BHP, Vale Face $44 Billion Lawsuit Over Brazil Dam Disaster

Mining and Exploration
04/05/2016 15:45

Brazilian prosecutors filed a $44 billion civil suit against two of the world's largest mining companies, Vale SA, BHP Billiton Ltd. and their iron-ore venture over a November dam rupture which has been called, “the worst environmental disaster in Brazil’s history”, killing as many as 19 people and causing severe environmental damage. The suit also targets the 50-50%-owned mine operator Samarco Mineracao, Brazil’s federal government along with the Minas Gerais and Espirito Santo state governments, reports Bloomberg. The prosecuting task force is demanding the two companies and Samarco Mineracao SA provide initial payment of $2.2 billion (7.8 billion reais) within 30 days, according to a statement from the prosecutor’s office. The civil suit, which challenges a previous agreement the companies signed with federal and state governments, probably will result in a much lower settlement, according to Bank of America Corp. analysts.

The prosecutors allege that state and federal agencies failed to provide the oversight necessary to avoid such a disaster. “This action is much more extensive” than the previous agreement with the governments, prosecutor Eduardo Aguiar said Tuesday in a telephone interview with Bloomberg. “It includes not just the three companies but the federal government, both state governments and also various agencies.” The amount sought in the prosecutors’ civil suit was based on costs to repair the damage caused by the 2010 Deepwater Horizon oil-spill disaster in the Gulf of Mexico, according to the statement. The Brazilian suit includes more than 10,000 pages of technical reports and more than 200 claims related to ecological, economic and social damages.

Vale’s $2.25 billion of bonds due 2022 slumped 3.9 cents in the past two days, to 87.4 cents on the dollar, while BHP notes due 2023 declined 0.9 cents to 105.4 cents. Samarco’s $1 billion in notes due 2022 fell to 49.6 cents on the dollar. BHP and Vale have said they would like the Samarco iron-ore operations to safely resume as soon as is technically feasible. Tuesday’s announcement comes after Samarco set a goal to partially restart later this year. The joint venture’s chief executive officer, Roberto Carvalho, has said he expects the mine to reopen in the fourth quarter. Last week, a Minas Gerais state environmental prosecutor filed a petition to block restarting Samarco until the mine can prove that the failed tailings dam is no longer polluting waterways. Samarco said leakage is contained and that their position is substantiated by studies conducted by Brazil’s environmental agency, Ibama.