Vale, the world’s biggest iron ore producer, is focused on repairing the damage caused by a deadly dam burst in Brazil and has no plans to buyback shares or resume dividend payments, say its chief financial officer.

Almost 250 people — mainly Vale employees and contractors — died in January when a dam holding waste material from a mine collapsed, unleashing a torrent of sludge that destroyed everything in its path including a staff canteen.

More than 20 people are still missing and earlier this month Brazilian federal police unveiled the first criminal charges against Vale and Tüv Süd, its German safety inspector.

“Vale is a very important company for lots of individuals. We have about 200,000 individual shareholders and about 200,000 retirees from the largest pension funds in Brazil that depend on the income,” CFO Luciano Siani told the FT Commodities Americas Summit in Rio de Janeiro.

“So we understand the anxiety of this audience . . . but what I have to say is that this is not a priority for the company right now. We need to be completely focused on reparation, compensation, litigation and beefing up our balance sheet.” 

Vale has set aside more than $6bn to cover fines and clean up costs and a government order to decommission nine so-called tailings dams with similar structures.

But the fallout from the tragedy, near the town of Brumadinho in the southern state of Minas Gerais, helped drive iron ore to a five-year high above $120 a tonne over the summer, boosting profits at Vale and other producers.

Since then the price of the steelmaking ingredient has fallen back to $90, a level at which Vale can still generate healthy margins.

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Mr Siani said the impact of the disaster on the global iron ore market had been a “little overestimated”. Vale was forced to curtail 90m tonnes of output in its immediate aftermath.

“The fact is China is going to increase steel production by more than 10 per cent this year. So a spike would have happened without Brumadinho. Certainly it contributed . . . but it is unfair to say Vale is making more money [because of the collapse] because this is an incredibly unique year for the industry.”

Mr Siani acknowledged that it would “take time” to rebuild trust in the company, which was riding high before the disaster. “We are very mindful that society does not like us at the present moment but we have a strong belief that by doing the right thing it will come back,” he said.

The company has set up a repair and development department with more than 400 employees working with local communities affected by the dam burst. More than 100,000 people are already receiving compensation and Vale has just announced plans to spend almost $300m to help impacted areas.

“Trust is our business. We are a company that relies on concessions and licences, we cannot do anything without them,” said Mr Siani. That would mean forging a “new pact” with society that went beyond paying taxes and creating jobs.

Asked if the company had put profit before safety in the run-up to the disaster, Mr Siani said there had been many meetings at the board level “where the situation of the tailings dams” had been discussed. 

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“When it comes to safety it was not that Vale was a company that didn’t pay attention to safety,” he told the FT summit last week. “We were doing a lot of stuff. But clearly it was not enough.”

Via Financial Times