BHP says ‘no confirmation’ of cause of dam failure, reviewing ore forecasts – by Rhiannon Hoyle (Dow Jones/The Australian – November 9, 2015)

BHP Billiton shares have hit a seven-year low in the wake of the deadly collapse of two tailing dams at a mine in Brazil. As more information emerges, analysts are trying to tote up the potential bill for BHP and Vale of Brazil, the mine’s co-owner.

The dam breach was the largest-ever spill of its kind, according to Robert Chambers, president of the non-profit Centre for Science in Public Participation, whose group has tracked these types of failures back to 1915.

The cost to the companies, including for clean-up and rebuilding, could top $US1 billion, said Paul Young, a Sydney-based analyst at Deutsche Bank, who estimated the mine could be closed until about 2019. He described the dam burst as “catastrophic.”

“The uncertainty regarding clean-up and legal costs is likely to be an overhang on” shares, according to Jefferies analyst Christopher LaFemina, who said the reputations of both BHP and Vale, which have relatively good safety records, would emerge damaged.

BHP said today it was reviewing its full-year projections for iron-ore production following the disaster at the Samarco iron ore mine in Brazil’s Minas Gerais state, which is 50-50 owned by BHP and Brazil’s Vale.

The miner says it still has not confirmed what caused the dams to burst, unleashing a wall of sludge that killed at least three people and left a further 28 people missing.

“At this time, there is no confirmation of the causes of the tailings release,” BHP (BHP) said today.

The UK market reacted savagely to the disaster, with BHP’s London-listed shares falling 5.7 per cent on Friday.

In early afternoon Australian trading today, BHP shares had plunged 5.1 per cent to a fresh intraday low of $21.54 — their lowest level since November 2008.

The price of iron ore has also hit a four-month low.

BHP says at least one of its employees is among the dead, and a further 13 workers are among the missing. Fifteen people from the local community are also unaccounted for.

BHP said the Fundão dam at the operation had failed, affecting the downstream Santarém dam. The third dam at the site, the Germano dam, was being monitored by Samarco, the mine’s independent operator.

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