Brazilian mining company Vale has successfully completed a US$3bn syndicated revolving credit facility (RCF) involving 16 banks, following the Brumadinho dam disaster which killed more than 250 people in January 2019 and resulted in Vale putting its plans to refinance debt on hold.
The five-year facility was arranged by a syndicate comprised of 16 banks and led by Citi, Crédit Agricole, MUFG and SMBC. Other banks that took part in the facility include: Banco do Brasil, Bank of America, Bank of China, Bank of Montreal, Barclays, HSBC, JP Morgan, Mizuho, RBC, Standard Chartered, The Bank of Nova Scotia and The Toronto-Dominion Bank.
A spokesperson for Vale confirms to GTR that the new RCF signed in December replaces a previous US$3bn facility, which was signed in 2015 and had a five-year tenor.
A statement from Vale adds that the total available amount the company has in revolving credit facilities is US$5bn, as it already has an existing agreement for US$2bn. These facilities are liquidity sources for Vale and can be used at any time throughout their duration – US$2bn until 2022 and US$3bn until 2024. Vale says that the RCF acts as a “buffer”, enabling more efficient cash management.
The RCF, signed in 2015, was arranged by a syndicate comprised of 24 lenders and led by BNP Paribas, Citi, Crédit Agricole and SMBC. ANZ, Bank of America, Bank of Montreal, Barclays, Canadian Imperial Bank of Commerce, DZ Bank, Goldman Sachs, HSBC, ICBC, Intesa San Paolo, JP Morgan, Mizuho, Morgan Stanley, MUFG, RBC, Santander, Société Générale, Standard Chartered, TD Securities and The Bank of Nova Scotia, were all involved in the facility. This RCF replaced a five-year US$3bn syndicated loan, signed in 2011 which was also for cash management purposes.
Brumadinho dam disaster
The news follows Vale’s dam disaster which took the lives of more than 250 people in January 2019. Dam I at the Córrego do Feijão iron ore mine in Brazil collapsed, triggering more than 10 million cubic metres of material to free flow and flatten the mine’s adjacent offices.
A report commissioned by Vale revealed that the dam collapse happened in less than 10 seconds, concluding that the failure was the result of liquefaction. Tailings are held in mining dams and are a mixture of sand-sized and finer silt particles left over after the process of separating the valuable fraction from the uneconomic fraction of an ore; while these particles are free-draining, when saturated they are vulnerable to liquefaction. Vale are to pay out more than US$100mn in moral damages and US$186,000 to each of the close relatives of those killed in the catastrophe. Vale’s chief executive, Fabio Schvartsman, who joined the company in 2017, stepped down in March following the disaster.
It is not the first catastrophe the company has been involved in. The Brumadinho dam failure occurred just over three years after the Mariana dam disaster in November 2015, which killed 19 people and demolished the village of Bento Rodrigues. The collapse of the dam at the Samarco mine, owned equally by Vale and BHP Billiton, in Brazil was due to design flaws which encouraged liquefaction, a report later revealed.
The latest RCF sees the mining giant return to the global loans market, only one year since the Brumadinho incident, showcasing lenders’ appetite to finance large multinational corporations in Latin America, of which there are only a handful.