Major mining firms Vale and BHP Group are reportedly planning to provide a debtor-in-possession loan of $238m (R$L1.2bn) to Samarco Mineracao.

The DIP financing from these controlling shareholders is expected to help the bankrupt miner in maintaining its operations and jobs while ‘defraying its cash needs’, reported Reuters, citing Samarco’s email statement.

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The move, however, is being opposed by a group that represents 80% of Samarco’s debt. The opponents claim that the DIP financing would only safeguard the assets of Vale and BHP.

According to the court document reviewed by Reuters, the DIP financing, which has an annual interest rate of 9.5%, would help Samarco in gaining enough cash required to meet its obligations.

A  joint venture between Vale and BHP, Samarco filed for bankruptcy protection in the state of Minas Gerais, Brazil, in April 2021 so that it could stop creditors’ claims from impacting its operations.

The firm resumed operations last year after more than five years following a tailings dam collapse.

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In 2015, the dam collapse at the Samarco mine led to the death of 19 people while severely polluting the Doce River with waste from the mine.

Meanwhile, Samarco claimed that the opposition from creditors would weaken its ability to recover from the damage caused by the accident.

The company has been facing litigation from bondholders.

Samarco’s debt with Vale and BHP is around $4.5bn (R$23bn) while it owes $5.17bn (R$26bn) to bondholders.

In separate emails, Vale and BHP stated that recent loans given to Samarco were aimed at helping it resume operations.