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Brazil dam disaster prompts African miners to consolidate tailings requirements

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Brazil dam disaster prompts African miners to consolidate tailings requirements

Vale SA's Feijao iron ore tailings dam disaster has prompted miners in southern Africa to reassess indemnity agreements for in-country directors of local subsidiaries, among a raft of measures being undertaken to better prepare for and mitigate any such incidents on the continent in the future, according to a legal expert.

Global law firm Herbert Smith Freehills’ Johannesburg-based environmental director Matthew Burnell told S&P Global Market Intelligence that African miners now have a "heightened awareness" of a greater risk to communities from any potential incident due to their location in proximity to their operations.

SNL Image
Herbert Smith Freehills' Matthew Burnell addresses Africa Down
Under on Sept. 6, 2019.
Photo: Paydirt Media/Bryan Charlton

He said miners should take "proactive measures" now, not only to help them identify problems and deal with them, but also to uncover more components at risk that possibly haven't been thought of.

Burnell had earlier told the Africa Down Under conference in Perth, Australia, on Sept. 6 that his firm is seeing increased and elevated fiduciary assessments by mining directors on the risk integrity of their company's exposure to dam incidents.

"There is a growing consolidation of the legal, corporate and social requirements that miners can now be expected to apply to the management of tailings dams regardless of whether they are current or former dam owners," he said.

He later said in an interview that companies might have contractual obligations to historic mines or tailings dams that they have sold, but "from a legislative perspective you could still be held responsible" in some African countries.

This consolidation includes pulling together the legislative risks and possible opportunities to mitigate those risks in respect of existing and historical dams, contractual legacy claims, claims against sub-contractors and what insurance provisions were or are in effect and their adequacy.

Other factors include indemnity agreements for directors and whether they are relevant or sufficient, and a revision and update of any existing emergency incident plans.

The frozen assets of the directors that were held responsible for Brazil's disaster is also a reminder that although they had been indemnified against any liability, there wasn't anything to govern the day-to-day management of their lives that were affected by the freeze.

As this has potential impacts on the local directors of African-registered subsidiaries which run mine operations for the foreign exchange-listed miners which own them, Burnell said many of the "finer details" around director indemnity agreements have been re-assessed in the local market in Africa.

"If those sort of agreements aren't in place, there's a reluctance of people to step into management roles if they have too much risk and are too exposed," he said, thus foreign mining companies "need to think about protecting their in-country people."

There should also be internal audits taking place in mining companies to ensure there are no structural concerns in existing tailings dams, he said, and Africa has plenty of local environmental consultancies and structural tailings engineers to review operations.

Burnell's firm is also witnessing in southern Africa a heightened awareness of the limitations on some financial provisions, which is leading to some revisions of mine closure plans.

While there have been no major dam failures in southern Africa of late like Brazil suffered, Burnell said miners are starting to "make sure their ducks are in a row" so that, should something happen, they have funds set aside to be able to mitigate those risks, and are taking more pro-active measures around it.

He said miners need to ensure they have in place a better management plan for such an incident, from notification of stakeholders through to immediate mitigation measures, long-term corrective measures for a failed dam and long-term monitoring and preventative measures.