Brazilian court gives nod to Samarco debt plan after dam disaster, BHP says

Bengaluru — Australian mining giant BHP said on Monday a Brazilian court has approved the reorganisation plan for its Samarco joint venture, clearing the path for the cash-strapped Brazilian miner to move ahead with a $3.7bn debt restructuring.

The debt reorganisation is intended to help Samarco, an iron ore miner that is 50% owned by BHP and 50% by Vale, meet funding obligations related to rectifying and providing compensation for the damage caused by a 2015 dam collapse that killed 19 people in Brazil’s worst-yet environmental disaster.

Shares in BHP rose as much as 3.1% to A$46.090 ($29.73) by 0.49am GMT (2.49am), while the Australian mining subindex climbed nearly 2%.

On September 1, the Second Business Court of Belo Horizonte, State of Minas Gerais, formalised Samarco’s restructuring plan as part of the ongoing proceedings, BHP said.

Samarco had struggled to reach an agreement for years with its creditors, who rejected its initial recovery plan in April 2022.

The reorganisation plan for Samarco allows for the Brazilian miner’s existing financial debt of $4.8bn to be exchanged for up to $3.7bn of long-term unsecured debt, BHP said, projecting the conclusion of the reorganisation to occur in the first half of fiscal 2024.

Samarco’s contribution to fund the reparation will be capped from 2024 to 2030 at $1bn, while BHP Brasil and Vale will be required to provide funding during this period to the extent that the funding amount required exceeds the $1bn cap.

“Samarco is not fully resolved. The court approval only ratifies a certain amount of debt. We are looking to see whether that number has increased. The bigger issue is still pending, and going through the courts can take a while,” Glyn Lawcock, an analyst with Barrenjoey, said.

Separately, about 720,000 Brazilians are suing BHP, the world’s biggest miner by market value, over the 2015 collapse of the Fundao dam owned by Samarco.

Reuters