Australian mining giant BHP’s infamous Samarco iron ore joint venture in Brazil is headed for a clash with creditors this week following a breakdown in the latest round of talks over a proposed debt restructure.
Samarco, a 50:50 partnership between BHP and Brazil’s Vale, has been locked in a years-long dispute with lenders after it was unable to pay back billions of dollars following the catastrophic Fundao tailings dam collapse in 2015 that killed 19 people, polluted one of Brazil’s largest rivers and halted production and revenue.
The collapse of the Fundao dam in 2015 killed 19 and poured roughly 40 million cubic metres of mining waste into communities.Credit:AP
Ahead of a vote on a proposal asking creditors to either accept just a quarter of what they are owed as part of a payout in 2041 or swap their debt for shares, a coalition of investors representing two-thirds of Samarco’s $US5 billion ($6.8 billion) external debt has accused BHP, Vale and Samarco of sticking to “unreasonable assumption and intransigence” in their latest negotiations.
“Despite minor changes in the most recent versions of the plan, the attitude remains all the more disappointing coming from two of the largest and most prosperous companies in the world, which have shown themselves incapable of taking their share of the responsibility,” said a spokesman for the ad-hoc group of financial institutions including asset managers York, Ashmore, Canyon, Maple Rock and Solus.
“In the last round of negotiations, Samarco’s shareholders presented depressed financial projections that are detached from reality – failing to recognise current and projected levels of iron ore prices set by investors and producers in a liquid, global market.”
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The collapse in talks over the weekend raises the prospect of the creditors’ group mounting a bid for an alternative restructuring plan for Samarco that would include appointing a new controlling group of shareholders and installing ex-Vale chief financial officer Tito Martins as chairman.
“With the support of Tito Martins, one of the most renowned specialists in the global mining market, the group is working at an accelerated pace in the elaboration of an alternative plan, to be presented within the legal deadlines,” the spokesman said.
“We believe that Samarco has enormous potential to generate improved results for all its stakeholders, with careful observance of its social, governance and environmental responsibilities.”
