8th Jan 2016 12:10
LONDON (Alliance News) - BHP Billiton PLC Friday said the amount of tailings released from the Fundao dam in Brazil that burst back in November was "significantly less" than some initial estimates suggested.
BHP and Brazilian miner Vale SA are 50/50 partners in the Samarco joint venture which operates the burst dam that killed 17 people and caused widespread damage to nearby communities.
BHP shares were trading down 1.7% to 662.50 pence per share on Friday, the ninth consecutive day that BHP's share price has fallen. BHP, like many of its miner peers, already has been battling falling commodity prices and an economic slowdown in developing countries such as China, but the catastrophe in Brazil has exacerbated its troubles.
On November 5, the day before the dam burst was announced, BHP shares closed at 1,034.0 pence per share - meaning its value has fallen by more than 35% since the incident. To put that into perspective, the FTSE 350 Mining Index fell by 29% over the same period.
The operation was producing around 30.0 million tonnes of iron ore pellets a year prior to the event, which was relatively minor in terms of both BHP's and Vale's annual production, so it was the reputations of the two companies that took the bigger hit. The Samarco joint venture was contributing around 3% of BHP's annual underlying earnings before interest and tax.
It is not known when or even if the mine will get back up and running, with initial investigations still ongoing, but Deutsche Bank previously forecast the operation will be shut until at least 2019.
Some initial estimates suggested over 50.0 million cubic metres of tailings, the by-products left over from mining activities, had been released by the burst dam, but BHP on Friday said satellite estimates show it is considerably less than this.
"Samarco confirmed in its 60-day update that satellite assessments showed the volume of tailings material released during the dam breach was approximately 32 million cubic metres. Approximately 85% of the released tailings were retained within 85 kilometres of the Fundao dam," said BHP.
"Furthermore, Samarco has undertaken several activities to stabilise the released tailings and prevent more material from entering the Rio Doce system. These include the construction of dikes to contain tailings and revegetation along the Gualaxo and Doce rivers. The native revegetation is intended to reduce the risk of erosion in heavy rainfall. Dredging of the Candonga hydroelectric dam is planned which will also improve water quality," the miner added.
Samarco has been mapping the affected area since a study carried out in December showed there were individual fish and shoals of fish living in the Rio Doce river which was flooded with the tailings.
Samarco also has completed repair work to reinforce the Selinha dike above the Fundao dam, and it is continuing to reinforce the Santarem water dam which overflowed, but still retained some of the tailings from Fundao, said BHP.
In December, BHP and Vale asked New York-based law firm Cleary Gottlieb Steen & Hamilton LLP to conduct an external investigation into the cause of the breach of the Fundao tailings dam and the Santarem water dam.
Brazilian authorities have already supported assessments that the tailings material leaked into the river was non-toxic, and BHP said the water treatment facilities situated along the river are still capable of treating water for human consumption and for agricultural and industrial use.
BHP and Vale are set to be sued by the Brazilian government over the incident. The Attorney General of the Union, the Brazilian prosecutor, and the Minas Gerais and Espirito Santo states, filed a civil suit against the two companies in November, along with the Samarco joint venture itself, for up to BRL20.0 billion, or USD5.2 billion, for the environmental damage caused by the dam burst.
The pair have also established a a separate, voluntary, non-profit fund to support the recovery of the Rio Doce river system.
By Joshua Warner; [email protected]; @JoshAlliance
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