Brazil says Norsk Hydro lacked waste licence for stalled plant

Norsk Hydro's share price tumbled after it announced that it had to stop production at a key facility located near the city of Belem in Brazil's northwest on Oct 3, 2018.
Norsk Hydro's share price tumbled after it announced that it had to stop production at a key facility located near the city of Belem in Brazil's northwest on Oct 3, 2018.PHOTO: EPA-EFE

BRASILIA (AFP) - Brazilian authorities said on Thursday (Oct 4) that Norwegian aluminium group Norsk Hydro failed to apply for a licence to operate a new waste deposit at its key Alunorte alumina plant, the world's biggest and now suspended as a result.

The company on Wednesday (Oct 3) announced it had to stop production at the facility, located near the city of Belem in Brazil's north-west. The news sent Norsk Hydro's share price tumbling.

The Norwegian group has been under close scrutiny by Brazil.

Earlier this year, Brazil accused it of contaminating the waters of the nearby Baracena municipality with bauxite residues suspected to have overflowed from a deposit basin after heavy rain.

Norsk Hydro denied any toxic spill took place, but Brazilian authorities ordered production be halved.

The Alunorte plant, 92 percent owned by Norsk Hydro, produces around 10 per cent of global alumina production, excluding that from China. The global price for aluminium, which is made from alumina, has already risen as a consequence.

Temporarily closing the plant will weigh on Norsk Hydro's results, which were already suffering from the months of setbacks with Brazilian officials.

In a statement Thursday, Brazilian prosecutors said that Norsk Hydro should have known to apply for a licence for the new waste deposit.

"If Hydro Alunorte knew that the useful life of its first waste deposit, called DRS1, was coming to an end, it should have scheduled the licence application for the second deposit, called DRS2," the statement said.

It said that situation "required Alunorte to take the responsible decision to temporarily close 100 per cent of its operations." The prosecutors stressed that a valid license for waste deposits was a requirement under Brazilian environmental laws, "which provide for no exception for any company."

Alumina, also known as aluminium oxide, is extracted from bauxite ore mined in Brazil and other tropical regions.