Challenges mount for BHP’s bid on Anglo American

BHP’s (ASX:BHP) ambitions to buy Anglo American are facing problems in Brazil – not from competition and ownership concerns over Anglo’s iron ore business in that country, but from the growing argument with the government over compensation for the 2015 Samarco dam wall collapse and disaster.

BHP and its Brazilian iron ore rival, Vale, have been trying to settle the compensation and other payments with the Brazilian government over the disaster while also fighting off a class action in a London court (which has pitted the two companies against each other).

Last week, they put up a new settlement offer in an effort to draw a line through the disaster for them and the people downstream of the dam.

The miners offered a total of 127 billion reais ($US25 billion) as compensation for the damage, loss of life, and other problems caused by the dam collapse. This sum includes 37 billion reais already paid out. The Brazilian government and the affected states want a total of 155 billion reais ($US30.6 billion).

But on Tuesday, reported that the Brazilian government filed an action in a federal court in Minas Gerais state, asking that Vale, BHP, and their joint venture Samarco pay 79.6 billion reais ($US15.73 billion) for the Mariana tailings dam burst in 2015 within 15 days.

The Brazilian solicitor general’s office (AGU) has reportedly said that if the amount is not paid on time, they will petition the court to block the companies’ assets.

According to the AGU, these measures are necessary because, nearly nine years after what is considered the largest environmental disaster in Brazilian mining history, the companies “have not yet been properly held accountable and continue to treat the reparation of the tragedy as just another indemnity case.”

With the 50% stake in Samarco in the sights of the government and BHP’s name a bit tarnished in Brazil, buying Anglo American and its iron ore mining operation and export business (as well as assets elsewhere) has become tougher.

BHP needs approvals from two other South American governments in Chile and Peru, and a brawl with the Brazilian government will not be a good look.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →