SYDNEY/LONDON (Reuters) - BHP Billiton (L:BLT) shares dropped more than 5 percent to a seven-year low on Monday after Brazil announced plans to sue the mining company and its partners for 20 billion reais (£3.4 billion) over the bursting of a dam.
The dam, holding back waste water from the Samarco mine in southeastern Brazil, burst on Nov. 5, polluting a major river valley and killing at least 13 people.
Brazil's federal and state governments on Friday announced plans to sue Samarco's co-owners, BHP (AX:BHP) and Brazilian miner Vale (SA:VALE5), for damages as early as Monday.
At 1045 GMT, BHP's shares in London were down 5.6 percent at 762.52 pence, the biggest fall by a European blue-chip stock (FTEU3), after touching a seven-year low of 755 pence.
The miner said on Monday its chairman Jac Nasser and three other board members would oversee its response to the disaster.
The company said in a statement it had yet to receive formal notice of the legal action.
Brazilian Attorney General Luís Inácio Adams said damages were being sought to fund an 10-year environmental clean-up in the Rio Doce valley affected by the disaster.
BHP has said it will establish a fund to help pay for a clean-up.
Samarco has already been fined 250 million reais by Brazil's environmental agency for the disaster, which covered the flood plain in mud for 80 kilometres (50 miles). Fish died and drinking water supplies for a quarter of a million people had to be closed off.
Vale confirmed some tests detected toxic elements in the river after the dam was breached.