Source: Compiled by the authors.
Note: There are indirect water uses that are not captured by this table that include human water consumption at the mine, water used in electricity production and chemical inputs, among other indirect uses.
Environmental and social impacts
According to a 2024 UN Environment Programme report, which referenced a study of 1,400 mines around the world, 20 per cent of mining operations were in areas where water consumption exceeded 80 per cent of the total water available. The number of mining companies operating in water-scarce locations is expected to rise. As previously mentioned, mineral extraction can reduce flows and groundwater levels, cause contamination, contribute to habitat fragmentation and loss of biodiversity, and increase competition for water with other sectors and users. For example, lithium mining in Chile has led to groundwater depletion, soil contamination and impeded local farmers’ access to water. The continued unsustainable use of water in mining and the impact on natural resources limits the capacity of communities to adapt to climate change and droughts. For example, degraded ecosystems cannot filter and regulate floodwaters or retain soil moisture, increasing vulnerability to floods and droughts.
The environmental impacts of mining can also exacerbate social issues and inequalities. Access to water sources for local communities can be diminished as water is diverted to mines or polluted as a result of mining activities. For example, in the Democratic Republic of the Congo (DRC), acid mine drainage, among other mining-related water risks, has polluted local drinking water. A March 2024 report by RAID and AFREWATCH found that industrial cobalt and copper mining in the DRC was negatively affecting neighbouring communities, which suffered from health issues that they believed were due to water contamination from local mines. Women and children were found to suffer disproportionately from skin, respiratory, digestive and reproductive issues as they are often responsible for a household’s collection and use of water e.g. for cooking, cleaning and laundry, resulting in more exposure to contaminants in polluted water. In addition, as water sources become polluted, women and girls may need to go longer distances to obtain water.
Women are also often excluded from consultation and community engagement processes carried out by mining companies, or it is simply the case that the contributions of men are prioritized over those of women. This bias against women can affect the implementation of grievance mechanisms – processes through which local communities are, in theory, able to report concerns to a mining company.
Community engagement strategies can assist mining companies to mitigate social and environmental impacts related to water, but miners would likely need to be compelled to take action, either through government regulation, consumer pressure or local community protests that threaten operations. Benefit-sharing agreements (BSAs), which typically establish how the economic returns of resource extraction are shared between communities and mining companies, are a potential option for addressing community interests. When well designed and implemented, BSAs can address social and environmental risks while maintaining the economic value of mining. For example, in the US state of Montana, the Stillwater Mine’s 25-year-old Good Neighbor Agreement sets water quality metrics that are more robust than those required by state and federal legislation. The agreement commits the company to transparency through operational monitoring, data access and annual performance audit requirements. As a result, the local community and the mining company have been able to collaborate to protect land and water resources.
BSAs remain a voluntary exercise on the part of mining companies and are most successful in jurisdictions that already have a strong governance and regulatory environment, which may limit their applicability in environments where governance is weak or lacking capacity. Third-party frameworks for the sector, which are discussed in Chapter 5, are also useful tools to prevent social and environmental impacts in mining by promoting best practices.
Financial losses
Unsustainable water practices can impact production capacity and cause financial losses for mining companies. Corporate disclosure data submitted to the independent environmental reporting organization CDP reveal that the main causes of water-related financial impacts for mining companies are flooding, extreme weather events, increased water scarcity, drought and declining water quality – all of which are worsened by unsustainable water use.
These can result in a range of impacts including stalled production, fines and penalties, damage to company assets and disrupted sales. For instance, a major drought in Chile caused Antofagasta Minerals to reduce production by around a quarter at its Los Pelambres mine in early 2022. In 2023, a copper mine in Australia had to cease operations when record levels of rainfall overwhelmed operations. The financial losses can be significant. Severe flooding in Germany in 2021 caused nearly $32 billion in damages and production losses at mines and metals plants. With the expectation of increased demand for minerals, the possibilities of disruptions to supply due to unsustainable water practices and extreme weather are a real risk for the local economy, mining companies, the downstream supply chain and consumers. Planning for floods and droughts in coordination with public authorities and local communities is critical to reduce economic losses and social and environmental impacts from these extreme events.
According to a 2023 CDP study, 90 per cent of water use takes place in the upstream part of the value chain, and a similar trend can be observed in the mining sector. Downstream buyers can coordinate with mining companies to evaluate water-related risks, using risk assessment tools like the WWF Water Risk Filter or World Resource Institute’s (WRI) Aqueduct Water Risk Atlas. Buyers setting water-use and water pollution targets for their suppliers can increase transparency and support more informed and sustainable water use. This in turn can reduce the risk of financial impacts to operations and downstream consumers. The mining sector’s increasing exposure to water-related impacts requires sustainable and forward-looking solutions rather than reactive and mitigation-oriented strategies.
Water-related trade challenges
In recent years, governments in the Global North have taken more aggressive action to secure supplies of minerals to meet demand, a pattern that is expected to continue as the energy transition progresses. Water scarcity and pollution have typically been understood as regional or basin-level issues, with responsibility sitting almost exclusively with host national and local governments. Water dependent supply chains like those of critical minerals reflect a very different reality. Given that most minerals are transported long distances and pass through multiple production and assembly supply-chain stages, from the mine to their final use in consumer and industrial products, it is important to consider the virtual water embedded in minerals and their end-use products when assessing the sustainability, resilience and social impacts of supply chains.
Consumer-country governments have a vested interest in supporting sustainable water practices in mining regions because water risks, from over-abstraction and pollution, can disrupt supply chains and threaten the supply of industrial and consumer goods. As more countries strive to secure access to these minerals, trade agreements will play an important role. Shared responsibility between producer and consumer countries could enable a more sustainable approach. Trade agreements can be leveraged to push for greater water stewardship, biodiversity protection and environmental resilience, in addition to social and economic development objectives. This can complement other policy measures like value addition in producer countries and supply-chain security for consumer countries. If trade agreements fail to address water security in an inclusive manner, this will undermine the resilience of communities involved in, and proximal to, mining and mineral processing activities and potentially introduce additional social, environmental and political challenges that could disrupt continuity of supply.
