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BHP Owned Samarco Reaches Agreement with Brazilian Authorities

BHP Owned Samarco Reaches Agreement with Brazilian Authorities
BHP and Vale will establish a fund of $7.1 billion earmarked for clean-up costs and other damages relating to the dam failure.
Mar 03, 2016 By Simon Herrmann Tags: BHP

BHP Billiton (ASX:BHP) announced that it has reached an agreement with the Brazilian Authorities to establish a foundation to remediate for damages caused by the Samarco dam failure in November 2015.

BHP and Vale Allocated $7.1 billion for Damages

The parties involved in the November disaster, Vale S.A. (Vale) and BHP Billiton SA Brasil LTDA (BHPB Brasil) have entered into an agreement with the Federal Attorney General of Brazil and other public authorities to set up a fund that will compensate for the damages.

Samarco (50% owned by BHP and 50% owned by Vale) will fund US$500 million in 2016, US$300 million in 2017, US$300 million in 2018 and between US$200 million and US$400 million for each of the 2019, 2020 and 2021 years.

However, the local court’s approval is pending for the aforementioned agreement. Upon receiving the approval, BHP and Vale will establish a fund of $7.1 billion earmarked for clean-up costs and other damages relating to the dam failure.

The term of the agreement is 15 years, renewable for periods of one year successively until all obligations under the agreement have been met.

The foundation is broadly divided between Reparatory and Compensatory programs. The reparatory initiatives are aimed at restoring the environment, local communities and the social conditions of the affected areas. The Compensatory programs will provide compensation where ‘remediation’ is not possible.

BHP Billiton Chief Executive Officer, Andrew Mackenzie commented on the agreement: “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 demonstrated our commitment to repairing the damage caused and to contributing to a lasting improvement in the Rio Doce.”

1H16 Results

BHP recently declared a US$5.7 billion loss for the half year ended 31 December 2015. The miner has also ended its ‘progressive dividend policy’ in response to the challenging global environment.

Following the announcement, BHP rose more than 5.5% upon opening as at 10:12 AM (AEDT).


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Simon Herrmann Author: Simon Herrmann Mar 03, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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