Brazilian miner Vale has declared force majeure on some of its iron ore contracts in the wake of the fatal tailings dam collapse at Brumadinho.
Despite saying after the tragedy that it would not declare force majeure, it has now reversed that decision after a court on Monday ordered it to stop using eight tailings dams, including one affecting production of about 30 Mtpa of iron ore output. Brumadinho accounted for 9% of Vale’s iron ore output.
Since the Brumadinho tragedy on 25 January, which likely claimed more than 300 lives, iron ore prices have surged by more than 20%, hitting a two-year high on Monday.
Furthermore, shipping analysts have warned that the disaster could see 35 to 40 Capesize vessels lose employment in 2019.
Vale’s declaration of force majeure comes as the company faces increasing scrutiny into whether more could have been done to prevent the dam breach. The company has vigorously defended its position.
On Friday (1 February), Vale said in a statement that all its dams have an Emergency Action Plan for Mining Dams (PAEBM), in compliance with Brazilian law. “This plan is based on technical studies of hypothetical situations in case of dam breach. The PAEBM foresees what will be the flooding area and also the self-saving zone.”
It said that the collapsed Brumadinho dam had “all applicable stability statements and was constantly audited by external and independent companies”, and there were bi-weekly inspections that were reported to the Brazil’s National Mining Agency. “The last one was carried out on 21 December 2018. The dam was also inspected on 8 and 22 January 2019, which was registered by Vale’s monitoring system.”
Earlier, by 30 January, the Minas Gerais Court had blocked R$11.8B (US$3.19B) to guarantee the recovery of damages caused by the dam breach. In addition, Vale was notified of the imposition of administrative sanctions by IBAMA and the state of Minas Gerais in the amount of approximately of R$350M.
On 28 January, a putative securities class action complaint was filed against Vale in the United States District Court for the Eastern District of New York. The complaint alleges that the Vale made false and misleading statements, and omitted to make disclosures, concerning the risks and potential damage of a dam breach, violating the Securities Exchange Act of 1934. Vale said it intends to “defend vigorously against the claims”.