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BHP's Brazil disaster costs climb further

AAP logoAAP 27/07/2016 Prashant Mehra

The financial impact on BHP Billiton's bottom line from last year's fatal Samarco mine disaster in Brazil is set to climb higher after the company said it will take a charge of up to $US1.4 billion ($A1.9 billion) for the second half of the 2015/16 financial year.

BHP says it will book a charge of between $US1.1 billion and $US1.3 billion in its accounts for the six months to June 30 - roughly equal to its half share of the Samarco joint venture's rehabilitation agreement with Brazilian authorities.

It will also book another $US100 million in direct costs related to the November, 2015 disaster, which killed at least 19 people and polluted a major river valley.

"The recognition of the provision demonstrates our support for the long-term recovery of the communities and environment affected by the Samarco tragedy," BHP chief executive Andrew Mackenzie said.

BHP had already outlined a $US1.2 billion provision during the first half of the fiscal year, reflecting the writedown in the value of its investment in Samarco.

The mining giant in February outlined a first-half loss of $US5.67 billion amid a collapse in commodity prices and a massive writedown against its US shale assets.

BHP and Brazilian iron ore giant Vale, who equally own the Samarco joint venture, in March struck a $US2.3 billion rehabilitation agreement with government authorities there to cover for the clean-up costs and damages from the disaster.

However, the complete financial hit from the accident remains uncertain after a Brazilian court in July agreed to reinstate a rival civil claim of $US6.2 billion. BHP and Vale have said they will appeal the decision.

Analysts have previously estimated the disaster may cost the global miner up to $US1.5 billion in fines and damages.

On Thursday, BHP said its fresh provision also reflected the ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco's operations.

Earlier in July, it said production at Samarco is unlikely to restart in 2016 as the clean-up continues. The two partners had hoped to restart the operations in 2016 but have not yet been able to secure all regulatory approvals.

BHP said it will provide a short term funding facility of up to $US116 million to Samarco to support its operations and to carry out remediation work.

It will announce full year earnings on August 16.

BHP shares gained 11 cents, or 0.55 per cent, to $19.97.

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