REG - BHP Group Limited - Samarco Brazil Settlement Negotiations

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21/10/2024 07:00

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RNS Number : 8523I  BHP Group Limited  21 October 2024

BHP Group Limited
Exchange release

19 October 2024

 

Samarco Update - Brazil Settlement Negotiations

 

BHP notes the recent press speculation in Brazil regarding the status of
negotiations in Brazil between Samarco Mineração S.A. (Samarco), BHP
Billiton Brasil Ltda (BHP Brasil) and Vale S.A. (Vale) (the Companies) and the
Federal Government of Brazil, State of Minas Gerais, State of Espirito Santo,
public prosecutors and public defenders (Public Authorities).

The Companies are continuing to negotiate a 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 Samarco's Fundão
dam failure on 5 November 2015 and are considering the terms of a settlement
proposal.

The negotiations between the parties are ongoing and no final agreement has
been reached on the settlement amount or terms. Any settlement is subject to
finalisation of the terms and conditions of a final settlement agreement,
entry into final and definitive settlement documentation by the Companies and
Public Authorities and approvals by the Boards of the Companies and by the
Public Authorities.

The negotiations are being conducted by the Brazilian Federal Court of the
6(th) region (TRF-6) and the National Council of Justice in Brazil with the
oversight of a court-appointed mediator and the participation of public
prosecutors and public defenders who are representing interested parties in
the negotiation process.

The parties are negotiating a settlement proposal that would provide a total
financial value of approximately R$170 billion1 (US$31.7 billion)2 on a 100%
basis to be delivered to the people, communities and environment impacted by
the dam failure.

The final settlement is expected to provide reparation for the impacts of the
dam failure and resolve the Federal Public Prosecution Office claim and all
existing claims by the Public Authorities in relation to the dam failure.

The final settlement would:

·  establish a new compensation and indemnification system that was
designed with the collaboration and endorsement of the public defenders and
prosecutors to provide compensation for eligible people in the affected
regions. Individuals and small businesses who agree to opt-in to the
settlement will be compensated R$30,000 per person(1) and eligible individual
water damage claims will be compensated R$13,000 per person(1). This is in
addition to other amounts outlined below that will provide benefits to people,
communities and the environment impacted by the dam failure;

·  provide compensation and performance obligations to complete the
community resettlements and other socioenvironmental programs, including
environmental remediation; and

·    provide R$8 billion(1) to eligible Indigenous People and Traditional
Communities following a consultation process pursuant to best practices to be
led by the Federal Government. This process will allow each Indigenous People
and Traditional Community to decide how to address the collective impacts to
their communities, including through payments to families and its members.

Summary of financial arrangements

The settlement proposal incorporates amounts already invested to date plus
future payments and obligations as follows:

·   R$38 billion (approximately US$7.9 billion(2)) in amounts already spent
to 30 September 2024 on remediation and compensation since 2016.

·  R$100 billion(1) (approximately US$18.0 billion(2)) 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 billion(1) (approximately US$5.8 billion(2)) that will be
carried out by Samarco in accordance with the terms of the settlement which
will provide direct benefits to the people, communities and environment
affected by the dam failure (Obligations to Perform).

The Obligations to Perform will include the establishment of a new
compensation and indemnification system, commitment to remove a certain amount
of tailings from the Doce River subject to a licencing process, ongoing
monitoring for potential environmental contamination in certain areas of the
Doce River and the transition of the Renova Foundation's remaining programs to
Samarco.

Financial obligations(1,2)

Under a final settlement agreement, Samarco would be 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.

 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 in the settlement proposal (100%)  170  31.7
 Total - BHP Brasil share (50%)                             85   15.9

The settlement proposal is broadly aligned with the existing US$6.5 billion
provision based on the current assessment of the uncertainties associated with
the execution of the Obligations to Perform and current estimates of the
extent to which Samarco could directly fund settlement obligations. The
provision remains subject to review and finalisation of the terms and
conditions of a final and binding settlement agreement.

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. 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 a final settlement

A final settlement would 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 (among others) and future or unknown claims which may arise from
new information or damages in connection with the dam failure.

The trial for the United Kingdom group action complaint commences 21 October
2024.  BHP will continue to defend the action which it believes is
unnecessary because it duplicates matters already covered by the ongoing
reparation work and legal proceedings in Brazil.

 

Authorised for release by Stefanie Wilkinson, Group General Counsel and Group
Company Secretary

 

 

 Contacts
 Media                                        Investor Relations

 media.relations@bhp.com                      investor.relations@bhp.com
 Australia and Asia                           Australia and Asia

 Josie Brophy                                 John-Paul Santamaria

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 Europe, Middle East and Africa               Europe, Middle East and Africa

 Gabrielle Notley                             James Bell

 +61 411 071 715                              +44 7961 636 432

 Latin America                                Americas

 Renata Fernandez                             Monica Nettleton

 +56 9 8229 5357                              +1 (416) 518-6293
 North America

 Megan Hjulfors

+1 (403) 605-2314

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1 Future 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 USD for amount spent to 30 September 2024 is calculated based on actual
transactional (historical) exchange rates related to funding provided to
Fundação Renova (Renova Foundation) and future spend is calculated using 28
June 2024 BRL/USD exchange rate of 5.56.

 

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