The short movie below was uploaded in March 2014 (the course was given in Brazil in the Fall 2013).
The course was given to over forty Engineers and Technicians in charge of various mines and tailings dams in Brazil. It was followed by a conference we gave at the university of Minas Gerais.
Now the catastrophe has occurred. The physical, reputational and social damages are clear to anyone.
Let’s see if the Brazilian legal system will actually follow through with sentences beyond the fines as this time. In addition to significant environmental damages and destruction, numerous casualties have brought sorrow and horror to a community. The failure has caused strong emotional reaction up to an international scale.
We are not going to delve into liability, post mortem clichés here. There are enough voices around to do that.
Instead we will have a look at some specific aspects, namely:
Share valuation costs
The relation between Tailings Dam catastrophes and published Risk Management Policies.
Discussing share valuation and risk management policies
1) In the aftermath of the catastrophe BHP Billiton reportedly hit decade low share value, a 31% share value loss. We note that this value compares very well with the 35% proposed earlier by Riskope based on the comparison of various types of failures in the mining world. We suggest that value is used from now on when evaluating holistic consequences of major tailings failures and comparing them to corporate (if not social) risk tolerance.
2) In 2013 Riskope evaluated the probability of failure of a dam similar in make, use, climatological conditions to the Samarco dam. The reason for the request was the project to restart operations at the mine. The dam we assessed had a FoS (factor of safety) for stability “around” 1.3, like most extant dams.
Despite the kinda-of-ok FoS, the probability of failure pf turned out to be at least 0.06-0.1 (6% to 10%) per year, to be compared to 1/1000 (0.1%) or less of the world-wide portfolio. That means that the dam was 60 to 100 times more prone to fail than the world-wide portfolio due to a number of deficiencies in the design, construction, monitoring, maintenance and inspections.
We never heard again from that client/project.
Having a Risk Management policy is not enough
What we know, however, is that the client had a Risk Management Policy. It explained how to follow codes and guidelines, evaluate and manage risks. Like we have pointed out during many reviews it seems that despite the incredibly high value of pf the dam fell in the “low probability”- “high consequence” cell of their PIGs risk matrix. Easy to understand why. As pointed out many times FMEAs arbitrarily define “low probability” and the “values of the consequence scale. Hence the PIG risk matrix give the answers the client wants to hear. And the results have no relation with the reality of the rate of failure, to societal or corporate risk tolerance.
So, again, if we want to better the Tailings Dam world-wide situation, it is time to embrace better ways to evaluate risks and stop hiding behind fallacious FoS, codes and policies.