Samarco disaster: are we hearing the peoples' voices?Published by MAC on 2015-11-20
Source: AAP, AFP, BBC, ABC News, Sydney Morning Herald (2015-11-19)
It's understandable that most media treatment of the November 5 tailings dams catastrophe at the Samarco mine in Brazil has tried to address six issues:
- the toll in lives lost;
- the culpability of the mine management in not preventing the disaster;
- the neglect of the owners (BHP Billiton and Vale) to forsee it;
- the cost to clean up and rehabilitate the vast area that's been damaged;
- who should foot the bill for doing so;
- the prospects of re-opening the mine.
That's as it should be.
But what's glaringly absent to date is any real insight into what the hundreds of families whose livelihoods have been shattered or who have been bereaved - in particular the workers - have had to endure, and what they demand should now happen. (Having said that Greenpeace Brazil have produced a short video which goes some way to redressing this imbalance - see https://www.youtube.com/watch?v=_HKnOVLpTZQ).
In a modest attempt to redress this imbalance, the update below leads off with a statement by the secretary of the Samarco mineworkers union, declaring that none of his members now feel safe working for Vale - and this is true throughout the Minas Gerais iron ore belt.
He puts this in large part down to the fact that: "[N]early 400 mine workers were dismissed in 2015 from Vale's mining complex of Mariana, even as it squeezed more productivity from the workforce to offset the drop in revenue from iron ore sales".
Among the civil protests that have erupted over the past fortnight, perhaps the most significant is one by the indigenous Krenak community, severely impacted by an unstoppable wave of mud and water, as it makes way to the Atlantic Ocean, which has rendered the Rio Doce river unusable. In response they have blocked the railroad that Vale uses to export iron ore to overseas markets - causing the company to temporarily close it down.
Doubtless there will many more such citizen actions as the initial shock of the disaster turns into anger, enhanced by fears that a similar event may re-occur (especially as further rains have been reported as hitting the area); and that neither the government nor the companies have the will or capacity to cope.
BHP Billiton: pussyfooting?
In this regard, statements made by BHP Billiton at this week's Australian AGM, give little cause for optimism. While it's promised a mere US$260 million as an "emergency" response to facilitate "community rebuilding", the company has made no further commitment to meeting the costs of clean-up and rehabilitation - estimated by one Brazlian lawyer at between US$2.5 billion and US$3.6 billion.
The company's chairperson, Jac Nasser, was quick to vaunt BHP Billiton's "good old fashioned Aussie values of compassion and fairness and openness" at this week's Australian AGM. But he appeared as much - if not more - concerned to assure shareholders they'd get a generous dividend next February, thanks to increased productivity. (Did anyone think to point out that it was precisely its hubristic rush to dig up as much iron ore as possible that must have contributed to a decline in safety standards?).
And how distasteful - if not hypocritical - that BHP Billiton's Chief Executive, Andrew Mackenzie, should thank Qantas airlines for getting him so swiftly to Brazi "to assess the damage" - when 600 survivors of the disaster were having to make-do with makeshift accomodation near the site - not to mention many others caught in the waste tsunami as it cascaded hundreds of kilometres further downstream.
As we reported last week, the specific causes of the Samarco dams failure hasn't yet been determined. Nonetheless a 2013 Brazilian academic report had forewarned of the tailings ponds design faults - and this was apparently completely ignored by both BHP Billiton and Vale [See: Brazil: who should take main blame for the Samarco mining tsunami?].
To mine or not to mine?
Meanwhile, a number of experts have supplied opinions on what should have been done to minimise the likeihood of the collapses - largely opting for drystacking of the tailings, despite its much greater cost. Even here there's no consensus. (Some authorities advocate covering tailings with water, as at the Samarco mine, in order to avert the dangers of acid-rock leaching into the environment).
But, surely, the fundamental issue that needs to be addressed is not how to engineer "better" methods of tailings containment, in Brazil or anywhere else.
It's virtually inevitable that Samarco-type disasters will happen, whatever steps are taken to avert them. As noted by Brazil's Metabase union, this danger is measurably compounded by a concerted over-production of iron ore by Vale and BHP Billiton, purely for their commercial benefit.
Whether workers and other victims of this particular catastrophe will demand that Samarco be dissolved, and any new mining upon their land be prohibited, is not for us to say.
What we can assert is that they, and they alone, have the right to make such decisions.
If they do want to close down mining, then BHP and Vale have an absolute moral duty, not just to clean up the mess for which they are responsible, but also fully fund whatever is needed to enable a truly "just transition" to alternative employent and genuinely sustainable livelihoods.
[Comment by Nostromo Research]
Vale workers fear for safety after Brazil's Samarco disaster
By Marta Nogueira
19 November 2015
MARIANA, Brazil - Workers at Brazilian iron ore miner Vale SA fear for their safety after the Samarco dam burst in the town of Mariana, where the company was reducing the number of employees because of weak ore prices, despite its push for output and complaints about safety.
A tailings dam at Samarco, a joint iron ore venture of mining majors BHP Billiton and Vale SA, unleashed 40 million cubic meters of mud on the valley below on Nov. 5, killing 11 people with 12 still missing.
For Ronilton Condessa, secretary of the Metabase labor union in Mariana, where Samarco is the main employer, in Minas Gerais state's iron belt, the dam's collapse is evidence of the risks the company is taking with its people.
"Now I feel that 100 percent of the workers at Vale are not safe on the job, and the main reason is that they knew the risk but thought it wouldn't happen," Condessa said.
He told Reuters that nearly 400 mine workers were dismissed in 2015 from Vale's mining complex of Mariana, even as it squeezed more productivity from the workforce to offset the drop in revenue from iron ore sales to the global steel industry.
Condessa said workers at Vale are emotionally shaken in Mariana. The company unearths 10 percent of its total iron output of roughly 340 million tonnes a year there.
Vale has four mines in the Mariana Complex around Samarco: the Algeria, Fabrica Nova, Vazendao and Timbopeba mines, where it employs 3,000 people. Metabase represents workers at the first three of those mines.
Vale told Reuters in a note that it is keeping its workers informed about its response to the disaster and that it has been trying to ease their concerns.
The company also said it was reviewing the safety conditions at 115 of its main dams and no concerns have arisen so far.
Meanwhile, Vale has been pushing productivity and output to record levels in the face of sagging prices, as it is fighting for the No. 1 slot in iron ore against its Australian rivals BHP and Rio Tinto.
"Hiring is happening only in exceptional cases," Condessa said. He said union members have complained about undue pressure to ramp up production.
(Writing by Reese Ewing; editing by Grant McCool)
Krenak Indian tribe blocks rail line in protest at BHP Billiton's Brazil disaster
by Steve Yolen
18 November 2015
Anger in the Brazilian city of Mariana about the Samarco tailings dam disaster is turning to action, with an Indian tribe affected by the tragedy blocking a key iron ore railroad line owned by Vale.
Though the 650 or so survivors from the smashed district of Bento Rodrigues of Mariana have been quickly and peaceably resettled in hotels and have been told they will be relocated to new homes "soon", anger is growing and public protests are being called as the red-tinged iron ore slurry continues its polluting journey to the Atlantic Ocean about 500 kilometres away along one of Brazil's most important rivers, the Rio Doce.
Many of the 350 members of the Krenak tribe who live on the banks of the Rio Doce in Minas Gerais, hundreds of kilometres downstream from the disaster site, have put on war paint and camped out on the Vale do Rio Doce railroad line that passes near their village, leading Vale to shut down iron ore shipments and other train traffic until the problem is resolved.
According to the G1 news site, Krenak chief Geovani Krevak said the murky, red-tinged slurry clogging the river water, their only source of potable water, had been undrinkable for a week. "Like us, now the trees and the animals also don't have any water. The river dies, we all die."
Samarco said the Krenak tribe had been given 8000 litres of mineral water, 140 water cisterns and a water truck to help them get through the situation. For its part, Vale said it was negotiating with the Krenak to re-establish ore shipments on the line.
Meanwhile, two public demonstrations were scheduled for Monday in front of Vale's offices through social networking: one at the Brazilian mining company's Rio de Janeiro worldwide headquarters, and another in front of the regional office in the capital of Espirito Santo state, Vitoria. On a Facebook page created for the protest, organisers said, "It wasn't an accident. Vale must pay."
Elsewhere, in the Rio Doce river town of Periquito in Espirito Santo, about 300 kilometres from the burst dam, residents also took to the streets for several hours on Sunday to protest about the lack of potable water. About 200 people blocked traffic on a federal highway in a non-violent demonstration.
Federal deputy Leonardo Quintao, the Brazilian lawmaker who is heading up the committee that is preparing a new mining bill to introduce into the federal Congress, reported on Monday that Samarco's US$1 billion ($1.4 billion) insurance policy would be inadequate to cover the expected overall damages from the catastrophic dam failure.
The total cost, according to specialists he had consulted, should be between $US2.5 billion and $US3.6 billion, Estadao news agency reported.
Mr Quintao – the first official to venture an overall figure for clean-up and reparations from the November 5 twin-dam failure and subsequent mudslide – announced the estimate during a special meeting in Belo Horizonte, the capital of the state where the accident occurred.
He also said he would seek to require that Samarco, and its shareholders BHP and Vale, set aside a provision expense on their books in the current fiscal year (2015), to be spent in 2016 for environmental clean-up and victim reparation purposes.
The new mining code has been under discussion by Congress since 2013 and now is expected to come down tougher on mining companies. Mr Quintao said one of the changes contemplated would be to "add the obligation to take out insurance protection against general, and not only environmental, damages".
Also on Monday, the federal and Minas Gerais prosecutors offices announced the signing of a preliminary accord with Samarco that requires the mining company to establish an escrow account of $US262 million to cover emergency and indemnification expenses.
The funds will be held in an account in Samarco's name and must be quickly available to pay out claims stemming from the tragedy. An independent auditing firm chosen by government prosecutors will monitor the payments.
Samarco also signed another agreement with the government authorities "to protect the right of the populations that have been affected". This accord requires that the company must present a plan for mitigating the environmental and social consequences of the disaster in cities along the Rio Doce River, including retaining walls, animal rescues and water supplies.
BHP faces billions in compensation after mine dam collapse, say protesters
Campaigners at annual general meeting say BHP has ‘long history with problems with tailings’ and should prepare to pay billions of dollars in compensation
Australian Associated Press
19 November 2015
BHP Billiton should prepare to pay billions of dollars in compensation for the deadly dam disaster in Brazil, campaigners picketing the mining company’s annual general meeting have said.
Charles Roche, from the Mineral Policy Institute, said the bursting of a dam containing waste known as tailings from an iron ore mine in south-east Brazil on 5 November, unleashing a torrent of sludge more than 400km downstream, was not an isolated incident.
The multinational had to change the way it operated to ensure the failure at its co-owned Samarco mine was not repeated.
“BHP has a long history with problems with tailings,” Roche said during a protest outside the company’s annual general meeting in Perth on Thursday. “This doesn’t compare well with their stated policy not to dump tailings in the river.”
Greenpeace estimated the overall cleanup and compensation would be in the billions of dollars.
The chairman of BHP, Jac Nasser, told the meeting the company was committed to finding out why the dam collapsed, killing at least 11 people. Eight people are missing.
“I commit to you that we will find out what went wrong,” he said.
The company had brought forward the next review of all tailings dams in which BHP has an interest. There are about 3000 around the world.
It would release the findings of an external investigation into the incident once it was completed.
“We will learn from these tragic events and do all we can to never see them repeated,” Nasser said.
Most of the nearby village of Bento Rodrigues was destroyed in the disaster and drinking water in the area was contaminated. The Brazilian authorities declared a state of emergency in more than 200 towns affected. About 500km of river in the south-eastern state of Minas Gerais and the neighbouring state of Espirito Santo was polluted, destroying crops and killing fish.
The mine is jointly owned by BHP, the world’s largest mining firm, and Vale.
Despite the Samarco woes, a plunging stock market value and the falling price of many of its main commodities such as coal and iron ore, BHP committed to its controversial progressive dividend policy.
The chief executive, Andrew Mackenzie, told the meeting it was an extraordinarily difficult time for BHP but the company remained strong.
“Through productivity gains, we have maintained the ability to pay the progressive dividend, we have increased our capacity to grow your company and we have secured our strong balance sheet which we will never put at risk,” Mackenzie said.
Everyone at the company was devastated by the tragedy and the company would support the region in the long term.
“We will fully play our part in helping Samarco reconstruct homes, community and spirit,” he said. “All of us recommit to making your company safer and our communities stronger.”
Nasser was disappointed with the company’s share price, which has fallen to a 10-year low, but said it was difficult to give a definitive view of where the global economy was heading as major economies went through transition.
The company believed global growth would return to healthier levels but would depend on China successfully moving to a consumption and services economy, recovery of growth in developing nations and a healthy US economy.
Shares in BHP were up 2% at $20.22 on the Australian stock market on Thursday.
Samarco mine tragedy: BHP 'deeply sorry' for Brazil dam disaster, pledges review of operations
By Kathryn Diss
19 November 2015
BHP Billiton chairman Jac Nasser has told shareholders in Perth the company is "deeply sorry" to all the people affected by the Samarco mine tragedy in Brazil and pledged to review all of its operations around the globe.
The tailings dam at the Samarco mine burst earlier this month, unleashing a flood of mud on the community of Bento Rodrigues.
It killed 11 people, displaced hundreds and contaminated the region's main water source.
Speaking to shareholders at the BHP's annual general meeting, Mr Nasser said the company believed eight other people were still missing.
"We are deeply sorry for all those who have been impacted by this tragedy, in particular for the friends and families of those who died and those who are missing, as well as those who have lost their homes and feel uncertain about the future," Mr Nasser said.
He said BHP had now committed $363 million to rebuild following the tragedy.
Disaster puts BHP Billiton under strain
The Brazilian dam collapse caps a year that BHP Billiton investors might rather forget, with shares sliding from almost $45 in 2011 to under $20 this week, Neal Woolrich writes.
"The emergency response team evacuated over 600 people and provided them with temporary accommodation," Mr Nasser said.
"Samarco has provided affected communities with water and food."
Mr Nasser dodged a question on whether the company will maintain its progressive dividend policy, saying he could ensure the company would be run responsibly.
A small group of protesters gathered outside the meeting asking BHP to provide answers over the disaster.
Sally Rugg from GetUp said BHP had plenty to answer for.
"BHP have some really serious questions to answer about this enormous mining disaster, one of the biggest environmental disaster the world has ever seen," she said.
"Why was nothing done in 2013 when a report was put to Samarco about the dam's instability?
"Why would the dam not have an alarm system that would have warned people in their homes to evacuate before they were hit with 60 million cubic metres of waste.
"It's not good enough."
Nikola Casule from Greenpeace said the organisation had representatives on the ground in Brazil.
"Greenpeace is working actively with local communities affected by this disaster, Greenpeace Brazil is on the ground right now, documenting what's happening and bearing witness," Mr Casule said.
"We are working closely with those communities to get the justice that they deserve, the amount of compensation are clearly far less than what is required."
In response to Ms Rugg's comments, BHP said it understands from Vale — the co-owner in the Samarco mine — that the inspections it undertook indicate the waste rock pile is intact and has not failed into the Fundao Dam.
Greenpeace says BHP Billiton's Brazil compensation not good enough
Sydney Morning Herald
19 November 2015
BHP Billiton chief executive Andrew Mackenzie held back tears as he talked about the disaster in Brazil that has killed 11 people and dominated proceedings at the miner's annual meeting in Perth on Thursday.
"I travelled to the region last week and what I witnessed on site and around the community was truly heartbreaking," he told shareholders.
His comments came after Greenpeace Australia, Get Up! and the Mineral Policy Institute staged a small protest outside the meeting and called on BHP to do more to clean up the disaster, on November 5, when a tailings dam failed at its Samarco joint venture that triggered a toxic mudslide that has spread 440 kilometres.
Greenpeace Australia climate and energy campaigner Nikola Casule said the clean-up and compensation bill could be in the "billions of dollars", based on previous environmental disasters around the world.
"The amounts of compensation that has been discussed so far are clearly far less than required," Mr Casule said.
"This toxic waste is now making its way down the Doce River and will reach the Atlantic ocean fairly soon," he said.
"It is killing fish and other wildlife as it goes along, and destroying the water supply for decades to come. This is going to be a long-term clean-up and the amounts that are being talked about now are far from sufficient."
Mr Casule later addressed the meeting during question time and asked for a minute's silence from the room to remember the victims. BHP chairman Jac Nasser agreed.
BHP has described its initial $US260 million ($366 million) emergency fund for community support and rebuilding as its "immediate response" and is continuing to investigate what caused the disaster and the extent of the damage.
The disaster has affected 11 villages and has pushed sludge down Brazil's Doce River.
More than 600 people have lost their homes. Samarco's operating licence has been suspended and employees are on paid leave.
It is still not known what the cause of the dam rupture was. Eight people are still missing.
BHP and Vale have commissioned an external investigation and stated BHP said it would publicly release the findings. BHP has also brought forward a review of all its tailings dams.
About 400 shareholders attended the meeting, which was dominated by questions about the extent of the disaster and what BHP was doing around the world to improve safety, and how it disposed of mine waste.
At a press conference following the meeting, Mr Mackenzie did not want to speculate on the cost of the clean-up and said it could be a number of months before its investigation was complete.
"I think we are talking months," Mr Mackenzie said.
"It will be longer than a few weeks, that's for sure."
He said it was too early to determine how much it would cost to repair the damage.
Mr Mackenzie rejected claims BHP had walked away from the Ok Tedi mine following an environmental disaster during the 1980s and 1990s, saying the miner had invested heavily in the aftermath, including a sustainable development fund.
Difficult to determine
He said walking away from the Samarco operation had "not entered my mind".
Mr Nasser said the board had discussed the potential clean-up cost, but it was difficult to determine until it had a true understanding of the situation.
He said BHP's response would be one of "good old fashioned Aussie values of compassion and fairness and openness".
"You can cloud it up with a whole bunch of words and legal interpretations," Mr Nasser said.
"In the end we will find out what went wrong and we will fix the environment so that the communities can get back to having a proper livelihood in the areas that they were in," he said.
"It's as simple as that."
Just a dozen protesters turned up about 10 minutes before a pre-arranged press conference by Get Up!, Greenpeace and the Mineral Policy Institute prior to BHP's meeting.
They held banners reading "BHP destroying the future". They chanted "BHP big horrible polluters" and "BHP not good enough" as shareholders walked past.
Get UP! representative Sally Rugg described BHP's apology as a "token".
"BHP's token apology and feeble amount of compensation just reeks of a company trying to fend off a PR disaster," Ms Rugg said.
"It's really not good enough. BHP is one of the biggest mining companies in the world. From what it looks like now they let this disaster happen and they are not doing enough to make amends."
Mr Mackenzie also defended Vale's role in the disaster.
"Vale have been invaluable to me personally in providing the resources on the ground so I could get to see a lot more of what was going on [in the area]," he said.
He also thanked Qantas for getting him to Brazil quickly to assess the damage last week.
"I think team Australia has been at my back, which I really liked," he said.
BHP Billiton says next word on dividend in February
By James Regan
19 November 2015
- BHP Billiton says focus on balance sheet
- No indication on dividend until February
- Moment of silence with Greenpeace over Brazil disaster
PERTH, Nov 19 Mining giant BHP Billiton will update the market on its future dividend policy in February, chairman Jac Nasser said on Thursday, at it battles falling prices for everything from iron ore to copper.
BHP's progressive dividend policy, under which the company promises never to cut dividends, is under pressure, with investors fearing it will have to borrow heavily to fund the payout as the commodity downturn slashes earnings.
Speaking at the company's annual shareholder meeting, Nasser and Chief Executive Andrew Mackenzie said maintaining a strong balance sheet would be BHP's first priority, but pointed to the savings it had made from improved productivity.
"We don't have to make any decisions on what the dividend is until next February," when fiscal first half results are released, Nasser told reporters.
"The balance sheet has to be strong 'A' through the cycle," he added. "Obviously debt is part of that equation."
Mackenzie said BHP's efforts to improve productivity meant it could reduce capital spending and invest less to generate future growth, "perhaps 50 percent less".
"That of course provides us with a bit more cash which then goes into the dividend discussion," he said.
UBS is forecasting a near 50 percent fall in BHP's net earnings to $3.3 billion in 2015/16, about half the $6.49 billion the company paid out last year on dividends, while Goldman Sachs has said BHP needs to cut its dividend in half.
Facing a potential multi-billion dollar bill to help clean up a mud slide disaster that killed at least 11 people on Nov. 5 at the company's Samarco joint venture in Brazil, Mackenzie said he was determined to see the operation resume some day and had no plans to exit the venture.
"There should be no doubt that our desire is to get it back to being a good business again and we are committed very much to the long term," he said.
In 1996, BHP agreed to a $400-million out-of-court settlement for land holders near its Ok Tedi mine in Papua New Guinea after a tailings dam disaster and five years later divested its majority interest.
Earlier at the meeting, Nasser agreed to a request by Greenpeace for a moment's silence in respect for those affected by the tragedy.
BHP shares closed up 3 percent on Thursday at A$20.42, after hitting a seven-year low in the previous session.
Iron ore, BHP's main source of income, was sitting at $46.35 a tonne .IO62-CNI=SI, down from highs above $180 in 2011, while copper was veering towards a six-year low. Oil and coal are also weaker. (Additional reporting by Sonali Paul; Editing by Richard Pullin)
BHP Billiton cancels staff Christmas parties
Syndey Morning Herald
19 November 2015
The world's largest miner, BHP Billiton, has cancelled more than a dozen Christmas parties across its iron ore operations as it manages an environmental disaster caused by a dam collapse at its Samarco joint venture in Brazil.
A BHP Billiton iron ore spokeswoman confirmed all corporate and mine site Christmas parties had been cancelled. It included the Christmas function planned for its Melbourne staff.
"Given the recent tragic events at the Samarco operations in Brazil, we have decided it would not be appropriate to continue with the end of year functions," the spokeswoman said.
The miner is investigating options to donate any food ordered and paid for that will no longer be needed.
It has been a challenging year for iron ore miners across the state, who have been under pressure to slash costs to counter crashing iron ore prices.
Iron ore prices fell to their lowest price since July earlier this week, sinking to $US45.58 per tonne.
Rio Tinto has cut Christmas hampers for staff but is hosting its Christmas functions at its various mine sites and a family event in Perth.
Fortescue Metals Group is hosting three functions in Perth for its staff and their partners as well as celebrating at some of its regional operations.
BHP Billiton chairman Jac Nasser and chief executive Andrew Mackenzie will front investors in Perth on Thursday for what is expected to be a heated and emotional annual meeting.
Greenpeace and Get Up activists are planning to protest outside the meeting. Greenpeace also plans to question BHP during the meeting.
Mr Nasser and Mr Mackenzie are facing re-election alongside nine other directors.
The failure of the tailings dam at Samarco's Brazilian mine on November 5 has caused a deadly mudslide that has so far spread 440 kilometres, killed nine people, affected 11 villages, and has pushed sludge down Brazil's Doce river.
More than 600 people have lost their homes. Samarco's operating licence has been suspended and employees are on paid leave.
It is still not known what the cause of the dam rupture was.
Brazilian officials have called the contamination the country's worst-ever environmental disaster.
BHP and Vale each hold a 50 per cent stake in Samarco.
Mr Mackenzie has repeatedly offered his sympathies to families and friends impacted by the disaster.
"I want to reemphasise that we are deeply sorry to everyone who has and will suffer from this terrible tragedy," he said on Tuesday.
BHP Billiton shareholder meeting draws protestors
Greenpeace Brazil, Earthworks, Greenpeace Australia Press Release
19 November 2015
At BHP Billiton shareholder meeting, protesters demand justice for Brazilian mining disaster victims
Despite forewarning & global trend of similar catastrophes, two of world’s largest mining companies didn’t act to prevent disaster
Perth, Australia – Greenpeace protesters today disrupted BHP Billiton’s Annual General Meeting (AGM) to demand justice for the thousands of victims of the mining waste spill that destroyed the historic Brazilian town of Mariana in Minas Gerais state. The Germano iron mine, whose tailings (waste) dam failed on November 5th, is operated by Samarco - a joint venture co-owned by Australia-based BHP Billiton, the world’s largest mining company, and Brazil-based Vale S.A, one of the world’s five largest mining companies.
About 40 Greenpeace and GetUp activists held banners reading “BHP: Mud and Profit” and “#justiceforMariana” before holding a media conference outside the AGM. Greenpeace campaigner Dr. Nikola Casule then attended the AGM and questioned the Board about the disaster.
Nine people are confirmed dead and at least nineteen others are missing; an estimated 500 have been displaced. Enough waste – including toxic metals like arsenic -- spilled into the Doce River watershed to fill 25,000 Olympic swimming pools. Since November 5th, the waste has been slowly working its way downstream, contaminating the drinking water of hundreds of thousands of people and submerging protected forests and habitats. Experts predict that it will take the ecosystem decades to recover.
“BHP and Vale’s mining disaster are ruining the lives of thousands — fishermen, ranchers, city-dwellers and the Krenak Indigenous people,” said Ricardo Baitelo, Climate and Energy campaign leader for Greenpeace Brazil. He continued, “The tragedy will spread over 500 kilometers as the mining sludge makes its way towards the Atlantic coast.”
The Brazilian federal government neither required, nor did Samarco prepare, an adequate disaster response plan nor financial assurance to clean up a spill that experts predict will cost US$1 billion to clean up.
BHP and Vale were warned in 2013 that the Germano mine waste dams could failunder typical rainfall conditions.The expert study by Instituto Pristino was commissioned by the Minas Gerais prosecutor’s office.
“If BHP Billiton knew there were design flaws in the tailing dams, why did operations proceed?” asked Greenpeace campaigner Dr. Nikola Casule. “BHP and Vale must cover the full costs of clean-up and reclamation of the Rio Doce, which is the main hydrographic basin in Southeastern Brazil.”
The Samarco mine waste spill is the third catastrophic tailings dam failure in the last 15 months, following Mount Polley in Canada and Buenavista del Cobre in Mexico, both in 2014. An independent review of the Mount Polley failure published in January 2015 found that the mining waste disposal technique used by Mount Polley (and also by the Germano mine), is inherently dangerous and should no longer be used. In July 2015, a statistical analysis of catastrophic mine waste failures since 1910 by the US Center for Science in Public Participation determined that such failures are increasing in frequency and severity as a result of modern mining techniques, predicting 11 such catastrophes this decade that will cost US$6 billion.
“The Samarco mining waste catastrophe is just the latest in a tragic mining industry trend,” said Earthworks’ mining program director Payal Sampat. She continued, “How many people will have to die, how many rivers will be polluted, how many billions of dollars will we spend trying to recover from these disasters before regulators and investors demand that mining companies finally change their ways?”
“BHP must pay for a thorough and independent investigation of how this happened and pay proper compensation for this environmental crime,” said Dr. Casule. “The company must also take comprehensive action to ensure that all its facilities globally are safe, properly maintained and operated, so they do not pose a threat to the community and the environment”.
--- END ---
For more information:
* Frequently Asked Questions about the BHP Billiton/Vale S.A. mining waste spill: http://bit.ly/FAQ-SamarcoSpill
* Images & Video of Germano spill:
* Instituto Pristino report warning BHP and Vale of tailings dam failure risk:
* Original in Portuguese: http://bit.ly/InstitutoPristinoReport-Portuguese
* Rough English translation: http://bit.ly/PristinoReport-English
* Independent Expert Engineering Investigation and Review - Mount Polley Tailings Storage Facility Breach: https://www.mountpolleyreviewpanel.ca
* The Risk, Public Liability, and Economics of Tailings Storage Facility Failures: http://bit.ly/CSP2-TailingsDamFailureAnalysis
* Bruno Weis, GP Brazil Comms Coordinator, +55 11 30351167, bruno.weis[at]greenpeace.org
* Nikola Casule, GP Australia campaigner +61 428 769 307
* Louise Fraser, GP Australia comms officer +61 438 993 068, lfraser[at]greenpeace.org
* Payal Sampat, Earthworks (San Francisco), +1-202-247-1180, psampat[at]earthworksaction.org
* Alan Septoff, Earthworks (Washington, D.C.), +1-202-887-1872 x105, aseptoff[at]earthworksaction.org
* Greenpeace International Press Desk, +31 (0)20 718 2470 (available 24 hours), pressdesk.int[at]greenpeace.org
Greenpeace is an independent campaigning organisation that uses non-violent direct action to expose global environmental problems and to force solutions which are essential to a green and peaceful future.
Earthworks is a nonprofit organization dedicated to protecting communities and the environment from the adverse impacts of mineral and energy development while promoting sustainable solutions.
Lawyer behind $3.6b Samarco class action wants to avoid taxpayer clean-up bill
by Steve Yollen
19 November 2015
The Brazilian tax lawyer who filed a R$10 billion ($3.6 billion) class action suit in Minas Gerais state court against the BHP Billiton-owned Samarco Mineracao says his lawsuit is meant to ensure taxpayers do not bear the sole responsibility of paying for damages caused by its recent catastrophic dam failure.
Pedro Eduardo Pinheiro Silva, principal of the Pinheiro Silva Advogados Associados law firm in Vitoria da Conquista, Bahia state, told The Australian Financial Review the suit was aimed only at Samarco, rather than BHP and Brazilian mining giant Vale, which jointly own the mine.
"It was filed against Samarco. In our view there is no legal reason to serve as the basis of filing of a lawsuit against BHP and Vale."
However, it is likely BHP will incur some of the costs of any suit. BHP chairman Jac Nasser said at the company's annual meeting on Thursday the company was "100 per cent committed to do everything we can to support Samarco and make this right".
Samarco's tailings dam failure on November 5 caused a wall of mud and mining waste to smash into a small town of 650 people and is affecting more than a dozen riverside towns and cities on its way to the Atlantic Ocean 500 kilometres downstream, which it was expected to reach by Friday.
Eleven people are confirmed dead and eight are still missing in the wake of the catastrophe, considered the worst mining tailings dam disaster ever because of the scope of the environmental damage being caused on the giant mudslide's messy journey to the sea.
Clean-up and reparation damages were estimated on Monday by a Brazilian lawmaker investigating the disaster at between $US2.5 billion and $US3.6 billion ($3.52 billion and $5.06 billion).
The class action lawsuit filed by Silva could raise the financial stakes for Samarco and its owners even further, although the lawyer said he did not want the Brazilian mining company to ultimately fail.
"We believe that responsibility should be imputed to the company, but preserving it without harming its activities and, hence, the jobs and funds generated on behalf of the country. This, incidentally, seems to be the feeling of the populations involved," Mr Silva said.
"The extent of the environmental damage and the collective non-material moral damages involved has led to the need for filing the civil suit, so that the courts can determine the compensation due to the Brazilian society, either because of ecological damage or the suffering caused to thousands of affected people."
Mr Silva said the suit had been filed on behalf of a small local non-government organisation, Defesa de Interesses Coletivos por Associacao (DICA), and it could be joined by other similar organisations that represent civil interests in the region.
The suit did not request compensation be paid to the DICA, he said. Any indemnities received would go into a federal reparations fund.
The difference between his class action suit and one being filed by the federal environmental agency IBAMA, he said, was that his was for civil non-material damages, whereas IBAMA was seeking punitive damages for the clean-up of the disaster.
"Besides being necessary, the law does not require there be a waiting period any time after the occurrence of the damage before a civil suit can be filed," Mr Silva said.
Amount of Compensation
The eventual amount of compensation "should be the subject of a technical study by experts, to be conducted during the discovery phase of the civil suit", he said.
The lawsuit was also designed to require Samarco "to conduct an environmental recovery plan that will be determined by the government authorities", he said.
This amount would be included in the R$10 billion value of the case.
Mine disasters show real cost of cheap waste solutions
‘When economics become the primary driver, we’re going to see more safety-related incidents,’ Chambers says.
18 November 2015
As miners globally review the way they store waste in the wake of another horrific dam spill, the solution may be as simple as it is dramatic: spend a lot more.
Images of sludge spewing into towns and rivers could be a thing of the past if mines used different types of storage such as removing water or building on more stable ground. While that can be as much as ten times costlier for companies already squeezed by slumping prices, the cost is much higher when things go wrong.
The cleanup bill for the November 5 spill at the Samarco iron-ore venture in Brazil, owned by BHP Billiton and Vale, probably will exceed $1 billion, on top of years of lost output, Deutsche Bank said.
“A failure is a lot more expensive than doing it right,” said Dirk van Zyl, professor of mining engineering at the University of British Columbia and one of three experts on a panel into a dam spill in Canada last year.
The Samarco breach, which propelled about 13 billion gallons of mud into communities below, comes a year after Imperial Metals Corporation’s Mount Polley mine in Canada also dumped billions of gallons into lakes and rivers. A common trait in the two cases was the fluidity of the waste.
Samarco says its dams were deemed safe in a July inspection and that it’s too early to determine reasons for the spill. On Monday, BHP chief executive officer Andrew Mackenzie said the company is “carrying out a thorough review of all of our dam facilities of scale.” On the same day, Vale said it’s open to improvements, even after concluding that its other installations, which use state-of-the-art safety practices, were fully compliant.
Tailings are the ground rock and effluents left over after milling. And when it comes to storage, the dryer the better, van Zyl said in a telephone interview.
Dry-stack tailings facilities, used in Chile where earthquakes are common, can cost ten times more than so-called upstream ponds, in which discharged tailings become the foundation for future embankment raises, van Zyl said. The next best option, building storage on virgin ground and limiting the amount of water, could cost twice as much, he said.
Still, those higher investment and operating costs pale next to the expenses associated with a catastrophic accident.
“When you allow economics to be the primary driver we’re going to see more safety-related incidents, and that’s what’s happening,” said David Chambers, president of the Center for Science in Public Participation, a non-profit group based in Bozeman, Montana.
When asked if any of the dams used upstream construction, Samarco’s owners * referred questions to Samarco, which didn’t provide a response. Alberto Sayao, a civil engineering professor at the Catholic University in Rio de Janeiro and a board member of non-governmental organisation Brazilian Dam Committee, said the dam that burst, Fundao, was an “upstream heightening” design.
At Mount Polley, the upper portion of the dam was upstream, although the spill was attributed mainly to a layer of clay under one section, Chambers said. Imperial’s press department in Vancouver didn’t respond to requests for comment.
Whatever the cause, there’s no doubt the damage from both breaches would have been much less if the tailings had been less fluid, Chambers said. He co-authored a study, still to be peer-reviewed, which predicts the number of catastrophic failures will increase as miners are tempted to build larger upstream ponds in order to cut costs.
Regulators need to ban upstream construction and “wet closures” of old tailings ponds, in which the water is allowed to remain, Chambers said. Asked whether the incident in Brazil shows miners need a new way to store tailings, the emergency response coordinator of environment agency Ibama said “it needs to be evaluated,” without elaborating.
The mandate of a panel into the Mount Polley case was to ensure that future large-scale tailings disasters would be impossible in Canada, rather than just to lower the probability, according to Norbert Morgenstern, the panel’s chairman.
By starting there, the focus quickly shifted to changing the nature of tailings themselves, and making them less fluid, Morgenstern said in an interview. That way, “if you have a failure, it’s not going to go very far.”
How tailings should be stored will vary from location to location, Ben Chalmers, the Mining Association of Canada’s vice president of sustainable development, said in an interview. Certain sulfide-heavy tailings may be safer under some amount of water, while dry storage may not be feasible in wet climates or at very high-output mines, he said.
While dry-stack storage is expensive while a mine is operational, it is much cheaper when it comes time to close, said Chuck Jeannes, CEO of Goldcorp, which uses dry-stack storage at mines in Canada, Mexico and Guatemala and has a dedicated manager in charge of tailings.
“The short answer is, yeah it’s more expensive,” he said in an interview. “But the long answer is, I don’t think it’s as much as people believe it is.”
Brazil mine accident puts tailings ponds safety back in the hot spot
Business In Vancouver
17 November 2015
The next time a mining company decides against dry-stacking as a too-costly alternative to tailings ponds, its directors and shareholders may want to consider what a tailings pond breach could cost companies like Imperial Metals Corp. or BHP Billiton Ltd.
Up until November 5, the August 4, 2014, tailings pond failure at Imperial’s Mount Polley copper mine had been the worst such breach at a mine in recent years.
It was eclipsed when two tailings ponds at Samarco’s large iron ore mine gave way, flooding the town of Bento Rodrigues, Brazil, with water and mine slurry. At least eight people were reported dead last week, and more than 20 missing and presumed dead.
The financial toll for BHP Billiton and Vale SA, which are partners in the Samarco joint venture in Brazil, will not be known for some time.
But it is likely to far exceed that of the Mount Polley disaster, which has cost Imperial Metals $61 million to date in rehabilitation, according to recent financials, plus a full year of lost production and a single-day market capitalization loss of 40% following the news of the collapse.
The Samarco mine disaster was the second fatal dam breach in Brazil in little over a year. In September 2014, a tailings pond dam breach killed three people at another nearby mine, the Herculano Mineração.
“So within 14 months, you have two tailings pond breaches – multiple fatal tailings pond issues – and the regulators are in full crisis recovery mode,” said Cameron Stockman, North American business development manager for CEC Mining Systems, which recently built a new dewatering plant for a small mine just 25 kilometres from the Samarco operation. “Whether Samarco will ever come back online, who knows?”
Vancouver’s CEC is one of a handful of companies that specialize in tailings dewatering technology. It is currently building dewatering plants for two new mines in Mexico and Chile.
Waste ore from mines is most often stored underwater in large holding ponds to prevent the oxidization that can cause acid rock drainage and other problems. The alternative is dry-stacking, which reduces a mine’s water consumption and prevents potentially catastrophic floods from collapsing tailings pond dams.
The mining process uses water, so mine waste is wet and needs to be dewatered before it can be stored in dry heaps until it can go back into a pit or shaft as part of mine reclamation.
It is an energy-intensive process that typically involves squeezing the water from the wet waste ore. CEC uses a vacuum process that it claims is much more energy-efficient.
But even with CEC’s lower energy requirements, dry-stack technology has higher capital costs than traditional tailings ponds. And in high-rainfall areas like B.C., dry-stacking isn’t feasible in many cases. Moreover, most mines in B.C. are in remote areas, which reduces the potential for a tailings pond breach to flood towns and cities.
One notable exception is the proposed Ajax mine, a large open-pit copper-gold mine that would be partially located within the city limits of Kamloops. With an annual production of 60,000 tonnes, it would be on a scale similar to Mount Polley.
KGHM International Ltd., the company developing the mine, has considered dry-stacking its tailings, but documents filed with the B.C. Environmental Assessment Office (EAO) indicated the company favoured using a tailings pond. That has raised concerns with the City of Kamloops.
“In light of the significant issues with the Mount Polley tailings impoundment, the move to a conventional tailings system in the Ajax project is concerning,” the city writes in a submission to the EAO.
A company spokesman, Robert Koopmans, said KGHM has settled on a compromise – a thickened tailings pond. That process involves removing some of the water, something the company hopes will reduce concerns about the potential for spills.
Stockman said his company sees an uptick in calls from mining companies every time there is a tailings pond breach, but so far it has received no contracts to build a dewatering plant in B.C.
Following the Mount Polley disaster, the B.C. government introduced new regulations requiring new mine projects to consider alternatives to tailings ponds.
Stockman said he thinks many of the inquiries his company gets for B.C. mine projects are not much more than “lip service to compliance so they could check the boxes for the provincial regulators.”
But he does not believe that dry tailings management should be mandatory in B.C., because he acknowledges that it simply isn’t viable in some cases for technical and geotechnical reasons.
Yet he thinks mining companies need to consider the longer-term payoffs of moving to dry-stacking.
While it may have higher upfront costs, it can be a lot less costly when the bills start coming in after a tailings pond disaster. He added that it can go a long way to obtaining environmental and social licence.
Mining company in Brazil says 2 other dams at risk of breaching near earlier deadly dam burst
By The Associated Press
17 November 2015
RIO DE JANEIRO - Two more dams at the iron ore mine that suffered a dam breach earlier this month are at risk of bursting and are undergoing emergency repairs, mining company officials said Tuesday
Klebber Terra, the director of operations at the Samarco mine in the southeastern state of Minas Gerais, said blocks of rocks were being used to reinforce the two dams, reported G1, the Internet portal of the Globo television network. Terra told a news conference that the work will take up to three months, G1 said.
"We are very sympathetic and distraught about what happened. We work with the best dam monitoring technicians but we cannot say that this tragedy could have been avoided," Terra said in comments carried by O Estado de S.Paulo newspaper.
Company officials also said that only one, not two dams as earlier reported, burst on Nov. 5. That breach unleashed a massive wave of mud, debris and water that practically wiped out the nearby hamlet of Bento Rodrigues, contaminated a river that's the source of water for residents of two states, and devastated aquatic life. Officials have called the contamination the worst-ever environmental disaster in Brazil.
The state fire department has said that at least seven people died in the disaster. There are another four bodies awaiting identification and 12 more people missing.
A separate report on Tuesday in the Estado de S.Paulo cited a lawmaker who said the accident caused an estimated $2.6 billion to $3.7 billion in damages. Rep. Leonardo Quintao said he based the estimate on assessments by parliamentary technical experts, the report said.
Samarco, which is jointly owned by mining giants Vale of Brazil and BHP Billiton of Australia, has signed a deal with the state and federal public prosecutors' office to pay $250 million in damages.
Samarco makes emergency repairs to dams at risk as rain sets in
Lisandra Paraguassu and Reese Ewing
18 November 2015
Brazilian miner Samarco said on Tuesday it is conducting real-time monitoring and emergency repairs on two of its tailings dams that suffered damage in the wake of the Nov. 5 collapse of another dam that killed 11 and left another 12 missing.
Officials of Samarco, an iron ore venture owned by miners Vale and BHP Billiton, said at a news conference on Tuesday that the company's Santarem dam was most at risk of collapse and that its teams were racing to transport 500,000 cubic meters (653,975 cubic yards) of stone to shore it up.
Samarco Operations Director Kleber Terra said he expected repairs to Santarem as well as at the Germano dam to take 45 to 90 days and that the rock was coming from Samarco's own mine.
But local weather forecaster Somar expects heavy rains to move into the region on Tuesday.
Jose Vasconcelos, civil engineer at the company said Santarem had been overrun by roughly 40 million cubic meters of mud and water released after the Nov. 5 collapse of the Fundao dam above it.
He estimated 20 million cubic meters of mud and mine debris settled in the valley below, but about 5.5 million cubic meters of that material remains contained by the Santarem dam.
Soon after the collapse of Fundao, the company had reported that Santarem had also given way, but upon later inspection officials discovered that Santarem's dike was mostly intact, but its dike had suffered considerable damage.
The company is trying to conduct repairs as quickly as possible before the region enters the rainy season, which could complicate repair efforts and further erode the damaged dike.
Heavy rains are moving across Brazil's southeast including the Rio Doce River Valley in Minas Gerais, where the disaster is unfolding, and down river in Espirito Santo state, where the mud is just now arriving 12 days after the dam burst.
The company's Germano dam, which is the biggest and oldest of Samarco's tailings dams, also suffered damage when the Fundao dam gave way.
But the Germano has been deactivated for years and engineers say it is almost completely dry and much more stable than Santarem is or Fundao was.
Samarco officials said they were continually monitoring the dams with radar, lasers and drones.
"There has been no movement detected in respect to the dikes," Terra added.
(Writing by Reese Ewing)
Brazil's Vale says Samarco costs already exceed insurance
(Update 2 - Adds comments from prosecutors on estimated payout by Samarco, paragraph 3)
By Stephen Eisenhammer and Marta Nogueira
16 November 205
The cost of a deadly dam burst at an iron ore mine in Brazil run by Samarco has already exceeded the insurance cap for civil damages, co-owner Vale SA said on Monday.
Samarco, owned by Vale and BHP Billiton, has been fined 250 million reais ($65.5 million) and forced to pay for accommodations for the dispossessed, after a dam burst earlier this month, killing at least seven people, with 15 still missing.
Brazilian state and federal prosecutors said on Monday that Samarco had agreed to pay a preliminary 1 billion reais ($262 million) to cover the cleanup costs and compensation.
"In terms of civil damages, Samarco's insurance policy is well below even the initial values being discussed in terms of costs," Vale's chief financial officer, Luciano Siani, said on a conference call, adding the 250 million-real fine was already larger than the cap on the policy.
Insurance to cover the suspension of production and cost of rebuilding elements of the mine, such as the dams, is higher, Siani said, without giving details.
Samarco, Vale and BHP are scrambling to control the fallout from the disaster, which has polluted the Rio Doce river across two states.
Vale, the world's largest producer of iron ore, said it could take years for the river to recover and refused to speculate on how much the cleanup costs and fines could reach or give a time frame for when the mine might reopen. "That is dependent on society," Siani said, because getting permission to reopen will take longer than the technical repairs needed.
The company has drawn criticism for its delayed public response to the disaster, but it sought on Monday to stress its involvement in the recovery plan and support for Samarco. Vale Chief Executive Officer Murilo Ferreira was largely absent from the two analyst calls, with Siani answering most questions.
Just after the call, dozens protested outside Vale's offices in downtown Rio de Janeiro, dressed up as the Rio Doce and painting Vale's logo with mud-like paint.
The accident, which also took out a conveyor belt at one of Vale's nearby mines, will affect Vale's production by about 19 million tonnes next year, including 9 million to 10 million tonnes of production that was usually sold to Samarco.
The company did not offer a new forecast for 2016 output but said it would give a new figure in December.
($1 = 3.816 reais) (Reporting by Stephen Eisenhammer; Editing by Steve Orlofsky and Peter Cooney)
Vale: 'Several years' to recover from Brazil mine disaster
16 November 2015
Vale said on Monday that it would take several years for Brazil's Doce river to recover following a deadly tailings dam burst at an iron ore mine it jointly owns with BHP Billiton.
In an update Friday, BHP revealed that mine tailings—a mix of water, iron and other waste materials such as silica — extended 440 kilometres (273 miles) downstream into a neighbouring state through remote mountain valleys from the mine site in Brazil’s Minas Gerais state. The accident left nine people dead and 15 are still missing and 11 communities affected.
BHP in a separate conference call on Monday said 600 people who have lost their homes have been put in hotels while rental properties are being considered. The operator of the mine, a standalone company called Samarco, ceased work immediately when the Germano dam was breached. The company's mining licence has now been suspended and all workers put on paid leave.
According to Brazilian state and federal authorities Samarco on Monday had agreed to pay a "preliminary" 1 billion reais (around $260 million) to cover the cleanup costs which could run into billions of dollars and compensation claims. The two mining giants have already been fined $66 million by the Brazilian government and Vale said on Monday costs and fines have already exceeded insurance against civil damages.
BHP also said it will be conducting a review of two other South American joint ventures with a similar structure to Samarco. According to a transcripts the Anglo-Australian giant will look into restructuring the Cerrejón coal mine in Colombia owned equally with Anglo American and Glencore.
Another joint venture with Glencore, Antamina, Peru's biggest copper and zinc mine, will also come under scrutiny. BHP and Glencore each have 33.7% stakes with Canada's Teck Resources holding 22.5% and Japanese conglomerate Mitsubishi 10%. BHP could consider moving to a structure typical in the oil business where operation is left to a party separate from the owners.
Vale and BHP fined $260m for deadly Brazilian dam burst
17 November 2015
BHP Billiton and Vale have been fined a further 1bn reais (£171m, $260m) for the mining disaster that killed 11 people in Brazil earlier this month.
The mining giants had already been ordered to pay 250m reais after a dam burst at a mine run by Samarco, a firm they jointly own.
Twelve people remain missing following the incident in southern Brazil that set off a deadly mudslide.
The fine will provide aid to the victims and fund environmental repairs.
The head of Brazil's environmental agency Ibama has described it as the worst mining accident in the country's history.
Prosecutors in the Brazilian state of Minas Gerais said the preliminary payment would cover the clean-up costs and compensation.
"We know that the amount of damages could be much greater, but the agreement establishes a firm legal guarantee," prosecutor Carlos Eduardo Ferreira Pinto said in the statement.
Brazilian miner Vale's chief financial officer Luciano Siani earlier refused to speculate on the level the clean-up costs and fines could ultimately reach.
State prosecutors are also considering whether to pursue criminal charges.
On Tuesday, BHP Billiton chief executive Andrew Mackenzie expressed his "sadness and concern" for the community affected by the dam burst.
He added: "Our priority remains the welfare of the workforce and the local community and I am encouraged by the support I saw Samarco providing.
"Samarco continues to provide food, water and emergency supplies to local communities.
"They also continue to work with the authorities' efforts to supply clean water to the communities further downstream along the Doce River."
More than 600 people who lost their homes in the accident have been placed in hotel or B&B accommodation, he added.
Meanwhile, Brazilian President Dilma Rousseff said the country was "committed to blame those who are responsible."
The cause of the dam breach has not yet been determined, but one of the structures was being extended as part of an expansion project at the time.
Mr Siani said he didn't yet know when the mine would reopen.
The incident is expected to affect Vale's production next year, and the firm has said it will give a new forecast for 2016 production in December.
Mining is Brazil's third largest industry.
BHP Billiton to Face Questions From Shareholders
Thursday’s annual meeting is likely to be one of the trickiest in years for BHP’s long-time chairman, Jac Nasser, and its CEO, Andrew Mackenzie
By Andrew Peaple
Wall Street Journal
15 November 2015
When shareholders in BHP Billiton Ltd. gather in Perth, Western Australia, for the company’s annual general meeting this week, a faraway iron-ore mine in rural Brazil will be on their minds.
The breaches at two tailings dams near BHP’s jointly owned Samarco operation in the Minas Gerais state on Nov. 5 unleashed a flood of mud across the surrounding area, leaving nine people confirmed dead and 19 missing. The clean-up bill could reach at least $1 billion, according to Deutsche Bank estimates.
BHP’s Australian-listed shares have fallen to their lowest level since the financial crisis and close to 10-year lows in the dam bursts’ aftermath, as investors fret about the cost to the business—both reputational and financial—and whether the world’s largest miner by market value can continue to pay its current dividend. BHP’s London-listed shares have also suffered.
Against such a backdrop, Thursday’s shareholder meeting is likely to be one of the trickiest in years for BHP’s long-time chairman, Jac Nasser, and its chief executive, Andrew Mackenzie.
“I hope they cut the dividend,” said one Australian-based fund manager, who holds shares in BHP and expects it to be a key topic at the meeting next week. “The [dividend] policy is creating havoc with the management of the company.”
For Mr. Mackenzie, holding to BHP’s dividend is a reputational issue. The company’s policy is to maintain or lift investor payouts every half-year, even in the face of the downturn in world commodity markets in the last few years. For cash-hungry investors like big pension funds, that sort of commitment is one of the key attractions of resources stocks like BHP.
The miner’s boss has strengthened his rhetoric to soothe such investors, even though earnings for its June-ended fiscal year slumped nearly 90%. “Over my dead body sounds a little strong, but it is almost right,” Mr. Mackenzie said in discussing the annual results in August, referring to the possibility of a dividend cut.
Analysts are less sure he can hold the line. BHP aims to generate enough cash flow each year not only to cover its costs, but also to fund new investment and its shareholder payout, without going too much further into debt.
Meeting those different objectives is becoming harder. Even before the Samarco disaster, Standard & Poor’s Ratings Services cautioned that the miner’s payout pledge could weaken its financial position given a broader downturn in commodity prices. The price of iron ore, which contributed 80% of BHP’s earnings last year, has fallen below $50 a ton this year, down by a third from a year ago.
In response to a request for comment, BHP pointed to a recent speech by Mr. Nasser in which he said the company’s balance-sheet strength had provided it with the confidence to increase its dividend this year.
BHP’s dividend already looks out of line with its long-term performance. The company on average paid out around 20% of its earnings before interest, tax, depreciation and amortization in the years from 1970 to 2012, Goldman Sachs has calculated. BHP would have to halve its current payout to achieve that sort of “sustainable” level now, the bank reckons.
It remains unclear how much harder the catastrophic dam bursts will make Mr. Mackenzie’s task. While offering some support on the ground, BHP has been careful to state that responsibility for the accident lies with Samarco, a limited liability company it owns in equal parts with Vale SA, the Brazilian mining giant.
But some local lawyers have suggested the co-owners will be targeted if their joint venture can’t cover the legal and clean-up costs. BHP should make a provision of around $400 million to cover potential charges over the next two years, Credit Suisse analysts say.
To date, BHP has provided no explanation of what caused the Samarco disaster, amid growing criticism of the company in Brazil. The company’s investors will be looking for a clearer accounting come Thursday.
—Rhiannon Hoyle contributed to this article.
Write to Andrew Peaple at andrew.peaple[at]wsj.com
BHP Billiton under pressure over Samarco disaster
Sydney Morning Herald
16 November 2015
The BHP share price is shouting the company won't be able to maintain it's extraordinary high dividend yield. Michael Pascoe comments.
The diving BHP Billiton share price has wiped more than $6 billion from the retirement savings of Australian workers as the company now faces the prospect of pressure from institutional investors to better link executive pay to safety breaches.
BHP's ASX-listed shares lost 10.8 per cent last week, in the wake of a tailings dam bursting at its Samarco Mineracao iron ore mining joint venture with Vale in Brazil on November 5.
The disaster virtually destroyed 10 districts, and killed at least nine people with 18 still missing. The final death toll and the full extent of the environmental and social damage remain unclear.
Brazilian prosecutors have now stepped up efforts to pursue criminal charges against the mine operators.
The disaster comes at a time when BHP Billiton was already under pressure from tumbling global commodity prices for the iron ore and oil it produces. The 25 per cent fall in the big miner's share price since July 1 has already wiped about $6.31 billion off the retirement savings of Australian workers.
Fiona Reynolds, the managing director of Principles for Responsible Investment, an institutional investor group based in London, said the pay and bonuses of BHP Billiton and Vale executives must be slugged following the disaster.
"The mining and extractives industry is one of the most dangerous sectors in the world. We think that one of the most important governance considerations for this sector is that executive compensation and incentives should be directly linked to the company's safety records, including employee and contractor safety and environmental standards," she said.
"By making this link, greater levels of accountability can be factored into compensation packages".
Australian Council of Superannuation Investors chief executive Louise Davidson said the initial response of BHP Billiton management to the tragedy had shown it was focused on addressing the issues, but "ACSI will have discussions with the company once more information comes to light".
But in an interview with Fairfax Media on Friday, the local mayor, Duarte Junior, cautioned against closing the mine down, warning it could send the city of Mariana broke.
"We're going to be firm. Samarco must pay full reparations," he said speaking after a meeting with victims.
"But if we were to defend the closure of this company, the city itself would be enormously disrupted. Some 80 per cent of our revenue comes from mining".
About 25-30 per cent of Australia's $2 trillion superannuation sector is invested in local shares. BHP Billiton accounts for just under 5 per cent of the S&P/ASX 200 Index and is given a similar weighting in the Australian equities portfolio of most managed super funds.
In its most recent disclosure of major holdings AustralianSuper, the nation's largest super with $92 billion under management fund, reported that BHP BIlliton shares made up 5.17 per cent of the domestic share portfolio for the balanced option that most of its members are invested in. AustralianSuper manages money on behalf of one in 10 workers.
That holding, valued about $1.09 billion at June 30, would today be worth closer to $817.5 million.
Members of most other major industry and retail funds are similarly affected.
Prosecutors in the Brazilian state of Minas Gerais have demanded Samarco pay preliminary compensation of about 1 billion reais ($370 million) to help provide aid to the victims of the disaster and fund environmental restoration work. A full report on the disaster is due in 30 days.
On Friday, a Brazilian court froze 300 million reais of Samarco's funds, and said the funds could be used to pay for only damages. Deputy state prosecutor-general Sandra Cureau has also warned the mine might be forced to close permanently.
"Normally, we recommend the most-severe penalties," Ms Cureau said on Friday.
"It will be a punishment to serve as an example to avoid other accidents as serious as this."
BHP facing downgrade pressure
With or without protected dividend.
23 November 2015
Whether BHP Billiton Ltd. scraps its progressive dividend policy or not, it risks a credit ratings downgrade as the collapse in oil and iron ore shows no sign of abating.
The price to protect BHP bonds from non-payment reached a four-year high of 132.5 basis points on Nov. 13 as the yield premium offered over swap rates surged for its debt. While the company is graded at the highest A level by the three major ratings companies, Bloomberg’s default-risk model indicates its creditworthiness is more in line with the highest BBB score, three levels lower.
Iron ore, the top earner for the world’s biggest mining company, has dropped to a four-month low, challenging BHP’s strategy of maintaining or increasing dividend payments while protecting a so-called “solid A” credit rating. The company is also under pressure following this month’s deadly disaster at its Samarco joint iron ore operation with Vale SA in Brazil, where tailings dams ruptured and devastated communities.
“We view BHP as a downgrade candidate in the coming six months or 12 months,” Chris Walter, a Sydney-based credit strategist at Commonwealth Bank of Australia said by phone. “We have uncertainty around the ultimate costs around Samarco, which is pushing the spreads a bit wider, and then there’s also the commodities piece, China’s slower growth and whether we have reached a bottom for prices of oil and iron ore.”
Both Standard & Poor’s and Fitch Ratings Ltd. have graded BHP at A+, the fifth-highest grade, with a negative view on the company. It carries the equivalent A1 score from Moody’s Investors Service with a stable outlook.
The metals and energy producer targets ratings of A+ or A from S&P and A1 or A2 from Moody’s, it said in August. The company declined to provide comment on the prospect of a ratings downgrade.
BHP declined 2.8 percent to A$19.92 at 10:50 a.m. in Sydney trading Monday, as an index of 31 energy and mining companies fell 1.7 percent.
“They are certainly falling below the range of A+,” as the prices of BHP’s main commodities decline, Perth-based Macquarie Group Ltd. analyst Hayden Bairstow said by phone. The bank sees a downgrade from A+ to A as likely, he said. A ratings cut to A is a possibility, Deutsche Bank analysts including Sydney-based Gus Medeiros said in a Nov. 20 note.
Benchmark iron ore has slumped by more than a third this year, while copper has plunged by about a quarter and crude oil has declined about 20 percent. The cost of insuring BHP’s debt with credit-default swaps has climbed 55.5 basis points since Dec. 31 to 132.1 on Friday, compared with a 45.8 basis point increase for Rio Tinto Group. The BHP CDS is above the iTraxx Australia index by the most since 2008.
The yield premium over the swap rate on the miner’s A$1 billion ($723 million) of March 2020 bonds widened to 154 basis points on Nov. 13, based on prices from Australia & New Zealand Banking Group Ltd., having been sold at a gap of 87 basis points in March.
With commodity prices tumbling, investors including Argo Investments Ltd. have questioned whether BHP should continue to target increases to dividend payouts. “If current prices persist, we expect the board to reduce the dividend to preserve the credit rating,” UBS Group AG analysts including Glyn Lawcock wrote in note dated Nov. 20.
BHP may be better served using funds to target bargain acquisitions as the commodities collapse forces competitors to sell assets, according to Jefferies Group LLC.
“We don’t have to make any decisions on what the dividend is until next February,” Chairman Jac Nasser told investors Thursday at an annual meeting in Perth. “What we are committed to throughout all conditions is a strong balance sheet.”
Underlying profits slumped 52 percent in the year to July, BHP reported in August as it also cut its forecast on peak steel demand in China. Brazil’s Samarco accounts for only about 6 percent of BHP’s iron ore output according to Macquarie, which forecasts the producer will continue to raise volumes until at least 2020.
Cuts to production costs and other productivity savings were $4.1 billion in the year to June 30 and have “secured our strong balance sheet, which we will never put at risk,” Chief Executive Officer Andrew Mackenzie told the Perth meeting.
“We’ve seen enormous amounts of costs pulled out of BHP in particular, and of all commodities companies,” Commonwealth Bank’s Walter said. “That’s outperformed market expectations across the board, but they can’t offset the lower prices.”