Court Ratifies Samarco’s Judicial Reorganisation Plan

The Second Business Court of Belo Horizonte, State of Minas Gerais, Brazil, has officially ratified the Judicial Reorganisation Plan of Samarco Mineração S.A. – Em Recuperação Judicial (Samarco). This significant development marks a pivotal moment in the ongoing Samarco Judicial Reorganisation proceedings.

Samarco, jointly owned by BHP Billiton Brasil Ltda (BHP Brasil) and Vale S.A (Vale), initiated the Judicial Reorganisation process in April 2021 in response to various enforcement actions taken by certain financial creditors that posed a threat to Samarco’s operations. Despite the legal proceedings, Samarco’s operations have continued without interruption.

With the court’s ratification, Samarco is now poised to move forward with the next steps in the process. These steps involve Samarco entering into definitive debt restructure agreements with its creditors to implement the debt restructure plan. This comprehensive restructure of Samarco’s debt, which includes payments to employees and suppliers and the issuance of new unsecured debt to Samarco’s financial creditors, is anticipated to be completed in the first half of FY2024.

The court’s ratification of the Judicial Reorganisation Plan follows the crucial support of the plan by a majority of Samarco’s financial creditors in July 2023, as mandated by Brazilian bankruptcy law. This plan outlines the terms of the debt restructure, which will see Samarco’s existing financial debt exchanged for up to US$3.7 billion of long-term unsecured debt. Importantly, this new long-term debt will remain non-recourse to Samarco’s shareholders, BHP Brasil, and Vale. This outcome paves the way for Samarco to restructure its financial obligations, establishing a stable financial position to rebuild its operations and enhance its ability to meet its Renova funding obligations.

Notably, the approval of the Judicial Reorganisation Plan will not impact the Renova Foundation’s ability to continue implementing the remediation and compensation programs stipulated under the Framework Agreement. The Framework Agreement, established in March 2016 between Samarco, Vale, BHP Brasil, the Federal Government of Brazil, the states of Espirito Santo and Minas Gerais, and certain other public authorities, established the Renova Foundation with the aim of remediating and providing compensation for the damage caused by the Samarco dam failure. Samarco will maintain its primary responsibility to fund the Renova Foundation, with Vale and BHP Brasil assuming secondary responsibility to fund 50% of the Renova Foundation should Samarco fall short of its funding obligations under the Framework Agreement.

Under the terms of the Judicial Reorganisation Plan, Samarco’s funding of the Renova Foundation will be capped at US$1 billion for the period CY2024 to CY2030. BHP Brasil and Vale will be obligated to provide funding to the Renova Foundation during this period should the required funding amount exceed the US$1 billion cap.

BHP Billiton Brasil Ltda (BHP Brasil) provided an update to the Group’s provision for the Samarco dam failure in its 2023 Annual Report, with the funding cap and Samarco’s long-term cash flow forecasts factored into the provision calculation as of June 30, 2023. For more detailed information about the provision, please refer to note 4, ‘Significant events – Samarco dam failure,’ in the Financial Statements of BHP’s 2023 Annual Report.

For additional information on the Samarco Judicial Reorganisation, please visit samarco.com.

As Samarco takes these critical steps toward financial recovery and operational stability, the company remains committed to fulfilling its obligations under the Framework Agreement and continuing its remediation efforts in collaboration with stakeholders and the communities affected by the dam failure.