BHP reviews its operations after disaster
BHP BILLITON was reviewing the operating structure of mining joint ventures with companies, including Glencore and Anglo American, in the wake of the deadly Brazil mine disaster, it said.
The world’s biggest mining company is reviewing Samarco Mineração, its joint iron ore operation with Vale in Brazil’s Minas Gerais state, after tailings dams burst on November 5, sending a torrent into a valley below and killing at least nine people.
It would also assess the Antamina copper operation in Peru and its Cerrejón coal venture in Colombia, BHP chief executive Andrew Mackenzie told investors on Monday.
Three of its mining joint ventures – Samarco, Antamina and Cerrejón – were operated by stand-alone entities owned by the partners, while in BHP’s petroleum business one of the partners acted as the operator, he said. BP and Chevron are among BHP’s oil partners.
Of 19 major assets in its portfolio of wells to mines, BHP operates 12 of the sites, according to a March filing.
“That is the kind of arrangement we need to review and have been reviewing,” Mackenzie said. BHP would assess “whether a more petroleum-type model might be more appropriate in the future,” he said.
Compensation
BHP shares closed 1.3 percent higher at A$20.37 (R208.07) in Sydney yesterday, while Rio Tinto Group climbed 1.5 percent and Fortescue Metals Group fell 1.3 percent.
Prosecutors in Brazil intend to demand that Vale and BHP pay compensation of about 1 billion reais (R3.75bn) for damages after the Samarco incident. Samarco would set aside $260 million (R3.74bn) to fund emergency measures, including prevention, remediation and compensation for the environmental and social effects of the incident, BHP said yesterday.
While any changes to the structure of joint ventures could speed up decision-making and allow for the adoption of more unified standards and working practices, it would be complicated for companies that own an equal share of a joint venture to select a single producer to take the lead, Paul Young, an analyst at Sydneybased Deutsche Bank, said.
“The issue is, when you have equal ownership and you have one operator, who’s going to be the operator and who do you choose?” Young said. Any change would likely take years, rather than months, he added.
Review of dams
BHP and Glencore both hold a 33.75 percent stake in Compañía Minera Antamina, which operates Peru’s Antamina copper mine, while Teck Resources has 22.5 percent and Mitsubishi holds 10 percent, according to filings. Glencore, BHP and Anglo American each have a third share in Cerrejón Coal, the filings show.
Glencore was not immediately able to comment in response and Anglo did not immediately respond to a phone call and e-mail requesting comment.
In addition to its consideration of operating structures, BHP was also conducting a review of dam facilities across the organisation, Mackenzie told investors.
“We are hungry for the lessons that we can learn from Samarco,” he said. “We are clearly looking at ways we can run the vast bulk of our business even better.” – Bloomberg