BHP Billiton (BHP) shares are facing a nasty 5% plus plunge on the ASX when trading resumes this morning after a another night of losses on global markets and the first fines imposed by the Brazilian government for the Samarco mine collapse a week ago.
BHP shares lost 5.07% in trading in London and nearly 4.5% in trading in New York.
They closed at $20.61 in Australia yesterday and seem certain to drop well under the $20 mark for the first time in more than 7 years when trading resumes in a few hours time.
If the London fall of 5% is repeated here today, it will mean BHP shares are down more than 13% since last Friday, a loss in value of more than $14 billion in that time.
BHP 1Y – Brazilian dam disaster tests BHP
The weakness in BHP, plus further falls in the prices of gold, oil copper and other commodities (and other commodity companies such as Glencore, down 7% in London and Rio Tinto, down more than 3% as well), will see our market open with losses of 1% or more this morning.
Overnight futures trading had a loss of 60 points for the ASX 200 pencilled in at the close just after 7am. That in turn could see the ASX 200 plunge under 5,100 points during trading today.
That was after a sell off in Europe and in the US on fears of the US Fed’s looming rate rise and those falls in commodity prices. The Dow fell 1.4%, Nasdaq, 1.2% and the S&P 500 was off 1.4% and back into negative territory for 2015 again at the close at 8am Sydney time.
The fines of $US66 million levied on BHP and its Samarco partner, Vale (the huge Brazilian iron ore miner), will weaken already nervy investors sentiment around the company. Already more and more analysts are questioning the sustainability of BHP’s progressive dividend policy.
The Commonwealth Bank’s analysts reckon BHP will cut dividend by 35% because of the downturn in iron ore, copper and oil prices, and the impact of the costs of the mine collapse. That view is shared by other analysts.
The initial cost of the collapse has been put at $US1 billion by analysts, but so far BHP or Vale have not released figures of their own.
Overnight Brazilian President Dilma Rousseff flew over the area of the disaster and then announced preliminary fines worth 250 million reais ($US66.2 million) against Samarco.
The fines came as Reuters reported that Brazilian federal prosecutors announced plans to work with state prosecutors to investigate possible crimes that could have contributed to the disaster at the mine, jointly owned by multinational mining companies BHP Billiton Ltd. and Vale SA .
Rousseff was reported as saying that the fines, imposed by Brazil’s environmental regulator for violations including river pollution and damages to urban areas where water service has been suspended, could be followed by penalties from other federal or state agencies.
On Wednesday, Rousseff spoke with the chief executives of BHP and Vale, who had held a press conference earlier that day to apologise for the disaster and promised to meet their obligations as the mine’s owners.
