It’s going to be a long time before the world’s largest iron ore producer will get out of the trouble it’s found itself in. With the catastrophic dam collapse in January that killed 300 people now always looming over the company’s tarnished image, it seems that the worst is still not over for the company. Vale announced today that the company has been ordered to shut down 13 additional dams upon demands from Brazilian authorities.
“The referred decision will only impact the operations of the Brucutu mine, due to eventual discharges from its concentration plant into the Sul Dam. Consequently, Brucutu will not resume its operation within the timeframe estimated in the Press Release “Vale reports on operation at Brucutu mine”, dated March 21st, 2019 with estimated annualized production impact of approximately 30 Mtpy,” said Vale in a press release. “Vale was made aware of the decisions but was not formally notified. The decisions were mainly based on a notification received by the MPMG containing preliminary information on the structures. Vale will continue to take all necessary measures to ensure the safety of its dams and will take the appropriate legal measures concerning the civil actions.”
Vale previously let shareholders know that Brazil had also frozen $260 million in the company’s funds for compensation to the affected communities, in addition to demanding $13 billion to pay for environmental damages done. “In addition to the block of funds, the decision also requires that Vale pays for the sheltering, lodging, maintenance and feeding of the removed people, besides the adoption of other measures aiming to grant assistance to the affected community,” said the company at the time.
Overall, Vale is expected to release its fourth-quarter earnings on Wednesday, which is expected to be quite disappointing in response to recent massive mine closures. One of those if the mine at Brucutu, the largest iron ore mine in the Minas Gerais state which has been halted for over a month. Vale also recently shut down its Alegria mine, which alone would see the removal of up to 10 million tonnes of annual iron ore a year from the global market, a figure which is expected to be much bigger in total once earnings figures are released. Brazilian authorities have been investigating over 100 mines to see whether they as well might be compromised structurally.
Shares of Vale on the NYSE, seemingly used to the bad news that the company is facing, hardly budged much in response to today’s news announcement, dipping a couple of percent in the early morning before recovering and ending the day up around 0.2 percent.
Vale Company Profile
Vale is the world’s largest iron ore miner and one of the largest diversified miners, along with BHP and Rio Tinto. Earnings are dominated by the bulk materials division, primarily iron ore and iron ore pellets, with minor contributions from iron ore proxies, including manganese and coal. The base metals division is much smaller, primarily consisting of nickel mines and smelters with a small contribution from copper. – Warrior Trading News