October 20, 2016

BRAZIL: Brazil Charges 21 People With Homicide In Samarco Mining Dam That Collapsed Last Year. Believed To Be The Biggest Disaster Of Its Kind Anywhere. BHP Chairman Nasser To Step Down.

The Wall Street Journal, USA
written by Paul Kiernan
Thursday October 20, 2016

BELO HORIZONTE, Brazil—Brazilian federal prosecutors filed homicide charges Thursday against 21 people in connection with a catastrophic collapse of a mining dam last year that killed 19 people.

Those charged include current and former top executives of mining giants Vale SA and BHP Billiton Ltd. and their joint venture, Samarco Mineração SA. Among them are former Samarco Chief Executive Ricardo Vescovi, Vale’s current iron-ore director Peter Poppinga, and eight Vale and BHP representatives at Samarco.

The charges mark the end of a nearly yearlong criminal investigation into the Nov. 5, 2015, failure of Samarco’s Fundão tailings dam in southeast Brazil.

Believed to be the biggest disaster of its kind anywhere, the incident released a torrent of sludge that washed away villages, displaced hundreds of people and traveled more than 400 miles through southeast Brazil’s Rio Doce basin before reaching the Atlantic Ocean. Almost a year later, the river is still tainted a rusty red from sediment, its washed-out banks visible from the cruising altitude of commercial airliners.

Additional charges against the 21 individuals include the crimes of causing a flood, landslide and grave bodily harm. Vale, BHP and Samarco were also charged with 12 different kinds of environmental crimes. Employees of a consulting firm that performed periodic checkups on Fundão were charged with presenting false stability reports.

In an emailed statement, Samarco said it “refutes” the charges and said the prosecutors ignored defense statements that it presented over the course of the investigation, “which prove that the company had no prior knowledge of the risks to its structure.”

“Safety was always a priority in the management strategy of Samarco, which reiterates that it never reduced investments in this area,” the company added.

BHP Billiton said it “rejects outright the charges against the company and the affected individuals. We will defend the charges against the company, and fully support each of the affected individuals in their defense of the charges against them.”

Vale reaffirmed its “deep respect and total solidarity” with the disaster’s victims but said it “vehemently repudiates” the charges filed Thursday. It added that its representatives on Samarco’s board confirmed that they “were never informed by Samarco’s technical or leadership team of any irregularities that could have represented real or untreated risks to the dam, nor by any consultancy responsible for monitoring the structure.”

The individual defendants couldn’t be reached.

If convicted of “qualified homicide,” the individuals could face sentences of between 12 and 30 years in prison, prosecutors said, adding that Brazil has extradition agreements with most or all of the countries from which the suspects hail.

“[The victims] were killed by the violent passage of the tailings mud, they had their bodies thrown against other objects, such as pieces of wood, they had their bodies mutilated and...dispersed across an area of 110 kilometers,” federal prosecutor Eduardo Santos de Oliveira said at a press conference. “The motivation of the homicides was the excessive greed of the companies—Samarco, here charged, as well as its shareholders—in the name of profit.”

Potential penalties for Vale, BHP and Samarco range from payment of fines and funding of charitable programs to partial or total suspension of their activities. Prosecutors added that they requested damage payments for the victims, the amount of which remains to be determined.

A judge must accept the charges for a trial, which would take place before a jury, to begin.

In a report released in August, the companies presented a report on the factors that contributed to Fundão’s failure.

All three firms have apologized for the disaster and committed to a full remediation of the damage. But Brazilian courts rejected a March settlement signed by the companies and the government. Prosecutors are seeking to replace it with a civil lawsuit filed in May in which they sought 155 billion reais ($49 billion) in damages and compared the Samarco disaster to BP’s Deepwater Horizon oil spill in the Gulf of Mexico.

The prosecutors’ case hinges what they say is evidence that Samarco and its shareholders were aware of chronic structural problems at Fundão dating back to April 2009. They say Samarco’s board—made up of Vale and BHP officials—was informed of flaws in the dam but responded by pressuring the company to extract more iron ore.

Samarco’s board was also allegedly informed of the likely consequences of a dam failure, prosecutors said. Company risk managers allegedly had estimated as recently as 2015, according to prosecutors, that a collapse of Fundão could kill 20 people, stop Samarco’s operations for two years and deal a substantial blow to the mining companies’ reputations.

Surviving residents of the devastated community of Bento Rodrigues reported after the accident that they received no official warning from Samarco in the crucial minutes after the dam gave way.

“There were internal committees, operational committees, dam committees, in which the issues were discussed, and on those committees there were representatives of Vale and BHP,” prosecutor José Adércio Leite Sampaio said. “Based on the minutes, on what was debated in those minutes, on the documents that were presented at those meetings, we identified the list of people on the charge sheet.”

The Business Times
written by Bloomberg staff
Friday October 21, 2016

[LONDON] Jacques Nasser, chairman of BHP Billiton Ltd, said he plans to step down from the world's biggest mining company after helping guide it through a deadly tailings dam spill in Brazil.

The 68-year-old chairman, who's been in the role since 2010, told shareholders at the company's annual meeting in London on Thursday that he won't seek re-election to the board next year. He had intended to announce his retirement last year, but was persuaded to stay as BHP responded to the Samarco disaster that killed as many as 19 and was described by Brazil as its worst-ever environmental disaster.

"The board believed it was important that I continue on as chairman to provide stability as we responded to Samarco," said Mr Nasser, who hails from Australia. Now that the "basic structure" of BHP's response is in place, he doesn't plan to seek re-election.

Brazilian prosecutors filed criminal charges including homicide against 21 people linked to the mine's operator, Samarco Minercao SA, and its owners, BHP and Vale SA, according to a statement by the prosecutors on Thursday. All three companies rejected the charges in written statements.

Mr Nasser, a former chief executive officer of Ford Motor Co, helped steer BHP through a downturn in commodities sparked by a slowdown in China and a glut in everything from iron ore to copper to coal. That forced BHP and its peers to rein in spending, focus on reducing costs, retreat from M&A and shed smaller assets to help trim debt as profits fell.

"We had to carefully pivot the company. We had to carefully look for other opportunities in other commodities that would be better represented in a world that was developing at 3 per cent, rather than this maybe once-in-a-century boom that China had," Mr Nasser told reporters after the shareholder meeting.

He pointed to rising global concern about the impact of climate change during his tenure and the company's relentless focus on productivity as key areas where he helped shape BHP's strategy.

"We kept the balance sheet very strong," Mr Nasser told reporters. "This is a sector where you can blow up the balance sheet very easily and we've seen our peers who have done that."

"We didn't do that. We didn't have to issue new shares. We kept a solid A credit rating through the valley of the commodity price death," he said.

BHP advanced 0.7 per cent to A$23.00 at 10:04am in Sydney trading, extending its advance this year to 29 per cent.

Getting the commodity mix right during the downturn was a key deliberation Mr Nasser and the board faced during his tenure, he said. Back in 2011, BHP spent US$20 billion expanding into US shale assets to tap a projected increase in energy demand. The company was later forced to write down the value of the assets as natural gas prices slumped.

Just a few months into Mr Nasser's chairmanship in 2010, BHP launched a US$39 billion hostile takeover offer of Potash Corp of Saskatchewan Inc. The bid was ultimately unsuccessful, but potash would later become a potential "fifth pillar" in BHP's strategy to focus on just four commodities - iron ore, oil and gas, copper and coal.

It was this four-pillar approach to the portfolio that led BHP to its most significant divestment when it spun off South32 Ltd, a collection of unwanted manganese, coal and alumina assets, last year. The company is now listed in London, Sydney and Johannesburg.

BHP, which has lost about 40 per cent of its value during Mr Nasser's tenure as chairman, hit a 10-year low in January before doubling in London trading this year. While the shares fell more than No 2 miner Rio Tinto Group since he took the role, they outperformed Anglo American Plc and Vale SA.

Mr Nasser also pushed for greater shareholder returns with the company paying a record dividend in 2015. The company's total return over the past decade was 101 per cent, compared with 69 per cent for the UK's benchmark FTSE 100 Index, he said. This year, BHP was forced to cut its payment for the first time in 15 years and changed its policy of paying out ever increasing dividends to returning a percentage of profits.

Mr Nasser, also on the board of Twenty-First Century Fox Inc, said succession planning is an "ongoing process" and that he'll keep leading the board.

Heidrick & Struggles has previously conducted external searches for BHP board candidates. After the company announced a workforce gender parity target today, Mr Nasser said the board should be open to appointing its first female chair, though he wouldn't insist on it.

As to what he'll do next, Mr Nasser said he had no desire to chase a new role of a similar standing.

"I'm almost 70 years old, I'm done," he told reporters. "I'm done in this more structured role. It's been terrific and I think we leave the company in a very robust position."

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