VALE ON (BOV:VALE3)
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By Jeffrey T. Lewis
Brazilian iron-ore miner Vale SA's profit jumped in the third quarter as production increased, prices rose and the financial impact of the deadly dam collapse at Brumadinho waned.
Vale reported a third-quarter net income of $1.65 billion, compared with a loss of $133 million in the second quarter and income of $1.4 billion in the third quarter of last year. Sales rose to $10.2 billion in the quarter, while earnings before interest, taxes, depreciation and amortization rose to $4.6 billion.
After the tailings dam in the small rural town of Brumadinho collapsed at the end of January, sending a wave of mining waste sweeping over Vale offices and a cantina close to the dam and into the nearby town, the company decided to shut down operations near similar dams. Legal authorities also ordered the closure of other Vale mines.
The tragedy resulted in the deaths of 270 people, most of them Vale employees who were suffocated under the sea of mud released when the dam collapsed. The company provisioned a total of $6.3 billion over the first and second quarters related to the disaster.
The lack of more provisions related to Brumadinho in the third quarter means investors can start looking more closely at the company's day-to-day business, while keeping an eye on how well its managers are making sure operations are safe, said Rodolfo Angele, an analyst at JPMorgan.
Vale is "getting back to a more normal situation," he said, adding that so far changes to improve safety are moving in the right direction. "I think they're doing more than ever. And I think investors agree," he said.
Vale reported $225 million in expenses related to the Brumadinho accident in the third quarter, after expenses of $1.5 billion in the second quarter.
The increase in output in the quarter came after Vale resumed operations at its Brucutu mine at the end of June. The company said the reference price for iron ore 62% Fe was 2% higher compared with the second quarter and jumped 53% from the third quarter of 2018.
Write to Jeffrey T. Lewis at firstname.lastname@example.org
(END) Dow Jones Newswires
October 24, 2019 18:11 ET (22:11 GMT)
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