Miners Vale, BHP finalising deal with Brazilian authorities for giant $45b settlement over dam disaster

Vale and BHP are a step closer to finalising a deal with Brazilian authorities to pay about $45 billion in damages over the deadly 2015 Samarco dam disaster.

The collapse of the Fundão dam in the south-east of Brazil caused a giant mudslide that killed 19 people.

It also severely polluted the Rio Doce river, contaminating waterways in two States.

In a filing on Friday, Vale said the deal would include $26 billion in compensation to be paid over 20 years to Brazil’s Federal Government, the States of Minas Gerais and Espirito Santo as well as affected municipalities.

The latest development comes more than eight years after the dam collapse in the south-eastern Brazilian city of Mariana caused the fatal mudslide.

The settlement will include the $10 billion already spent in compensation measures during the last few years, along with $8.4 billion for obligations including initiatives for resettlement and environmental recovery, Vale’s filing added.

BHP issued a similar statement on Friday after Brazilian media reported that a final deal could be signed as soon as October 25.

“The negotiations between the parties are ongoing and no final agreement has been reached on the settlement amount or terms,” the statement released via the New York Stock Exchange said.

It said any settlement was subject to finalisation and that it was “expected to provide reparation for the impacts of the dam failure ... and all existing claims by the public authorities in relation to the dam failure”.

The $45 billion deal, which has yet to be finalised, is a big step up from Vale SA and BHP’s last offer in April — which was of around $33.3 billion.

Meanwhile, BHP is set to face a trial in a parallel UK class action lawsuit involving as many as 620,000 people impacted by Samarco mine disaster, starting next week.

The approach of the trial has increased the rush by the mining companies to resolve the case in Brazil, as the deal may impact the size and scope of the UK litigation.

The UK class action, by law firm Pogust Goodhead, has run into other problems on the eve of hearings.

On Monday, Brazil’s highest court, the Supreme Federal Court (STF), ordered Brazilian municipalities who are party to Pogust Goodhead’s claim to hand over their funding contracts with the firm, and barred them from making any payments to Pogust Goodhead without express approval from the STF.

The STF injunction was part of an action brought by the Brazilian Mining Institute (IBRAM). The law suit alleges that contracts between 46 municipalities and Pogust Goodhead, which contain percentage-based success fees, could expose Brazilian taxpayers and affected claimants to immense risk of economic harm.