Vale says it will sacrifice output for dam safety in Brazil

January 30, 2019

By Gram Slattery

BRUMADINHO, Brazil (Reuters) – Vale SA, the world’s largest iron ore miner, vowed to sacrifice production for safety to avoid another instance of the tailings dam failures that have tarred its legacy – a move that sent metal prices and shares of rivals soaring.

Chief Executive Fabio Schvartsman vowed to take up to 10 percent of Vale’s output offline to decommission 10 dams similar to the one that burst on Friday in the town of Brumadinho, leaving hundreds missing and presumed dead.

Chinese iron ore futures jumped in early trade on Wednesday, and shares of mining rivals BHP Group, Rio Tinto and Fortescue Metals Group lifted Australia’s benchmark metals and mining index to its best day in two years.

The dramatic move by Vale was an effort to preempt tough questions about its safety record, as the Friday disaster at the Corrego do Feijao mine – where the death toll has reach at least 84 people – came just over three years after a similar dam burst at the nearby Samarco mine it co-owns with BHP.

Vale’s plan to cut output was expected to cost 5 billion reais ($1.3 billion) over the next three years, and involved suspending operations at mines producing some 40 million tonnes of iron ore and 11 million tonnes of pellets per year, Schvartsman told journalists in Brasilia.

Brazilian prosecutors have said they will bring criminal charges against those responsible for the disaster and on Tuesday they arrested three Vale employees, including two senior managers at Corrego do Feijao. The have also arrested two engineers from German auditor firm TUV SUD.

In the town of Brumadinho, which was devastated by the torrent of mining waste, Vale workers organized to demand more from the company. In a letter seen by Reuters, the local miners’ union demanded months of additional pay and years of guaranteed employment, among other benefits.

In a separate statement, the union said it had asked Vale for the last two years to move the company dining hall, which was located directly under the dam, a charge that Vale denied.

A worker outside the cafeteria who narrowly escaped the fast-moving mud flow told Reuters he doubted anyone inside had made it out alive.

On a hilltop site, Brumadinho cemetery director Jose Eustaquio da Silva, 63, has been working long days, digging 98 graves with his team in one cemetery alone. So far, five of the graves have been filled as recovery crews comb through mud from the disaster.

“Everyone is tense,” he said. “People who live near other dams are tense as well.”

(Reporting by Gram Slattery; Additional reporting by Jake Spring in BRASILIA; Editing by Tom Hogue)