Brazilian iron ore pellet maker Samarco eyeing 60% production capacity by year-end

Brazilian iron ore pellet producer Samarco now expects to reach 60% of full production by the end of this year, amid expectation that a final agreement on the biggest mining litigation in the country's history is close.

The company, a joint venture between Vale and BHP, announced that it is resuming operations at two pelletizing plants in the Ubu complex in Espírito Santo state. 

The reactivation of the P3 plant is a big step towards achieving the company's plan to reach 60% of full production capacity by the end of this year, it said in a statement. To reach that level, Samarco is investing 1.6bn reais (US$287mn).  

The gradual ramp-up of operations also includes the construction of a new waste filtration plant in Mariana and the reactivation of a concentrator in the Germano complex in Ouro Preto, both in Minas Gerais state. 

That will put the company's production at approximately 15Mt/y of iron ore pellets and fines.

The resumption of operations at the P3 plant was scheduled for March 2025, but was brought forward so it could run with surplus ore from its P4 pelletizing plant, optimizing production processes. 

Samarco is currently operating at 30% capacity, equivalent to around 9Mt/y of iron ore pellets and fines. Since it resumed operations in December 2020, it has produced 30.7Mt. 

The company is aiming to reach full production capacity by 2028, with output climbing to 30Mt/y of iron ore pellets.

MARIANA AGREEMENT IN SIGHT

Samarco was directly responsible for one of the country's worst environmental mining disasters in 2015, when a tailings dam collapsed, destroying communities in Mariana, Minas Gerais state, killing 19 people and causing serious and extensive environmental damage.

The dam failure led to the release of an estimated 40Mm3 (million cubic meters) of toxic mud and mining waste into rivers in Minas Gerais and Espírito Santo states, eventually reaching the Atlantic Ocean.

After the tragedy, the company was forced to halt production until December 2020, which led it to file for bankruptcy protection to renegotiate its debts. 

Samarco, Vale and BHP have been holding talks with authorities on a compensation agreement, which is likely to be the largest in the country’s history. 

"I think it's possible for us to reach a final agreement between the companies and authorities by the end of this year. In terms of values, I would say that what the companies are offering and what the authorities are demanding are already fairly close," a source directly involved in the negotiations between the parties told BNamericas on condition of anonymity.

"Perhaps the biggest point of disagreement that prevents the finalization is the recognition by companies of having to remove waste that persists in the Doce river," the source added.

The country's attorney general’s office, the AGU, recently rejected a Vale-BHP offer of 127bn reais that would have involved only 72bn reais in fresh funds, as the companies claim they have already disbursed billions in compensation since the collapse of the dam.

AGU is demanding 109bn reais in fresh funds to be paid over 12 years, without considering the amount already paid.