BHP, Vale in push for Samarco settlement

The Bento Rodrigues village, ruined by the flood after the collapse of the Samarco dam in Brazil.

BHP Billiton and Vale appear to be making progress to bring down the cost of a $64 billion civil case over the 2015 Samarco tailings dam burst that killed 19 people and caused widespread environmental damage, striking a deal to bring federal prosecutors together with Brazilian authorities who previously agreed to an $8bn claim.

The move appears to be confirmation from both sides that a ­penalty of somewhere between $8bn and $64bn will be in order.

At the same time, BHP has warned that any restart of the idled iron ore mine is a long way off, signalling that Brazilian government talk of it resuming operations in the next couple of months is optimistic.

Last night, BHP said it had entered a preliminary agreement with federal prosecutors making the 155 billion Brazilian real ($64bn) civil claim that would see experts appointed to advise on the social and environmental impact of the dam failure. Previously, federal prosecutors had not been involved in negotiations over a 20 billion real plan agreed in March last year between the Samarco partners, the Brazilian government and the states of Espirito Santo and Minas Gerais.

BHP said a final settlement with the prosecutors was expected by June 30. The federal prosecutors’ compensation bid is based on penalties BP paid for the Deep­water Horizon disaster in the Gulf of Mexico and has been widely seen as an ambit claim.

The mine disaster happened on the afternoon of November 5, 2015 at the 50-50 Samarco iron ore joint venture between BHP and Vale, when the Fundao tailing dam burst, sending a wall of mining sludge into the valley below and killing 19 people.

The landslide all but levelled the town of Bento Rodriguez and sent the mine waste into the Rio Doce river system that drains into the Atlantic Ocean.

As well as the claims against the companies, eight current and former BHP employees were among 21 people charged with qualified homicide over the disaster. BHP has said it “rejects outright the charges against the company and the affected individuals” and will support the individuals’ defences.

BHP said there was no timeline for a restart of operations after the Brazilian government this week hinted at a resumption in two months. “Any restart of operations at Samarco is subject to a separate set of negotiations with relevant parties and will occur only if it is safe, economically ­viable and has the support of the community,” BHP said.

Under the new agreement, Samarco, Vale and BHP will provide total security of 2.2 billion real to support the payments for the social and environmental remediation programs. It also requires Samarco, Vale and BHP to ­advance 200 million real of the funding obligations under the $US2.3bn ($3bn) framework deal to programs for several municipalities within the next 90 days.

Meanwhile, applications by federal prosecutors for a 7.7 billion real injunction and the 20 billion real asset freezing order in criminal proceedings will be suspended pending negotiations on the settlement.