Tailings dams

Several recent and catastrophic tailings dam collapses have brought into focus the complex interaction between a mine site and the local community and environment in which it operates. The failure of the tailings dam at the Córrego do Feijão iron ore mine in Brumadinho, Brazil, in January 2019 is one of the most devastating. When the dam collapsed, 12 million m³ of toxic mining waste surged through the mine site towards the town below, killing 270 people and causing widespread environmental and socio-economic damage.² It followed another failure of the Fundão tailings dam in Mariana only four years earlier, in the same state in Brazil and by the same mine owners; at least 19 people were killed when the dam breached and abruptly discharged over 43 million m³ of tailings, polluting the region’s most important river, the Rio Doce, and causing what has been termed the biggest environmental disaster in the global mining industry.³

The subsequent rise in scrutiny and renewed sense of urgency to understand the risks posed by tailings facilities and their potential for failure has been preceded by decades of stakeholder campaigns along with calls for greater public disclosure and corporate accountability.⁴ Yet the failures at Mariana, and then Brumadinho, were evidence that change was not happening from within the industry.

In April 2019, efforts gained momentum when a group of institutional investors (now representing more than $13 trillion assets under management)⁵ governed through a steering committee chaired by the Church of England Pensions Board and the Council on Ethics of the Swedish AP Funds established an investor-led engagement initiative, known as the Investor Mining and Tailings Safety Initiative (the ‘Initiative’); Ruffer began supporting the Initiative in April 2019.

This has led to several key interventions.

First, the Initiative called for a new, independent international standard for tailings dams.

In response, and in collaboration with the Principles for Responsible Investment (PRI), the United Nations Environment Program (UNEP) and the International Council on Mining and Metals (ICMM) a Global Tailings Review was commissioned. On 5 August 2020, the Global Industry Standard on Tailings Management^† (the ‘Standard’) was launched. The Standard establishes a first-of-its kind international benchmark and sets a new normative aspiration for the management of tailings facilities by declaring an ‘ultimate goal of zero harm to people and the environment, with zero tolerance for human fatality.’⁶ By establishing clear expectations around transparency, accountability and safeguarding the rights of affected people, it is hoped the Standard will mark a step-change in the industry.

Secondly, the Initiative issued an open letter to 726 companies requesting public disclosure on specific questions about their tailings facilities. With this information, the world’s first global database of mine tailings facilities was launched in January this year, allowing public access to detailed information on more than 1,800 tailings dams around the world, categorised by location, company, dam type, height, volume and risk, among other factors.⁷

The first round of disclosures has captured many of the world’s largest tailings dams operated by publicly listed companies, but the project intends to increase the number of dams described and be ‘a global hub, providing up to date and reliable information on tailings storage facilities, in the public interest.’⁸

As a supporter of the Investor Mining and Tailings Safety Initiative, we have been engaging with companies over the last 18 months on their disclosures and encouraging companies that have so far not yet responded, to do so. For some time, Ruffer has held a material weighting in gold mining companies. This issue of tailings management is therefore relevant to a number of the companies in which we are invested and we joined the Initiative as we agree with its aims and what it is trying to achieve.

Looking forward, it is hoped that the tailings database and the public disclosure provisions in the Standard will drive a new level of transparency in the mining sector and encourage companies, regardless of their size, to view tailings management as an industry problem that requires a collective industry solution. At the same time, it is expected that these disclosures will enable investors to develop an assessment framework to analyse companies’ tailings management and hold their management to account if necessary. At Ruffer, we will continue to include these factors in our engagements on environmental, social and governance considerations with mining companies in our portfolios.