Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Brazil’s Vale said on Thursday that it expects to reach global settlements covering economic and environmental damages from the January collapse of its Brumadinho tailings dam by late this year or in 2020.
Vale is scrambling to deal with the fallout from the disaster, which killed at least 246 people, triggered the replacement of its CEO and an overhaul of its board, and has forced it to set aside billions for compensation and cleanup costs.
Investors have been closely watching its ongoing talks with prosecutors and regulators on the terms of a global settlement to see how much higher the price tag from the disaster will be.
Vale has provisioned $4.5 billion in Brumadinho-related costs, an amount that does not include environmental costs, which are likely to be gradually added over the year
“We have been in constant talks with federal and state prosecutors,” Vale said in a statement, adding that the goal was to reach a global deal embracing “socio-economic and environmental reparations.”
Vale said the forecast on the timing of a global settlement was provided by one of its executives on Wednesday during a meeting with analysts.
Vale has provisioned $4.5 billion in Brumadinho-related costs, an amount that does not include environmental costs, which are likely to be gradually added over the year, according to brokerage XP Investimentos, which published a note after the meeting, with Vale Chief Executive Eduardo Bartolomeo and Chief Financial Officer Luciano Siani.
Credit Suisse, which attended the same meeting, said it estimated that additional environmental provisions would total between $1 billion and $1.5 billion.
Vale also said an investigation into the causes of the disaster being conducted by law firm Skadden, Arps, Slate, Meagher & Flom LLP is expected to be wrapped up by the end of September.
Vale also told the analysts that it expects to soon restore 20 million tonnes of yearly capacity at its Brucutu mine, a move which depends on persuading a judge that the mine is safe. Brucutu is producing just 10 million tonnes a year, or a third of its capacity.
XP Investimentos said another 30 million tonnes of capacity could be restored in the second half once its Alegria, Vargem Grande and Timbopeba mines receive dry processing licenses.
Vale had forecast in May that those licenses could take 6 months to 12 months.
Vale shares rose 0.7% to close at their highest level in almost two months, helped by gains in Chinese iron ore prices.
(By Marta Nogueira; Editing by David Gregorio and Sandra Maler)
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