A Brazilian federal court on Friday ordered Vale, the world's number one nickel and iron ore producer, to halt activity at its Onça Puma nickel mine in northwestern Brazil.

The judge said operations at the mine which produces nearly 9% of Vale's total production of the steelmaking raw material should cease until the Rio de Janeiro-based company sorts out compensation to indigenous communities in the region, reports Reuters.

The court also ordered the company to deposit 1 million reais ($287,000) for each indigenous village in the area in Para state until a new payment program for the local communities can be implemented.

They are being asked by indigenous peoples to finance services that are properly the responsibility of Brazil's federal and state governments

Protestors have been disrupting operations by blocking Vale's railway line from its expansive Carajas iron ore and nickel mining complex in the state.

Vale has said in the past that "despite working closely with native groups and supporting cultural and social projects, they are being asked by indigenous peoples to finance services that are properly the responsibility of Brazil's federal and state governments, not Vale."

Vale overtook Russia's Norilsk Nickel last year to become the world's largest nickel producer in terms of output with mines in its home base, Canada, Indonesia, and New Caledonia producing some 290,000 tonnes a year.

Vale's dominant position in nickel mining is largely the result of its acquisition in 2006 of Canada's Inco for $20 billion with base metal operations centred in the city of Sudbury, Ontario.

In April Vale put on hold plans to spin off its nickel operations and sell up to a 40% stake in the business due to the depressed nickel price. The company was aiming for a $30 billion to $40 billion valuation for the base metals group at the time.

Nickel was last trading at around the $10,500 a tonne mark after dropping to levels last seen at the height of the global financial crisis earlier the week following the devaluation of the Chinese currency. China sucks in more than 40% of the world's nickel production.

• [Editor:Juan]