Samarco disaster hits home

The first financial impacts of last November’s deadly tailings dam collapse is showing in BHP accounts.

The first financial impacts of last November’s deadly tailings dam collapse at BHP Billiton’s half-owned Samarco iron ore operation in Brazil have begun to flow through the group’s accounts.

BHP took an exceptional charge of $US1.2 billion before tax ($US860 million after tax) in the interim results, with the charge split in to three components.

There was a $US655m loss covering BHP’s 50 per cent share of Samarco’s $US1.3bn provision for costs relating to the dam failure, and a $US525m impairment to reduce the value of BHP’s investment in Samarco to zero.

There was an offsetting $US330m write-off of deferred tax liabilities to reflect the reduction in undistributed earnings, now earmarked for the humanitarian and environmental clean-up efforts.

The full extent of BHP’s exposure to the disaster — 17 people died and two are listed as missing — will not be known until details of an agreement with Brazilian authorities is known.

Brazilian media has reported it could be this week, but said the same last week. The agreement cannot be reached with the restart of Samarco being a precondition by Samarco, or its 50:50 owners BHP and Brazil’s Vale. But the hope is that Samarco could eventually restart, re-establishing the 6000 local jobs and providing a source of funding for the foundation that has been proposed to repair the environment and meet the humanitarian needs.

BHP chief executive Andrew Mackenzie wrapped up yesterday’s briefing on the group’s 92 per cent fall in interim profit to $US412m with the comment that there was “no doubt that there’s a shadow over this presentation which has Brazil written on it’’.

“And the team there are very much focused on the response efforts and rebuilding communities and restoring the environment,’’ Mr Mackenzie said.