Opinion: Brazil’s Brumadinho is Vale’s Worst Nightmare

Opinion, by Michael Royster

RIO DE JANEIRO, BRAZIL – Brumadinho is a municipality south of Belo Horizonte, the capital of Minas Gerais, where some 12 million cubic meters of iron ore tailings were impounded — until late last month when the “Feijão” dam broke, with catastrophic consequences — estimates are that some 300 lives have been lost.

Vale S.A., once known as Companhia Vale do Rio Doce (CVRD) but now universally called simply “Vale”, is a mining behemoth, the world’s largest producer of iron ore. Much of its production of iron ore is in Minas Gerais, where it has dozens of mines.

Mariana is a municipality near historic Ouro Preto in Minas Gerais, where in November 2015 some 62 million cubic meters of impounded iron ore tailings were released when the dam broke. This disaster caused the loss of nineteen lives, along with immense ecological damage to the Rio Doce, Vale’s namesake river. Vale was a fifty percent owner of Samarco, the company whose tailings dam failed.

What do these dam failings have in common? Both started out small, then used the “upstream” method to increase impoundment capacity — tailings stored and buried by the dam were moved back and upwards, creating “steps” rising upstream.

It is universally recognized that the upstream method of increasing dam size is the cheapest; unfortunately, it is also universally recognized that these dams are the most likely to break, because they contain little or no concrete, and are subject to liquefaction.

Notwithstanding the fact that it had been inactive for three years, Feijão presented an extremely high risk in terms of the potential damage to human life if the dam broke—there were company office buildings and a refectory directly below the dam.

When the dam collapsed shortly after noon, the avalanche of tailings swept away everything and everyone in its path, burying most. Almost a month after the disaster, workers still seek more than 150 bodies under the mud.

So, everyone asks, why did the dam break? So far, “liquefaction” is the chief suspect. The tailings themselves, compressed by their own weight, changed from solid into liquid, which sought and found its way downstream.

Vale has offered the official company view: the failure was an “accident”, there were no warning signals, there were fortnightly inspections, independent appraisals had confirmed the low risk, etc etc etc. In short, it is not responsible.

Ongoing investigations, however, reveal internal communications indicating that this “accident” was, in fact, predictable and preventable. For starters, Vale knew that the Mariana disaster also involved the collapse of an upstream tailings dam, and had committed itself to prevent similar disasters elsewhere.

Vale did not honor that commitment, notwithstanding its claim that it was just about to decommission the Feijão impoundment. You cannot lock a barn door to prevent horses from escaping, when the barn no longer exists.

Vale must now decommission all its upstream dams, which will involve huge direct costs and a drastic reduction of iron ore production, its chief income source. Simultaneously, it will have to pay monumental fines and indemnities to victims and government agencies.

As a result, the former poster child for privatization now faces receivership or even bankruptcy, as neither government officials nor investors in the market will forgive it for those 300 lost lives.