Vale to follow BHP on new provisions over dam failure, analysts say

Since then, several lawsuits for damage restitution have been filed against the companies. Last month, a federal judge in Brazil ruled that BHP, Vale and Samarco must pay up to 47.6 billion reais ($9.57 billion) in damages – though the decision remains subject to appeal.

“Vale’s provisions at the end of the third quarter were $3.0 billion and in theory, we should see a similar increase to BHP since the JV (joint venture) is 50-50”, Citi analysts Alexander Hacking and Stefan Weskott wrote in a report.

Ahead of its half year results next week, BHP said on Thursday it will record another $3.2 billion impairment in relation to the dam failure, reaching $6.5 billion for the case as of Dec. 31, 2023.

Analysts at Itau BBA led by Daniel Sasson said they calculated an additional provision between about $3.5 billion and $3.6 billion to match BHP provisions for the year, though they noted that investors in Vale with whom they had spoken were already factoring in extra provisions up to $4 billion.

Vale, which is expected to report earnings on Feb. 22, did not immediately respond to requests for comment.

Vale’s shares were down 0.3% in the afternoon trade, while the Brazilian equities benchmark Bovespa was up 0.5%.

In January, Vale said the Renova foundation, which the companies have been using to pay for some of the repairs, had as of last December paid 34.7 billion reais in socioeconomic and environmental compensation.

($1 = 4.9747 reais)

(By Marta Nogueira and Andre Romani; Editing by Aurora Ellis)