BHP-Vale’s Samarco To Pay $6.2B Over 15 Years To Brazilian Government For Deadly Dam Burst

Samarco Mineração SA, the Brazilian iron ore mine responsible for the deadly dam burst in the country last November, will pay $6.2 billion in damages for the tragedy, the company announced Wednesday. The sum will be paid out over 15 years as social and environmental compensation.

Of the agreed amount, Samarco will pay $1.1 billion over next three years and the remaining $5.1 billion will go to the clean-up costs and damages following the disaster, the company’s Australian co-owner BHP Billiton Ltd. said, in a statement. The agreement is yet to receive a court approval.

“To the extent Samarco does not meet its funding obligations, each of Vale [Brazilian co-owner of Samarco] and BHP Billiton Brasil is liable in proportion to its 50 percent shareholding in Samarco,” BHP said, in the statement.

Brazilian President Dilma Rousseff said the settlement would help heal "a tragedy without precedent," according to Agence France-Presse (AFP). She also noted that the hefty financial costs for Samarco, co-owned by Brazil’s Vale SA, are unlikely to end, the report added.

"There will be complete restoration of socio-economic conditions and of the affected environment. And I want to emphasize: There will be no financial limits until there is full reparation," Rousseff said, according to AFP. "We want to build a new life on the ruins."

BHP Billiton CEO Andrew Mackenzie said: “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.”

The fatal dam burst at Samarco’s iron ore mining site in Mariana city in southeastern Minas Gerais state on Nov. 5, 2015, had sent thick red mud rolling down the hilly area, killing 17 people and leaving two others missing. Lorries, cars and houses were trapped in the mining waste and the burst caused significant damage to the environment. The cause of the incident is not yet known.

However, engineer Joaquim Pimenta de Ávila, who worked on the dam between 2008 and 2012, told the Wall Street Journal in January that he informed about structural problems to the dam a year before the tragedy. Pimenta de Ávila, a prime witness in a criminal investigation of Samarco, told the newspaper that he advised the world’s second-largest producer of iron-ore pellets to construct the buttress at the base of the dam and design it in a way it could strengthen the dam even in this worst-case scenario. Samarco’s lawyer reportedly said the company did not get any warning of an “imminent” break from any of its consultants.

Brazil’s Federal Police accused BHP and Vale SA of environmental crime in the incident. Seven company executives and engineers were charged along with consulting company Vogbr, which sends technical reports on the stability of the dam to Samarco. Samarco’s CEO Ricardo Vescovi was among those indicted.