Brazil agreed to accept a R$170 billion settlement related to the 2015 mining disaster at Brazil’s iron ore joint venture Vale and the British BHP.
The mining giants, their joint venture Samarco Mineração and Brazilian authorities participated in a ceremony this Friday to sign the agreement in Brasilia. The agreement comes almost nine years after the collapse of a tailings dam at the Samarco mine in southeastern Brazil, which released a flood of waste that killed up to 19 people and contaminated waterways in the states of Minas Gerais and Espírito Santo.
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The agreement is the largest of its kind ever recorded globally, according to the attorney general of the Union of Brazil. The deal clears a significant legal hurdle for metals producers, although BHP still faces a parallel class action in the UK related to the disaster, involving up to 620,000 people. The mining company hopes that the resolution of the case in Brazil will help weaken the process in the British court.
The mining giants will pay a total of 170 billion reais, including 38 billion reais already spent on reparations in recent years, in addition to 32 billion reais for obligations such as resettlement and environmental recovery initiatives related to the November 2015 disaster. according to the Brazilian government in a statement.
The agreement also includes 100 billion reais in new resources: compensation that will be paid over two decades to the federal government of Brazil, the states of Minas Gerais and Espírito Santo, as well as the affected municipalities.
The agreement represents a victory for the Lula government, which adopted a firmer stance in negotiations after taking office in 2023. The final value of the new resources is double the initial agreement proposed by the companies.
“The new agreement inaugurates a new moment and brings hope to the population affected by the disaster,” said the Union’s attorney general, Jorge Messias. “The government is taking the lead in actions to prevent people living in the Rio Doce Basin from continuing to have their dignity violated.”
Negotiations have accelerated since April, with companies and authorities presenting different proposals to a Brazilian court responsible for mediating the talks. The proposed payment will be made mainly by Samarco, with Vale and BHP assuming the remainder.
One of the key points of the negotiation was the payment schedule, as it is expected that Samarco itself will be able to contribute more in the coming years, as it recovers its production capacity, reducing the burden on BHP and Vale. Companies will start paying 5 billion reais 30 days after signing, with the largest installment of 7 billion reais to be paid in 2026.
Vale said in a statement on Thursday that it had increased the total set aside for the disaster to $4.7 billion, while BHP said last week that the deal is broadly in line with its $6.5 billion provision for future obligations related to the dam collapse.
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Plaintiffs’ lawyers in English courts said the settlement has no impact on the legal proceedings, which began earlier this month.
The agreement is also positive for Vale’s new CEO, Gustavo Pimenta, who inherited the task of resolving the Samarco issue when he took charge of the company, based in Rio de Janeiro. Both Pimenta and BHP CEO Mike Henry attended the ceremony with Lula in Brasília.
The agreement comes about three years after Vale reached a 38 billion reais settlement with Brazilian authorities over another tailings dam collapse near the city of Brumadinho, in the state of Minas Gerais, in 2019. That disaster killed 270 people and led to production cuts that removed Vale from its position as the largest iron ore producer in the world. At the time, it was the largest reparations agreement ever signed in Latin America.
