The 1998 dam breach at the Los Frailes mine in Spain

In April 1998, a dam breach accident occurred in the tailings pond at the Los Frailes mine in Spain, which was then owned by Boliden's subsidiary, Boliden Apirsa S.L. ("Apirsa"). Boliden is involved in a number of disputes and legal proceedings arising from the accident at the mine.

Background

In April 1998, the dam at Apirsa's mine, Los Frailes, breached, resulting in the release of large quantities of metal-bearing water and tailings sand along the river Guadimar. The accident impacted large areas of agricultural land and affected areas 40 km downstream from the mining area, although the Donana National Park was not affected.

Mining operations were halted immediately and all available in-house resources were mobilised to clean up the affected area, to limit the damage done, and to restore the natural landscape. The area was cleaned up by Apirsa in collaboration with the central government and the local government (Junta de Andalucía). The three parties took an immediate decision whereby they would each clean one third of the area. Apirsa undertook to take the area closest to the mine (0-12 km) where approximately 70-80 per cent of the tailings sand had been deposited. No agreement was reached regarding the costs of the clean-up. By the end of 1998, the major part of the area had been cleaned up. Apirsa's total costs in respect of the dam breach accident were approximately EUR 115 million.

Production restarted at the mine in 1999, but the accident resulted in increased production costs and other operational problems which, in combination with low metal prices, resulted in the mining operations being terminated after two years and Apirsa applying for a "suspensión de pagos", a form of composition proceedings. The composition agreement was reached in October 2002, when more than 250 creditors were paid in accordance with the agreement. The Los Frailes mine is now owned by the local government and Apirsa is subject to liquidation proceedings since 2005, by its own initiative.

The legal proceedings

The question of liability

Following the dam breach the prosecutor initiated a criminal investigation and it was determined that the accident was caused by design and construction errors in the dam, not by Apirsa's handling of the operations at the mine. There was no suspicion of crime and the prosecutor did not bring charges against Apirsa. In 2002, following the result of the criminal investigation, Apirsa initiated an action for damages against the companies responsible for the dam's design and construction, and their insurance companies. However, the Spanish Supreme Court rejected in final Apirsa's claim in January 2012.

Claim by the Ministry of the Environment

The Spanish Ministry of the Environment submitted a claim against Apirsa to pay approximately EUR 45 million. The claim was affirmed in the highest instance in 2004 and Apirsa was ordered to pay approximately EUR 45 million in respect of the authorities' clean-up costs, and of damages and fines. This resulted, in January 2005, in Apirsa initiating insolvency proceedings in order to ensure a coordinated and orderly closure of the company.

The bankruptcy

The receivers in bankruptcy have, within the framework of the insolvency proceedings, requested that Apirsa's parent company, Boliden BV, together with Boliden Mineral AB and Boliden AB, be held liable for Apirsa's shortfall in an amount which, according to the receivers in bankruptcy, totals approximately EUR 141 million. The amount includes an alleged and untried claim of approximately EUR 89 million from the local government (Junta de Andalucía) (as described in more detail under the next section, "The current suit"). The bankruptcy process has been dormant since 2007, pending the outcome of the local government's claim.

The Junta de Andalucia suit

In May 2015, Boliden Apirsa S.L. was served with a summons for approximately EUR 89 million. Claims are also directed towards Boliden BV and Boliden AB which companies have subsequently been served. The suit has been brought by Junta de Andalucía which, already in 2002, initiated a corresponding suit. The local government has, after final dismissal on formal grounds, brought the suit to the District Court in Seville for a substantive examination of their claim.

The suit refers to costs that the Junta de Andalucía alleges it incurred on Boliden Apirsa S.L.'s behalf in conjunction with the clean-up after the dam breach. Junta de Andalucía is claiming compensation both from Boliden Apirsa S.L. which, at the time of the accident, owned and operated the mine and which is subject to liquidation proceedings since 2005, and from Boliden BV and Boliden AB in their capacities as direct and indirect owners of Boliden Apirsa S.L.

All three defendants have contested the claim in their respective statements of defence which have been filed with the Court of First Instance in Seville. Boliden's opinion is that it will not suffer any significant financial harm as a result of the claims.

 

Read more in note 30 in Boliden's Annual Report 2014