Brazilian rescuers have found seven bodies of people who were swept away by a burst tailings dam, and more are expected to be found, with about 200 people still missing, Brumadinho Mayor Avimar de Melo Barcelos told TV channel GloboNews on Friday.

The owner of the iron ore mine, Vale SA, said 300 workers were in the area at the time of the disaster, mostly having lunch, and 100 have been accounted for so far.

"Our main worry now is to quickly find out where the missing people are," fire brigade spokesperson Pedro Aihara said on GloboNews. He said two lower dams gave way after the bigger one burst.

Scores of people were trapped in nearby areas flooded by the river of sludge released by the dam failure.

U.S.-listed shares of Vale, which also operates mines in Canada, tumbled as much as 10 per cent after the incident, the second major accident at a tailings dam in Minas Gerais in the past three years.

The iron ore mining region is still recovering from the collapse of a larger dam in 2015 that killed 19 people. That dam, owned by the Samarco Mineracao SA venture between Vale and BHP Billiton, buried local homes in Brazil's worst environmental disaster.

The mud from Friday's dam burst also hit parts of the local community Vila Forteco, near the town of Brumadinho, authorities said. Families have been told to evacuate homes in low-lying areas, they said.

An aerial view shows flooding triggered by the dam collapse. (Bruno Correia/Nitro via Associated Press)

Helicopters plucked people covered in mud from the disaster area, including a woman with a fractured hip who was among eight injured people taken to hospital, officials said.

Television reports showed people running away as the dam broke and nearby fields with bean crops destroyed by packed mud.

Aihara said the torrent of mud stopped just short of the local Paraopeba river, a tributary of Brazil's Sao Francisco river.