By Jeffrey T. Lewis 

SÃO PAULO -- Brazilian mining giant Vale SA posted a net loss in the second quarter after it set aside additional funds -- more than $1 billion -- related to a deadly accident at a tailings dam that claimed 270 lives in January.

Vale's said it lost $133 million in the quarter, compared with net income of $76 million in the same period a year earlier. Net operating revenue rose to $9.2 billion, from $8.6 billion in the year-earlier period. The company reported adjusted earnings before interest, taxes, depreciation and amortization of $3.1 billion, from $3.9 billion a year earlier.

Vale said it provisioned an additional $1.37 billion in the quarter related to the dam accident in the small, rural town of Brumadinho in January -- after provisioning $4.5 billion in the first quarter. Vale said it also incurred $158 million in additional expenses over the tragedy in the second quarter.

Vale's revenue rose from a year earlier thanks to an increase in the price of iron ore, which partly stemmed from the dam's collapse.

After the disaster, the mining giant chose to shut down several of mines near similar tailings dams and was ordered by courts to shut down other mines. As a result, Vale said it expects sales in a range of 307 million metric tons to 332 million tons for this year, after providing a production guidance of about 400 million tons for 2019 before the dam accident.

The decline in production contributed to a 52% increase in the price of iron compared with a year earlier, according to Chris Terry, an analyst at Deutsche Bank in New York.

Other big producers experienced some production problems as well, while stronger-than-expected demand for iron ore from Chinese steel makers also supported prices during the quarter, Mr. Terry added.

"Demand hasn't paused to wait for supply to come back online," he said.

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

 

(END) Dow Jones Newswires

July 31, 2019 19:57 ET (23:57 GMT)

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