(Bloomberg) -- Brazil has agreed to accept a 170 billion-real ($29.9 billion) settlement for a 2015 mining disaster at Vale SA and BHP Group’s iron-ore joint venture.
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The mining giants, their Samarco Mineracao venture and Brazilian authorities attended a ceremony Friday to sign the deal in Brasilia. The agreement comes nearly nine years after a tailings dam collapsed at Samarco’s mine in southeastern Brazil, unleashing a torrent of waste that killed as many as 19 people and contaminated waterways in Minas Gerais and Espirito Santo states.
While the agreement removes a significant legal overhang for the metals producers, BHP still faces a parallel class-action lawsuit in the UK tied to the disaster that involves as many as 620,000 people. The miner hopes that resolving the case in Brazil will help weaken the case in the British court.
The mining giants will end up paying a total of 170 billion reais, which includes 38 billion reais already spent for reparations during the last few years, along with 32 billion reais for obligations including initiatives for resettlement and environmental recovery for the November 2015 disaster, Brazil’s government said in a statement.
The settlement is the largest-ever of its kind globally, according to Brazil’s attorney general.
The deal also includes 100 billion reais in new money: compensation to be paid over two decades to Brazil’s federal government, the states of Minas Gerais and Espirito Santo as well as affected municipalities.
The agreement represents a win for the Lula government, which took a firmer stance on negotiations after taking office in 2023. The final amount of new money is double the initial settlement proposed by the companies.
“The new agreement ushers in a new moment and brings hope to the population affected by the disaster,” said Brazil’s attorney general, Jorge Messias. “The government is taking the lead in actions to prevent people living in the Doce River Basin from continuing to have their dignity violated.”
Negotiations have been accelerating since April, with the companies and authorities presenting different proposals to a Brazilian court responsible for mediating the talks. The proposed payment will be made primarily by Samarco, with Vale and BHP picking up the remainder.
One of the key points of negotiation has been the payment schedule, because Samarco itself is expected to be able to contribute more in future years as it recovers production capacity, reducing the burden on BHP and Vale. The companies will start paying 5 billion reais 30 days after the signing, with the largest installment of 7 billion reais to be paid in 2026.
Vale said in a filing Thursday it had increased the total set aside for the disaster to $4.7 billion, while BHP said in a filing last week that the agreement was broadly aligned with its $6.5 billion provision for future obligations tied to the dam collapse.
Lawyers for the claimants in English courts said that the settlement has no impact on the court case, which started earlier this month.
The settlement is also positive for Vale’s new chief executive officer, Gustavo Pimenta, who inherited the task of resolving the Samarco issue when he took over the helm of the Rio de Janeiro-based company. Both Pimenta and BHP CEO Mike Henry attended the ceremony with Lula in Brasilia.
The deal comes about three years after Vale struck a 38 billion reais settlement with Brazilian authorities for another tailings dam collapse near Brumadinho city, in Minas Gerais state, in 2019. That disaster killed 270 people and led to production cutbacks that stripped Vale of its ranking as world’s biggest iron ore producer. At the time, it was the largest reparation agreement ever signed in Latin America.
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