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Message: Vale still confident about nickel prices

Sudbury Star Staff

A deadly dam disaster in its home country of Brazil has put Vale SA in the red. On the bright side for Sudbury, however, the company remains cautiously optimistic about the demand and price for nickel.

Bloomberg News reports Vale suffered the first quarterly loss since late 2015 as the company set aside funds to cover damages, legal costs and other obligations related to the dam disaster that left hundreds dead in January.

The agency said he world’s largest iron ore producer set aside US$4.5 billion and posted a loss of $1.64 billion as the company comes under strict government scrutiny that resulted in authorities freezing billions of dollars of its assets to ensure the victims will be compensated and environmental remedies will be implemented.

The provision matches the amount that various Brazilian courts have ordered frozen, which the company had disclosed in April. The outlook for the company’s prospects are dimming, Bloomberg said. On Monday, Rio de Janeiro-based miner scaled back its 2019 outlook, saying sales of iron ore and pellets will likely be in the middle-to-lower end of its guidance after a local court ordered that operations at its Brucutu mine be shuttered for a second time.

In a filing on April 18, the company estimated that provisions for its obligations to address lawsuits related to the deadly Jan. 25 dam spill may reach $220 million. More money may have to be set aside to cover other “potential liabilities” related to the accident, it said.

On Friday, Bloomberg said investors are looking past Vale SA’s worst-ever quarter as analysts highlight the top iron ore miner’s brightening prospects after it set aside $4.5 billion to cover potential costs linked to a fatal dam disaster.

Shares gained as much as 2.6 percent in Brazil trading on Friday, even after the company posted a net loss of $1.6 billion in the three months ended in March. Provisions related to the dam breach in January took the company’s adjusted earnings before interest, taxes, depreciation and amortization to negative $652 million, the first such loss in its history.

In an earlier report, Reuters said “Vale has been in crisis mode since January when a tailings dam collapsed in Brumadinho, Minas Gerais, spewing enough waste to fill more than 4,500 Olympic-sized swimming pools.”

The disaster killed almost 300 people, displaced hundreds more and triggered an outpouring of public anger against the company, which resulted in the departure of former chief executive Fabio Schvartsman.

He was replaced by Eduardo Bartolomeo, the man who led Vale’s Canada operations — including those in Sudbury.

Bartolomeo, a veteran executive at the company, has been named chief executive officer as it attempts to draw a line under one of the darkest chapters in its history, according to Reuters.

Vale remains Sudbury’s largest employer, with six mines, a mill, a smelter, a refinery and nearly 4,000 employees. It produces nickel, copper, cobalt, platinum group metals, gold and silver in Sudbury.

Nickel is Sudbury’s key product for Vale and the company said its near-term outlook for the metal “is relatively positive.”

Vale said it’s concerned about China’s nickel output and noted that supply for the metal for stainless-steel production and electric vehicle batteries is high for now. In addition, global trade disputes and a slowing global economic could negatively effect demand for nickel.

“These considerations have the potential to negatively impact commodities, nickel included,” Vale said. “(However) our long-term outlook for nickel continues to be positive.

“Nickel in electric vehicle batteries will become an increasingly important source of demand growth particularly as battery chemistry favors higher nickel content due to lower cost and higher energy density against the backdrop of robust demand growth in other nickel applications.”

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