Brazil's Vale agrees to $7 billion Brumadinho disaster settlement

RIO DE JANEIRO/SAO PAULO: Brazilian miner Vale said on Thursday it had reached a 37.7 billion real ($7 billion) agreement with prosecutors and the state of Minas Gerais to settle claims stemming from the collapse of a mining dam in 2019 which killed 270 people.

In a securities filing, Vale said it would book a further 19.8 billion reais related to the agreement this year.

Vale shares, suspended for the announcement, reopened up 2.3%, then pared gains to trade little changed by late morning. On Wednesday, as initial information of the agreement emerged, shares jumped 3%.

Brazil's most deadly mining tragedy has hampered Vale's performance over the past two years as it was forced to curb production amid new safety protocols.

The government of Minas Gerais, where the disaster occurred, said the agreement does not set a ceiling on potential costs associated with the environmental cleanup, which Vale will have to cover.

It also does not interfere with any criminal cases against Vale personnel, the government said.

Leonardo Correa, analyst at BTG Pactual, said in a note the agreement appeared positive for the company and was significantly lower than the 54 billion reais the government had initially wanted. According to Correa, the positives also went beyond the headline figure.

"This is not really about numbers, this is more about putting an overhang source behind the company and turning the Brumadinho page," he said, referring to the town where the dam collapsed.

On Wednesday, Vale reported lackluster annual production figures, but flagged a potential rebound in both output and sales in 2021.

Vale said it closed 2020 with 322 million tonnes of annual iron ore production capacity, and it expects that number to rise to 350 million tonnes by the end of 2021.