February 1, 2019 / 12:10 PM / 3 months ago

Brazil's Vale knew of risk to area hit by deadly mine disaster -Folha de S.Paulo

* Vale knew of toxic mud risk -paper, citing company study

* Company says mud flow destroyed sirens before could sound alarm

* CEO has said Vale facilities comply with building regulations

RIO DE JANEIRO, Feb 1 (Reuters) - Brazil's Vale knew as recently as last year that some of the areas hit by last week's deadly mining disaster were at risk if its tailings dam burst, according to an internal Vale study published by a local newspaper on Friday.

The study seen by newspaper Folha de S.Paulo represents a fresh embarrassment for the world's largest iron ore miner, which has come under intense pressure over the burst tailings dam at its Corrego do Feijao mine last Friday.

With 110 people confirmed dead and another 238 missing, according to a firefighters' count on Thursday evening, the tailings dam collapse in the town of Brumadinho could be Brazil's deadliest mine disaster.

The disaster poses a headache for the new government of far-right President Jair Bolsonaro, whose new business-friendly administration must juggle public anger over the tragedy and its own desire to ease mining and environmental regulations to kick-start growth.

The internal study reported by the paper was dated April 18, 2018, and outlined the likely impact of a collapse at the dam. It found that the mine restaurant, where many Vale workers are likely to have died when the dam collapsed, would be hit by toxic mud. Other areas where people probably died were also at risk, Folha reported.

The study envisaged that sirens would alert workers if the dam burst, but the company has said that did not happen because the mud flow destroyed them before they could sound the alarm. Two of the Vale officials responsible in case of emergencies were killed by the rupture, Folha said.

The plan also predicted that the mud flow would travel up to 65km (40 miles) from the dam.

Vale did not immediately respond to a request for comment on the report.

Folha quoted the company as saying the mining dam emergency action plan "was built based on a hypothetical rupture study".

Vale Chief Executive Fabio Schvartsman has said the miner built its facilities to comply with regulations and that equipment had shown the dam was stable.

ASSETS FROZEN

In the wake of the disaster, Vale has said it will take up to 10 percent of its production offline and spend 5 billion reais ($1.36 billion) to decommission 10 dams.

On Thursday state labor courts froze more than 800 million reais ($219 million) of Vale's assets as compensation for victims. That followed court orders over the weekend freezing 11.8 billion reais ($3.1 billion) in assets to cover rescue efforts and damages. The company had about 24 billion reais in cash and equivalents at the end of the third quarter.

A ministerial task force convened by Bolsonaro began drawing up a unified legislative plan to improve safety, oversight and the licensing of dams.

A person with direct knowledge of the proceedings said the proposals are likely to include executive orders and bills in Congress and take at least seven to 10 days to prepare.

Residents in the devastated town of Brumadinho were still learning of the fallout from the deadly mud flow.

The Minas Gerais state government said on Thursday that initial tests of the Paraopeba River, which was contaminated by the toxic mud, indicated that "the water poses risks to human and animal health". It added that locals should not use Paraopeba River water for any purpose.

United Nations human rights experts on Wednesday urged an official investigation of the incident. Federal and state prosecutors have already said they are seeking to make the matter a criminal case.

After a meeting with Brazil's top prosecutor, Vale CEO Schvartsman told journalists that he had no reason to think the company's executives would go to prison.

Schvartsman said the company was focused on paying families as soon as possible and he had also discussed environmental issues with federal prosecutors.

Reporting by Pedro Fonseca and Ricardo Brito Writing by Gabriel Stargardter Editing by David Goodman

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