Vale Shares Jump After Company Announces Plan to Dismantle Dams
January 30 2019 - 7:59AM
Dow Jones News
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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