Vale suspends rail freight movement on dam alert

Brazilian mining company Vale has suspended freight transport on a portion of its Vitoria-Minas railroad as a precautionary measure against the risk of a breach at the Sul Superior tailings dam, which is connected to the closed Gongo Soco iron ore mine.

Transport of freight has been suspended on the Belo Horizonte branch line between Sabara and Barao de Cocais. The company is weighing alternatives to minimising the impact on freight movement, without disclosing any details.

The 905km Vitoria-Minas railroad hauls iron ore from Minas Gerais province, where its southern system mines are located, to the Tubarao port for exports. Vale put annual iron ore traffic on the line at 115mn t/yr in October 2017. The line also carries coal and agricultural products for third parties.

Vale last week alerted authorities to the risk of a breach at the Sul Superior dam as it noticed movement on the northern slope of the Gongo Soco mine pit, closed since 2016. Any erosion in the pit wall could potentially trigger a breach at the dam, although Vale has said that there is no technical information available to link a pit wall slide to a breach at the dam.

Vale has started earthworks for the construction of a concrete containment structure downstream from the dam to retain most of the tailings volume in case of a breach, while information distribution and evacuation drills are being carried out for the affected population.

Although the Gongo Soco mine is not productive, the alert over a potential dam breach helped lift the Argus ICX to a five-year high above $100/dry metric tonne (dmt) to $101.40/dmt on Friday.

Seaborne prices have been rising since a 25 January tailings dam breach at Vale's Feijao iron ore mine in Minas Gerais. The accident has led to the closure of some of Vale's iron ore mines in the province, including its second-largest mine Brucutu. Vale has forecast a 50mn-75mn t drop in iron ore shipments in 2019 compared with 2018 sales, which is expected to support prices this year.

The most-active iron ore contract on the Dalian commodity exchange closed higher by 1.34pc today.