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Brazil Vows to Make BHP, Vale Pay for Deadly Mine Disaster

  • Reuters

Rescue workers take a rest from their search for victims at the town of Bento Rodrigues, after a dam burst on Thursday, in Minas Gerais state, Brazil, Nov. 8, 2015.

Rescue workers take a rest from their search for victims at the town of Bento Rodrigues, after a dam burst on Thursday, in Minas Gerais state, Brazil, Nov. 8, 2015.

The Brazilian government on Wednesday said it may fine mining giants BHP Billiton Ltd. and Vale SA for the "environmental catastrophe" caused by ruptured dams at an iron ore mine jointly owned by the companies in a southeastern state.

The government is increasingly concerned over the rising death toll and contaminated mud flowing through two states as a result of the disaster. It is studying the mine's permits and will ensure the owners pay for cleanup costs, Environment Minister Izabella Teixeira told reporters in Brasilia, the capital.

"If federal fines are applicable, we will apply them," Teixeira said. "There will be punishment, and under Brazilian law the environment has to be repaired."

Her remarks are the strongest yet from Brazilian government officials, who have been caught off-guard by a disaster that killed at least eight people and left another 21 missing in the mineral-rich state of Minas Gerais nearly a week ago.

The warning also came as the chief executives of Australia-based BHP, the world's largest mining company, and Brazil's Vale, the world's biggest iron ore miner, scrambled to publicly take responsibility for the disaster.

After surveying the devastated area together, BHP CEO Andrew Mackenzie and Vale CEO Murilo Ferreira told a press conference they would fulfill all their obligations as joint owners of the mine, which is formally run by Samarco Mineracao.

The two men said the mining giants would create a joint fund for the recovery costs, but added that it was too soon to calculate how much would be needed. They also reaffirmed the companies' commitment to the joint venture over the long term.

"We are 100 percent committed to do everything we can do to support Samarco and make this right," Mackenzie said. "We are deeply sorry for everyone who has or will suffer for this terrible tragedy."

Meanwhile, the search continued for more victims along nearly 100 km (62.5 miles) of mud-caked floodplain. Authorities in Minas Gerais and the neighboring state of Espirito Santo also have suspended water service for hundreds of thousands of people after contaminated sediment from the dams, which held water containing mining residue, flowed downstream.

Washed away

Mackenzie flew to Brazil this week as Ferreira came under increasing fire from local authorities, residents and media for what many saw as a laconic response to one of the worst mining disasters ever in the nation.

Neither the companies nor Brazilian officials have determined a cause for the ruptures, though Samarco acknowledged that workers, 13 of whom were washed away by the torrent, were engaged in an expansion of the dam when it burst. The disaster has become a public relations, regulatory and financial nightmare for the companies, as Brazilian politicians, environmentalists and residents call for tougher rules on the mining sector, which employs hundreds of thousands of people and is a major source of export revenue in the country.

In addition to the financial costs due to lost output and repairs at the mine, which accounts for about 10 percent of Brazil's iron ore exports, BHP and Vale are expected to face steep fines as well as lawsuits at a time when iron ore prices are at their lowest point in a decade.

A person familiar with the insurance framework around the mine said on Tuesday that the disaster could trigger $600 million in insurance claims.

In the days after the dam burst last Thursday, Vale, a company with decades of mining experience in the area, made only a brief statement and referred all inquiries to Samarco. Though Ferreira made a visit to the mine over the weekend, he did so quietly and without disclosing the trip until BHP announced Mackenzie was en route.

In response to the growing public criticism, Vale on Tuesday said it had "supported Samarco since the first day" of the disaster and had provided 100 employees, helicopters, fuel and vehicles to the recovery effort. The mine employs about 1,800 workers, most of whom are now on paid leave as a result of the halt in operations.

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