BHP Billiton locked into descent after mining catastrophe in Brazil

Chief executive Andrew Mackenzie and his Vale counterpart Murilo Ferreira toured the site of the Germano mine on Thursday

BHP Billiton could face a $1bn (£660m) clean-up bill for the mining disaster in Brazil (Getty)

Shares in the miner BHP Billiton hit a seven-year low as investors bailed out of the FTSE 100 company in the wake of one of Brazil’s worst-ever mining disasters, which has left eight people dead so far.

The London-listed miner sank another 5 per cent, or 46.4p, to 877.3p, marking its fifth consecutive day of falls since two dams burst at the Germano iron-ore mine in the mineral-rich state of Minas Gerais on 5 November. BHP owns the mine with Brazil’s Vale through the Samarco joint venture.

Deutsche Bank analysts forecast that the company could face a $1bn (£660m) clean-up bill for the disaster, as well as three years’ lost production from the mine.

Alongside the dead – and a further 21 missing – the toxic mudslide virtually wiped out the small village of Bento Rodrigues and has contaminated water supplies for miles around, also leaving BHP and Vale with the prospect of huge environmental fines.

More than 600 people have been placed in hotels and shelters as emergency workers slowly comb the vast area of the mudslide for potential survivors.

The BHP chief executive Andrew Mackenzie and his Vale counterpart Murilo Ferreira toured the site of the Germano mine on Thursday. The two bosses, who have established a $100m emergency fund as a first step, said in a statement: “We were overcome when we saw the devastation in and around Bento Rodrigues. We cannot rebuild the lives of the families who have lost loved ones, but we redouble our commitment to Samarco to support the response effort.”

BHP’s boss Andrew Mackenzie toured the disaster site (AFP)

But the pair have come under fire for a sluggish response to the catastrophe from the state governor Fernando Pimentel, who has called for a “greater effort” from the companies. Governador Valadares, a city of 300,000 residents in Minas Gerais, is now having its water trucked in due to the pollution.

Two of the mine’s three dams – the Fundao and the Santarem – failed in the incident, resulting in the toxic flood of mine waste. Samarco has acknowledged that workers were expanding the capacity of the first dam when it burst – work that was needed due to the higher output from the mine.

But investigators are also investigating reports that Vale contributed to higher water volumes by sending waste from one of its nearby mines into Samarco’s dam system.

Meanwhile the City is picking through the financial fall-out of the disaster. Deutsche Bank’s Anna Mulholland said: “Samarco’s standard industry insurance policies would appear to cover the cost of cleaning up the disaster and the required [capital expenditure] on the repair work. What is less clear is how much the indemnity insurance of $1.2bn for 2015 will cover in terms of loss of income between now and the [expected] return to normalised production.”