Vale ordered to halt Timbopeba iron ore mine: Update

Updates with additional information, summary table

Brazilian mining firm Vale has been hit with a court order to halt operations at the Timbopeba iron ore mine, further cutting the company's output capacity in the wake of the fatal tailings dam collapse at the Feijao mine in January.

Vale said it has immediately complied with the court's decision. It faced a daily penalty of 500,000 real ($130,000) for non-compliance. The Timbopeba mine at Ouro Preto city in Brazil's Minas Gerais state produces 12.8mn t/yr.

Vale said the closure is based on preliminary findings by Minas Gerais prosecutors on the Doutor tailings dam at the mine. Vale said the dam was inspected on 14 March by the national mining agency that did not find "any relevant irregularity or any condition that compromises the safety of the dam" and said there was no reason to evacuate the local population.

Iron ore prices have increased amid the latest supply disruption. The most active May contract on the Dalian commodity exchange closed up by 1.6pc at 632.50 yuan/t today. Portside PBF offers rose by Yn10/wet metric tonne (wmt) to Yn645/wmt at Shandong and Yn650/wmt at Caofeidian in the morning.

The suspension is the second announced by Vale in a week. It temporarily suspended operations at its Guaiba Island Terminal after receiving a notice from the Mangaratiba city government but said it has all the required licences to operate the terminal. Vale shut down its Feijao, Vargem Grande and Brucutu mines in the weeks following the 25 January tailings dam accident.

Today's suspension increases Vale's output losses to more than 80mn t/yr, with its direct reduced pellet and high-silica southern system fines the most affected. This is mainly from its Paraopebas (Feijao) and Vargem Grande complexes that removed 40mn t/yr from its Southern System output, and the Brucutu mine that was 30mn t/yr of Southeastern System output. Vale's expansion of its Northern System's S11D project will partly offset with an additional 30mn t/yr expected added this year.

The closure has raised expectations that Brazilian officials may close down other mines as scrutiny mounts on tailing dams. It reinforces the idea that iron ore prices will remain supported at higher levels, despite lower profit margins that are driving Chinese steel mills to increase the use of low-grade ores and non-mainstream ores in their furnace burden.