BHP Billiton share price: Samarco partner Vale targeted in class action lawsuit

on Dec 9, 2015
Updated: May 24, 2024

US investors have launched a class action lawsuit against Vale, the partner of BHP Billiton Plc (LON:BLT) in the Samarco joint-venture in Brazil, holding the company responsible for significant losses incurred by investors following the dam breach at the Samarco mine last month.

Corporate litigation firm Bronstein, Gewirtz & Grossman initiated the legal action on Tuesday, accusing the Brazilian mining behemoth of making false statements and failing to disclose material adverse facts about the Samarco iron ore project. Notably, the file accuses Vale of failing to disclose the bursting of the dam on November 5, and of “inadequate” programs and procedures to mitigate environmental, health and safety incidents.

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The class action is open to investors who bought shares in Vale between March 21 and November 30 this year.

BHP is not mentioned in the lawsuit file, but fallout from a successful attack on Vale could spell trouble for the Anglo-Australian miner, analysts noted.

The Samarco joint venture is already being sued by Brazilian authorities for 20 billion reals (£3.5 billion) for damages following the breach, although that figure may be increased.

Analysts at Citi suggested recently that the scale of the disaster and required clean-up operations means that the mine would not reopen until at least the next decade.

Furthermore, the adviser suggested that the clean-up costs would amount to at least $1 billion, while the probability of the mine ever resuming operations is only 50:50.

Last month, at BHP’s Australian annual shareholder meeting, chief executive Andrew Mackenzie said he was determined to see the operation resume some day and that BHP had no plans to exit the venture.

“There should be no doubt that our desire is to get it back to being a good business again and we are committed very much to the long term,” he said.

Meanwhile, BHP announced today that Mackenzie will again visit the disaster site this week.

“Our first priority is to assist Samarco in safely and effectively responding to this terrible tragedy,” Mackenzie said. “BHP Billiton employees have been deeply affected by this tragic event and Samarco has our full support as it continues with the response effort.”

BHP’s share price opened well on the upside today, adding 3.25 percent to 746.30p. In contrast, over the last two sessions, BHP’s stock dropped more than eight percent as iron ore slumped following a bearish forecast from the China Metallurgical Industry Planning and Research Institute.

The official forecast projected that steel production will fall 3.1 percent to 781 million tonnes in 2016, while demand for iron ore was tipped to fall 4.2 percent. The commodity slipped to a 10-year low, and the whole mining sector was plunged deep in the red.

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