World’s Biggest Miner To Pay For Brazilian Disaster
What's going on?
The world’s most valuable mining company, BHP, and its Brazilian partner, Vale, are in trouble! They will be fined more than $5 billion for the damage caused by a huge accident that occurred on November 5th at their jointly owned Brazilian mine. Both stocks declined to multi-year lows (though BHP did recover somewhat).
What does this mean?
The disaster is being called the biggest mining disaster in Brazil’s history. Mines have dams that contain waste from the mining activities. In this case, a dam broke and a tsunami of mud and debris swept through a nearby village (as can be seen in the image above), levelling houses and killing villagers. It is believed that around 20 people died or went missing in the accident and 50 million tonnes of mine waste escaped into the nearby Doce River.
Why should I care?
The bigger picture: This is a huge environmental disaster! The mud plume from the broken dam entered the river, destroying much of the local fishing industry (among other things) before drifting out into the Atlantic Ocean. Satellite images show the scale of the disaster.
For stocks: BHP and Vale are getting kicked while they’re down. Their stock prices were already down heavily this year due to the dramatic sell off in commodity prices. Both stocks are down more than 20% since the accident, which brings them down more than 50% since a high point earlier this year. Analysts now expect BHP to eliminate its dividend (its cash payout to investors), which could heap further pressure on the stock.
Originally posted as part of the Finimize daily email.
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