May 9, 2019 / 10:24 PM / 5 months ago

Brazil's Vale swings to loss as dam burst charges near $5 bln

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/File Photo

SANTIAGO/RIO DE JANEIRO (Reuters) - Brazil’s Vale SA set aside $4.95 billion to pay for costs from the collapse of its Brumadinho tailings dam, driving the world’s top iron ore miner deep into the red as it reckoned with the aftermath of one of the country’s deadliest industrial disasters.

Vale, which swung to a $1.64 billion first-quarter net loss, acknowledged it was still too early to determine all the costs related to the Brumadinho collapse in late January, which unleashed a torrent of toxic mud that killed at least 237 people, most of them buried alive.

Prosecutors accusing the company of ignoring warning signs ahead of the disaster pressured it into replacing Fabio Schvartsman as chief executive with company veteran Eduardo Bartolomeo. Vale also included an additional independent member on its board in the months following the dam burst.

“I am committed to leading Vale through the most challenging moment in its history,” Bartolomeo said in a statement issued with the company’s results, pledging to “never forget Brumadinho.”

Payments to victims’ families and estimated out-of-court settlements for various damages related to the collapse accounted for $2.42 billion of the charges with another $1.86 billion for shutting down dams to avoid a recurrence of the disaster.

Vale also reported a $652 million loss before interest, taxes, depreciation and amortization for the period, its first-ever quarterly loss on an that basis.

Quarterly revenue fell 4.6% to $8.2 billion due to weaker sales as several key mines were taken offline in the wake of the disaster.

Excluding the Brumadinho-related provisions, Vale said it would have posted a proforma net income of $3.31 billion, $500 million below the fourth quarter’s results, largely because of lower sales volumes.

As Vale tries to lower its risk for future ruptures of tailings dams filled with the muddy debris of mining, the company told Reuters earlier that it planned to spend $2.5 billion on so-called “dry processing” over the next five years, which makes such dams unnecessary.

Reporting by Christian Plumb and Marta Nogueira; Editing by Lisa Shumaker and Peter Cooney

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