Vale-BHP Mine Ready to Resume in Two Months, Minister Saysby , , and
Samarco 2022 bonds advance after comments in Davos interview
Brazil state regulator still reviewing re-licensing of project
The Brazilian iron ore mine owned by Vale SA and BHP Billiton Ltd., which has been shut since late 2015, will “probably” be operational again in two months, the country’s mines and energy minister said. The venture’s bonds surged.
Fernando Coelho Filho, speaking Tuesday in an interview at the World Economic Forum in Davos, Switzerland, said he believed Samarco Mineracao SA would “get back in business, having addressed all the environmental and legal problems” it has encountered since a deadly dam spill killed as many as 19 people. The November 2015 accident has been dubbed Brazil’s worst environmental disaster.
Semad, the Minas Gerais state regulator managing Samarco’s restart bid, is still working with the miner on the two licenses necessary to resume operations. The agency said in November that a mid-2017 restart was possible. Rio de Janeiro-based Vale and Melbourne-based BHP have both said they are hoping the mine can restart this year, but stopped short of saying that was assured.
Vale and BHP declined to comment. Samarco reiterated that it expects the venture to reopen in the second half, but can’t offer guarantees.
“They want to bring profitable tons back online, so if the government is saying that it’s doable in two months, then that’s better than what the market is expecting,” Jeremy Sussman, an analyst at Clarksons Platou Securities Inc. in New York, said by phone. Coelho’s comments are likely to offer a boost to Samarco’s owners, according to Sussman. “It’s safe to say this would be a positive,” he said.
Samarco’s notes due in 2022 rose 6.3 percent Tuesday after Coelho’s comments. The bonds have gained 17 percent this year.
BHP and Vale said last month Samarco had agreed to use Vale’s Timbopeba pit to deposit mining waste following a restart of the venture, which would allow operations to continue for several years without the need for a new tailings structure.
Samarco was the world’s second-largest producer of iron ore pellets before operations were halted, supplying the material used in steelmaking to about 20 countries, including the U.S., according to researcher AME Group. The venture generated more than 2 billion reais ($623 million) in annual profit for its owners, according to data compiled by Bloomberg.