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Moody's downgrades Vale credit rating to junk bond status

Company reeling from deadly Brazil dam collapse that killed hundreds
Under financial stress and with managers facing criminal charges, the credit rating agency Moody's downgraded Vale Ltd.'s credit rating Wednesday to junk bond status. (File)

Under financial stress and with managers facing criminal charges, Vale Ltd.'s credit rating was downgraded on Wednesday, Feb. 27 to junk bond status by the credit rating agency Moody's.

Vale Canada Ltd. also received a downgrade, with a negative outlook for all Vale affiliates, the agency said.

“The outlook for all ratings is negative,” Moody’s said. “These rating actions conclude the review for possible downgrade for Vale's ratings initiated on 29 January, 2019 in response to the collapse of the tailings dam at the Córrego do Feijão mine in the city of Brumadinho, state of Minas Gerais.”

The Jan. 29 review notice said the impact to Vale – the world's largest producer of iron ore – is expected to be severe. Wednesday's news sent shares tumbling by 1.6 per cent.

“While the extent of the damage is still unpredictable, it will have a profound impact on Vale in all aspects,” Moody's reported. “It is difficult to measure the potential environmental, administrative, criminal and civil liabilities that the company could face, as well as how its reputation could be affected.”

Also Wednesday, eight Vale employees arrested Feb. 15 after the January disaster were released from prison in Brazil.

While Vale has said the Brumadinho dam was inspected recently and met safety standards, one of the inspectors of the dam said in early February he was pressured to certify it was structurally sound.

Also this week, the International Council on Mining and Metals, a London-based industry group representing 27 major companies, said it would set an independent panel of experts in charge of developing a global standard for tailings facilities to be followed by its members.

The rules will be based on a review of current best practices in the industry, “including key aspects such as a global and transparent consequence-based tailings facility classification system, with specific requirements for each level,” said the story from

“The standard would also establish a scheme for credible, independent reviews of tailings facilities, as well as requirements for emergency planning and preparedness.”

Currently, there are no established global standards defining what a tailings dam is, how to build one and how to care for it after it is decommissioned, the story said.

The group includes major industry names such as BHP, Barrick Gold, Anglo American, Newmont Mining, Glencore, Newcrest and Vale. 

Following the collapse, a court ordered halt to a mine responsible for nearly nine per cent of Vale's iron ore output. 

At market close Wednesday, Vale’s shares were trading at US$12.50, down 16 per cent since the tragedy.