Vale to suspend operations at several iron ore mines

Brazilian mining company Vale will remove around 10pc of its annual iron ore output capacity as it decommissions 10 tailings dams at various mines in the next three years, after an accident at the Feijao mine left 65 people dead and 279 missing in Minas Gerais province.

The total loss of production from the suspension of operations is expected to be around 40mn t/yr, including 11mn t/yr of pellet output. The decommissioning of the dams will cost around $1.3bn.

Vale said it will increase production at other mines to make up for loss of output but did not give details. Vale is currently raising production at its 90mn t/yr S11D complex in the Carajas region. Vale estimated output of 390mn t of iron ore in 2018.

Vale will temporarily halt the production of the units where the dams are located, which are Aboboras, Vargem Grande, Capitao do Mato and Tamandua operations in the Vargem Grande complex and the Jangada, Fabrica, Segredo, Joao Pereira and Alto Bandeira operations in the Paraopeba complex. The fatal dam burst on 25 January was at the Feijao mine that is part of the Paraopeba complex. Work will also be stopped at the Fabrica and Vargem Grande pelletising plants. The operation of the halted units will be resumed as the decommissioning works are completed.

Both the Paraopeba and Vargem Grande complexes are part of Vale's southern system mines, which produce high-silica medium-grade fines such as SSFG and SSFT fines. Vale has said over the past year it plans to reduce production of these fines as it ramps up output of high-grade ore in the Carajas complex. The southern system fines are blended with the 65pc basis Vale IOCJ fines to produce the BRBF fines, a best-selling medium-grade ore in the Chinese market.

Vale's mine closure news lifted prices of portside iron ore and futures in China. The most active Dalian iron ore futures contract was higher by around 6pc AT 12.14pm Singapore time (04:14 GMT). Offers for PB fines were at 605-630/wet metric tonne (wmt), or a $80-83.35/dry metric tonne seaborne equivalent, in the morning, up by Yn40/wmt from yesterday's offer prices. Deals for PB fines were done at Yn605/wmt, Yn615/wmt and Yn620/wmt at Caofeidian port.

Brazilian public prosecutors ordered the arrest of five people involved in licensing Vale's Corrego do Feijao tailings dam that ruptured last week. Authorities are investigating whether the technical documents used to certify the dam's safety were fraudulent. Vale is co-operating with investigations, the company said. An additional $215mn in Vale assets was frozen by the department of labour, in addition to $2.65bn that has already been frozen earlier by the Minas Gerais public prosecutor.

A securities class action lawsuit has been brought against Vale in a New York district court alleging the company provided false and misleading information about the risks and potential damage of a potential breach in Feijao dam. "Vale intends to defend vigorously against the claims," the company said.