Brazil mining authority halts two Vale complexes

Vargem Grande complex. Image from Data Plus Engenharia.

Brazil’s mining agency (ANM) has ordered Vale (NYSE:VALE) to suspend operations at its Fabrica and Vargem Grande complexes, as part of an ongoing crack down following last month’s deadly dam break at the iron producer’s Corrego do Feijão mine.

Vargem Grande complex, which accounts for around 13 million tonnes of iron ore per year, had been shut since early February.

The Rio de Janeiro-based company said the ANM’s decision was made in light of a possible failure of five dams at both complexes, which are located in Minas Gerais, the same state where the Feijão mine dam collapse last month likely killed over 300 people.

Further supply disruptions expected

Since last month’s dam collapse, the second such accident involving Vale in about three years, 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.

While Vale said it was abiding by the regulator’s decision, it has asked the agency for permission to dismantle the dams, while continuing some operations to limit impacts on production.

The Vargem Grande complex, which accounts for around 13 million tonnes of iron ore per year, had been shut since early February, as part of Vale’s previously announced plans to curb 40 million tonnes of output.

Wood Mackenzie’s analysis indicates that, excluding Vale, close to 8 million tonnes of seaborne supply is at risk in 2019.

According to Wood Mackenzie’s iron ore team, the ANM ban of all dams in the country built with the upstream method has put at risk 8 million tonnes of seaborne supply, and that doesn’t even include Vale’s curtails.

“Nothing is certain in this fluid situation. But it seems increasingly likely that Vale will produce around 50 Mt less than planned this year,” Wood Mackenzie says.

The supply cutbacks will most likely come from Usiminas, Gerdau, Mineração Morro do Ipê and junior miners that sell run-of-mine (ROM) ore to Vale and CSN, which is Brazil’s second largest iron ore exporter.

Compensation to Brumadinho residents

In a separate statement, Vale said it would pay adult residents in Brumadinho, the Brazilian town affected by the Feijão dam collapse, a total of 12,000 reais ($3,227.02) each as compensation for the damage. The sum is roughly equivalent to 12 monthly minimum wages in Brazil.

The world’s biggest iron ore miner also committed to pay half that amount for every teenager and 25% for every child, but didn’t  specify when those payments would begin.

Earlier this week Brazil banned new upstream mining dams and ordered the decommissioning of upstream waste dams by August 15, 2021.

Click here for complete coverage of the dam burst at Vale’s Córrego do Feijão mine.