Second “imminent” Vale dam collapse will sweep these ASX shares off their feet

ASX iron ore shares could get a giant second tailwind on the back of a potential looming disaster
The post Second “imminent” Vale dam collapse will sweep these ASX shares off their feet appeared first on The Motley Fool Australia. –

ASX iron ore shares have outperformed the market on Friday on a broker upgrade, but another possible dam collapse at Vale SA (NYSE: VALE) could send them skyrocketing.

The BHP Group Ltd (ASX: BHP) share price and Fortescue Metals Group Limited (ASX: FMG) share price jumped by over 1% today.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) inched up 0.1% to 7,312 – a new record high.

Vale’s new dam threat a bigger catalyst for ASX miners

ASX iron ore miners were bolstered after Macquarie Group Ltd (ASX: MQG) upgraded its price forecast for the commodity.

But the rally triggered by the broker may pale to the uplift the sector will experience if Brazilian authorities are right.

Vale’s decommissioned Xingu dam is at “imminent risk of collapsing” warned the Regional Labour Department for the south eastern Brazilian state of Minas Gerais, reported Reuters.

Second major failing will boost iron ore prices

The warning brings back bad memories of the Brumadinho dam disaster on 25 January 2019. The tragedy killed 270 people and cost the mine owners US$7 billion, and Vale copped the brunt of the blame and payout.

A breach in the Xingu tailings dam killed 19 people in 2015. It had its risk level elevated last October by Brazil’s National Mining Agency, according to Reuters.

The Xingu dam may have stopped receiving tailings, or waste from mining operations, in 1998. But it’s at risk of liquefaction, a process where water weakens the walls and barriers or the dam.

Bad memories reawakened

It’s the same reason that caused the Brumadinho dam to collapse with devastating consequences.

However, Vale contradicted the official warning. It said the Xingu dam was not at “imminent risk” in a regulatory filing on Friday.

The Brazilian iron ore giant only said that it had halted production at its nearby Timbopeba mine and part of its Alegria mine. This was after government officials ordered the evacuation of an area around Xingu.

Brazil’s iron ore export could be hit again

But if the dam collapses, it could very well impact on Vale’s iron ore exports at a time when it’s struggling to meet production guidance.

The COVID-19 pandemic that’s raging across Brazil is already hampering exports from the country and contributing to record iron ore prices.

Vale could give second wind for ASX miners

Vale’s Aussie competitors like Rio Tinto Limited (ASX: RIO) and BHP are reaping the benefits and are flushed with cash. Investors are expecting generous dividends from both these ASX shares as a result and if Xingu results in further production cuts, that will give the Aussie miners an extra big tailwind.

Vale will have to meet a number of technical conditions before it can get permission to reopen the area.

ASX investors will be hoping that Vale will take a little longer to achieve those conditions.

The post Second “imminent” Vale dam collapse will sweep these ASX shares off their feet appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

Top brokers name 3 ASX shares to sell next week

These were the best performing ASX 200 shares last week

These were the worst performing ASX 200 shares last week

What moved the Stockland (ASX:SGP) share price this week?
Here are the 3 most traded ASX 200 shares today

Brendon Lau owns shares of BHP Group Ltd, Fortescue Metals Group Ltd and Rio Tinto Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!