Mining giant BHP Group Ltd (ASX: BHP) is in danger of being sued in a $53 billion lawsuit because of the Samarco disaster.
You may remember a few years ago that an important dam broke at the Samarco joint venture between BHP and Vale. The tragedy left 19 people dead and many more became homeless, as well as all the environmental damage that it caused.
The two mining giants escaped being heavily sued because they had committed to some settlements, retained advisory groups and help the towns that had been affected by the disaster.
According to Reuters reporting, the $53 billion lawsuit could be revived as a way to pressure the miners to honour the pledges that they had made. So far advisers have been hired for five of the towns, but prosecutors had set a November 2019 deadline for advisers to be hired for all of the towns impacted.
Those advisers are meant to monitor the implementation of victims' relief programs and provide technical & legal support to people affected.
The Brazilian prosecutors' office has not ruled out other legal measured.
Samarco has said that 7.42 billion reals has been allocated to reparation and compensation measures, which is around $2.5 billion.
Sometimes mistakes happen, just look at what happened with BP in the Gulf of Mexico. But as long as businesses do the correct things to put things right then most of the fallout can be resolved.
Foolish takeaway
It's highly doubtful that BHP would let itself get to the point of being sued.
BHP is trading at 16x FY21's estimated earnings. BHP is trading close to its 52-week high, so I don't think now is the best time to buy. The best time to buy cyclical shares is near the bottom of the cycle, not the top.
