Vale Dam Fallout Deepens With Mine Closure and Blocked Funds

(Bloomberg) -- Vale SA’s shares declined on Monday as the world’s biggest iron ore producer faced continued backlash from Brazilian authorities after a deadly mining accident in January.

Rio de Janeiro-based Vale was ordered on March 15 to shut its Timbopeba mine in Minas Gerais state, which produces 12.8 million tons of iron ore per year, due to safety concerns. On Monday a court ordered the company to freeze 1 billion reais ($264 million) in funds as compensation for affected communities in the state. Last week prosecutors took a separate action, seeking guarantees of 50 billion reais for environmental restoration. Vale said in an email that it isn’t aware of that request.

Vale fell 0.2 percent to 50.46 reais in Sao Paulo, while rival iron ore producers Anglo American Plc and BHP Group climbed 2.1 percent and 2.9 percent, respectively, in London.

Since the Brumadinho dam accident that left more than 300 people dead or missing on Jan. 25, Vale has shut in more than 80 million tons of annual iron ore production at projects that use similar tailings dams as the one that ruptured. While the company has said some of those losses can be offset by operations elsewhere, analysts are predicting the output curbs will push the market into a deficit this year.

Vale said Monday it had stopped using two additional retention dams in Minas Gerais at the request of state authorities. The stoppages at Minervino and Cordao Nova Vista won’t have a significant impact on mining operations, as the waste is being directed to other structures, Vale said.

Iron ore futures in China climbed as much as 2.9 percent on Monday.

Vale said the dam at Timbopeba was inspected on March 14 by experts from the national mining agency, who didn’t find any “relevant anomaly that puts its security at risk.” The Brazilian outages have left the global iron and steel industry trying to gauge how much production will ultimately be lost as Vale’s remaining mines face scrutiny.

“Vale may continue to face volatility in the short-term related to unexpected stoppages in operations,” Banco Santander SA Analyst Gustavo Allevato said in a research report Sunday.

To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, ;Luzi Ann Javier at ljavier@bloomberg.net, Steven Frank, Joe Ryan

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