru’s northern Andes gold belt.

In 1993, following a decade of exploration and construction, Newmont Mining Corporation, in partnership with the World Bank’s International Finance Corporation and Minas Buenaventura, Peru’s largest gold mining company, opened the Yanacocha gold mine. In its two decades of operation, Yanacocha has produced more than 20 million ounces of gold worth more than $US 8 billion.

Yanacocha’s enormous mining pits and terraced mountains of ore established new global standards for size, technology, production, and profitability. The mine was planned in the 1980s during a decade of economic depression in Peru and opened in the 1990s in the midst of a civil war that claimed an estimated 70,000 lives. The mine is pitched on the dry Pacific side of the Andes, where water is scarce in the winter and the alpine lakes are essential for water storage.