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BHP faces $1.9bn hit from Brazil disaster


The fatal Samarco mine disaster in Brazil will dent BHP Billiton’s bottom line by up to $US1.4 billion ($A1.9 billion) for the 2015/16 financial year.

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BHP says it will book a charge of between $US1.1 billion and $US1.3 billion in its accounts for the year to June 30 – roughly equal to its half share of the Samarco joint venture’s rehabilitation agreement with Brazilian authorities.

It will also book another $US100 million in direct costs related to the 2015 disaster, which killed at least 19 people and polluted a major river valley.

“The recognition of the provision demonstrates our support for the long-term recovery of the communities and environment affected by the Samarco tragedy,” BHP chief executive Andrew Mackenzie said.

It is the first time the mining giant has quantified the financial impact of the dam burst at its iron ore mining operations in Brazil.

BHP and Brazilian iron ore giant Vale, who equally own the Samarco joint venture, in March struck a $US2.3 billion rehabilitation agreement with government authorities there to cover for the clean-up costs and damages from the disaster.

However, the complete financial hit from the accident remains uncertain after a Brazilian court in July agreed to reinstate a rival civil claim of $US6.2 billion. BHP and Vale have said they will appeal the decision.

Analysts have previously estimated the disaster may cost the miner up to $US1.5 billion in fines and damages.

Today, BHP said its provision also reflected the ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco’s operations.

Earlier in July it said production at Samarco was unlikely to restart in 2016 as the clean-up continued. The two partners had hoped to restart the operations in 2016, but have not yet been able to secure all regulatory approvals.

BHP said it will provide a short-term funding facility of up to $US116 million to Samarco to support its operations and to carry out remediation work.

BHP made an annual net profit of $US1.9 billion in 2014/15, and a loss of $US5.67 billion in the first half of 2015/16 amid a collapse in commodity prices and a massive write down against its US shale assets.

It will announce its full-year earnings on August 16.

BHP shares were up 20 cents, or one per cent, at $20.06 at 1150 AEST.


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