MAC: Mines and Communities

Brazil: BHP and Vale hit with $44 billion lawsuit over deadly spill

Published by MAC on 2016-05-04
Source: Mining.com, Reuters, ABC News, AFP, Bloomberg (2016-05-04)

BHP, Vale hit with $44 billion lawsuit over deadly spill

Frik Els

http://www.mining.com/bhp-vale-hit-44-billion-brazil-lawsuit/

3 May 2016

Brazilian prosecutors on Tuesday filed a civil lawsuit for 155 billion reais (just over $44 billion) against Vale and BHP Billiton for a fatal spill at their Samarco joint venture iron ore operation in November.

Bloomberg reports 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. Demands include an upfront payment of $2.2 billion.

In March Vale and BHP reached a deal with Brazilian authorities and the mine owners agreeing to pay an estimated 24 billion reais or $6.2 billion spread out over several years. Samarco committed to providing $1.1 billion through 2018 into a fund for clean up costs and amounts between $200 million and $400 to 2021.

The disaster in Brazil’s Minas Gerais state caused sludge to wash downstream into neighbouring state Espírito Santo through remote mountain valleys reaching the Atlantic ocean 600 kilometres away.

Vale SA and BHP Billiton will pick up the tab should Samarco be unable to make payments. The mine which has annual capacity of roughly 30 million tonnes has been closed since the November 5 disaster that killed 19 people and left hundreds homeless. Samarco hopes to re-open the mine before the end of the year.

In January BHP said the tailing waste spill was much smaller than previously determined. The volume of tailings material released when two dams were breached was about 32m cubic metres. Initial estimates were put as high as 60m cubic metres. Samarco also found that approximately 85% of the released tailings were retained within 85 kilometres of the Fundão dam.

American Depository Receipts of BHP Billiton (NYSE:BHP) trading in New York fell 5.1% during regular dealings on Tuesday, while Vale (NYSE:VALE.P) ADRs lost 8% during a generally down day for mining stocks. Iron ore continued its wild ride on Tuesday with the benchmark price pegged at $62.50 a tonne, down more than 4% on the day. Iron ore is still up over 45% so far this year.


Brazil prosecutors file $44bn lawsuit against Vale, BHP

After a collapsed tailings dam in November killed 19 people and polluted a major river

Reuters

3 May 2016

Federal prosecutors in Brazil filed a 155 billion-real ($43.5 billion) civil lawsuit on Tuesday against iron miner Samarco, and its owners, Vale SA and BHP Billiton, for a collapsed tailings dam in November that killed 19 people and polluted a major river.

The 359-page lawsuit, which is also against the two states affected by the spill and the federal government, is the result of a six-month investigation led by a task force set up after the disaster, prosecutors said in a statement.

Vale said it had not been notified of the suit and was therefore unable to comment. BHP did not immediately respond to a request for comment.

The total damages, prosecutors said, were calculated based upon the cost of the Deepwater Horizon oil spill in the United States. BP’s total pre-tax charge for that spill reached $53.8 billion.

Prosecutors demanded an initial payment of 7.7 billion reais.

The civil action is separate from the lawsuit that Samarco, Vale and BHP settled with Brazil’s government in March in which the companies would pay an estimated 20 billion reais for damage caused by the spill. Federal and state prosecutors did not form part of that settlement.

The settlement itself was criticized by prosecutors, who said it was insufficient and lacked the legal mechanisms to ensure the companies would fulfill their obligations, making it little more than a “letter of intent.”

The roles of the state and federal government were also questioned, with prosecutors accusing the state of Minas Gerais, where the spill occurred, as being guilty of negligence in the permitting and monitoring of the dam.


Brazil prosecutors file Aus$58 billion lawsuit against BHP Billiton-owned mining company over fatal dam spill

ABC News

4 May 2016

Federal prosecutors in Brazil have filed a 155 billion real ($58.2 billion) civil lawsuit against iron miner Samarco, and its owners Vale SA and BHP Billiton, for a collapsed tailings dam that killed 19 people and polluted a major river.

The 359-page lawsuit, which is also against the two states impacted by the spill and the Federal Government, is the result of a six-month investigation led by a task force set up after the disaster, prosecutors said in a statement.

The total damages, prosecutors said, were calculated based upon the cost of the Deepwater Horizon oil spill in the United States — BP's total pre-tax charge for that spill reached $US53.8 billion ($71.89 billion).

Prosecutors demanded an initial payment of 7.7 billion reals ($2.89 billion).

Vale and Australia's BHP both said they had not received formal notice of the claim.

However, BHP said in a statement to the Australian Securities Exchange that it was "committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam".

It said that a separate lawsuit that Samarco, Vale and BHP settled with Brazil's Government in March, in which the companies would pay an estimated 20 billion reals ($7.51 billion), was the best way to repair damage caused by the spill.

"We believe that the 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.

Federal and state prosecutors did not form part of that settlement, which they criticised, saying it was insufficient and lacked the legal mechanisms to ensure the companies would fulfil their obligations, making it little more than a "letter of intent".

The roles of the state and federal governments were also questioned, with prosecutors accusing the state of Minas Gerais, where the spill occurred, as being guilty of negligence in the permitting and monitoring of the dam.

BHP's shares slumped nearly 8 per cent to a more than two-week low in a broader market that was down 1.2 per cent.


BHP, Vale disaster turned into mining's Deepwater Horizon

Frik Els

http://www.mining.com/bhp-vale-disaster-turned-minings-deepwater-horizon/

4 May 2016

On Wednesday shares in the world's largest miner BHP Billiton trading in New York closed down 6.6% while top iron ore miner Vale dropped more than 5% following news out late yesterday that Brazilian prosecutors have filed a civil lawsuit for 155 billion reais (around $43 billion) against the two companies for a fatal dam burst at their Samarco joint venture in November.

The suit also targets the 50-50%-owned mine operator Samarco Mineracao, Brazil’s federal government along with the Minas Gerais and Espírito Santo state governments. Demands include an upfront payment of $2.2 billion according to Bloomberg.

The Guardian reports that federal prosecutors from Minas Gerais where the iron ore mine is located based their damages claim on the clean-up costs associated with the oil spill at Deepwater Horizon, a rig in the Gulf of Mexico owned by BP:

“Preliminary studies show the human, economic and socio-environmental impacts of the collapse of the dam are, at least, equivalent to those verified in the Gulf of Mexico,” they said. “It does not seem credible, neither technically nor morally, that the value of the human, cultural and physical environment in Brazil should be worth less than other countries,” they added in a statement.

British oil giant BP has sof far paid out $54 billion in penalties, environmental reparation costs and compensation to communities affected by the 2010 offshore rig explosion and leak that released the equivalent of 4.9 million barrels of oil that covered an area anywhere from 6,500 to 176,000 square kilometres based on differe

In a statement Melbourne-based BHP, which appears to be taking the lead in public communication concerning Samarco, said it had not received any formal notice of the claim adding that it "remains committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam."

In March Vale and BHP reached a deal with Brazilian authorities and the mine owners agreeing to pay an estimated 24 billion reais or $6.2 billion spread out over several years. Samarco committed to providing $1.1 billion through 2018 into a fund for clean up costs and amounts between $200 million and $400 to 2021.

The disaster in Minas Gerais caused sludge to flow into the country's second largest river system, the Rio Doce, into neighbouring Espírito Santo state through remote mountain valleys reaching the Atlantic ocean 600 kilometres away.

Vale SA and BHP Billiton will pick up the tab should Samarco be unable to make payments. The mine which has annual capacity of roughly 30 million tonnes has been closed since the November 5 disaster that killed 19 people and left hundreds homeless. Samarco hopes to re-open the mine before the end of the year.

In January BHP said the tailing waste spill was much smaller than previously determined. The volume of tailings material released when two dams were breached was about 32m cubic metres. Initial estimates were put as high as 60m cubic metres. Samarco also found that approximately 85% of the released tailings were retained within 85 kilometres of the Fundão dam.

Iron ore continued to slide on Wednesday with the benchmark price pegged at $61.00 a tonne, down more than 2% on the day. Iron ore is still up over 40% so far this year.


Vale, Samarco bonds dive in wake of lawsuit
 
by Paula Sambo and Filipe Pacheco

Australian Financial Review

Bond investors are reeling after prosecutors in Brazil unexpectedly filed a $US44 billion civil suit against Vale and Samarco Mineracao for their roles in the nation's worst-ever environmental disaster.

Notes issued by the two mining companies have lost $US637 million of their market value since the suit was announced on Tuesday, according to data compiled by Bloomberg. And there may be more pain ahead.

The 155 billion-real suit threatens to delay the reopening of the Samarco mine, according to Cantor Fitzgerald. The mine has been shut down since a dam rupture in November killed as many as 19 people and unleashed billions of gallons of sludge into the Rio Doce river. Samarco, which is jointly controlled by Vale and Melbourne-based BHP Billiton, had delivered the biggest gains in Brazil's bond market this year as the companies reached an agreement with state and federal governments to pay for damages, fuelling speculation the mine could restart operations later this year.

"This was a major blow," said Jorge Piedrahita, the chief executive officer at brokerage Torino Capital in New York. "And until there is some clarity on this situation, there is more downside for the companies involved."

Vale, the world's biggest iron-ore producer, said Wednesday that it will take measures to defend itself. Samarco's press office said by telephone that officials would be looking at the case.

"BHP Billiton remains committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam," the company said in the filing.

In March, Samarco, Rio de Janeiro-based Vale and BHP reached a settlement with federal and state governments, committing to pay about 12 billion reais over 15 years.

The civil suit challenges that deal, with the prosecutors' office demanding the companies provide initial payment of 7.8 billion reais within 30 days.
 
"This action is much more extensive" than the previous agreement, prosecutor Eduardo Aguiar said Tuesday in a telephone interview. "It includes not just the three companies but the federal government, both state governments and also various agencies."

In a statement that day, the prosecutors alleged that state and federal agencies failed to provide the oversight necessary to avoid the disaster.

While the size of the civil suit surprised investors, prosecutors in Brazil have a history of demanding outsize payments for environmental disasters that are later reduced. San Ramon-based Chevron was targeted by a 40 billion-real suit for 2011-2012 offshore oil spills. It agreed to pay 95 million reais in a 2013 deal with prosecutors and environmental regulators; it also paid additional fines to oil regulators of more than 20 million.

"I don't know how they came up with it, but $US44 billion is just crazy," said Patrik Kauffmann, a money manager at Solitaire Aquila, which oversees $US11 billion and holds Vale bonds.

BHP and Vale have said they would like Samarco to resume operations as soon as it's technically feasible. The joint venture's chief executive officer, Roberto Carvalho, has said he expects the mine to reopen in the fourth quarter. Samarco was the world's second-largest producer of iron-ore pellets.

The "market will still see a bit more weakness as investors fully digest the possible delays in getting the permits to restart operations given the new developments and that we don't know what the next steps will be or how long they will take", said Rafael Elias, the New York-based head of research at Cantor Fitzgerald.


BHP-Vale settlement ratified by court in blow to civil suit

The agreement can’t be challenged by this new lawsuit, lawyer says.

Anna Edgerton and R.T. Watson

Bloomberg

6 May 2016

Vale and BHP Billiton’s Brazilian iron-ore venture received judicial ratification on Thursday for its settlement with federal and state governments over compensation for a tailings dam spill in November.

A federal judge signed off on the March accord, in which Samarco Mineracao agreed to pay about 12 billion reais ($3.4 billion) over 15 years to clean up environmental damage caused by the November disaster and assist victims. Samarco is attempting to resume operations to help pay for the damage.

The court’s endorsement of the settlement probably will weaken a lawsuit filed by prosecutors this week seeking $44 billion, according to Paulo Bessa, a lawyer who spent more than 30 years as a federal prosecutor.

“Now, the agreement can’t be challenged by this new lawsuit, which is what they are trying to do,” Bessa said by telephone from Rio de Janeiro.

The new multibillion-dollar suit, which caused the stocks and bonds of the companies involved to tumble this week, sought to challenge the validity of the agreement that was ratified Thursday.

“I don’t think the prosecutors will just give up because of this, but it certainly gives the courts yet another element to throw out the new demands,” said Rafael Elias, the New York-based head of research at Cantor Fitzgerald.

S&P Global Ratings said in a note that its ratings of Vale, BHP and Samarco “are not immediately affected by the civil suit filed against them.”

The ratified agreement “provides a framework that Samarco, its shareholders and the Brazilian authorities agree is the best way of managing the ongoing response to the Samarco tragedy,” Melbourne-based BHP said Friday in a statement.

While a cementing of the March deal is welcome news for Samarco and its controllers, the mining venture was also in the spotlight Thursday when prosecutors in Minas Gerais state accused company executives of seeking to withhold information from authorities and committing environmental crimes related to the tailings dam collapse.

Executives Named

“Several high-ranking company officials corroborated to protect that image of the company by limiting access to environmental agencies,” said prosecutor Marcos Paulo Miranda. Samarco executives withheld data and documentation necessary to understanding both how the accident occurred and the true extent of the damage, he said.

The prosecutors named 14 Samarco executives, alleging they knowingly withheld key information including two January mudslides that threatened the integrity of a second tailings dam.

“We discovered that on January 16 and 17 of this year Samarco had serious accidents inside the Samarco mining complex,” Miranda said. “Thousands of tons of mud was carried downstream, compromising the Santarem dam. All of this was hidden.”

Prosecutors have alleged that the dam burst is partly attributable to an increase in production levels.

Samarco chief executive officer Roberto Carvalho has said he expects the mine to resume operations at two-thirds capacity by the end of the year. Reopening would help Samarco meet its commitment to pay 4.4 billion reais over the next three years.

Samarco’s $1 billion in notes due 2022 traded at 50 cents on the dollar at 4:03pm in New York on Thursday, down from about 60 cents before the civil suit was announced. The notes had rallied from a low of about 31 cents after the spill.

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