Brazil overhaul of eye management for Vale after the disaster with a dam

BRUMADINHO, Brazil (Reuters) – The Brazilian government weighed Monday for a management overhaul by iron ore minister Vale SA on Monday, because grief above the hundreds feared killed by an eruption of the dam turned into anger, involving prosecutors, politicians and families of victims to punished.

By Monday evening, firefighters in the State of Minas Gerais had confirmed that 65 people were killed by Friday's disaster, when an outburst of landfill poured a flood of silt into the offices of the miners and the city of Brumadinho.

279 people were still missing and officials said it was unlikely that anyone would be found alive.

The acting president of Brazil, Hamilton Mourao, told reporters that a government official for the response to disasters is considering whether or not it can change the top management of Vale.

Pension funds in the public sector have multiple seats in the management of the mining company and the government has a "golden share" that gives it power over strategic decisions.

"The issue of Vale management is being studied by the crisis group," said Mourao, who serves as acting president for about 48 hours while President Jair Bolsonaro recovers from an operation. "I'm not sure if the group could make that recommendation."

Shares of Vale, the world's largest producer of iron ore and nickel, plummeted 24.5 percent in Sao Paulo Monday, eliminating nearly $ 19 billion in market capitalization. An American law firm filed a lawsuit for shareholder claims against the company in New York and tried to recover investment losses.

Igor Lima, a fund manager at Galt Capital in Rio, said the serious threats from the government and the prosecutors have driven shares even lower than many analysts had estimated.

"This reaction has created quite a bit of uncertainty about the extent of the financial penalty that Vale has to deal with," he said.

Senator Renan Calheiros, who is in the middle of a senate leadership race, demanded on Twitter that the top management of Vale should be urgently removed "out of respect for the victims … and to prevent destruction of evidence."

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

Vale's senior executives apologized for the disaster but did not accept responsibility because they said the installations met the highest industry standards.

The Brazilian supreme prosecutor, Raquel Dodge, said the company should be held very responsible and prosecuted. Executives can also be held personally responsible, she said.

REPEATED ERRORS

The disaster at the mine of Corrego do Feijao occurred less than four years after a dam collapsed in a nearby mine run by Samarco Mineracao SA, a joint venture between Vale and BHP Billiton, killing 19 people and poisonous sludge in one large river was dumped.

While the Samarco disaster caused roughly five times more mining waste in 2015, the Friday night was much more deadly when the mud wall hit the local offices of Vale, including a crowded cafeteria, and tore down through a densely populated area.

"The cafeteria was in a risky area," said Renato Simao de Oliveiras (32) when he was looking for his twin brother, a Vale employee, at an emergency service station. "Just to save money, even if it meant we lost the little man. … These business people only think of themselves."

While the search efforts continued on Monday, firefighters laid down wooden planks to cross a sea of ​​silt that is hundreds of meters wide in some places to reach a bus that is looking inside. Villagers discovered the bus as they tried to save a nearby cow in the mud.

Long-term resident Ademir Rogerio cried as he inspected the mud where Vale's facilities once stood on the outskirts of the city.

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

Members of a rescue team wear a body that was recovered after a residue dam owned by Brazilian mining company Vale SA collapsed in Brumadinho, Brazil, January 28, 2019. REUTERS / Washington Alves

Nestor José de Mury said he lost his nephew and colleagues in the mud. "I have never seen anything like it, it has killed everyone," he said.

Luciano Siani, Chief Financial Officer of Vale, told journalists Monday night that despite the interruptions in Brumadinho, the company would continue to pay royalties to the municipality. He said that Vale royalty was about 60 percent of the 140 million reais the city earned last year.

Siani said that a donation of 100,000 reais will be made to every family who has lost a family member in the disaster and said Vale would invest more in the safety of the dam.

SAFETYDEBEL

The board of Vale, which has increased its dividends last year, suspended the payout of the shareholders and the executive bonuses late on Sunday because the business strategy of the disaster was under attack.

Since the disaster, the courts have imposed an order of € 11.8 billion on the assets of Vale to cover the damage. State and federal authorities have hit it with 349 million reais of administrative fines.

The German insurer Allianz SE may have had to cover some of the costs of the collapse of the dam, two people who were familiar with the case told Reuters.

"I am not a mining technician, I followed the advice of the technicians and you see what happened, it did not work," said Vale CEO Fabio Schvartsman in a TV interview. "We are 100 percent within all standards, and that has not been done."

Many wondered whether the Minas Gerais state, named after the mining industry that had shaped its landscape for centuries, should set higher standards.

"There are safe ways of mining," said Joao Vitor Xavier, head of the commission for mining and energy in the state meeting. "It's just that it reduces 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 the newly-opened President of Brazil to relax restrictions on the mining industry, including proposals to open up indigenous reservations and large parts of the Amazon rainforest.

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Minister of the Environment Ricardo Salles said Monday in a TV interview that Brazil should draw up new rules for dams, and replace wet dams with dry mining methods.

Minister of Mines and Energy, Bento Albuquerque, has proposed in an interview with a Sunday newspaper to change the law to give responsibility in cases like Brumadinho to the people responsible for certifying the safety of dams.

"The current law does not prevent disasters like those we saw on Brumadinho," he said. "The model for verifying the condition of mine dams will have to be re-examined, the model is not good."

Additional reporting by Tatiana Bautzer, Maria Carolina Marcello, Ricardo Brito and Marcelo Teixeira; Edited by Marguerita Choy and Leslie Adler

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