Wrap Text
Samarco Update - Final Agreement with Public Authorities
BHP Group Limited
BHP Group Limited ABN 49 004 028 077
Registered in Australia
Registered Office: Level 18, 171 Collins Street Melbourne VIC 3000
Share code: BHG
ISIN: AU000000BHP4
Exchange release
25 October 2024
BHP Brasil reaches final settlement with Public Authorities in
Brazil for reparation of Samarco's Fundão dam failure
"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 Mineração
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
BHP Group Limited ABN 49 004 028 077
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$13,0181 per person to individuals with water damage claims; and
• establishes a further compensation and indemnification system.
Further detail on the terms of the Agreement is included below in "Detailed terms of the Agreement".
1 All financial obligations are presented on a real, undiscounted basis and will accrue inflation at IPCA inflation rate.
Payments will be made in Brazilian Reais.
2 All USD amounts throughout are calculated based on actual transactional (historical) exchange rates related to
funding provided to Fundação Renova (Renova Foundation) for investment to date and future spend is calculated
using 28 June 2024 BRL/USD exchange rate of 5.56.
Financial obligations1,2
Under the Agreement, Samarco is the primary obligor for the settlement obligations and BHP Brasil and
Vale are each secondary obligors of any obligation that Samarco cannot fund or perform in proportion
to their shareholding at the time of the dam failure, which is 50% each.
BRL Billion USD Billion
(R$) (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. 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
3 FY25 payment includes CY24 and CY25 instalments.
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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
• The Federal Government of Brazil, the State of Minas Gerais, the
Parties State of Espírito Santo, the public prosecutors and public defenders
• Samarco, BHP Brasil and Vale
• 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.
Settlement and • Releases from the Obligations to Perform and Obligations to Pay
releases 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.
• 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).
Payment terms
• 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.
BHP Group Limited ABN 49 004 028 077
Category Description of term
• 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.
• Allocation of amounts that will be directly paid to eligible
Municipalities in the affected regions that agree to opt-in to the
settlement.
Municipalities
(Obligation to Pay)
• 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).
• Funding for the creation of a perpetual fund to strengthen the
Health
public health system in the affected regions, which will be
(Obligation to Pay)
coordinated by the Federal Government of Brazil.
• 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.
Fishing • The existing fishing ban applicable to the portion of the Doce River
(Obligation to Pay)
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.
• Funding for the universalisation of basic water sanitation for
Water sanitation municipalities in the Doce River basin, with the objective of
(Obligation to Pay) reducing the amount of untreated sewage that is discharged into
the river.
• Funding for infrastructure works related to the construction and
improvement of roads in the affected regions and the development
State Projects
of a defined list of State Government actions and projects that will
(Obligation to Pay) replace the socioeconomic and socio-environmental programs that
are currently run by the Renova Foundation.
• Funding for a program to support women.
Program for Women
(Obligation to Pay)
• Program to be managed by the public prosecutors and public
defenders.
• 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.
Other community
funding • Economic Recovery Plan: Funding allocated to the creation of a
program to support education, science, technology, innovation,
(Obligation to Pay)
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.
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Category Description of term
• 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.
• 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
Indigenous and continue to receive monthly financial aid payments.
Traditional • Communities that opt-in will have discretion to decide how the
communities payments are used to compensate the community members for
(Obligation to Pay) 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.
• 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
Indemnification and the Public Authorities will compensate eligible individuals and small
Compensation businesses who agree to opt-in to the settlement for remaining
(Obligations to Perform) 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.
• Samarco will complete the resettlement of the communities of
Community Bento Rodrigues and Paracatu de Baixo.
resettlement
• At 30 September 2024, approximately 91 per cent of resettlement
(Obligations to Perform)
cases were completed.
• 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
Environment environmental licensing limits and certain conditions.
(Obligations to Perform) • 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.
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Category Description of term
• 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.
• 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.
Renova Foundation • 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
Sponsor: J.P. Morgan Equities South Africa Proprietary Limited
BHP Group Limited ABN 49 004 028 077
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Date: 25-10-2024 04:30:00
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