BHP braces for Brazil­ian law­suit af­ter deadly col­lapse of dam

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

GLOBAL di­ver­si­fied miner BHP Bil­li­ton ex­pects to con­clude ne­go­ti­a­tions over the $47.5 bil­lion (R613.4bn) law­suit against it over the deadly col­lapse of a dam it co-owns in Brazil by Oc­to­ber, while it also ex­pects a $546 mil­lion hit on its prof­its due to a strike ear­lier this year at its Es­con­dida cop­per mine in Chile.

The min­ing gi­ant, yes­ter­day re­leased its op­er­a­tional re­view for the year ended June.

In the re­view it said BHP Bil­li­ton Brasil and Vale, which each own a 50 per­cent stake in Sa­marco, had en­tered into a pre­lim­i­nary agree­ment with the pros­e­cut­ing au­thor­i­ties in Brazil in re­la­tion to the Sa­marco dam fail­ure that it blamed “de­sign is­sues”.

“The court has ex­tended the fi­nal date for ne­go­ti­a­tion of a set­tle­ment un­til Oc­to­ber 30, 2017, al­low­ing for the con­tin­u­a­tion of the in­terim se­cu­rity ar­range­ments pro­vided to the court on Jan­uary 24, 2017, and the pro­vi­sion of on­go­ing ex­pert ad­vice to the fed­eral pros­e­cu­tors in re­spect of the re­me­di­a­tion and com­pen­sa­tion pro­grammes iden­ti­fied un­der the frame­work agree­ment,” the com­pany said.

The group said it had a short-term fa­cil­ity of up to $76m that would be made avail­able to Sa­marco to carry out re­me­di­a­tion and sta­bil­i­sa­tion work and to sup­port Sa­marco’s op­er­a­tions sub­ject to achieve­ment of key mile­stones.

This is on top of the $174m it said it would pay to fund the Ren­ova Foun­da­tion it set up with Vale to carry out re­me­dial work and re­build re­la­tions with the dev­as­tated lo­cal com­mu­nity.

In Novem­ber 2015, the three­tiered tail­ings dam col­lapsed, de­stroy­ing nearby vil­lages and towns, killing 19 peo­ple and leav­ing more than a quar­ter of a mil­lion peo­ple with­out potable drink­ing water, re­sult­ing in Brazil’s worst eco­log­i­cal dis­as­ter.

Pros­e­cu­tors in Brazil then hit BHP and Vale with a $47.5bn civil claim.

Pros­e­cu­tors in Brazil are known to re­quest vast dam­ages, but set­tle for far less.

In 2013, Chevron set­tled for a $135m fine for an off­shore oil spill, hav­ing ini­tially faced claims for $18bn.

Ear­lier this year, the com­pa­nies an­nounced a pre­lim­i­nary agree­ment with Brazil’s pros­e­cut­ing au­thor­i­ties.

They said the agree­ment would in­clude Sa­marco and its share­hold­ers pro­vid­ing se­cu­rity of $680m to sup­port a so­cial and en­vi­ron­men­tal re­me­di­a­tion pro­gramme.

BHP also said its earn­ings would be ad­versely af­fected by the 43-day strike at its Es­con­dida mine in Chile ear­lier this year.

The mine is the world’s largest cop­per mine and pro­duced about 5 per­cent of the world’s cop­per last year.

The com­pany said due to the loss of pro­duc­tion dur­ing the strike and other fac­tors in Chile it ex­pected to record ex­cep­tional items of $546m in the sec­ond half of the 2017 fi­nan­cial year.

“These items re­late to idle ca­pac­ity and other strike-re­lated costs in­curred as a re­sult of the Es­con­dida in­dus­trial ac­tion in the March 2017 quar­ter and Chilean with­hold­ing tax on a one-off div­i­dend paid while a con­ces­sional tax rate was avail­able.”

BHP said that it ex­pected its group cop­per equiv­a­lent pro­duc­tion to in­crease by 7 per­cent in the 2018 fi­nan­cial year, while its divest­ment of non-core on­shore US acreage is pro­gress­ing, with the sale of a por­tion of the south­ern Hawkville shale gas oper­a­tion an­tic­i­pated in the third quar­ter of this year.

The group said its crude oil, con­den­sate and nat­u­ral gas liq­uids pro­duc­tion for the 2017 fi­nan­cial year de­creased by 16 per­cent to 97 mil­lion bar­rels of oil equiv­a­lent.

An­drew Macken­zie, the chief ex­ec­u­tive of BHP, said the group’s per­son­nel had stepped up to un­lock low-cost la­tent ca­pac­ity and achieve strong pro­duc­tiv­ity gains across its tier one as­sets.


BHP Bil­li­ton ex­pects to con­clude its ne­go­ti­a­tions with the Brazil­ian courts in the law­suit for com­pen­sa­tion over the col­lapse of the Sa­marco dam of the mine it co-owned with Vale that re­sulted in 19 deaths and cre­ated an eco­log­i­cal dis­as­ter.

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