BHP shares lift on $48b Samarco disaster settlement
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The news: Shares in BHP gained after the mining giant agreed to pay a settlement of USD31.7 billion ($48 billion) to Brazilian authorities following the Samarco dam collapse in 2015.
The numbers: BHP shares were up 1.7% to $43.11 by 3:05pm AEDT.
The agreement includes amounts already paid plus future obligations:
- USD7.9 billion already spent by September 2024 on remediation and compensation since 2016;
- USD18 billion in instalments over 20 years to public authorities, the relevant municipalities, Indigenous peoples and Traditional communities; and
- Additional performance obligations of USD5.8 billion that will be carried out by Samarco.
BHP Brasil’s expected outflows aligned with BHP’s FY2024 Samarco dam failure provision of USD6.5 billion, requiring no update to that figure.
The context: The Fundao dam is owned by Samarco — a joint venture between BHP and NYSE-listed miner Vale. Its collapse killed 19 people and caused a giant mudslide that uprooted homes and villages and triggered Brazil's worst environmental disaster.
Under the final settlement agreement, BHP Brazil and Vale are each required to pay 50% of any obligation that the joint venture cannot fund or perform.
RBC Capital Markets analysts said they saw the settlement as "neutral" given there was no change to the quantum of the provision and provided clarity on the stock.
What they said: "However, the FY26 obligation is larger than expected and we estimate will result in a small drag (-1% to FCF)," RBC said.
BHP chief executive Mike Henry said: "As shareholders in the Samarco non-operated joint venture, BHP Brasil and Vale have already 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," he said.
"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."
The source: ASX announcement
