Implications of climate change on mine water quality

A recent review sheds light on best-practice water quality assessments for mine design, operations and closure.

The 2019-20 Black Summer bushfires inspired Bronwen Forsyth to write a paper on the implications of climate change on mine-waste management and water-quality prediction.

Dr Forsyth, a senior environmental geochemist at SRK Consulting, wanted to start a conversation in mining about the effects of climate change on Acid Metalliferous Drainage (AMD) assessment and water-quality prediction.

She identified a lack of Australian-based literature that address climate-change impacts on AMD – and believed more could be done to inform mining companies on this issue. 

“When I saw the devastation from the bushfires, I considered how climate change is affecting my everyday work in AMD and water quality assessment,” Forsyth says. “I wanted to encourage new thinking on how I could help mining companies with AMD issues to better adapt to climate change.”

Forsyth presented her paper – Climate Change and the Assessment of Acid Metalliferous Rock Drainage: What are the Considerations for Our Technical Discipline? – at the 10th AMD Australia workshop in June. The virtual workshop was held through the Sustainable Minerals Institute at the University of Queensland, where Forsyth completed her PhD in 2014.

The paper is timely. Climate change in Australia is expected to bring more hot days and shifting rainfall patterns, including longer droughts followed by floods. This uncertainty has implications for AMD assessment and water-quality predictions that should be factored in mine design, operations and closure.

“There’s a natural tendency to avoid uncertainty in AMD assessments,” Forsyth says. “But climate science has come a long way. We need to embrace climate uncertainty and factor it into AMD and water-quality predictions. And better communicate those risks to executives and boards, so they can make informed decisions.”

The risks are substantial. In her paper, Forsyth cited research from the devastating 2010/11 Queensland floods that closed or restricted production in 40 of Queensland’s 50 coal mines, costing more than $2 billion in lost production. 

Several coal or coal-seam gas mines had uncontrolled water discharges during that wet season. Environmental groups raised questions about whether the run-off from those mines led to elevated salinity in downstream environments. 

Practical implications 

For her paper, Forsyth analysed local and international research on AMD and climate change, across government, academia and industry. In addition, she drew on personal observations from more than a decade of work in Australian and Canadian mining. 

She had two goals. First, to identify the practical implications of higher temperatures and more variable rainfall on mine waste and water management. Second, to offer suggestions for the pursuit of best practice for AMD assessment in response to climate change.

“Australian mining needs a framework for AMD assessment that incorporates climate change,” she says. “More research can raise awareness of this issue, encourage industry debate, and help AMD practitioners and mining companies better respond to climate-change risk.”

Forsyth’s paper outlines potential impacts of climate change on mine waste and management – and provides a range of suggestions. Chief among them is developing a new approach to determining “first-flush” concentrations to account for longer dry periods followed by intense rainfall. First flush refers to pollutant concentration or mass loadings associated with the initial portion of run-off water.

During drought, soluble minerals, as by-products of sulphide mineral oxidation, accumulate in the mine waste rock. If heavy rainfall follows a dry season, the soluble minerals dissolve and can be transported from the waste facility in runoff to local waterways, or as seepage into groundwater. The discharge from a mine’s waste-rock dump, for example, could have a high concentration of solutes within an intense first flush, followed by a “long tail” of lower concentrations.

“AMD assessments typically focus on long-term averages or mean annual preciptiation rates,” Forsyth says. “We need to better account for extreme lows and highs in precipitation brought on by climate change, and how that can affect first-flush concentrations, in AMD assessments.”

Creating value

Enhanced AMD assessments can create significant value for mining companies by better understanding the environmental risks and identifying appropriate mitigation measures. A robust understanding of AMD potential is a critical input into the design of mine pits, waste-rock dumps, tailings storage facilities, covers, water-management structures and water treatment.  

Moreover, AMD assessments that better incorporate climate change can help mining companies identify and manage risks prior to closure. These include: the unintended exposure of potentially AMD-forming wastes following extreme weather events; and unforeseen closure costs, such as water treatment and longer periods of care and maintenance to achieve mine waste landform rehabilitation objectives before mine lease relinquishment.

She says some mine closures underestimate AMD risks. “It can be very costly if a mine gets its closure wrong and has to provide water treatment in perpetuity. Mining companies need to understand how climate change will affect discharge flow, seepage or underground transport at mine closure, many decades after production stops.”

Risk management

Forsyth says executive teams and boards should view AMD assessments (in the context of climate change) as part of their organisation’s risk-management strategy.

Efflorescent salts and iron precipitates in an area of seepage at the base of a tailings facility.

She recommends incorporating best-practice AMD assessment during the pre-feasibility stage of mine planning. “It’s important that an AMD assessment that factors in climate change is done early in a mine project. Too often, companies think about this after the mine is built,” Forsyth says.

Ongoing testing to validate water-quality predictions is also needed. “It’s not enough to model long-term water-quality predications using climate-change assumptions. Companies need to monitor water quality and flows to test that modelling. Automated sampling might be required during extreme weather events when it’s hard to get people on the ground,” Forsyth continues.

She says boards should ask how climate change is affecting water-quality risk at their company’s operations. “AMD issues are not easy to quantify because they play out over decades. But water discharge issues at mine sites can be damaging – environmentally, financially and reputationally – if companies don’t manage the risk.”

Forsyth says the summary table in her paper can help mine management teams and boards frame AMD discussions about climate change. 

“Our industry needs to talk more about how we factor climate change into mine waste and water-management assessments. And what the possibility of an increase in extreme weather events means for long-term water quality management from mine waste facilities,” she concludes. 

SRK Consulting is a leading, independent international consultancy that advises clients mainly in the earth and water resource industries. Its mining services range from exploration to mine closure. SRK experts are leaders in fields such as due diligence, technical studies, mine waste and water management, permitting, and mine rehabilitation. To learn more about SRK Consulting, visit www.srk.com 

This article appears in the October issue of Australian Resources & Investment.

Gold

With inflation occupying increasing mindshare, what is gold’s strategic role?

By Andrew Naylor, World Gold Council Regional Chief Executive Officer, APAC and Public Policy

With second quarter CPI (consumer price index) in Australia jumping to its highest in more than 13 years, inflation is emerging as a key concern for investors. 

As a consequence, institutional and retail investors are looking for ways to protect against rising prices. In the long term, gold is a proven hedge against inflation, but its short-term performance is less convincing. 

More recent analysis by the World Gold Council shows that gold can indeed be an important component of an inflation-hedging portfolio.

Why is inflation a concern?

Investors in many markets around the world have been used to decades of relatively low inflation. COVID-19 has been a game changer. Supply chains have been tightened, and with the prospect of a quick economic recovery on the horizon in many markets, demand in many areas could substantially outstrip supply. 

Commodity prices in particular are reflecting this, as are business inventory data and shipping rates. Other factors are also coming into play – a huge increase in government debt (to fund unprecedented support packages during the height of the pandemic) and an indication that monetary authorities will tolerate higher inflation suggests that the risks are skewed toward the upside. 

Relationship between gold and inflation

Most global conversations on inflation focus on US CPI given the hegemony of the US dollar and US interest rates. But for all the discussion on gold as an inflation hedge, gold’s relationship to US CPI is surprisingly weak – historically CPI changes and gold returns have had a weak linear relationship.

And since 1971, when the US fully exited the Gold Standard, only 16 per cent of the changes in gold prices can be explained by CPI inflation. Other factors come into play. Another reason is that there are several tools that are used as inflation hedges – gold is just one. 

More recent analysis has compared gold to other inflation hedges, such as TIPs and REITs. Whilst this analysis shows that TIPs and REITs are the most consistent hedges against inflation, gold actually ranks third in rising inflation environments, and second in persistently high inflation environments. Sensitivity to inflation is just one consideration – others include reliability, accessibility and cost. 

A similar conclusion can be drawn from the long run picture and whilst there is more work to be done, gold’s financial asset status and its value as a means of saving, ties it more closely to economic growth and money supply growth in the long run, rather than just CPI. 

Strategic case for gold

So whilst gold can be an effective inflation hedge, along with other assets, what makes gold different? When analysing the strategic case for gold there are a number of attributes that make it an attractive asset class.  

First, it can be a source of returns. Investors have long considered gold as a beneficial asset during periods of uncertainty. Historically, it has generated long-term positive returns in both good and bad economic times. Looking back almost half a century, the price of gold in US dollars has increased by an average of nearly 11 per cent per year since 1971 when the Gold Standard collapsed. Over this period, gold’s long-term return is comparable to equities and higher than bonds. 

Gold has also outperformed many other major asset classes over the past five, 10 and 20 years. The average annual return of gold in Australian dollars was more than nine per cent between December 2000 to December 2020. 

This duality of gold (its long-term performance in both good and bad economic times) reflects the diverse sources of demand for gold and differentiates it from other investment assets. Gold is often used to protect and enhance wealth over the long term as it is no one’s liability, and it operates as a means of exchange due to its global recognition.  

Demand also comes from a range of sectors, including investment, jewellery, central banks and technology. Each has different drivers making gold a unique asset class. 

A second attribute is it can be an effective diversifier. The benefits of diversification are widely acknowledged – but it is hard to find effective diversifiers. Many assets become increasingly correlated as market uncertainty rises and volatility is more pronounced, driven in part by risk-on/risk-off investment decisions. 

As a result, many so-called diversifiers fail to protect portfolios when investors need them most. Gold is different in that its negative correlation to risk assets generally increases as these assets sell off.

Thirdly, gold is a liquid asset. It is traded globally and average daily trading volumes between December 2010 and December 2020 exceeded $245 billion.

Taking these factors together suggests that gold can enhance a portfolio’s risk-adjusted returns and it is for these reasons that institutions and individuals have long recognised the strategic role of gold.  

Australia is a critical component of the global gold market – in 2020 Australia was the third largest producer of gold in the world, after China and Russia. 

It is also home to some of the largest international refineries, processing material for the domestic and international markets. And with an estimated $2.7 trillion invested in superannuation funds alone (including self-managed funds) there is an opportunity for gold to play a larger role in protecting the wealth of the nation. 

Andrew Naylor

Andrew joined the World Gold Council in 2016 and since 2020 has led its regional office in Singapore. Originally part of the central banks and public policy team, Andrew was responsible for its Islamic finance initiative, culminating in the launch of the AAOIFI Shari’ah Standard on Gold.

Andrew Naylor.

Andrew started his career at international consultancy firm Cicero Group advising financial institutions on foreign investment and trade policy in Asia, and the global regulatory reform agenda. In this role, he provided economic and political commentary for global broadcasters including the BBC, Bloomberg, CNBC and China Central TV.

To read the analysis referenced in this article, or to access the World Gold Council’s gold valuation tool Qaurum, please visit www.goldhub.com. 

This story also appears in the October issue of Australian Resources & Investment.