6th Nov 2015 11:19
LONDON (Alliance News) - BHP Billiton PLC on Friday said there has been a "serious incident" at its iron ore operation in Brazil which is run by a joint venture company with Brazilian giant Vale.
The FTSE 100-listed giant holds a 50% stake in Samarco Mineracao SA, the joint venture entity that operates the project, and said it is "concerned for the safety of employees and the local community".
Later Friday, BHP Chief Executive Andrew Mackenzie addressed the public in Melbourne but said the company still does not know the full extent of the "tragic incident".
Although neither BHP nor Vale have confirmed the nature or cause of the incident, MacKenzie did state his thoughts were with the local community which has been "devastated by flooding".
Media reports have suggested a burst dam has flooded the local community which has led to fatalities.
The Financial Times said Samarco has confirmed the dam had burst at its Germano unit located in the municipalities of Ouro Preto and Mariana in the state of Minas Gerais.
Significantly, the FT also reported that the burst dam has "submerged" the Bento Rodrigues community, leading to "at least" 15 fatalities. However no fatalities have been confirmed by any of the companies involved.
SP Angel, a broker, said at least 16 people have died. Both SP Angel and the FT said a failure at the tailings dam caused a mudslide which caused the accident. The tailings dam holds back wastewater from the operation.
http://www.ft.com/cms/s/0/eee826ac-8453-11e5-8e80-1574112844fd.html#axzz3qhrCFpK1
On Friday, Mackenzie said: "We still don't know the full extent of the situation, but we are working closely with Samarco, and with Vale, to better understand the circumstances. I have spoken to the chief executive of Vale, Murilo Ferreira, and Jimmy Wilson, our president of iron ore has been speaking with his equivalent in Vale , Peter Poppinga, as well as the chief executive of Samarco, Ricardo Vescovi De Aragao."
"We have also offered our full assistance to the Samarco team, and the local authorities, to manage the immediate rescue efforts and help first with the clean-up and then the investigation," he added.
BHP and Vale each hold a 50% stake each in Samarco.
The Samarco operation produces around 30.0 million tonnes of iron ore pellets a year, and according to Shore Capital analyst Yuen Low any production losses would therefore be "relatively minor" in terms of both BHP's and Vale's wider production portfolios.
"We expect BHP's shares to be in the red today due to the bad press. In terms of commodity prices, pending confirmation as to the exact scale of the disaster, we see potential for a minor positive impact on pellet prices. We do not expect any significant reaction in the fines benchmarks," said Low.
BHP shares were down 4.7% to 985.20 pence per share on Friday morning, by far the worst performer in the FTSE 100.
SP Angel said the incident is a "much bigger hit" to BHP's reputation, and said the miner has invested "a lot" of capital expenditure on developing the three slurry pipelines at the mine which transports production to the port where the iron ore pellets are produced for export.
SP Angel said it would "be a shame" if there had been any safety breach at the tailings dam.
By Joshua Warner; [email protected]; @JoshAlliance
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