Brazil’s Vale has announced they have made available $539 million to cover potential losses related to a tax and royalty dispute with the government.
The extra provision was made after Vale decided it will likely lose an attempt to deduct the cost of transportation from the value used to determine royalty payments on minerals
Vale has set an amount of 1.41 billion reais against the government's claim.
Although the amount is not enough to cover the full claim, it is a fair amount already set aside.
A commodities boom over the past decade prompted Brazil's federal, state and municipal governments to seek greater control and revenue from natural resources. The government has signaled that it hopes to resolve the dispute with Vale over royalties by the end of the month.
An Analyst with Morgan Stanley & Co, said, "We believe Vale's decision to provision a larger amount related to a dispute on past royalties suggest we are getting closer to a settlement,"
"While we do not think the charge comes as a total surprise to the market, the number does seem on the low end of recent estimates," he said, adding that he thinks a potential settlement could be "marginally positive" for the stock.
Vale preferred shares, the company's most-traded class of stock, closed down 2.93 percent at 32.12 reais in Sao Paulo, its biggest decline in nearly two weeks. The stock, which has fallen to its lowest levels in nearly three years, is on track for its worst decline in three weeks.