Vale chief steps down over deadly dam collapse in Brazil

The chief executive of Vale has resigned following pressure from prosecutors in Brazil investigating the company’s deadly dam burst in January that is likely to have killed more than 300 people.

The move comes after state and federal prosecutors on Friday asked for the “immediate removal” of Fabio Schvartsman and other executives, including the head of its iron ore division Peter Poppinga, from “any functions or activities” at the mining company. 

In a statement, Vale said Mr Schvartsman had offered his “temporary” resignation on Saturday, and the board had “immediately accepted” it. Eduardo de Salles Bartolomeo, the company’s base metals chief, will replace him as interim chief executive.

Lucio Flavio Gallon Cavalli, head of ferrous metals and coal, and Silmar Magalhães Silva, who was in charge of Vale’s operations in south-east Brazil, are other executives who have stepped down. 

Mr Schvartsman’s resignation is a blow for the company and comes just over a month since a dam storing waste from Vale’s Córrego do Feijão mine in the state of Minas Gerais collapsed, killing at least 186 people, most of them company employees. Another 122 people remain missing.

It was the second deadly dam collapse involving Vale, the world’s biggest producer of steelmaking ingredient iron ore, in less than four years. In November 2015, 19 people were killed when dams holding waste material at the Samarco iron ore mine — owned by Vale and Anglo-Australian miner BHP — burst, submerging the town of Mariana, also in the state of Minas Gerais.

In a legal document asking for the removal of Mr Schvartsman over the Córrego do Feijão disaster, police and prosecutors said “evidence” had emerged showing that the company was not only aware the dam had a high risk of rupture, but that Vale also exerted “pressure” on inspectors who certified the dam as safe. One Vale executive allegedly described the dam in an email as “more tenebrous than what I imagine”.

The document also said investigations showed Vale had “adopted a policy of contracting companies” to audit dams with “evident conflict of interests”. They also said managers at Vale “continue to act in prejudicial form, imposing immeasurable risks to society, even after the occurrence that resulted in the deaths of hundreds of people”. Mr Schvartsman was also accused of insensitivity in his testimony before Brazil’s Congress last month, when he referred to Vale as a “Brazilian jewel” that should not be “condemned” for an accident.

On Friday, Alexandre Vidigal de Oliveira, Brazil’s mining secretary, said he had asked for an investigation to be opened into whether Vale had colluded with auditors to misrepresent the safety of the dam.

In its statement late on Saturday, Vale said it was seeking a “transparent and productive relationship with the Brazilian authorities in order to clarify the facts” and “to properly remediate the damages”.

Several Vale employees and workers at German company Tüv Süd, which certified the dam as stable, have already been arrested by prosecutors in Brazil seeking to establish why the dam failed.

Under Mr Schvartsman, who took the helm in May in 2017, Vale became a favourite of stock market investors. He slashed debt and boosted returns to shareholders as Vale took advantage of strong Chinese demand for its high-grade iron ore.

It is not clear what caused the dam breach but speaking in Congress last month, Mr Schvartsman said the accident at Córrego do Feijão had been a surprise. “All the information showed us that there was no imminent risk with that dam, not requiring any actions of the company,” he said. 

Mr Schvartsman has said the stability reports for the dams had been produced by qualified national and international experts. “If these reports, made by people qualified for this, say that the dams are stable and there is no imminent risk, why do we, from within the company, contest that?”

On Saturday, Mr Schvartsman sent a letter to the board asking to be “temporarily” removed from his position, “although with the absolute conviction of the correctness of my conduct”.

Analysts say the disaster could cost Vale billions of dollars in fines and damages. The company has also been forced to cut more than 50m tonnes of iron ore production and seen billions wiped from its market value. Last week Moody’s cut its ratings on Vale’s debt to junk, citing the “significant overhang of litigation exposure and financial liability that is likely to persist in the years to come.”

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