BHP Billiton's Samarco JV hit with $43bn compensation lawsuit

BHP, which set up the Samarco joint venture with Brazil's Vale, said it had not yet received formal notice of the claim, which is for social, environmental and economic compensation in relation to the failure of the tailings dam at Samarco's iron ore operation in Minas Gerais.

The claim comes on top of an $8bn compensation and clean-up programme agreed with local authorities in March., which BHP highlighted in its statement.

Prosecutors have reportedly demanded BHP, Vale and Samarco provide an initial payment of 7.8bn reais ($2.2bn) within 30 days.

The civil suit also challenged the March agreement signed, with calculcations for the new amount based on costs caused in BP's 2010 Deepwater Horizon oil-spill disaster, Bloomberg said.

BHP said it felt the March agreement, once approved by courts, "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".

"Ouch," said analyst Yuen Low of Shore Capital, though he believes a much lower settlement is likely.

Low noted that Federal and state prosecutors were not part of the local authority settlement, and the former criticised the settlement as being insufficient and lacking in legal enforceability.

Low added: "The good news, according to Bloomberg, is that Brazilian prosecutors have a history of demanding large reparations for environmental disasters, which are subsequently settled at much lower amounts."

Investec agreed that it was "disappointing new development for the company" but noted that the market is treating the news "only slightly seriously" with shares down but not crashing.

By 0900 in London, BHP's shares were nearly 6% lower on the day at 824.2p.