BY
Mining companies Vale SA (VALE5.SA) and BHP Billiton (BLT.L) were hit with a 155 billion-real
($43.5 billion) civil lawsuit for the collapse of a dam at a mine last year
that killed 19 people and caused damage that prosecutors said was comparable to
BP's oil spill in the Gulf of Mexico.
The 359-page lawsuit brought by
independent federal prosecutors was the result of a six-month investigation and
is also against state and federal governments. Prosecutors accused the state of
Minas Gerais, where the dam collapsed in November 2015, of negligence in its
monitoring of the build up of waste and water sludge left over from the
companies' mining venture, Samarco.
The total damages, prosecutors
said, were calculated on the basis of the cost of the Deepwater Horizon oil
spill in the United States. BP's (BP.L) total pre-tax charge for that accident, in 2010,
reached $53.8 billion.
The Brazilian prosecutors also
demanded an initial payment of 7.7 billion reais. A judge in Brazil now has to
accept the lawsuit.
Analysts said the comparison with
BP's oil spill would likely be contested, but nevertheless represented another
headache for companies reeling from a commodities downturn and now facing the
prospect of protracted litigation. The drop in prices of commodities such as
iron ore has seen BHP lose almost half of its market value, and Vale more than
a quarter, over the past 12 months.
BHP's shares were trading 6.5
percent lower and Vale's U.S. listed shares fell 7.5 percent in premarket
trading, while the sector was down around 4 percent by 1015 GMT .FTNMX1770.
Hunter Hillcoat, analyst at
Investec in London, said the BP Deepwater Horizon oil spill was "a
completely unrelated incident" and the figures were an opening gambit.
Paul Gait of Bernstein said the
case was political as prosecutors added to the pressure on President Dilma
Rousseff, who is under fire over corruption allegations.
"They're implying she had
radically undersold the Brazilian people and was in the pockets of
business," he said.
The civil action comes after the
Brazilian government in March reached a settlement with Samarco, Vale and BHP,
in which the companies agreed to pay an estimated 20 billion reais.
Vale and BHP both said they had
not received formal notice of the new claim.
BHP said in a statement to the
Australian Securities Exchange it was "committed to helping Samarco to
rebuild the community and restore the environment affected by the failure of
the dam".
It said the March agreement
provided "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".
In the civil case prosecutors said
the compensation agreement was insufficient and lacked the legal mechanisms to
ensure the companies would fulfil their obligations, making it little more than
a "letter of intent".
(Additional reporting by Sonali
Paul in Melbourne and Barbara Lewis in Brussels; Editing by Joseph Radford and
Elaine Hardcastle)
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