U.S. Markets closed

Vale investors seek clarity two months after Brazil dam burst

By Christian Plumb

SAO PAULO (Reuters) - Vale SA, the world's largest iron ore miner, is set to report fourth-quarter earnings on Wednesday but those results now look like ancient history as the company grapples with fallout from a second deadly dam burst in less than four years.

The collapse of the tailings dam at Brumadinho, which killed an estimated 300 people two months ago, is expected to dominate the discussion when Vale executives take questions from analysts on Thursday.

"The market's main focus when looking at the quarterly numbers will be any update on the current situation - anything on production, any clarification about the suspended mines and dams as well as anything about movement toward negotiating a global settlement," said Karel Luketic, head of equity research at brokerage XP.

On Tuesday, Vale reported an 8.2 percent rise in quarterly iron ore production, bringing full-year 2018 output to 384.64 million tonnes, slightly below its annual target.

In the weeks following the Brumadinho disaster, Vale has been forced to slash iron ore output at many of its oldest mines, with an annualized impact of about 93 million tonnes, the company said.

The Brumadinho dam burst at the end of January unleashed a torrent of the muddy detritus, devastating the mine's facilities and a nearby hamlet. First responders have confirmed 214 deaths from the disaster, with another 91 still missing.

Investors will also seek clarity on the company's leadership after Chief Executive Fabio Schvartsman stepped down under pressure from prosecutors in a move Vale called temporary.

Schvartsman was replaced by Eduardo Bartolomeo, previously director of base metals, who is expected to negotiate a global settlement with Brazilian authorities.

Vale has reached preliminary agreements to compensate Brumadinho residents and victims' families and is in talks with environmental regulators about cleaning up a nearby river.

A spokeswoman for the miner declined to comment on a report in financial daily Valor Economico that a final accord would also include corporate conduct measures to prevent another disaster.

Vale and BHP Group Ltd last June signed a similar deal with prosecutors and state governments settling a 20 billion reais lawsuit related to a dam burst at their Samarco joint venture that killed 19 people in 2015.

For all of 2018, Vale is expected to report net income of $7.2 billion, according to a mean of estimates by analysts polled by Refinitiv, up from $7.02 billion the year before.

(Additional reporting by Marta Nogeira; Editing by Andrea Ricci)