Own BHP shares? Here's why a US$45 billion cloud hangs over the company

BHP has a sizeable mining footprint in South America.

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BHP Group Ltd (ASX: BHP) shares are down 0.3% during the Wednesday lunch hour.

The S&P/ASX 200 Index (ASX: XJO) mining giant closed yesterday trading for $44.19 a share. At time of writing shares are changing hands for $44.06 apiece.

For some context, the ASX 200 is down 0.9% at this same time.

That's today's price action for you.

Now what's all this about a US$45 billion (AU$70 billion) cloud?

Is the ASX 200 miner facing a $70 billion hit?

The ongoing potential financial hit to BHP shares relates to the 2015 Samarco Fundao iron ore tailings dam collapse in Brazil. The Fundao Dam was owned and operated by Samarco Mineracao, a joint venture between BHP Brasil and Vale.

The dam's collapse unleashed a flood that killed 19 people and caused untold environmental destruction.

As of March this year, BHP and Vale had spent approximately US$6 billion on remediation and compensation programs through what's known as the Renova Foundation.

Earlier this month BHP reported:

Samarco's funding of the Renova Foundation will be capped at US$1 billion for the period CY2024 to CY2030. BHP Brasil and Vale will be required to provide funding to the Renova Foundation during this period to the extent that the funding amount required exceeds the US$1 billion cap.

The potential $70 billion hit to BHP shares comes atop its Renova commitments.

It's instead related to the ongoing class action lawsuit, which encompasses some 700,000 claimants.

Tom Goodhead is the CEO of Pogust Goodhead, the United Kingdom-based law firm spearheading the class action.

Commenting on the record-breaking size of the environmental class action bill, Goodhead said (courtesy of The Australian Financial Review), "It's a heavy number, but considering the level and scale of the damage and the context of other large-scale disasters, it's not surprising at all."

In a note to British Prime Minister Rishi Sunak earlier this year, the claimants wrote:

We are bringing a case against the biggest mining company in the world, BHP, for the damage and devastation it has caused to our lives and livelihoods.

But the mining giant insists it is already taking the required reparation efforts and claims the UK case is a duplicate of the one in Brazil.

According to a BHP spokeswoman:

BHP will continue to defend the UK group action and denies the claims in their entirety. This action is also unnecessary, as it duplicates matters already covered by the existing and ongoing work of the Renova Foundation and other legal proceedings in Brazil.

Stay tuned!

How have BHP shares been tracking?

BHP shares are up 12% over the past 12 months. That compares to a 2% gain posted by the ASX 200 over that same period.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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