BHP Billiton to take $1.3bn hit from Samarco dam disaster
By Jon Yeomans
Australian mining giant BHP Billiton has set aside up to $1.3bn (£1bn) to cover costs arising from the fatal accident at an iron ore mine in Brazil last year.
The FTSE 100 company said it would record a provision of between $1.1bn and $1.3bn in its accounts for the Samarco disaster last November, when the collapse of a dam unleashed a tidal wave of wastewater into a river valley, flattening two towns and killing 19 people.
It is the first time BHP itself has put a number on the financial cost of the disaster. The $1.3bn charge will cover its funding commitments under a “framework agreement” it struck with the Brazilian government earlier this year, in conjunction with mining giant Vale, its partner in the Samarco joint venture.
However the future of this agreement remains uncertain after the settlement was suspended by a court earlier this month. Brazil has seen a change of government since the deal was made and the Federal Prosecutors’ Office – an independent arm of the judiciary – has claimed that the amount agreed is insufficient to cover the damage wrought by the disaster. It is seeking $33bn in compensation from BHP, Vale and Samarco – a sum based on the amout BP had to pay after the Deepwater Horizon oil spill in 2010.
BHP maintains that the framework agreement is the most “effective” plan to compensate for the dam failure.
“The recognition of the provision demonstrates our support for the long-term recovery of the communities and environment affected by the Samarco tragedy and the belief we have that the agreement is the most appropriate mechanism to do this,” said Andrew Mackenzie, chief executive.
Operations at Samarco – which employed 5,000 people – are unlikely to restart this year.
BHP’s shares in London rose 1pc in morning trade, having earlier closed up half a percent in Sydney. The company reports its full-year results on August 16.