Brazil to Pursue Criminal Charges Against Vale After Deadly Disaster -- 2nd Update

Date : 01/29/2019 @ 12:17AM
Source : Dow Jones News
Stock : Cia Vale Rio Doce (VALE3)
Quote : 57.0  1.83 (3.32%) @ 10:45PM

Brazil to Pursue Criminal Charges Against Vale After Deadly Disaster -- 2nd Update

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By Paulo Trevisani and Jeffrey T. Lewis 

BRUMADINHO, Brazil -- Brazil's top prosecutor said she would pursue criminal charges against executives at Vale SA, the world's largest iron-ore miner, and the government said it was ordering inspections at dams across the country after a deadly disaster at one the company owned.

Vale's shares plunged nearly 25% on Monday and the company said it would suspend dividend payments and share buybacks after the miner's second deadly dam collapse killed at least 65 people on Friday. Iron-ore prices jumped, fueling speculation of lower supply ahead.

The miner said it would immediately donate $27,000 to each family affected.

Prosecutor General Raquel Dodge said the company should be severely punished for the dam's collapse, its second such incident in less than four years. The government also said it would publish an official order on Tuesday to demand state governments immediately inspect 140 or so dams similar to the one that burst in the town of Brumadinho in the southeastern state of Minas Gerais.

"The government will do everything possible to make sure this is the last time something like this happens in Brazil," Attorney General André Mendonça said. It is possible the government will also demand higher damages than it did over the 2015 dam collapse because so many people died, he said in an interview with The Wall Street Journal. Three years ago, Brazil's government sued Vale and BHP Group for $5.3 billion when their dam burst at the Samarco mine.

Israeli troops joined the search operation on Monday, using equipment typically employed in submarines to hunt for cellphone signals from the 279 people still missing. But even if the victims' cellphones still have battery power, their owners have likely perished, buried now for three days deep in mining waste, rescue workers said.

Fabio Noronha, a 34-year-old bar owner who volunteered to help in the search, said it was becoming increasingly difficult to extract corpses from the mud, which has begun to harden under the tropical sun.

The quickest way to spot them is "a dark spot in the mud, a body part sticking out, or the smell," he said.

The dam's collapse, which is shaping up to be the most deadly mining incident of its kind in more than 50 years, comes just over three years after Brazil's worst environmental disaster, when the Samarco mine dam burst 80 miles away in Mariana, killing 19 people. At the time, Vale swore it would never happen again, employing the country's best geotechnical engineers to verify its tailings dams, used to hold the waste generated from mining.

"Mariana never again" had been the company's motto ever since.

But it happened again at midday Friday. A dam at the Córrego do Feijão mine that was as tall as a 28-story building burst open, unleashing an avalanche of reddish mud so powerful that it dragged some workers having lunch at the on-site canteen more than a mile down the valley.

Jefferson Ferreira dos Passos, 32, a local farmer, saved two women who clung to tree trunks, wading neck-deep into the mud to bring them to safety. "It was like swimming in jelly."

Vale said it doesn't know what caused the dam to burst, leaving residents nervous over potential problems at other dams. German safety certifier TUV SUD inspected the Córrego do Feijão mine in September and found it to be stable.

"Just imagine how many more dams like this one are about to burst," said Rosilane Maria Felipe, 47, whose cousin Wesley was working as a machine operator at the mine when the dam burst. She has lost hope he could still be alive.

Brazil's National Water Agency said in a 2014 report that the country has more than 600 tailings dams, and about 144 of those are large enough to cause catastrophic social environmental and economic losses should they fail, said Lindsay Newland Bowker, the founder and executive director of World Mine Tailing Failures, a global team of experts who study causes and consequences of dam failures.

The type of tailings dam generally used in Brazil, known as an upstream dam, is the cheapest to build, but also carries a higher risk of catastrophic danger, experts say.

Ms. Bowker said the dam may have burst as a result of a phenomenon called static liquefaction. Tailings dams are made of lawyers of mining waste that gradually dry out. If new layers are added too early, the dam's contents can quickly turn into an avalanche of mud.

"Brazil is totally locked into a portfolio of existing, very large upstream dams," Ms. Bowker said. "They should be on the top priority list for systematic reassessment by the government."

Judges have frozen about $3 billion of the company's assets in response to Friday's disaster to fund relief efforts and structural work to shore up the dam.

Brazil's environmental agency, IBAMA, has fined Vale $66 million, while the state of Minas Gerais has ordered the company to pay $26 million as a penalty for the breach.

The dam disaster comes less than a month into the administration of President Jair Bolsonaro, who underwent surgery on Monday to reconnect his intestines after he was stabbed in the stomach while campaigning.

The former army captain has won praise for his government's quick reaction, setting up a crisis cabinet and sending troops and rescue workers on the same day as the accident, and visiting the site the following day.

But the market-friendly right winger has also been a vocal advocate of deregulation, insisting on the need to reduce government interference in the economy. After the catastrophe at Brumadinho, Mr. Bolsonaro might have to scale back his plans, some analysts said.

"It makes it harder for him to carry out his deregulation agenda. Political attacks from the opposition, and public opinion, will probably force him to change his plans," said Rafael Cortez, a political scientist at São Paulo-based consulting firm Tendências.

--Luciana Magalhaes and Samantha Pearson in São Paulo contributed to this article.

Write to Paulo Trevisani at paulo.trevisani@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com

 

(END) Dow Jones Newswires

January 28, 2019 19:02 ET (00:02 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.


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