CEO sees little chance of Samarco restart in 2017

The Samarco iron ore mine in Brazil – a joint venture Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP) – is unlikely to resume operations before the end of the year.

Samarco Mineracao ceased operations in November 2015 following a deadly tailings dam burst. CEO Roberto de Carvalho told Reuters that talks with South American nation's environment authorities to restart operations is ongoing but there's only a "small possibility" of a restart this year:

"It is getting increasingly tight to resume operations this year," Carvalho said in a telephone interview. "Each day that passes makes it tighter."

At 30 million tonnes per year before the disaster Samarco's pelletizing operations supplied roughly one-fifth of the seaborne trade in the steelmaking raw material that attracts a premium price over iron ore fines and lump ore. Earlier Samarco said that should the mine reopen output would likely be capped at 19 million tonnes per year.

The uncertain timing of a new environmental licence to restart operations had forced the company to move to lay off over 1,000 workers last year. Samarco is also in debt restructuring talks with its bankers concerning $3.8 billion in outstanding loans.

A settlement in a civil lawsuit brought by Brazilian prosecutors for 155 billion reais (nearly $50 billion today) against the two companies and Samarco is being negotiated with a deadline for an agreement set for June 30.

In March last year Vale and BHP reached a deal with Brazilian authorities and the mine owners agreeing to pay an estimated 24 billion reais or $6.2 billion spread out over several years.

The disaster in Brazil’s Minas Gerais state that killed 19 people caused sludge to wash downstream into neighbouring state Espírito Santo through remote mountain valleys reaching the Atlantic ocean 600 kilometres away.

The benchmark Chinese import price for iron ore fines fell sharply to $59.30 on Wednesday, down more than 25% year-to-date.