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

By Paul Kiernan 

RIO DE JANEIRO--Brazilian federal prosecutors filed a civil lawsuit Tuesday demanding that mining companies responsible for a catastrophic dam failure in November shell out up to 155 billion reais ($43.55 billion) for cleanup and remediation, far more than the government initially estimated.

If upheld by a judge, the lawsuit would require Brazil's Vale SA, Anglo-Australian miner BHP Billiton Ltd., and their joint-venture Samarco Mineração to make an initial deposit of 7.7 billion reais to an independent fund responsible for cleaning up the fallout from the Fundão tailings dam collapse on Nov. 5. The accident, believed to be Brazil's worst environmental disaster ever, released an avalanche of sludge that killed 19 people, destroyed villages and polluted more than 400 miles of rivers before spewing into the Atlantic Ocean weeks later.

The lawsuit represents authorities' biggest response yet to the disaster. It also threatens to upend a landmark settlement reached between the mining companies and Brazil's government in early March. In that deal, the companies agreed to spend as little as 9.46 billion reais through 2030 via a foundation run mostly by their own appointees.

Many investors interpreted the settlement to mean that Vale and BHP Billiton had left the bulk of Samarco's liabilities behind them. Shares of both companies, after plunging in the wake of the disaster, have rebounded in recent months. Vale's stock more than doubled between early February and late April, aided by a rally in iron-ore prices.

But the settlement wasn't endorsed by the task force of public prosecutors that has been investigating the Samarco disaster since it happened. Such officials enjoy broad freedom from other institutions in Brazil and are known for occasionally hitting companies with massive lawsuits.

In 2011, a federal prosecutor sought the equivalent of $11 billion at the time from Chevron Corp. and Transocean Ltd. in response to an offshore oil spill and asked a judge to shut down the companies' operations in Brazil. The companies ended up agreeing to pay about $42 million after reports from regulators showed the damage was relatively minor.

The damage estimates in Tuesday's lawsuit also cited an oil spill: BP PLC's 2010 Deepwater Horizon catastrophe in the Gulf of Mexico.

"Based on preliminary studies, the human, economic and socio-environmental impacts caused by the break of the Fundão dam are at least equivalent to those verified in the Gulf of Mexico," federal prosecutors said in a news release. "It doesn't seem technically or morally credible that...the human, cultural or environmental value of Brazil should be inferior to that of other countries."

BHP said in a statement after the lawsuit was announced that it "remains committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam."

Samarco and Vale didn't immediately return emails seeking comment on the lawsuit.

Write to Paul Kiernan at [e-mail]

(END) Dow Jones Newswires

May 03, 2016 20:39 ET (00:39 GMT)

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