BHP BHP Group Limited

By Paul Kiernan 

RIO DE JANEIRO -- Brazilian mining giant Vale SA said Tuesday it hopes to restart operations in mid-2017 at its Samarco Mineração SA joint venture, which has been shut down since a dam failure killed 19 people in November 2015.

Vale and its partner in the venture, Australia's BHP Billiton Ltd., had disagreed in recent months over how to proceed with the restart. At the company's annual investor day on Tuesday, however, Vale General Counsel Clovis Torres said that dispute was somewhat ironed out at a meeting last week.

"We're still maintaining mid-next year as the target for Samarco to return to its operations," Mr. Torres said, adding the two companies expect to reach an agreement to move forward in December.

Samarco's operating license was revoked after its massive Fundão tailings dam collapsed on Nov. 5, 2015, unleashing an avalanche of mine waste that polluted some 400 miles of rivers and is widely considered Brazil's worst-ever environmental disaster.

With its business suspended and no cash flow to sustain it, the joint venture ran out of money this year and has defaulted on debt payments in recent months. That has forced Vale and BHP to step in and pay for cleanup and remediation efforts that are expected to drag on for years and cost billions of dollars.

Brazilian prosecutors this year have announced a civil lawsuit claiming more than $45 billion in damages and a criminal case charging 21 current and former officials at Samarco, Vale and BHP with homicide in response to the tragedy. They have also bristled at the companies' hopes of resuming operations as quickly as possible, saying safety should be the top priority.

Carlos Eduardo Ferreira Pinto, one of the public prosecutors working on the case, said the dikes that Samarco built to keep more waste from escaping Fundão regularly overflow when it rains. The Samarco is under pressure to restart from its parent companies, he said, as well as the Minas Gerais state government, which depends on mining for tax revenue, jobs and investment.

"All the measures adopted by Samarco so far have been insufficient and aimed at resuming operations," Mr. Pinto said in an interview. "That puts society at risk."

Obtaining a new license isn't likely to be easy, with regulators hesitant to sanction the sort of low-cost, earthen dam Samarco had previously used to store its waste.

Vale's preferred solution -- to let Samarco fill one of its exhausted mine pits -- had initially been opposed by BHP Billiton.

"We agreed that we could go ahead and put the license [request] forward to the authorities with Vale's infrastructure regardless of us signing an agreement, because it's the only way that we feel is possible," Mr. Torres said Tuesday.

Mr. Pinto said his team of prosecutors has hired a research institute to analyze the technical studies Samarco submits in its licensing process and plans to "rigorously" monitor it. If the prosecutors don't feel comfortable with Samarco's plan, they will challenge the license in court, he added.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

November 29, 2016 17:05 ET (22:05 GMT)

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