5th November 2015- A tailings dam burst at vale/BHP’s Samarco mine on Brazil, killing 19 people and polluting miles of Brazil’s waterways.

25th January 2019- A tailings dam at Vale’s Córrego do Feijão mine collapsed, killing hundreds of people.

21st February 2019– Brazil’s mining agency (ANM) halts two Vale complexes (Fabrica and Vargem Grande) as part of an ongoing crackdown.

26th February 2019- The International Council on Mining and Metals (ICMM), (a London-based industry group representing 27 major companies), vowed to set an independent panel of experts in charge of developing a global standard for tailings facilities to be followed by its members.

There are about 3,500 tailings dams around the world. And although dam breaches are infrequent the devastation can be immeasurable. But dam breaches aren’t the only problem- there are many high-impact risks associated with mining activity, and unfortunately this number seems to be rising. Why?  The chart below explains.


Source: UBS/ https://worldminetailingsfailures.org/
(see homepage for film footage showing the failure of Vale’s Dam 1 of the Corrego do Feijao Mine in Brumadinho, Brazil)

The chart is for copper, but pretty much all mined commodities show a similar trend.  Global copper supply from mining activity has risen over the decades as the global population grows — pushing up demand.  However, the amount of copper within the ore, the grade, has gradually been falling.  This is because mining companies have targeted high ore grade first, (since it delivers the most metal for the lowest cost).  As copper output has been rising, and ore grade has been diminishing, the growth in volume of waste/spoil or in industry parlance ‘tailings’ has accelerated.

But mining lower grades does not only tend to mean that the volume of tailings increases.  Tailings is usually in the form of a mud like material, and mining lower grade ores often changes the mixture of compounds in the mud.  Sometimes the chemical composition of the tailings is out of scope of the original dam design and construction. Measuring the volume building up behind a dam is perhaps relatively easy, but measuring composition change requires scientific analysis.

Another thing challenging dams is the extreme weather. Many dams were built decades ago…before climate change was on their radar. More often than not a dam failure is triggered by extreme weather.

The World Mine Tailings Failures group has compiled a global database of tailings dam failures since 1915.  It predicts that there will be 17 more catastrophic tailings failures worldwide by 29, and they also predict this will happen without radical intervention.  Serious failures have occurred in many countries, but Brazil and China have the worst records.  Australia has a good record.  The tailings dam regulation and inspection regime in Australia is well regarded, but Australia also has natural advantages as mining is usually in areas that are dry, remote and have low seismic activity.

Storing and handling tailings has become a major environmental issue.  There is increasing pressure on companies to track potential risks to their tailings facilities, including seepage and tailings dam failure, and act upon the results to avoid, minimise and mitigate the risks.  The best mining companies report on managing these risks through an audit or review process. But surely more needs to be done sooner?

 

About the author

Alastair Campbell is an investment manager in the Equities team with responsibility for managing Asia Pacific ex-Japan portfolios. He also assists in stock selection for our global equity portfolios and has analysis responsibilities for Australia, Korea, China, Thailand, Indonesia and the Philippines. Alastair joined us in 2001 from Scottish Life where he was an investment manager on the Asia Pacific and UK desks. Prior to this, he worked in various analyst and investment management roles for General Accident and CIN Management, and has 31 years’ industry experience. Alastair studied Economics at Heriot Watt University, is a Chartered Fellow of the Securities Institute. *As at 30 November 2018.

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