The US financial watchdog has charged Brazilian iron ore producer Vale with making false claims about safety before one of the worst disasters in the history of the mining industry.
The Securities and Exchange Commission said the miner, which is listed in São Paulo and New York, had manipulated dam safety audits, obtained numerous fraudulent stability certificates and regularly misled local governments, communities and investors about the safety of a dam that collapsed in 2019 killing 270 people.
“While allegedly concealing the environmental and economic risks posed by its dam, Vale misled investors and raised more than $1bn in our debt markets while its securities actively traded on the New York Stock Exchange,” said Melissa Hodgman, the SEC’s associate director of enforcement, in statement. The SEC is seeking civil penalties and a disgorgement award.
Its complaint, which has been filed in a New York court, is a setback for Vale. The miner has been trying to rebuild its reputation and relations with local communities in the wake of the disaster and is working to decommission dams built to the same design as the one that burst.
Two hundred and seventy people — mainly Vale employees and contractors — died when almost 12mn cubic metres of mining waste spewed from a storage dam near the town of Brumadinho in south-east Brazil. The disaster at the Córrego do Feijão mine came four years after a similar event at a nearby mine jointly owned by Vale and BHP.
In its complaint, the SEC alleges that “for years” Vale knew that the Brumadinho dam, which was built to contain potentially toxic byproducts from mining operations, did not meet internationally recognised standards for dam safety.
“However, Vale’s public sustainability reports and other public filings fraudulently assured investors that the company adhered to the ‘strictest international practices’ in evaluating dam safety and that 100 per cent of its dams were certified to be in stable condition.”
In a statement Vale said it would “vigorously” defend itself against the SEC charges, which it denies.
“The company reiterates the commitment it made right after the rupture of the dam . . . to the remediation and compensation of the damage cased by this event,” it said. Last year, Vale agreed a $7bn settlement with authorities in Brazil over the disaster.
Under the Biden administration, the SEC has increased its focus on environmental, social and governance (ESG) disclosures, setting up a task force in March 2021 charged with identifying gaps or misleading statements.
“Many investors rely on ESG disclosures like those contained in Vale’s annual sustainability reports and other public filings to make informed investment decisions,” said Gurbir Grewal, director of the SEC’s Division of Enforcement.
“By allegedly manipulating those disclosures, Vale compounded the social and environmental harm caused by the Brumadinho dam’s tragic collapse and undermined investors’ ability to evaluate the risks posed by Vale’s securities.”
The SEC announcement came after Vale posted first-quarter net income of $4.46bn, down a fifth on the same period in 2021, but beating analyst expectations. The miner also unveiled its biggest share buyback with plans to repurchase 500mn shares — roughly 10 per cent of its outstanding equity.
Vale’s shares were more than 2 per cent higher in Thursday afternoon trading in New York, giving the company a market value of more than $80bn.
The dam that burst at Brumadinho was 86m high. It was built in 1976 by Ferteco Mineração — a company acquired by Vale in 2001 — using an “upstream design” whereby waste mining slurry was pumped into a storage pond behind a starter mud wall. New upstream tailings dams have now been banned in Brazil.
