19th Jan 2017 07:37
LONDON (Alliance News) - BHP Billiton PLC on Thursday said it has signed a preliminary agreement with federal prosecutors in Brazil to pay USD47.50 billion to settle a civil claim related to the Fundao tailings dam disaster at its Samarco operation.
BHP and Vale both own 50% each of the Samarco iron ore operation, where in November 2015 the Fundao dam within the complex failed and the downstream Santarem dam was also affected, resulting in a significant release of mine tailings which flooded the community of Bento Rodrigues and harmed other communities downstream.
The operation remains suspended and does not look set to come back into action any time soon.
On Thursday, the FTSE 100 company said, alongside Vale, it has signed a preliminary agreement with federal prosecutors in Brazil to settle a civil claim by paying BRL155.00 billion, equal to around USD47.50 billion.
Importantly, BHP and Vale have already signed a framework agreement with Brazilian authorities which is separate to the civil claim. Federal prosecutors were not involved in the framework agreement.
The framework agreement signed in March agreed that the Samarco partners would pay between BRL6.80 billion to BRL9.20 billion over a 15-year period to fund a long-term remedial and compensation plan for the local area.
BHP and Vale now hope to reach a final settlement for the civil claim with federal prosecutors before the end of June.
The agreement covering the civil claim will lead to experts being appointed to advise federal prosecutors about the social and environmental impact of the fatal dam failure last year, which may lead to the remediation programmes under the framework agreement being changed.
"The expert advisors' conclusions will be considered in the negotiations of a final settlement arrangement with the federal prosecutors, which is expected to occur by June 30, 2017 under the timeframe established in the preliminary agreement," said BHP.
Under the preliminary agreement, BHP and Vale will provide BRL2.20 billion, or USD675 million, as security to support the remediation programmes agreed under the framework agreement.
That security comprises a charge over Samarco's assets of BRL800 million, roughly USD245 million, insurance bonds of BRL1.30 billion, about USD400 million, and liquid assets of BRL100 million, equal to about USD30 million.
The preliminary agreement also requires BHP and Vale to advance BRL200 million, or USD60 million, of the funding obligations for the remediation programmes under the framework agreement to the municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova. That will be paid within the next 90 days.
Importantly, whilst the USD675 million security is in place, it will replace the previous BRL1.20 billion, or USD370 million, injunction that was issued under the previous BRL20.00 billion civil claim, BHP said.
In addition, the applications lodged by federal prosecutors for another BRL7.70 billion injunction, or USD2.40 billion, under the BRL155.00 billion civil claim will be suspended. The asset freezing order of around USD6.00 billion under the criminal proceedings commenced by federal prosecutors also will be suspended.
"The parties have agreed that the interim security will remain in place until the earlier of June 30, 2017 and the date that a final settlement arrangement is agreed between the federal prosecutors, and Samarco, Vale and BHP Billiton Brasil. If a final settlement arrangement is not agreed by June 30, 2017, the federal prosecutors may request reinstatement by the court of the BRL1.20 billion (approximately USD370 million) injunction," said BHP.
"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. Resuming operations would require government approvals, the granting of licenses by state authorities, the restructure of Samarco's debt, and the completion of commercial arrangements with Vale regarding the use of its infrastructure," BHP added.
By Joshua Warner; [email protected]; @JoshAlliance
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