Fitch: Samarco on watch

Fitch Ratings said it placed the BBB long-term foreign-currency and local-currency issuer default ratings and AAA(bra) national long-term ratings of Samarco Mineracao SA on Rating Watch negative.

The action follows the dam ruptures at Samarco’s Germano unit in Brazil last week and subsequent developments regarding the extent of the damage, Fitch said.

Following the dam breaches, the impact on Samarco’s iron ore pellet output in the medium term is currently unknown, the agency said.

Samarco’s mine and production facilities were unaffected by the ruptures and subsequent flooding, but the company is unable to produce at the Germano unit at this time, Fitch said.

Investigations as to the cause of the dam breaches are currently underway, the agency said, and the findings may have a significant impact.

Should the cause be due to natural events, such as seismic activity, Fitch said it expects the company to be permitted to operate as normal following clean-up efforts.

But if the cause of the breach was due to a technical error, the penalties could be more punitive, the agency said.

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