BHP hit by $58 billion Samarco damages claim
BHP stock dives as Brazilian prosecutors file $58 billion suit against Samarco and its owners, workers strike in Chile.
Federal prosecutors in Brazil have filed a 155 billion real ($58bn) damages suit against Samarco, and its owners BHP and Vale, in relation to the fatal collapse of a tailings dam in November.
The proceedings were announced overnight Australian time, with BHP informing its Australian investors this morning it was yet to receive a formal notice of the claim.
The mining giant’s stock has since sharply underperformed on the local market, even amid a broad resources sector sell-off, and is on track for its worst day since the financial crisis.
The materials sector collapse came after a 4 per cent slide in iron ore prices overnight and a 2 per cent dip in crude prices.
News of a strike at BHP’s Spence copper mine in Chile further compounded the bad news for the miner.
Workers walked off the job on Tuesday afternoon over claims BHP had “consistently refused” to deliver a response to a “series of problems” confronting workers.
The action comes less than one month removed from the miner’s decision to slash the Spence workforce by around 7 per cent.
Meanwhile, the lawsuit follows on the back of a near six-month investigation into one of the worst environmental disasters in Brazil’s history.
It also comes on the heels of a March agreement between Samarco, two Brazilian states and the federal Attorney General of Brazil that saw $US2.3 billion ($A3.1bn) pledged by the parties over the next six years as part of a 15-year recovery plan.
That deal, which did not include federal and state prosecutors, has not been ratified in court and the latest update suggests BHP could potentially be on the hook for much more.
The mining giant said it remained committed to helping the community rebuild but indicated it would push back strongly against the latest claim.
“We believe that the [March] agreement (once approved by the court) provides 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,” BHP said in a statement.
Analysts at Macquarie said the likely payout would be “materially lower” than the $58 billion figure floated, but warned of an ongoing shadow over BHP’s outlook.
“At this stage it is uncertain exactly whom the claimant represents and the key risk remains the possibility of further claims from other impacted parties,” Macquarie said in a note, adding it maintained an ‘underperform’ recommendation.
“Uncertainty over the impact of ongoing litigation and financial liabilities stemming from the Samarco tragedy continues to overhang BHP.”
The investment bank’s analysts said it expected the miner to release more information to clarify its Samarco position.
BHP stock plummeted 9.4 per cent to $18.79 at the closing bell, against a broader market fall of 1.5 per cent.
The one-day slide was the miner’s most severe since December 2, 2008.
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