13 December 2016
This note provides an update on the recovery and response effort following the breach of the Fundão tailings dam and Santarem water dam at Samarco’s iron ore operations in Minas Gerais, Brazil, in November 2015. It provides an update on the dam reviews and lessons shared, the Framework Agreement and the Foundation, dam restoration and tailings stabilisation, restart of Samarco operations and legal claims.
Dam reviews and lessons shared
To contribute to the improvement of the safety of tailings dams, we have shared the expert panel’s findings of the external investigation into the causes of the dam failure, including with the International Council on Mining and Metals (ICMM).
The ICMM has now issued a position statement that commits members to adopting key elements of tailings management and governance. The ICMM’s review provides a further useful contribution to the industry’s approach to tailings management.
BHP Billiton has established a dam management function to bring additional expertise to the Company and to further draw on leading international science and engineering practice.
In addition, we have centralised responsibilities for our non-operated minerals joint ventures under Danny Malchuk, President Operations Minerals Americas, and we are developing a new global standard for those minerals assets that are operated by a separate joint venture company.
BHP Billiton remains focused on consistently enhancing safety and risk management in all of our operations, and we will continue to look for opportunities to make further improvements.
Framework Agreement and Foundation
In accordance with the Framework Agreement, the Foundation became operational on 2 August 2016. Since commencing in the role of Chief Executive Officer, highly respected environmentalist Roberto Waack has spent much of his time meeting with people who have been impacted by the tragedy or who are playing a key role in the recovery process. Under Roberto’s leadership, the Foundation will have a strong focus on working collaboratively with local community members, all levels of government, regulatory authorities, non-government organisations, and academic and other institutions to deliver the programs under the Framework Agreement.
Financial assistance and compensation for those affected, the reconstruction of public and private infrastructure and the relocation of the impacted communities of Bento Rodrigues, Paracatu and Gesteira are key programs.
Following a participatory process, the Bento Rodrigues community voted to rebuild their town on the Lavoura site and the purchase of this land has been concluded. Residents are now engaged in the urban design of their new community. Negotiations to purchase land selected by the Paracatu and Gesteira communities are ongoing.
The Foundation has commenced a compensation program so that community members who were directly impacted by the dam failure have the opportunity to seek and receive fair and reasonable compensation in a timely manner. To date, there have been nearly 8000 registrations for the compensation and other socioeconomic programs. Compensation claims for water shortages in the cities of Colatina and Governador Valadares are currently being processed, with the first payments made in early November.
Dam restoration and tailings stabilisation
A significant increase in turbidity in the Rio Doce can be expected during the wet season (November to March) relative to the dry season, despite the work undertaken to stabilise the tailings. Works by Samarco are ongoing, including to limit the potential for tailings material to be washed into the Rio Doce and to seek to prevent further disruption to water supplies. Additional work has focused on upgrading the water treatment plants that draw water from the Rio Doce so as to enhance their capacity to deal with any increase in turbidity during the wet season.
Restart of Samarco operations
A restart of Samarco operations is important for Samarco, BHP Billiton Brasil, Vale, the local communities and for the Brazilian economy. BHP Billiton Brasil continues to work through options for restart with Vale and Samarco.
Samarco has submitted licencing applications to relevant authorities for Samarco to restart operations at reduced capacity. A restart of operations is technically feasible in 2017, however, restart will occur only if it is safe to do so and the necessary approvals are received from Brazilian authorities.
A restructure of Samarco’s debt that enables Samarco to be economically viable is also required to allow Samarco to move forward.
BHP Billiton Brasil is among the companies named as defendants in proceedings in Brazilian federal and state courts. The other defendants include Vale, Samarco and certain individuals. A summary of significant proceedings is set out in BHP Billiton’s Annual Report 2016, with key updates provided in the note below. Many of these proceedings involve claims for compensation for similar damages and as such there is overlap between these cases.
Note - Summary of key claims
R$20 billion Civil Claim
A public civil claim was commenced by the Federal Government of Brazil, the states of Espirito Santo and Minas Gerais and other public authorities (Brazilian Authorities) on 30 November 2015, seeking the establishment of a fund of up to R$20 billion (approximately US$6 billion) in aggregate for clean-up costs and damages (R$20 billion Civil Claim). On 18 December 2015, an injunction was granted to, among other things, order Samarco to deposit R$2 billion (approximately US$0.6 billion) for community and environmental rehabilitation.
On 2 March 2016, Samarco, Vale and BHP Billiton Brasil entered into the Framework Agreement that provides for settlement of the R$20 billion Civil Claim by establishing a fund for clean-up costs and remediation and compensation of impacts relating to the Fundão tailings dam failure.
Ratification of the Framework Agreement on 5 May 2016 suspended the R$20 billion Civil Claim and the corresponding R$2 billion injunction. Subsequently, on 30 June 2016, both the R$20 billion Civil Claim and the corresponding R$2 billion injunction were reinstated by the Superior Court of Justice in Brazil. A final decision by the Court on the issue of ratification is pending.
The R$2 billion injunction remains the subject of litigation before Federal Courts. On 17 August 2016, the Federal Court of Appeals confirmed the R$2 billion injunction. This decision has been appealed. On 4 November 2016, the 12th Federal Court of Belo Horizonte reduced the R$2 billion injunction to R$1.2 billion (approximately US$0.4 billion). Payment is due on 8 January 2017.
R$155 billion Civil Claim
On 3 May 2016, the Federal Prosecution Office commenced proceedings against Samarco, Vale and BHP Billiton Brasil for R$155 billion (approximately US$46 billion) for social, environmental and economic compensation relating to the Samarco dam failure (R$155 billion Civil Claim). The 12th Federal Court of Belo Horizonte has not yet decided on any injunction in the R$155 billion Civil Claim. On 11 November 2016, the Court ordered an expert examination in relation to the containment and removal of tailings. Experts will be appointed and the examination is expected to start in the coming weeks.
The Federal Prosecution Office has filed criminal charges against BHP Billiton Brasil and certain employees and former employees of BHP Billiton Brasil (Affected Individuals) in the Federal Court of Ponte Nova, Minas Gerais. BHP Billiton Brasil rejects outright the charges against the company and the Affected Individuals and will defend the charges and fully support each of the Affected Individuals in their defence of the charges.