Brazil to sue BHP, Vale for $5 bln in damages for dam burst

(Adds new fines sought and background on previous fines, details on pollution)

BRASILIA, Nov 27 (Reuters) - Brazil's federal and state governments plan to sue the owners of the Samarco iron ore miner for 20 billion reais ($5.24 billion)in damages caused by the burst of a tailings dam, Environment Minister Izabella Teixeira told reporters on Friday.

Samarco is a joint venture between the world's largest mining company, BHP Billiton Ltd , and the biggest iron ore miner, Vale SA .

The dam burst earlier this month unleashed 60 million cubic meters of mud and mine waste that devastated a village, killed at least 13 people and polluted a major river valley.

Teixeira said the suit will be filed on Monday. The proceeds will be put in a fund and used for environmental cleanup in the Rio Doce valley over 10 years, Attorney General Luís Inácio Adams said.

Samarco has already been fined 250 million reais by Brazil's environmental agency, Ibama, for the disaster, which covered the flood plain in mud for 80 kilometers as well as polluting the river. Fish died and drinking water supplies for a quarter of a million people had to be closed off.

Ibama is planning additional fines against Samarco on top of the 20 billion reais in damages and clean-up charges the government is seeking, Adams said, but he did not specify an amount.

The dense orange sediment in the river reached the ocean on the weekend, hurting local tourist businesses.

The United Nations' human rights agency said on Wednesday that the mud from the dam burst was toxic, contradicting claims by Samarco and mine co-owner BHP Billiton (NYSE: BBL - news) that the water and mineral waste posed no risk to human health.

The minister announced the lawsuit after the close of the Sao Paulo stock market. The share price of co-owner Vale fell 5.78 percent on Friday.

Vale and BHP announced earlier on Friday that they would create a fund with Samarco to help in the clean-up of the Rio Doce and its tributaries affected by the disaster. They did not detail the size of the recovery fund.

($1 = 3.8181 Brazilian reais) (Reporting by Lisandra Paraguassu; Editing by Chris Reese, Bill Trott and Leslie Adler)