BHP aims to settle over Brazil dam disaster

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BHP, the world’s largest mining group, has said publicly for the first time that it wants to reach a final settlement over a dam disaster in Brazil potentially worth tens of billions of dollars in debt.

The Australian company is in financial trouble following the collapse of a dam storing mining waste at the Samarco iron ore complex in November 2015, near the town of Mariana in the southeastern state of Minas Gerais.

It killed 19 people and destroyed villages and parts of the countryside as an avalanche of mud polluted hundreds of kilometers of waterways.

In the aftermath of the accident, which ranks as one of the country’s worst environmental disasters, federal prosecutors filed a lawsuit seeking R$155 billion ($32 billion) in compensation from Samarco and its joint owners, BHP and Brazilian miner Vale .

BHP’s vice president for legal affairs for the Americas, Emir Calluf, told the Financial Times that it planned to reach an agreement soon with public authorities in the South American country.

“The idea is to reach a final deal in Brazil that settles everything,” Calluf said, adding that negotiations were “quite advanced.”

“If the right circumstances were there and the legal certainty and releases, we would be prepared to do a deal by the end of the year.”

The executive declined to quantify the potential compensation bill but said a deal could also include further remediation work.

Brazil’s federal prosecutor’s office was not immediately available for comment.

BHP is also facing a case in Britain brought by 700,000 claimants seeking compensation for damage to homes and livelihoods. Their lawyers estimate the maximum potential damage this year at £36 billion. A trial is planned for October 2024.

Calluf said BHP hoped a settlement with Brazilian prosecutors would cover all outstanding litigation: “We believe the London lawsuit duplicates efforts in Brazil.”

Thomas Goodhead, global managing partner of Pogust Goodhead, the law firm behind the claim, said BHP seeking a settlement in Brazil amounted to “misleading” shareholders since a London court ruled in July 2022 that there was minimal overlap between the UK and Brazilian business. .

“The time has come for BHP to stop making sweetheart deals in Brazil, without the involvement of the victims, and face up to its obligations,” he added.

BHP said it would “continue to defend the UK action and denies the claims in their entirety”. It denied that a deal in Brazil would mislead shareholders, saying it was difficult to know its full scale and impact at the time of the accident.

The miner also denied any “cute” deal, saying a settlement would be reached through complex technical negotiations, with procedures drawn up by Brazilian authorities.

Renova, a non-profit foundation set up to make repairs and provide financial compensation under an initial 2016 agreement between the companies and the government, has spent almost R$30.8 billion to date. Financing obligations are the responsibility of Samarco, but if it is unable to meet payments, BHP and Vale are determined to intervene.

Calluf said BHP had discussed reaching a possible final settlement with both Vale and Samarco, a 50-50 joint venture between the mining groups.

“Samarco is and will remain the main party to any settlement on this matter,” Calluf said. “BHP’s role, like Vale’s, is to replenish resources as may be necessary for the company to meet the terms of any settlement – ​​which will certainly be the case here.”

In parallel with Renova, Samarco has separately made R$2.6 billion in direct compensation payments.

A resolution to outstanding claims arising from the Mariana disaster could turn the page on an episode that has tarnished the companies’ reputations and sparked deep scrutiny in the mining industry.

The rupture of the Fundão Dam released 40 million cubic meters of tailings – byproducts left over from mining that can contain toxic substances – prompting increased scrutiny of the safety of such structures.

In 2019, a Vale tailings dam burst near the town of Brumadinho in the same state of Brazil, causing 270 deaths.

Vale said in a statement on Sunday that renegotiations of the Mariana agreement are ongoing, with meetings planned throughout this month: “Given the complexity of the subject and the intention to seek definitive solutions, it is normal that the talks will be extended .”

The company stated that it is “committed to repairing the damage caused by the collapse of the Fundão Dam” and provided support to Renova, which has helped more than 430,000 people be compensated.

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