Tailings dam collapse leaves 58 dead, hundreds missing

January 28, 2019

The collapse of a tailings dam in Brazil has left at least 58 people dead and hundreds more missing. The dam failure occurred on Jan. 25 at Vale’s iron ore mine in the town of Brumadinho in Minas Gerais state.

It is the second time in less than four years that Vale has been part of a dam failure in Brazil. In 2015, 19 people were killed when a larger dam, owned by the Samarco Mineracao SA joint venture between Vale and BHP, failed. That was the nation's worst environmental disaster at the time.

The most recent dam failure is almost certain to deal a significant blow to the mining industry in Brazil that is already grappling with investor wariness and a poor image. It will also cast doubt on new President Jair Bolsonaro's vow to reduce government regulation of the mining industry.

Lawyers representing victims of the Samarco dam collapse told Reuters that the financial implications of the new tragedy are open-ended and potentially crippling for Vale.

Brazil’s attorney general, Raquel Dodge, announced a task force to investigate the cause of the Brumadinho disaster, and judges ordered Vale to set aside 11 billion reais, about $2.9 billion, to pay damages caused by the dam collapse.

"This calls into question the financial viability of Vale going forward because of the sheer scale of their potential liabilities," Tom Goodhead, a lawyer at SPG Law, told Reuters.

Vale Chief Executive Officer Fabio Schvartsman said the company did everything possible to verify all its dams were safe in the aftermath of the 2015 dam burst.

With the prospect of class action suits from shareholders, as well as possible criminal and civil suits in Brazil, liabilities could easily exceed the initial provision.

Last year, Vale settled a 20 billion reais ($5.4 billion) civil claim with local authorities to establish a clean-up fund for Samarco. Federal prosecutors suspended but have not closed an even larger lawsuit.

Vale is a member of the International Council on Mining and Metals (ICMM), which seeks to establish best practice guidelines.

Following the Samarco dam burst, the ICMM issued updated guidelines its members must should follow to try to safeguard tailings dams used to store waste left over from mining operations.

“It goes without saying that we still have lessons to learn from this disaster, and we will need to do everything we can to incorporate those lessons across the industry,” ICMM CEO Tom Butler told Reuters.

“Our thoughts are with those affected by what appears to be a major and tragic dam failure."

Related article search: