Australian iron ore miners' prices set to jump following Vale disasterBy Luke HousegoUpdated 29 Jan 2019 — 7:50 PM,first published at 5:47 PMSaveShareBHP, Rio Tinto and Fortescue are among the Australian iron ore producers that may reap higher prices if Brazilian authorities order a halt to iron ore miner Vale's operations in response to the fatal Feijao dam collapse in which 65 people have been confirmed dead so far.Noting the tragedy follows the 2015 dam collapse at the joint Vale and BHP Samarco mine that killed 19 people, analysts say that one possible scenario is for authorities to order Vale to halt all operations while the disaster is investigated.UBS research analyst Lachlan Shaw said that following the recent disaster, in which more than 300 people were still reported missing, it was foreseeable that Brazilian authorities might require the miner to demonstrate there were no immediate threats at any of its other operations.With almost 300 people still missing, the human toll of the dam collapse is expected to rise. Victor Moriyama"There's clearly a set of issues that the authorities in Brazil will be looking to address and this is where there are broader question marks," he said."There may be a scenario where the authorities require Vale to stop operations at that site indefinitely; that seems quite likely.Advertisement"Once you get to a scenario of the whole mine complex being shut down and the company having to prove to the regulator that the dams are safe, that's when you start to see meaningful tightening of the iron ore market," Mr Shaw said.He said to lose that volume would be material to the global iron ore market and Australian iron ore producers might see a rise in prices as a result."If you've got a major supplier that's not able to supply as much as they were previously, that demand needs to shift to another source of iron ore, and, certainly, the Australian producers should benefit from that. From that point of view, it should be a positive for the Australian producers."BHP, Rio Tinto and Fortescue share prices closed up 2.09 per cent, 3.8 per cent and 4.79 per cent respectively on Tuesday.'Constrained supply'Morgans chief economist Michael Know said supply in the iron ore market was already constrained. He said a ramp-up in infrastructure spending in China to ward off an economic slowdown had lifted demand for iron ore.The fallout from the recent dam collapse also could affect the ongoing settlement negotiations with the Samarco joint venture, which is equally owned by BHP and Vale.Prosecutor Jose Adercio Sampaio said that depending on investigations into the recent disaster, his taskforce's handling of the $41 billion case against Samarco might change.The case is currently suspended amid negotiations for a potential settlement. A restart at Samarco Mineracao SA depends on talks with prosecutors on building a new tailing dam system and a restructuring of the company's debt, executives at BHP and Vale have said.According to an announcement by BHP on Tuesday, Samarco's operations will restart only if it is safe, economically viable and has the support of the community and regulators."In terms of remediation, it's clearly a very sensitive time to be trying to resolve it. So now it's just another thing to try to work through," Andy Forster, senior investment officer with Argo Investments in Sydney, said.However, the fallout for BHP was likely to be limited."It's obviously an ongoing issue – while they do still have a minority interest in Samarco, they wear these potential liabilities when they occur," Jason Teh, chief investment officer at Vertium Asset Management in Sydney, said."Samarco is quite small in terms of BHP's operations. It's a small proportion of its total business. BHP today has a pretty good balance sheet for any potential liabilities," he said.With Reuters
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