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Samarco - $1B Agreement Reached with Brazilian Authorities

Samarco Mineracao S.A (Samarco) and its two shareholders, Vale S.A (Vale) and BHP Billiton Brasil LTDA (BHPB Brasil), have entered into an agreement wit...

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|Mar 8|magazine24 min read

Samarco Mineracao S.A (Samarco) and its two shareholders, Vale S.A (Vale) and BHP Billiton Brasil LTDA (BHPB Brasil), have entered into an agreement with the Federal Attorney General of Brazil, the States of Espirito Santo and Minas Gerais and certain other public authorities (Brazilian Authorities) for the restoration of the environment and communities affected by the Samarco dam failure on 5 November 2015.

The Agreement provides a long-term remedial and compensation framework for responding to the impact of the Samarco tragedy.

Samarco, Vale and BHP Billiton Brasil will establish a Foundation that will develop and execute environmental and socio-economic programs to remediate and provide compensation for damage caused by the Samarco dam failure.

There are two broad types of programs included in the Agreement:

  • Reparatory Programs to restore the environment, local communities and the social condition of the affected areas; and
  • Compensatory Programs to provide compensation where remediation is not possible, and to provide compensation on a goodwill basis for certain special projects which go beyond strict make-good and compensation (for example, improvements to sewage systems and landfill management in the river basin).

The Foundation will be governed by a seven member Board, with Samarco, BHP Billiton Brasil, and Vale each appointing two members and the Brazilian Authorities appointing one member. The Foundation will be assisted in its work by an advisory panel that will include technical experts, regulators and community representatives.

The Foundation will submit remediation and compensation programs for approval to a Council consisting of representatives of the Brazilian Authorities. The Foundation’s activities will be subject to independent external audit.

The term of the Agreement is 15 years, renewable for periods of one year successively until all obligations under the Agreement have been performed. 

Samarco will fund the Foundation with contributions as follows (calendar years):

  • BRL2 billion (approximately US$500 million) in 2016, less the amount of funds already spent on, or allocated to, remediation and compensation activity
  • BRL1.2 billion (approximately US$300 million) in 2017, and
  • BRL1.2 billion (approximately US$300 million) in 2018.

The amount of annual contributions for each of the years 2019, 2020 and 2021 will vary between a minimum of BRL800 million (approximately US$200 million) and a maximum of BRL1.6 billion (approximately US$400 million), depending on the remediation and compensation projects which are to be undertaken in the particular year.

To the extent Samarco does not meet its funding obligations, each of Vale and BHP Billiton Brasil is liable in proportion to its 50 per cent shareholding in Samarco.

Samarco will continue to conduct and fund the humanitarian and environmental recovery and remediation work until the Foundation is operational, which is likely to be in the next few months.

The Agreement is subject to Court approval. If approved, the Agreement will settle the civil public claim commenced on 30 November 2015 by the Brazilian Authorities against Samarco, Vale and BHP Billiton Brasil which sought the establishment of a fund of up to BRL20 billion in aggregate for clean-up costs and damages relating to the dam failure.

BHP Billiton Chief Executive Officer, Andrew Mackenzie said: “This Agreement is an important step forward in supporting the long-term recovery of the communities and environment affected by the Samarco dam failure. It provides a platform for the parties to work together to support the remediation of affected areas.

“This agreement demonstrates our commitment to repairing the damage caused and to contributing to a lasting improvement in the Rio Doce.” 

Source: BHP Billiton Website - http://www.bhpbilliton.com

About Samarco

Founded in 1977, Samarco is a privately held Brazilian mining company, controlled in equal parts by two shareholders: Vale S.A. and BHP Billiton. Our main product is iron ore pellets, made by transforming minerals with low ore content into a valuable product, with high added value, sold to steelmakers worldwide. We are essentially an exporting company, which has been one of the largest companies in the country for years, occupying 10th position in 2014, according to the Ministry of Development, Industry and Foreign Trade (MDIC). Our iron ore pellets and fines are sold in markets such as the Americas, Middle East, Asia and Europe, in a total of 19 countries.

Since the inauguration of the Fourth Pellet Plant in the first half of 2014, our nominal production capacity is rising to 30.5 million tons a year. We have created some 6 thousand direct and indirect jobs.

We are the second largest exporter on the seaborne iron ore pellet market. In 2015 we were again recognized as the Best Mining Company of Brazil and the second largest in the sector, by Exame magazine. We have three concentrators, installed at the Germano plant in Minas Gerais, which beneficiate the ore and increase its iron content. Our facilities include four pellet plants (which transform the ore into pellets) at the Ubu plant, in the municipality of Anchieta, in Espírito Santo state.

The two industrial plants are connected by three slurry pipelines, measuring almost 400 kilometers in length each, which transport the slurry between two states, passing through 25 municipalities. We are pioneers in this type of transportation.

We have our own port terminal, located in Ubu (ES), through which we transport all our production, in addition to three sales offices, in Belo Horizonte (MG) and Vitória (ES), and two international offices, in Amsterdam (Holland) and Hong Kong (China).

We also have a hydroelectric plant in Muniz Freire (ES) and we participate in the consortium to build the Guilman-Amorim hydroelectric plant in Antônio Dias and Nova Era (MG). Together, the two plants account for 14.5% of Samarco’s electricity consumption.

Human Resources

Samarco believes that development is only possible with the involvement and effective participation of people. We believe nothing is more important than life and actions aimed at human resource management, occupational safety, health and general welfare are therefore a priority. Our employees are an invaluable asset and provide the foundation for achieving the results established by Vision 2022. The importance of people to Samarco is evidenced in our Mission, Vision and Values. The company strives for good people management practices and the promotion of a work environment that fosters professional development and the quality of life of employees.

We seek committed and engaged people who identify with our Values and our Mission and contribute to the achievement of our Vision. Employee commitment to organizational results is a Samarco differential, and to encourage this commitment the company invests in initiatives that stimulate the development of skills and conduct that can contribute to achieving great results.

These initiatives include Saber Samarco, the corporate education model established by the company in 2011 and which seeks to transform challenges into solutions that support the implementation of our strategy and equip our employees with the skills required by our business. Our efforts to build a productive and stimulating working environment were recognised for three consecutive years, in 2013, 2014 and 2015, by Exame Magazine, which classified the company as the Best Mining Company, and Guia Você S/A, as one of the 150 Best Companies to work for.

If you identify with Samarco, come and be a part of our team!

Health and Safety

Samarco believes life is more valuable than anything else. Life is more important that results and property and must be preserved every day by our conduct. All our activities are underpinned by our respect for people inside and outside the company.

As we were aware that low accident rates do not guarantee that the risks with a high potential for severity are under control, Samarco is maintaining the Critical Risk Management Project, a management program based on 18 priority operational risks that includes projects, campaigns, investments and process changes.

We compiled a proprietary methodology to calculate the Samarco Safety Risk Factor and Health Risk Factor. This indicator is being applied to all operational activities, with an emphasis on reducing unacceptable, critical risks, and results in more than R$ 10.5 million in annual investments to mitigate and control occupational safety risks. Our target is to invest R$ 26.2 million in this project by 2025.

In addition to the Central Safety Committees, our governance practice includes Operational Health and Safety Committees (OHS), the Internal Committees for Accident Prevention (CIPA and CIPAMIN), which cover all units and 100% of Samarco’s employees and permanent staff. Every year these groups organize the Internal Occupational Accident Prevention Week (Sipat) at each plant, in which we schedule a series of activities for raising awareness and sharing good practices.

Regarding the rates monitored by the company, we point out that in 2013 our accident rates fell within the established target (less than 1.00), with a modest increase over the previous year, due to the fewer hours worked.

With regard to employee health, Samarco uses aprevention-focused approach. The results of periodic examinations are used to identify areas for improvement and critical issues related to metabolic rates, high blood pressure, diabetes, obesity, sedentary lifestyles and fatigue, among others. These assessments are used to update the employees’ “Health Profile” each year.

Safe and healthy behavior programs

  • Critical Risks: after analyzing the work stations and activities of its various departments, Samarco mapped out the potential safety risks to which its employees and contractors are exposed, classifying them into five levels and mapping out 18 priority operational risks. Projects, campaigns, investments and changes in specific processes were developed for each risk.
  • Health and wellness: through the Occupational Health Department (GSO), Samarco implemented initiatives such as physical, mental and dental assessments, social services for employees, monitoring of ergonomics, occupational hygiene and activities that seek to contribute to improved health and quality of life for employees inside and outside the work environment.
  • Source: Samarco Website - http://www.samarco.com