News Article

Brazil mining giant Vale tarnished by dam disaster

RIO DE JANEIRO: Vale, the Brazilian company that owns the dam that burst at one of its mines killing dozens and leaving hundreds missing, is the world’s biggest iron-ore miner – and its reputation has taken a harsh blow with the disaster.

Brazilian authorities have frozen 11 billion reais – around US$3 billion – in Vale assets in anticipation of compensation it will likely have to fork out.

The accident is the second involving Vale in the southeast Brazilian state of Minas Gerais within three years.

A tsunami of toxic mud broke through a dam at an iron-ore mine owned by Vale near the town of Brumadinho, in Minas Gerais, on Jan 25. The official toll from the disaster was 58 dead and 305 missing as of late Sunday (Jan 27).

In 2015 a dam at another mine jointly owned by the company ruptured, killing 19 and causing what was considered the worst environmental disaster Brazil had seen.

Vale and its partner BHP are still paying for that accident, with compensation and fines costing over US$6 billion and lawsuits ongoing.

Vale’s shares lost eight per cent in New York trading following news of the dam rupture.

The Sao Paulo stock market was closed Friday for a holiday, and trading in Vale shares there was expected to be intense Monday when it reopens.

The company is also mourning their personnel losses, as the overwhelming majority of the dead and missing were Vale employees.

Many of the victims had been eating lunch at the site when millions of tons of trailings – muddy sludge that is a byproduct of mining – burst through the dam and engulfed the administrative area they were in.

Emergency workers also found an company bus buried in the mud with bodies inside.

PROFITABLE COMPANY

The dam that broke was built in 1976 and was in the process of being decommissioned. Vale said it had passed a structural safety inspection four months ago, which was confirmed by the German firm, Tuev Sued, that carried that out.

Vale, headquartered in Rio de Janeiro, has a deep purse from which to pay fines, compensation and lawsuits resulting from the latest disaster.

In 2017, based on the last full-year results available, the company made US$5.5 billion in profits, on revenue of US$34 billion.

That net result was a 38 per cent jump over the previous year, evidence of a bounceback after a sharp commodities slump in 2015 that forced the company into cost-cutting.

A mining specialist at the State University of Rio de Janeiro, Luiz Jardim Wanderley, told AFP that there was “a tendency for companies, in that period of commodity prices falling, to cut safety and maintenance budgets.”

He said that, of the 450 dams in Minas Gerais state, “we have a relatively high number of dams that are doubtful or in inappropriate conditions.”

‘LIFE MATTERS MOST’

Vale is worth an overall US$78.7 billion dollars, according to its market capitalization. That makes it the third-biggest miner in the world, behind BHP and Rio Tinto, both Anglo-Australian groups.

Apart from iron-ore, which feeds China’s appetite, Vale also mines nickel, copper and other metals.

The company, has a workforce of 76,500 worldwide and also operates hydroelectric plants, rail lines, ports and ships to get its products to market.

Vale started out in Minas Gerais – a rich state for mining, as its name declares in Portuguese – in 1942 as a state-owned company called Companhia Vale do Rio Doce. It was privatised in 1997.

On its corporate website Vale boasts that it has a “passion for people and the planet.”

The list of values the company says it aspires to include “life matters most” and “do what is right.”

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