Court Ruling Could Double BHP and Vale Dam Collapse Compensation
BHP Billiton's (BHP) - Get Report and Vale's (VALE) - Get Report hopes of capping liabilities from the devastating Samarco dam collapse suffered a set back after a Brazilian court suspended a 9.2 billion Brazilian reais ($2.86 billion) compensation deal, reinstating a R20 billion claim and opening the door to a period of prolonged legal uncertainty.
BHP said Friday that Brazil's Superior Court of Justice agreed an interim order to suspend compensation agreements struck with Federal and state authorities. That deal, struck in March, capped BHP and Vale's liabilities at R9.2 billion to be paid over six years.
The immediate effect of the ruling is to reinstate an earlier civil claim by the Brazilian authorities for R20 billion, or about $6.2 billion. It also provides a boost to other claimants and potential claimants, by removing the compensation guidance that the framework offered.
BHP's London listed stock fell Friday to 923 pence, down 19.6 pence or just over 2% on its Thursday close.
"This is negative news for BHP Billiton as it imputes uncertainty around the Samarco settlement - both in terms of timing and magnitude," noted Goldman Sachs. "We cannot rule out the possibility that other claimants could launch proceedings."
The claims relate to the bursting of a dam in November at a mine operated by Brazilian iron ore miner Samarco, which in turn is owned by BHP and Vale. The resulting wave of mud destroyed the town of Bento Rodrigues, killed at least 17 people and flooded more than 400 miles of the Doce river with mining waste.
BHP and Vale are already facing a far larger claim by Brazilian Federal prosecutors who, in May, lodged a civil lawsuit demanding R155 billion in compensation.
BHP said Friday "it intends to appeal the decision of the Superior Court of Justice." That appeal could result in all or part of the framework agreement being reinstated or it could confirm that the framework is no longer on the table.
Vale's American Depository Receipts traded in the pre-market on Friday at $5.01, down $0.06 or 1%.