The January 25 Brumadinho mine dam wall disaster which left nearly 300 people dead or missing continues to take a heavy toll on the financial strength of Vale, the Brazilian iron ore, nickel, and copper miner.
In late January, the collapse of a tailings 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.
The company saw billions more in losses, write-offs and impairments from the disaster and the company was only saved from an even greater financial embarrassment because of the near 40% rise in global iron ore prices since the disaster has helped offset the loss on millions of tonnes of iron ore exports.
Vale reported a second-quarter net loss of $US133 million after a year-ago profit of $US76 million and compared with a market forecast for earnings of $US2.84 billion.
The surge in iron ore prices saw the company enjoy a 9% rise in second-quarter revenues to $US9.19 billion, well under the market forecast of $US9.59 billion.
That was after first-quarter revenue fell 4.6% to $US8.20 billion due to weaker sales as several key mines were taken offline in the wake of the disaster.
The rise in iron ore prices because of the disaster (plus bad weather in late March, April and early May in northern Brazil where the company’s best iron ore mines and ports are located, as well as cyclones in Australia and problems at Rio Tinto’s Pilbara operations), was offset by a slide in copper and nickel prices in the quarter.
Vale said it took $US1.5 billion in write-downs for the cost of environmental measures and agreements related to the Brumadinho disaster as well as a $US257 million charge to shut down its Germano dam and an additional $US383 million toward the Renova Foundation, which is supposed to distribute funds to the victims of the Samarco disaster.
The first-quarter loss was driven by a series of provisions for the cost of the disaster, including $US2.42 billion for compensation and remediation programs and $US1.86 billion for shutting down dams.
The surge in iron ore prices has bolstered key global rivals such as Anglo American, which last week reported stronger-than-forecast first-half results and boosted its dividend and share buyback program. Rio Tinto reported its biggest first-half profit in at least six years on Thursday afternoon.
Vale reported last week that iron ore output in the quarter tumbled by more than 30% because of the various dam and mine shutdowns triggered by January’s disaster.
The June quarter result followed the $US1.64 billion quarterly net loss for the three months to March as the world’s top iron ore miner struggled with the aftermath of one of the country’s deadliest mining disasters.
The first-quarter loss was driven by a series of provisions for the cost of the disaster, including $2.42 billion for compensation and remediation programs and $1.86 billion for shutting down dams.
