On January 25, 2019, the world looked on in horror at the wave of mud unleashed by the Brumadinho dam collapse. The incident, the second of its kind in just over three years, killed 246 people, polluted river basins, and destroyed entire parts of a city. After the disaster, authorities promised to act—imposing tougher regulations on tailings management and punishing the culprits. But now, seven months later, the federal government decided to adopt a more lenient approach with mining companies.

</p> <p>The National Mining Agency (ANM) has just issued a <a href="http://www.in.gov.br/web/dou/-/resolucao-n-13-de-8-de-agosto-de-2019-210037027">new norm</a> establishing longer deadlines for miners to decommission so-called &#8220;upstream&#8221; dams, the same kind that collapsed in Brumadinho this year and in <a href="https://brazilian.report/society/2018/11/05/mariana-disaster-2015-tragedy/">Mariana in 2015</a>. These dams are the cheapest, least-safe variety, consisting of walls built using tailings to form a sort of staircase effect (picture below).</p> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/08/unnamed-4-1024x365.jpg" alt="upstream tailings dams" class="wp-image-22174" srcset="https://brazilian.report/wp-content/uploads/2019/08/unnamed-4-1024x365.jpg 1024w, https://brazilian.report/wp-content/uploads/2019/08/unnamed-4-300x107.jpg 300w, https://brazilian.report/wp-content/uploads/2019/08/unnamed-4-768x273.jpg 768w, https://brazilian.report/wp-content/uploads/2019/08/unnamed-4-610x217.jpg 610w, https://brazilian.report/wp-content/uploads/2019/08/unnamed-4.jpg 1539w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure> <p>Some of the first tasks determined by the agency—such as removing administrative, leisure, or healthcare buildings from areas that could be directly impacted by the dams in case of a disaster—would be due this week, according to the original schedule. Now, companies will have two more months to comply with this norm. They will also be able to present their projects to deactivate the dams by December, instead of the original deadline, which expired this week. Works to reinforce dam structures may be finished in September 2021, instead of February 2020, and it is still forbidden to build new upstream dams.&nbsp;</p> <p>Miners were also able to push the deadline to deactivate dams containing up to 30 million cubic meters of tailings to 2027. Those between 12 and 30 million cubic meters may operate until 2025, and smaller ones may keep on going for three more years.</p> <p>According to ANM data, the country has 61 upstream dams at present.&nbsp;</p> <p>In a statement, the ANM explains that its decision to postpone the deadlines came as a suggestion by the Minas Gerais State Prosecution Office, in order to give companies more time to adapt.</p> <h2>Pros and cons</h2> <p>Although closing these dams is an urgent matter, it wouldn&#8217;t be possible with a simple stroke of a pen. Brazil&#8217;s mining giant Vale had established its own schedule to <a href="https://brazilian.report/society/2019/01/31/vale-dangerous-dams/">close every upstream dam</a> after the Mariana disaster, and the Brumadinho dam had been decommissioned for four years before it collapsed.&nbsp;</p> <p>“The practice of decommissioning is new to Brazil’s mineral sector. When we established the 2021 deadline, it was a prerogative due to the matter’s urgency, but the sector considered that, by rushing the process, we could create a new disaster,” said ANM director Eduardo Leão, in a statement. “We saw that it was possible to make it gradually—from smaller to bigger dams. That can be a safer, better-monitored push, as we try to diminish any kind of risk this activity may show,” he added.&nbsp;&nbsp;</p> <p>Professor Paulo Afonso Luz, an expert on dams at Mackenzie Presbyterian University, explains that there are a few ways to deactivate upstream tailings dams. The first is by simply stopping operations at the dam and covering the area with soil, monitoring any kind of ground movement with instruments. Although it certainly is a cheaper process, it is more dangerous.</p> <div class="flourish-embed" data-src="visualisation/590868"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p>The other option would be to drain the sites and recycle the tailings into something that could be useful to fabricate brickwork products. Vale has been doing this to manufacture a product called Brazilian Blend Fines (BRBF), a mixture of different types of iron ores which has quickly become one of the company’s most important products. Even before the Brumadinho disaster, BRBF was set to be Vale’s highest volume product in 2019. The sale of BRBF is now particularly attractive, due to the high price of iron ore around the world.&nbsp;</p> <p>Vale’s decision to decommission these upstream mines may actually turn out to be quite profitable.</p> <p>However, as Mr. Luz explains, “it takes more time, depending on the volume you can remove. The other process would be easier, it just requires some calculations, it could be done in a matter of two to three months.”</p> <p>Another sensitive topic regards the losses which miners would incur to decommission active dams, as they would have to temporarily stop production, severely affecting Brazil&#8217;s overall industrial output. In January, before Brumadinho, the index measuring industrial production reached 103.1 points—its highest. It bottomed to 77.2 in April, recovering to 85.7 points as of June (most recent data available).</p> <p>Considering that the country’s overall GDP is expected to grow a mere 0.81 percent in 2019, further blows to this industry may be detrimental to the overall economy—despite the risks represented by keeping upstream dams in operation.</p> <div class="flourish-embed" data-src="visualisation/590953"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p>

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MoneyAug 13, 2019

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BY Natália Tomé Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, worked as an Editor for Trading News, the information division from TradersClub investor community.