Moody’s has cut the credit rating of Vale, the world’s biggest iron ore miner, to non-investment grade in the wake of the terrible January 25 mine disaster that has left around 300 people dead or missing.
Moody’s cut Vale’s rating to Ba1 from Baa3 with a negative outlook, citing heightened credit risk since the disaster which saw a tailings dam burst at Vale’s Córrego do Feijão iron ore mine in Brumadinho, Minas Gerais state, submerging the town of Mariana and spewing millions of tonnes of mud and waste into a river system.
Moody’s became the first of the big three international rating agencies to cut the Brazilian miner into junk territory. S&P Global Ratings and Fitch, the two other big rating agencies, both cut Vale to BBB-, their lowest investment-grade rating, immediately following the accident. Moody’s had put Vale’s ratings under review at the same time and revealed the move on Wednesday.
Moody’s cited “considerable uncertainties associated with the full impact and long-term implications of this labour and environmental disaster for Vale’s overall credit profile, as well as the significant overhang of litigation exposure and financial liability that is likely to persist in the years to come.” I
Moody’s added: “While Vale’s robust financial position provides a good cushion against the potential financial impacts, the accident raises concerns from a social, environmental and corporate governance perspective, in particular considering that it occurred a little over three years after Samarco’s tailings dam collapse . . . it remains uncertain at this stage the full extent of costs, claims and the overall business impact of this accident on Vale’s reputation, operations and financial results.”
Nearly 180 people are known to have died in the disaster and a further 133 people are still thought to be missing.
It followed a similar dam collapse in November 2015 at the Samarco iron ore mine, owned by Vale and BHP Billiton, that killed 19 people in what until last month was Brazil’s worst-ever environmental disaster.
Meanwhile, a court in Brazil has ordered the release of 8 Vale officials who were jailed following the disaster.
And iron ore prices continue to sag this week, falling another 1.3% on Wednesday to $US83.75 a tonne. That was after a 2.1% fall on Tuesday according to the Metal Bulletin index price.
The benchmark has now shed 7.63% since hitting a multi-year high of $US90.58 a tonne on February 11, and at the lowest level since late January.
