Water Scarcity Drives New Mining Regulations: Will Chile Serve as a Blueprint for Mexico?

10 May 2023  |  Ethan Edwards

The mining sector uses a lot of water—in fact, it’s the world’s second most water-intense industry, when benchmarked against company revenues. Skyrocketing demand for metals like copper, lithium, and cobalt that are used in solar panels, electric vehicle batteries, and other technologies is only further straining global water supplies. Mining companies, racing to meet this demand, have long been challenged by mineral-rich areas lacking a widely available water supply. 

These challenges have manifested within Mexico’s mining sector, which accounts for 3% of its gross domestic product (GDP). On 29 April 2023, Mexico’s Senate passed President Andrés Manuel López Obrador’s National Water Law Amendment aimed at restricting water usage for mining. The amendment allows the state to grant or deny mining concessions based on a region’s water availability. 

Water scarcity is clearly a big issue in Mexico. By 2030, available supplies are predicted to meet just 75% of Mexico’s water demand. With the country’s mining sector concentrated in its arid northern states, an uncertain future now lies ahead for new mining developments in Mexico. It’s worth looking at what the impact of these regulations will be:

Chile previously passed similar legislation, and companies responded by turning to desalination. In January 2022, the Chilean Senate revamped the country’s water code to grant shares of water based on the availability of the supply source, similar in structure to the Mexican mining amendment. This followed years of contention over mining water use. For example, in 2021, Chile’s courts ordered the BHP Group to temporarily cease groundwater pumping at its Cerro Colorado copper mine due to scarcity concerns.

Global lithium production, 28% of which occurs in Chile, has increased at a breakneck clip in recent years—closing in on a 9% compound annual growth rate. To adapt to the country’s new water code while scaling production, mining companies in the Andean nation have turned to desalination projects. By 2031, more than half of the Chile’s mining sector water consumption is expected to be from seawater. Further, water is now a fundamental element in corporate strategic plans:

  • Antofagasta Minerals has targeted 90% of their Chilean mine water to come from desalination or reuse by 2025. 
  • Anglo American’s Sustainable Mining Plan’s goal is to reduce freshwater withdrawals in water scarce areas by 50% by 2030. The company has secured a desalinated water supply for its Los Bronces copper mine in Chile that will come online in 2025, where it strives to eliminate freshwater use by 2030. 
  • State owned Codelco aims to reduce its continental water use by 60% by 2030 and began building a US$1 billion desalination plant and 160km water pumping system in 2022.

Mexico will turn towards reuse and desalination. Given the pressure to secure water supplies for drinking, agriculture, and industrial uses, elected officials in Mexico have demonstrated a greater willingness to engage the private sector. This has been especially true for desalination projects, as Mexico has increased its desalination capacity by 240% in the last ten years. The country’s 350 desalination plants now process around 198.1 million gallons a day (MGD). Given desalination’s relatively high costs, wastewater reuse, water transfers, and conservation measures have historically been more economical options for industry. However, the new mining proposal could force industry to reconsider desalination to directly meet supply needs.

As long as mining projects are underpinned by strong fundamentals, which in mining’s case is the undeniable inertia from the energy transition’s demand for critical materials, companies will find a way to manage their water needs.

Bluefield will continue to track water scarcity impacts on the global mining sector. With water scarcity an ever-present issue, governments are increasingly eager to curb industrial water usage. According to our market forecasts, Bluefield expects the water management spend in global mining to expand at a 3.1% compound annual growth rate through the end of the decade—in part due to increased spend on water reuse, efficiency improvements, and desalination projects to meet regulatory pressures (like Mexico’s proposed amendment). As long as mining projects are underpinned by strong fundamentals, which in mining’s case is the undeniable inertia from the energy transition’s demand for critical minerals, companies will find a way to manage their water needs.