Vale Faces Spiraling Losses After Brazil Dam Collapse -- Update
January 28 2019 - 8:44AM
Dow Jones News
By Samantha Pearson
SÃO PAULO -- Vale SA's shares tumbled at the start of trading
Monday as the iron mining company potentially faces spiraling
losses after a dam burst at one of its mines in southeast Brazil,
leaving at least 60 people dead and hundreds missing.
Vale's ordinary shares fell 19% to 45.00 reais ($12) shortly
after they began trading.
The company said earlier Monday that it suspended dividend
payments and share buybacks . Vale also froze executive bonuses and
created independent committees to help victims and investigate the
cause of what is shaping up to be the world's most deadly mining
disaster in over 50 years.
The death toll rose to 60 by Monday morning, according to civil
defense authorities, but rescue workers were losing hope of finding
another 292 or so people alive who were buried under thick mud when
the Vale-owned dam burst Friday.
Analysts said the disaster is unlikely to have a big effect on
Vale's production, but the legal liabilities and cleanup costs are
potentially enormous.
"The company will have to make provisions, and shares will fall
sharply, but investors are going to realize that it might not
justify such big losses because the impact on production is small
and the company will continue to generate cash," said Pedro Galdi,
an analyst at Mirae Corretora in São Paulo. "Vale won't disappear.
Brazil needs Vale, the government needs Vale and the towns where it
operates need Vale."
The dam's collapse in Minas Gerais state has sparked outrage
across Brazil, especially as it comes only three years after
another dam partly owned by Vale also burst nearby, killing 19
people and causing widespread environmental damage.
Judges have already frozen about $3 billion in total of the
company's assets in response to Friday's disaster to fund relief
efforts and structural work to shore up the dam, Vale said in a
statement.
Brazil's environmental agency IBAMA has also fined Vale $66
million, while the state of Minas Gerais has ordered the company to
pay $26 million as a penalty for the breach.
Rating agency Standard & Poor's warned Saturday that it
could cut Vale's BBB-rating by several notches as a result of the
disaster, citing concerns over fines and the possibility that the
company could be stripped of some operating licenses.
Write to Samantha Pearson at samantha.pearson@wsj.com
(END) Dow Jones Newswires
January 28, 2019 08:29 ET (13:29 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
VALE ON (BOV:VALE3)
Historical Stock Chart
From Apr 2024 to May 2024
VALE ON (BOV:VALE3)
Historical Stock Chart
From May 2023 to May 2024