Engineering & Mining Journal

APR 2016

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REGIONAL NEWS - LATIN AMERICA 10 E&MJ; • APRIL 2016 www.e-mj.com Agreement Sets Funding Requirements for Samarco Dam Disaster Recovery shareholders, Vale and BHP Billiton, signed an agreement in early March with Brazil's federal government, the Brazilian states of Espirito Santo and Minas Gerais, and certain other public authorities to fund restoration of the environment and communities affected by the disastrous Samarco tailings dam failure that oc- curred on November 5. The disaster killed 19 people, devastated surrounding com- munities and polluted the Rio Doce for hundreds of kilometers downstream. The agreement provides a long-term framework for responding to the impact of the tailings dam failure. Under the agreement, Samarco, Vale, and BHP Bil- liton will establish a foundation that will develop and execute environmental and socioeconomic programs to remediate and provide compensation for damage caused by the dam failure. The agreement covers two broad types of programs: reparation programs to re- store the environment, local communi- ties, and the social condition of the af- fected areas; and compensatory programs to provide compensation where remedia- tion is not possible and to provide com- pensation on a goodwill basis for certain special projects that go beyond strict make-good and compensation—for ex- ample, improvements to sewage systems and landfll management in the Rio Doce river basin. The foundation will be governed by a seven-member board, with Samarco, BHP Billiton, and Vale each appointing two members and Brazilian authorities appointing one member. The agreement is for 15 years, renewable for periods of one year successively until all obligations under the agreement have been met. Sa- marco will fund the foundation with con- tributions of BRL 2 billion (approximately $500 million) in 2016 and BRL 1.2 bil- lion (approximately $300 million) each in 2017 and 2018. Contributions in 2019 and beyond will be determined in accor- dance with projects undertaken in a giv- en year. To the extent that Samarco does not meet its funding obligations, Vale and BHP Billiton will be liable in proportion to their 50% shareholdings in Samarco. The agreement is subject to court ap- proval, and if approved, will settle the civil claim brought against the companies by Brazilian authorities on November 30, which sought payments for damages of up to BRL 20 billion. Lithium Americas, SQM Announce Chilean JV Lithium Americas Corp. (formerly Western Lithium USA) announced an agreement with Sociedad Química y Minera de Chile S.A. (SQM) to enter into a 50/50 joint venture to develop the Cauchari-Olaroz lithium project in Jujuy, Argentina. The joint venture will go into effect following a contribution of $25 million by SQM in exchange for a 50% ownership stake in Minera Exar S.A., a wholly owned subsidiary of Vancouver, British Colum- bia-based Lithium Americas. SQM's con- tribution includes $15 million to repay intercompany loans between Minera Exar and LAC; the remaining $10 million will be allocated to project development. SQM and LAC intend to immediately advance a work and engineering plan, which con- templates completion of an updated de- fnitive feasibility study based on an exist- ing study for Cauchari that was completed by Minera Exar in 2012. The updated study will evaluate economic feasibility for a project with a nameplate production capacity of approximately 40,000 metric tons per year of lithium carbonate equiv- alent. Depending on the results, the proj- ect may be executed in stages. John Kanellitsas, vice chairman of Lithium Americas, said, "Lithium Amer- icas' board has determined that SQM represents the premier partner in the world for our project. Their understanding of brine chemistries, pond and chemi- cal plant construction, knowledge of all end-user product specifcations, and the collaborative approach with our team were important criteria in our selection process. We believe that SQM is the world's largest and lowest-cost producer of lithium from brines, and our board has determined that a joint venture with SQM in which we pursue a production path utilizing a proven, low-cost brine evap- oration process represents the optimal course to maximize long-term value for Lithium Americas' shareholders." Cauchari-Olaroz is believed to be the world's third largest lithium brine re- source and is fully permitted for imme- diate construction and development. The project can take advantage of existing infrastructure including a nearby natural gas pipeline, a paved international high- way with direct access to Salar de Atac- Operators monitor the environment in the area of the Samarco tailings dam breach that took place in early Novem- ber 2015. The disaster took the lives of 19 people and polluted the Rio Doce river. (Photo: Samarco) (Continued on p. 22)

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