Brazil sues mining company in dam tragedy

2016-05-04 22:04
A fireman rescues a dog that was trapped in the mud that swept through the village of Bento Rodrigues in Brazil. (AFP)

A fireman rescues a dog that was trapped in the mud that swept through the village of Bento Rodrigues in Brazil. (AFP)

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London - Shares in miner BHP Billiton tumbled after Brazil's federal prosecutor launched a $43 billion civil suit for a dam break that killed 19 people and caused the worst environmental disaster in the country's history.

The suit seeks social, environmental and economic compensation over the failure of the dam at an iron ore operation owned by Samarco, a joint venture of mining companies Vale of Brazil and BHP Billiton of Australia.

The dam burst in November, unleashing a flood of toxic mud that destroyed several towns, killed people and damaged the environment.

"BHP Billiton remains committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam," the company said in a statement.

Shares in BHP Billiton, which are listed in Sydney and London, fell 9.4% to 18.79 Australian dollars ($14.24). Vale's stock price was down 5.6% to 13.79 reals in early trading in Brazil.

The attorney general of the state of Minas Gerais said it arrived at the compensation amount by examining the cost so far of repairing damage caused by BP's Deepwater Horizon oil spill in the Gulf of Mexico.

It says the damage caused by the dam "is, at least, equivalent to that which occurred in the Gulf of Mexico."

The prosecutor's approach raises the risk of spiralling costs for BHP Billiton and Vale.

The attorney general's office wants an independent team to be appointed to assess the damage, and wants to put 7.7 billion reals ($2.2 billion) — or 5% of what it says is the minimum evaluation of damages - in an escrow account while a ruling is made.

The lawsuit comes despite an agreement on March 2 with the Attorney General of Brazil, the States of Espirito Santo and Minas Gerais and certain other public authorities to restore communities hurt by the disaster.

"The agreement provides a long-term remedial and compensation framework for responding to the impact of the Samarco tragedy," the company said in a statement.

But it remains subject to court approval, BHP said.

"Today's news will be unwelcomed, as the market had largely priced in the original agreement as an end to the potential liabilities from the Samarco incident," said Andrew Duncan an analyst at Killik & Co.

"Further claims from Brazilian authorities will likely cause renewed market uncertainty around the company."

Read more on:    bhp billiton  |  brazil  |  environment

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