Brazilian multinational mining company Vale SA loses shares of up to $19 billion, or 71.34 billion reais, in market value due to the deadly collapse of a tailings dam and taking more than a thousand lives. The unfortunate disaster that happened last Friday resulted in the shutdown of the country’s stock market. Vale’s shares closed at 42.65 reais after its steep descent, falling by 24 percent. Additionally, the mining company’s ADR dropped by 8.1 percent on Friday, followed by 18 percent on Monday. Shares experienced its lowest close at $11.20.
The Falling Empire
As the death toll from 65 casualties rose, families of victims and government officials sought for punishment. Such nature or form of consequences, including lawsuits and fines, were not out of the question and is sure to affect Vale’s stocks significantly. In response, Vale needed to suspend dividend payments on Sunday.
The fund manager, as well as partner at Galt Capital, Igor Lima, made a comment regarding the company’s shares. “The fact is that Vale’s share drop was even steeper than some market participants expected.” In relation to a similar incident about a 2015 mining damn accident with a Vale joint venture, he remarks that the recent tragedy invoked stronger reactions from public and government institutions. As a result, the financial consequences on the mining company remain uncertain.
Monetary compensation may not be only an effective nor adequate means of settlement. Raquel Dodge, one of Brazil’s top prosecutors, suggested that the company and its members, especially the executives, should be criminally prosecuted and held responsible.
Financial groups including HSBC and Jefferies reacted in favor of its clients’ shares by removing their recommendations to hold from buy. Analysts similarly responded by conducting further assessments on potential risks. A New York court took a lawsuit case from a law firm against Vale and its chief executives.
Enduring Path to Recovery
Chief investment officer at Capital Innovations LLC Michael Underhill suggested Vale’s other dams can be put to greater scrutiny in addition to the production losses of the affected mine. He stated that billions of dollars at Vale had been frozen, thus protecting its assets.
One of the mining company’s major shareholders remained loyal and optimistic. Previ, the largest pension fund in Brazil, stated that it could take the impact from the significant share price drop without potentially selling its holdings. Earlier within the day of the dam collapse, Vale’s August 2026 bonds had a yield of 5.7 percent from 4.6 percent before its prices also went down. One of the “big three credit rating agencies” Fitch placed a negative watch rating on its radar, while Vale is under consideration for possible downgrade by Standard & Poor’s.
Vale’s accounts that amount to $3.1 billion, or 11.8 billion reais, were ordered to freeze by Brazilian courts to cover the expenses for recovery efforts and damages. Credit Suisse analysts foresee some changes of regulations for Vale’s tailing dams after another tragedy that followed since the 2015 dam burst less than four years ago.