BHP Billiton share price: Brazil to sue Samarco for £3.5bn

Company facing more fines

BHP Billiton share price: Brazil to sue Samarco for £3.5bn

Brazilian authorities will demand 20 billion reals (£3.5 billion) from BHP Billiton Plc (LON:BLT),Vale and their Samarco joint venture, for clean-up costs and environmental damages following the tailings dam burst on November 5, environment minister Izabella Teixeira told reporters on Friday.

The lawsuit, expected to be filed later today, will demand that the three companies establish a fund that would see to the long-term remediation of the region.

“The action will propose to the court that any value paid by the miners will not be paid to the coffers of the federal government or the states involved in the disaster but to a fund that will be used to finance exclusively actions to repair the damages,” the AGU said.

The amount of 20 billion reals was estimated based on “technical reports" by environmental and water agencies, the government said. The figure, however, is still preliminary and may be increased because the environmental damage caused by the tailings mud to the Atlantic Ocean will not have been calculated, analysts noted.

BHP said it “will assess the case once it has been filed."

Separately, Attorney General Luís Inácio Adams said Brazil’s environmental agency is planning additional fines against Samarco. A £43.6 million fine has already been issued, while last week the company agreed to allocate one billion reals to an emergency fund.

The disaster killed 13 people, while six more are still missing. Water supplies to a quarter-million people have also been contaminated, while the Rio Doce river’s ecosystem has been decimated.

Earlier on Friday, BHP and Vale announced that the two companies will establish a “voluntary, non-profit fund to support the rescue and recuperation of the Rio Doce river system.”

The size of the fund was not revealed, as BHP noted that "the total cost of damage has not been calculated yet.” According to the Australian Financial Review, the “River Doce” fund will run over a decade and would allocate at least $200 million.

The two companies will initially sponsor the fund, but the aim is to secure additional support from other private, public and non-government organisations.

“The Fund would focus on supporting the remediation of the river as part of the commitment of Vale, BHP Billiton and Samarco to the aquatic environment following the release of the tailings into the Doce basin,” BHP and Vale said in a joint statement on Friday.

Meanwhile, BHP reiterated today that analysis by the Brazilian Geological Service (CPRM) has confirmed that concentrations of metals in the Rio Doce in the period from November 14 – 18 “do not significantly differ from the results produced by CPRM in 2010.”

A separate analysis by an independent company has also confirmed that the tailings are composed of materials that are “not hazardous to human health, based on the hazard classification of the material under Brazilian standards.”

Last week, the UN Office of the High Commissioner for Human Rights said “new evidence” had shown that the mud which burst from Samarco’s tailings dam was toxic. BHP said in response that “the tailings are chemically stable” and “will behave in the environment like normal soils in the catchment.”

The Samarco dam disaster "will prove to be the straw that breaks the camel’s back on BHP’s progressive dividend,” JP Morgan said last week. The bank predicted a 50-percent dividend cut, while it also downgraded the miner to “underweight” and lowered its price target to A$18 (861p), down from A$27.

BHP’s share price opened on the downside today, dropping 2.29 percent to a fresh seven-year low of 789.50p. Since the dam breach on November 5, BHP’s stock has lost more than 23 percent.

As of 08:13 GMT, Monday, 30 November, BHP Billiton plc share price is 807.60p.

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