COURT EXTENDS DATE FOR NEGOTIATION
BHP braces for Brazilian lawsuit after deadly collapse of dam
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.