One of the main factors impacting the rise of iron prices for the past couple of months is the situation with Vale SA . The world’s largest iron ore producer has been the subject of many investigations since a dam in Brazil burst late January, killing hundreds of people.
While it was clear that there was wrongdoing involved in the construction and maintenance of the facility, the only thing that’s been confirmed in terms of legal actions taken against the company is the $13 billion that prosecutors are seeking from the company for environmental damages. However, today we have confirmation that the Brazilian government will be pressing criminal charges against the company.
Investigators have found enough evidence to confirm that Vale employees knew beforehand that the dam was unsafe, disregarding warning signs about the structural stability of the facility.
“At this point, we know that the operational side knew [that the dam was at risk of collapse], but did Vale’s directors know?” said head prosecutor Jose Adercio Leite Sampaio according to Reuters. “It is necessary to wait until the investigation is completed. Vale continues cooperating fully with the authorities to ascertain the facts related to the dam breach. The issues identified in the audits have been addressed under the guidance of the auditing firms.”
The charges in question could include environmental damage, false representation, manslaughter, and murder. Over 300 people were killed or are still missing and presumed dead since that dam collapsed in late January. Brazilian prosecutors are also preparing possible charges against employees of the German inspection firm TÜV SÜD, which certified Vale’s dam as being structurally sound four months before it collapsed.
Earlier in April, Vale announced that 17 of it’s tailing dams in Brazil have failed stability condition tests and production from those facilities would be on pause. Overall, the company estimated that it would produce 75 million tonnes less of iron ore this year due to these closures, further tightening the supply of iron in the global markets and pushing up prices.
In March, Vale’s CEO Fabio Schvartsman and three other executives resigned following the dam collapse, a request which was made by Brazilian prosecutors that asked for the executives to be “temporarily removed.” These top figures are likely to be prosecuted in some way or another themselves, possibly facing lengthy jail sentences.
Shares of Vale have dropped around 2 percent in light of today’s news, a significant one day drop for a company of such size. However, since shares fell drastically on the day the dam collapsed, Vale’s stock has been steadily recovering over the past three months.
Vale SA Company Profile
Vale SA 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