Moody's may downgrade Vale

Moody's Investors Service said it placed under review for downgrade Vale SA's Baa3 senior unsecured ratings, along with the ratings on the debt issues of Vale Overseas Ltd. that are fully and unconditionally guaranteed by Vale.

Moody's also placed under review for downgrade the Ba1 senior unsecured ratings of Vale Canada Ltd.

Also on downgrade review include Vale's Baa3/Aaa.br issuer rating and the Baa3/Aaa.br rating on its senior unsecured local notes.

The downgrade review follows a major accident Jan. 25 with the company's tailings dam at the Corrego do Feijão mine in Brumadinho, state of Minas Gerais, Moody's explained.

The dam collapsed, paralyzing Vale's mine operations in the area while leading to a large number of fatalities and environmental damage, the agency said.

The disaster's direct economic impact is limited since the Feijão mine site accounts for less than 2% of Vale's total 390 million annual iron ore output, Moody's said.

The company estimates that the environmental disruption will be smaller than observed after the Samarco accident, given the much lower volume of tailings leaked, the agency noted.

But the social damage is far more serious with the number of fatalities already surpassing 60, more than the 19 fatalities observed in Samarco's case. The number of fatalities may reach a much larger number, Moody's added.

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