Vale offers US$30bn to settle Mariana case

Brazil’s biggest mining litigation case could be moving toward a conclusion as the companies involved presented a new compensation proposal, which would not have major impacts on new projects.

The case involves the 2015 Mariana disaster, when a tailings dam operated by iron ore pellet maker Samarco – a Vale-BHP joint venture – collapsed and killed 19 people, also causing the country’s biggest environmental tragedy, with mining waste polluting rivers and reaching the Atlantic Ocean.

Vale announced that the companies offered 170bn reais (US$30bn) as part of a settlement, including a large portion of fresh funds.

"The general terms under discussion... [are] comprising past and future obligations, to serve the people, communities and environment impacted by the dam failure," Vale said in a statement.

Of the total, 38bn reais corresponds to amounts that have been disbursed for remediation and compensation measures, 100bn reais would be paid in installments over 20 years, and 32bn reais in obligations by Samarco, including initiatives for individual compensation, resettlement and environmental recovery.

Payments will go to stakeholders like the federal government, the states of Minas Gerais and Espírito Santo, municipalities and individuals affected by the collapse.

According to Vale, the proposal will generate an impact of 5.3bn reais in the form of provisions in its financial results for the third quarter.

"The announcement of the payment details shows that we should not have an impact on the development of Vale's projects, in the iron ore, copper and nickel areas, because such amounts of new resources will be divided between the parties and because payments will take place over 20 years. Vale has sufficient cash generation to face this compensation and invest in new projects," mining consultant Pedro Galdi told BNamericas. 

"Furthermore, as the payment will be diluted over 20 years, I would say that in this period Samarco alone, with its own cash generation, will be able to pay these obligations, since the company is already in the process of resuming production and with its own cash generation, will have resources for these payments," added Galdi. 

Samarco expects to reach 60% of its production capacity by the end of this year. Currently, Samarco is operating at 30% of capacity, equivalent to around 9Mt/y of iron ore pellets and fines. Since it resumed operations in December 2020, Samarco has produced 30.7Mt and the company is now restarting operations at two pellet plants at the Ubu complex in Espírito Santo state. 

After the tragedy, the company was forced to halt production, which led it to file for bankruptcy protection to renegotiate its debts. 

Samarco is aiming to reach full production capacity by 2028, with output climbing to 30Mt/y of iron ore pellets.

PENDING DETAILS 

The agreement presented by the companies requires the approval of authorities.

In parallel, lawsuits in the UK and the Netherlands on behalf of affected municipalities and individuals are ongoing. Representing around 700,000 people, British law firm Pogust Goodhead has filed lawsuits in the two countries, seeking 230bn reais in damages. The legal procedures in London started on Monday and are likely to continue well into 2025.

Mining companies have criticized these lawsuits on the grounds that foreign courts don’t have jurisdiction in Brazil. It remains unclear if the suits will proceed if Brazilian authorities accept the proposal.