The global mining sector has come out tops as the industry most likely to be hardest hit by the world’s worsening water crises, and South Africa’s mining sector is not immune.

The World Wide Fund for Nature (WWF) has warned of the water risks facing the mining industry after an exhaustive analysis of some 3 174 operating mine sites.

“With the extractive sector suffering over $20-billion in water-related financial impacts in 2018 alone . . . this report highlights the companies, commodities, river basins and countries facing the highest overall water risks, including floods and water scarcity, as well as reputational and regulatory risks,” the WWF says.

The report, ‘Water Risk Filter Research Series: An analysis of water risk in the mining sector’, warns that, apart from agriculture, no sector is as exposed to water risks as the mining sector.

With the new information available, the WWF is calling on companies and investors to urgently assess and respond to the growing water risks to their businesses and assets.

When water risks manifest at mine sites, they can be extremely costly for companies and their shareholders, says WWF global water stewardship lead and author of the report Alexis Morgan, noting the significant water risks from the reputational threat of potential disasters to the direct financial impact of extreme floods and water scarcity on their operations.

“Investors can no longer turn a blind eye to these water risks: they must start demanding rigorous assessments of water risks – accounting for basin and operational water risk and water stewardship responses – before investing in mining operations.”

The report shows that India, China, South Africa, Mexico and Peru are the countries that are most at risk, with commodities such as chromite, coal, palladium, platinum, bauxite and lead topping the risk list.

The report’s analysis shows that these commodities tend to be more exposed to flood, quality and ecosystem service degradation risks rather than scarcity risks.

Further, while no commodity is ‘very highly exposed’ to water risks, no commodity is exposed to ‘very low’ water risks either.

The most exposed large public mining companies are Coal India, followed by Grupo México and China Shenhua Energy, the report further comments, noting that the companies are exposed to specific water risks, such as either water scarcity or flood risks.

The analysis shows that the world’s two largest mining companies, BHP Billiton and Rio Tinto, are exposed to lower-than-average physical and regulatory water risks, but higher-than-average reputational water risks.

“Countries such as China, South Africa, India and Australia [were mentioned] several times, owing to a combination of risk factors – including water scarcity, which is a highly material basin water risk,” the report outlines.

However, analysis shows the emergence of relatively high levels of water risk posed by flood risk in many of the basins and for many commodities – an issue which has resulted in tragic consequences in the past decade, including the failure of several significant and high-profile tailing dams in Brazil and Canada.

“Mining companies have taken significant steps to assess and address their specific water risks, but the sector has not done nearly enough to collectively respond to water risks,” says Morgan.

“Our analysis underlines the scale of the risks posed by water to mining operations: the industry needs to transform its approach to mitigate them.”

The report’s analysis represents a first step towards a future in which asset-level data contributes to more sophisticated and accurate environmental, social and governance assessment for investors and companies reliant on metals and mining.

The analysis was conducted through the WWF’s Water Risk Filter using the S&P Global Market Intelligence mining database.