BHP-Vale Mine Restart Encounters New Obstacle: Small-Town Mayor

Updated on
  • Brazil venture said unlikely to complete study before July
  • Issues cast doubt on minister’s predicted start in two months

BHP Billiton Ltd. and Vale SA’s crippled Samarco mine, once the world’s second-largest producer of iron-ore pellets, has a new obstacle threatening to slow its much-anticipated restart: a small-town mayor.

The Brazilian city of Santa Barbara declined to sign off this week on a plan for Samarco to continue to use water from a nearby river. Without the approval, Samarco won’t be able to complete an ongoing environmental study required by state regulators for a restart, a person familiar with the matter said, asking not to be identified because the matter is private.

“There are environmental impacts related to the water supply that need to be thoroughly studied,” Leris Braga, the 34-year-old mayor of the town of 30,000 people in Minas Gerais state, said by telephone. He is calling for a separate study to be done to test for possible disruptions to water flow.

The Samarco Mineracao SA joint venture has been shut since a November 2015 tailings dam ruptured, polluting waterways in two states and killing as many as 19 people in an incident called Brazil’s worst environmental disaster. The closing also has left thousands without jobs and prompted Samarco to stop paying interest on $2.2 billion in bond obligations.

Environmental Study

Melbourne-based BHP, Rio de Janeiro-based Vale and Samarco have all stopped short of providing an exact estimate for the mine’s restart, only saying they hope to return to operations some time this year. Last week, Brazil’s mines and energy minister Fernando Coelho Filho said the mine could be operational in two months.

Even if Samarco resolves Braga’s objections, the mine will probably only be able to complete the environmental-impact study needed for an operating license by July at the earliest, the person said. If Braga’s dispute can’t be resolved, the study’s completion date could be delayed even further, making the likelihood of a restart this year more difficult.

Samarco is providing all the necessary information to the city of Santa Barbara and the company is taking all suitable steps to resolve the situation as soon as possible, a spokesman said Thursday by e-mail.

Regardless of Braga, once Samarco is able to complete the required study, it must then submit it to the state regulator overseeing the company’s re-licensing. Then public hearings will need to be held before the regulator performs a final assessment required before the license can be put to a vote.

“A restart of operations is technically feasible in 2017,” BHP said Thursday in e-mail. But the “restart will occur only if it is safe to do so and the necessary approvals are received from Brazilian authorities.”

Vale’s press office declined to comment.

— With assistance by Paula Sambo

    Before it's here, it's on the Bloomberg Terminal.