Shares in BHP Billiton Limited jump around 3% despite negative Samarco news

Credit: Lucas Walters

What: Shares in global mining giant BHP Billiton Limited (ASX: BHP) are trading around 3% higher on Friday afternoon despite an apparent setback regarding the Samarco dam incident in Brazil.

In March 2016 BHP announced that it had reached a ‘Framework Agreement’ (after last year’s dam failure) with the Federal Government of Brazil and certain other parties which provided a plan for the restoration of the environment and communities which were affected by the disaster.

So What: Today, BHP has informed the market that the Framework Agreement – which was ratified by the Federal Court of Brasilia in May 2016 – has now been issued with an interim order suspending the decision of the Federal Court after an appeal by the Federal Prosecutors’ Office.

According to today’s ASX announcement “the effect of the interim order of the Superior Court of Justice is to reinstate the BRL20 billion public civil claim made by the Brazilian Authorities against Samarco, Vale and BHP Billiton Brasil.”

Now What: From a BHP shareholder perspective the Framework Agreement provided certainty as to the liability which BHP was exposed to. The agreement was also a much lower liability than the potential civil claim.

The ruling from the Superior Court of Justice creates further uncertainty for investors and potentially exposes the miner to a larger monetary liability.

Interestingly, the market appears to have taken the announcement in its stride with BHP’s shares not only outperforming the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today, but also outperforming peer Rio Tinto Limited (ASX: RIO), despite Rio having no exposure to the Samarco disaster.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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