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BHP Billiton, Vale make up to $2.5bn provision for Samarco costs

The Samarco slimes dam failure of November 2015 is Brazil's worst environmental disaster

The Samarco slimes dam failure of November 2015 is Brazil's worst environmental disaster

28th July 2016

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online

  

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JOHANNESBURG (miningweekly.com) – Diversified mining groups BHP Billiton and Vale, which jointly own the Samarco operation in Brazil, will make provisions of up to $2.5-billion to cover the costs of the joint venture's fatal dam disaster.

The charge reflects the “ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco’s operations”, BHP Billiton said in a statement on Thursday.

BHP Billiton will book a charge of between $1.1-billion and $1.3-billion in the June 2016 half-year, while Vale has recognised a provision of R$3.7-billion ($1.2-billion) in its interim statements.

It is increasingly unlikely that the Samarco mine, which was closed after the November 2015 slimes dam failure, will restart operations this year. BHP Billiton previously advised that 40% of the workforce was expected to leave the organisation to reflect the reduced production.

The provisions should cover the current estimate of Samarco’s funding obligations under the terms of the framework agreement that the mining companies entered into with three tiers of government in March, for the restoration of the environment and communities affected by what is Brazil’s worst-ever environmental disaster.

“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 agreement is the most appropriate mechanism to do this,” said BHP Billiton CEO Andrew Mackenzie.

The mining majors also approved short-term funding to assist Samarco to carry out remediation and stabilisation work. BHP Billiton approved a $116-million short-term facility, in addition to an already approved $134-million for reparatory and compensation programmes, while Vale made $100-million available to Samarco for short-term assistance.

“The short-term facility announced today will preserve the value of BHP Billiton’s investment, while we continue to monitor developments. The safe restart of the Samarco operations remains an important priority, along with the restructure of Samarco’s debt,” BHP Billiton stated.

The dam collapse of November 2015 killed 19 people and has left BHP Billiton and Vale with a major civil claim, which the companies have said they will appeal. The $6.2-billion claim was reinstated by the Superior Court of Justice at the end of last month.

Edited by Creamer Media Reporter

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