With a missed debt payment hanging over its head and BHP Billiton (BHP) and its Brazilian partner, Vale, still facing massive costs and penalties from the Brazilian government, a game of ‘dare’ has emerged over the future of the Samarco iron ore mine where a disastrous dam collapse late last year devastated villages and the environment, killing people and causing billions of dollars in damage.
Thursday night sees the shareholders of BHP Billiton Plc meet in London where the future of the stricken Samarco iron ore mine and pellet plant operation in Brazil will be high on the agenda, with talk now of it possibly not restarting.
A day earlier, BHP will have released its first quarter operations review which should contain more details about Samarco’s future and the progress of claims against the company (and Vale, the co-owner of Samarco) by Brazilian governments.
The possibility of the mine not restarting appeared in a story in London’s Sunday Telegraph has raised the possibility that BHP cannot guarantee Samarco will be reopened.
The company says, according to a senior executive that Samarco would have to be economically viable to justify a restart and therefore its future was “not assured”.
The mine has been closed since November last year the tailings dam collapsed, sending a tidal wave of mud across the neighbouring landscape, killing 19 people, injuring others and flattening two towns.
“It’s very important for the region, the employees, the shareholders and the country that Samarco restarts,” according to quotes in the Sunday Telegraph by Dean Dalla Valle, BHP’s commercial officer, who has led the company’s response to the disaster since February.
"Technically, that can happen quite quickly but a number of approvals are needed. We’d need to look at what the costs would be. We can’t sign blank cheques. We’d very much like to see it restart but it has to be done under conditions where the revenue it makes can offset the costs. Restart is not assured.”
The most immediate problem is Samarco’s $US3.8 billion ($A5 billion) debt. Last month it missed an interest payment on a $US500 million bond, though it has a 30-day grace period in which to pay. That expires after the London meeting, on October 26.
Samarco,which has laid off more than half its 5,000 workers, has had no cash flow since suspending operations and claims it can’t meet the interest payment.
While many locals are keen for it to reopen as it is a major contributor to the local economy, but that is unlikely to reopen before the second half of 2017, if it happens at all.
The London meeting will see an argy bargy between activists against BHP and Vale over the clean up after the disaster and opposition to the mine restarting.
BHP and Vale are known to be concerned about more penalties from Brazilian governments and you get the impression that if there is opposition to the mine’s restart, and then more penalties imposed over the disaster, then it will be all too hard and costly for Samarco to re-open, and 5,000 people will be out of work.
