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Vale: Samarco investment 'reduced to zero'

Bnamericas Published: Thursday, February 25, 2016

Investment by Brazilian iron ore miner Vale in pellet-maker Samarco "was reduced to zero," the former said in its 2015 results report.

And no liability was recognized in the document.

Operations at Samarco were suspended following a dam collapse in November at its Germano mine, near the city of Mariana, Minas Gerais state, which resulted in at least 17 deaths and widespread pollution.

Samarco is a 50:50 JV between Vale and fellow mining heavyweight BHP Billiton.

"The dam failure had no effect on Vale's cash flow for the year ended December 31 2015," the company said.

"Vale accounts for Samarco's results under the equity method, and, therefore, the impacts of Samarco's dam failure on Vale's balance sheet and income statement are limited to Vale's interest in Samarco's capital as per the Brazilian corporation law," Vale said.

The mining giant said it had been "summoned" by Brazil's federal government, the state governments of Minas Gerais and Espírito Santo and other entities in a public civil action filed at a federal court in Minas Gerais state capital Belo Horizonte.

The action, which was brought against Samarco and its shareholders, BHP Billiton and Vale, requests a "freeze on transfer of the mining rights of the three respondents, without, however, limiting their commercial and production activities and ii) remediation of the damages caused by the failure of the Samarco Fundão dam," Vale said. "The claimants valued the action at 20.2bn reais [around US$5bn]. Vale has adopted the necessary measures to guarantee its right of defense."

On Tuesday, BHP Billiton recognized a total after tax charge of US$858mn relating to the Samarco dam failure.

The Australian miner also announced on its quarterly release it had written down to zero its investment in Samarco.

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