Brazilian mining giant Vale SA and the state of Minas Gerais, Brazil, on Thursday, have signed a 37.6 billion reals (USD $7B) compensation deal for the damage caused by the Brumadinho tailings dam collapse in 2019, which had claimed the lives of 270 people and caused widespread environmental damage.
The mining tragedy had resulted in new safety protocols and a curb in production, hampering Vale’s performance over the past two years.
According to the compensation deal, Vale must pay 37.6bn reais (US$7bn) for the reparation of the socio-economic and environmental damage caused by the Brumadinho dam collapse.
Vale will also have to cover the potential costs associated with the environmental cleanup, for which no ceiling has been set by the agreement. The government said that deal also does not interfere with any criminal cases against Vale personnel.
The analyst at BTG Pactual, Leonardo Correa, said that the agreement appeared positive for the company, as the amount agreed was significantly lower than the 54 billion reais initially demanded by the government.
Payment over 6 years
According to sources, 5.5 billion reais of the overall payment would come from a judicial escrow account, which had held Vale funds during the litigation process. The remaining amount would be paid biannually over the course of six years.
Despite reporting lackluster annual production figures, Vale SA had reported a potential rebound in both output and sales in 2021.
Vale closed 2020 with 322 million tonnes of annual iron ore production capacity and is expected to increase to 350 million tonnes by the end of 2021.