Vale’s Senior Management Unaware of Dam Risk Report, Says CFO

February 13, 2019 by

Senior management at Brazilian miner Vale were never shown internal security documents indicating that its dam at Brumadinho was at risk of collapse, the company’s chief financial officer said on Tuesday [Feb. 12].

The CFO, Luciano Siani, was asked about management’s knowledge of the internal documents at a news conference a day after Reuters reported on them. The documents, dated Oct. 3, 2018, classified the dam at Brumadinho as being two times more likely to fail than the maximum level of risk tolerated under internal guidelines. The dam collapsed in late January in one of the deadliest mining disasters in decades.

Asked whether the company’s senior management had seen the internal report, Siani said, “No.”

“There was a lot of controversy about this recommendation to pass technical details to senior management,” Siani said at the company’s headquarters in Rio de Janeiro. “If a mechanic and a pilot detect a problem, they have to have the autonomy to take immediate decisions in the field, and if you scale that into the company hierarchy, it can mean the difference between taking a quick decision and not.”

The disaster in the mineral-rich state of Minas Gerais was the second major collapse of a mining dam in the region in about three years, following a similar disaster in 2015 at a nearby mine co-owned by Vale. So far, at least 165 people have been confirmed dead after the dam burst, with nearly 200 more likely also killed.

Siani said that in general, it was debatable whether technical details on Vale‘s dams should reach the board, as that could affect flexible decision-making.

He said the safety measures recommended by the documents, generated by national and international experts, were already being acted upon by the company. He said the report recommended actions, such as reducing the water level, which were already under way.

Siani stressed that the board was told that the dam was stable.

The collapsed dam, which had more than 12 million cubic meters of iron ore tailings, released a wave of mud that buried company facilities, nearby dwellings and forests, and affected rivers in the region.

“This structure, in addition to having no imminent risk, did not show any symptom of problems,” Siani said.

Vale shares added to gains after the news conference, rising 5.4 percent to close at 44.30 reais.

“The news conference helped reduce risk perception in relation to potential future litigation,” XP Investimentos analyst Karel Luketic said in a research note, adding that the current depressed share price more than reflected future risks stemming from the collapse.

Siani said there were 46 board meetings related to the dam issue between 2016 and last year, but did not go into detail.

On Tuesday, Brazil’s Senate leader Davi Alcolumbre announced the creation of a 180-day special investigative commission to probe the collapse of the dam, identify who was responsible, and enact measures to prevent such a tragedy happening again.

(Reporting by Marta Nogueira, additional reporting by Tatiana Bautzer; writing by Gabriel Stargardter;

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