Brazil’s Vale (NYSE:VALE) has halted operations at the Alegria iron mine in the Mariana complex of Minas Gerais state, which may remove up to 10 million tonnes of iron ore a year from the market.
The preventive measure, said the world’s top iron ore producer, was taken after a stress test failed to guarantee stability of the mine’s structures. Vale noted it would restart production when new studies are completed and their results are conclusive.
What’s unclear is what “structures” Vale is referring to. Based on data provided by Brazil’s regulator, there is no upstream dam at Alegria, and the dry processing means no dam should have been needed, at least in recent years.
The mine is close to the Samarco operations and was already impacted after the dam failure in 2015. Following that accident, Alegria was operating at a reduced rate using dry processing only.
Since January’s dam collapse at the company’s Corrego do Feijão mine, which left at least 300 people dead, both authorities and companies have stepped up scrutiny of so-called upstream dams, the cheapest but generally regarded as the riskiest method to store mine waste.
Last week, Vale was forced to shut its Timbopeba mine, also in Minas Gerais state, which produced 12.8 million tonnes of iron ore per year, due to safety concerns.
The company later received a fresh order to halt another two dams — Minervino and Cordao Nova Vista. The same day, prosecutors took a separate action, seeking guarantees of 50 billion reais (roughly $13 billion) for environmental restoration.
While BMO Global Commodities Research added back on Wednesday 16Mt of iron ore into its estimate for Vale’s 2019 iron ore production on the announced restart of Brucutu mine, analyst Edward Sterck said Thursday he was holding off making changes related to Alegria, but noted that removing that mine’s output would reduce 2019 EBITDA by 1.5%