The potential development of an El Niño in 2019 poses a risk of costs rising among miners relying on hydroelectric power generation in key Latin American markets, according to new Fitch Solutions industry analysis report released this week.
Most state meteorological departments are warning of risks of the El Niño event in 2019, and on Thursday, the U.S government weather forecaster raised the probability of an El Niño weather pattern emerging from 60 to 65%.
El Niño, a warming of ocean surface temperatures in the eastern and central Pacific that typically occurs every few years, last occurred around 2015 to 2016. Depending on the severity of the phenomenon, countries in the northern part of South America are likely to experience lower rainfall as a result.
El Niño could impact countries such as Brazil, Colombia, and Ecuador that heavily rely on hydroelectric plants to generate. The potential return of El Niño in 2019 poses downside risks to mining production and each respective country’s mining industry value, Fitch reports.
Fitch cited examples where Minsur’s cash costs rose at its Brazilian mine Piting, caused by a lack of rain in Q118. And Kinross Gold was also impacted by a similar event in 2017, when lower than expected rainfall reduced Q317’s y-o-y production at the Paracatu mine by 58% to 46koz that quarter.
Read the full report here.