This article uses Critical Resource’s LicenseSecure™ model to assess the likely level of political and stakeholder risk around Samarco’s operations in Brazil. Our updates provide a rapid overview of new or updated ratings in our database, with a focus on projects in the news.
- On 5 November 2015, a tailings dam at the Germano iron ore mine operated by Samarco in Brazil failed. An estimated 32 million cubic metres of tailings flowed from the dam, destroying the small town of Bento Rodrigues and killing at least 17 people. The tailings subsequently entered the Rio Doce; resulting oxygen depletion has reportedly caused the loss of flora and fauna along affected parts of the river.
- Samarco is a 50-50 joint venture between BHP Billiton and Vale. Both companies have apologised for the incident and have committed to supporting Samarco as it works to rebuild the local community and restore the environment. The companies have commissioned an independent external investigation into the causes of the failure and will make the findings public.
The incident will have major financial consequences for the companies involved. The day following the disaster, shares in BHP Billiton fell more than 5.7%; shares in Vale fell 7%. Brazil’s federal government has announced a lawsuit against the companies for US$5.2bn, in addition to the US$66m fine already levied by Brazil’s environmental regulator. President Dilma Rousseff told the COP21 conference in Paris that she was committed to “severely punishing” those responsible for what she described as “the biggest environmental disaster in the history of Brazil.” Compensation and remediation costs may grow as the extent of damage becomes clear.
- Samarco’s license for the mine has been suspended pending investigations. The mine may reopen in future, as it remains viable and is a significant contributor to the local economy. However, it will be extremely difficult to resurrect stakeholder trust. The severity of the incident – coupled with the strong government reaction and protests from NGOs, indigenous communities and labour unions – will cause long-term reputational damage.
- Much of the anger expressed by protesters and Brazilian media has been directed at the companies, but there has also been criticism of the Brazilian government. Many commentators believe that politicians have turned a blind eye to outdated mining regulations and inspections regimes in exchange for financial support from industry. Updates to the mining code have been held up in congress since 2013. The Brazilian government has already faced recent protests over corruption and economic inequality, and is now likely to come under pressure to review mining regulations.
- The mining industry as a whole will need to engage in self-reflection. The sector has been shaken by the fact that companies of the size and standing of BHP Billiton and Vale should have failed to prevent a disaster of this magnitude. Around the world, support for mining among communities near tailings dams will suffer. It is imperative that the incident is investigated thoroughly and that lessons are applied globally. On 1 December, the International Council on Mining and Metals announced a global tailings management review, which will look at tailings storage standards, critical control strategies, and emergency preparedness across the industry.
Please note that these ratings updates are provisional, based in part on open source analysis and are not from client projects. Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.
Photo credit: Bruno Oliveira is a Brazilian freelance photographer based in the UK. He has recently been documenting the Samarco incident. www.eyeperture.co.uk
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