Vale S.A. and the Brazilian iron mining company’s CEO and CFO are staring down a proposed class action filed by shareholders after stock prices plummeted in the wake of a fatal dam burst.
The January 25, 2019 collapse of Vale’s tailings dam at its Corrego do Feijão iron ore mine in Brumadinho, Brazil is the company’s second catastrophe since 2015, when another dam failure flooded communities with mining waste and resulted in 19 fatalities, according to the lawsuit. After the first dam burst, the suit says, Vale attested in an April 2018 SEC filing to its purported commitment to “keeping its workplace safe and minimizing environmental damage.” In the SEC document, the case says, the company published a list of its sustainability measures and assured shareholders that it adheres to Brazil’s mining and environmental regulations by routinely inspecting its dams.
The suit alleges that shareholders were misled by the defendants’ representations as the company ultimately “failed to adequately assess the risk and damage potential of a dam breach at its Feijão iron ore mine” and did not implement effective emergency action plans. The latest dam failure reportedly killed at least 58 people, and hundreds of others remain missing, the case says, adding that the death toll is so high “in part because the dam’s alarm system failed at the time of the accident.”
The proposed class action seeks to compensate shareholders for damages incurred as a result of the company’s steep decline in market value. According to the case, Vale stock prices fell by over eight percent on the day of the dam failure. BBC News reports that several Vale officials have since been arrested as part of an investigation into the disaster and that protestors have gathered outside the company’s headquarters. As of Monday, the company’s share price on the Brazilian stock market has reportedly fallen by nearly 25 percent.