The BHP Group Ltd (ASX: BHP) share price is in focus after the company announced a Samarco final settlement with Brazilian Public Authorities.
Final settlement
BHP announced that BHP Brasil has reached a final settlement with Public Authorities in Brazil for reparation of Samarco’s Fundao dam failure.
The Federal Government of Brazil, State of Minas Gerais, State of Espirito Santo, public prosecutors and public defenders have entered into an agreement with Samarco, BHP Billiton Brasil and Vale to settle.
The companies have been engaged in negotiations with public authorities since early 2021 to reach a settlement.
BHP said the agreement provides reparation for the impacts of the dam failure and builds on the existing remediation and compensation work already performed which totals (US$7.9 billion).
The overall financial value of the agreement is US$31.7 billion on a 100% basis, to be delivered to the people, communities and environment impacted by the dam failure.
The miner explained that BHP Brasil’s expected outflows under the agreement align with BHP’s FY24 Samarco dam failure provision of US$6.5 billion and no update is required to the existing provision at this time.
Where is the money being spent?
BHP said approximately US$7.9 billion of amounts have already been spent up to 30 September 2024 on remediation and compensation since 2016.
Next, approximately US$18 billion is being allocated to instalments over 20 years to the Public Authorities, the relevant municipalities and Indigenous peoples and traditional communities.
Finally, additional performance obligations come to an estimated financial value of approximately US$5.8 billion that will be carried out by Samarco.
These costs could be a negative for BHP shares, though certainty could be a positive for investors.
Management commentary
The BHP CEO Mike Henry said:
The Samarco Fundão dam failure in 2015 was a terrible tragedy. It should never have happened and must never be forgotten.
As shareholders in the Samarco non-operated joint venture, BHP Brasil and Vale have always been committed to supporting Samarco to do what’s right by the Brazilian people, communities, organisations, and environments affected by the dam failure.
Today’s signing of a comprehensive agreement with the Brazilian government and public authorities is an important reflection of that commitment. It delivers expanded and additional programs for the environment and for the people, including designated funding for the health system, economic recovery, improved infrastructure and extensive compensation and income support measures, including for farmers, fisher people and Indigenous and Traditional communities.
We acknowledge the significant commitment of the Brazilian Government and public authorities in reaching this milestone.
Final thoughts on the BHP share price
It’s good to have some certainty about the Samarco situation with the Brazilian public authorities. However, there are still some unresolved legal action in places like Australia, the UK and the Netherlands which have not concluded yet.
I wouldn’t say BHP shares are a great buy right now, there are other ASX mining shares I’d rather buy first.
