BHP Group said tailings dams needed to have “nuclear-level” safety measures and be monitored by an independent body following a deadly breach in Brazil that is likely to have killed at least 300 people.
Andrew Mackenzie, chief executive of the world’s biggest natural resources company, said the mining industry had to “energise itself” to understand how tailings dams collapse after last month’s disaster at Vale’s Córrego do Feijão iron ore mine.
“We have to acknowledge the deficiencies in the scientific and technical understanding that can lead to the operation of dams that clearly give an unacceptable level of failure,” Mr Mackenzie said. “They have to have a nuclear-level of safety now and that does mean we do need to get some of the best physicists and engineers involved.”
Last month, the Church of England and fund managers with more than £1tn in assets called for independent safety monitoring of tailings dams, which are used to store waste material from mines.
Mr Mackenzie did not confirm whether BHP would support that venture but said an independent third party should monitor the safety of global tailings dams. He would not give details of a timeline but said the chief executives of global mining companies would meet next week at a conference in Miami.
“Events like this simply cannot happen,” he said. “We will be meeting with a number of global bodies this month to expedite this work and response.”
In the wake of a previous dam breach in 2015, also in Brazil, a report commissioned by the International Council on Mining and Metals recommended a consequence-based classification system for tailings dams but it was not widely adopted, according to analysts.
“With hindsight you can suggest we should have invested a bit more in some of these things,” Mr Mackenzie admitted. “Given what happened . . . we absolutely need to invest more in these things to make sure that the full body of scientific capability within humankind is applied.”
Mr Mackenzie said it was “too early to speculate” on what the dam breach would mean for the future of Samarco, BHP’s iron ore joint venture with Brazil’s Vale, the world’s biggest iron ore miner.
“In the current environment the re-starting of Samarco is furthest from our minds,” Mr Mackenzie said.
The mine has been out of operation since a dam collapse in 2015 killed 19 people.
Mr Mackenzie said BHP “did not learn a lot” from the dam collapse, but had isolated a number of risk factors that may have been the cause of its failure. That highlighted the lack of scientific understanding of the structures, he said.
BHP also provided more details of its tailings dams, which total 115 including non-operated joint ventures. Of that total, 20 are active and 47 have been constructed using the upstream method — the same design used at the Córrego do Feijão mine.
Separately, BHP said it had abandoned a productivity drive to generate an extra $1bn in cash following a series of mishaps including a major train derailment in Western Australia.
Working the group’s assets harder to deliver higher profits has been a key focus for Mr Mackenzie since he took the helm in 2013.
But in the past six months the Anglo-Australian company was hit by a “negative productivity movement” of $460m following a string of production outages at some of its operations.
BHP revealed last month that it was struggling to meet its efficiency targets after the train derailment reduced iron ore exports by 4m tonnes and problems at two mines affected 58,000 tonnes of copper production.
The company reported that underlying attributable profit for the six months to December — the measure most closely watched by analysts — came in at $3.76bn, 8 per cent lower than it had been at the end of June 2018.
Net debt came in at $9.9bn, down $1bn from the proceeding period and below the end of BHP’s targeted range of $10bn to $15bn. London-listed shares in BHP were down 0.44 per cent at £17.91.
With BHP on track to generate $9bn of free cash flow based on current commodity prices, according to Mr Mackenzie, the company could be in a position to launch a share buyback later this year.
BHP declared a dividend of 55 cents a share, or 75 per cent of earnings. The company has a minimum payout ratio of 50 per cent.
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