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September 5, 2022

Vale and BHP nearly double compensation offer for mine disaster

A potential deal between Brazil, Samarco and its owners would create a fund to develop a green economy in the region.

Samarco and its owners, BHP Group and Vale, have agreed to increase their compensation offer to more than R$100bn ($19bn) for a mine waste disaster that occurred in 2015.

Bloomberg News reported that the new offer almost doubles the previously proposed compensation of R$52bn and comes after Brazilian authorities showed discontent with Samarco’s original offer.

In addition, it is nearer to the prosecutors’ public civil action of R$155bn for compensation, which they had used as a benchmark.

Last week, officials said that BHP Group and Vale were ‘far from agreeing’ on a final agreement.

They said it would undertake the measures required to obtain reparation if the companies fail to make a ‘minimally worthy’ offer to repair the damage caused by the dam collapse.

The increased amount of compensation would result in additional provisions for the companies, which have already spent R$23bn ($4.4bn) through their Renova Foundation.

The parties have advanced talks for a final multi-billion-dollar settlement since last week, but are currently considering an agreement on the time frame for disbursement.

The negotiation involves Samarco and its two parent companies, the federal government, Mina Gerais and Espirito Santo states and judicial authorities.

Agencia Brasil quoted Brazilian Environment Minister Joaquim Leite as saying that the deal will create a fund that will aim to develop a green economy in the disaster-affected region

Brazil’s development bank BNDES would manage this fund.

BHP said deliberations are underway, while Samarco stated it is ‘open to discussions’ for signing an agreement to support efficiency in repairing the damage caused when the dam broke.

Last month, BHP Group reported a 34% rise in profit from operations for the 12 months to June this year, driven by higher commodity prices.

The company’s profit from operations increased from $25.5bn to $34.1bn year-on-year, while its attributable profit for the year was $30.9bn.

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