Aust'n mining giant to pay billion-dollar damages bill for Brazil disaster

The world's biggest mining company, Australia's BHP Billiton, has agreed to pay more than one billion U.S. dollars in damages to Brazilian authorities as a result of the Samarco dam disaster.

BHP Billiton, which part-owns Samarco with Brazilian company Vale SA, pledged 1.13 billon U.S. dollars for a fund set up to help the community of Bentos Rodrigues recover from last year's flooding disaster.

The iron-ore dam burst in November, killing 19 people and leaving thousands of people homeless. It has been labelled the worst environmental disaster in Brazil's history.

"This agreement is an important step forward in supporting the long-term recovery of the communities and environment affected by the Samarco dam failure," BHP chief executive Andrew MacKenzie said in a statement released on Thursday (Australian time).

"(It) demonstrates our commitment to repairing the damage caused and to contributing to a lasting improvement in the Rio Doce."

Following the announcement, which ends some of the uncertainty surrounding BHP Billiton's liability in Brazil, the company's share price surged 5.4 percent at the opening of the Australian Stock Exchange on Thursday.

However, the Australian company has suffered from its connection to the incident, posting a 5.7 billion U.S. dollar half-year loss in February after its shares fell to a 10-year low in December.

Executives from all three companies have also committed to establishing a foundation to restore the environmental and social conditions of the besieged local community.

The group will plug 6.2 billion U.S. dollars into the program over the next 15 years.

Samarco will finance the foundation itself. However, BHP and Vale SA will be liable to fulfil the agreement should Samarco fail to complete its obligations.

Brazil's president, Dilma Rousseff, welcomed the deal on Thursday, saying the money would go a long way to fixing many broken lives.

"We want to build new life on the rubble of an unprecedented tragedy," Rousseff said at the signing ceremony in Brasilia.

Earlier this week, a special report from the Australian Broadcasting Corporation (ABC) alleged that the dam's architect had warned Samarco about its deteriorating structural integrity.

Joaquim Pimenta de Avila said he was brought in to assess the structure and noticed cracks in the dam and recommended the owner take immediate action.

The ABC also reported that Brazilian state police are investigating the possibility that damage may have occurred due to Samarco ramping up production to offset falling iron-ore prices.

MacKenzie has refused to comment on the accusations until the release of the company's internal report on the matter.

The deal will not be finalized until it is reviewed in a Brazilian court. Endit