BHP, Vale in fresh Samarco legal battle

A Brazilian bank has filed a class action suit against BHP Billiton and joint venture partner Vale over $2.2 billion in notes used to fund the troubled Samarco project.

The claim, launched by Banco Safra SA in New York on behalf of itself and other unidentified noteholders, alleges Samarco Mineracao – BHP and Vale’s joint venture entity – contravened its disclosure requirements, according to the Sydney Morning Herald.

It alleges Samarco guaranteed noteholders of its environmental efforts, even though it repeatedly overlooked warnings that signalled the dam’s impending collapse. The Samarco dam burst, which claimed 19 lives, is regarded as Brazil’s worst environmental disaster.

The claim said the defendants “made false and or/misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects” to “defraud” noteholders buying and selling the securities.

While Samarco CEO Ricardo Vescovi is listed as one of the defendant’s, BHP and Vale are not.

The notes were issued in 2012, 2013 and 2014, and had a 10-year term. International banks, including a number from the United States, are believed to also have an interest in the notes.

The noteholders also claimed that two days after announcements of the dam failure, the value of the Samarco notes took a steep dive.

They claimed the ‘2022’ note value dropped around 30 per cent to $US25.77 ($34.03) – closing at $58.38; the ‘2023’ note dropped nearly 40 per cent to $54.36; and the ‘2024’ note fell approximately 35 per cent to $56.07.

In addition, they claimed the notes dropped even further after the Brazilian Government said it would begin legal proceedings against BHP, Vale and Samarco for the dam failure.

Since then the value of the securities has risen to around $68.

This is the second class action filed in New York – the first involving investors suing BHP for inflating the price of its American shares and exaggerating its safety management of the dam prior to its collapse.

Last week, BHP and Vale set a timeline to settle their $US47.5 billion civil claim relating to the disaster, aiming to reach a decision by June 30.