Exchange release
25 October 2024
BHP
Brasil reaches final settlement with Public Authorities in Brazil
for reparation of Samarco's Fundão dam failure
THIS
ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
"The Samarco Fundão dam failure in
2015 was a terrible tragedy. It should never have happened and
must never be forgotten.
As shareholders in the Samarco
non-operated joint venture, BHP Brasil and Vale have always been
committed to supporting Samarco to do what's right by the Brazilian
people, communities, organisations, and environments affected by
the dam failure.
Today's signing of a comprehensive
agreement with the Brazilian government and public authorities is
an important reflection of that commitment. It delivers expanded
and additional programs for the environment and for the people,
including designated funding for the health system, economic
recovery, improved infrastructure and extensive compensation and
income support measures, including for farmers, fisher people and
Indigenous and Traditional communities. We acknowledge the
significant commitment of the Brazilian Government and public
authorities in reaching this milestone."
Mike
Henry
Chief
Executive Officer, BHP
The Federal Government of Brazil, State of
Minas Gerais, State of Espirito Santo, public prosecutors and
public defenders (Public
Authorities) have entered into an agreement with
Samarco Mineirão S.A. (Samarco), BHP Billiton Brasil
Ltda. (BHP
Brasil) and Vale S.A. (Vale) (the Companies) to settle the Framework
Agreement obligations, the Federal Public Prosecution Office civil
claim and other claims by the Public Authorities relating to
Samarco's Fundão dam failure on 5 November 2015 (Agreement). The Agreement was executed
by the parties today in Brazil. The Agreement remains subject
to approval by the Brazilian Supreme
Court.
As stated in BHP's 2024 Annual Report, the
Companies have been engaging in negotiations with the Public
Authorities since early 2021 to seek a definitive and substantive
settlement of the Framework Agreement obligations, the Federal
Public Prosecution Office civil claim and other claims by the
Public Authorities relating to the dam failure.
The negotiations were conducted by the
Brazilian Federal Court of the 6th region and the
National Court of Justice in Brazil with the oversight of a
court-appointed mediator and the participation of public
prosecutors and public defenders.
Key terms of
the Agreement
The Agreement delivers a full and
final settlement of the Framework Agreement obligations, the
Federal Public Prosecution Office claim and other claims by the
Public Authorities in relation to the dam failure. The Agreement
provides reparation for the impacts of the dam failure, and builds
on the existing remediation and compensation work already performed
by the Renova Foundation in Brazil which totals R$38 billion1 (approximately US$7.9
billion2).
The financial value of the
Agreement is R$170 billion1
(US$31.7 billion2) on a
100% basis to be delivered to the people, communities and
environment impacted by the dam failure.
The Agreement includes amounts
already spent to date plus future payments and obligations as
follows:
·
R$38 billion1
(approximately US$7.9 billion2) in amounts already spent
to 30 September 2024 on remediation and compensation since
2016.
· R$100
billion1 (approximately US$18.0 billion2) in instalments over 20 years to the
Public Authorities, the relevant municipalities and
Indigenous peoples and traditional communities
(Obligation to
Pay).
·
Additional performance obligations for an
estimated financial value of approximately R$32 billion1
(approximately US$5.8 billion2) that will be carried out
by Samarco in accordance with the terms of the Agreement
(Obligations to
Perform).
BHP Brasil's expected outflows under
the Agreement align with BHP's FY2024 Samarco dam failure provision
of US$6.5 billion and no update is required to the existing
provision at this time. Further detail on the financial impacts and
payment schedule of the Agreement is set out below.
Summary of key
obligations in the Agreement
The Agreement:
· allocates
compensation to programs for the benefit of people, communities and
the environment in the affected regions, including
R$11bn1 for universal water sanitation,
R$12bn1 for health programs, R$6.5bn1 for
economic recovery programs, R$4.3bn1 for improvements to
road and infrastructure, R$2.0bn flood response fund, R$2.4bn to
foster fishing and biodiversity, R$1bn for a program to support
women, R$5.7bn1 for a social participation fund for
investment in education, culture, sports and food security, and
R$3.75bn1 for an income assistance program to support
the most vulnerable people in the affected regions;
· provides R$8
billion1 (US$1.4bn2) to eligible Indigenous
People and Traditional communities with the allocation of funds to
be determined by Indigenous and Traditional communities following a
consultation process to be conducted by the Federal
Government;
· provides
compensation payments of R$95,0001 per person to
eligible fishermen and farmers in the affected regions and
R$13,0181 per person to individuals with water damage
claims; and
· establishes a further compensation and indemnification
system.
Further detail on the terms of the
Agreement is included below in "Detailed
terms of the Agreement".
1 All
financial obligations are presented on a real, undiscounted basis
and will accrue inflation at IPCA inflation rate. Payments will be
made in Brazilian Reais.
2 All USD
amounts throughout are calculated based on actual transactional
(historical) exchange rates related to funding provided to Fundação
Renova (Renova Foundation)
for investment to date and future spend is calculated using 28 June
2024 BRL/USD exchange rate of 5.56.
Financial
obligations1,2
Under the Agreement, Samarco is the primary
obligor for the settlement obligations and BHP Brasil and Vale are
each secondary obligors of any obligation that Samarco cannot fund
or perform in proportion to their shareholding at the time of the
dam failure, which is 50% each.
|
|
BRL Billion
(R$)
|
USD Billion
(US$)1
|
|
Spent to date (as at 30 September 2024)
(100%)
|
38
|
7.9
|
|
Obligation to Pay (100%)
|
100
|
18.0
|
|
Obligations to Perform (100%)
|
32
|
5.8
|
|
Total
Settlement Amount (100%)
|
170
|
31.7
|
|
Total - BHP
Brasil share (50%)
|
85
|
15.9
|
(i) Payment
schedule
The payment schedule for the
Obligation to Pay is set out in the table below. The first payment
will become payable 30 days after the Court confirms the Agreement and subsequent
payments will become payable in six months
after the first payment and annually thereafter for a total of 20
years.
The Obligations to Perform are
expected to be largely completed over approximately the next 15
years with approximately R$6.6
billion1 (US$1.2 billion2),
R$14.7 billion1 (US$2.6
billion2) and R$3.1 billion1
(US$0.6 billion2) to be spent on a 100% basis over FY25,
FY26 and FY27 respectively.
Obligation to Pay schedule of
payments (R$ Billion,
100%)1,2
|
FY25
|
FY26
|
FY27
|
FY28
|
FY29
|
FY30
|
FY31
|
FY32
|
FY33
|
FY34
|
|
11.03
|
7.0
|
5.0
|
5.0
|
5.1
|
5.5
|
6.0
|
5.4
|
5.0
|
5.0
|
|
FY35
|
FY36
|
FY37
|
FY38
|
FY39
|
FY40
|
FY41
|
FY42
|
FY43
|
|
|
4.5
|
4.5
|
4.5
|
4.5
|
4.5
|
4.5
|
4.5
|
4.5
|
4.4
|
|
(ii) Samarco dam
failure provision
BHP Brasil's expected outflows under
the Agreement align with the existing US$6.5 billion Samarco dam
failure provision based on the current assessment of the
uncertainties associated with the execution of Obligations to
Perform and current estimates of the extent to which Samarco could
directly fund settlement obligations. No
update is required to the existing provision at this
time.
Under the terms of Samarco's
Judicial Reorganisation Plan, Samarco's funding of remediation
obligations will be capped at US$1 billion for the period CY2024 to
CY2030.
3 FY25 payment includes CY24 and CY25 instalments.
To the extent that Samarco has a
positive cash balance each year after meeting its various
obligations including operating capital requirements, debt service
and remediation obligations in line with the cap, BHP Brasil and
Vale are able to direct 50% of Samarco's year end excess cash
balance to provide further funding for remediation and compensation
obligations. BHP Brasil and Vale will be required to provide
funding to remediation obligations during this period to the extent
that the funding amount required exceeds the US$1 billion cap and
any excess Samarco cash available.
Other litigation not resolved by the
Agreement
The Agreement will not resolve the Australian
class action complaint, United Kingdom group action complaint, the
group action claim brought against certain Vale and Samarco
entities in the Netherlands, criminal charges against Samarco, BHP
Brasil, Vale and certain individuals, civil public actions
commenced by private associations, including the civil public
action concerning the use of Tanfloc for water treatment, trailing
litigation from individuals, Indigenous Peoples and Traditional
communities and businesses (among others) and future or unknown
claims which may arise from new information or damages in
connection with the dam failure such as potential claims alleging
health impacts to individuals.
Detailed terms of the Agreement
This table sets out a summary of the key terms
of the Agreement.
|
Category
|
Description of
term
|
|
Parties
|
· The
Federal Government of Brazil, the State of Minas Gerais, the State
of Espírito Santo, the public prosecutors and public
defenders
·
Samarco, BHP Brasil and Vale
|
|
Settlement and
releases
|
·
Full and final settlement of the Framework
Agreement obligations, the Federal Public Prosecution Office civil
claim and other claims by the Public Authorities relating to the
dam failure.
·
Confirmation that the collective socio-environmental and
socio-economic damages of any nature (including social,
moral and non-economic damages) arising from the
dam failure are compensated and remediated by the Obligations
to Perform and Obligations to Pay and no additional obligations
will be required for the reparation and compensation of the
collective damages.
·
Releases from the Obligations to Perform and Obligations to
Pay will be provided once the obligations have been
completed.
·
Releases from liability by eligible individuals, small
businesses, Municipalities and Indigenous and Traditional
communities will be provided on receipt of compensation payments if
they choose to opt-in to the settlement.
· All
releases under the agreement will be extended to BHP Group UK Ltd,
BHP Group Ltd and other affiliates of the BHP Group.
· See
"Other litigation not resolved by the
Agreement" section above for the liabilities and
claims that will not be resolved by the Agreement.
|
|
Payment
terms
|
· Samarco will be
required to pay the Obligation to Pay to the Public Authorities in
instalments over a 20-year period from FY25 to FY43 (see "Financial
obligations" for further detail).
· Samarco and the
Renova Foundation will be required to complete the Obligations to
Perform in accordance with the scope and period set out in the
Agreement.
· Samarco is the
primary obligor for the settlement obligations and BHP Brasil and
Vale are each secondarily liable for any obligation that Samarco
cannot fund or perform in proportion to their shareholding at the
time of the dam failure, which is 50% each.
|
|
Municipalities
(Obligation to Pay)
|
· Allocation of
amounts that will be directly paid to eligible Municipalities in
the affected regions that agree to opt-in to the
settlement.
· Investments in
Municipalities and communities via the various environment and
community initiatives in the Agreement, including in relation to
health, economic recovery and water sanitation programs (described
in the table below).
|
|
Health
(Obligation to Pay)
|
· Funding for the
creation of a perpetual fund to strengthen the public health system
in the affected regions, which will be
coordinated by the Federal Government of Brazil.
|
|
Fishing
(Obligation to Pay)
|
· Funding for the
creation of federal and state perpetual funds to strengthen fishing
activity in the Doce River which will be administered by the Public
Authorities.
· The existing
fishing ban applicable to the portion of the Doce River in the
State of Minas Gerais will be released in up to six months, and the
fishing ban applicable to the river mouth and coastal area of the
State of Espírito Santo will be released in up to two years. Both
releases will support the resumption of livelihoods and economic
activities in the affected regions.
|
|
Water
sanitation
(Obligation to Pay)
|
· Funding for the
universalisation of basic water sanitation for municipalities in
the Doce River basin, with the objective of reducing the amount of
untreated sewage that is discharged into the river.
|
|
State
Projects
(Obligation to Pay)
|
· Funding for
infrastructure works related to the construction and improvement of
roads in the affected regions and the development of a defined list
of State Government actions and projects that will replace the
socioeconomic and socio-environmental programs that are currently
run by the Renova Foundation.
|
|
Program for
Women
(Obligation to Pay)
|
· Funding for a
program to support women.
· Program to be
managed by the public prosecutors and public defenders.
|
|
Other
community funding
(Obligation to Pay)
|
· Income support
program: Funding allocated to the financial
support of individuals involved in agriculture and fishing
activities in the affected areas. The Federal Government will
create a program to provide a prescribed amount to eligible
individuals on a monthly basis for three to four years.
· Economic Recovery
Plan: Funding allocated to the creation of a
program to support education, science, technology, innovation,
socioeconomic development and farming, with the aim to support the
economic recovery of the affected regions.
· Prevention and mitigation of mining
risks: Funding for actions aimed at monitoring
and risk mitigation for mineral exploration activities.
· Strengthening of National Social
Assistance System: Funding to strengthen the
services and other public offerings of the Unified Social
Assistance System in Brazil.
· Social Security
Reimbursements: Funding to reimburse the
Federal Government for public spending on social security resulting
from the dam failure, including amounts for social security
benefits due to work accidents and unemployment insurance for
eligible fishermen.
|
|
Indigenous and
Traditional communities
(Obligation to Pay)
|
· Compensation of
R$8bn (US$1.4bn) for eligible
Indigenous and Traditional communities that opt-in following a
consultation process led by the Federal Government, which is
expected to take up to 18 months. During the consultation period,
the communities will continue to receive monthly financial aid
payments.
· Communities that
opt-in will have discretion to decide how the payments are used to
compensate the community members for their collective way of life,
including through community programs and/or individual
payments.
· The agreement
will also establish a fund administered by the Federal Government
to implement public policies in connection with Indigenous and
Traditional communities.
|
|
Indemnification and
Compensation
(Obligations to Perform)
|
· Eligible
individual claimants with unresolved claims in connection with
water damage will be entitled to R$13,018 per person if they opt
in.
· Eligible
fisherman and small farmers in the affected regions will be
entitled to R$95,000 per person.
· A further
compensation and indemnification system endorsed by the Public
Authorities will compensate eligible individuals and small
businesses who agree to opt-in to the settlement for remaining
general damages claims in the amount of R$35,000 per person for a
full release.
· Under the
compensation and indemnification system, eligible claimants will
only be required to present proof of identity and residency in
order to be assessed for eligibility, and this simplified structure
and eligibility criteria has been designed to
accommodate a large number of people in a simplified processing
scheme.
|
|
Community
resettlement
(Obligations to Perform)
|
· Samarco will
complete the resettlement of the communities of Bento Rodrigues and
Paracatu de Baixo.
· At 30 September
2024, approximately 91 per cent of resettlement cases were
completed.
|
|
Environment
(Obligations to Perform)
|
· Samarco has
committed to remove up to 9.15 million m³
of tailings and sediment from a pre-defined location of the
Doce River. The removal of the material would be subject to
approved environmental licensing limits and certain
conditions.
· If Samarco
receives approval by the environmental agency to remove only part
of the 9.15 million m³ of the material, a
compensation payment of R$450 million per million m3 of
material not removed will be payable at the end of the removal
works.
· Samarco will
continue an environmental monitoring program to test for the
presence of seven prescribed chemical substances in eight defined
areas of the Doce River basin which may increase to nine areas if
the full 9.15 million m3 is not removed (a total area of
approximately 42,000 hectares).
· Samarco will
undertake additional remediation of areas impacted by the dam
failure, including restoration of aquatic habitats and
environmental and water quality monitoring of the Doce River
basin.
|
|
Renova
Foundation
|
· In March 2016, a
Framework Agreement entered into between the Companies and relevant
Brazilian authorities established the Renova Foundation, a
not-for-profit, private foundation responsible for implementing 42
remediation and compensatory programs to address the impacts of the
dam failure to date.
· The Renova
Foundation's 42 programs will be completed or transferred to
Samarco or to the Federal or State Governments of Brazil within 12
months and the Renova Foundation's governance body will cease on
signing.
· As noted above,
Samarco will be the primary party responsible for completing the
Obligations to Perform.
|
Authorised for release by Stefanie Wilkinson,
Group General Counsel and Group Company Secretary
|
Contacts
|
|
Media
media.relations@bhp.com
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Investor Relations
investor.relations@bhp.com
|
|
Australia,
Europe and Asia
Gabrielle Notley
+61 411 071 715
|
Australia and
Asia
John-Paul Santamaria
+61 499 006 018
|
|
Latin America
Renata Fernandez
+56 9 8229 5357
|
Europe, Middle East and Africa
James Bell
+44 7961 636 432
|
|
North America
Megan Hjulfors
+1 (403) 605-2314
|
Americas
Monica Nettleton
+1 (416) 518-6293
|
|
|
|
|
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