MAC: Mines and Communities


Published by MAC on 2007-05-02


Celfin: MINING - The Chilean water dilemma in the Northern mining district


2nd May 2007

Cesar Perez-Novoa / Felipe Hirai

Chilean copper mining companies will likely face significant hurdles in securing future water sources and rights for water-intensive copper processing operations. This is the result of (1) natural depletion, (2) limited availability, (3) environmental constraints, and (4) political and regulatory changes. Copper production in Chile requires vast amounts of water, a commodity hard to come by in the mining-intensive Northern region, located in or bordering the Atacama Desert, one of the driest regions in the world.

Water will be more expensive, significantly contributing to mining companies' surging production costs (along with energy), and also be harder to obtain.

Supply supports current development, not future growth

Water supply is available through concession of water rights, water purchases from utilities firms domiciled in Chile or Bolivia, and surface/underground riverbeds; this supports current mining operations, but not future expansion: today, little or no water rights are available, and farmers are pushing regulators to limit the granting of water sources to the mining industry. Repercussions in ecosystems are also being monitored by environmental watchdogs, exerting further pressure. Risks are skewed to the upside, primarily because of the possibility of Bolivia limiting supply due to the dispute over the Silala basin (which is located in Bolivia but feeds Chilean mines).

Changes in regulations are also a problem

A new law designed to de-concentrate holdings of water rights was passed in 2005. Under the previous law, of 1981, companies could accumulate water rights indiscriminately free of charge, without justifying the quantity claimed and without any obligation to use it, leading to concentration and speculation in holdings. The new law, effective 1 January 2006, lowered barriers to market entry and increased competition, allowing companies to have access to the resource. However, it establishes limits on water use that previously didn't exist, and companies will have to give technical justification for the amounts of water they consume.

Feasible solution but at a higher cost...

Water scarcity has led mining companies to launch exploration programs in the mining region, seeking to secure supply for future development. Some are implementing water management programs, ranging from design development to recovery of water from tailings dams, and some are looking to build desalinization plants. So we believe we should assume higher costs until new technologies become economically viable.

Home | About Us | Companies | Countries | Minerals | Contact Us
© Mines and Communities 2013. Web site by Zippy Info