Brazilian mining giant Vale said Monday it was suspending dividend payments to shareholders and performance-related executive bonuses after a dam at one of its mines burst, killing dozens and leaving hundreds missing.
Vale, the world’s biggest iron-ore miner, has seen its reputation severely tarnished by the deadly accident, the second involving a company-owned mine in the southeast Brazilian state of Minas Gerais in just over three years.
The decision to suspend payments follows an emergency board meeting on Sunday, officials said in a statement. It said Vale was also suspending stock buybacks.
The news came hours before the Sao Paulo stock exchange opened. Trading in Vale shares was expected to be intense Monday as the market was closed for a holiday on Friday.
However Vale shares lost eight percent in New York trading on Friday following news of the dam rupture.
Brazilian authorities separately have frozen 11 billion reais – around $3 billion- in Vale assets in anticipation of compensation it will likely have to fork out.
A tsunami of toxic mud broke through a dam at an iron-ore mine owned by Vale near the town of Brumadinho, in Minas Gerais, on January 25. The official toll from the disaster was 58 dead and 305 missing as of late Sunday.
In 2015 a dam at another mine jointly owned by the company ruptured, killing 19 and causing what was considered the worst environmental disaster Brazil had seen.
Vale and its partner BHP are still paying for that accident, with compensation and fines costing over $6 billion and lawsuits ongoing.
The company is also mourning its lost personnel, as the overwhelming majority of those dead and missing in Friday’s disaster were Vale employees.
Many of the victims were eating lunch at the site when millions of tons of muddy sludge, a byproduct of mining, burst through the dam and engulfed the administrative area they were in.
Emergency workers also found a company bus buried in the mud with bodies inside.
The dam that broke was built in 1976 and was in the process of being decommissioned. Vale said it had passed a structural safety inspection four months ago, which was confirmed by Tuev Sued, the German firm that carried it out.
Vale, headquartered in Rio de Janeiro, has a deep purse from which to pay fines, compensation and lawsuits resulting from the latest disaster.
In 2017, based on the last full-year results available, the company made $5.5 billion in profits, on revenue of $34 billion.
That net result was 38 percent higher than the previous year, evidence of a bounceback after a sharp commodities slump in 2015 that forced the company into cost-cutting.
A mining specialist at the State University of Rio de Janeiro, Luiz Jardim Wanderley, told AFP that there was “a tendency for companies, in that period of commodity prices falling, to cut safety and maintenance budgets.”
He said that, of the 450 dams in Minas Gerais state, “we have a relatively high number of dams that are doubtful or in inappropriate conditions.”
Vale is worth an overall $78.7 billion dollars, according to its market capitalization. That makes it the third-biggest miner in the world, behind BHP and Rio Tinto, both Anglo-Australian groups.
Apart from iron-ore, which feeds China’s appetite, Vale also mines nickel, copper and other metals.
The company has a workforce of 76,500 worldwide and also operates hydroelectric plants, rail lines, ports and ships to get its products to market.
Vale started out in Minas Gerais – a major mining state, as its name declares in Portuguese – in 1942 as a state-owned company called Companhia Vale do Rio Doce. It was privatized in 1997.
On its corporate website Vale says it has a “passion for people and the planet.”
It says that “life matters most” and it apsires to “do what is right.”