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BHP says could restart Samarco in 2017

AAP logoAAP 13/12/2016 Prashant Mehra

BHP Billiton says production at its disaster-hit Samarco iron ore mine in Brazil could restart in 2017 but only if the joint venture project's $US3.8 billion of debt is restructured and new operating approvals are secured.

Operations at the Samarco mine have been suspended since a tailings dam failed in November, 2015, causing flooding that killed at least 19 people and led to widespread environmental damage.

On Wednesday, BHP said Samarco has submitted applications to local authorities to restart mining at the site, initially at 60 per cent of capacity.

The mine produced 30 million tonnes of iron ore annually prior to the fatal accident.

"A restart of operations is technically feasible in 2017, however, restart will occur only if it is safe to do so and the necessary approvals are received from Brazilian authorities," it said in a statement.

The mining giant also specified that a restructure of Samarco's debt was essential to move forward, in order to make the operations economically viable.

Samarco, which is an equal joint venture between BHP and Brazil's Vale, currently has about $US3.8 billion of debt on its books of which $US1.6 billion is owed to banks, and another $US2.2 billion to bondholders.

With its operations suspended and no cash flow over the past year, the two major shareholders have let Samarco default on its interest payments twice in recent months. The JV is believed to be negotiating with creditors for a restructure.

BHP and Vale in March struck a $US2.3 billion rehabilitation agreement with government authorities in Brazil to cover the clean-up costs and damages from the disaster, but the deal is still awaiting ratification from the courts there.

The complete financial hit remains uncertain after a Brazilian court in July agreed to reinstate a rival civil claim of $US6.2 billion.

BHP said on Wednesday a federal court had confirmed an injunction seeking a $US400 million deposit to cover community and environmental rehabilitation.

The payment is due on January 8.

Brazil's federal prosecutors have also filed criminal charges against eight current or former BHP employees in relation to the dam disaster.

BHP has said it will defend the charges against the company, and fully support each of the affected individuals.

At 1358 AEDT, BHP Billiton shares were down 20 cents to $25.92 in Australian trading.

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