BHP, Vale, and Samarco propose US$25.1bn settlement for fatal 2015 dam collapse

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MINING giants BHP, Vale, and their joint-venture Samarco have proposed a R$127bn (US$25.1bn) settlement for a fatal 2015 tailings dam collapse in Brazil. The companies hope the amount, which includes both past and future payments, will draw a line under their obligations to Brazilian authorities.

Tailings are a waste product of ore processing; a slurry of fine uneconomic rock and chemical effluent that is stored in dams. On 5 November 2015, a dam operated by Samarco failed due to design flaws, releasing a torrent of around 39.2m m³ of toxic sludge that killed 19 people, buried homes and villages, and caused an environmental crisis.

The mining companies submitted their non-binding, indicative settlement proposal to the Brazilian federal court of appeals amid negotiations with federal and state governments, and other public authorities. It would resolve legal claims from Brazilian government entities and bring an end to the companies’ responsibilities under the 2016 framework agreement, which established measures to address damage from the collapse.

While amounts, terms, and conditions of the proposal are otherwise confidential, a leak published in Brazilian newspaper O Globo forced BHP, Vale, and Samarco to admit the R$127bn figure.

The total includes R$37bn already invested in remediation and compensation, of which R$17bn was paid to more than 430,000 people in indemnities and emergency financial assistance. The R$37bn was paid through the Renova Foundation, which was established under the framework agreement to create, manage, and execute actions to repair and compensate the areas and communities affected by the 2015 collapse.

Meanwhile, an additional R$72bn is earmarked to go to the Brazilian federal government, the states of Minas Gerais and Espírito Santo, and relevant municipalities. The 2015 disaster impacted a stretch of 670 km, affecting 39 municipalities. The amount would be paid over an extended period, “well in excess of a decade”.

The remaining R$18bn covers further cleanup and compensation by Samarco and the Renova Foundation. Samarco said the amount would finance remediation and compensation projects to completion.

However, the amounts and payments proposed are tied to specific undisclosed terms and conditions.

Samarco would be responsible for the settlement amount, but if it is unable to pay, BHP and Vale would be jointly responsible.

Vale said: “The proposal is intended to provide a mutually beneficial resolution for all parties, especially for the impacted people, communities, and environment, while creating definitiveness and legal certainty for the companies.”

Samarco added that it is the result of a broad dialogue process involving several institutions of justice, public authorities, and representatives of civil entities and society. While negotiations are ongoing and a final agreement is yet to be reached, Samarco is “confident that the parties will reach a consensus soon, giving definitiveness to the issue”.

Associated claims

Since the November 2015 collapse, BHP, Vale, and Samarco, have faced numerous legal proceedings in Brazil.

That same month, Brazil’s federal government, the states of Espírito Santo and Minas Gerais, and other public authorities filed a claim of R$20bn for cleanup and damages. In May 2016, Brazil’s public prosecution office and 18 other public entities filed a R$155bn claim for reparation, compensation, and collective moral damages.

In 2018, the mining companies, other parties to the framework agreement, and the federal prosecutors entered into a governance agreement which settled the R$20bn claim, while the R$155bn claim was suspended. The governance agreement established a process for renegotiating the scope of efforts under the framework agreement, and to progress towards a final settlement related to the public prosecution office claim.

Since 2021, the parties have been negotiating to achieve a final settlement on this, and other Brazilian claims.

Earlier this year, BHP, Vale, and Samarco were ordered to pay US$9.6bn in collective moral damages for the impact of the accident.

The companies are also facing legal action related to the collapse in other countries. In March, lawyers in the Netherlands announced that victims were suing Samarco and Vale for £3bn (US$3.8bn). In the UK, Pogust Goodhead is representing nearly 700,000 victims in a case against BHP.