According to Edward Sterk, an analyst at Capital Markets from London, the mining of fine-grained iron ore at Vale’s Brazilian mining company in 2019 is likely to shrink by 64 million tons from levels expected before the destruction of Brumadinho dam on January 25.
This figure includes various production cuts, including at the Timbopeba mine, where production was halted by Vale on Friday.
Timbopeba and Brucutu mines are expected to resume operations in the last quarter of 2019 after reductions due to civil lawsuits, and the company's net loss compared with expectations to Brumadinho is likely to shrink to 39 million tons in 2020 and to 36 million tons in 2021 year, said Sterk in a note on Monday.
In addition to the expected re-launch at Timbopeba, which has a capacity of 12.8 million tons per year, and a capacity of the Brukutu mine of 30 million tons per year, the company's shutdown may be reduced by some other launches amounting to about 3 million tons in year. The analyst added to the interview 4 million tons / year in the company's southeastern system.
According to analyst estimates, the restartings of the southeastern system can provide an increase of up to 14 million tons in 2020 and 15 million tons in 2021.
“However, additional materials from this system will lower the average prices received, since Vale has reduced production in the southern and southeastern systems in the past few years to improve the average quality of its products and maximize the prices received,” Sterk said. said
After Friday’s announcement of the suspension of work on Timbopeba in the southeastern system, BMO suggests a reduction of this asset by 7.8 million tons this year. According to Vale, BMO understands that Timbopeba is a processing plant for the processing of materials from the Fabric Nova mine, and that its own quarry has not been operating for many years.
Following recent reports of reductions, BMO expects Vale to produce 336 million tons of iron ore in 2019, compared with expectations of about 400 million tons before the January dam accident.
BMO estimates production at Vale at 379 million tons in 2020 and 378 million tons in 2021.
Recently, BMO raised its estimate of the average price of iron ore supplied to China, on average, this year to $ 78 per tonne by 62% Fe, which is $ 10 per tonne higher than the previous forecast.
According to Sterk, Vale "will earn more money as a result of these mine closures due to higher iron ore prices, although they will entail additional costs."
