Fasten your seatbelts
Water and energy issues are proving inimical to the development of Chile’s mining industry.
Mining is an integral pillar of the Chilean economy, providing substantial economic growth and a fifth of total tax revenues for the state. The industry has grown significantly over the past 20 years.
However, Chilean mining is facing a range of environmental and socio-economic pressures, limiting the potential for sustainable growth.
Dwindling water supplies
Water is a precious resource in Chile, but the country’s water supplies are running dangerously low, slowing both production levels and mine development. This is caused by extreme heat and dry air, which leads to high levels of evaporation.
Storage and the transport of water are increasingly an issue.
The Atacama Desert, one of the most important mining regions in the world, is also one of the driest.
Water is extremely scarce and the only sources to be found are in salt lakes and melting snow water from the Andes.
The water-intensive requirements of mining have had a detrimental effect on both ground and surface water resources in the Atacama. This has damaged the environment and caused water shortages for nearby villages and wildlife.
Energy supply issues
Chile faces an impending energy shortage. The country produces almost no fossil fuels and is therefore forced to import around three quarters of its energy from other countries in the form of oil, coal and liquefied natural gas.
The vast amount of energy required in the mining process is putting added pressure on Chile’s supplies, driving prices up, and making life difficult for miners.
In recent years, Chile has attempted to diversify its energy supply, investing in natural gas in a bid to become less reliant on thermo and hydro-generated power. But political tensions have made this a difficult process.
For instance, there is abundant gas in neighbouring Bolivia and Peru, but poor relations with these countries means supplies have failed to materialise.
Although Chile has had gas contracts in place with Argentina since the 1990s, the latter’s economic problems have disrupted the relationship. This has left Chile needing to produce energy via other means.
Hydropower already accounts for 40% of its electricity requirements, but growth faces opposition from environmentalists, and plans to build five new hydroelectric plants in Patagonia are under threat.
Whilst there are many alternatives for Chile to resolve its energy problems, there is no consensus on the best approach.
A solution needs to be found urgently to enable the mining industry create wealth and employment.
Social discontent has become more widespread and protest groups have demonised the industry, accusing it of failing to deliver benefits to the wider community.
The Pascua Lama mine, which straddles the Chilean- Argentine border in the Andes, has sparked controversy due to its close proximity to glaciers, with campaigners claiming nearby mining could cause the ice to melt or move. Public protests, regulatory fines and ongoing legal proceedings have contributed to operational delays.
Furthermore, mining companies’ profits are under pressure from falling metals prices, deteriorating grades of ore and greater demands from workers, while strikes against low pay, working hours and conditions are all too frequent.
One recent example at the Codelco copper mine, where workers held a 24-hour strike to demand better pensions and enforcement of subcontracting laws, is estimated to have cost the company up to US$35 million.
The collapse of the San José mine in 2010 propelled Chilean mining onto the front pages of newspapers across the globe when 33 miners were trapped underground for more than three months. Although the Chilean government ordered the mine’s closure in 2007, it was re-opened before it had passed safety inspections. Unfortunately, the general safety record of the industry in Chile is poor – on average, 34 people have died in mining related incidents in Chile each year since 2000.
The ICEM (The International Federation of Chemical, Energy, Mine and General Workers’ Unions) as cited Chile as a prime example of failing safety standards, with just 18 safety inspectors employed to oversee over 900 mines.
The Chilean mining industry is highly profitable, a major employer and contributes significantly to the country’s economy.
With 30% of the world’s copper reserves, it is vital that this resource can be tapped for the benefit of all. But much needs to be done if the sector is to achieve its potential.
This article appeared in Mining Journal on 21 June 2013.