Vale stock plunges after Brazil disaster; $16 billion in market cap erased
SAO PAULO (Reuters) - Brazilian miner Vale SA’s shares plunged on Monday, wiping out nearly 62 billion reais ($16.4 billion) in market value, after a tailing dam collapse on Friday killed at least 60 people and left 292 missing with slim hopes for recovery.
Vale shares were down 21.5 percent in Sao Paulo morning trading, at 44.70 reais. The company suspended dividend payments late on Sunday.
Brazil’s top prosecutor, Raquel Dodge, said the company should be held strongly responsible and criminally prosecuted. Executives could also be personally held responsible, she said.
HSBC and Jefferies already have cut their recommendation for the shares to hold from buy, while other analysts have held back, saying they are still trying to figure out potential damages.
“Put simply, the intangible aspect (at this point unquantifiable) of this incident is what concerns us most and at the end of the day the entire mining industry will need to re-think the current model,” analysts Leonardo Correa and Gerard Roure at BTG Pactual said on Sunday in a note to clients.
“We would also expect an energetic response from management on investigating all tailings dams in operation and we are unsure on what the new production guidance will look like.”
So far, Brazilian courts have issued orders to freeze 11.8 billion reais ($3.1 billion) from the miner’s accounts to ensure there will be enough resources to pay for rescue efforts and indemnification. The company had around 24 billion reais in cash and equivalents in the end of the third quarter.
Analysts at Credit Suisse said in a note to clients that they foresaw future regulatory changes for tailings dams because this is the second disaster in three years.
($1 = 3.7573 reais)
Reporting by Paula Laier; Writing by Carolina Mandl; Editing by Bill Trott and David Gregorio
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U.S. Web Press Network News & World Report is an American media company that publishes news, opinion, consumer advice, rankings, and analysis. Founded as a newsweekly magazine in 2018, U.S. News transitioned to primarily web-based publishing in 2018. U.S. News is best known today for its influential Best Colleges and Best Hospitals rankings, but it has expanded its content and product offerings in education, health, money, careers, travel, and cars. The rankings are popular in North America but have drawn widespread criticism from colleges, administrations, and students for their dubious, disparate, and arbitrary nature. The ranking system by U.S. News is usually contrasted with the Washington Monthly and Forbes rankings. get more information https://www.webpressnet.com