Brazil Judge OKs Samarco Dam Burst Settlement With Government

A Brazilian judge on Thursday ratified the settlement Samarco and its owners, BHP Billiton and Vale SA, signed with Brazil's government in March to cover damages for a deadly dam spill last year, Vale said in a statement.

The move potentially saps some of the energy from a separate $44 billion lawsuit filed by federal prosecutors on Tuesday who criticized the settlement as insufficient.

The agreement will see Samarco, BHP and Vale pay a government-estimated 20 billion reais ($5.6 billion) over 15 years to cover and repair damages. Vale, however, has outlined it expects to pay less than that due to the way the deal is structured, calculating future payments depending on how much work remains to be done.

"It's a very important step because you remove any uncertainty about the agreement's validity," said Marilene Ramos, President of Brazil's federal environment agency Ibama which formed part of the settlement.

"The programs outlined in the agreement can now be implemented by the companies," Ramos added, referring to the environmental reparation plan which includes work on sewage, landfill, reforestation and water treatment.

The settlement has been strongly criticized by federal prosecutors who called it little more than a "letter of intent" in their lawsuit. "It is absolutely insufficient," said Jorge Munhós de Souza, one of the prosecutors working on the case.

Samarco Chief Executive Roberto Carvalho told Reuters the settlement and the lawsuit filed by prosecutors covers the same ground.

"The agreement ratified today already carries all the socio-economic and environmental reparations which this other lawsuit proposes," Carvalho said.

He reiterated that he expects the Samarco mine, closed after the disaster, to restart later this year, and that a return to production is vital for the company to afford the terms of the agreement. The settlement specifies that if Samarco cannot meet its obligations, the cost of doing so falls to Vale and BHP.

BHP said on Friday progress was being made to rebuild the communities worst-hit by the massive spill, and more than 5,2000 people affected in Mariana, Barra Longa and Rio Doce had received emergency support cards.

The people of Bento Rodrigues, the village most devastated by the mudslides, are set to vote on where to rebuild their town, BHP said.

"While we cannot bring back the lives that were lost, we continue to focus on ensuring that the families and communities impacted by this tragedy are supported," Dean Dalla Valle, BHP's senior executive in Brazil dealing with the disaster, said in a statement.

Standard & Poor's said on Friday its credit ratings on BHP, Vale and Samarco had not been affected by the $44 billion lawsuit by Brazil's public prosecutors, as it was too early to say what financial impact it would have.

It said the same court that approved the March settlement would decide on whether the prosecutors' lawsuit would proceed. "The decision will also likely take into account the identified damages and restoration costs that were covered by the agreement," S&P said.

BHP's shares, which have been pounded this week partly due to the lawsuit, rose 1.7 percent on Friday in a weaker broader market.

($1 = 3.55 reais)