The Samarco iron mining operation in Brazil is moving forward again; a key regulator is looking favorably on a proposal that would give the mining company a permit to restart operations. However, the project still faces steep costs that could prove problematic for the company and its owners, BHP Billiton (NYSE: BHP) and Vale (NYSE: VALE).
A year ago, a tailings dam at the Samarco site in Minas Gerais failed, sending billions of gallons of sludge into the Rio Doce River, a toxic wave that overwhelmed the small towns in its path, killing 19 people, and polluting hundreds of miles of waterways.
While work has been suspended at the mine since the accident, Bloomberg reports that Samarco has been plotting its return to operation and has submitted a proposal that rather than rebuild the dam, it would instead deposit waste into an unused pit called Alegria Sul, an idea the state’s mining regulator, Semad, believes has merit. The Semad subsecretary managing the process has also said considering issuing a single “corrective” permit instead of requiring numerous individual licenses.
Although that would be beneficial to Samarco, as well as BHP Billiton and Vale, the operation is still under a cloud of uncertainty. Brazil’s federal environmental agency, Ibama, is fining Samarco $149,000 a day until it proves it has fully contained the leakage from the failed dam, something it says Samarco hasn’t done. A federal judge has also said Samarco has failed to contain the leaks, and has given the miner 90 days to come up with a plan to do so, and just 30 days to post a 1.2 billion real ($351 million) guarantee.
All of this is in addition to the other legal actions that have been launched in the wake of the disaster. Moreover, even though the decisions of the environment regulator overseeing the permitting process have been favorable, it will not have the final say on the outcome. A gaggle of politicians, regulators, engineers, NGO representatives and others will all have a voice on the matter. Whether or not the permits get approved may have as much to do with the company’s ability to shore up public perception and confidence among the various interested parties as it does with the safety and environmental impact of the mine itself.
10 stocks we like better than BHP Billiton
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and BHP Billiton wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of Nov. 7, 2016
Rich Duprey has no position in any stocks mentioned.
{loadposition user99}