February 21, 2020 / 2:40 PM / a month ago

UPDATE 2-Vale downplays report, could boost Brumadinho charges

(Adds management and prosecution comments, updates share price)

By Marta Nogueira and Gram Slattery

RIO DE JANEIRO, Feb 21 (Reuters) - Brazilian iron ore miner Vale SA on Friday downplayed an internal report examining the causes of last year’s deadly Brumadinho tailings dam disaster while opening the door to $1 billion to $2 billion in fresh provisions related to the collapse.

The market is closely monitoring Vale’s reputation, as well as its eventual liabilities related to the disaster, the second deadly dam burst the firm experienced over a four-year period.

Late on Thursday, Vale released the report, which said the company had information as far back as 2003 pointing to the fragility of the B1 dam in Minas Gerais, which burst in January 2019 and killed at least 270 people.

But steps taken to deal with the problem and heighten the dam’s security were limited and ineffective, according to the report by a committee, led by former Brazilian Supreme Court Justice Ellen Gracie.

“Regarding yesterday’s report, the independent committee didn’t really bring any new facts, nor surprises to the table,” General Counsel Alexandre D’Ambrosio said, when an analyst asked about the report’s potential impact on the firm.

“The report is based on the same information that prosecutors and police have already had access to,” he said.

Executives also said on Friday that they could add an additional $1 billion to $2 billion in provisions related to the disaster if the miner were to reach an additional compensation settlement for collective damages, society and the environment stemming from Brumadinho.

Brazil-listed common shares in the miner were down 4% in afternoon trade, while Brazil’s benchmark Bovespa index was off 1.1%.

Vale Chief Financial Officer Luciano Siani said such a larger settlement would only happen if existing legal claims about the company were wiped out.

“It’s important to say this provision would only be recognized in our financial statements if the counterparty were the suspension of civil suits and the guarantee that we’ll have leeway to proceed with public security and speed in conducting reparations,” he said.

On Thursday, the firm also released fourth quarter results, which hit top-line forecasts, but were heavily bogged down by impairments.

Vale is working to restart dividend payments after a roughly year-long pause following the deadly dam burst, its Chief Executive Eduardo Bartolomeo said on the Friday call. He added that new dividend payouts would likely be similar in structure to Vale’s pre-Brumadinho disaster payouts.

Bartolomeo previously said that it was too early to discuss resuming dividends. (Reporting By Marta Nogueira and Gram Slattery; Additional reporting by Roberto Samora and Christian Plumb in Sao Paulo; Editing by Chizu Nomiyama, Christian Plumb and Marguerita Choy)

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