• 390 days Could Crypto Overtake Traditional Investment?
  • 395 days Americans Still Quitting Jobs At Record Pace
  • 397 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 400 days Is The Dollar Too Strong?
  • 400 days Big Tech Disappoints Investors on Earnings Calls
  • 401 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 403 days China Is Quietly Trying To Distance Itself From Russia
  • 403 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 407 days Crypto Investors Won Big In 2021
  • 407 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 408 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 410 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 411 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 414 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 415 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 415 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 417 days Are NFTs About To Take Over Gaming?
  • 418 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 421 days What’s Causing Inflation In The United States?
  • 422 days Intel Joins Russian Exodus as Chip Shortage Digs In
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Ian Campbell

Ian Campbell

Through his www.BusinessTransitionSimplified.com website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world…

Contact Author

  1. Home
  2. Markets
  3. Other

Resource Extraction: Water Due Diligence

If you trade or invest in resources stocks (whether mining or oil and gas) you ought to ensure that you have due diligence questions organized with respect to current and prospective water permitting and supply. This because an adequate supply of water is of fundamental importance in both mining and oil and gas operations. Water is of particular significance in shale oil and gas extraction.

A recent Mineweb article sets out a number of facts and observations that suggest going forward from here issues around water will delay resource projects, increase resource extraction costs, and in some cases preclude resource projects from proceeding. These include statements:

  • that water infrastructure annual costs have more than tripled from 2009 to a spend of $11.9 billion in 2013. My Comment: While interesting, that statistic is not as meaningful as would be if information on how much would have been spent in 2009 to develop exactly the same water infrastructure that is ongoing and being planned for 2013 was available. Only then would the real incremental cost of water infrastructure over that comparatively short four year period be identified. About all that can be said based on the stated statistic is that water infrastructure costs are almost certainly escalating - and likely escalating quickly;

  • miners are looking to expensive options including seawater desalination and sewage treatment plants to acquire water for both themselves and the communities geographically close to them;

  • local communities are becoming increasingly demanding of resource companies, and fresh water infrastructure that continues to serve the local community after the resource extraction process is completed is becoming a 'major bargaining chip' for companies with those communities; and,

  • in February Moody's warned of risks to resource company credit ratings as a consequence of "poor environmental risk management (that) will increasingly lead to production stoppages, protests, fines, and license withdrawals - all factors which may directly impact mining companies profitability and credit risk profiles".

Water and issues related to water are things that going forward are virtually certain to delay natural resource projects, and increase both their capital and operating costs. Viewed in isolation, in coming years this ought to negatively impact natural resource supply, and positively impact natural resource prices.

I suggest you read Water: critical resource and costly risk for miners to learn further detail as to water impacts that are almost certainly in coming years going to negatively impact natural resource project:

  • timing by way of delays, and in some cases curtailment;

  • capital costs, operating costs, quantity outputs; and,

all other things equal, push natural resource prices higher.

You might also want to read Fracking Creates Water Scarcity Issues in Michigan that discusses concerns related to the use of groundwater on a massive scale in Michigan, citing one instance where 8.4 million gallons of water are expected to be used to frack a single well.

Reference: Water: critical resource and costly risk for miners, from Mineweb, Julie Gordon, May 30, 2013 - reading time 4 minutes. Also see Fracking Creates Water Scarcity Issues in Michigan, from Resilience, June 6, 2013 - reading time 3 minutes.


Back to homepage

Leave a comment

Leave a comment