Brazil's Vale to sacrifice output for safety after deadly dam collapse

By Gram Slattery

BRUMADINHO, Brazil (Reuters) - Vale SA, the world's largest iron ore miner, said it would sacrifice production for safety to avoid another tailings dam failure, after the death toll in the second dam collapse in just over three years was expected to exceed 300.

Chief Executive Fabio Schvartsman said he would take up to 10 percent of Vale's output offline to decommission 10 dams similar to the one that burst on Friday at the Corrego do Feijao mine, an announcement that sent metal prices and shares of rival companies higher.

At least 84 bodies have been recovered from the slurry so far, with over 250 still missing and presumed dead.

Vale's initiative aims to pre-empt tough questions about its safety record after Friday's disaster, which followed a similar deadly dam collapse in 2015 at the nearby Samarco mine, which Vale co-owns with BHP.

U.N. human rights experts called for an investigation into the disaster. Baskut Tuncat, a U.N. expert on disposal of hazardous substances, urged Brazil to prioritize dam safety evaluations and block new tailing dams until safety could be ensured.

Vale's initiative to curtail output, which is expected to cost the company 5 billion reais ($1.3 billion) over three years, sent Chinese iron ore futures higher in early trade on Wednesday.

The plan involves suspending operations at mines producing about 40 million tonnes of iron ore and 11 million tonnes of pellets per year, Schvartsman told journalists.

Shares in Vale's rivals BHP Group, Rio Tinto and Fortescue Metals Group also climbed, lifting Australia's metals and mining index. Vale's own shares rose about 6 percent in early trade. [IRONORE/] [.AX]

A Vale shareholder group has asked Brazil's securities regulator CVM to investigate the company's conduct, alleging Vale did not fulfill its obligation to disclose the risks and impact of its activities at the mine.

Brazilian prosecutors have also said they will bring criminal charges against those responsible for the disaster.

The authorities arrested three Vale employees, including two senior managers at Corrego do Feijao on Tuesday. They have also arrested two engineers from German auditor firm TUV SUD.

DEMANDS

In the town of Brumadinho, devastated by the torrent of mining waste, Vale workers laid out their demands. In a letter seen by Reuters, the local miners' union sought several months of additional pay and years of guaranteed employment, among other benefits.

In a separate statement, the union said it had asked Vale for the last two years to move the company dining hall, which was located directly under the dam, a charge Vale denied.

A worker outside the cafeteria and who narrowly escaped the fast-moving mud flow told Reuters he doubted anyone inside had made it out alive. [L1N1ZU00Q]

On a hilltop site, Brumadinho cemetery director Jose Eustaquio da Silva, 63, has been digging 98 graves with his team in one cemetery alone. So far, five of the graves have been filled as recovery crews comb through mud from the disaster.

"Everyone is tense," he said. "People who live near other dams are tense as well."

Brazilian regulator, the National Electric Energy Agency (ANEEL), said on Wednesday it was setting up a task force to monitor dams for about 130 hydroelectric plants. It said the program was expected to last until May.

Brazil's Retiro Baixo hydroelectric plant suspended its operations to preserve its equipment although it said dam was safe, state-owned Eletrobras said late on Tuesday.

(Reporting by Gram Slattery; Additional reporting by Jake Spring in BRASILIA; Editing by Tom Hogue and Edmund Blair)