The Growing Relationship Between Mining And The Water Sector
By Erin Bonney Casey, Analyst, Bluefield Research
Global mining is emerging as a key sales channel for water players. Underpinned by scaling water stress and regulatory pressures in major markets, Bluefield Research is forecasting the global mining sector’s capital investment in water solutions to grow from approximately US$9 billion in 2014 to US$17 billion in 2019.
This growth is offering new opportunities to water treatment players across the value chain and altering the market’s competitive landscape as water-related M&A activity in the mining sector heats up.
Water Stress And Regulation
Currently, 48 percent of investment (US$223 billion) in planned hard-rock mining projects is slated for regions with medium-to-high water stress. This is fomenting broader political oversight in Latin America, Southern Africa, and Asia Pacific.
FIGURE: Water Stress and Mineral Footprints
As a result, demand for water solutions in these markets is becoming bifurcated between securing water supplies and mandated treatment of effluents. For example, Chile’s US$16.4 million fine on and temporary shutdown of Barrick Gold’s operations signals stronger regulatory enforcement in the growing Latin American market.
In addition, more than 6,000 shuttered mines in South Africa have sparked a debate over acid mine drainage and its impact on existing water sources.
A Shifting Competitive Landscape
‘Big Water’ companies, such as Veolia and Suez, are increasingly turning their attention to mining as a strategic industrial vertical for expansion. In April 2014, Suez’s acquisition of M.A.I.L.S demonstrated its strategy to expand its industrial footprint. At the same time, Veolia announced plans to expand its current US$1.2 mining business in mining water treatment to US$2 billion by 2020.
Beyond water treatment suppliers, EPC companies and project design firms are playing a pivotal role in the competitive landscape. Because of the scale of mining projects, EPC firms typically act as decision-makers for water solutions implementation.
In Bluefield’s ranking of EPC players for mining, Grupo ACS, Hochtief, and Bechtel stand out as key influencers. The top 20 EPC providers had revenues of approximately US$20 billion within the mining sector in 2012.
The Entrance of Seawater Desalination Players
In markets where there are scaling mining sectors, acute water scarcity, and relative proximity of mines to the coast, Bluefield is also seeing the emergence of seawater desalination. Currently, more than 17 large-scale seawater desalination projects for mining end-users are in development, planning or construction, for a total planned investment of US$15 billion globally.
Policy initiatives are pushing desalination investment in the mining sector as well. For instance, the Chile legislature is considering a proposal that would require mines using over 10,000 m3/d to supplement their supplies with desalinated seawater.
FIGURE: Seawater Desalination for Mining Projects
The Global Water For Mining Outlook
Water treatment and management is estimated to comprise between 10 percent and 15 percent of total mining capex globally to 2019. This represents an estimated US$17 billion by the end of 2019.
Iron and copper will drive the forecasted water use for hard-rock mineral mines in Asia Pacific and Latin America. Asia Pacific will also remain the dominant region for water use globally, but Latin America and North America are positioned for greatest year-over-year growth.
Detailed forecast methodologies and water use outlooks by hard-rock mineral and water treatment expenditure by global region are provided in Bluefield’s new report, Water Solutions for Global Mining: Competition, Costs & Demand Outlook, 2014–2019.
This report also provides complete analysis of regulatory trends, water solutions provider value chain analysis and supplier profiles. Learn more at www.bluefieldresearch.com/water-treatment-for-global-mining-competition- costs-demand-outlook-2014-2019.
Image credit: "Iron ore mining operation," CDEGlobal © 2011, used under an Attribution-NoDerivs 2.0 Generic license: https://creativecommons.org/licenses/by-nd/2.0/