Vale, BHP and Brazil reach Settlement Agreement for Operation Resumption at Samarco

Brazillian Samarco, after being shut for a period of around three years has reached an agreement for operation resumption. The Samarco pellet plant bear’s pellet making capacity of around 30 MnT per year, and was suspended post a dam failure occurred in November 2015, resulting in loss of life and property.

Samarco mine is a joint venture of Vale SA and BHP Billiton, each holding 50% stake.

The agreement was signed by Samarco, Vale, BHP, and the Brazilian prosecution offices of the federal government and the states of Minas Gerais and Espírito Santo, as well as other government authorities.

The deal extinguishes USD 5.29 Billion lawsuit filed by the Brazilian federal government and the state governments of Minas Gerais and Espírito Santo following the collapse of Samarco’s dam. The agreement suggests improvements in governance of Renova Foundation, created to help victims of accident. The size of the settlement is yet to be negotiated.

The deal also provides appointment of experts to monitor progress of reparation deal signed in Mar’16. To this, Samarco will provide the Brazilian court with 2.20 billion Reais (USD 589 Mn) for the fulfillment of obligations relating the reparation programs.

The date for resumption of operation at mines is expected to be around late 2018 or by early 2019 with reduced rate of operation at 19 MnT per year.

Samarco Mines resumption may reduce Indian Pellet Export

The operation halt at Brazillian Samarco post Nov’15 resulted in increased pellet exports from India.

Post operation halt at Brazillian Samarco in Nov’15, Chinese mills shifted towards Indian pellet to fulfill the demand which resulted in significant growth in pellet exports from India post 2015. Indian pellet exports in CY’15 witnessed at 0.81 MnT. The exports witnessed significant rise Y-o-Y to 5.79 MnT in CY’16. In CY’17, the Indian pellet exports surge 67% Y-o-Y to 9.68 MnT, with China accounting 84% of total export share.

The operation resumption at Samarco Brazil may bring down Indian pellet exports. Besides, amidst stricter environmental norms in China, mills are expected to shift to Brazillian ore owing to low silica content, which may adversely impact Indian pellet exports.