BHP and Vale to restart Samarco plant 5 years after fatal dam burst

BHP and Vale have resumed production at Samarco, their iron ore joint venture that was at the heart of Brazil’s biggest environmental disaster after a dam collapse five years ago.

The two mining groups said on Thursday that Samarco had met the licensing requirements to restart operations and the production of iron ore pellets at its processing plant.

“Independent tests have been carried out on Samarco’s preparations for a safe restart of operations,” BHP said in a statement, adding that it would initially produce about 8m tonnes a year of the pellets, an ingredient in steel.

The resumption of production at Samarco comes with the price of iron ore hitting a nine-year high this week, as it rose above $170 a tonne.

The collapse of the Fundao tailings dam in November 2015 sent a torrent of mining waste sludge cascading through villages in the south-eastern state of Minas Gerais, killing at least 19 people.

It is considered Brazil’s worst-ever environmental disaster, contaminating a river for hundreds of miles to the ocean and destroying entire communities.

The accident left BHP and Vale, two of the world’s largest miners, facing legal action. Following the disaster, BHP and Vale halted production at Samarco to focus on reparations, compensation and the clean-up effort. 

They created a foundation called Renova to oversee reparations and remediation work in Minas Gerais, where Samarco is located. It has so far paid out $2.1bn.

However, Brazilian federal prosecutors filed a lawsuit contesting the compensation package in October, arguing that it was far too low.

Vale, the world’s biggest producer of iron ore, suffered a second deadly dam breach at its Córrego do Feijão mine, also in Minas Gerais in January 2019.

That disaster claimed the lives of 270 people and has led to the creation of a new international standard for tailings dams in an effort to prevent another catastrophic failure.

Tailings are waste material left over from mining activities. They are typically mixed with water and held in earth dams, which can range in size from no bigger than a swimming pool to covering more than 1,000 hectares.

Vale has been dismantling the most risky types of tailing dams and shifting towards new methods of storing waste that does not involve the use of water, such as dry stacking.

“Samarco will use new processes for tailings disposal, reflecting its commitment to a sustainable restart and operational safety, “Vale said in a statement.

Separately, Rio Tinto’s Oyu Tolgoi copper mine in Mongolia was hit by a $228m tax demand from the Mongolian government on Thursday.

The tax claim comes amid strained relations between Rio and Mongolia over a $6.75bn underground expansion project at Oyu Tolgoi, which is running late and is over budget.

Ulaanbaatar said certain transactions involving the Oyu Tolgoi’s holding company had not been done at an arm’s length basis and were in violation of international rules.

“Some investors might interpret this claim as a reflection of an ‘uneasy’ relationship between both parties ahead of the receipt of a key approval for the 2020 feasibility study, which is a key requirement to proceed with the underground project,” said Alain Gabriel, analyst at Morgan Stanley.

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