By Jeffrey T. Lewis

 

SAO PAULO--Shares of Brazilian iron-ore giant Vale SA (VALE3.BR, VALE) jumped Wednesday after the company announced a plan to dismantle all the tailings dams it owns that are similar to the one that burst last Friday, killing scores and leaving hundreds more missing and feared dead.

The death toll in the accident, which took place in the small, rural town of Brumadinho, rose to 84 by Tuesday evening, and close to another 300 people are unaccounted for. Rescue workers say there's little chance any of the people still buried under the thick layer of reddish-brown mud left behind by the accident are still alive. The search continues and the number of dead is expected to rise rapidly over coming days after more rescuers have arrived to help.

Vale Chief Executive Fabio Schvartsman announced Tuesday evening that the company will accelerate its plan to dismantle 10 dams while halting all mining activity near them. The plan will cost about 5 billion reais ($1.3 billion), halt about 10% of its annual production and take one to three years to complete, Mr. Schvartsman said. The company also said it will increase output at other facilities to offset the loss of production.

Vale shares rose 8.2% shortly after the open to 46.26 reais. The company's stock price plummeted on Monday, losing almost one-quarter of its value, then rose almost 1% on Tuesday.

"We believe the decommissioning of these dams is a prudent move by Vale; reducing the risk of another dam collapse is well worth the $1.3 billion Vale will spend to decommission these structures," said Christopher LaFemina, an analyst at Jefferies, in a note.

The company had already stopped using the type of dam that collapsed Friday in Brumadinho, known as an upstream dam, about three years ago after a similar dam about 80 miles away in a town called Mariana burst, killing 19 people and spewing a river of mining waste that contaminated hundreds of miles of river valleys.

Upstream dams are cheaper to build than other types, but also more prone to failure, according to experts. After the Mariana accident, Vale began the process of decommissioning, or dismantling, the 19 upstream dams it owned at the time, and had already decommissioned nine of them by the time of the Brumadinho disaster, according to Mr. Schvartsman.

Mr. Schvartsman said the company didn't carry out the process more quickly because safety audits of the dams showed them to be in good condition.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

 

(END) Dow Jones Newswires

January 30, 2019 07:44 ET (12:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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