Dam disaster at BHP Billiton's Samarco mine in Brazil leaves 17 dead

The bursting of a tailings dam at a mine part-owned by BHP Billiton in Brazil's Minais Gerais region is thought to have left at least 17 people dead and almost 50 missing in the resulting mudslides.

The Germano iron ore mine is operated by Samarco Mineração, a joint venture of which BHP Billiton and Vale both own 50%.

According to the mineworkers union, cited by website G1, there were at least 45 people still missing after the disaster around the town of Mariana.

Andrew Mackenzie, the chief executive of BHP, said in Melbourne: “Most of what happened there has been under the cloak of darkness. At daybreak, clearly we will do an awful lot more and give you further updates.”

A regulatory statement from BHP stated the FTSE 100 company was concerned for the safety of employees and the local community and was in the process of obtaining more details from Samarco Mineração SA, which later put out a statement in Portuguese that confirmed it was not possible to confirm the number of victims and missing persons.

Analysts at Investec noted that, "for the record" BHP is not the operator of the operation, the 50:50 JV company is. Last year the JV produced 29m tonnes of iron ore pellets and delivered EBITDA for BHP of $695m, which the broker was already expecting a substantial reduction this year.

"A break in operations is therefore expected to have a negligible impact (smaller than 0.1 cents per share) on forecast earnings, although associated reputation risk/sentiment impact could be worse."

SP Angel noted that the open pit mine that produces 30m tonnes of iron ore, from three 396km slurry pipelines to the port where pellets are produced for the export market.

"This is a small operation in the context of BHP but a much bigger hit in terms of reputational hit. BHP has invested a lot of capex in iron ore in Australia and capex has gone to develop the three slurry pipelines at the mine. It will be a shame if there has been a safety breach on the tailings dam."

It was also noted overnight in the Sydney Morning Herald that short selling in BHP shares has increased five times since March as investors forecast the mining giant's share price will fall further.

Shares in BHP fell immediately on Friday and continued further, falling 5.8% to 973.89p by 1545 GMT.