Samarco Licensing Moving Forward Despite Fines, Regulator Says

  • Agency sees merit in miner’s plan to dispose of waste in pit
  • BHP-Vale venture still needs to prove it has contained leaking

Samarco’s quest to obtain permits for resuming its Brazilian iron-ore operations is progressing despite environmental fines and a court order, with a mid-2017 restart still possible, the state licensing agency said.

The venture owned by BHP Billiton Ltd. and Vale SA, which halted work a year ago after a tailings dam collapse, is seeking a new operating license as well as additional permits to deposit waste into an unused pit called Alegria Sul rather than building a new dam. Minas Gerais state environmental regulator Semad sees merit in the Alegria Sul option, which the company says would allow it to resume at partial capacity for about two years.

“The benefit and the environmental balance is very positive,” Anderson Silva de Aguilar, who is overseeing the licensing requests, said in an e-mailed response to questions. "Environmentally, it is a lot better than depositing in an area that was not prepared or would have to be prepared for this purpose."

For now, Semad has received all the documentation requested from Samarco and is analyzing the plan to use the vacant pit while it formulates a set of guidelines for the mining complex license.

The regulator’s decision to look at re-licensing the mine’s main complex under a single “corrective” permit rather than requiring dozens of individual licenses, will simplify the process, according to Semad’s press office.

Legal Challenges

Samarco Mineracao SA, as the operating company is known formally, was the world’s second-largest producer of iron-ore pellets before the dam collapse sent billions of gallons of sludge into the Rio Doce river valley. The incident killed as many as 19 people, contaminated waterways in two states, put thousands out of work and is threatening repayments on more than $3 billion in debt.

As it seeks new licenses, the mine is facing other regulatory and legal challenges that threaten to increase costs. Earlier this month, Brazil’s federal environmental agency Ibama said Samarco had yet to fully contain leakage from the dam that ruptured more than a year ago, imposing a fine of 500,000 reais ($149,000) a day until it proves otherwise.

Separately, a federal judge in Minas Gerais ruled Samarco had failed to prove it has definitively contained leaking. The judge gave the company 90 days to provide proof that the situation has been rectified, and 30 days to come up with a 1.2 billion-real guarantee.

While Samarco will need to also prove to Semad it has contained the leaking of mining waste before it can secure licenses, the issue is not slowing the agency’s work, according to Semad’s press office.

Final Vote

Samarco said in a written statement that it is engaged in increasing the capacity of one dike while building another, and it expects that the works will meet the containment demands. The construction is scheduled to be done by the beginning of next year.

While the regulatory progress is welcome news for the miner and its shareholders and creditors, the final word on the two licenses won’t be decided by Semad. Two separate hearings will be held before a mix of politicians, engineers, scientists, mining executives and NGOs, who will then vote to either approve or deny Samarco’s licenses.

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