While Vale’s (NYSE: VALE) iron output has recovered significantly over the past couple of months as iron facilities come back online following safety-induced shutdowns, it turns out that Brazil’s second-largest iron mine will need to go back offline for a while.
Specifically, Brazil’s top mining authority order Vale to halt operations at a part of its Brucuta iron ore mine until it resolves an ongoing issue.
The National Mining Agency said that this order was based on the fact that Vale had exceeded the mineral reserve limit that was approved for in the exploration area. While going over this limit isn’t a severe mistake, Vale’s history of accidents has put all mining regulators in the country on guard, eager to notify the company of even slight errors in operational procedure.
“The suspension follows a decision from Brazil’s National Mining Agency (“ANM” – Agência Nacional de Mineração), based on ANM’s understading that one of the operating mining fronts exceeds the mineral reserve limit approved by the agency to the respective área. Vale understands that all the agency’s requirements to operate the mining front were fullfilled and reported in the economic utilization plan submitted to the agency in 2017,” read an official press release from Vale. “Vale will take the appropriate measures in this case and reaffirms its 2019 iron ore and pellets sales guidance of 307-332 million tons, as per previous announcement.”
However, Vale said that the suspension won’t end up significantly impacting the overall production of the line in the long term. Brucutu has an annual capacity of 30 million tonnes of iron ore production and has been operations for 13 years. The company had to stop its productions in the mine back in February following a Brazilian court’s decision to ban Vale from storing tailings at a dam located in the Brucutu mining complex.
This was in response to January’s dam disaster at another mine, Brumadinho, which saw over 300 people die as the structure collapsed. Since then, Vale has seen the bulk of its iron output in Brazil get shutdown, which was the main reason why iron prices reached a multi-year-high at $120 per tonne.
At the same time, Vale ended up receiving billions in fines for environmental damages alongside ongoing criminal investigations due to the negligence that caused the disaster in the first place.
Shares of Vale didn’t move much in response to the news, dipping just 0.16 percent on Friday but gaining 1.1 percent in after-hours trading. Over the past six-months, the iron mining giant has seen its shares hover between the $12 and $14 price range, although they ended up falling to around $10.5 in late-August.
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
