BBL BHP Group Plc

By Paul Kiernan and Rhiannon Hoyle 

RIO DE JANEIRO--Brazil's government filed a civil lawsuit Monday against mining company Samarco Minerao SA and its parents, Vale SA and BHP Billiton Ltd., in response to a massive dam failure at a Samarco iron-ore mine on Nov. 5.

In the lawsuit, which was announced Friday, public attorneys are seeking 20.2 billion Brazilian reais ($5.2 billion) over 10 years from the companies, including an immediate deposit of 2 billion reais. Their objective is to finance compensation for the thousands of people affected by the disaster and efforts to restore the Rio Doce river basin, which was flooded with mud and mine waste.

A spokesman for BHP Billiton confirmed court documents had been filed by Brazil's government. "We will consider the matters raised in due course, " he said in an emailed statement.

Neither Vale nor Samarco--which is equally owned by the two global mining giants and operates the mine--were immediately available for comment.

Upon learning of the government's plan to sue the companies, Vale said on Saturday: "We are surprised by the path chosen by the federal government and that of Esprito Santo and Minas Gerais states, given that Vale, BHP and Samarco have displayed an openness to dialogue."

As a guarantee, government attorneys asked a federal judge to set aside 50% of the net profit or 20% of the annual revenue of Samarco--whichever is greater--for a special fund. Samarco reported gross revenue of 7.6 billion reais in 2014.

If Samarco is unable to foot the bill, they requested that Vale and BHP Billiton be required to pay.

Vale and BHP have previously said Samarco is responsible for the entirety of the operation. On Friday, though, the pair said they would establish a voluntary fund for efforts to rehabilitate the Rio Doce river system, although they didn't say how much money would be available.

Citigroup said the level of compensation being sought would put increasing pressure on BHP, the world's biggest miner, to cut its own dividends to shareholders. Mining companies such as BHP and Vale have already been facing difficulties from a sharp downturn in global prices for commodities such as iron ore, which has this week plunged to its lowest level in nearly a decade.

Shares in BHP slumped to a more-than 10-year low on Monday as investors reacted to news of the civil suit. The stock bounced on Tuesday, and at 0349 GMT was trading 3.4% higher on its previous close.

As many as 13 people were killed and hundreds displaced in the disaster, as the mud swallowed up entire villages below the dam.

Authorities quickly suspended Samarco's operating licenses in the days following the accident, and analysts say it could be years before the company regains those permits.

Write to Paul Kiernan at paul.kiernan@wsj.com and Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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(END) Dow Jones Newswires

November 30, 2015 23:24 ET (04:24 GMT)

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