BHP to review production guidance after dam disaster

Villages have been devastated by a massive mudflow after two dams burst at a major Brazilian mine Friday, wreaking havoc more than 80 kilometers (50 miles) downstream and prompting officials to warn of a higher death toll.

“They didn’t tell us the mud would come through with such force”, said Losangeles Freitas, resident of Barra Longa, a town nearly 80 kilometres downstream flooded by the 60 million cubic meters of waste water and mud. This already appears to be happening, as the sludge is already reaching the neighbouring state of Espirito Santo.

Shares in BHP Billiton (ASX:BHP) fell sharply on Sydney Monday, touching a seven-year low, as the mining giant took an additional hit from the tailings dam disaster at the Samarco iron ore mine in Brazil, which co-owns with Vale (NYSE:VALE).

The tragedy in the south-eastern state of Minas Gerais, which was rich in minerals, had dislodged hundreds of residents and set off investigations by prosecutors and calls for stricter supervision of the mining industry that has provided numerous jobs and government tax receipts, The Guardian further reported. Twenty-eight people are said to be missing, 13 of which are mine workers while the remainder are local villagers who were caught in the destruction. “What we’re seeing is maybe three to six people, at the most 10 people, who are missing from Bento”. In total, 612 people (162 families) are being housed by the company in hotels in the Mariana region. Samarco is paying for accommodations and relocation.

“It’s probably the last thing the company needs, given it’s struggling to generate earnings, it’s on track to pay dividends out of debt, and then they’ve got this liability”, said Ric Ronge, a portfolio manager at Pengana Capital. Da Silva’s village was washed away by the waters.

“We are trying to resolve all this without going to court”, said prosecutor Mariana Guilherme de Sa Meneghuin. Vale has referred all queries about the incident to Samarco.

Minas Gerais’ governor, Fernando Pimentel, acknowledged state mining regulations are not enough and his aides said they may need to rethink their efforts to fast-track licensing.

Though dams in the state undergo reviews by independent inspectors, more would be needed to ensure similar disasters do not happen again.

“Obviously, this wasn’t enough”, he said.

Mariana Mayor Duarte Junior had to be hospitalized on Sunday due to stress and exhaustion, but doctors ruled out that he had suffered a heart attack.

Production at the Minas Gerais site, which churns out about 30 million tonnes of iron ore every year, has been suspended and Samarco will cease shipping ore and run down its stockpiles.