Brazilian prosecutors sue BHP, Vale for $43B over mine tragedy

SAO PAULO, Brazil (UPDATED) – Brazilian prosecutors have filed a US$43.4 billion lawsuit against BHP Billiton and Vale over the Samarco mine dam burst that killed 19 and wreaked environmental havoc.

The authorities “estimate the preliminary value for repairs to be 155 billion reals,” the public prosecutor’s office in the state of Minas Gerais said in a statement.

The announcement sent BHP’s share price plummeting. In the European morning, it was down 7% at 814 pence on the London stock exchange. It had already closed 9.36% down in Sydney, with a fall in iron ore prices adding to the selling pressure.

“This has quite rightly spooked investors into pricing in the prospect of long and protracted litigation,” said Mike van Dulken, head of research at Accendo Markets.

Brazilian-owned Vale and Anglo-Australian BHP, which co-own the Samarco iron ore facility, had already agreed to a separate settlement of US$6.2 billion with the Brazilian government in March.

Those funds were ordered to go toward compensating for social and environmental damages and to be paid over 15 years.

But the deal was criticized by prosecutors, who said that the amount of money was not calculated realistically.

The accident on November 5 last year near Mariana in Minas Gerais began when a tailings dam at Samarco’s mine failed, unleashing a flood of polluted water and mud into the River Doce, one of the biggest in Brazil.

A village was destroyed and drinking water supplies for hundreds of thousands of people were severed.

The damage reached as far as the river’s mouth on the Atlantic coast, with wildlife, tourism, and fishing all suffering.

In February, police announced homicide charges against 7 people, including 6 Samarco executives – one of whom was the chief executive at the time of the accident.

Historic disaster

Paulo Hartung, governor of Espirito Santo state, which also straddles the River Doce, has said the toxic flood marked “the biggest environmental disaster in the history of Brazil.”

The civil suit filed Tuesday, May 3, called on Samarco’s co-owners to “completely” compensate for the disaster.

Prosecutors said they calculated the US$43 billion figure based on charges faced by BP after the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

“The overnight news of a fresh legal challenge echoes that suffered repeatedly by BP and suggests that the March settlement between BHP, its domestic partner Vale, and the Brazilian government was just the beginning of the road,” Accendo’s Van Dulken said.

BHP said in a statement to the market the lawsuit filed Tuesday was for “social, environmental and economic compensation.”

“BHP Billiton remains committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam,” it said, adding that it was still awaiting formal notice of the claim.

Vale had no immediate response.

Referring to the previous settlement reached with the Brazilian authorities, BHP said that this ensured “the long-term remedial and compensation framework for responding to the impact of the Samarco tragedy and the appropriate platform for the parties to work together.”

At the time, Brazilian President Dilma Rousseff had said the deal would help heal “a tragedy without precedent.”

However, she had also warned of further costs for BHP and Vale.

“There will be complete restoration of socio-economic conditions and of the affected environment. And I want to emphasize: There will be no financial limits until there is full reparation,” she said.

Prosecutor Jose Adercio Leite Sampaio was among those who immediately criticized that settlement, saying: “Where did they get this number? For us, it’s a magic number… It could be 23 or 24, 30, 40 billion.” – Rosa Sulleiro, AFP / Rappler.com