The future of BHP Billiton's Samarco iron ore mine in Brazil has been thrown into doubt after the mining giant admitted for the first time that it cannot guarantee that it will be reopened.
The FTSE 100 miner warned that the operation would need to be economically viable to justify a restart and therefore its future was "not assured", it told London's The Sunday Telegraph.
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Drainage, design blamed for Samarco disaster
An investigation into last year's Samarco mine disaster in Brazil has found the fatal collapse was due to construction and design flaws. Vision courtesy ABC News 24.
The mine has been closed since November last year when a tailings dam collapsed, deluging the surrounding area with a tidal wave of mud that killed 19 people and flattened two towns.
BHP, which co-owns Samarco with Brazilian mining giant Vale, is expected to face uncomfortable questions about the disaster at its London AGM next week, ahead of the one-year anniversary of the dam's collapse.
"It's very important for the region, the employees, the shareholders and the country that Samarco restarts," said Dean Dalla Valle, BHP's commercial officer, who has led the Anglo-Australian firm's response to the disaster since February.
"Technically, that can happen quite quickly but a number of approvals are needed. We'd need to look at what the costs would be. We can't sign blank cheques. We'd very much like to see it restart but it has to be done under conditions where the revenue it makes can offset the costs. Restart is not assured."
A key sticking point is Samarco's $US3.8 billion ($5 billion) debt. Last month it missed an interest payment on a $US500 million bond, though it has a 30-day grace period in which to pay. The company, which has laid off more than half its 5000 workers, has had no cash flow since suspending operations.
Many locals are keen for it to reopen as it is a major contributor to the local economy, but experts believe it is unlikely to reopen before the second half of 2017.
Restoration of the environment along the contaminated River Doce had now passed from Samarco to the newly established Renova Foundation, potentially freeing up the company to resume commercial operations, Mr Dalla Valle said.
Campaign group the London Mining Network, which regularly targets London-listed mining companies, has called for a protest outside BHP's AGM on Thursday.
Co-ordinator Liam Barrington-Bush criticised the lack of local participation on the board of Renova, saying BHP and Vale risked missing out on insights from people living at the scene of the accident.
"They are chucking money at a problem without significant on-the-ground knowledge to help them do so in an effective way," he said.
"This will cost affected communities via poorly planned interventions, but it will also cost the companies and their shareholders via the never-ending price tag on insufficient clean-up efforts."
BHP says the foundation has a 17-strong advisory panel of local people that will provide "input" to the executive board.
The Sunday Telegraph, London