(Adds context, details on the report, deal discussion with LyondellBasell)
By Alberto Alerigi
SAO PAULO, May 9 (Reuters) - Brazilian petrochemical company Braskem SA is preparing alternatives in the event the company is forced to stop its mining activities in the northeastern state of Alagoas, its chief executive officer said on Thursday.
A report by the country's Geological Service released on Wednesday blamed mining by Braskem in the city of Maceio for damages to local real estate.
State prosecutors requested last month that 6.7 billion reais ($1.7 billion) of Braskem funds be frozen to pay for the damages. The matter is being considered by a Brazilian court.
Braskem CEO Fernando Musa told journalists the company is reviewing the report and considering alternatives to mining in the region, which supplies raw material for the production of PVC.
Preferred Braskem shares were down 4 percent in mid-morning trading in Sao Paulo, at 41.94 reais. The company's first-quarter results, released on Wednesday, showed net income fell 2 percent over the same period a year ago to 1 billion reais.
The environmental problems in Alagoas are one more hurdle to a deal that has been under discussion with LyondellBasell. The deal has been slowed by the delay in a SEC filing by Braskem, which Reuters reported in March.
If the company does not file its 2017 20-F form next week, its shares may be delisted from the New York Stock Exchange
($1 = 3.9708 reais) (Reporting by Tatiana Bautzer Editing by Chizu Nomiyama and Paul Simao)