December 2017

Climate impacts for mining: risk, materiality and actions

  • By Russell Merz, Principal Hydrotechnical Engineer and Sean Capstick, Principal, Golder Associates

With appropriate life cycle planning, many of the challenges for mining operations presented by climate variability can be better understood and mitigated

For those in the mining industry who are not directly involved in planning and response to our highly variable climate, it only takes a quick read of quarterly, half-yearly, or annual reports from the country’s mining companies to realise the materiality of climate variability.

One may read of missed financial targets due to production experiencing ‘weather-related impacts’. Perhaps an extended dry spell or, more likely, extreme rainfall from a cyclone that prevented mining activities resulted in a breach of environmental compliance or caused transport corridors to shut down for a period of time.

There is increasing pressure from investors, regulators, governance professionals and activists for companies across all sectors to report material exposure to climate risks. The mining sector has a unique relationship with climate risk, especially in regards to water; but every mine is different.

Some mines have exposure due to insufficient water supply and/or water storage to meet extreme drought conditions, while others’ exposure is from extreme flooding events due to the mine setting and layout. Some have exposure from a limited ability to discharge mine-affected water to the environment, and others from the location of related infrastructure such as transportation corridors or ports. Some mines have the highest exposure during their operating life, and others during post-closure. If material and plausible, each of these risk factors should be evaluated and reported.

Mine water risk for the purpose of public reporting needs to be done in a way that consistently represents the combination of likelihood and consequence. But a consistent approach is difficult to envision with different mining methods, processing technologies, water management strategies and the stage in the mine life cycle.

Comparisons of water use between mines are difficult to evaluate. Depending on the approach and focus, standardised reports may be misleading and may result in the wrong impression of the ability of a mine to manage water in order to mitigate the specific risks the mine is subject to. The mining sector may need to take the lead in defining a system of reporting that satisfies its requirements before a global multi-sector system is imposed that doesn’t take into account each mine’s unique relationship with water.

Climate change is expected to increase climate variability, and in most of Australia result in an increased intensity of extreme events. However, more informed projections on the range of variability are being developed that better characterise the risk for reporting, and also assist in planning for adaptation.

Climate change adaptation is an important step for the mining industry and the key players have a strong focus on measures to achieve resilience. Company-level guidance and standards assist in developing preparedness for extreme events.

Over the past decade, there have been programs and funding for Australian climate adaptation studies via universities, industry-led organisations such as the International Council on Mining and Metals (ICMM) and Australian Coal Association Research Program (ACARP), and via national organisations such as the Bureau of Meteorology and CSIRO. There is now a clear path to address these climate risks and an acknowledgement that inaction is no longer an acceptable approach.

Breaking the cycle of inaction

Water management at a mine site is often a case of too much water when you don’t need it, and too little when you do. However, in the past mines were often able to deal with these shortages or periods of excess because the extreme conditions were manageable.

Climate change is making these extreme conditions even more extreme, and this leads to an inefficient cycle of reacting to events and not planning for the future, as shown in Figure 1. The cycle shows that without constant action, planning and preparation, the likelihood and magnitude of financial losses can occur and recur.

The obstacles in breaking this cycle are significant, and include:

  • Business planning and budgeting cycles by necessity focus on the expected near-term conditions and are predicated on the available climate information and forecasts, which may not coincide with the business plan duration.
  • Increased competition for dwindling resources, combined with increasingly variable and extreme climatic events such as droughts, will enhance attention on efficient use of water and reporting for gauging the risk of water to mining.
  • Supporting business continuity in both floods and droughts requires different operating philosophies, rules and infrastructure, and it is difficult to plan for both types of events at the same time.
  • Small incremental changes in climate can impact hydrologic processes. Precipitation, evaporation, temperature and wind affect hydrological processes, which can impact groundwater and surface water in large ways that require analysis to establish the relationships.
  • It is not just the increased variability in extreme events (for example, subdaily rainfall or a single cyclone), but mines also need to consider consecutive extreme wet seasons or dry seasons, as these are important in planning to ensure that the impact of these conditions on system performance is understood and able to be managed.

However, the costs of inaction now clearly outweigh these barriers.

Cost of inaction

The cost of insufficient planning can include, but is not limited to, business disruption, lost production, increased recovery costs, environmental non-compliance, higher insurance premiums, and higher closure bonds and financial assurance.

It is the bottom line that drives extreme climate preparedness. Increasingly, the social licence risks are becoming as important as the financial risks, as mines may compete for water resources with local stakeholders. This can affect company reputation and relationships between the local community, civil society groups and governments in the areas where companies operate.

If these risks are not defined and addressed, they may have cost implications that affect return on investment and the profitable operating life-of-mines or facilities.

Drivers for planning

Many companies have responded to stakeholder interests by incorporating the issue of climate change through corporate social responsibility or sustainability programs. However, it should also be considered as part of the company corporate risk management and business continuity management frameworks.

Companies need to understand the risks of a changing climate and exposure to extreme weather, and reform their current and future practices through implementing adaption measures.

Operators, investors and regulators all want to minimise impacts from dealing with unpredictable weather, to minimise production losses or releases of mine-affected water to the environment. Stakeholder confidence would be vastly increased with the presence of declared water management preparedness plans.

These plans would include dam safety conditions and trigger action response plans (TARPs), supply line resilience and alternatives, and water balance modelling of scenarios, all leading to have pumps, pipes and fitters available and equipped with a clear plan for actions based on trigger water levels.

Climate change planning can be incorporated in each phase of the mining cycle, as shown in Figure 2.

Opportunities

Using the principles of risk assessment, various approaches have been developed and implemented to characterise and rank the risks to various mine infrastructures under current and future climate conditions.

Golder Associates utilises an approach in which mine infrastructure components (eg tailings dams, holding ponds or water supply) that could be adversely impacted by climate are identified as a potential climate/infrastructure interaction. The risks are then characterised for each interaction using a combination of the severity of the consequence, and the likelihood that the consequence would occur under both the current and future climate conditions.

This approach allows the analysis of how different climate adaptation measures impact the risk score for the different climate/infrastructure interactions. This step-wise approach is represented graphically in Figure 3.

The upsides of breaking the cycle of inaction are many. By undertaking comprehensive planning and preparation, a mine and its product can be associated with a higher degree of reliability and ability to operate under various extreme conditions. There may also be an opportunity to gain efficiency in operating costs due to a more detailed understanding of the assets and operations needed to manage an extreme climate event.

Many mining companies have implemented a planning and continuous improvement process, with dynamic water balance models and water management plans as living documents with scenario plans and actions that are updated and acted upon regularly.

Climate change is costing the mining industry, and with appropriate life cycle planning many of these challenges can be better understood and mitigated. In turn, the materiality of the risks and the actions being taken to manage them can be reported for the benefit of key stakeholders.

By taking appropriate action now and seeking professional advice, mining companies can ensure climate risks remain manageable now and into the future.

Russell Merz may be contacted at rmerz@golder.com.au or via telephone on +61 7 3721 4913; Sean Capstick can be contacted at Sean_Capstick@golder.com or via telephone at +1 (905) 5676100.

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