‘Red Sludge’ Wake-up Call for Investors and Financial Institutions

On October 4th, the wall of a wastewater reservoir for the Ajka alumina processing plant broke, sending 35 million cubic feet of corrosive ‘red sludge’ downhill into nearby villages and ultimately the Danube River. This ecological disaster has claimed eight lives and devastated many more by destroying homes, livestock, and crops. Meanwhile workers are rushing to build emergency dams to stem a second flood that is expected to occur should another wastewater reservoir wall collapse.

This ongoing situation is the latest reminder of the environmental risks associated with the thousands of hardrock metals and minerals operations around the world. The site in Hungary was listed as “risky” by an environmental non-governmental organization in 2006, yet this warning did not spur the type of response required by regulators and corporate executives to prevent the flood. Last summer the same type of disaster struck at a copper mine in southeastern China, where 2.4 million gallons of waste water laced with acidic copper spilled into the Ting River.

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