BHP Billiton mired in disaster

Shares in BHP Billiton have sunk to a ten-year low after the Brazilian government took the miner to court over the bursting of two of its dams.

15-12-3-Samarco-634

The shares may not be as lucky

Shares in BHP Billiton, the world's largest miner, fell to a ten-year low this week after the Brazilian government filed a $5.2bn lawsuit against the company. Two dams at BHP's Samarco iron-ore mine burst in early November, pouring 50 million cubic metres of mine waste over Brazil's River Doce basin.

Enough sludge to fill 25,000 Olympic swimming pools has covered an 850km area. Thirteen people have died. The Samarco mine is co-owned by Brazil's Vale, which will share the cost of any damages.

What the commentators said

"With the fallout from the disaster still not fully known, few seem willing to call the bottom for BHP shares," agreed The Sydney Morning Herald. "The market is pondering just how low this grand old ship can go." This incident has tightened the financial screws on BHP, said Rhiannon Hoyle and Alex MacDonald in The Wall Street Journal. It has already been hit by a slump in iron ore, one of its key products.

Prices have fallen by 78% from the 2011 peak. Yet its dividend payout is one of the industry's highest. Citigroup calculates that dwindling operating cash flow of $11.5bn won't cover estimated dividends of $6.5bn and capital expenditure of $8bn. Many analysts have already recommended the group cut its payout. This episode may provide a convenient excuse.

Recommended

Emerging markets fall behind their developed-world counterparts
Emerging markets

Emerging markets fall behind their developed-world counterparts

While developed-world markets look forward to a recovery, emerging market stocks have tumbled as foreign investors pull out cash.
16 Apr 2021
Tech has dominated the economy – but the real world is about to strike back
Industrial metals

Tech has dominated the economy – but the real world is about to strike back

The digital economy has driven tech stocks to incredible valuations. But it is all dependent on the real-world economy. And particularly on metals and…
7 Apr 2021
Four of the best investment trusts for investing in emerging markets
Investment trusts

Four of the best investment trusts for investing in emerging markets

Investors need to tread very carefully in this risky sector. Here are the best ways to approach it
22 Mar 2021
Storm brews in emerging markets as investors pull cash out
Emerging markets

Storm brews in emerging markets as investors pull cash out

Foreign investors have begun to pull cash out of emerging markets as they begin to look less attractive when compared to the rising return from holdin…
12 Mar 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
What does the Coinbase listing mean for bitcoin and other cryptocurrencies?
Bitcoin

What does the Coinbase listing mean for bitcoin and other cryptocurrencies?

As the bitcoin price hit new highs, the world's biggest cryptocurrency exchange, Coinbase, listed on the stockmarket. John Stepek looks at what that m…
15 Apr 2021
Properties for sale for around £400,000
Houses for sale

Properties for sale for around £400,000

From a converted church in Banffshire with views towards the Cairngorms National Park, to a period property in the Georgian market town of Beverley, e…
2 Apr 2021