PUBLIC-PRIVATE PARTNERSHIPS IN LARGE-SCALE MINERAL EXTRACTION AND WATER RESOURCE MANAGEMENT PROJECTS

ABSTRACT

This article examines the role of public-private partnerships (PPP) in implementing large-scale projects in the fields of mineral extraction and water resource management. It analyzes the effectiveness of various PPP models, such as Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), concessions, as well as service and management contracts. Through examples of successful PPP projects, the study demonstrates how collaboration enables investment attraction, technology implementation, and enhancement of service quality. Special attention is given to the environmental and legal aspects affecting project implementation.

АННОТАЦИЯ

В статье исследуется роль государственно-частных партнерств (ГЧП) в реализации крупных проектов в сфере добычи полезных ископаемых и управления водными ресурсами. Анализируется эффективность различных моделей ГЧП, таких как «строительство-эксплуатация-передача» (Build-Operate-Transfer, BOT), «строительство-владение-эксплуатация» (Build-Own-Operate, BOO), концессии, а также сервисные и управленческие контракты. На примерах успешных ГЧП проектов демонстрируется, как сотрудничество позволяет привлекать инвестиции, внедрять современные технологии и улучшать качество предоставляемых услуг. Особое внимание уделено экологическим и правовым аспектам, влияющим на реализацию проектов.

Keywords: public-private partnership (PPP), mineral extraction, water resources, investment, PPP models.

Ключевые слова: государственно-частное партнерство (ГЧП), добыча полезных ископаемых, водные ресурсы, инвестиции, модели ГЧП.

Introduction

Public-Private Partnership (PPP) is a form of long-term collaboration between government agencies and private enterprises. It is based on the allocation of risks, resources, as well as the rights and responsibilities of the parties to implement projects of strategic importance for socio-economic development. PPP involve the engagement of the private sector in creating, financing, operating, and managing infrastructure facilities or providing services traditionally undertaken by the state.

The realization of large-scale infrastructure projects that require substantial capital investment, technological resources, and effective risk management is significantly supported by PPP. These projects are particularly relevant in sectors such as mineral extraction and water resource management, where the alignment of interests and capabilities between public and private entities helps address complex challenges in sustainable development, economic growth, and environmental protection. Global experience shows that successful cooperation between the government and the private sector enables funding and the implementation of modern technologies, optimizes project management, and enhances their social significance and environmental sustainability.

The aim of this article is to analyze the effectiveness and specific characteristics of PPP in major projects related to mineral extraction and water resource management.

Main part. Concepts and models of PPP

The goal of PPP is to leverage private capital and expertise effectively to address socially significant challenges, such as infrastructure development, improvement of service quality, cost optimization, and distribution of financial burden. PPP represent one of the most advanced forms of cooperation between public and private entities, especially relevant for capital-intensive projects in sectors such as mineral extraction and water resource management [1].

The primary concepts of PPP include the long-term nature of the collaboration, private sector participation in financing and operational management, and the allocation of responsibilities and risks between the parties. In typical PPP models, the private sector not only provides financial resources but also brings competencies and experience in project management, ensuring more efficient resource allocation and reduction of operational costs. In turn, the public sector grants access to resources, land, legal support, and guarantees compliance with regulatory requirements, while also ensuring that services and projects meet public standards.

In large infrastructure projects, such as mineral extraction and water resource management, models of PPP vary depending on the level of involvement and responsibility of each party. Each model represents a unique distribution of rights and obligations between the public and private sectors, allowing projects to be tailored to specific needs and conditions. The most common PPP models include Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), concession agreements, service contracts, and management contracts. These models differ in terms of private sector involvement in financing, management, ownership, and operational responsibilities.

In the BOT model, the private company assumes responsibility for the design, construction, and operation of the facility for an agreed period, after which the facility is transferred to the government (fig.1).

Figure 1. BOT model diagram

This model is suitable for projects that require significant investment and a long payback period, such as the construction of water treatment facilities and pipelines. BOT enables the private sector to bear the main investment costs and earn revenue from operation [2]. At the end of the agreement, the government receives a fully functioning facility, which is particularly valuable in the long term. A successful example of BOT implementation is the construction and operation of water treatment plants, where the private sector manages the facility, and ownership is transferred to the government after the concession period.

In the BOO model, the private company not only builds and operates the facility but also retains ownership throughout the operational period [3]. This approach is attractive for projects in the mining sector, where private companies are interested in long-term development of resources. Under the BOO model, the government typically sets regulatory requirements, provides licensing, and offers incentives to encourage investment. This model allows the government to transfer a significant portion of project responsibility to the private company, which then manages all operational aspects. It is particularly advantageous for mineral extraction projects with high risk and extended development timelines.

The concession model is one of the most flexible forms of PPP, where the private sector is granted the right to use and operate a facility or natural resources for a specified period, typically with an obligation to invest in facility improvement and modernization [4]. In concession agreements, the government retains ownership of the facility, but the private company handles financing, management, and revenue collection from operations (fig.2).

Figure 2. Concession model diagram

The concession model is common in countries with high social and environmental standards, where government agencies strictly monitor compliance with environmental and social obligations. In sectors such as water resource management, concessions allow private companies to manage water infrastructure and reduce the burden on public budgets, while maintaining control over the quality and accessibility of services.

A service contract is a form of cooperation in which the government hires a private company to perform specific tasks, such as equipment maintenance or water pipeline infrastructure management. In this case, the private company does not assume obligations for financing or ownership of the facility but ensures professional and efficient management of certain aspects of the project. This model is suitable for short-term tasks that do not require significant investment, allowing the government to leverage private sector expertise to address specific technical issues.

A management contract implies that a private company manages the facility or service provision on behalf of the government, retaining control over operational activities but without ownership rights or financial responsibility. Generally, the government remains the asset owner but transfers management to a private operator to improve efficiency. This PPP model is in demand in water resource management, where experienced operators can ensure better service quality and reduce operational costs.

These PPP models allow governments to approach large projects with flexibility, sharing risks and creating economic incentives for the private sector. The choice of a specific model depends on the project’s objectives, the level of investment required, the social importance of the project, and the need for control over the asset, enabling economic and social needs of each party to be considered and the project to be adapted to local conditions.

Public-private partnerships in mineral extraction

In recent years, the global mineral extraction market has undergone transformations influenced by various factors, including fluctuations in global prices, environmental constraints, a shortage of skilled labor, and technological advancements. In this context, PPP serve as a mechanism that not only attracts investments and distributes risks but also meets increasing environmental and social demands.

One of the key market trends is the growing demand for strategic resources such as rare earth metals, cobalt, lithium, and nickel, essential for producing batteries, electronics, and renewable energy sources. In 2023, global lithium production reached a new peak of 180,000 metric tons, a significant increase from 2010 when global lithium production was approximately 28,100 metric tons [5]. This demand intensifies competition among countries and drives the search for new extraction and processing technologies.

In the USA, as in other countries, there is a growing need to secure domestic production of rare earth metals. According to Statista, total global reserves of rare earth metals are estimated at approximately 110 million tons. A large portion of these reserves is in China, estimated at about 44 million tons. Following China, the countries with the largest reserves of rare earth metals are Vietnam, Russia, and Brazil. The USA also has substantial reserves, estimated at 1,8 million tons.

Another significant challenge is the tightening of environmental standards and regulations governing the extraction industry [6]. In the USA, numerous initiatives have been implemented to improve the sustainability of extraction projects, necessitating significant financial investments in purification, restoration, and land reclamation technologies. This trend is also gaining traction in other nations, rendering PPP an effective model for drawing private investments to execute environmentally sustainable initiatives. Finally, technological progress also affects the market, especially in mining automation and data usage to enhance operational efficiency, necessitating investment in digital infrastructure.

In the USA mineral extraction sector, PPP are primarily used for large-scale projects that require significant investment and risk management. A key example is the partnership for developing the Mountain Pass rare earth metal deposit in California, one of North America’s largest. The USA government provided funding and permits, while MP Materials manages operations and environmental standards. This model enables government oversight without bearing all costs and risks. In 2020, the Department of Defense invested $10 million, and in 2022, awarded MP Materials a $35 million contract to build a facility for processing heavy rare earth elements.

Another instance of PPP in the USA is the lithium extraction and processing initiative in Nevada, where private firms, in collaboration with government bodies, create lithium mines while following strict environmental regulations. In this scenario, the government offers regulatory and infrastructure assistance, whereas the private sector takes care of project funding and administration. In 2024, a proposal for a lithium-boron mining project emerged in the Rhyolite Ridge range. As per the plans from the Bureau of Land Management (BLM), the Rhyolite Ridge mining site will span around 7,166 acres, with 6,369 acres allocated for mining activities and 797 acres set aside for access roads and infrastructure pathways. BLM indicated that throughout the construction stage, the mine is anticipated to hire as many as 500 individuals, with approximately 350 employees during the operational phase. As per BLM, Ioneer aims to produce around $125 million each year in salaries during the project's lifespan and pledges to invest in the community with upcoming training initiatives and scholarship opportunities. The project is anticipated to function for 23 years.

Legal risks in PPP within the mining industry relate to legislative instability, changes in environmental standards, and challenges in regulatory compliance. In countries with developing or unstable legal frameworks, mining projects are vulnerable to contract revisions, the sudden imposition of additional taxes, or stricter environmental regulations, which could negatively impact the project’s economic viability and timelines. In the USA, such risks are often associated with the need to comply with strict federal and local environmental standards, violations of which may lead to significant fines, delays, and project suspension. Additionally, changes in natural resource legislation and public protests against mining may necessitate the revision of existing partnership agreements.

Public-private partnerships in water resource management

Key areas of PPP in the water sector include the modernization of treatment facilities, construction and management of water supply and sewer systems, and the implementation of technologies to reduce water loss and increase energy efficiency.

A successful public-private partnership example in water resource management is Rialto, California’s water and wastewater infrastructure modernization with Veolia North America. This agreement involved Veolia and investment partners upgrading the city's outdated infrastructure, requiring significant investment to ensure reliable, safe services. Veolia took on management, maintenance, and system upgrades to improve water quality and energy efficiency, while also introducing resilient, innovative solutions. Private investment funded the project, easing the city’s budget. In the USA, water PPP financing often includes government subsidies, tax incentives, and long-term loans, such as the $50 billion from the Infrastructure Investment and Jobs Act, and the State Revolving Fund’s $12 billion for sustainable water projects in 2024, reducing local governments' financial strain and drawing long-term private investments.

Environmental and legal aspects play a central role in water resource management partnership projects. Strict EPA and local regulations govern water quality and treatment methods, requiring adherence to emission reduction and waste disposal standards. These regulations compel private operators to invest in purification and monitoring technologies, which often increase project costs but also ensure compliance with modern environmental requirements. PPP also account for potential legislative changes, especially in light of the growing focus on protecting aquatic ecosystems and strengthening water supply safety standards.

Thus, PPP in USA water resource management are an effective tool for addressing both financial and environmental challenges. The involvement of private capital and expertise enables the modernization of water infrastructure, reduction of losses, improvement of water quality, and ensures compliance with high environmental standards.

Challenges and prospects of PPP

Despite making a significant contribution to infrastructure improvement, PPP projects face a number of challenges, such as legal restrictions, financing difficulties, risk allocation, and environmental obligations. Overcoming these challenges could promote the broader use of PPP in the future, particularly in sectors like mineral extraction and water resource management (table 1).

Table 1.

Key challenges and prospects for PPP development [7, 8]

The analysis of challenges and prospects for PPP development shows that effectively overcoming existing barriers requires a comprehensive approach. Improving the legal framework and creating mechanisms for fair risk distribution will allow for a broader and more effective use of PPP in implementing socially significant projects. Financial support through subsidies, low-interest loans, and tax incentives will reduce the budgetary burden and increase the attractiveness of PPP for private companies.

From an environmental perspective, it is essential to develop and implement safe technologies to meet modern sustainability standards. Involving local communities in the planning and implementation process can enhance their support and trust, minimizing social conflicts. The prospects for PPP development also include strengthening the role of the government in project coordination, which can contribute to greater transparency and efficiency in infrastructure initiatives.

Conclusion

A promising approach to addressing challenges that require substantial investment, complex project management, and effective risk allocation is represented by PPP. These partnerships combine the resources and expertise of the public and private sectors, facilitating the implementation of large infrastructure projects, especially in areas such as mineral extraction and water supply. Successful examples of PPP demonstrate their capacity to attract investment, enhance service quality, and introduce modern technologies, which is particularly valuable given the constraints of public budgets. Despite their significant advantages, PPP projects also face challenges, including legal, financial, and environmental risks. For the successful development and scaling of PPP, it is essential to improve regulatory frameworks, ensure transparent risk-sharing, and create conditions that encourage sustainable private investment in socially significant initiatives.

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