Investors sue BHP over Samarco tailings dam disaster
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Investors sue BHP over Samarco tailings dam disaster

About 3000 investors have signed up to participate in a class action against miner BHP over the Samarco dam disaster of 2015, that alleges the miner breached continuous disclosure obligations and engaged in misleading and deceptive conduct.

The statement of claim, filed in the Federal Court of Australia, alleges that a number of problems were encountered at the Fundao tailings dam in Brazil in the years before the disastrous dam failure in November 2015 that killed 19 people, flooded three communities, left people homeless and caused widespread damage.

The small town of Bento Rodrigues, Minas Gerais, Brazil after the Samarco dam disaster.

The small town of Bento Rodrigues, Minas Gerais, Brazil after the Samarco dam disaster.Credit:AP

The claim also alleges that spending on safety and maintenance of the tailings dam declined during the period from 2012 until the dam’s failure.

The dam was at a Samarco iron ore operation in Brazil. Samarco is a joint venture between the Brazilian miner Vale, and BHP.

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The applicant in the case is Victorian investor Vince Impiombato, who is being represented by the specialist class action law firm Phi Finney McDonald. Investors in BHP’s Australian-listed stock and its London-listed stock have signed up to the case.

The statement of claim alleges that BHP was aware of the “dam failure risk” no later than  August 27, 2014, and should have immediately informed the Australian Securities Exchange of both this risk and the “consequential financial risk”.

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The statement of claim alleges problems were encountered at the dam in the period 2009-11, with “further problems” encountered at the dam in the years 2011-14.

“In about March 2013, seepage, saturation and cracking appeared at several locations at the left abutment of the Fundao Dam,” with “further seepage” appearing at this location in about June 2013.

More evidence emerged of problems at the dam in the following year, the statement of claim said.

“On or about 27 August 2014, a series of cracks were discovered at the left abutment of the Fundao Dam that extended behind the dam crest, emerged at the toe of the dam, and encompassed most of the slope,” the statement of claim alleges, adding that this cracking was “much more extensive than anything that had occurred in 2013”.

Asked to respond to the class action, a spokesman for BHP said: “We can confirm that a claim was filed in the Federal Court in May. We are defending the company against the claim. We would encourage shareholders with questions about this matter to contact their investment adviser.”

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The statement of claim also condemns Samarco’s emergency action plan. “At all material times, the Emergency Action Plan adopted by Samarco had no procedures for notifying residents in towns in the Fundao Valley directly below the Fundao Dam of an emergency,” it said.

In the period leading up to the disaster on  November 5, 2015, equipment “installed by Samarco recorded ‘emergency’ levels of water pressure at the Fundao Dam”, the claim alleges.

The dam disaster made headlines around the world and placed the spotlight on the safety of tailings dams across the industry.

The statement of claim also itemised a series of occasions between 2009 and 2015 where it alleged that Samarco’s board of directors discussed “matters relating to the risk of dam failure”. These occasions included a discussion in about September 2010 when “Samarco’s board discussed damage discovered at the Fundao Dam and potential construction failures,” it said.

When it released its operations review for fiscal 2018 last week, BHP said it expected to recognise a $US440 million ($593 million) charge in the second half of fiscal 2018 relating to the dam failure, taking its total charge from the disaster to $US650 million for the full 2018 financial year.

Production was suspended at Samarco’s Germano iron ore complex as a result of the dam failure and hasn’t recommenced since.

Darren is the mining and agribusiness reporter for The Age and The Sydney Morning Herald.

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