As we all know, water is essential for human life… but it’s also vital to many industries, as well.
For instance, the global mining industry is having a particularly difficult time coping with a recent water issue. That’s partly because it’s the second-biggest industrial water consumer in the world, second only to agriculture.
Yet just a short while ago, water wasn’t even a concern for this industry. So how did it become one of the top 10 problems facing mining companies?
High Tide for Water Costs
First of all, miners consume a lot of water.
To make matters worse, many of the world’s biggest mining projects are planned in areas with shortages.
In fact, Bluefield Research Analyst Erin Bonney Casey says that 50% of all new hard rock mining projects around the globe are planned in areas with medium- to high-water stress levels, and Reuters shows that 70% of the projects planned by the big six mining companies are in water-stressed areas.
All three consume more than one billion cubic meters annually, and Vale consumes 1.58 billion cubic meters. That’s equivalent to a month’s worth of drinking water for all of Europe.
Lately, water stress for miners is being felt right here in the United States, too. Two years ago, for example, Freeport-McMoRan (FCX) paid an Arizona farmer $1.2 million just for the water rights to 280 acres of land near its copper mine.
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Yet that’s just a drop in the bucket.
You see, not only does mining consume a lot of water, but it also produces a lot of waste.
Last year, global mining companies spent about $12 billion on water infrastructure, including water treatment facilities and pipelines.
That spending figure is up from a mere $3.4 billion in 2009, and according to Bluefield Research, it’s expected to grow to at least $18 billion within five years, while consuming 10% to 15% of overall mining capital expenditures.
Translation: Someone’s going to make a lot of money in the coming years by providing water services to mining companies.
Two Investments That Could Make a Splash
In April, Suez purchased MAILS, an Australian company that specializes in treating waste from gold mines.
Meanwhile, Bluefield Research notes that Veolia is going all in by doubling its mining water treatment business to $2 billion by 2020. That should increase its share of the global market to the high single-digit range, with profit margins around 10%.
Both French firms are leaders in water and water treatment services, and the two companies look to be well-positioned as leaders in the water industry.
If you want to ride the trend of global water needs, take advantage by establishing a position in these two companies.
And “the chase” continues,