(Reuters) - Vale SA said on Monday that a Brazilian state court has ordered it to stop using eight tailings dams in the wake of a disaster last month that likely killed more than 300 people, a step that will crimp nearly 9 percent of the company’s annual iron ore output.
The move is the first step by Brazilian officials to limit production by the world’s largest iron ore miner since the disaster, which has sparked a global outcry over common mining practices that many now are decrying as unsafe.
Shares of Vale fell 4 percent on Monday before trading was halted.
With 134 people confirmed dead and another 199 still missing, according to the latest tally on Monday, the Brumadinho dam burst could be Brazil’s deadliest mine disaster on record.
Vale said in a securities filing that a court in the state of Minas Gerais ordered it to stop using three upstream tailings dams, like the Brumadinho dam that burst last week, which were already inactive.
The ruling also halted use of the Laranjeiras dam at the Brucutu mine, which does not use the upstream model, affecting production of about 30 million tonnes of iron ore output per year - nearly 9 percent the company’s annual output.
The Laranjeiras tailings dam is a conventional design, which is built vertically over time. It is typically safer than an upstream design, which is built higher and leans into the waste it is meant to contain.
By extending the ban to a different type of tailings dam design - one considered safer by many engineers - Brazilian officials seemed keen to move quickly to reassure an anxious public.
Of the three main tailings dams designs common in the mining industry, the upstream design is the cheapest but also the least safe.
Vale said in the filing it will take “appropriate legal measures,” which could include filing an appeal.
Chile, Peru and other earthquake-prone countries ban the design, in which tailings are used to progressively construct dam walls the more a mine is excavated. Brazil is not as earthquake-prone as its western neighbors, but even small seismic activity has been shown to affect tailings dams.
The move is not expected to affect Vale’s overall production as it already produces an excess of the market’s current needs. Still, analysts expect it to have a ripple effect.
“This is likely to unnerve iron ore markets further,” analyst at RBC Capital Markets wrote in a note to clients.
SEEKING MANAGEMENT CHANGE
A group of small shareholders will file a request on Tuesday asking for an extraordinary shareholders meeting to discuss a change in management.
The shareholders are part of an association of people affected by Vale’s operations, including members of nongovernmental organizations in Brazil and other countries, members said.
The group last week visited communities affected by the burst.
Another group of shareholders last week requested a probe by Brazil’s securities industry regulator CVM.
Reporting by Luciano Costa and Ernest Scheyder; Editing by Alistair Bell and Phil Berlowitz
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