Exclusive: BHP/Vale's Samarco sees mine restarting at 19 million tonnes

BELO HORIZONTE, Brazil (Reuters) - Samarco, joint venture between Brazil's Vale SA VALE5.SA and Australia's BHP Billiton BLT.L, expects to restart production at its iron ore mine in Minas Gerais by the start of the fourth quarter, its chief executive told Reuters on Thursday, less than a year after a burst tailings dam there killed 19 people.

CEO Roberto Carvalho said iron ore pellet production for the initial two to three years would likely be at a reduced 19 million tonnes per year as the company develops a long-term plan to store the mining waste known as tailings.

Before the dam disaster, Samarco was producing about 30 million tonnes per year.

“All our focus is turning to the restart,” Carvalho said at the company’s headquarters in Belo Horizonte, the capital of Brazil’s mining heartland. “We have talked to our clients, they have given us all the help possible and are awaiting the return of Samarco.”

Samarco is an influential miner in the pellet market. Before the dam spill in November, it accounted for about 20 percent of the global market for this high-grade steelmaking raw material that attracts a premium from mills.

Though the restart depends on authorization from Minas Gerais state environmental body and mining regulator DNPM, Carvalho said the settlement with the government of a 20 billion-real ($5.53 billion) lawsuit for damages caused by the spill has provided positive momentum.

Brazil’s government considers the dam burst the country’s worst-ever environmental disaster. The mud flow of mining waste killed 19 people, forced hundreds to leave their homes and polluted one of the country’s main rivers.

Under the government settlement, Samarco must pay 2 billion reais this year for clean up and compensation, an amount Carvalho says the company can afford.

But payments over the coming years will depend on Samarco returning to production. Any shortfall over the 15 years the accord lasts must be covered by shareholders Vale and BHP.

Samarco has already taken the first steps towards reopening the mine, applying for permission to use old mining pits to store tailings. This is a temporary solution as the miner awaits results of the investigation into the cause of the dam burst, after which it can develop a long-term production plan.

The cost of re-opening the mine would not be expensive, Carvalho said. “There’s nothing complicated that needs to be installed.”

($1 = 3.619 reais)

Reporting by Marta Nogueira; Writing by Stephen Eisenhammer; Editing by Matthew Lewis and Alan Crosby