Vale CEO sees stronger Q3 after Brazil dam burst charges

RIO DE JANEIRO/SAO PAULO: Brazil's Vale SA is expecting its results to improve in the third quarter after the company surprised analysts by posting a quarterly loss because of writedowns related to a deadly dam burst in January, its chief financial officer said on Thursday

Vale has been trying to ramp up production after several of its mines were shuttered as prosecutors and regulators scrambled to avoid a recurrence of the collapse of the Brumadinho dam, which killed 248 people.

"We hope the second quarter was transitional and that we're going to have quite a strong third quarter to support reparation efforts as well as future shareholder returns," Luciano Siani told analysts in a conference call.

On Wednesday, Vale reported a $133 million quarterly loss, confounding analysts' expectations of a $2.84 billion profit for the period.

Shares were down 1.2% in early afternoon trading in Sao Paulo.

The weak results were in contrast to those of other big mining companies like Rio Tinto and Anglo American , which in recent weeks have reported blockbuster quarters, helped in part by a spike in iron ore prices this year fueled by Vale's woes. Both substantially raised their payouts, with Rio Tinto announcing a record one earlier on Thursday.

Vale Chief Executive Eduardo Bartolomeo emphasized during the call that the company was trying to focus on safety and reconstruction and that it was too early to talk about resumption of dividend payments.

Speaking a day after Vale announced $2 billion in charges related to both Brumadinho and a prior dam disaster at Samarco, a joint venture with BHP Group, Siani added that the company hopes to wrap up a global compensation settlement for victims of the dam burst by year-end.

It remains unclear whether Vale's writedowns, which now total some $7 billion, would cover every part of a victims' settlement, but Siani suggested that further charges would be minimal.

"From a qualitative point of view, we already have a good idea of the scope of reparations and environmental compensation and we're using our best estimate," he said.

He reiterated Vale's prior forecast for a resumption of production at Samarco, closed since 2015, in the second half of next year.

Siani said Vale now has an annual iron ore capacity of between 340 million and 345 million tonnes, and said he expected strong copper and nickel output in the second half of the year.