Brazil's iron ore output faces potential outages after dam warnings were triggered in the Corrego do Feijao Mine region in Brumadinho just days after a nearby tailings barrage suffered a catastrophic failure, producer Vale reported early Sunday.
"This dam forms part of the Brumadinho complex," Vale said on its website. "Authorities have been advised and, as a precautionary measure, the community in the region is being moved."
Vale, the world's largest producer of iron ore, said it continues to monitor the situation at Dam 6 and is using pumps to drain water. The company also said civil defense has lowered its warning level enough to allow people in the local area to return to their homes. The latest alert follows the failure of Vale's iron ore tailings Dam 1, which burst on Friday afternoon at the same mining complex in Minas Gerais state, southeastern Brazil.
Such mining accidents typically lead to production halts and inspections. The current problems impact Vale's crucial southern system iron ore operation in Brazil. As such, some supply disruption is expected.
In November 2015, production of iron ore and pellets was halted at Samarco -- also in Minas Gerais state -- a joint venture owned by Vale and BHP. In this instance, a dam bursting caused one of Brazil's worst environmental disasters with a mud slide claiming 19 lives and causing production disruptions, which is still on going.
The latest failures could further delay work to restart output from Samarco.
"At the very least, we believe the event could conjure up doubt on the timing and/or likelihood of the return of Samarco," Cowen Equity researchers said in a Friday note.
"Samarco's absence (previously 30.5 million mt of capacity) has restricted pellet supply contributing to strong pellet premium pricing in the Atlantic Basin over the past few years," Cowen noted.
