Samarco Sets Sights on 2020 to Resume Operations

- October 28th, 2019

After four years of lawsuits and red tape, the Brazilian iron ore mine run by Vale and BHP has an official timeline to open.

Samarco, a joint venture between Vale (NYSE:VALE) and BHP (ASX:BHP,LSE:BLT,NYSE:BHP), has announced plans to reopen its namesake iron ore mine by the end of 2020.

The mine was initially shut down following a major dam collapse in 2015, which left 19 people dead and contaminated the surrounding lakes. Officials have deemed the catastrophic event the worst environmental disaster in Brazil’s history

Samarco received a corrective operation license on October 25 that will allow the company to resume operations at the asset in the coming year.

The company plans on implementing a filtration system that will take about 12 months to build. Once the filtration process is ready and shareholders sign off, the company will restart its operations.

According to Samarco, the filtration process will allow the mine to substantially dewater sand tailings and stack said tailings in piles safely.

“With the approval of the (Corrective Operation License) application, Samarco is authorized to restart operations, but first we want to adopt new filtration technologies that will increase safety, a key principle that guides our work for Samarco’s recovery and operations,” said Samarco CEO Rodrigo Vilela.

As mentioned, Samarco is a joint venture between BHP and Vale, and those two companies were held responsible for the 2015 accident. BHP agreed to pay US$211 million in financial support to the Renova Foundation to aid victims, while Vale settled a US$5.3 billion civil lawsuit with the Brazilian government. 

The accident had a major effect on both companies, particularly BHP. In July 2018, BHP was served with a class-action lawsuit on behalf of BHP shareholders, who were seeking to recover losses from the period following the disaster. 

In October 2018, the two companies were able to come to an agreement with the country of Brazil. They now make compensation payments to the relatives of those who lost their lives in the collapse. 

Since the collapse, the dam has been idle as it must acquire new licensing and approval. BHP announced its initial timeline in August 2018, with the expectation that it would not reopen until after 2019. 

In New York, BHP’s shares were trading at US$49.97 on Monday (October 28), while Vale’s share price was at US$12.18.

Iron ore is currently changing hands at US$90.23 per tonne. 

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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.

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