Environmental Requirements Halt Vale Operation in Brazil

Vale’s (NYSE:VALE) Onça Puma nickel operations in Brazil’s Pará state have been suspended after a court ruling over environmental concerns.

According to the court ruling, the company must pay US$26.8 million in damages to indigenous tribes in the area around the Onça Puma mine in Pará state that have been affected by river contamination and health issues allegedly caused by Vale’s operations there.

Under the court order by the Federal Regional Court, Vale will not be able to resume operations at the mine until it has met certain environmental requirements, and proves it will mitigate health effects on local indigenous peoples.

Onça Puma, which contributed a little over 10 percent of Vale’s total nickel production in the previous quarter, has produced 17,400 tonnes of nickel in 2018 year-to-date.

According to local media, Vale has said the ruling is nothing new, and “does not bring new fact to the ongoing process.” Last year, the same mine was ordered shut over the same concerns, in an ongoing circle of appeals.

The company has said it will appeal the latest decision, as it says that internal studies had shown that its operations were not harming the environment or local populations in the area.

According to the prosecutors in the case, Vale’s operations are impacting the availability of food and water for members of the Xikrin and Kayapó tribes.

Under the ruling, for operations to resume, the company must prove it has met its environmental and social obligations, which includes compensation for the tribes.

Vale is one of the world’s largest nickel producers, and so far this year across its Canadian, Indonesian, New Caledonian and Brazilian operations has mined 180,600 tonnes of the metal, which is having its value increasingly affected by the booming lithium-ion battery sector.

As of Friday (November 16), nickel was valued at US$11,257 per tonne on the London Metal Exchange.

The price of the metal is well down from highs reached earlier this year at US$15,745, but above the lows of 2015-17 that initially caused Vale to either seek a partner for its VNC operations in New Caledonia, or shutter them entirely. A decision on the new Caledonian operations could potentially be announced before the end of the year.

On Monday (November 19) on the NYSE, Vale was trading at US$14.72, down 1.67 percent.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.