BHP nears $23.7bn settlement with Brazil over Samarco dam failure

Australia’s biggest mining company has agreed to a massive settlement with the Brazilian government over an environmental catastrophe.

Mining giant BHP has agreed to a massive $23.7bn settlement with the Brazilian government over the 2015 Samarco dam disaster.

The pay out, which would be one of the largest environmental settlements in history if finalised, is part of a total $47bn settlement with the government over the catastrophe.

In a statement to the New York Stock Exchange overnight on Friday, BHP said it and joint-venture partner Vale had reached a tentative agreement with Brazil’s Public Prosecution Office over the civil claims brought against them.

“The parties are negotiating a settlement proposal that would provide a total financial value of approximately US$31.7bn ($47.25bn) on a 100 per cent basis to be delivered to the people, communities and environment impacted by the dam failure,” the company said.

“The final settlement is expected to provide reparation for the impacts of the dam failure and resolve the Federal Public Prosecution Office claim and all existing claims by the public authorities in relation to the dam failure.”

Australian miner BHP has reached a settlement agreement with the Brazilian government over the Samarco dam disaster. Picture: NewsWire / Brenton Edwards

Some 43 million tons of mining waste were released into the environment and into nearby local villages when the mine’s Fundao tailings dam collapsed on November 5, 2015, and 19 people were killed.

The sludge contaminated the Doce River and devastated the livelihoods of impacted communities around Mariana in the Brazilian province of Minas Gerais.

BHP and Vale have already paid about $11.8bn in remediation and compensation payments and the full settlement would involve a further $26.8bn payment over 20 years to public authorities, affected municipalities and Indigenous peoples and traditional communities and $8.65bn in “additional performance obligations”.

“The Obligations to Perform will include the establishment of a new compensation and indemnification system, commitment to remove a certain amount of tailings from the Doce River subject to a licencing process, ongoing monitoring for potential environmental contamination in certain areas of the Doce River and the transition of the Renova Foundation’s remaining programs to Samarco,” BHP said.

BHP chair Ken McKenzie and CEO Mike Henry at the Adelaide Convention Centre in SA for the company’s 2024 AGM. Picture: NCA NewsWIRE / Emma Brasier

The payments will be split between Vale and BHP, with BHP’s component set at $23.7bn.

Individuals and small businesses who agree to opt-in to the settlement will be compensated about $7900 per person, BHP said.

“The negotiations between the parties are ongoing and no final agreement has been reached on the settlement amount or terms,” the company said.

“Any settlement is subject to finalisation of the terms and conditions of a final settlement agreement, entry into final and definitive settlement documentation by the companies and public authorities and approvals by the Boards of the companies and by the public authorities.”

The mining behemoth is battling multiple complaints over Samarco, including cases in the United Kingdom and the Netherlands.

The trial for the UK group action complaints starts on October 21, 2024.

“BHP will continue to defend the action which it believes is unnecessary because it duplicates matters already covered by the ongoing reparation work and legal proceedings in Brazil,” BHP said.

BHP is Australia’s second largest company and boasts a market capitalisation of some $213bn.

The company mines predominantly iron ore, copper and coal.