Brazil shuts mudslide mine in new blow to companies

Douglas Magno

Mariana (Brazil) (AFP) - Brazilian authorities said Monday they have halted operations at an iron ore mine where the collapse of a waste reservoir triggered a deadly mudslide, the latest blow to co-owners BHP Billiton and Vale.

At least four people were killed and around 20 are missing after a deluge of mud and mining sludge burst through retaining walls at the Samarco mine Thursday and buried most of the nearby village of Bento Rodrigues.

The mine, a joint venture between Australia's BHP Billiton and Brazil's Vale, "can only resume operations once the investigation is finished and measures are taken to repair the damage," said a spokeswoman for the environment office in the southeastern state of Minas Gerais.

State officials gave the order to close the mine Friday due to the seriousness of the incident and the need to investigate the risks for the population and the environment, the spokeswoman told AFP.

"Samarco is only authorized to carry out emergency actions aimed at minimizing the impact of the collapse and preventing new damages," the environment office said in a statement.

The two mining giants have seen their stock prices plunge since the disaster.

Shares in BHP Billiton, the world's largest mining firm, fell five percent Monday in London to a new seven-year low.

Shares in Vale racked up heavy losses Friday and were down one percent Monday in Sao Paulo.

Deustche Bank analysts warned the disaster could shut down Samarco for a decade, with clean-up costs of more than $1 billion.

BHP Billiton's chief executive, Andrew Mackenzie, announced he would fly to Brazil "to understand first-hand the human, environmental and operational impacts of the incident."

Samarco, the 10th-largest exporter in Brazil, is 50-percent owned by both companies.

It has announced plans to hire external investigators to determine what caused the disaster.

The mine did not have sirens to warn residents in case of such a collapse.

- Drinking water polluted? -

The disaster is a public relations nightmare for BHP Billiton and Vale.

Authorities said they have identified two bodies pulled from the sludge and are still working to identify two others. Rescue workers have warned the death toll is likely to rise as the search operation continues.

More than 600 people were left homeless by the mudslide, a spokesman for the state government said.

A small group of survivors protested Monday against Samarco outside the city hall in Mariana, the nearby town where the evacuees from Bento Rodrigues have been taken.

Brazilian media reports said the nearly 60 million cubic meters (two billion cubic feet) of ochre sludge, which has flowed into local rivers, could contaminate the water supplies of more than half a million people.

Initial water tests in the Rio Doce river basin, which supplies a dozen cities, show abnormally high levels of opacity and electric conductivity, officials said. The results of metal toxicity tests are expected Tuesday.

State prosecutors recommended that Samarco pay baseline monthly damages equivalent to the minimum wage ($207 a month) to each family that lost its home.

They also urged the company to set a timetable for resettling victims in new homes.

"We are trying to resolve all this without going to court," said prosecutor Mariana Guilherme de Sa Meneghuin.

But "if Samarco doesn't comply with our recommendation, we're going to let the justice system rule on fulfilling these measures," she told AFP.