The Samarco iron ore pellet operation in Brazil is not expected to restart in 2017, likely missing an earlier target for resumption in the second half of 2017, shareholder BHP Billiton said Friday.
The notice confirms building industry expectations that a restart may be further delayed at the 30.5 million mt/year pellet joint venture with Vale, given the complexity in securing a range of approvals after a fatal accident at the end of 2015.
Buyers earlier this month were losing hope of a near-term injection in high grade pellet supplies to help counter high pellet pricing premiums seen in the market over the past two years.
Samarco's pellets were known for low silica, high strength and supplied to blast furnaces and DRI plants.
"A restart of operations at Samarco is subject to obtaining separate regulatory approvals and will occur only if safe, economically viable and has the support of the community," BHP said in a statement.
"Resuming operations would also require government approvals, the granting of licenses by state authorities and the restructure of Samarco's debt. Accordingly, operations at Samarco are unlikely to restart in calendar year 2017."
Samarco's pellet operation relies on iron ore concentration plants feeding material via a slurry pipeline to coastal pellet plants in Ponta Ubu, Espirito Santo state.
Samarco's entire operation, including its mines, was idled after an accident at the end of 2015 let waste water with iron ore tailings from the mining and processing operation in Minas Gerais flood the Rio Doce river.
Since the accident, changes in ore processing legislation, to dry basis from wet, may complicate mining and technical processing, affecting pellets.
BHP said it had approved a total of $250 million in financial support for the Renova Foundation and Samarco Mineracao SA until December 31, 2017.
BHP said $174 million will be used to fund the Renova Foundation for remediation and compensation programs in place after the accident, and offset against the group's provision for the Samarco dam failure.
Samarco will benefit from a short-term facility, with BHP contributing up to $76 million for its share in remediation and stabilization works and to support Samarco's operations, it said.
BHP and Vale own Samarco on a 50:50 basis, with Vale also making available a credit line to Samarco for $76 million to cover the second half of 2017.
