A Brazilian federal judge has ruled that Australian miner BHP Group (AU:BHP) and its Brazilian counterpart Vale (NYSE:VALE), along with their joint venture Samarco, will have to pay 47.6 billion reais or $9.7 billion for a dam collapse that occurred in Brazil in 2015. Currently, it is not clear how much of the amount is owed by each of the companies. The ruling is related to a civil action filed by the state-level and federal public prosecutors.
The Brazilian Dam Disaster
The disaster occurred at the Samarco iron ore mine in Mariana town of Brazil when the tailings dam, which stores mining waste, ruptured and led to an avalanche of mud, killing 19 people. The dam’s collapse also destroyed the surrounding villages and contaminated a huge area through the Rio Doce river and its outlet to the Atlantic Ocean.
Judge Vinicius Colucci wrote that the amount would go to a state fund and be used for initiatives in the areas affected by the dam collapse.
BHP Under Pressure
As per a Reuters report, BHP said that it would review the Brazilian federal court’s decision. The miner added that its Brazilian unit has not yet received the court’s ruling. In its 2023 annual report, BHP disclosed a $3.7 billion provision related to the dam failure.
Analysts at RBC Capital think that while both BHP and Vale can bear these damages, it could adversely impact capital returns over time and increase BHP’s net debt beyond its $15 billion target ceiling.
The news of the fine comes at a time when BHP Group is already under pressure due to weakness in commodity prices amid a demand slump. The company recently announced that it was evaluating plans for its nickel business, given the industry-wide downturn.
Is BHP Stock a Good Buy?
Analysts have a Moderate Buy consensus rating on BHP stock based on five Buys, nine Holds, and one Sell rating. The BHP Group share price target of AU$50.63 implies nearly 6.5% upside potential. BHP shares have declined over 3% in the past year.
