Global mining giant Rio Tinto facing pressure over water practices
Global mining giant Rio Tinto is facing new pressure from socially conscious investors and lenders over its water practices at two mines. The Local Authority Pension Fund Forum (LAPFF), representing UK pension funds, has raised concerns about the company’s water management at its Oyu Tolgoi mine in Mongolia and an ilmenite mine in Madagascar. These concerns add to Rio Tinto’s existing reputation risk following the destruction of an ancient Indigenous site in Australia last year.
LAPFF Chair Doug McMurdo has warned that these water challenges could further damage Rio Tinto’s reputation, which could complicate its efforts to gain government approvals for future projects, including a lithium mine in Serbia and a copper mine in Arizona. Growing litigation surrounding water management and stricter regulations make these challenges a financially crucial issue, McMurdo added.
Rio Tinto has acknowledged the importance of water to its host communities and committed to driving effective water stewardship and enhanced transparency. However, LAPFF, whose members hold over GPB 350 billion ($445 billion) in UK pension funds, is pushing for a resolution that would require Rio Tinto to conduct independent water impact assessments at its mine sites.
Water practices in the mining industry are a particular concern for LAPFF, given the lack of disclosure by major miners. In fact, Rio Tinto received an “F” grade from environmental adviser CDP for failing to disclose its water data since 2016. This lack of transparency has raised concerns about the company’s operations.
Issues at Oyu Tolgoi mine in Mongolia and ilmenite mine in Madagascar
Specifically, LAPFF has highlighted issues at Rio Tinto’s Oyu Tolgoi mine, where ground water quality outside the mine lease has been affected, and questions have been raised about the watertightness of its tailings dam. Local herders have reported that their livestock became ill and died due to worsening water quality, which Rio Tinto has not adequately addressed. While Rio Tinto claims that the seepage has not affected herder wells or user water quality, the ongoing seepage has been declared an environmental incident by project lenders, including the European Bank for Reconstruction and Development.
In Madagascar, tailings dam failures at Rio Tinto’s QIT Madagascar Minerals (QMM) ilmenite mine have worsened water quality and contributed to fish deaths, according to a local advocacy group. The Andrew Lees Trust is calling for independent audits to address these challenges. Rio Tinto has compensated local fisherfolk and commissioned an independent report, which found no conclusive link between its mine activities and fish deaths.
Rio Tinto’s water audits and engagement with LAPFF
LAPFF and advocacy groups argue that Rio Tinto’s water audits do not provide a comprehensive picture of the impact of its operations in both Mongolia and Madagascar. Concerns have also been raised about the company’s practices in Serbia and Arizona regarding its planned mines.
Rio Tinto has engaged with LAPFF and acknowledged in a December report that it can improve its practices at the Madagascar site. However, LAPFF has postponed filing its proposed resolution until April 2025 to allow Rio Tinto time to address these concerns.
The need for effective stewardship and transparency
As Rio Tinto faces increased scrutiny over its water management, the mining giant must demonstrate its commitment to effective stewardship and transparency to regain the trust of investors and lenders. Failure to do so could have significant reputational and financial consequences for the company.
Analyst comment
Negative news: Global mining giant Rio Tinto is facing pressure from socially conscious investors and lenders over its water practices at two mines. Concerns about water management could damage Rio Tinto’s reputation, complicate government approvals for future projects, and result in financial consequences. Rio Tinto received low grades for lack of transparency in disclosing water data. It must demonstrate effective stewardship and transparency to regain trust.
