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Brazil eyes management overhaul for Vale after deadly dam disaster

Brazil eyes management overhaul for Vale after deadly dam disaster
Members of a rescue team search for victims after a tailings dam owned by Brazilian mining company Vale SA collapsed, in Brumadinho, Brazil January 28, 2019. REUTERS/Adriano Machado   -   Copyright  ADRIANO MACHADO(Reuters)
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By Gram Slattery

BRUMADINHO, Brazil (Reuters) – Brazil’s government weighed pushing for a management overhaul at miner Vale SA on Monday as grief over hundreds feared killed by a dam burst turned into anger, with prosecutors, politicians and victims’ families calling for punishment.

By Monday, firefighters in the state of Minas Gerais had confirmed 60 people killed by Friday’s disaster, in which a burst tailings dam sent a torrent of sludge into the miner’s offices and the town of Brumadinho.

Nearly 300 more people are unaccounted for, and officials said it was unlikely that any would be found alive.

Brazil’s acting president Hamilton Mourao told reporters a government task force on the disaster response is looking at whether it could or should change Vale’s top management. Public-sector pension funds hold several seats on the miner’s board.

“The question of Vale’s management is being studied by the crisis group,” said Mourao, who is serving as acting president for some 48 hours while President Jair Bolsonaro recovers from surgery. “I’m not sure if the group could make that recommendation.”

Shares of Vale, the world’s largest iron ore and nickel producer, plummeted as much as 25 percent in Monday trading on the Sao Paulo stock exchange, erasing more than $16 billion in market capitalisation.

Senator Renan Calheiros, who is in the thick of a Senate leadership race, called on Twitter for Vale’s top management to be removed urgently “out of respect for the victims … and to avoid any destruction of evidence.”

One of Vale’s lawyers, Sergio Bermudes, told newspaper Folha de S. Paulo that management should not leave the company and Calheiros was trying to profit politically from the tragedy.

Brazil’s top prosecutor, Raquel Dodge, said the company should be held strongly responsible and criminally prosecuted. Executives could also be personally held responsible, she said.

The disaster at the Corrego do Feijao mine occurred less than four years after a dam collapsed at a nearby mine run by Samarco Mineracao SA, a joint venture by Vale and BHP Billiton, killing 19 and dumping toxic sludge in a major river.

While the 2015 Samarco disaster unleashed about five times more mining waste, Friday’s dam break was far deadlier as the wall of mud hit Vale’s local offices, including a crowded cafeteria, and tore through a populated area downhill.

“The cafeteria was in a risky area,” Renato Simao de Oliveiras, 32, said while searching for his twin brother, a Vale employee, at an emergency response station.

“Just to save money, even if it meant losing the little guy… These businessmen, they only think about themselves.”

As search efforts continued on Monday, firefighters laid down wood planks to cross a sea of sludge that is hundreds of meters wide in places, to reach a bus in search of bodies inside. Villagers discovered the bus as they tried to rescue a nearby cow stuck in the mud.

Longtime resident Ademir Rogerio cried as he surveyed the mud where Vale’s facilities once stood on the edge of town.

“The world is over for us,” he said. “Vale is the top mining company in the world. If this could happen here, imagine what would happen if it were a smaller miner.”

Nestor José de Mury said he lost his nephew and coworkers in the mud.

“I’ve never seen anything like it, it killed everyone,” he said.


The board of Vale, which has raised its dividends over the last year, suspended all shareholder payouts and executive bonuses late on Sunday, as the disaster put its corporate strategy under scrutiny.

Since the disaster, courts have order a freeze on 11.8 billion reais (2.38 billion pounds) of Vale’s assets to cover damages. State and federal authorities have slapped it with 349 million reais of administrative fines.

German insurer Allianz SE may have to cover some of the costs of the dam collapse, two people familiar with the matter told Reuters.

“I’m not a mining technician. I followed the technicians’ advice and you see what happened. It didn’t work,” Vale CEO Fabio Schvartsman said in a TV interview. “We are 100 percent within all the standards, and that didn’t do it.”

Many wondered if the state of Minas Gerais, named for the mining industry that has shaped its landscape for centuries, should have higher standards.

“There are safe ways of mining,” said Joao Vitor Xavier, head of the mining and energy commission in the state assembly. “It’s just that it diminishes profit margins, so they prefer to do things the cheaper way – and put lives at risk.”

Reaction to the disaster could threaten the plans of Brazil’s newly inaugurated president to relax restrictions on the mining industry, including proposals to open up indigenous reservations and large swaths of the Amazon jungle for mining.

Environment Minister Ricardo Salles said in a TV interview on Monday that Brazil should create new regulation for mining dams, replacing wet tailings dams with dry mining methods.

Mines and Energy Minister Bento Albuquerque proposed in Sunday newspaper interview that the law should be changed to assign responsibility in cases such as Brumadinho to the people responsible for certifying the safety of mining dams.

“Current law does not prevent disasters like the one we saw on Brumadinho”, he said. “The model for verifying the state of mining dams will have to be reconsidered. The model isn’t good.”

The ministry did not immediately respond to questions about the interview.

(Reporting by Gram Slattery; Additional reporting by Tatiana Bautzer, Maria Carolina Marcello and Ricardo Brito; Editing by Frances Kerry and Marguerita Choy)

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