Iron ore miner Vale facing criminal charges in Brazil

A Vale SA iron ore mining operation. Source: Vale SA.

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A Vale SA iron ore mining operation. Source: Vale SA.

Vale SA [VALE-NYSE], the world’s largest producer of iron ore and nickel, is facing charges in Brazil over a deadly tailings dam breach.

A Wall Street Journal report says prosecutors are planning to file criminal charges against the Brazilian miner and its employees over the collapse of the mine waste dam in January 2019, that killed hundreds of people.

Investigators have gathered enough evidence to affirm that the Vale employees in the mine operation knew the dam was unsafe, the WSJ report said, quoting Jose Adercio Leite Sampaio, the prosecutor heading the probe.

The charges for crimes related to the disaster could include murder, manslaughter, environmental damage and false representation, according to the WSJ report.

The Brumadinho dam breach at Vale’s Feijao iron ore mine occurred on Friday January 25, 2018. It killed at least 65 people.  Another 279 have been declared missing according to published reports. The breach has been declared a Brazilian national disaster. Three years ago, a similar disaster occurred in the same state at a mine operated by Samarco, a joint venture involving Vale and BHP Billiton Ltd. [BHP-NYSE, BHPLF-OTCPK]. It resulted in the death of 10 people and poisoned local drinking water.

Vale has substantial nickel mining operations in Canada (including Sudbury, Ontario, and Voisey’s Bay, Labrador) as well as in Caledonia and Indonesia.

Meanwhile, the global iron ore market is getting squeezed as shipments from Brazil dwindle following Vale’s dam disaster and subsequent mine curtailments, with vessel-tracking data highlighting a steep decline in cargoes being loaded. Exports from the top shipper after Australia fell to 3.4 million tonnes in the week ended April 5, 2019, according to GlobalPorts data compiled by Bloomberg News. That’s down from 3.9 million in the previous week and far below the weekly totals of between 5.0 million and 8.0 million seen in the initial months of this year.

Not surprisingly, iron ore prices rose from US$75 per tonne to US$95 per tonne in the weeks following the Brumadinho dam disaster before settling at $85 per tonne, according to the latest research on the global iron ore market by the Macquarie Group.

Spot prices are now back up at the US$95 per tonne level as lower shipment volumes out of Australia mainly due to Cyclone Veronica have contributed to supply disruptions from Brazil, according to Macquarie analysts. Macquarie is an Australian investment bank and financial services company.

Vale American Depositary shares were trading at US$13.40 on Thursday, down 1.18% or US$0.16. The shares trade in a 52-week range of US$10.89 and US$16.13.

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