BHP Group Ltd (ASX: BHP) shares are starting the week positively.
In morning trade, the mining giant's shares are up 1% to $42.82.
Why are BHP shares rising?
Investors have been buying the miner's shares this morning after it announced an agreement to settle the Samarco dam failure legal action.
According to the release, the agreement delivers a full and final settlement of the framework agreement obligations, the Federal Public Prosecution Office claim, and other claims by the Public Authorities in relation to the dam failure.
It provides reparation for the impacts of the dam failure, and builds on the existing remediation and compensation work already performed by the Renova Foundation in Brazil, which totals R$38 billion (approximately A$11.9 billion).
In total, the financial value of the agreement is R$170 billion (A$47.9 billion) on a 100% basis to be delivered to the people, communities and environment impacted by the dam failure.
Management also notes that the agreement includes amounts already spent to date, plus future payments and obligations. This is as follows:
- R$38 billion (A$11.9 billion) in amounts already spent to 30 September 2024 on remediation and compensation since 2016.
- R$100 billion (A$27.2 billion) in instalments over 20 years to the Public Authorities, the relevant municipalities and Indigenous peoples and traditional communities.
- Additional performance obligations for an estimated financial value of approximately R$32 billion (A$8.8 billion) that will be carried out by Samarco in accordance with the terms of the agreement.
The good news is that BHP's expected outflows under the agreement align with its FY 2024 Samarco dam failure provision of US$6.5 billion (A$9.8 billion). As a result, no update is required to the existing provision at this time.
Commenting on the agreement, BHP's 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.
