Vale suspends dividends and buybacks after Brazil dam disaster

Vale has suspended its dividend, share buyback programme and bonus payments to top executives in the wake of the deadly dam burst in the Brazilian state of Minas Gerais that has killed at least 58 people.

The Brazilian mining group made the decision at a board meeting on Sunday where it also agreed to set up independent committees to investigate the causes of the disaster and monitor relief efforts in and around the town of Brumadinho.

The suspension of its dividend and buyback shows Vale is bracing itself for a significant financial hit from the accident, one of the worst in the modern history of the mining industry. Hundreds of people are still missing after a torrent of mud spilled from the dam on Friday. The majority of the victims have been identified as Vale employees.

Aided by strong demand for its iron ore from China, Vale was able to pay out billions of dollars last year, boosting its share price and making it a favourite among natural resource investors. At its annual investor day in December Vale pledged to return a minimum of $4 billion between 2019 and 2021.

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"Although Vale's modest levels of debt should protect the company's solvency, we expect the aftermath of this incident will weigh on the company's shares for the foreseeable future," said Tyler Broda, analyst at RBC Capital Markets. – Copyright The Financial Times Limited 2019