Brazilian miner Vale has halted operations at units that analysts say account for about 2% of its iron-ore production outlook for this year after water overflowed at the sites, a securities filing showed late on Monday.

Vale said the city of Congonhas had ordered the suspension of operating permits for its Fabrica and Viga units and the adoption of emergency and control measures following the overflows, which also affected a site owned by steelmaker CSN and damaged a river, according to local authorities.

The overflows on Sunday were reported in two nearby but separate areas hit by heavy rain in Brazil's Minas Gerais state.

Vale reaffirmed its 2026 iron-ore production guidance of 335-million to 345-million metric tons, but analysts said the suspension was negative, as the units have an annual combined estimated output of around 8-million tons.

SHORT-TERM VOLATILITY

RBC Europe stressed in a note to clients that the causes behind the overflow, the potential length of the license suspension and remediation costs remained unclear.

Vale's shares closed down more than 2% on Monday.

Itau BBA analysts said the events could impact Vale's short-term share performance, but argued this was "primarily due to regulatory scrutiny and headline risk rather than a reassessment of structural operational risk."

Capacity exposure remains manageable, they added, noting that the run rate in the first quarter is usually slower due to challenging rainfall conditions.

INTENSE SCRUTINY AFTER RECENT DISASTERS

Vale has faced intense scrutiny since two major dam disasters in Minas Gerais in the 2010s.

Sunday's incidents occurred on the anniversary of the 2019 burst of a dam in Brumadinho, which unleashed an avalanche of muddy mining waste, killing an estimated 270 people while ravaging local rivers and communities.

Vale said there was no connection between the latest accident and the tailings dams it has in the region, which it described as "in stable and safe conditions," while noting that no injuries were reported.

"The company has suspended operations at the mentioned units and will respond in a timely manner to the required actions, fully cooperating with the competent authorities," it said.