Brazilian Federal Prosecutors File Suit Against Vale, BHP and Samarco for $US43.55 Billion Demanding Immediate Provision of $US2.8 Billion

May 4, 2016  2pm EST  USA

Lindsay Newland Bowker lindsaynewlandbowker@gmail.com

RIO DE JANEIRO—Brazilian federal prosecutors filed a civil lawsuit on Tuesday demanding that Samarco, BHP, and Vale , the mining companies responsible under Brazilian law  for a cataasrophic dam failure on November 5, 2015 payt up to 155 billion reais ($43.55 billion) for cleanup and remediation.

The 359-page lawsuit brought by independent federal prosecutors was the result of a six-month investigation .  Importantly, it also is against state and federal governments. Prosecutors accused the state of Minas Gerais, where the dam collapsed in November 2015, of negligence in its monitoring of the build up of waste and water sludge at the Samrco mine.   Every mine failure is ultimately a failed public private partnership in which miner and permit authority are co -responsible.

If upheld by a judge, the lawsuit would require Brazil’s Vale SA, Anglo-Australian miner BHP Billiton Ltd., and their joint-venture Samarco Mineração to make an initial deposit of 7.7 billion reais to an independent fund responsible for cleaning up the fallout from the Fundão tailings dam collapse on Nov. 5. The accident, the  worst environmental  tailings disaster in recorded history, released an avalanche of 60 million cubic meters of tailings and waters that killed 19 people, destroyed villages and polluted more than 400 miles of rivers before spewing into the Atlantic Ocean weeks later.  The huge plume of suspended wastes has not dispersed as anticipated  and  has returned to the bay  where phyto plankton species, the foundations of ocean health,  have changed dramatically.

Shares in BHP Billiton fell more than 6% in early trading in London.

Prosecutors filing this suit were not signatories  to,  and did not approve, the settlement agreement announced between the mining companies and Brazil’s government in early March. That  deal, the final of which has not been made publicly available,  provides specific minimum payments totaling  9.46 billion reais through 2030 via a foundation run mostly by their own appointees.  The settlement, however, at least in a draft dated days before the final, recognized that actual liabilities could exceed the $us 5.2 billion tentatively estimated as total damages early on after the man made catastrophe.

Shares of both Vale & BHP , after plunging in the wake of the disaster, had  rebounded on news of the settlement . Vale’s stock more than doubled between early February and late April, aided by a rally in iron-ore prices.

However, BHP’s shares slumped 9.5% on Wednesday, underperforming rival iron-ore miner Rio Tinto Ltd. and Australia’s benchmark share index. BHP’s stock is also weighed by weakening global oil prices, which are down more than 5% from their 2016 highs reached last week.

Prosecutors  announcing their action, criticized the deal for not involving victims in negotiations, for failing to establish legal mechanisms to ensure that the mining companies would meet their obligations, and for ignoring the government’s responsibility for the disaster.

“Input from the public prosecutors’ office was not considered by the negotiating parties,” the lawsuit said, adding that the government and companies appeared to be in a hurry to get a deal signed. “This resulted in a settlement that was incomplete, precarious and partial.”

Both the settlement and the prosecutors actions  are governed by Brazilian law which provides strict liability  and joint and several  liability among owners and their co owned operating subsidiary Samarco.  Neither has any bearing on criminal actions pending against Samarco Officials and their consultant VOGBR  who certified the dam  as safe t officials in July 2015.  Neither the agreement nor the prosecutorial action supercedes or overrides any claims individuals or  businesses may assert .

The Brazilian Federal prosecutors amount is not based on any revised estimate of actual total costs for recovery and compensation specific to the Fundao/Santorem damages but on reference to the BP Gulf disaster as a “comparable”

“Based on preliminary studies, the human, economic and socio-environmental impacts caused by the break of the Fundão dam are at least equivalent to those verified in the Gulf of Mexico,” federal prosecutors said in a news release. “It doesn’t seem technically or morally credible that…the human, cultural or environmental value of Brazil should be inferior to that of other countries.”

The $US45B is just a place holder and perhaps  more realistic than the initial estimate of $US5.2B ( which is not the ceiling in the settlement agreement either although referenced.  The draft settlement agreement recognizes that the full loss is non estimable and a good deal of it beyond any concepts of “replacement value” or “replaceable”).
The timing of the settlement announcement was to buoy, Vale and BHP  and give some hope to Samarco debt and bond holders.  At least its anticipation and announcement had  that effect in financial markets  who seem to need to believe that all three companies can survive this economically.
It is certainly a plus for the Public interest that the prosecutors, in taking this action, have spoken to the lack of transparency thus far and to the likelihood of unfair settlement processes if  the process is in Samarco’s control with no informed ( independent) control and direction.
Dislocation and resettlement are almost routine in mining.  It is thought of in the same vein as  displacements that occur for large important public works projects, including urban renewal projects.  Mining thinks of itself and has historically been regulated as if it were an “important public works” machinery.
The subtleties of loss and evaluation of loss in the case of the this largest tailings failure in recorded history of the world, are not within the capacity or culture of Samarco or any miner to assess.  They have a legal and moral duty to pay for whatever  it costs but they have no capacity to actually envision or actualize a fair recovery from the disaster they have caused in their any deviations from best knowledge, best science, best  practice at the Fundao.
The prosecutor has not specifically acknowledged that or shown a full undertstanding of that in this important action in the public interest but through the recognition of the need for transparency and community involvement it may lead to that.
It seems very clear the politics of the settlement agreement were not ever going to lead to that.

 

Posted in Samarco $44 billion lawsuit by Brazil, samarco disaser recovery, Uncategorized | Leave a comment

GUADALCANAL COMMUNITY DOWNSTREAM OF TROUBLED GOLD RIDGE MINE FEAR DEWATERING IS OUT OF CONTROL

April 7,2016

 

http://www.solomonstarnews.com/news/national/10086-heavy-rain-threatens-tailings-facility

 

Sadly, this news this morning from the Solomon’s, underscores the universality of the issues of disenfranchisement and lack of accountability to fundamental community needs and values that is indemic to the “social license to operate” as defined and promulgated by the mining cartel but also, as in this case,  adopted by local communities and indigenous peoples themselves.  In this case,  the mine owners are disgruntled landowners, a collective of 17 tribes of indigenous peoples who owned the land of the mine site,  who foolishly orchestrated a sort of hostile takeover of the  never profitable Gold Ridge Mine.  Local control motivated by profits and a piece of the pie without adequate technical knowledge and adequate capital is as dangerous and as disenfranchising to surrounding community as operation by any miner

 

All mines require adequate capital, excellence in techincal and scientific knowledge, and a standard of deisgn and  operation  that is accountable in the first instance to environmental security and preservation of community.  Local control and local input must be about securing this for every mine that is allowed to operate and expand.

 

This 20 million cubic meter  50 m  high TSF  has hovered on the brink of collapse for almost two years. Landowners sought what St Barbara had been denied before it was locked out: permission to dewater at a very high rate of release and without treatment. Because of downstream community and environmental issues UNESCO stepped in at the request of the Solomon Island Government ( SIG) with its own independent technically expert team and established standards on a safe rate of release and a requirement for treatment.  Local government had been prepared to and actually did grant an untreated release at unsafe levels far in excess of what UNESCO advised: 12,000 cubic meters per day vs 3, 572 cubic meters per day.

SIG & landowner/mine owners opted to await the  installation of the water treatment which only went on line March 29th .  By then overflow conditions had already been reached. Apparently also beginning that date an emergency untreated release was authorized but in fact it is literally overflowing the crest of  spillway  with no means of control or diversion so it cannot be properly called an “authorized release”.  All that , from UNESCO report  ’til March 29th, took a long time and the dam was in a crisis when all these discussions began ( as at Mt. Polley).    Nothing was ordered by SIG or initiated by  the 17 tribes who now own the mine to catch and hold any overflow even though it has been known for some time that an overtopping was likely.   Local control  has not brought increased levels of accountability to environmental security or to the safety and preservation of downstream communities.  

 

 

Like so many other mines that have failed at a catastrophic level this deposit was never properly assessed in the first instance. Flow sheets, and tinkerings with them over several turnovers in ownership, all propped up by the World Bank, IFC and the Australian Export Credit Agency never found a flow sheet that could profitably mine this anomalous deposit.  Recovery rates at each new expansion or tinkering got lower and lower from only 86% at outset to 69% when last operated. The latest tinker and expansion had already been initiated  and miners already knew it had failed again when they  went looking for some hapless buyer that they found in St. Barbara, after quite a time. (there was no long line of eager offerors).  St. Barbara has since admitted they did no independent assessment pre acquisition but relied on the representation of Australian Government.

 

Very shortly after St. Barbara’s ill advised acquisition, the rapid rate of deposition to the TSF, well beyond what facility designers had prescribed (it was filled to near max in a much shorter time than was planned life of mine)  had pushed it to the verge of crisis.  This is the story behind almost all catastrophic tailings failures.  Bad practice and/or miner incompetence.  Important to note that according to Golder , serving as ad IFC , the TSF was not built according to the state of the art plans submitted to all by Ross Mining, the original developer.  Critical aspects of the drainage system were never put in place.  No as built drawings of the TSF have been presented in Golder’s work for IFC or by UNESCO. 

St. Barbara went back to Australia leaving no personnel to manage the mine or reduce the threat level when local government refused to allow them a huge discharge of untreated water to avert collapse. (Such a release was not allowed under the terms of the IFC financing ) St. Barbara refused to install the promised water treatment facility which was destroyed  during their absence their site was taken over by  artisan  miners.  Government refused the security and protection St Barbara expected as a condition of returning in any way. (Throughout the life of the mine, miners and the Australian Government have “papered over” the fundamental issues of technical incompetence that plagued this mine  as a matter only of political risk and social unrest, of unpredictable fluctuations in commodity prices, and a disorganized and incompetent local government.)

 

Local government locked St. Barbara out and local landowners who were owed much money under prior agreements took control and ownership  including responsibility for all liabilities. SIG had refused to do so. They naively assumed , as many citizens do, that all mines are cash in the ground and that there would be a long list of interested parties to co venture with landowners in the reopening and operation of the mine. 

 

After quite awhile the only partner to step forward, AXF, a conglomerate of extremely wealthy Chinese individuals, has no experience whatsoever in mining ( they are in the entertainment and commercial property development business…not clear what motivated AXF but Bowker Associates is investigating whether again tinkering by the Australian Government, perhaps in connection with qualifying for investor immigration  requirements that trades  presence and investment  of foreign entities  for investment in desired or high risk projects ).  AXF created a separate entity for this partnership which was executed in December 2015.  AXF, like the hapless landowners, probably didn’t even know what questions to ask before it signed on.

 

So this apparently out of control dewatering, as it seems to the excluded and most directly threatened Guadalcanal community downstream, has no mining  competent persons involved locally to assess and oversee and accomplish a safe dewatering. ( At least no contracts with competent engineers and scientists have been announced).  There is no one of competence to speak to the concerns of the Guadalcanal community; no one of competence to give any meaningful assurances at all.

 

Speaking concerns is not enough to solve the complex complex problems of mining  necessary to satisfactory levels of environmental and community security.   Concerns, when addressed to the absence of competence can’t possibly bring fruitful or timely solutionsTo be effective on mining threats, spoken  concerns must  come with that competence and demand that that competence be provided as part of the operating and oversight of the mine.

 

This applies as well to concerns about fair and equitable implementation of the Samarco settlement and to the nature of mobilization required to bring that about.

  

 It illustrates that local control, especially without adequate capital for management and adequate technical know how is not inherently a positive and where a serious danger is present, as at this mine, puts the entire downstream at risk with no means of mitigating  the danger.

 April 8, 2016 Additional Press & Video http://www.sbs.com.au/news/article/2016/04/08/major-tailings-dam-spill-solomon-islands-disaster-gold-mine

 

 

 

 

 

Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager

Bowker Associates

Science & Research In The Public Interest

15 Cove Meadow Rd.

Stonington, Maine 04681

 

207 367 5145

 

lindsaynewlandbowker@gmail.com

Danger of continuing uncontrolled release recognized..dwnstream 8,000 warned but not offered any assistance .  Naezan and the coalition of 17 tribes who own the mine, whose management of it has fallen well below international standards for responsible management, had initially denied that the release was uncontrolled and that it was harmful fully aware of the UNESCO findings and warning that the maximum safe daily release of untreated waters is around 3,500 cubic meters per day.  The uncontrolled , uncontrollable release has greatly exceeded that.  Naezan acknowledged 95,00o cubic meters  over the dam without treatment since March 29th as of last Friday.April 7th.  That is an untreated release rate more 3 times the safe rate known to  SIG and Naezan’s coalition.   SIG, fully aware of the UNESCO advice which they themselves sought, had nevertheless issued a permit to Naezan’s coalition for an untreated daily release of 12,000 cubic meters.

The Naezan group’s new partner, AXF, an entertaninment/commercial property conglomerate  of wealthy Chinese investors  with no mining experience whatsoever has been silent but according to Naezan have had management control since December.  No deep pocket there though as they created a separate company for the partnership and Australian/Solomon Islands law does not have cut through provisions and strict liability as Brazil.

All are mum on cyanide also noted in the UNESCO report .  The initial plan for the mine which started in 1998 and as approved by IFC and the Australian export credit called for cyanide removal at the end for the water only but not the tailings themselves.  In a report by Golder for IFC they noted in 2011 this practice was below acceptable acceptable international standards and that the tailings should be treated before deposition and the waters treated before release..  That was the purpose of the water treatment plant.  No action was ever taken to remove the cyanide from the tailings before deposition.  ( The plan had been to close the wrongly built TSF and build a new one)

http://www.radionz.co.nz/international/pacific-news/301394/poisoning-warning-in-solomons

April 15 In a vague statement Solomons’ Island Environment Minister says Spill over under control and only treated waters being released now 

http://www.radionz.co.nz/international/pacific-news/301501/solomons-tailings-dam-spill-under-control

No details were made available on how much water actually escaped and/or were pumped nder the permit for unteated release;, what the current level of water in the dam is;  whether the treated waters are being held  for monitoring and testing prior to release as advised by UNESCO to the Solomon Islands Government or whether the rate of treated release is otherwise at the rate advised by UNESCO to the Solomon Islands Government.

 

Should this TSF fail, based on modeling of past  failures, this 20 million cubic meter 50 m high facility could easily spill 10 million cubic meters of arsenic and cyanide tainted tailings propelling them  with that nearly 1 million cubic meters of waters and the wall of the dam itself into the settlement of the 8,000 downstream.  If that should happen it would be the  3rd TSF failure in 30 months exceeding 10 million cubic meters.  It would be only the 6th release of tis size ever in recorded history.

 

Even with Samarco’s man made catastrophe and its horrific images so fresh and current in global awareness, this long  unfolding catastrophe  has received no notice outside of regional and local press.

 

 

 

 

Posted in Catastrophic Tailings Failures, Causes Of Catastrophic Tailings Dam Failures, Gold Ridge Mine, Tailings Risk Management, Uncategorized | Leave a comment

Blankenship , Energy CEO, Jailed In Fatal 2010 Mine Accident

 

Per Business Insurance

“Former Massey Energy Co. CEO Don Blankenship was sentenced Wednesday to a year in federal prison and ordered to pay a $250,000 fine for his role in the Upper Big Branch mine explosion in West Virginia that killed 29 miners in 2010.

“Mr. Blankenship was acquitted of all felony charges, but convicted of a misdemeanor conspiracy charge in December for willfully violating U.S. mine health and safety standards and received the maximum sentence and fine applicable under his conviction, according to news releases.

“This sentence is a victory for workers and workplace safety,” Acting United States Attorney Carol Casto for the Southern District of West Virginia said in a statement. “It lets companies and their executives know that you can’t take chances with the lives of coal miners and get away with it. Putting the former chief executive officer of a major corporation in prison sends a message that violating mine safety laws is a serious crime, and those who break those laws will be held accountable.”

 

Upper Big Branch Miners Memorial

Upper Big Branch Lost Worker Memorial

During the trial, more than two dozen witnesses, including coal miners who worked at Upper Big Branch, testified about unsafe working conditions at the mine, violations of U.S. Mine Safety and Health Administration regulations and organized efforts to obstruct and interfere with MSHA inspectors, according to the government’s release.

Mr. Blankenship’s motion to stay his sentence pending appeal was denied by the judge, who ruled he will self-report once the Bureau of Prisons determines where he will serve his sentence, according to a government spokesperson.

An attorney for Mr. Blankenship could not be immediately reached for comment.”

Don Blankenship

Massey Energy Company Chief Executive Officer Don Blankenship pauses as he testifies on Capitol Hill in Washington, Thursday, May 20, 2010, before the Senate Health and Human Services subcommittee hearing on mine safety. (AP Photo/Carolyn Kaster)

Criminal charges for homicide  against Samarco Execs, including their former President, and one consultant VOGBR,  have also been made but not yet heard. Heruculano Mine partners were recently indicted for murder for deaths in the 2014 tailings dam failure.

In a recent industry update the Insurance Information Institute reported

  1. Mining accounted for 7 of 147 man made disasters known to insurers in 2014( 5%)
  2. The 7 manmade* mining disasters in 2014 known to insurer resulted in 400 death but involved an insured loss amount of only $100 million indicating not the consequence of of loss but the very low presence of insurance and risk management outside of Property ($625 billion in insured assets) Business Interruption and Political Risk.

(*”manmade disaster” means arising from human activity and includes causes other than those originating from the insured miner’s operations)

In their 2016 Mining Market Outllook report global brokerage house Marsh & McClennan provides extensive stats and analysis showing that as risks have grown and the value of insured assets has grown, more and more insurers have reduced limits of coverage ( ie bought less coverage even though for property at least limits are generous and cheap.

In the worlds most costly and damaging mine failures, the Marsh report notes the  values the total damages was extremely low.   They made specific note of both Mt. Polley and Samarco..  Even for all those Tailings facilities rated “Extreme Hazard”,usually meaning that human settlements would be completely lost as happened at Samarco, permitting regulations and statutes rarely require adequate third party liability limits.

The government has assessed damages against Samarco of $(us)5.2 billion.  Samarco self reported that they had only about $600 million available for compensation from insurance almost all of that for their own proper  ty damages and their Business Interruption.  Under applicable liability applies and the settlement agreement, which flows the dictates f law, does not limit liability to that amount but sets minimums for each year to serve as benchmarks for minimum compliance ( falling below these minimums would consitute non compliance and subject Samarco, Vale & BHP to very costly daily penalties)  and further action under environmental crimes law.

The Upper Big Branch Mine disaster occurred on April 5, 2010 roughly 1,000 feet (300 m) underground in Raleigh County, West Virginia at Massey Energy‘s Upper Big Branch coal mine located in Montcoal. Twenty-nine out of thirty-one miners at the site were killed.[1] The coal dust explosion occurred at 3:27 pm.[2] The accident was the worst in the United States since 1970, when 38 miners were killed at Finley Coal Company‘s No. 15 and 16 mines in Hyden, Kentucky.[3][4][5] A state funded independent investigation would later find Massey Energy directly responsible for the blast.[6]

The Mine Safety and Health Administration (MSHA) released its final report on December 6, 2011, concluding that flagrant safety violations contributed to the explosion. It issued 369 citations at that time, assessing $10.8 million in penalties.[7] Alpha Natural Resources, which had bought Massey Energy in 2011, settled its corporate criminal liabilities with the U.S. Attorney for $209 million.[8] Investigation of possible personal criminal liability continues,[8] with one former superintendent, Gary May, pleading guilty in March 2012, and “confess[ing] to conspiring to ‘impede the [MSHA]’s enforcement efforts'”. The CEO of Massey Energy at the time of the disaster, Don Blankenship, was convicted in 2015 of conspiring to willfully violate safety standards. He was found not guilty of charges of securities fraud and making false statements.[9]

In April 2012, Coal producer Alpha Natural Resources Inc. (ANR) (the then current owner) said it will permanently close its Upper Big Branch mine in West Virginia.[10

Wikipedia Summary

Posted in Uncategorized, Underinsurance for Manmade Mining Disasters, Upper Big Bank Mine Explosion 2010 | 1 Comment

Samarco Agreement Draft A Springboard To Model Language on All TSF’s With “Extreme” Hazard Classification

“There will be complete restoration of socio-economic conditions and of the affected environment. And I want to emphasize: There will be no financial limits until there is full reparation,” Rousseff said, according to AFP. “We want to build a new life on the ruins.”
Attached please find a still very crude Google/Bing  translation* of  the February 26th draft of the Samarco, BHP, Vale settlement agreement on the $US5.2 billion in civil damages.

The actual final is still not available for examination but this draft as of a few days before the final was signed and announced, offers a  powerful, enlightened springboard to model language that should attend all approvals of TSF’s with “Extreme” or “Very High” hazard rankings. With eloquence, wisdom and  clarity this document recognizes the nature and extent of present, still unfolding and enduring loss and the impossibility of restoration to “as before” for so much of the social, cultural, biologic,terrestrial, riverine,watershed, marine and other losses this man-made, avoidable catastrophe has caused.  Even stray dogs and cats are mentioned and wild animals who have lost habitat as is the enduring collective trauma of witness to this event and the psychological damage of non-presence of any help or relief in its wake.

 

childs drawing before and after failure

When the river was clean, I and my family would go swimming every Saturday and Sunday. But that can’t happen anymore because it’s dirty and orange” 

​​”Quando o rio estava limpo, eu e minha familia ia tomar banho todo sabado e domingo. Mas agora não pode mas tomar porque está sujo de lixo e laranja.

By Gabrielly , Regencia, Brazil
Principal features of the agreement that are readily generalizable as  conditions attending any permit for any TSF and urgently needed as revised conditions for already permitted facilities with an “extreme” or “very high” hazard classification are:
(1) There is no limit of liability only an agreed commitment to full reparations and restorations over a 15 year period and beyond if necessary  under an open transparent  publicly controlled and monitored process completely apart from the permitting process and its authorities. This follows from the strict liability in Brazilian law from which miners everywhere have traditionally negotiated exemption . ( Strict liability in common law automatically applies to all consequence for ultra hazardous activities without limitation.  It is negligence per se for which no defense( other than natural catastrophe) is available).  It is therefore most likely that this provision is in the final agreement.
(2) The liability  is joint and several among Samarco, Vale and BHP and the original $US5.2 billion of the civil suit is reaffirmed as the best available estimate  and without any agreement to limit liability even to this amount.  This also follows from Brazilian law which has  cut through provisions built in where a subsidiary cannot finance its own liabilities for damages.  So this provision almost certainly is in the final agreement as it follows directly from law.  The schedule of payments are minimums and  part of a system of penalties for non compliance )  Again,there is no financial cap on the civil liability which by law is unlimited where strict liability applies.
​(3) The creation of a foundation as the vehicle for undertaking the main part of the reparation and restorations transfers no liability.  The liability remains with Samarco,Vale & BHP​.  The foundation is merely a public interest non profit vehicle for passing the funds from the miners to the many programs and projects it will take to carry out the full mandate of the agreement.  The one government seat on the foundation board allows an ongoing inside eye on the foundation’s operations and management.  The main control and oversight is via a separate external committee of municipalities and government agencies who decide what qualifies under this agreement.  Virtually all of what Samarco had claimed “as already spent on clean up” was disallowed.  The miners have no control over what consiitutes restitution, compensation, restoration and reconstruction.  These decisions are all solely in the public realm with full transparency and full accountability to each affected sector of the mine affected area.
(4) Funding is not pre conditioned on continued operation of the mine or its economic feasibility.  The obligation is to all of VALE, BHP and Samarco. ( again as distinguished from the BHP settlement at OK Tedi which transferred the mine itself to a “public benefit entity” and BHP was free of all liability via that transfer of ownership).
(5) No part of the reparation and restoration is for the mine itself ( at Mt Polley all of the money was spent on the mine itself essentially annexing, not restoring Hazeltine Creek. The responsibility and financing to make the TSF and waste piles safe against continued seepages, flows and breaks is in the context of the permit.
(6) The process of settlement of  damages is separate and apart from the law governing permitting operations and oversight and also only for civil liabilities.  The criminal charges are active under a separate “Environmental Crimes” statutes which have their own oversight as separate branch of law.  (It wasn’t designed for mining, it was designed for illegal clear cutting of the amazon but it has been serviceable and effective in  its application to this man made catastrophe).  I haven’t  seen any other comparable structures in law ..it is very different in purpose to say EPA ,Environment Canada  or at the State level in the U.S. DEP’s and  makes great sense for any political jurisidiction which has an extraction based economy.
(7) The agreement provides, overall, a fluid pre-determined out of court process for damages to have their own focus , their own accountability, that is not co entangled with the mine revenues.
As a condition of permits it would provide for immediate response on a finding that there was no “natural non MCE ( Maximum credible event) Cause”. More importantly it would disallow approval of any extreme or high hazard TSF without up front corporate capacity and commitment of security.  Simply put, applicants without extra deep pockets can’t build extra hazardous TSF’s.  They would have to go back to the drawing board with a less hazardous design or partner up with a deep pocket entity accountable to the permit authority ( ege through pledge of security in actual shares of the parent).  With a collective global commitment for miners and their permitting authorities to account centrally for consequence of loss, it will be possible to refine expected losses beyond what was done in Bowker Chambers 2015.  For now using best available data we can say that a non-mine source of revenue must be available to a specific mine project  to fund a $543 million loss over 10 years.   And of course only a handful of companies are large enough to do that.
(8) this obligation will have to be reflected on the books for Samarco Vale and BHP.  BHP has already taken a $5.2 billion write down for its share of the Samarco which is entirely separate accounting to do only with the present and future viability of the mine and nothing to do with this legal obligation for damages caused by faulty operation of the mine  BHP’s and Vale’s unlimited accountability  for these damages will have to be provided for in its annual statements at least until 2031.  This underscores the absurdity of  licensing TSF’s with an extreme or very high hazard rating to entities with no financial capacity whatsoever to be responsible for its own negligence.  The probability modeling used to justify these permits is actuarially absurd and further exacerbated by the reality that when miners stray from sound practices they dramatically increase the probability of loss and that loss will be felt in the mining affected area. .
The Samarco BHP Vale unlimited liability settlement underscores that the main emphasis, as respects existing and planned TSF’s, must be on preventing loss and not issuing permits or even accepting applications from entities that do not already possess the actual technical and financial capacity to develop a proven financially viable resource  for its projected life.  No community can absorb losses of this scale.  And THIS IS THE SCALE THAT ATTENDS MEGA SCALE SUPER LOW GRADE ORE  PROJECTS LIKE PEBBLE or the rejected Prosperity.
It is of note that Vale & BHP two of the worlds top miners, to protect their own viability, together still had to negotiate even the minimal payments set up to establish minimum compliance.. had to negotiate even  the  minimum annual payments schedule.  What this means is that there are only a handful of mining companies in the world large enough  to enter a compensation and reparations agreement of this scale with any hope of making good on it.
Bowker Associates believes that incorporating this language into all existing permits for extreme and high hazard TSF’s would most likely force large miners to establish some form of joint professionally managed self insured retention facility with an attending underwriting division that independently holds each TSF to the  highest standards.  Vale would not likely  have signed off on going ahead with the $3.1 billion expansion at Samarco knowing there was not adequate TSF capacity, knowing production would push the Fundao to  unacceptable limits, knowing there was no available land on site to create a facility that is big enough, knowing that an upstream dam should never have been used for a facility of this size in the first place,.   ( Of course no local permitting entity would accept certificate of insurance from any such facility..the local entity would rely only on security posted in the form of actual shares in the company guaranteeing the losses)
 Bowker Associates  will try to smoothe  the translation  out a bit more but does not have the resources to commission a full professional translation.  . If you are able to offer smoothe text for any portions would be very grateful if you would share.

Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager

Bowker Associates
Science & Research In The Public Interest
15 Cove Meadow Rd.
Stonington, Maine 04681

lindsaynewlandbowker@gmail.com

Posted in Analysis TSF Failures, BHP, Measuring Magnitude of Consequence TSF Failures, Samarco Settlement Agreement, TSF Design & Management Standrds, TSF Failure Environmental Costs, TSF Failures Consequence, TSF Risk Management, TSF Risk Profile, Uncategorized, Vale SA. | Leave a comment

Mining Financial Risks Post-“Super Cycle” Point to Escalated & Unexamined Already Accrued Public Liabilities & Environmental Security Losses

cuajone-copper-mine-43-l
Although this Ernst & Young report on “post super cycle” mining business risks speaks from the miners point of view, not from the environmental risk/public liability point of view, the economic realities presented here are what Bowker Chambers (2015) was pointing at (and named) as a major factor in the formation and manifestation of public liability risks.   This report details the dramatic elevation of global business risk in the mining & metals sector.  The steps the global mining cartel  have taken, and are continuing to take, to navigate what Ernst & Young lays out here  leave local communities with existing, operating, financially at risk zombie mines and zombie companies with ever higher levels of public liability risk and ever diminishing possibilities of intervention in time to prevent the irrevocable manifestation of that risk in environmental security breakdowns of unimaginable economic and biologic consequence.
 herculao dam failure_
The knowingly myopic focus of the ICMM, MAC and the other huge mining lobbies on “the mechanics of failure” in the wake of Mt Polley and the Samarco TSF failures is meant to divert public attention and any and  any demands for fundamental legal reform away from interference with the massive consolidation and reallocation of viable global mining assets under the control of a very few very large miners.
Those less desireable financially marginal assets spun off by the global cartel or, that a Zijin or some other notorious violator of human rights and environmental security will take on, will be beyond any control or accountability  to local voices and local rights and beyond the  reach of existing legal frameworks for mining.  Witness the Chinese owned Yukon mine, the Wolverine.  Those deposits  that not even the most avaricious foreigners will view as actual “assets”in this new epoch of metallic mining, will become, really already are, “stranded assets” both in the usual sense of that  in economic terms and  in a broader sense from the point of view  of local community, local budgets and GDP. (In other words what is being thrown as  life lines to these already fatally impaired mineralized deposits and/or what it will take to assure their environmental security, is a net financial loss to the local community and local natural resources.  There’s always a  community economic, social and environmental impact side to any economically stranded mine asset.( witness coal which is a far more advanced cycle  of loss of place in global economy)
 liquid gold
The global mining agenda being executed by the  mining cartel is the consolidation and therefore global market control of potentially still viable metallic  assets with a few large companies.  Non performing assets and assets that are fully depleted in this new era of mining will simly be written off and abandoned  They are already “stranded assets” in the fuller meaning of that economics term that Bowker Associates uses here.   They are already fully accrued but unexamined public liabilities.
The message to public interest and environmental advocacies is clear.  It isn’t enough to speak louder to the statistically irrefutable trend to increasing consequence and severity of loss from mines that have been mis planned, mis developed  and which cannot be  operated profitably even with the huge direct and indirect subsidies from the public sector ( approval of ever larger deferral of royalties and taxes, the push for lacustrine riverine and marine dispoal of tailings & toxic mine wastes etc). Witness among a long list in B.C.,  Taseko , Tulsequah and the Gibraltar Mine.
The message on behalf of environmental security is to pay much more attention to the  fundamentals  of economic viability and to global markets and trends.  To recognize that the present economic epoch of metallic mining puts the economics of mining on a collision course with environmental security at a greatly higher level of public consequence and real public  “off the top of GDP” cost.
Some points of advocacy that call for an essential fundamental  course correction in mining public policy  might include:
(1) a complete and immediate  financial risk assessment of all permitted assets and some sort of legislation to prevent  the abandonment or undesireable transfer of the assets  (ie keeping existing permit holders and their remaining assets accountable to the public consequence they are trying to escape  ( witness St. Barbara’s improved financial condition after  transfer of a trouble asset ( Gold Ridge Mine) to hapless local landowners.  Contray to local landowner expectations there has been no competition to take on this mine and its enormous liabilities). In plain English:..fine sell, but you are still  legally liable for the public liabilities accrued under your tenure unless the entity you want to sell to  has the assets and technical capacity to assume that liability and actually does.including taking immediate responsibility for the corrections necessary to make the asset immediately secure environmentally, and of course actually performing on this commitment ( which has not happened at Tulsequah).
(2) an immediate national and provincial re assessment of mineralized assets against these global economics and a responsible expertly informed  repositioning of the place of metallic mining viz competitiveness in global markets and effect on GDP
(3) a  complete reform of the legal framework for mining to insure that no mineralized asset is given a permit or allowed to submit an application without a peer reviewed proof  that:
(a) the deposit actually is financially viable life of extraction inclusive of and conditioned  on full incorporation of essential environmental security
(b) there is a field proven ( not theoretical or bench proven) technology /BAP available to attain adequate levels of environmental security (see unproven seepage control proposed at Tasekeo’s New Prosperity or the “innovations” to TSF’s of upstream construction that are outside best knowledge/best practice especially Samarco)
(c) the miner has the technical and financial capacity to undertake the proposed development within acceptable boundaries of financial risk.
If these are some of the mining legal framework  reforms which will assure higher levels of accountability to environmental security and public risk, the legislative drawing board must have input from all voices and sectors of expertise and advocacy.
contact: Lindsay Newland Bowker, CPCU. ARM Environmental Risk Manager, Founder & Director Bowker Associates Science & Research In The Public Interest  lindsaynewlandbowker@gmail.com
Posted in Bowker Associates Science & Research In The Public Interest, Catatrophic Tailings Dam Failures, Causes Of Catastrophic Tailings Dam Failures, Environmental Risk Management, financial risk and public liability, Fundao Talings Dam, Germano Tailings Dam Failure, Gibraltar Mine, Global Capital Squeeze In Mining, global cash flow crunch, global copper market outlook, Gold Ridge Mine, Height Limits of Earthen Dams, Highly Valued Natural Resources, lacustrine mine waste disposal, Lindsay Newland Bowker, Measuring Magnitude of Consequence TSF Failures, Metallic Mining Risk Management, mine Company Valutaion, Mine Feasibility, Mine Risk Management, Mining Economics, mining environmental risk management, Mining Financial Feasibility, mining post-supercycle, Mining Regulation, Mining Risk Management, New Prosperity Mine, plutonomy, politics of mining, polluter pays, Prosperity Mine, Public Liability & Financial Risk, Rate of Raise for Upstream Tailings Dams, Responsible Mining, Risk & Public Liability of Tailings Dams, Risk Avoidance & Loss Prevention Metallic Mining, Risk Economics and Public Liability of Tailings Dam Failures, Samarco falha de barragem de rejeitos, Samarco investigação de crimes ambientais, Samarco Mineracao S.A., Science for Sale, Social Premium of Metallic Mining, Tailings Dam Failures, Tailings Dam Risk Management, Tailings Storage Facility Failures, Taseko, TSF Failure Environmental Costs, TSF Failures Consequence, TSF Risk Profile, TSF Risk Profile Globally, Uncategorized, Upstream Tailings Dam Safety | Leave a comment

Samarco Executives May Face Homicide Charges For Deaths In Fundao Tailings Dam Failure

 It was reported on February 5th that Samarco executives may face homicide charges on the basis of victim autopsies and records seized by police.

We have gathered all of the findings from the autopsy reports, in which we determined that the crime of murder had been committed,” said Rodrigo Bustamante, who has been heading up the investigation for the state’s civil police

What is suggested in this report is that the evidence supporting criminal charges for murder  was based on (1) cause of death clearly attributable to the gigantic mudflow (2) that the risks  of failure and its consequence were clearly known and/or  forseeable and that  (3)  not  taking recommended steps to prevent failure .

As part of their criminal investigation, authorities carried out searches on the premises of the Samarco headquarters, in which they collected copies of emails and internal company messages in order to determine whether the company executives know about the impending risk of the dam breaking.

Independent experts warned two years ago that the jointly owned Samarco mine, which collapsed in southeastern Brazil killing 19 people, was not safe.

 

Most of those killed were workers at the mine working on a project preparatory to the merging of the closed Germano and the Fundao by removing the Silenha Dike separating the two .  That plan had not been authorized or approved though steps towards its implementation were underway.  The Silennha dike was one of the structures damaged during the failure.  Some of those may have been employees of the contractor retained by Samarco for this work.

The criminal investigation, presumably through new evidence gathered in the raid on Samarco’s record, may increase the amount of the already initiated $us5.1 billion damage claim.  It was not disclosed whether criminal charges other than murder would also be brought.  A separate lawsuit and investigation under Brazil’s Environmental Crimes Statute has been underway since right after the failure on November 5th.

Still another law suit was recently initiated by  the Federal Office in Linhares near the mouth of the Rio Doce on behalf of fisherman whose livlihoods have been indefinitely interrupted and impaired by the mud flow.

Criminal charges have also been filed against Herculano Mine exceutive for a tailings dam failure there in 2014.

A finding of criminal acts would most likely nullify all or most of the $60 million of the loss previously reported as insured.  Property & casualty insurance , which would include claims fied by homeowners, business owners, farmers and the two states involved where a cause is “an act of God”  would not respond to any claims resulting from criminal acts or fror forseeable and preventable.   Until recently, as usually happens following a mine catastrophe owners were suggesting that the final investigation would show the cause was two small earthquakes quite close to he site of failure.  Bowker Associates has reviewed that data and it appears that both were after the Fundao failure and possibly caused by it.  In recent comments Samarco, BHP and Vale have not referred to the two small tremors as a possible cause of failure.  That would be an unsustainable claim anyway as the dam should have been built to withstand a maximum credible event during its operation and into perpetuity and that is well above 4.5.  The two small quakes were 2.5 and under.

 Claims by victims families and all who suffered damages can still be pursued in civil court and by writing a notice of cliam directly to Samarco at its Corporate Headquarters. And of course, all claims are still be valid, regardless of insurance coverage  but there would be no insurance to respond and it would be that much harder for victims to prepare, file and manage their claims.

Minas Gerais has not required Samarco to set up and fund a claims management litigation support process for victims.  Bowker Associates is investigating whether it is possible to set up a miner funded claims management litigation support process for the victims likely to number in the thousands.  They have enumerated $R 1.2 billion in damages and losses to the two municipalities affected by the failure exclusive of te $US 5.1 billion in envionemntal damages and any payment to families and affected businesses.

O valor consta em relatório divulgado nesta quinta-feira (4), pela força-tarefa montada pelo governo de Minas para apurar prejuízos causados pela tragédia.) The value contained in a report released on Thursday (4), the task force set up by the government of Minas to determine damages caused by the tragedy.( O valor será cobrado da Samarco, que pertence à Vale e à BHP Billiton.) The amount will be charged  to Samarco, which belongs to Vale and BHP Billiton. (No total não estão incluídos danos ambientais e recursos que serão utilizados para o pagamento de indenização a famílias). This amount is nand does not include environmental damages or provision for the payment of compensation to families.

(Conforme o relatório, 320 mil pessoas foram atingidas pela tragédia, que já tem 17 mortes confirmadas.) According to the report, 320,000 people were affected by the tragedy, which already has 17 confirmed deaths. (Duas pessoas ainda estão desaparecidas. Two people are still missing.

“….According to the report, the production chain in the region recorded losses to the private sector of R $ 540,466,816.00, according to information forwarded by municipalities.( As perdas foram por morte de animais, destruição de lavouras, pastagens, máquinas e construções). Losses were due to death of animals, destruction of crops, pastures, machinery and buildings. (Os prejuízos públicos totalizaram R$ 146.066 455,33, principalmente com a prestação de serviços como abastecimento de água, que ficou prejudicado com a lama no Rio Doce.) Public losses amounted to R $ 146,066 455.33, mainly to the provision of services such as water supply, which was damaged by the mud in Rio Doce. (Em relação à infraestrutura pública, a lama da Samarco consumiu R$ 513.755.631,00, com a destruição de estradas, postos de saúde, escolas, e comunidades, total ou parcialmente, como Bento Rodrigues e Paracatu de Baixo, em Mariana.) In relation to public infrastructure, the  Samarco mud flow caused R $ 513,755,631.00, in losses including the destruction of roads, health centers, schools, and communities, in whole or in part, as Bento Rodrigues and Paracatu Low in Mariana”

Samarco has claimed it relied entirely on qualified consultants with recognized expertise for the design and ongoing  management of the failed tailings dam specifically naming Dr. Joaquim Pimeta De Avila who has been a key witness in the police investigation.  They say they received no notice of imminent risk of failure and had no knowledge of any problems that elevated the risk of failure.

Samarco id not meet the Federal government demand for deposit $R2.1 billion of the $Us5.1 billion to provide immediate funding for emergency recovery claiming it has already spent$R2.3 billion in clean up. and is continuing to fulfill its recovery obligations.They also indicated they need more time to post any further large amounts in cash.

Contact: Lindsay Newland Bowker, Founder & Director Bowker Associates Science & Research In the Public Interest lindsaynewlandbowker@gmail.com

Posted in BHP, Bowker Associates Science & Research In The Public Interest, Catatrophic Tailings Dam Failures, Causes Of Catastrophic Tailings Dam Failures, Fundao Talings Dam, Geoesteval, Germano Tailings Dam Failure, Linhares Civil Action Against Samarco, Samarco Murder Charges, Uncategorized | Leave a comment

1 million Cubic Meter Landslide From Ruins of Failed Fundao Dam

 

On January 27 the debris in the site of the former Fundao dam  shifted causing a 10 minute slide of 1 million cubic meters of material out of the site  and necessitating the evacuation of all workers. According to Paul Kiernan, WSJ, Samarco did not report the slide to authorities. The Extraordinary Commission on Dams of Minas Gerais who visited the site on Januray 29th have stated that there is imminent risk of further failure of material from the Fundao site.

This incident is also cited in the Civil Action against Samarco filed on 2/2/2016 by the Federal Prsoecutors Office in Linhares on behalf of fisherman who have suffered and are suffering economic loss of indeterminate future impact.  I was unable to get a Bing Translation from this pdf but understand that all fishing had been suspended as is the annual custom during the spawning of certain important native species.  During the time of suspension fisherman are compensated for agreeing not to fish.  The original failure on 11/5/2015 occurred during this spawning period. It is not clear what impacts the failure had on the protected spawning species or how long I will be before fishing can resume. com .  The public civil action against Samarco on behalf of fisherman cites the release on 1/27/2016 as 960,000 cubic meters. ( less that the 1 million threshold for classification as a “very Serious Failure”  in the Bowker Chambers 2015 classification of severity.

fish killed by mud samarco.png

Fish Killed By Samarco Dam Failure

“Members of the Special Commission on Dams MGSL (Legislative Assembly of Minas Gerais) were to visit the Germano mine in Mariana, in the central region of the state, on Friday (29).( A estrutura pertencente à Samarco continua em pé, mas apresentou trincas após o rompimento de Fundão , em novembro do ano passado.) The structure belonging to Samarco is still standing, but showed cracks after the breakup of Fundão, in November last year. (Agora, os parlamentares querem verificar se o novo vazamento ocorrido na quarta-feira (27) no complexo das barragens não afetou o local.) Now, lawmakers want to make sure that the new leak occurred on Wednesday (27) in the complex of dams did not affect the site”(link to source in original language)

This is only the 36th recorded event in world history of a tailings dam release of 1 million cubic meters or more, the definition set in Bowker Chambers 2015 for  “very serious failure”.   That global study of trends in the severity of  tailings  dam failures  1910-2010 identified 29 authoritatively documented TSF ( Tailings Storage Facility) failures.  Since then a 1937 previously un documented catastrophic failure in Mexico has come to light and we had authoritatively documented 5 new “very serious” failures from 1/1/2010 to 12/31/2015 (including the Samarco on November 5th, the largest ever recorded in world history).

The January 27th post failure release of and additional 1 million cubic meters from the site brings the count of events for the decade ending  on the date of the “latest very serious failure” at Samarco’s  mine to 10 as compared with 7 for the decade ending 12/31/2009 as reported in Bowker Chambers 2015.

Although there are several events in recorded history of multiple very serious failures at the same mine and a few repeated at same TSF with a time interval of a few years, this is the first recorded  time in history 2nd major failure at the same TSF immediately following a first primary very significant release.

According to company statements following the 2nd “very serious failure” on Wedesday January 27th, there are 20 million cubic meters more at the obviously unsecured, usatble  site of the former dam.  There we no statements about  steps being taken to prevent the release of more of this 20 million cubic meters of material remaining in the site of the former Fundao dam.

After the first release of the  former dam on November 5th there was no evidence of any remaining structural component of the Fundao which was put on line c 2008-2010. ( see photo below). In statements after that failure Samrco eventually reported that structural assessment of the other two dams had been undertaken and that both were below the required 1.5 level.  They made no mention of any stability assessment at the failed Fundao site where this second release occurred  on January 27 or of any work planned there  to assess or stabilize any material in the site.  They did not describe or characterize the  material at the site of the former Fundao.

photo of two dams..

Fundao Dam Former Site Immediately After Failure

In their December 2015 report updating site conditions, repair and relief work no mention at all is made of the Fundao  site, only of the damaged Silenha dike and the damaged Santorem.  That report details the “state of the art” surveillance system  and use of drones to monitor stability and safety at the dam sites and makes no mention of the presence of 20 million cubic meters of material within the former  site of the Fundao dam.

This recurrence points to an apparent gap in the overall statutory and regulatory structure presently applicable to stability and safety at the site . There is no police power to force an independent stability assessment and an independent expert opinion prioritizing actions to prevent further damages at a level 30 times greater in magnitude well above the minimum level for “catastrophic”  potential impacts in the  Bowker Chambers 2015 severity classification .  The public continues to remain at the mercy of Samarco’s reassurances that priority in their decisions making post failure is to prevent further downstream damage.

The New Zealand parliament found itself in this same situation in 1996 when it became clear that the miner was not taking proper action to prevent a complete failure of the tailings dam at Golden Cross.  The flaw in the dam was known at acquisition by the miner and a focus of community demands for its proper indepedendent inspection and repair.  The miner, not very experienced and trying to build a global presence through acquisitions, had under estimated the cost and scope of work necessary to repair the known flaw.  When the inevitable and expected landslide occurred without breaching the dam the parliament met to deliberate whether they had given themselves sufficient power to intervene and realized they had not. In that case fortunately the miners excessive debt and other financial woes came to the rescue of the public interest and court proceedings provided $53 million out of assets towards the damages at the dam. which was successfully repaired and closed without a rupture.

This gap exists in almost all mining statutes and could be cured through creation of independent expert panels funded by applicant miners and those licensed via the overall regulatory framework for mining,  accountable to neither  regulator nor miner,  with clear accountability to investigate and direct action .

It is important to note that Samarco did have an Internal Tailings Review Panel ( membership and details unknown) which functioned as it should in red flagging  emerging stability and safety issues and offering alternative.  Where the ITRP adivce didn’t fit with Samarco’s greater commitment to maintain production costs at a certain level, the panel was ignored. This in essence is the testimony of Dr. Avila to police investigating a possible Environmental Crimes action against Samarco.

As that investigation progresses, there is still no way under existing law to compel independent assessment and action at Samarco’s expense of the actual security and stability of the former Fundao site and the damaged Dike and Santorem.

OLYMPUS DIGITAL CAMERA

Town Of Mariana Where Samarco’s Failed Mine Located

 

We will be updating this post to bring in links to the referenced Golden Cross parallel, to Samarco’s previous statements and to the confirmation of  Samarco’s independent expert panel.  Most of this is already provided in other posts on the Samarco at this site.  Not all of our commentary and analysis is via this site.  Most, in fact is in a running e-roundtable with a multi disciplinary global network of experts, press, other researchers and other pubic interest groups. It is from this “e roundtable” that we will bring in the links.

As always, please contact me directly at lindsaynewlandbowker@gmail.com with any corrections, clarifications or further information related to this post.

February 2 2016 Stonington Maine

Lindsay Newland Bowker, CPCU, ARM, Environmental Risk Manager

Founder & Director Bowker Associates Science & Research In The Public Interest

 

 

 

 

 

 

 

 

 

We will add to and update this post with refernce

Posted in alegria mine, Analysis TSF Failures, Bowker Associates Science & Research In The Public Interest, Brazil 's High Grade Iron Ores, Causes Of Catastrophic Tailings Dam Failures, corporatocracy, Environmental Risk Management, Fundao Talings Dam, Germano Tailings Dam Failure, Height Limits of Earthen Dams, Highly Valued Natural Resources, Lindsay Newland Bowker, Linhares Civil Action Against Samarco, Measuring Magnitude of Consequence TSF Failures, Metallic Mining Risk Management, Mine Feasibility, Mine Risk Management, Mining Economics, Mining Environmental Crimes, mining environmental risk management, Mining Financial Feasibility, Samarco falha de barragem de rejeitos, Samarco investigação de crimes ambientais, Uncategorized | Leave a comment

TASEKO TEETERING: ANOTHER SCHOLZ VETTED “Mining Metric Original” Accrues Ever More Potential Public Liability While It Struggles With Too Much Debt And Too Little Cash Flow

 With copper prices dropping below $2 per pound, Taseko may just be trying to keep afloat during 2016. It has an estimated $65 million USD in cash at the end of 2015, and requires approximately $2.25 per pound copper to break even as a company. At current copper prices, Gibraltar’s production is very marginally profitable after factoring in off-property costs.

There is some hope that copper prices may rebound somewhat, as many analysts believe that the current copper price does not accurately reflect the supply/demand picture. However, there is quite a bit of uncertainty around copper prices, and Taseko needs to carefully weigh the need to bolster its liquidity versus increasing its interest costs too much when refinancing its Red Kite loan (and potentially taking on more debt).  Seeking Alpha 2016

Board member George Ireland, a highly regarded and well informed mining investor  recently dumped over 7 million shares at $us0.30/share.

As of January 22, 2016 Taseko had a market cap of only $us98 million. It has $32 million due in May from the Curis  transaction financed at 11%.  Copper prices have continued to decline since Taseko last discussed refinancing at a lower rate. “Interest costs are approximately $19 million per year including the estimated interest cost from the new secured debt.

This results in estimated cash flow in 2016 ranging from approximately negative $45 million at $1.75 copper to positive $39 million at $2.75 copper. These estimates incorporate the effect of the Canadian dollar exchange rate varying in conjunction with copper prices.

Continuing a general alert about Taseko throughout the investor community  Taseko was further  downgraded by Standard and Poors from a B- to a CCC+.

“The downgrade reflects our view that Taseko’s capital structure appears unsustainable due to very high leverage and interest costs, although we do not envision a specific default scenario at this point,” said Standard & Poor’s credit analyst Jarrett Bilous. S&P expect Taseko’s high ongoing debt servicing obligations and maintenance capital expenditures will result in cash flow deficits that gradually weaken the company’s liquidity position…

The agency estimates the company has sufficient cash to fund its operations beyond the next 12 months, with an additional cushion from its recently announced secured credit facility. “However, we believe the company’s capital structure is likely unsustainable in the long term, barring a pronounced and sustained rebound in copper prices. As a result, we view the company as vulnerable and dependent on favorable business, financial, and economic conditions to meet its financial commitments, which is consistent with our criteria for issuers we rate ‘CCC+’.” Taseko derives all production from its 75%-owned Gibraltar mine, which exposes the company to copper market fluctuations and unexpected production disruptions that can impair operating results, as witnessed in late 2014 to early 2015

All of this and the economic history of this mine, an original Scholtz acquisition setting out to prove that very low grade ores can be profitably mined,   was known and knowable at the time B.C. Ministry of Mines recently approved the highly controversial supernatant discharge.   The Gibraltar was originally permitted as a zero discharge facility.  In 2008 Taseko applied for and received a permit for discharge to the Fraser.  The latest, recently approved  doubled the allowed discharge.  Taseko threatened they would have to close the mine if the discharge were not approved. 

This week B.C. Ministry of Mines announced “relief”  for the B.C.’s  troubled mines essentially through more debt.  Miners on shaky ground financially will pay 12% and those more stable 8% to defer  hydro payments for two years.  Of course energy costs have been a key factor in increasing mine unit costs of production but  the problem is so much bigger than that and it is that bigger problem that B.C. Ministry of Mines and all other regulatory agencies need to take into account in reassessing  the present and future place of their mineralized assets in the global market place.  Two years is not going to bring any good news to B.C.s existing permit holders or to mining affected communities in B.C.  This is just ducking the problem , deferring the ultimate consequence to lost jobs and possibly accepting a loss on debt added where debt is already a huge part of the financial risk that will translate to public liability.

The economics of  a mine and its possible implications for accrual of unfunded unfundable public liability are simply not taken into account and rarely,  if ever, addressed in public advocacy.  On both sides the envirnonmetal security threats  are considered strictly in terms of the volume and quality of the sought release and the flow and quality of the receiving public waters, in this case the Fraser River. The liklelihood and implications of a sudden standby are never specifically reviewed  and taken into account by experts in mine risk finance or mine valuation.  The conditions promptng the discharge application, a dramatic increase in production  pushing beyond the capacity of the exiting TSF, its drainage systems and the associated water management infrastructure to handle the projected volume of production is never explicitly evaluated from the point of view of the “increased social premium” in the event of failure or public costs which will be incurred to avert failure should the miner not perform on its obligations ( e.g. Golden Cross in New Zealand).

This is the story not told or even acknowledged by the Mt Polley Dam Committee.  This is the story of the Gold Ridge in the Solomon Islands hovering on the verge of collapse. This the story of Samarco. This is the story of many superfund sites including the $1 billion public liability of the Yellowknife. and the now abandoned Wolverine.

“Although there are alternatives to management of increased supernatant levels a substantial  increase of mine throughput requires, law does not require a consideration of such alternatives all of which would add both to cost and to ongoing costs to produce

At a minimum, it would seem that wise public policy needs to insist on a proof of “no likely increase in the social premium” by at least showing economic feasibility in a global context through the stated increased throughput stage as well as demonstrating the  the pre existing full capacity to manage the additional wastes and minewaters”  Bowker Associates Science & Research In The Public Interest 2016

 

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The Gibraltar mine attained a throughput of 100,000 tpd,  the lower range of throughput envisioned by the Pebble mine. ( 100 Ktpd). With only one 4 year period in stand by (1997-2004) the very low grade Gibralter mine has operated continuously  since 1971, 44 years, approximately half the projected life of the Pebble.  It has s a center line conventional slurry deposition tailings facility that is now 452 feet ( 140 m) high with a foot print of 546 hectares, some 6 miles across.  (will add source and re verify these figures).  It’s hazard ranking is “extreme”, ie in the event of failure lves would be lost and the  damages would be non recoverable according to the 2014 Klohn Crippen dam inspection report.. Mt Polley at failure was only  50 m high with a much smaller foot print  not as well engineered and constructed as the present Gibraltar TSF.  From the outset  the Gibraltar has had a sand cyclone system which is still considered best available technology  for slurry deposition.

The waste from the mine has filled three valleys  generated mostly at throughput 1972 to 1997 that had averaged only 37Ktpd at an average head grade of 0.313 cu.  So we have yet to see what sustained production at 100ktpd and to an even lower grade (.20 cu  the cut off grade at Gibralter) actually means to the surrounding potentially receiving environment. The review of mine expansions never considers whether the technology that presently exists can keep these mines profitably  producing over their very long lives without more and more accommodation on the public side and higher and higher levels of environmental and public risk.

We will be adding more to this post, one of a series we hope to do on Scholtz vetted mines and the actual economic and environmental performance of very low grade mines in history.

Every economic failure of a large mine translates to a “social premium” that comes right off the top of GDP.  Treating these losses as “insured”  by simply leaving the often non remediable damages does not change that.  The damages themselves impair present and future GDP. They have a very long “tail”.

Lindsay Newland Bowker, CPCU ARM, Environmental Risk Manager

Director, Bowker Associates Science & Research In The Public Interest

Stonington Maine

contact: lindsaynewlandbowker@gmail.com

 

 

 

 

 

Posted in B.C. Hydropower Payment Deferral For Troubled Mines, Bowker Associates Science & Research In The Public Interest, Canadian Mine Risk & Loss Profile, Canadian Mining, Causes Of Catastrophic Tailings Dam Failures, Environmental Risk Management, George Ireland, Gibraltar Mine, Global Capital Squeeze In Mining, global cash flow crunch, global copper market outlook, Highly Valued Natural Resources, Imperial Metals, Lindsay Newland Bowker, Measuring Magnitude of Consequence TSF Failures, Metallic Mining, Metallic Mining Risk Management, Metals Price Forcasting, Mine Feasibility, Mining Economics, mining environmental risk management, Mining Financial Feasibility, Mt. Polley, Mt. Polley Tailings Dam Failure Impacts, politics of mining, polluter pays advocacy, Social Premium of Metallic Mining, Taseko, Uncategorized | Leave a comment

Herculano Mine Partners Indicted on First Degree Murder Charges For Worker Deaths In September 2014 Tailings Dam Failure

The indictment, announced December 16, 2015 is for  continuing to place tailings in a dam that was impaired , had already reached its capacity, and no longer was licensed to receive tailings. Findings also reference failure to notify authorities of the failure and providing false information to officials.
 herculao dam failure_
Reuters Photo Immediately After  Failure
The new  B4 tailings dam was to receive all tailings waste from a mine expansion as of 2010 but developed problems in 2014.which precluded its continued use. Apparently  without authorization  or technical independent review the company started using the compromised B1 again.  ( The  Bing Translation of the above news source refers to construction of a series of 4 holding bays within the unlicensed B1) An  official  government document rescinding  Herculano’s authority to mine,  refers to google earth photos showing unauthorized construction to “increase the height of the B1”, the phrase produced by the web translator.
The hastily modified B1 tailings dam  failed due to saturation caused by inadequate drainage according to a technical report prepared by the Institute of Criminology.
The finding was that Herculano executives were fully aware of the dlminished capacity of the dam and the risks and of  the consequences of failure and nevertheless assumed the risk .  Under Brazilian law that constitutes criminal intent ( according to the awkward Bing Translation).
We are not well steeped in Brazilian Law and  any evaluation based on a Bing translation and not in properly translated actual technical and legal documents is inherently limited . This sounds, though,  very much in line with common law as  it applies and governs most court cases in the US and Canada. Unless modified by statute ( there have been some fiddles in Canadian Law for mining) strict liability” applies to all inherently dangerous activity.  The activity may not be prohibited by law or regulation or  explicitly prohibited by the  terms of a permit but any damages accruing from its undertaking are “negligence per se”. There is no defense in tort.  The fact of the ultra hazardous activity and the fact of the resulting damage constitute.a legal accountability for all consequence.as in defective product torts.
That this is a criminal indictment implies that the  ultra hazardous activity was undertaken in a reckless manner and/or that the decision itself to use the dam in such a condition was de facto reckless. Strict liability in the context of criminal charges does not require a proof that that any intent existed with respect to the consequence ( in this case, the death of the  B1 workers).   The description of charges and findings suggests that what has been applied in Brazilian Law is very similar to ,if not exactly in conformance with, a criminal strict liability charge.
 herculano dam break photo 2
 Reuters Photo 2010 Immediately After B1 Failure
Pattern of Pushing Tailings Dams  Beyond Safe Capacity & Use Very Clear In History of Catastrophic Dam Failures
Bowker Chambers 2015 ( The Risk, Economics and Public Liability of Tailings Storage Facility Failures pointed to the pattern of production needs and aims trumping tailings dam safety as a recurring and significant theme in the history of catastrophic tailings dam failures 1910-2010.  Several modern catastrophe’s including Samarco,  Mt Polley and this failure  occur as a result of aggressive mine expansion plans that do not have accompanying adequate waste management plans or capacity.  Herculano Mineracao Ltd. had received licenses for a major expansion in 2013.predicated on the capacity and future expansion of the B4.

“In fact this is the pattern we see on close examination of Very Serious and Serious failures; older TSFs with smaller footprints are pushed to unplanned heights to accommodate additional production that was not anticipated when the tailings dams were originally designed and the permits originally  issued.. Capital markets and investors don’t finance clean ups. They finance production that is profitable. Smaller companies operate on tighter margins within the same overall metric affecting all miners but are less able to take advantage of and finance optimizations or achieve economies of scale that will keep production costs low enough to maintain a specific mine site as economically feasible.

Our sense of the data, and the case histories we have looked to for a deeper understanding of the data, is that “mining economics” plays  a significant role in TSF failures. It is important in permitting, and in the checks and balances built into the regulatory process over the life of a TSF, to look beyond “mechanisms of failure” to the  fundamental financials of the miner, the mine, and mega trends that shape decisions and realities at the level of miner and individual mine.​”

​The November 5, 2015 failure of the Fundao  at Samarco’s  Minas Gerais mine in the Alegria Complex also  fits this pattern.  They elected to go forward with a major expansion without adequate TSF capacity and without any plan for achieving this capacity  They were fully aware from a failure analysis that a failure of the Fundao would wipe out Bento Rodriquez in a matter of minutes and elected to take the risk with no peer review  based on an undisclosed mathematical model indicating a low probability of failure..( This according to Jack Caldwell and a recent source in Brazil who had been consulting engineer on the dams through 2012)
Technical Details on The Herculnao & Most Catastrophic Mine Failures Hard to Come By
Jack Caldwell first reported this tailings dam failure  of September 20, 2014   at his now   silenced and completely obliterated   mining blog,” I think Mining.com”. At the time  neither Jack nor any of his 5,000 regulars and handful of commenters myself included, could find any data at all on the failure.  It took a year to turn up in WISE as part of their compilation and the details needed for the Bowker Chambers 2015 recompilation of WISE/ICOLD data elements   and for meaningful further statistical analysis are still sparse: design dam height and slope, dam construction, year paced in service, design capacity, height at failure , run out and release all undocumented even after exhaustive and frequent searches in Portuguese and in English.
Most of these critical technical elements are also still not available on the Samarco tailings dams and its use of them .  The Germano Tailings Dam was supposedly closed in 2009 and the Santorem used mostly for water storage on top of some 12 million cubic meters of previously deposited tailings.  The Fundao, placed in service in 2009 was not capable of holding all the waste to be generated by the massive expansion Samarco planned nor was there adequate land space within the mine foot print to accommodate additional capacity but the expanded production nevertheless went ahead .   Over the life of the Fundao, 90 m high at failure, and an un buttressed upstream construction, the rate of raise had average 15. meters per year: pushing capacity by anyone’s reasonable definition.
Our rough estimate based on BHP’s SEC 20 filings to the Securities and Exchange Commission is that closer to 90 million cubic meters of wet tailings were produced since 2009. We can’t swear by our estimate yet and continue to polish it  but it seems very very clear far more than 55 million cubic meters in wet tailings was produced over the llfe of the Fundao.  Additionally we know now that Vale contributed about 2 million cubic meters per year to the Fundao. Where did all these wet tailings go?
Scope Of  Other  Damages At Closed  Herculano Mine
In December 2014 government completed a preliminary assessment of the scope of environmental damages caused by the B1 failure and negotiated financial responsibility agreement with Herculano Mineracoa Ltd for clean up and restitution.  An escrow of  was established  for work in 2015 in exchange for lifting the freeze on all Herculano assets.   Recovery is estimated to take 10 years.

The environmental damage caused by the accident at the dam Herculaneum Mining in Itabirito, Central region of Minas Gerais, is at least R $ 30 million. (Para garantir que todas as medidas de reparo e compensação sejam implementadas, o Ministério Público (MP) e a empresa firmaram um acordo no início deste mês e o valor, que já foi depositado em juízo, deve ser gasto em 2015. Em troca, a Justiça liberou os bens da Herculano e dos sócios da mineradora que estavam bloqueados.) To ensure that all repair and compensatory measures are implemented, the Public Ministry (MP) and the company signed an agreement earlier this month and the amount that has been deposited in escrow, should be spent in 2015. In return, Justice released the goods of Herculaneum and members of mining that were blocked.

(“Pode ser que o prejuízo seja ainda maior.) “It may be that the damage is even greater. (O que vai determinar a exata extensão dos danos é o laudo que está sendo feito.) What will determine the exact extent of the damage is the report that is being done. (Ele vai apontar, ainda, quais são as medidas necessárias a serem tomadas para recuperação da área”, explica o coordenador do Centro Operacional do Meio Ambiente (Caoma) do MP, Carlos Eduardo Ferreira Pinto). He will point out, though, what are the necessary steps to be taken for recovery of the area, “explains the coordinator of the Operational Centre of Environment (Caoma) MP, Carlos Eduardo Ferreira Pinto.”
 Bowker Associates has not been able to locate any text or summary of the referenced final report on damages and costs.  Herculano’s license to operate remains in suspension.
Tailings Management, Tailings Capacity & Processing Problems Long Term The Mine
 Compared to other Itabarites in Brazil generally and in MInas Gerais specifically, this mine had a  lower grade and characteristics which  challenged processing and resulted in higher processing costs.
Some details of this history are given in a technical report  on a magnetic separator which was introduced in 2010 to address some of the mines historic and persistent operations problems and associated environmental impacts.

In the historic mine, 40% of material extracted from the deposit was treated as waste and had an average iron content from 40 to 58% silica and about 30%, generating extremely high tailings volumes which the existing structures for containment themselves, were insufficient and caused major environmental impacts such as carrying of solid ravine on the edge, demanding – a big factor as to the monitoring of the dam, which was the limit of the quota and volume parameters, and so necessary licensing new areas and implementation of a new structure for disposal of waste produced.

 

This technical report also has a photo ( fig 3.9 pdf p 24) and some details on the dam: an upstream dam, 20 million cubic meter capacity ( in 2010), 60m high .  These are descriptor of a dam pushing the limits on  best knowledge, best guidance, best practice on upstream dam use.

The separator promised recovery of u to 78% of material which had historically been treated as waste  post concentrator. and therby better use and longer life  of tailings impoundments as well as lower overall production costs.

Interesting to note that the photo and focus on this 2010 report is of the failed  B1 whose license had already expired and whose full capacity had already been reached as is apparent in the photo.  The new dam, the B4, was supposed to be already in service but is not mentioned in this report on the magnetic separator.

DESCRIPTION OF B4 THAT DEVELOPED DRAINAGE PROBLEMS EARLY ON IN ITS USE

The following is a web translation of the EIS and Enviornmental Damage Compensation on construction of the B4 which was to receive all tailings from the mine expansion totally replacing the B1.

The final mass of the dam has maximum height of 1,240 m, maximum height of 30m( e comprimento da crista superior de 360 m, sendo constituído de solos argilo-siltosos, 30m )and length of the upper crest of 360 m, consisting of silty-clay soils)compactados e protegidos por um sistema de drenagem interna (sistema extravasor do tipo )compressed and protected by an internal drainage system (overflow system of the type (galeria tubular, com diâmetro de 600 mm que irá subindo à medida que o maciço for sendo )tubular gallery with a diameter of 600 mm that will rise as the mass is being(alteado, atingindo em sua configuração final a cota de 1.240 m, em sua soleira. alteado)reaching its final configuration the height( believe this should be translated elevation) of 1,240 m, on his doorstep.( O sistema )The system(de drenagem interna é constituído de filtro vertical e um tapete drenante horizontal) internal drainage is constituted by vertical filter and a horizontal drainage mat(interligados e construídos com areia grossa e materiais de transição, sendo que este tapete) interconnected and constructed with coarse sand and transitional material, with this carpet (se estenderá à montante, e ainda o tapete vertical inclinado de forma a impedir ao máximo a )extend upstream, and still inclined vertical carpet to prevent the most of (saturação das faces á jusante). saturation of downstream will face.

It was the drainage system described  that failed in the B4.  Herculano, chose to continue processing  and use the unlicensed already full B1 without notice to or permission of the  regulatory authorities and also, apparently without any formal technical/engineering review of their ad hoc adaption of the B1. ( the construction of internal holding areas)

The EIS is dated 2013 but refers to a life of facility from July 27,2009 and anticipates a 6 year life/term of operation for the B4)  The cost is estimated at R$10.9 million (2009)

 

Lindsay Newland Bowker, CPCU, ARM Environmental Risk Manager

Bowker Associates Science & Research In The Public Interest

*******
ADDITIONAL LINKS AND RESOURCES
An Early English language report on the dam failure with Hercuano Mineraco’s public statement.   http://www.resourcereports.com/brazilian-tailings-pond-incident-claims-2-lives/

Essentially same account of indictment at Mining.com   https://translate.google.com/translate?hl=en&sl=pt&u=http://noticiasmineracao.mining.com/2015/12/17/socios-da-herculano-mineracao-sao-indiciados-por-homicidio-doloso-por-tragedia-em-itabirito/&prev=search

In Portuguese.the findings of fact.  Translation facility awkward but describes not just unauthozed use use but unauthorized major heightening of the B1 as confirmed in google earth photos. (lost this link will find and repost)

https://translate.google.com/translate?hl=en&sl=pt&u=http://g1.globo.com/minas-gerais/noticia/2014/09/rompimento-de-barreira-soterra-veiculos-na-cidade-de-itabirito.html&prev=search

update in spring 2015 on damage assessment

action blocking reopening of socoimex steel mine impaired snce 2003

 

https://translate.google.com/translate?hl=en&sl=pt&u=http://g1.globo.com/minas-gerais/noticia/2014/09/rompimento-de-barreira-soterra-veiculos-na-cidade-de-itabirito.html&prev=search

Posted in Causes Of Catastrophic Tailings Dam Failures, Herculano Indictment, Herculano Mine, Risk & Public Liability of Tailings Dams, Risk Economics and Public Liability of Tailings Dam Failures, Tailings Dam Failures, Tailings Dam Risk Management, tailings dewatering, Tailings Facility Failures 1910-2015, Tailings Failure Rates, Tailings Risk Management, Tailings Storage Facility Risk Management, Uncategorized | 1 Comment

Brazil’s Largest Newspaper’s Press For Truth & Full Accounting on Samarco Failure

Brazil’s largest newspaper, Folha De Sao Paolo, has been pressing hard  and with care and diligence to ask the right questions about the Samarco tailings dam failure on November 5th.  Their efforts serve not only the people of Brazil but the global community of leadership in responsible mining.   This post  provides the  full text of an interview between Lindsay Newland Bowker, Managing Director of Bowker  Associates Science & Research In The Public Interest, and Eleanora  Allgayer Canto  de Lucena . This interview was the basis of Ms. Lucena’s published article on December 12, 2015.  We are providing it here because there is no English translation of Ms. Lucenas  excellent article   and we felt it was important to bring forward both her excellent questions and our answers.

Chile, China, Peru and other nations are also allowing upstream tailings dam construction  which deviates  from well established and widely shared views  based on science and proof that this form of contsruction should not be used for any large dam.  In another Funha article also n December 12, there is a revelation that Samarco had been in the process of pre engineering to join the closed Germano Tailings Dam , also an upstream dam but buttressed and the then still exsting Fundao into one 225 million cubic meter mega dam. Folha reports that plan had never been mentioned to or or approved by Brazlian officials.  They report  that  Samarco had concluded that it could not create additional tailings storage capacity at the Fundao  through added height without also joining the two dams.

Any nation may under international law  enact any laws within the boundary of its recognized sovereignty. The repercussions of an event of this scale , however, are of global economic consequence  in financial markets.  The investors who relied on Fitch ratings glowing and seemingly informed July 2015 very positive review of bond offerings associated with  Samarco’s $3.2 billion expansion plan  were holding bonds rated as “junk” by Moody’s a few months later after the catastrophe.  In addition, the  thousands of investors, some of them unknowingly in the holdings of pension portfolios, or IRA’s have also suffered as yet unmeasured losses on their investments in BHP, Vale and Samarco.  A class action law suit in has been initiated and announced on behalf of U.S. investors. who  include  the school teachers, policemen, firemen, transit workers, and  blue collar workers to whom risk is ultimately passed through their pension fund managers.

When a nation such as Brazil, China, Peru , Chileg Canada allows deviations  from best science, best practice , best knowledge in order to facilitate and further  its own competitive advantage in world commodities markets and the continuance of royalties it earns on production it is essentially  transferring the public liability and financial risk risk beyond the  limits of its sovereignty.

In 1998, Samarco the first iron miner in history to meet the ISO 14 001 environmental standards and it has been monitored for compliance with World Bank and International Finance Bank (IFB) standards. Both Vale and BHP are  members  of the Mining Association of Canada ( MAC) who recently announced the recommendations of a year long task force  to strengthen its  member commiments to “zero failure” for TSF’s.  These recommendations and MAC’s policy does not contemplate rescinding Vale’s membership or BHP’s for its many violations of even existing guidelines of its members  operations in  foregin nations. ( Imperial metal owner of Mt Polley is also still  a member in good sanding of MAC)  So clearly there is no effective existing global mechanism that will prevent a transfer of risk consequence  from poorly framed national policy to citizens around the world.

Two nations, France and Norway  have transcended this gap in global checks and balances in financial markets through statutory programs of divestment.   While their national holdings are perhaps too small to deter miners, small and large , from practices that aim at quick  capital  and quick revenue through shortcuts on safety and envionmtal security, the quality of research and the established process benefit all markets all investors, all permitting authorities and other national policies on investment and management of publc funds.

 

 TEXT OF INTERVIEW BOWKER -LUCENA

 

Q What is your hypothesis about what caused the disaster in Brazil? Where did the the company fail? The President of Brazil has said the company was irresponsible. Do you agree?

 

Apriori we can say that all catastrophic dam failures are failed public private partnerships. The weakness in law and oversight that allows a the formation of a catastrophe sometimes over many years,is less frequently well examined or even acknowledged. But always in a failure of this magnitude government and miner are co –responsible. I read somewhere that funding had been crowd soured for a completely independent review.  It was a tiny amount and not sufficient to the task but that is what is needed to get to the whole truth of cause and I hope support will pour in from around the world to enable a truly expert , truly independent  multi disciplinary review.   The answers to your questions matter globally, not just in Brazil.

I know who I would hire. My expert panel would include experts on finance and economics as well as global experts on toxic torts and mining law. The Committees mandate would go well beyond the usual “proximate cause” of failure that is the customarily narrow scope of dam committee reviews.  Relying only on government contracted or miner issued data will never get to the whole truth.

 

It takes a very long time for a detailed and evidentiary analysis of “cause” to become “official”. Considering the scale of this disaster, the amount of “official” information on basic details is appalling and inexcusable. It falls to the permitting agencies and government to have this data in the first place and make it immediately public.

 

As a risk manager with more than a decades experience in risk management for high risk heavy construction  who has recently co -authored a major research paper on the risks , economics, and pubic liability of dam failures 1910-2010  I am  alarmed that there has been no official disclosure of any of the key and basic questions I have, that any risk manager  would  have about the failed dam:  its construction type, its total capacity, its height at failure vs its design height, the rate of raise of the dam height and the rate of deposition of waste materials as compared with design rates of deposition..

 

As with many large modern tailings facilities in Brazil, Peru, Chile and China the failed fairly new (c 2009) Fundao tailings dam may have been a super large un buttressed “upstream” construction. Upstream dams are the least stable and especially subject to loss and failure by non- seismic triggers related to rate of deposition of tailings,, height and the rate, of dam raise, active construction along the crest.  Certainly there is indisputable evidence that Samarco was using extremely high very steep upstream dams.  What isn’t clear is how that applies to the fairly new Fundao.

 

Bowker Associates is focused on that because of this “Culture of deviation” from known best practice which Samarco and some its consultants associated with the development and design of their mines within the Alegria complex describe as a “culture of innovation”. In official company statements and records it is clear that Samaco went ahead with its $3.2 billion expansion without adequate land surface area for the tailings and waste rock the dramatic expansion in production would generate. That’s almost universally the case.  It is also well documented that the reason Brazil, Peru, Chile are using the supersized  upstream dams is they are out of land surface area to manage the exponential increase in waste volume that attends each dramatic increase in production.

 

So, it is too early to have a pet theory but on the basis of an exhaustive review of all publicly available documents, I am looking most closely at the possibility that this was an upstream dam defying all established best knowledge and best practice in the name of “innvovation”

 

There is a fuller explanation and link to all doumentation we have found that may have a bearing in the catastrophe at my wordpress post.

Q  How do you compare this accident in Brazil with others around the world? In Your study of tailings dams and their accidents, do you find commonalities?

 

What is apparent here and what we have seen in our study of all tailings dam failures in recorded history at modern mines is that Samarco pushed ahead with a huge expansion in production without simultaneously developing and concurrently implementing an independently vetted plan for handling the wastes. In our research for Bowker Chambers 2015 we saw this pattern associated with smaller mines with lower quality ores by smaller less well capitalized miners.

 

Mt Polley is the prototype for that pattern.

 

The other commonality between the Samarco disaster and virtually all tailings dam failures in history is that it deviated from best knowledge, best practice and accepted standards and was completely predictable and avoidable.

Mt Polley, again is a very recent gravely consequential tailings dam failure where a pattern of deviation left unchecked for years finally ended in complete failure.

BHP, via a subsidiary , was responsible   for another man made modern tailings disaster at OK Tedi in PNG but the top 10 miners in general are better positioned to avoid the economic crunch junior and mid sized miners face. Their principal producing mines are larger and at higher grade deposits and the big miners have better revenue streams and better access to capital.

It is a major red flag to see this at a “top 10 miner” major production mine.

Very sadly, we may see more of this. I read recently that Codelco is investing $4.1billion to expand throuhput that will not even maintain their established level final metals output. This was also necessitated by declining ore grades and declining global prices.

These are the economics and realities that dramatically increase the potential for deviation from known best practice in tailings management and we predict will result in more and more severe catastrophic failures. of these super sized dams at these huge mines the “top 10 “control .

These failures will bring the consequence of failures to an entirely new level where as we see in the completely avoidable tragedy repair reclamation and remediation aren’t even feasible.

While these super dams have been in use (mostly not upstream construction) for more than a decade, Samarco was the first failure of a mega sized dam. Mt Polley’s dam was about half the size of the Fundao in total capacity and in dam height. The official record of ‘very serious” failures was almost entirely at smaller mines owned and operated by smaller and less well capitalized miners.

To me having just spent two years deeply and almost exclusively immersed in the ”official record” on tailings dam failures this is a very bleak landmark .

Even the big guys with much higher grade deposits are being defeated by falling ore grades and falling prices.

Q Are These Accidents Related to the End of Periods of High Prices?

Your study found a trend toward failures of increasing coseuqence in the modern times.Why Is That So?

 

Actually, the 100 year history of falling prices and falling grades for all metals over the past 100 years is about the costs to produce. On average over the 100 years until 2000, technology has lowered the average costs to produce sufficiently to more than off set falling prices.

 

The evolving modern trend to more serious failures had been mostly associated with smaller mines with  lower than average grrdes of ore  and  higher than average costs to produce ( the spot prices is the same for everyone on any given day )

 

What is happening now is that costs to produce are no longer offsetting lower grades even for the big guys as we see with Codelco. So it is really more a question of reaching the limits of what present technology has to offer to keep that spread between production costs and price working in ever and ever lower grades.

 

The equation of viability has broken down. It is beyond technology known and proven at this time to “fix”.

 

Q What is the best technology to handle iron mine tailings?

What companies use the best technologies and what are their costs?

 

 

Across all metals including iron, it is my advocacy that no new mine, no mine reopening, mine or mine expansion should be approved unless there is authoritatively vetted economic viability inclusive of all costs to properly manage wastes and conditioned upon the implementation of those best practices. That essentially was also Steven Vicks  commented in his capacity of Dam Review Committee member  for the Mt Polley failure in August 2014.

 

In other words, it is not a question of “best technology” it is more a question of whether there is any known proven technology for properly preventing harmful releases from all wastes of mining and from mining operations.

 

Q Should government take a stronger role in regulation and supervision of mining activities? Are there examples of better models of law and regulation that Brazil could look to in evaluating its own present policy?

                                                           

Can Mining be a “sustainable” activity?

 

What that does this disaster reveals about the mining model used in Brazil? How ishould Bazil’s Law and Regulation be modified?

 

Mt Polley had already moved the mining industry away from its long term insistence on  law counting on  responsible self regulation to a call for sound law and regulation as an essential enforcer of responsble self regulation.  This just puts that in bold, all caps with lots of exclamation points.

 

The problem is no one has actually yet framed what that would like.

 

The closes we have seen and studied is West Australia who have regs based on a very well informed search of best knowledge and best practice but even theirs is not complete. It is an excellent place to start and especially relevant for Brazil who also have an iron based metal sector. But it too needs lots of work.  I cannot say that it would have prevented this disaster that has tragically befallen Brazil.

No single permtting jurisdiction could ever have the level of competence and experience to address and evaluate all the public liabilities inherent in any mineralized deposit. So Bowker Associates, joining  many other longer established voices for responsible mining, and responsible well informed public policy , is calling for the use of expert panels life of mine including properly vetted  expertise in mine economics and mine finance and  clear standards for what “expert” means.

 

These panels need to be available life of mine with long continuity in membership to address the emergence of public liabilities, before they arise after a mine Is permitted: a significant event, a planned stand by, a planned reopening, a planned expansion, any deviation from design height, slope, rate of deposition or rate of raise for an approved tailings facility and a regular schedule monitoring of  review of changes in cash flow and balance sheets, a regular schedule of  audits and on site inspections.

 

Bowker Associates work now is on trying to develop vetted meaningful “triggers” that would prompt engagement and review by the expert panel.

The expert panel recommendations should be binding on both the government agency and the miner. All expenses should be paid by the miner but with no direct control or supervision by either miner or permitting agency. (ie actually independent but with a clear  and comprehensive mandate)

Such a panel may have prevented the Samarco disaster but it may also have disallowed approval of the expansion without a concurrent vetted plan for management of the additional wastes it would create.

The entire axis of permitting needs to be vastly re oriented . Applications shouldn’t even be accepted without independent verified proof of economics, technological and environmental viability.

 

 

 

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