Exchange release                                                 

25 October 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE

"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."

Mike Henry

Chief Executive Officer, BHP

The Federal Government of Brazil, State of Minas Gerais, State of Espirito Santo, public prosecutors and public defenders (Public Authorities) have entered into an agreement with Samarco Mineirão S.A. (Samarco), BHP Billiton Brasil Ltda. (BHP Brasil) and Vale S.A. (Vale) (the Companies) to settle the Framework Agreement obligations, the Federal Public Prosecution Office civil claim and other claims by the Public Authorities relating to Samarco's Fundão dam failure on 5 November 2015 (Agreement). The Agreement was executed by the parties today in Brazil.  The Agreement remains subject to approval by the Brazilian Supreme Court.

As stated in BHP's 2024 Annual Report, the Companies have been engaging in negotiations with the Public Authorities since early 2021 to seek a definitive and substantive settlement of the Framework Agreement obligations, the Federal Public Prosecution Office civil claim and other claims by the Public Authorities relating to the dam failure.

The negotiations were conducted by the Brazilian Federal Court of the 6^th region and the National Court of Justice in Brazil with the oversight of a court-appointed mediator and the participation of public prosecutors and public defenders.

Key terms of the Agreement

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. The Agreement 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 billion¹ (approximately US$7.9 billion²).

The financial value of the Agreement is R$170 billion¹ (US$31.7 billion²) on a 100% basis to be delivered to the people, communities and environment impacted by the dam failure.

The Agreement includes amounts already spent to date plus future payments and obligations as follows:

·       R$38 billion¹ (approximately US$7.9 billion²) in amounts already spent to 30 September 2024 on remediation  and compensation since 2016.

·     R$100 billion¹ (approximately US$18.0 billion²) in instalments over 20 years to the Public Authorities, the relevant municipalities and Indigenous peoples and traditional communities (Obligation to Pay).

·   Additional performance obligations for an estimated financial value of approximately R$32 billion¹ (approximately US$5.8 billion²) that will be carried out by Samarco in accordance with the terms of the Agreement (Obligations to Perform). 

BHP Brasil's expected outflows under the Agreement align with BHP's FY2024 Samarco dam failure provision of US$6.5 billion and no update is required to the existing provision at this time. Further detail on the financial impacts and payment schedule of the Agreement is set out below.

Summary of key obligations in the Agreement

The Agreement:

·      allocates compensation to programs for the benefit of people, communities and the environment in the affected regions, including R$11bn¹ for universal water sanitation, R$12bn¹ for health programs, R$6.5bn¹ for economic recovery programs, R$4.3bn¹ for improvements to road and infrastructure, R$2.0bn flood response fund, R$2.4bn to foster fishing and biodiversity, R$1bn for a program to support women, R$5.7bn¹ for a social participation fund for investment in education, culture, sports and food security, and R$3.75bn¹ for an income assistance program to support the most vulnerable people in the affected regions;

·      provides R$8 billion¹ (US$1.4bn²) to eligible Indigenous People and Traditional communities with the allocation of funds to be determined by Indigenous and Traditional communities following a consultation process to be conducted by the Federal Government;

·      provides compensation payments of R$95,000¹ per person to eligible fishermen and farmers in the affected regions and R$13,018¹ per person to individuals with water damage claims; and

·      establishes a further compensation and indemnification system.

Further detail on the terms of the Agreement is included below in "Detailed terms of the Agreement".

1 All financial obligations are presented on a real, undiscounted basis and will accrue inflation at IPCA inflation rate. Payments will be made in Brazilian Reais.

2 All USD amounts throughout are calculated based on actual transactional (historical) exchange rates related to funding provided to Fundação Renova (Renova Foundation) for investment to date and future spend is calculated using 28 June 2024 BRL/USD exchange rate of 5.56.

Financial obligations^1,2

Under the Agreement, Samarco is the primary obligor for the settlement obligations and BHP Brasil and Vale are each secondary obligors of any obligation that Samarco cannot fund or perform in proportion to their shareholding at the time of the dam failure, which is 50% each.

(i)         Payment schedule

The payment schedule for the Obligation to Pay is set out in the table below. The first payment will become payable 30 days after the Court confirms the Agreement and subsequent payments will become payable in six months after the first payment and annually thereafter for a total of 20 years.

The Obligations to Perform are expected to be largely completed over approximately the next 15 years with approximately R$6.6 billion¹ (US$1.2 billion²), R$14.7 billion¹ (US$2.6 billion²) and R$3.1 billion¹ (US$0.6 billion²) to be spent on a 100% basis over FY25, FY26 and FY27 respectively.

Obligation to Pay schedule of payments (R$ Billion, 100%)^1,2

(ii)        Samarco dam failure provision

BHP Brasil's expected outflows under the Agreement align with the existing US$6.5 billion Samarco dam failure provision based on the current assessment of the uncertainties associated with the execution of Obligations to Perform and current estimates of the extent to which Samarco could directly fund settlement obligations. No update is required to the existing provision at this time.

Under the terms of Samarco's Judicial Reorganisation Plan, Samarco's funding of remediation obligations will be capped at US$1 billion for the period CY2024 to CY2030.

³ FY25 payment includes CY24 and CY25 instalments.

To the extent that Samarco has a positive cash balance each year after meeting its various obligations including operating capital requirements, debt service and remediation obligations in line with the cap, BHP Brasil and Vale are able to direct 50% of Samarco's year end excess cash balance to provide further funding for remediation and compensation obligations. BHP Brasil and Vale will be required to provide funding to remediation obligations during this period to the extent that the funding amount required exceeds the US$1 billion cap and any excess Samarco cash available.

Other litigation not resolved by the Agreement

The Agreement will not resolve the Australian class action complaint, United Kingdom group action complaint, the group action claim brought against certain Vale and Samarco entities in the Netherlands, criminal charges against Samarco, BHP Brasil, Vale and certain individuals, civil public actions commenced by private associations, including the civil public action concerning the use of Tanfloc for water treatment, trailing litigation from individuals, Indigenous Peoples and Traditional communities and businesses (among others) and future or unknown claims which may arise from new information or damages in connection with the dam failure such as potential claims alleging health impacts to individuals.

Detailed terms of the Agreement

This table sets out a summary of the key terms of the Agreement.

Authorised for release by Stefanie Wilkinson, Group General Counsel and Group Company Secretary