BHP - Vale Samarco JV files for Brazil bankruptcy protection

The collapse of a dam at the Samarco mine complex in 2015 killed 19 people and severely polluted the Doce River with mining waste, one of Brazil’s worst environmental disasters. The facility, which resumed production in December, is the focus of significant litigation from bondholders holding nearly $5bn in debt.

Vale

“The (judicial reorganization - JR) filing is necessary to prevent legal actions already underway ... from affecting Samarco’s ability to produce, ship, receive for its exportations and to fund the normal course of its activities,” the company said.

Vale said the bankruptcy protection filing would not impact Samarco’s ability to pay reparations to those affected by the 2015 dam burst. It said out-of-court negotiations with creditors had slowly broken down over time.

The in-court reorganization request, filed in the state of Minas Gerais, is roughly analogous to a Chapter 11 bankruptcy filing in the United States, reports Reuters.

Samarco

Samarco has $4.7bn of financial debt from non-related parties, Vale said. In the years following the Samarco disaster, Samarco had negotiated with creditors to reach a restructuring agreement. However, those talks slowed in 2019 after changes in dam regulations in Brazil, which materially affected operations at Samarco, Vale said.

BHP

In a statement BHP added: "The JR is a means for Samarco to restructure its financial debts in order to establish a sustainable independent financial position in order for Samarco to continue to rebuild its operations safely and meet its Renova Foundation (Renova) obligations. Samarco’s restarted operations provide jobs, local economic activity and community support as well as continuing the remediation and compensation programs underway through the legally approved programs. Samarco’s operations will continue through the JR and restructure process.

"The JR does not affect Samarco’s obligation or commitment to make full redress for the 2015 Fundão dam failure, and it does not impact Renova’s ability to undertake that remediation and compensation."