Vale Swings to a Loss After Impairment Charges on Mines

By Jeffrey T. Lewis

SÃO PAULO -- Brazilian iron-ore miner Vale SA posted a net loss in the fourth quarter after taking impairment charges on a nickel mine in New Caledonia and a coal mine in Mozambique.

Vale reported a fourth quarter loss of $1.56 billion, compared with income of $3.79 billion a year earlier and income of $1.65 billion in the third quarter of 2019. Adjusted earnings before interest, taxes depreciation and amortization reached $3.54 billion, down from $4.47 billion a year earlier.

Revenue rose to $9.96 billion from $9.81 billion in the fourth quarter of 2018.

The company said in November it was analyzing the performance of the nickel mine in the Pacific Ocean island of New Caledonia. Vale took an impairment charge of $2.5 billion on the operation in the fourth quarter, citing challenging issues during 2019 mostly related to production and processing.

The company wrote down another $1.7 billion in the quarter for the coal mine in Mozambique and recorded $898 million in charges related to the tailings dam collapse in the small, rural town of Brumadinho in January of last year.

Vale is still working to re-open some mines that were shut down after the dam failed, sending a wave of thick sludge over nearby offices and a Vale lunch facility and killing 270 people. Shortly after the tragedy, the company closed operations near similar dams around Brazil, while authorities ordered the closing of more of Vale's mines.

Some of those mines restarted last year, and Vale said it expects more to open this year. Vale produced 312.5 million metric tons of iron ore and pellets in 2019, squeaking past the upper end of its guidance of 307 million metric tons to 312 million tons. It forecast output of 340 million tons to 355 million tons this year, after reducing its guidance for the first quarter.

"They say they'll catch up in the following quarters," said Yuri Pereira, an analyst at XP Investimentos in São Paulo. "But even if the company can deliver the production, we think sales will come in a bit less" than the increase in output because Vale will also be replenishing stocks it ran down in the aftermath of the disaster in Brumadinho.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

(END) Dow Jones Newswires

February 20, 2020 18:47 ET (23:47 GMT)

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