Norwegian metals group Norsk Hydro said Thursday it has reached agreement with the Brazilian authorities following a dispute over the discharge of untreated water from its aluminium factory Alunorte, the largest in the world.

Brazilian authorities had accused Norsk Hydro of having contaminated the Baracena municipality's waters with bauxite residues which they claimed had overflowed from a deposit basin at the Alunorte plant after heavy rainfall on February 16 and 17.

They slapped Norsk Hydro with two fines of 10 million reais (2.5 million euros, around $3 million) each and ordered the aluminium supplier to halve its production at the site and suspend the use of the basin.

"On September 5, Alunorte signed two agreements representing a milestone to resume normal operations at the alumina refinery in Para, Brazil," Norsk Hydro said in a statement.

Under the terms of the two agreements signed Wednesday in Brazil, Norsk Hydro has committed to paying a total of 160 million reais in fines, investments and food coupons for local communities.

The group also pledges to pour another 150 million reais into local development projects that will benefit communities living near Alunorte.

Norsk Hydro said no timeline has yet been set for the resumption of full operations.

"Neither of the agreements signed include provisions or establishes a timeline to resume normal operations at the refinery. However, Hydro consider the agreements as an important step towards resuming operations," the Norwegian company said.

- 'Completely unacceptable' -

According to an institute reporting to Brazil's ministry of public health, the discharge into the local river posed risks to fishermen and other local communities living near the Amazon as the water they drink and bathe in has high levels of aluminium and heavy metals.

Norsk Hydro denies any toxic spill, but admits there was an unauthorised discharge of untreated rainwater.

"Internal and external reviews confirm that there was no overflow from the bauxite residue deposits or harmful spills from the February rain event," the company said.

Norsk Hydro had in March apologised for the discharge, adding that it was "completely unacceptable and in breach with what Hydro stands for".

The company will likely benefit from a return to full production capacity, after seeing its second quarter profits hit by the Brazil dispute.

Investors welcomed news of the agreement, bringing Norsk Hydro's share price up 4.5 percent in Thursday mid-morning trading.

phy/ser/jh

NORSK HYDRO

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