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Samarco faces R$30 billion dam disaster bill

A general view where a dam burst in the village of Bento Rodrigues, in Mariana, the southeastern Brazilian state of Minas Gerais on November 6, 2015.
Douglas Magno | AFP | Getty Images
A general view where a dam burst in the village of Bento Rodrigues, in Mariana, the southeastern Brazilian state of Minas Gerais on November 6, 2015.

Samarco, the joint venture between Vale and BHP Billiton, has reached a deal with the Brazilian government that could cost it as much as R$30 billion (US$7.7 billion) following a dam collapse that killed at least 17 people and triggered the country's worst environmental disaster.

President Dilma Rousseff said on Wednesday that Samarco would pay R$4.4 billion over the next three years to fund the clean-up operation as part of a settlement of the country's lawsuit against the miner. After 2019, Samarco will spend an estimated R$1.2 billion per year, paying out as much as R$20 billion, Ms Rousseff said.

Samarco will also have to pay out R$4.1 billion over 15 years in compensation for the disaster, which killed at least 17 people and unleashed a tsunami of waste-filled mud across two states, potentially bringing the total cost of the deal to more than R$24 billion.

However, Ms Rousseff said there was no limit or ceiling for how much the company would have to pay to fix the socio-economic and environmental damage of the dam's collapse in Brazil's Minas Gerais state.

"It could be as much as R$30 billion," Brazil's attorney-general Luís Inácio Adams said in a later press conference with the country's environment minister Izabella Teixeira. "We don't know and no one knows how much is needed in repairs and compensation," he said.

According to Brazil's authorities, Samarco agreed with the federal and state governments to fund 38 clean-up and compensation projects, without fixing a set price tag for the programs.

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In a separate announcement, Brazil's Vale said Samarco's initial R$4.4 billion payment would be divided between R$2 billion in 2016, subtracting the capital already spent on the clean-up, R$1.2 billion in 2017 and R$1.2 billion in 2018. It said Vale and Anglo-Australian miner BHP would be equally responsible for funding the projects if Samarco itself could not meet its obligations.

"This day is a turning point for all those involved, given that a settlement is always better than a dispute in the courts," said Vale chief executive Murilo Ferreira.

BHP chief executive Andrew Mackenzie also praised the agreement, calling it "an important step forward in supporting the long-term recovery of the communities and environment affected by the Samarco dam failure".

Wednesday's deal settles a civil lawsuit for R$20 billion filed by Brazil's attorney-general at the end of November, three weeks after the dam collapsed at Samarco's iron ore mine.

However, company executives are still facing criminal charges over the incident.

Last month, police charged Ricardo Vescovi, Samarco chief executive, and six others with homicide following the deaths of at least 17 people, including two children, in the disaster. Two men are missing, presumed dead.

Police said they were also carrying out a criminal investigation into the environmental impact of the incident that could lead to further charges.