Brazil’s Vale: Financial Results Suffer From Effect of Two Devastating Dam Collapses

RIO DE JANEIRO, BRAZIL – Rio-based mining giant Vale said on Wednesday, July 31st, it had swung to a quarterly loss as the company announced more than US$2 (R$7.6) billion in fresh writedowns related to two deadly dam bursts (Mariana and Brumadhino disasters) suffered by the company over a period of fewer than four years.

The world’s largest Iron Ore exporter reported a second-quarter net loss of US$133 million after a year-ago profit of US$76 million, compared to the forecast of US$2.84 billion.

Revenue rose 6.6 percent from a year earlier to US$9.19 billion, shy of a forecast of US$9.59 billion, lifted by higher iron ore prices, offset by declining nickel and copper prices.

The company’s newly installed Chief Executive Eduardo Bartolomeo said in a statement that Vale’s key priority, in addition to beefing up safety efforts, was to “reduce uncertainties” and “deliver sustainable results.”

“The bottom line is that we view today’s results as another weak quarter, though we are encouraged by Vale’s plans to restart additional iron ore capacity,” Clarksons Platou Securities analyst Scott Schier said in a research note, adding that he expected its shares to fall slightly as a result.

In late January, the collapse of the Brumadinho dam storing muddy mining waste near the town of Brumadinho killed nearly 250 people, less than four years after a deadly disaster at the company’s Samarco joint venture with BHP Group in Mariana.

Vale said it took US$1.5 billion in writedowns for the cost of environmental measures and agreements related to the Brumadinho disaster as well as a US$257 million charge to shut down its Germano dam and an additional US$383 million toward the Renova Foundation, which is supposed to distribute funds to the victims of the Mariana disaster.

Vale’s share prices remain 2.3 percent lower for the year to date, although they have rebounded from a sharp drop following the dam burst.

Higher iron ore prices, triggered in part by Vale’s woes, have bolstered key global rival Anglo American, which last week reported stronger-than-forecast first-half results and boosted its dividend and share buyback program. Rio Tinto Ltd. is expected on Thursday to report its biggest first-half profit in at least six years.

Vale reported last week that iron ore output in the quarter tumbled by more than a third because of the various dam and mine shutdowns triggered by January’s disaster.