Samarco, Vale and BHP Billiton Brazil have entered into a preliminary agreement with Brazilian authorities regarding the Fundao tailings dam failure of 2015. The framework agreement is for the remediation and compensation of the impact of the dam failure. The federal prosecutors are not a party to the framework agreement.
The preliminary agreement outlines the process and timeline for negotiation of a settlement of the US$47.5 billion civil claim relating to the dam failure. It provides for the appointment of experts to advise the federal prosecutors in relation to the social and environmental impacts of the dam failure, any revisions to the social and environmental remediation programmes under the framework agreement and for the ongoing assessment and monitoring of the programmes.
Samarco, Vale and BHP Billiton Brasil will provide existing studies and research to the expert advisors. The conclusions of the expert advisors will be considered in the negotiations of a final settlement arrangement with the federal prosecutors, which is expected to occur by 30 June 2017 under the timeframe established in the preliminary agreement.
Under the preliminary agreement, Samarco, Vale and BHP Billiton Brasil will provide, subject to court approval, total security of about $675 million to support the payments for the programmes.
The interim security comprises a charge over Samarco’s assets of approximately $245 million, insurance bonds of about $400 million and liquid assets of about $30 million.
The preliminary agreement also requires Samarco, Vale and BHP Billiton Brazil to advance $60 million of the funding obligations under the framework agreement to programmes for the municipalities of Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova. The funds are to be advanced within 90 days after signing of the preliminary agreement.
During the period that the interim security is in place, it will, subject to court approval, replace the $370 million issued in the civil claim. In addition, the applications by the federal prosecutors for the approximately $2.4 billion in the civil claim and the asset freezing order (approximately $6 billion) in the criminal proceedings against Samarco, Vale, BHP Billiton Brasil and others will be suspended.
The parties have agreed that the interim security will remain in place until the earlier of 30 June 2017 and the date that a final settlement arrangement is agreed. If a final settlement arrangement is not agreed by 30 June 2017, the federal prosecutors may request reinstatement of the $370 injunction.
Any restart of operations at Samarco is subject to a separate set of negotiations with relevant parties and will 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 restructure of Samarco’s debt, and the completion of commercial arrangements with Vale regarding the use of its infrastructure.