Brazil state could ban dam design used at Samarco mine

(Adds Samarco comment)

By Marta Nogueira

RIO DE JANEIRO, July 20 (Reuters) - A Brazilian state law to ban upstream tailings dams, the design used at a dam that collapsed at the Samarco iron ore mine in November, could be approved this year, an environmental official for the state of Minas Gerais told Reuters on Wednesday.

Anderson Silva de Aguilar, the subsecretary for environmental regulation, also said Samarco, which is co-owned by Vale SA and BHP Billiton (NYSE: BBL - news) , would not be resuming operations this year and may not in 2017 either.

In an emailed comment, Samarco said it was following all licensing procedures and had delivered the documents necessary for agencies to allow it to resume partial operations.

Support for a ban of upstream tailings dams from Silva de Aguilar, who has been in the job for less than two months, represents a major policy change for his department that could increase the cost of new projects in Brazil's mining heartland.

As recently as May, his predecessor, Geraldo Abreu, said an outright ban was not on the cards in a Reuters report which showed that engineers, prosecutors and tailings dam experts were increasingly arguing for a ban.

"It was a devastating disaster... it is a stain on the industry," Silva de Aguilar said by phone. "There is now great impetus for us to introduce more rigorous norms and criteria."

A dam design used to store mining waste, known as tailings, upstream costs about half the price of other dams but is regarded as having a greater risk of failure because its walls are built on a foundation of mining waste rather than external material or solid ground. It is also the most common, holding back waste at mines across the world.

Chile (Stuttgart: 704599.SG - news) , where earthquakes have caused deadly spills in the past, is currently the only major mining nation to ban upstream dams.

The dam burst at the Samarco mine killed 19 people, left hundreds homeless and polluted a major river. Brazil's government called it the country's worst-ever environmental disaster.

Vale, Brazil's largest miner and the world's biggest producer of iron ore, has already warned that stricter licensing laws could force it to cut output by as much as 100 million tonnes.

Silva de Aguilar said he aims not to curtail Minas Gerais' mining industry, crucial to the state's economy.

"The state can't afford to lose mining activity now, our gross domestic product depends on it, but the standards will be much higher," he said. (writing by Stephen Eisenhammer; Editing by Chizu Nomiyama and Alan Crosby)