May 10, 2019 / 2:51 PM / 4 months ago

Vale CFO says hopes to restore lost output within two to three years

RIO DE JANEIRO/SANTIAGO (Reuters) - Brazilian miner Vale SA expects to restore capacity lost after the deadly Brumadinho tailings dam burst within two to three years, executives said on Friday, emphasizing that the company is not rushing to resume full output.

FILE PHOTO: The logo of the Brucutu mine owned by Brazilian mining company Vale SA is seen in Sao Goncalo do Rio Abaixo, Brazil February 4, 2019. REUTERS/Washington Alves

The dam’s collapse, which came a little over three years after a similar accident at a joint venture in the same state with BHP Group, has led to months of turmoil at Vale, culminating in a $1.64 billion quarterly loss reported on Thursday.

The world’s largest iron ore miner has been forced to take some 90 million tonnes of production capacity offline since the disaster, some voluntarily but much under pressure from courts and regulators aiming to avoid another disaster.

“We’re not in a hurry,” Chief Financial Officer Luciano Siani told analysts on a conference call. “We’re working together with prosecutors and the authorities with a common objective: making sure that there won’t be any kind of resumption until there is absolute safety.”

Vale on Thursday announced nearly $5 billion in writedowns for various costs related to the disaster, emphasizing that the total tab remained unclear.

Vale Chief Executive Eduardo Bartolomeo, named in March under pressure from prosecutors to replace Fabio Schvartsman in the post, said the miner was fully committed to paying reparations to those affected by the dam collapse, which killed at least 237 people.

Vale shares rose 2 percent on Friday as investors focused on signs the miner is pushing to settle its legal and operational woes.

“The fact that they are accelerating negotiations to turn the page on this is a sign that the market sees the effort positively ... that will allow Vale to refocus on normalizing its situation as much as possible,” said XP Investimentos equity research head Karel Luketic.

Vale CFO Siani said the company expects about 20 million tonnes of lost capacity to come back online fairly quickly once it persuades a judge to allow its Brucutu mine, which the company insists is safe, to restart production. Brucutu is now only producing iron ore using “dry processing,” and is operating at a third of total capacity.

Another 30 million tonnes of production frozen by court orders is likely to come back on line within six to 12 months using dry processing, Siani said.

A final 30 million tonnes, reliant on wet processing that require the use of tailings dams, could take two to three years to gain clearance, he said.

Turning to Samarco, whose 2015 collapse caused what is widely regarded as Brazil’s worst-ever environmental disaster, Siani said he expected the joint venture to get licensing approval by the end of September, then resume production in the second half of 2020.

Reporting By Christian Plumb and Marta Nogueira; editing by Chizu Nomiyama and Jonathan Oatis

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