A joint venture between mining giants BHP Billiton and Vale is to pay $1.1 billion (£780 million) in compensation and repair costs over a dam disaster in Brazil dubbed the country’s “worst environmental catastrophe.”
BHP on Thursday announced that it has reached an agreement with Brazilian authorities over the Samarco dam collapse, which happened last November.
The disaster saw a dam collapse and release 60 million cubic metres of mud downstream into the water systems of hundreds of towns and cities. Brazil’s President has compared the disaster to the 2010 BP oil spill in the Gulf of Mexico and dubbed it Brazil’s worst ever environmental disaster.
Samarco, the company responsible for the dam collapse, is a 50-50 joint venture between BHP Billiton and Vale. BHP said in a statement that the pair have agreed to establish a foundation that will do restorative environmental and social work, as well as pay out for compensation.
Samarco will fund the foundation, putting in $500 million (£355 million) this year and $300 million (£213 million) for the two years after that. But BHP adds: “To the extent Samarco does not meet its funding obligations, each of Vale and BHP Billiton Brasil is liable in proportion to its 50 per cent shareholding in Samarco.”
BHP doesn’t elaborate on Samarco’s finances, meaning it’s impossible to know what shortfall, if any, BHP and Vale will have to make up. But theoretically at least BHP is on the hook for $550 million (£390.7 million) over the next 3 years.
The 15-year agreement between Samarco and the government settles a civil case that was pending against the company. In December, a Brazilian court ordered BHP Billiton and Vale to set aside £330 million ($491.5 million) with the possibility of billions more and ordered it to carry out extensive environmental and social work in the region hit by a dam burst at its joint venture.
BHP Billiton CEO Andrew Mackenzie says in Thursday’s statement:
This Agreement is an important step forward in supporting the long-term recovery of the communities and environment affected by the Samarco dam failure. It provides a platform for the parties to work together to support the remediation of affected areas.
This agreement demonstrates our commitment to repairing the damage caused and to contributing to a lasting improvement in the Rio Doce.
Last month BHP posted a massive half-year loss of $5.67 billion (£4 billion), the big miner’s first in 16 years, more than halved its dividend.