Mayor con­cerned over wa­ter use stops mine restart

The Star Early Edition - - BUSINESS NEWS - Bloomberg

BHP BIL­LI­TON and Vale’s crip­pled Sa­marco mine, once the world’s sec­ond-largest pro­ducer of ironore 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 last 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. He is call­ing for a sep­a­rate study to be done to test for pos­si­ble dis­rup­tions to wa­ter flow.

The Sa­marco Min­er­ação 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 (R29.55bn) in bond obli­ga­tions.

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 li­cence 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 on Thurs­day.

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 on Thurs­day. 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. – Bloomberg

The com­pany (Sa­marco) is tak­ing all suit­able steps to re­solve the sit­u­a­tion as soon as pos­si­ble.

PHOTO: REUTERS

BHP Bil­li­ton’s of­fice in Perth, Western Aus­tralia. The Brazil­ian city of Santa Bar­bara has de­clined to sign off on a plan for BHP Bikki­ton and Vale-owned Sa­marco to con­tinue to use wa­ter from a nearby river.

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