BHP BHP Group Limited

By Paul Kiernan 

RIO DE JANEIRO--Brazil's government said it is preparing to sue mining giants Vale SA, BHP Billiton Ltd. and their joint venture Samarco Mineração SA in response to a catastrophic dam failure earlier this month, as Vale acknowledged the presence of toxic elements in a river downstream for the first time.

The civil suit demanding damages of 20 billion Brazilian reais ($5.3 billion) is expected to be filed on Monday, the Attorney General's office said on Friday in a news release. The proceeds are intended to create a fund to help recovery efforts in the Rio Doce, a major river that was contaminated with mud and toxic mining waste in the wake of the Nov. 5 collapse of Samarco's dam in Minas Gerais.

As many as 13 people were killed and hundreds displaced as the mud swallowed up entire villages below the dam. An additional 11 are missing.

The lawsuit will represent by far the biggest government response yet to what is widely considered one of Brazil's worst environmental disasters. Environmental agency Ibama had previously announced a fine of 250 million reais, while prosecutors secured a preliminary commitment from the mining companies to create a 1-billion-real emergency fund.

The amount of damages sought, the Attorney General's office said, "is preliminary and could be raised over the judicial process, since the environmental damages of the mud's arrival at the ocean have not yet been calculated."

Vale's admission about the river contamination came two days after a United Nations report alleging "high levels of toxic heavy metals and other toxic chemicals" in the Rio Doce and criticizing the mining companies and the Brazilian government for their "defensive" public response to the incident.

Vale, BHP Billiton and Samarco all say the tsunami of mud unleashed by the dam break comprised water, mud, iron-oxide and sand, none of which are harmful. In a news conference on Friday, Vale executives continued to stress that was the case. But Vania Somavilla, Vale's executive director of human relations, health and safety, sustainability and energy, said the mud may have upset toxic elements settled in the bed of the Rio Doce or along its banks.

"In fact there was lead, arsenic--not mercury--detected in some points along the river," Ms. Somavilla said. "When the dam breaks and that stuff washes out the banks of the river, it could have picked up some kind of material that was already present, from the most diverse of origins, but they're all materials present in nature."

She cited a report on the river's water quality after the collapse by the Minas Gerais state Institute of Water Management, or IGAM, or IGAM. The report was dated Nov. 17 but was only published this week, after prosecutors ordered it to do so. A spokesman for IGAM said he didn't know why the institute didn't publish the report earlier.

The 29-page document includes samples collected at 12 points along the Rio Doce between Nov. 7 and Nov. 12, as the mud from Samarco's dam snaked downstream. At various collection points, the report showed record levels of toxic metals.

Vale and BHP Billiton have attempted to distance themselves legally from Samarco--a limited liability company they say is independently run--while touting their contributions to recovery efforts. The two companies said Friday they plan to create a volunteer and nonprofit fund with Samarco to clean up the Rio Doce.

Attorney General Luiz Inácio Adams said authorities are open to the possibility of an agreement whereby the mining companies propose initiatives themselves.

"[Samarco] has announced measures that show it is preoccupied with recovering its image before society for the damage it caused, which indicates there is an understanding attitude toward the government," Mr. Adams was quoted as saying in the news release. "If the willingness doesn't come, what we'll ask the judge to do is to block the money by court order."

Brazilian authorities have come under fire for their reaction to the catastrophe that, in the eyes of many critics, underscores politicians' dependence on the mining industry for job creation and tax revenue. Vale is the country's top exporter and is known to donate millions of dollars to political campaigns.The mayor of Mariana, where Samarco's dam stood, said shortly after the accident that his town depends on mining for 80% of its revenue, making it "hostage" to the industry. Citing more than 40 water samples between Nov. 14 and 18 taken by federal agencies, the government said Thursday that "there was not an increase in the presence of heavy metals in the water and sediments." In a statement Friday, the government said metals detected in the earlier tests by IGAM had likely settled by the time its samples were collected.

Arsenic, which the World Health Organization says can cause skin lesions, liver disease and cancer, was detected in the river at as much as 108 times the legal maximum. Lead, which can cause brain damage, was measured at as much as 165 times the legal maximum. Copper, linked to gastrointestinal problems, was at as much as 75 times the limit. Chromium, which can cause gastrointestinal disorders and hemorrhaging, was at as much as 57 times the limit. Among the other metals detected were nickel, cadmium, manganese and iron found at elevated levels.

Tests by a municipal water agency along the river, which were sent to the U.N. Office of the High Commissioner for Human Rights, also showed high levels of toxic elements such as arsenic on Nov. 10. This and other evidence prompted a blistering criticism of BHP, Vale and the Brazilian government by U.N. special rapporteurs John Knox and Baskut Tuncak on Wednesday.

"This is not the time for defensive posturing," Messrs. Knox and Tuncak said, "It is not acceptable that it has taken three weeks for information about the toxic risks of the mining disaster to surface."

Brazil's Environment Ministry said Friday it expects the revitalization efforts in the Rio Doce basin to take at least 10 years. The government may seek to hire workers in the communities affected by the disaster, which is believed to have devastated fisheries and other economic activity along the river, officials said.

Write to Paul Kiernan at paul.kiernan@wsj.com

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(END) Dow Jones Newswires

November 27, 2015 19:28 ET (00:28 GMT)

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