The company said the provision was equivalent to a 50% share of the current estimate of Samarco’s funding obligations under the framework agreement signed with the Brazilian government.
“This reflects the ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco’s operations,” BHP said.
“The associated income statement charge will be recognised as an exceptional item in the June 2016 half-year, together with direct costs of approximately $100 million (post tax).”
Samarco partner Vale separately said it would recognise a $1.2 billion provision.
BHP and Vale reached a $2.4 billion settlement with Brazilian authorities in March, suspending an earlier 20 billion real claim.
The settlement agreement was ratified by Brazil’s Federal Court of Appeal in early May, but the Federal Prosecutors’ Office successfully appealed the ratification.
Despite the uncertainty, the partners reiterated that the agreement provided the most effective framework for remediation and compensation.
The BHP board has approved $134 million to support the foundation established to manage recovery programs, which will be offset against the provision.
“The recognition of the provision demonstrates our support for the long-term recovery of the communities and environment affected by the Samarco tragedy and the belief we have that the agreement is the most appropriate mechanism to do this,” BHP CEO Andrew Mackenzie said.
BHP will make a short-term facility of up to $116 million available to Samarco to carry out remediation and stabilisation work.
The company said the facility would preserve the value of its investment while it monitors developments, and said the safe restart of operations and the restructure of Samarco’s debt remained priorities.
RBC Capital Markets analyst Paul Hissey said it was difficult to keep up with Samarco given the various legal cases surrounding the company.
“We believe a restart as soon as possible would be the quickest way to ensure that BHP no longer has to fund ‘value preservation’ efforts, although once the asset has restarted, it is not likely that it will make a meaningful contribution to its parent BHP for some time while compensation and remediation continue,” he said.
Samarco’s operations have been suspended since November last year due to the tailings dam collapse which killed 17 and left hundreds homeless.
Last week, BHP flagged charges of up to $175 million in its underlying attributable profit figure to be released next month, based on redundancies and coal impairments, which should be offset by reversal of some previous write-downs due to an improvement in commodity prices.
The company will report its full-year results on August 16.
BHP shares were A8c higher at $19.94.
