Economy

Vale agrees to a $ 7 billion settlement for the Brumadinho Dam collapsing

Vale agrees to a $ 7 billion settlement for the Brumadinho Dam collapsing

São Paulo – Brazilian miner

Valley

On Thursday, it agreed to pay Minas Gerais $ 7 billion in compensation The collapse of the dam two years ago killed 270 people, Pollute rivers and erase the surrounding landscape.

The settlement, the largest in Brazilian legal history, is a watershed moment for a country that has long been impeded by impunity and where miners and big corporations often wield greater power than the state, especially in rural areas.

Prosecutors said the $ 7 billion deal aims to compensate the state for the social, economic and environmental damage caused by the disaster. But it does not affect the pending numerous murders and other criminal charges in the case against the world’s largest iron ore miner and former executives, including former Vale CEO, Fabio Schwarzmann.

Minas Gerais State Prosecutor Garbas Soares Jr. said he hopes the size of Thursday’s settlement will send a message to the rest of the world: “We will not accept the exploitation of our resources without a minimum commitment to social and global issues. Environmental responsibility.”

Vale accepted the decision and said it would book an additional $ 3.7 billion in expenditures in its 2020 results.

“Vale is committed to repair and fully compensate for the damage caused by the Brumadinho tragedy and to contribute increasingly to the improvement and development of the communities in which we operate,” said Vale’s CEO, Eduardo Bartolomeo. “We know we have work to do and we remain resolute with that.”

Mourners visited a memorial to the victims of the Brumadinho Dam collapse in 2019. Suicides and suicide attempts rose in the area after the disaster, especially among women.


Photo:

Douglas Magno / AFP / Getty Images

Vale’s investors welcomed the settlement as a way to avoid a drawn-out court battle, as did prosecutors who cited other lawsuits over environmental problems in the state that had not been resolved after nearly 20 years.

Shares in the miner, which have increased in value by nearly 60% since the dam’s collapse, initially rose after news of the settlement, signaling investor hopes that the company will finally be able to weather disaster.

“Vale was able to get a discount of about a third based on what the state government was asking for, so they were adept at these negotiations,” said Ilan Arbtmann, equity analyst at Brazilian brokerage Ativa Investments. He said the mining company had already provided a large portion of the agreed value and was taking advantage of the higher iron ore prices.

When the Vale Dam burst near the town of Brumadinho in January 2019, it unleashed a tsunami of mining waste speeding up the canyon at speeds of up to 50 miles per hour, wiping out the on-site canteen where many workers were having lunch. The neighboring houses and the guest house are destroyed.

Two years later, the bodies of 11 victims had not been found.

The collapse, one of the deadliest avalanches in the world, came just three years after a dam collapsed at another iron ore mine owned by the Valley Company 100 miles away in the town of Mariana, killing 19 people and contaminating more than 400 miles of the river. . The company pledged at the time that such a disaster would not happen again.

Settlement funds will be spent on environmental projects, supporting local water supplies, as well as improving transportation networks and health services. The agreement also includes Vale’s initial costs in the aftermath of the disaster, when the company paid for temporary housing, mental health professionals and monthly emergency bonuses for residents.

Suicides and suicide attempts rose in Brumadinho the year after the collapse, especially among women. Some lost husbands, sons and fathers in the mine, one of the largest employers in the area, and had to wait months for rescue workers to retrieve the remains of their loved ones from the harsh mud.

After Mariana collapsed in 2015, Vale and its partner in that dam,

BHP Group Ltd.

, It set up the Renova Compensation Management Foundation, which it said has paid out about $ 2.1 billion as of December last year. Prosecutors said they believe the second dam collapse in 2019 might not have occurred if Vale and BHP had faced tougher consequences for the first dam.

In January of last year, Brazilian prosecutors indicted former Vale CEO Mr. Schwarzmann and 10 others from the mining company. They also brought murder charges against five people at German company TÜV SÜD, an auditing firm that has determined that the mine’s tailings dam is safe before it explodes.

All 16 people, including several executives and high-ranking directors of Vale, have also been charged with environmental crimes, and so have both companies as entities. These charges are still contested in the Brazilian court system.

Prosecutors said last year that the dam had been clearly a critical structural risk since at least 2017 and that Vale was fully aware of its safety issues. The German inspector assured that the dam was safe despite also being aware of its structural problems, and was looking forward to an opportunity to win multiple contracts with Vale and expand its Brazilian operations, they said.

As part of a year-long investigation into the disaster, the Wall Street Journal first reported in February 2019 Conflict of interest Between Vale and TÜV SÜD, who acted as an in-house consultant and an independent safety assessor to the miner.

A spokeswoman for Vale said Thursday that the miner was not aware of an imminent danger at the dam. TÜV SÜD said it reiterated its commitment to “see the facts of the dam collapse explained,” adding that it is cooperating with the authorities. Mr. Schwarzman and individuals facing criminal charges denied any wrongdoing in the case.

In recent years, Brazil’s prosecutors have fought against large companies with little success. After an oil spill off the coast of Rio de Janeiro in 2011, The plaintiffs filed a lawsuit against

Chevron Corp.

For more than $ 7 billion. Two years later, they settled with the American oil giant for $ 55 million.

Write to Samantha Pearson at samantha.pearson@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com

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