Samarco Mineração, along with parent companies Vale (NYSE:VALE) and BHP (ASX:BHP,NYSE:BHP,LSE:BHP), has confirmed ongoing settlement negotiations with Brazilian authorities over the Fundão dam collapse.
The incident is recognized as Brazil’s worst environmental disaster, and parties to the negotiations include public prosecutors, the federal government and the states of Minas Gerais and Espírito Santo.
They are focused on a proposed settlement that could reach up to US$31.7 billion. The agreement aims to address both civil and environmental liabilities, while compensating affected individuals, Indigenous communities and businesses.
The Fundão dam disaster occurred on November 5, 2015, when the tailings dam operated by Samarco in Mariana, Minas Gerais, collapsed, subsequently unleashing around 60 million cubic meters of iron ore tailings.
The toxic sludge inundated nearby villages, including Bento Rodrigues, and contaminated over 600 kilometers of waterways. It reached the Atlantic Ocean, decimating ecosystems along the way.
The disaster claimed a total of 19 lives, while also displacing thousands in the process.
The tailings, which contained heavy metals, polluted the nearby Doce River. This impacted local communities’ access to water and crippled the region’s economy, which primarily relied on agriculture and fishing.
Indigenous groups, such as the Krenak, consider the Doce River sacred. Efforts to restore the river and the surrounding ecosystems have been slow, and a full recovery still remains elusive.
Under the proposed terms, Samarco will take primary responsibility for settlement obligations, with Vale and BHP acting as secondary obligors. The settlement includes an estimated 8 billion Brazilian reais specifically allocated to compensate Indigenous peoples and traditional communities affected by the disaster.
The collective funds will be used to assist impacted residents, primarily through residential resettlement.
In addition to the compensation, individuals opting into the settlement could receive 30,000 Brazilian reais each, with an additional 13,000 Brazilian reais for water contamination claims.
While the companies have already invested around 38 billion Brazilian reais since 2016 in remediation and compensation efforts, they are expected to continue paying into recovery programs over the next two decades.
Despite the progress in negotiations, not all lawsuits related to the Fundão dam collapse have been resolved.
Internationally, BHP is currently facing a class-action lawsuit in the UK scheduled for later this month, where claimants are seeking additional damages for the environmental and economic harm caused by the disaster
“BHP will continue to defend the action which it believes is unnecessary because it duplicates matters already covered by the ongoing reparation work and legal proceedings in Brazil,” BHP said about those proceedings.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.