Samarco to invest nearly US$400mn to reach 60% capacity

Brazilian iron ore pellet producer Samarco Mineração – a joint venture between mining giants Vale and BHP – plans to invest 2 billion reais (US$377 million) this year compared with 1.6bn reais in 2023. 

With the funds, the firm expects to reach 60% of production capacity at the end of the year compared with 30% at the end of 2023, the firm said in its annual sustainability report released this month.

The company expects to reach full capacity in 2028, with output climbing to 30Mt/y of iron ore pellets.

LEGAL ISSUES 

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

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. 

Due to the incident, 40 million cubic meters of toxic mud and mining waste were spilled into rivers in the states of Minas Gerais and Espírito Santo, reaching the Atlantic Ocean.

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. 

The 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 requesting 109bn reais in fresh funds to be paid over 12 years, without considering the amount already paid.

Earlier this month, the companies presented a new offer to authorities involving 140bn reais and comprising 37bn reais already invested in repairs and compensation, a cash payment of 82bn reais over 20 years to the federal government, the states of Minas Gerais and Espírito Santo and municipalities, and 21bn reais in other obligations.

The companies want a longer period for the cash payment to take advantage of the total resumption of Samarco's capacity, which would mean Vale and BHP would not need to inject their own resources into the agreement.

The companies expect to reach a final agreement with the authorities in the coming weeks, a person involved in the talks told BNamericas, asking not to be named.

Last year UK law firm Pogust Goodhead, which represents 700,000 people affected by the Mariana catastrophe, obtained an order for the case to be heard in a London court, where lawyers are seeking around 230bn reais in compensation for the victims.

José Eduardo Cardozo, a former Brazilian justice minister and current legal representative of victims on behalf of Pogust Goodhead, told BNamericas that the legal procedures in a court in England are likely to continue despite the proposal made by the mining firms in Brazil and they involve individuals and small municipalities.

Recently, Brazilian mining association Ibram, which represents large mining companies, asked the country's supreme court to declare unconstitutional any attempt by Brazilian municipalities to resolve the dispute in overseas courts.