The world’s largest miner of the steelmaking ingredient declared force majeure on some of its contracts Tuesday after a judge forced it to suspend some operations at its Brucutu mine — a move that it said would result in an annual production loss of 30 million metric tons. Brucutu’s restart is now conditional on both overturning the court injunction and the reinstatement of the dam’s license, Vale said in a statement.
Prospects for the Rio de Janeiro-based company are dimming after January’s fatal accident that left at least 150 people dead and put the miner’s operations under stricter government scrutiny. The revocation of its dam license dampens market optimism that operations could return to normal.
“It’s hard to view Vale as cheap,” James Gulbrandsen, a Rio de Janeiro-based asset manager at NcH Capital said in a telephone interview. “China data is poor, we are in a global growth downshift and they were asleep at the wheel on dam maintenance. How many other Brumadinho ticking time bombs are out there?”
Prior to imposing the force majeure, the company had already said it would be cutting 40 million tons of production as part of a plan to improve safety by decommissioning dams similar to the two that have failed in recent years. Vale also said it will partially offset the losses by lifting output at other mines.
Vale shares resumed losses after Bloomberg reported the license cancellation, and were down 4.1 percent to 42.83 reais ($11.57) at 5:30 p.m. local time.
What Our Analyst Says “Revocation of the mining license for Vale’s Brucutu mine is likely to prolong the time it will be offline. Has Brucutu become Alunorte 2.0? The situation rings all too familiar, given that there doesn’t appear to be any technical basis or risk assessment justifying the suspension as was partly the case for Alunorte, While Alunorte used worker layoffs as leverage to combat a full-fledged shutdown, Vale seems to lack the same ace in the hole, given the mine’s recent transition to a fully autonomous trucking fleet.”– Andrew Cosgrove, BI Senior Industry Analyst
The Rio de Janeiro-based miner’s inability to deliver on its supply contracts could trigger a scramble for the raw material in a market already reeling after the company’s previously announced cuts. Iron ore prices have rallied more than $10 per metric ton in Singapore since Jan. 25, when the dam broke.
Vale shares have fallen about 24 percent since Jan. 24, a day before the dam collapse, while its rivals in Australia have benefited from higher prices and signs of a tightening global seaborne market. DM
Watch Pauli van Wyk’s Cat Play The Piano Here!
No, not really. But now that we have your attention, we wanted to tell you a little bit about what happened at SARS.
Tom Moyane and his cronies bequeathed South Africa with a R48-billion tax shortfall, as of February 2018. It's the only thing that grew under Moyane's tenure... the year before, the hole had been R30.7-billion. And to fund those shortfalls, you know who has to cough up? You - the South African taxpayer.
It was the sterling work of a team of investigative journalists, Scorpio’s Pauli van Wyk and Marianne Thamm along with our great friends at amaBhungane, that caused the SARS capturers to be finally flushed out of the system. Moyane, Makwakwa… the lot of them... gone.
But our job is not yet done. We need more readers to become Maverick Insiders, the friends who will help ensure that many more investigations will come. Contributions go directly towards growing our editorial team and ensuring that Daily Maverick and Scorpio have a sustainable future. We can’t rely on advertising and don't want to restrict access to only those who can afford a paywall subscription. Membership is about more than just contributing financially – it is about how we Defend Truth, together.
So, if you feel so inclined, and would like a way to support the cause, please join our community of Maverick Insiders.... you could view it as the opposite of a sin tax. And if you are already Maverick Insider, tell your mother, call a friend, whisper to your loved one, shout at your boss, write to a stranger, announce it on your social network. The battle for the future of South Africa is on, and you can be part of it.
Don't believe Han Solo's evasion of Empire TIE Fighters. There are many miles of vacuum space between each asteroid in a field.