Communist Party of Australia  


The Guardian

Current Issue

PDF Archive

Web Archive

Pete's Corner


Press Fund


About Us

Why you should ...

CPA introduction

Contact Us

facebook, twitter

Major Issues





Climate Change



State by State

NSW, Qld, SA, Vic, WA

What's On






Books, T-shirts, CDs/DVDs, Badges, Misc


Issue #1712      November 25, 2015

Did BHP Billiton know their dams would collapse?

A report prepared two years ago by four Brazilian university academics warned that design flaws could lead to a catastrophic collapse of iron ore tailings dams owned partly by BHP-Billiton in Brazil.

The town of Bento Rodrigues hit by the toxic flood from the collapse of the dam.

And on Friday November 6 one dam suffered a massive breach and another collapsed, sending a 50 million cubic metre toxic flood up to 18 metres high and hundreds of metres wide down a mountain, inundating the town of Bento Rodrigues before flowing 500 kilometres along the river Rio Doce to the Atlantic Ocean.

One scientist has estimated it will take 50 years for the river to recover, but no one knows whether this will ever be possible. At least nine people have died and 21 are missing, and the toll will undoubtedly rise because people living along the river depend on it for water, which is now undrinkable.

The tailings contain sand and iron ore, and possibly other toxic matter. A representative of Samarco, the project-specific corporate giant in which BHP Billiton and Brazilian corporation Vale share partnership, admit they don’t know the chemical composition of the tailings, and samples are being analysed.

Samarco has admitted that the structures supporting a third dam was not built to Brazilian engineering standards, and the area below that dam has now been evacuated.

“Arm’s length” operation

The dams were built and the mine operated “at arm’s length” by a separate company which failed to install emergency warning sirens. Brazilian officials are now considering laying criminal charges against the company.

Samarco has been fined $91.9 million, and has agreed to make a preliminary payment of $367.6 million for clean-up and compensation. A Brazilian court has frozen $109 million of Samarco’s funds.

A Brazilian Congress subcommittee is currently drafting amendments to mining legislation, which will increase the level of insurance that mining companies will have to take out.

Consultants hired by the committee’s chief have advised that the final bill for Samarco clean-up and compensation will be between $2.5 billion and $3.6 billion. However, Samarco is only insured for $1.4 billion. Moreover, as a company representative interviewed by the Australian Financial Review noted, “Samarco has non-recourse external debt…”

After the insurance is paid, the remaining bill for compensation and remediation, combined with Samarco’s external debt, means the conglomerate company could go broke.

As the owners, BHP-Billiton and Vale would presumably have to pick up the bill. However, Samarco’s representative pointed out that the company’s external debt “… is not guaranteed by BHP[-Billiton] or Vale.” In other words, whether Samarco goes broke or not, the two companies could walk away without having to repay the debt that Samarco already had prior to collapse of the dams.

They would still have to pay compensation, but as BP’s Gulf of Mexico disaster showed, major corporations can do so without going under. BHP-Billiton shares fell after the disaster, reducing the company’s worth to its value ten years ago. But that certainly doesn’t mean the company is about to crash.

Community shirtfronts corporation

Samarco has provided emergency accommodation and water supplies for 650 residents affected by the collapse, and has promised to set up a $US100 million emergency assistance fund, but public rage is still mounting.

Members of the Krenak tribe who live downstream have blocked the Rio Doce freight rail line, forcing Vale to suspend ore shipments. Protesters demonstrated outside Vale’s headquarters in Rio di Janeiro and the company’s regional office in Vitorio, and residents of the river town of Periquito held street demonstrations and stopped traffic on a federal highway.

BHP Billiton is hastily reviewing its involvement in two other “arm’s length” mining projects in South America. At one stage it asked Xstrata, its partner in one of the projects, to take over management of that mine while BHP managed the other, but Xstrata refused.

BHP Billiton and Vale will probably argue that penalties they incur for the Samarco disaster should be lenient, in order to save the project. Shareholders are now exerting pressure on the two companies to take over direct responsibility for mining operations from the current operator, but that would necessitate the sale or restructure of Samarco, and possibly a declaration of bankruptcy.

However, it’s most unlikely that BHP Billiton itself will go broke. The company reduces its tax and royalty payments by selling its products at rock-bottom prices to BHP Billiton AG, a Swiss subsidiary operating out of Singapore, which then sells the product to the end buyer at the top market price.

BHP Billiton and Rio Tinto both operate subsidiaries in Singapore, reaping a $2.6 billion profit last year and paying only 2.5 percent local tax, according to the Australian Financial Review.

Nevertheless, things are changing. The Queensland government requires royalty payments as a percentage of the first sale of minerals, and it has taken BHP-Billiton to court over claims for unpaid royalties. Claims against the company for unpaid tax and royalties arising from its Singapore operations now amount to $810 million.

Superannuation companies with major investments in BHP-Billiton want the company’s executive salaries to be conditional on achieving environmental objectives. The Brazilian disaster and the recent fall in global coal and iron ore prices are said to have reduced the value of Australian workers’ superannuation retirement savings by $6 billion.

So far, BHP Billiton has refused to take responsibility for the safety of its operations, delegating that job to someone else while it reaped in the profits and minimised any tax paid in Australia.

It is fighting the tax and royalty claims, and might adopt stalling tactics over the Brazilian disaster by lodging endless legal appeals, as Exxon did after the Exxon-Valdez disaster.

The company has refused to reveal whether it knew about the contents of the report predicting a collapse. However, it’s impossible to believe it didn’t, given that the report was available to the public. And in any case, it was their job to find out, rather than adopt a policy of “see no evil, hear no evil”.

Before its merger with Billiton, BHP used to describe itself as “the big Australian”. But the Brazilian disaster has revealed it as just another super-ruthless, super-greedy multinational.

Next article – Hutchison port workers win return to work

Back to index page

Go to What's On Go to Shop at CPA Go to Australian Marxist Review Go to Join the CPA Go to Subscribe to the Guardian Go to the CPA Maritime Branch website Go to the Resources section of our web site Go to the PDF of the Hot Earth booklet go to the World Federation of Trade Unions web site go to the Solidnet  web site Go to Find out more about the CPA