BHP to pay $A3.15b for deadly Samarco dam spill

BHP Billiton’s Samarco joint venture has agreed to pay up to $US2.3 billion ($A3.15 billion) after reaching a settlement with Brazilian authorities over a deadly dam spill in November.

Mar 03, 2016, updated Mar 03, 2016
A fireman rescues a dog that was trapped in the mud that swept through the village of Bento Rodrigues. AFP PHOTO / Douglas MAGNO

A fireman rescues a dog that was trapped in the mud that swept through the village of Bento Rodrigues. AFP PHOTO / Douglas MAGNO

Samarco, which is jointly owned by BHP and Brazil’s Vale, will set up a fund for repair work and to provide compensation for damages caused by the tailings dam spill, as part of a 15-year agreement.

The dam collapse at the Samarco mine in Brazil’s Minas Gerais state caused a massive spill of waste material, polluting a major river and killing at least 17 people, besides leaving hundreds homeless in what has been called the country’s worst environmental disaster.

Under the agreement, Samarco will pay 4.4 billion reals ($1.55 billion) over three years through 2018.

It will make smaller annual payments between 800 million reais ($282 million), and 1.6 billion reais ($550 million) in each of the next three years.

BHP did not outline payments for the following nine years, but the Brazilian government authorities have said that total payments would add up to an estimated 20 billion reais ($5.1 billion) over the 15 year period, Reuters reported.

“This agreement is an important step forward in supporting the long-term recovery of the communities and environment affected by the Samarco dam failure,” BHP chief executive Andrew Mackenzie said in a statement.

The agreement will settle the civil public claim made by Brazilian authorities against Samarco, Vale and BHP in November, Billiton Brasil, under which they had sought up to 20 billion reals for clean-up costs and damages.

The payments are to be self-funded by Samarco, but in the event it is unable to pay its obligations, Vale and BHP would be responsible for covering the costs.

BHP shares reacted positively to the news, jumping by six per cent in early trade as investors welcomed the certainty relating to the financial impact of the deadly accident.

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The shares were up 73 cents, or 4.4 per cent, at $17.46 by 1043 AEDT.

“Financially, the outcome looks satisfactory with Samarco likely to self-fund the foundation contributions, although back-stopped by shareholders, BHP and Vale,” Shaw and Partners analyst Peter O’Connor said in a note.

In February, BHP outlined a $US1.12 billion provision in its half year accounts related to the Samarco disaster.

The amount included writing down the value of its Samarco business to zero, and part provision for costs related to the disaster.

At the time, the company said it was too early to assess the full financial impact.


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