Vale ordered to pay $1.5bn for dam burst damages

The tailings dam failure on Jan. 25, 2019, killed 257 people and left 13 others missing for an assumed death toll of 270. (Image courtesy of Vinícius Mendonça | Ibama.)

A judge in the Brazilian state of Minas Gerais has partially granted an injunction sought by prosecutors by ordering Vale (NYSE: VALE) to set aside 7.9 billion reais (about $1.5 billion) to pay potential fines related to the tailings dam collapse that killed 270 people last year.

The figure adds to the 1 billion reais ($260m at the time) in frozen funds a federal court ordered Vale to pay affected communities shortly after the deadly incident.

About $48 million reais ($10.4 million) were released back to the company in March this year to fund a probe into the causes of the dam collapse.

The town of Brumadinho, where Vale’s Córrego do Feijão iron ore mine is located, suspended this month Vale’s license to operate on concerns workers were not respecting social distancing rules.

It also halted ongoing work to repair the mine’s tailings storage facility.

State prosecutors charged Fabio Schvartsman, the chief executive at the time of the burst, and 15 other people with homicide

The iron ore giant faces multiple legal actions over the incident, the deadliest in Brazil’s mining history. They include allegations that Vale was aware of the dam’s unstable condition years before the accident happened.

In January, state prosecutors charged Fabio Schvartsman, the chief executive at the time of the burst, and 15 other people with homicide. Schvartsman left his position at the company in March 2019.

They also charged Vale and its German contractor, TUV SUD, with environmental crimes, as the burst unleashed an avalanche of muddy mining waste that polluted the nearby town of Brumadinho, water streams, and agricultural land.

Tailings in the spotlight

The tragic incident has triggered over the past year several criminal investigations, including a global inquiry into the status of 726 tailing dams.

It has also put the safety of those structures under the microscope.

The International Council on Mining and Metals (ICMM), a London-based industry group representing 27 major mining companies, formed an independent panel of experts in charge of developing global standards for tailings facilities.

The Church of England, which invests in mining companies through its pensions for retired clergy, along with its partners, launched a global inquiry in April 2019 into the mining waste storage systems of more than 700 resources companies.

It now asks companies to disclose data on tailings dams on a regular basis.

Switzerland-based Responsible Mining Foundation (RMF) published a study in early April this year, showing that investor-led action had resulted in improved transparency regarding the state of such facilities.

The vast majority of miners, however, have yet to demonstrate they are reviewing how they effectively manage tailings-related risks.

The non-profit, funded by the Dutch and Swiss governments and some small philanthropic organizations, said that while a global standard on tailings management is a welcome initiative, it could be strengthened to become significant in terms of tailings safety.

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