Johannesburg - BHP Billiton on Thursday entered into a preliminary agreement with the federal prosecutors' office in Brazil in relation to the Samarco tailings dam failure, a joint venture between it and Brazilian giant Vale.In November 2015, the three tiered tailings dam collapsed, destroying nearby villages and towns, killing 19 people and leaving over a quarter of a million people without potable drinking water, resulting in Brazil's worst ecological disaster.
After a 10-month investigation, the Anglo-Australian mining giant said it had found that design and construction issues were to blame for the disaster.
A public civil claim was commenced by the federal government of Brazil, the states of Espirito Santo and Minas Gerais and other public authorities in 2015 seeking the establishment of a fund of up to BRL 20 billion, approximately $6 billion, in aggregate for clean-up costs and damages related to the Samarco dam failure.
An injunction was granted to order Samarco to deposit BRL 2 billion, approximately $600 million, for community and environmental rehabilitation.
Samarco, Vale, BHP Billiton Brasil and the Brazilian authorities then entered into a framework agreement for the remediation and compensation of the impacts of the dam failure.
The preliminary agreement signed on Thursday outlines the process and timeline for negotiation of a settlement of the BRL 155 billion, or approximately $47.5 billion, civil claim relating to the dam failure.
The preliminary agreement provides for the appointment of experts to advise the federal prosecutors in relation to the social and environmental impacts of the dam failure.
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BHP Billiton said the expert advisors' conclusions would be considered in the negotiations of a final settlement arrangement with the federal prosecutors, expected to take place by June 30.
Under the preliminary agreement, Samarco, Vale and BHP Billiton Brasil will provide, subject to court approval, total security of BRL 2.2 billion, approximately $675 million, to support the payments for the programmes.
The preliminary agreement also requires Samarco, Vale and BHP Billiton Brasil to advance BRL 200 million, approximately $60 million, of the funding obligations under the framework agreement to programs for the municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova.
In the meanwhile, the applications by the federal prosecutors for the BRL 7.7 billion injunction, approximately $2.4 billion, in the BRL 155 billion civil claim and the BRL 20 billion asset freezing order, approximately $6 billion, in the criminal proceedings commenced against Samarco, Vale, BHP Billiton Brasil and others would be suspended.
BHP Billiton said the restart of operations at Samarco was subject to a separate set of negotiations with relevant parties and would occur only if it is safe, economically viable and has the support of the community.
Resuming operations would require government approvals, the granting of licenses by state authorities, the restructuring of Samarco's debt, and the completion of commercial arrangements with Vale regarding the use of its infrastructure.