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BHP Billiton (BLT) is underperforming a weak commodity sector, one which is already under the cosh from a USD rebound, an oil price turning over from its highs and persistent global growth concerns after the latest China data. The reason for it faring worse than peers this morning – echoing losses by its Aussie dual-listing overnight – comes from news of a $44bn civil legal challenge from Brazilian federal prosecutors related to last November’s Samarco dam failure. And this has quite rightly spooked investors into pricing in the prospect of long and protracted litigation akin to that which BP only put to bed in July last year – a whole 5 years and $53.8bn after its 2010 Deepwater Horizon Gulf of Mexico disaster.
Today’s claim relates to clean-up costs for waterways and villages, community rebuilding and compensation for the deaths of 19 and resulting homelessness inflicted on a further 700. While BP worked tirelessly to limit the impact (both environmental and financial) of its disaster, several attempts to close the affair failed. The overnight news of a fresh legal challenge echoes that suffered repeatedly by BP and suggests that the March settlement between BHP, its domestic partner Vale and the Brazilian government was just the beginning of the road. A silver lining at this early stage is the shares holding above Jan rising support. Weakness perhaps limited by hopes that the claim has been inflated using BP as a precedent and that a smaller figure will ultimately be agreed.
Mike van Dulken, Head of Research, 4 May
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
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