The Columbia Water Center, a center of the Earth Institute at Columbia University, has received a 3-year grant from Norges Bank to develop a modeling platform to quantitatively assess mining-related water and environmental risks and their financial implications.
For the initial phase of the project, the Center’s research team will focus on water-related exposure for the mining of copper and gold.
The new modeling platform will allow investors access to targeted analyses of water-related mining risk, with a high level of specificity related to type of mining operation, geophysical and socio-political setting, remediation and mitigation needs, financial implications of particular asset risks on the broader company portfolio, and causal connections between risk factors and financial performance. A comprehensive database will be developed as part of the project to support these analyses.
The mineral extraction industry faces the dual challenge of rising water management costs and growing public scrutiny of the often-irreversible effects of mining on local land and water resources. Awareness of these risks has led to a growing desire from industry leaders to better assess and manage water resources; unfortunately, existing tools, while useful for a general comparison of companies and locations, are inadequate for detailed, asset-level risk assessment and management.
Researchers will develop statistical modeling tools to address elements of specific risks, including: meeting water requirements for mineral processing, energy production and community needs; treatment and disposal and reuse of wastewater; mine dewatering operations; and addressing accidents and spills. The model will also address water allocation, trading, regulation and related governance issues.
The model will be developed using data-rich settings in the USA, Canada and Australia. By limiting the data used to make predictions in specific locations, the research team hopes to cross-validate performance to test the application of the models to settings where data is less abundant. Applications will then be tested in other regions such as South Africa, Chile and Peru, where geophysical and mining conditions are similar but where data might not be as readily available and where there may be differences in economics, governance and other site factors. Portfolio risk analysis tools are also being developed for the analysis of financial risk at the asset, company and regional levels.
The data and models being developed are open source and, subject to restrictions from the data providers, will be available to mining companies seeking to assess, manage and mitigate a broad range of environmentally induced financial risks. Other targeted users include financial analysts, mining companies, government regulators, NGOs and academics.
Water risk increasingly is helping to prompt a new wave of innovation in the private sector, according to BSR’s Sissel Waage.
In other recent mining news, BMW Group, Hydro, Nestlé Nespresso SA, Rio Tinto Alcan and other members of the Aluminum Stewardship Initiative (ASI) recently released a new standard to help improve environmental and social standards for sourcing the material, as well as government performance to improve the sector’s conditions throughout its value chain. The standard also aims to reduce the industry’s historically high greenhouse gas emissions.