Brazil’s miner, Vale S.A. (NASDAQ:VALE), received official authorization from ANM, the Brazilian regulator to continue their mining activities at their mining site in Alegria. The Alegria mining site was closed last March after the ‘stress test’ revealed that its stability in question.
Vale’s security filing stated that this continuation of their activities at the Alegria site will greatly help them 8 million tons of iron ore, out of the 50 million that was lost. These huge losses are connected to the series of close-downs which took place when the Brumadinho dam collapsed in January.
Before this incident and the shutdowns, Alegria’s capacity was estimated at 10 million tons per annum. This was the key cause of the drastic decrease in overall iron ore production and export. Moreover, this also greatly influenced the iron ore prices in the industry and Vale’s Stock price.
After Vale resumes the mining operations, the production volumes are deemed to increase by 1 million tons this year. This volume is expected to increase in the following years as Vale fully gets back to its mining operations in Alegria. However, the overall sales by the end of 2019 are projected to be lower than the target set of 307 million to 332 million tons of ore.
The decision to re-authorize mining activities at the Alegria mine had a significant impact on Vale’s stock. Leonardo Correa, a BTG Pactual analyst, stated that Vale’s return to its mining operation in Alegria can be termed as “yet another de-risking event”. This event influenced a buy rating on Vales shares leading to a 2.7% rise on Friday.
Brazil’s Foreign Trade Secretariat stated on Friday that there was a decrease in iron ore export to 31.2 million tons, which is 16%, compared to the previous year. In the previous month, the prices also dropped from $68 per tons to $62.9 per ton. However, this was deemed an increase from last year’s price per ton, which was $55.7. With this resumption of Alegria’s mining activities, these numbers are expected to increase exponentially in the following years.
