Brazilian iron ore miner Vale will halt operations at the Vargem Grande complex sooner than was scheduled, the company said on Monday February 4.
This was one of the mines already included in the company's decommissioning plan for tailings dams, but its stop has been brought forward, Vale added. Mine output has been stopped immediately although the decommissioning process could take two or three years.
By halting operations at the facility, in the state of Minas Gerais, some 13 million tonnes per year of iron ore output will be eliminated. Vale is the world's largest iron ore producer and had previously published an estimate of 400 million tonnes of iron ore production in 2019.
Taking into account all 10 of the tailings dams that Vale intended to decommission, and the end of their respective mining operations, the negative consequences for the company's total output could reach 40 million tonnes per year. The Brazilian miner, however, will offset this by ramping up activity in other complexes, such as S11D, in the northern Brazilian state of Pará.
Currently, 30 million tpy of iron ore output is affected by a court ruling handed down on February 4. A local court in Belo Horizonte, the state capital of Minas Gerais, prohibited Vale from using eight different dams in the state. The Brucutu mine is the largest asset affected by this ruling.
A rupture in a dam at Vale's Córrego do Feijão mine on January 25 flooded its own facilities, as well as part of a nearby community and the Paraopeba river. The search for victims still continues; so far, 134 people have been confirmed by authorities to be dead after the accident, with 199 more still missing.
Vale's plan to decommission dams and to halt mining operations should reduce the global supply of iron ore. Prices have been boosted by this news, although the market is currently at a standstill because of the Lunar New Year holiday in China, the biggest consumer of iron ore.
Fastmarkets' 62% Fe iron ore price index was $85.53 per tonne cfr Qingdao, China, on February 4. This was the highest level since March 23, 2017, and 14.50% above the value reported before the latest accident, which was $74.69 per tonne on January 25.
"The temporary halt at the Vargem Grande complex is intended to accelerate the decommissioning process and to begin collecting data immediately for a more detailed plan," Vale said.
"It is important to reiterate that Vale had already decided in 2016, soon after the Samarco mine dam failed, to decommission all of its 19 upstream-method iron ore tailings dams," the miner added. "Since this [decision was made], nine of the dams had already been completely decommissioned."
The accident at the Samarco mine, a 50:50 joint venture between Vale and Billiton, occurred in November 2015. Although the death toll was very much lower than at Córrego do Feijão, the effect on the environment - and especially on the Rio Doce river - was considered much worse.
To compensate for the Samarco incident, the joint venture put aside around 15 billion Reais ($4.09 billion) to compensate families and local authorities. Following the Córrego do Feijão incident, the courts have already frozen a further 12.6 billion Reais of Vale's assets in preliminary rulings.
Although the decommissioning plan affects dams that use the upstream method, which is considered riskier, Brucutu and other mines targeted by the latest legal action use other processes.
Brazilian bank Itaú BBA ran a sensitivity analysis, before Vale announced its plans to give up on upstream dams, on the potential effects should Vale's Southern and Southeastern systems be targeted by authorities because they use wet-processing of iron ore and waste material. It found that the consequent decrease in production could be as much as 160 million tpy.
When S11D reaches its nameplate capacity, however, Vale will be able to produce as much as 450 million tpy of iron ore.
source: fastmarket |
