Ruling rattles iron ore producers
SOUTH Africa’s iron ore producers lost ground on the JSE this week after a Brazilian court ruled that global mining giant Vale SA could reopen its disaster-struck Brucutu mine.
Shares in Anglo American’s Kumba Iron Ore and Assore, the joint venture operated by Assmang and African Rainbow Minerals, eased after the court order allowed Vale to resume operations at Brucutu and the associated Laranjeiras tailings dam.
Just hours after the ruling, Kumba, which produces high-quality material, fell 3.66percent in early trade on Wednesday to R380.50 a share and Assore declined by 2.94percent to R363.02, while BHP Billiton, which operates iron ore mines in Australia and is listed on the JSE, declined by 1.44percent to R334.79 a share.
On Friday, the shares had recovered, with Kumba closing 3.21 percent higher at R394.00, and Assore up 2.78 percent at R371.50 while BHP Billiton eased 0.09 percent to settle at R335.69.
Vale said operations at Brucutu remained frozen as it awaited approval from Brazil’s environmental agency.
Seleho Tsatsi, an investment analyst at Anchor Capital, said the decline was a reaction to the 5percent fall in the iron ore price overnight following the Brazilian court’s decision.
“Brucutu still needs environmental approval before it can restart,” Tsatsi said. “The operation produces about 30million tons a year, but even with the addition of Brucutu the remaining supply that will be pulled from the seaborne iron ore market due to the Vale dam disaster remains meaningful.”
Vale suspended operations following the tailings dam collapse at its Feijao iron ore mine on January 25 that killed more than 290 people.
Feijão produces around 8million tons of iron ore a year. Brucutu, Vale’s second-largest iron ore mine, was suspended following a court order in February, with the government moving to cancel the operational licence for the dam.
Laranjeiras receives waste material from Brucutu, which had an installed capacity of 30million tons or 8percent of Vale’s planned annual production in Brazil before the disaster.
On Monday, a judge allowed
Vale to resume shipping iron ore at the Ilha Guaíba export terminal in Mangaratiba, where the company ships 40million tons a year.
Vale, which had been expected to produce 400million tons this year, flagged a supply loss of up to 70million, though it said it would be able to offset some of that.
Iron ore hit its highest level since 2014 as a result of the Vale crisis, with Kumba expecting prices to average $70-$75 a ton – well above last year’s $41 break-even.