BHP calls for body to oversee tailings dams

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Olympic Dam is a multi-mineral ore body containing uranium oxide, copper, gold and silver. Source BHP

BHP Billiton Ltd. [BHP-NYSE; BHPLF-OTCPK] CEO Andrew Mackenzie is urging the global mining industry to ensure there is no repeat of the recent collapse of a tailings dam at Vale SA‘s [VALE-NYSE], Brumadinho iron ore operation in Brazil.

The Brumadinho dam breach, which occurred on Friday, January 25, 2018, killed 169 people.  Another 141 have been declared missing, according to published reports. The incident has prompted Brazil to impose a ban on so-called upstream dams. This type of dam will need to be decommissioned or removed by August 2021, according to a resolution that was published by the National Mining Agency on February 18, 2019.

“The recent tragedy at Vale’s iron ore operation shows we, as an industry, must act with even greater urgency to make sure these incidents do not happen,” Mackenzie said in a statement that contains BHP’s half year financial results.

“At BHP, we welcome a common, international and independent body to oversee the integrity of the construction and operation of all dams,” he said.

“And we support the call for increased transparency in tailings dam disclosure.”

The tailings dam breach near Brumadinho has been declared a Brazilian national disaster. Three years ago, a similar disaster occurred in the same state at a mine operated by Samarco, a joint venture involving Vale and BHP Billiton. It resulted in the death of 19 people and poisoned local drinking water.

In British Columbia, a tailings dam breach at Imperial Metals Corp.‘s  [III-TSX] Mount Polley copper-gold mine in August 2014  released over 21 million cubic metres of water and mine tailings in the surrounding environment and water courses.

According to B.C.’s Chief Inspector of Mines, the spill was due to a structural failure of the Mount Polley tailings storage facility perimeter embankment.

Fitch and Moody’s recently downgraded their credit ratings on Vale “on the expectation that the company will incur heavy repatriation costs as a result of the Brumadinho accident and the expectation of decreased production in the near-to-intermediate term and additional capex for remediation and other expenditures needed to ensure safety.

Mackenzie said BHP has significantly increased the rigour of its assessment and management of tailings facilities since the failure of the Fandao dam at Samarco in 2015.

“Dam safety reviews have been performed at all significant active, inactive and closed tailings facilities across BHP, including a thorough evaluation of risk,” he said.

Vale recently presented to Brazilian authorities a plan to decommission all of its dams built by the upstream method. “The plan presented to the Brazilian authorities aims to de-characterize these structures as tailings dams in order to reintegrate them into the environment,” the company said.

Vale said it currently has 10 dams built by the upstream method. All of them are currently inactive.

The company has estimated that it will cost around US$2.5 billion to decommission its upstream dams, a process that is expected to occur over the next three years.

In order to carry out the decommissioning of the upstream dams safely and quickly, Vale said it would temporarily halt the production of units where the structures are located. It said the estimated impact of the production stoppage is about 40 million tons of iron ore per year. Included in this figure is the pellet feed needed for the production of 11 million tons of pellets.

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