BHP Billiton flags dam disaster provision of up to $US1.3bn
BHP Billiton will record a provision of between $US1.1bn and $US1.3bn for the clean-up of the Brazil dam disaster.
BHP Billiton has detailed a specific provision for the clean-up of last year’s Brazilian mining disaster for the first time, saying it will take a $US1.1billion to $US1.3 billion charge ($1.46bn-$1.73bn) in its half-year accounts.
The move relates to the tragic Bento Rodrigues tailings dam collapse last November, linked to a mine run by Samarco, a joint venture of mining giants BHP (BHP) and Vale. The event polluted rivers and killed 19 people.
The miner had previously hoped a restart of Samarco’s operations would largely cover the costs associated with the disaster after it had completely written off the equity in the joint venture in its December accounts last year.
The detailing of the provision comes a week after the group said it was unprepared to outline any likely costs from the disaster upon the release of its full-year production report.
“For the June 2016 half year, we are not yet in a position to provide an update to the potential financial impacts on BHP Billiton Brasil of the Samarco dam failure,” the miner said at the time.
However, it said it was now able to factor in a charge of at least $US1.1bn to recognise its share of funding obligations currently outlined in a framework agreement reached in March.
That deal with Brazil’s federal government and two state governments remains murky as court proceedings continue that could see BHP and its partner Vale face a much higher payout.
BHP, Vale and Samarco had initially been hit with a civil public claim worth 20 billion reals ($8.3bn) before reaching the framework agreement that would see about $US2.3bn ($3.1bn) pledged over the next six years, as part of a broader 15-year recovery plan.
The latter agreement was reached in March and ratified by the Federal Court of Appeal in Brasilia on May 5.
However, the $8.3bn civil suit was last month reinstated by the Superior Court of Justice, with BHP and Vale currently in the midst of an appeal of that decision.
For now, BHP is willing to accept it will pay at least $US1.1bn through the framework agreement, although the civil suit and a separate $58bn lawsuit hang over its head. The latter two were seen almost certain to fail until the Superior Court of Justice stepped in, with uncertainty now clouding the process.
In its latest update BHP said the $US1.1bn — $US1.3bn provision was linked to doubt around the potential restart of Samarco’s operations, with direct costs of $US100 million after-tax recognised.
“The recognition of the provision demonstrates our support for the long-term recovery of the communities and environment affected by the Samarco tragedy and the belief we have that the (framework) agreement is the most appropriate mechanism to do this,” BHP Billiton chief executive Andrew Mackenzie said.
The miner added it would offer Samarco a short-term facility $US116m to fund immediate recovery work, with funds of $US134m to be directed to reparatory and compensatory programs.
“The short-term facility announced today will preserve the value of BHP Billiton’s investment while we continue to monitor developments,” BHP said.
“The safe restart of the Samarco operations remains an important priority, along with the restructure of Samarco’s debt.”
The miner recently confirmed operations at Samarco would not restart this year.
