BHP, Vale have assets frozen over Samarco damages

Two of the largest mining companies in the world are being held to account by the Brazilian government over a massive tailings dam rupture.

In a ruling issued late Friday, BHP Billiton (NYSE:BHP) and Vale SA (NYSE:VALE), who jointly own Samarco, the company that operated the open-pit iron ore mine, could be held responsible for the November 5 disaster which killed 16 people and caused 60 million cubic metres of mine waste from the site in Brazil’s Minas Gerais state to wash downstream into neighbouring state Espírito Santo through remote mountain valleys, eventually reaching the Atlantic ocean 600 kilometres away.

Toxic materials, including arsenic, and high levels of lead, aluminum, chromium, nickel and cadmium, were found in the waters of the Rio Doce by a United Nations team and the Institute for Water Management of Minas Gerais (IGAM) state. Rio de Janeiro-based Vale and BHP Billiton maintain the waste contains only water, soil, iron-oxide and sand, none of which are harmful.

The Brazilian government isn't buying it, stating on November 27 that it, along with two Brazilian states, are suing Samarco for "an initial" $5.3 billion. Brazil's environmental watchdog earlier levied a 250-million real ($65 million) fine on Samarco.

Vale has tried to deflect responsibility for the huge spill, arguing that as an independent entity and a large company, Samarco should be made to pay compensation.

However the federal judge, Marcelo Aguiar Machado, disagreed. “I understand to be correct the allegation that Vale and BHP, as controllers of Samarco, can be classified as indirect polluters and as such responsible for the environmental damage caused,” he wrote in a 19-page judgment quoted by The Guardian.

The judgment didn't specify the amount of assets that had been blocked, but it could be over half of the $5 billion sought in damages, of which Samarco is unable to pay, according to the news report. Meanwhile Samarco must come up with $2 billion reais (about US$500 million) for cleanup, or face daily fines. BHP and Vale can appeal the decision.