Vale: No Production Upgrade despite Authorization to Reopen Mine

Mine restart authorized

On April 16, a Brazilian (EWZ) court gave Vale (VALE) authorization to restart its operations at the Brucutu mine. After the dam burst in January, the court halted the mine’s operations in February.

Vale: No Production Upgrade despite Authorization to Reopen Mine

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Since the disaster on January 25, Vale stock has fallen 10.4% as of April 18. During the same period, the S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA) have risen 10.0% and 8.2%, respectively. BHP Billiton (BHP), Rio Tinto (RIO), and Cleveland Cliffs (CLF) have also gained 17.9%, 27.1%, and 5.0%, respectively.

There have been several developments for Vale since the dam disaster including the temporary departure of its top executives, freezing of the company’s funds, and several downgrades. However, the latest news was positive for the company.

No guidance upgrade 

Restarting the Brucutu mine would bring ~30 million tons per annum of production online. During the annual results, Vale said that its production will likely be impacted negatively by 75 million tons per annum due to mine closures and injunctions following the dam burst. Even though the court authorized reopening the mine, the company hasn’t upgraded the guidance.

Production offset by disruption elsewhere

In a press release, Vale said that its shipments in the Northern System were impacted negatively by heavy rains in São Luís do Maranhão in March and April. The company affirmed its previous guidance of 307 million tons–322 million tons.