BHP shares hit a seven-year high close of $35.08 yesterday after prosecutors in the Brazilian state of Minas Gerais state said they reached a final compensation deal with Samarco and its joint owners, Vale and BHP Billiton regarding a fatal 2015 dam collapse that became Brazil’s largest-ever environmental disaster.
BHP shares climbed 1.1% to end at $35.08 yesterday, the highest they have been since 2011, in the early stages of the China resources boom. The shares touched a day’s high of $35.16 during trading as investors reacted positively to the news.
Reuters reported that according to a statement from prosecutors released late on Tuesday, the deal allows for compensation payments to start to relatives of the 19 people killed in the disaster, as well as to people who lost their houses and other properties.
No financial details of the deal were disclosed in the short statement on Tuesday, but Reuters reported that the chief prosecutor in the city of Mariana will hold a press conference on Wednesday to discuss the agreement and reveal more details.
Brazil’s worst environmental catastrophe happened when a dam designed to hold back mine waste from the Samarco iron pellets operation in Mariana burst in 2015, leaving a trail of destruction for hundreds of kilometres in Minas Gerais and Espírito Santo states.
With this last settlement, the companies might be able to prepare to resume operations more than two years after the accident. And they might find that demand for Samarco’s high-grade iron pellets is solid and growing.
Vale had said it expects the Samarco mine and processing operation to resume operations in 2018 or early next year, but it has extended the expected start-up forecasts several times.
But permits to resume mining and processing ore have not been granted and they need sorting out before BHP and Vale can think about restarting Samarco.
Early 2019 is now the best estimate from industry analysts, but others reckon it could be another year or more. The looming Brazilian elections may be an important factor.
There is actually rising demand for Samarco’s pellets. Before the dam disaster, it was the second largest producer of iron ore pellets globally.
But since 2015, Chinese steel mills have sought higher grades of iron ore and been looking for more pellets to limit pollution and improve their economics. Pellets do not need sintering like iron ore lump and fines do, so this improves their appeal.
