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MarketScreener Homepage  >  Equities  >  Bolsa de Valores de Sao Paulo  >  Vale S.A.    VALE3   BRVALEACNOR0

VALE S.A.

(VALE3)
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Vale S A : 10/28/2020 Vale_IFRS_3Q20_i.pdf

10/28/2020 | 06:15pm EST

Loading ship at Ponta da Madeira Maritime Port, São Luís, MA, Brazil.

VALE'S PERFORMANCE IN 3Q20

www.vale.com

vale.ri@vale.com

Tel.: (55 21) 3485-3900

Investor Relations Department

Ivan Fadel

André Werner

Mariana Rocha

Samir Bassil

Conference call and webcast on Thursday, October 29th

  • Portuguese (non-translated) at 10:00 a.m. Brasilia time
  • English at 12:00 p.m. Brasilia time (11:00 a.m. New York time, 3:00 p.m. London time).

Brazil: (55 11) 3181-8565 or 4210-1803

USA: (1 412) 717-9627 or toll free (1 844) 204-8942

U.K.: (44 20) 3795-9972

Access code: VALE

Except where otherwise indicated the operational and financial information in this release is based on the consolidated figures in accordance with IFRS. Our quarterly financial statements are reviewed by the company's independent auditors. The main subsidiaries that are consolidated are the following: Companhia Portuária da Baía de Sepetiba, Mineração Corumbaense Reunida S.A., Minerações Brasileiras Reunidas S.A. PT Vale Indonesia Tbk, Salobo Metais S.A, Vale Holdings B.V., Vale Canada Limited, Vale International S.A., Vale Manganês S.A., Vale Malaysia Minerals Sdn. Bhd., Vale Moçambique S.A., Vale Nouvelle-Calédonie SAS, Vale Oman Pelletizing Company LLC and Vale Oman Distribution Center LLC.

This press release may include statements about Vale's current expectations about future events or results (forward-looking statements). Many of those forward-looking statements can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" "will" and "potential," among others. All forward-looking statements involve various risks and uncertainties. Vale cannot guarantee that these statements will prove correct. These risks and uncertainties include, among others, factors related to: (a) the countries where Vale operates, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. Vale cautions you that actual results may differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. Vale undertakes no obligation to publicly update or revise any forward- looking statement, whether as a result of new information or future events or for any other reason. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports that Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM) and, in particular, the factors discussed under "Forward-Looking Statements" and "Risk Factors" in Vale's annual report on Form 20-F.

Cautionary Note to U.S. Investors - The SEC permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We present certain information in this presentation, including 'measured resources,' 'indicated resources,' 'inferred resources,' 'geologic resources', which would not be permitted in an SEC filing. These materials are not proven or probable reserves, as defined by the SEC, and we cannot assure you that these materials will be converted into proven or probable reserves, as defined by the SEC. U.S. Investors should consider closely the disclosure in our Annual Report on Form 20-K, which may be obtained from us, from our website or at http://us.sec.gov/edgar.shtml.

The information contained in this press release includes financial measures that are not prepared in accordance with IFRS. These non-IFRS measures differ from the most directly comparable measures determined under IFRS, but we have not presented a reconciliation to the most directly comparable IFRS measures, because the non-IFRS measures are forward-looking and a reconciliation cannot be prepared without unreasonable effort.

Vale's 3Q20 in review

Rio de Janeiro, October 28th, 2020 - "At the same time that we remain firm in our commitment to Brumadinho full reparation, in this quarter we achieved an important milestone in our production stabilization, with an all-time production record in the Northern System, a major step towards the de-risking of our company", commented Eduardo Bartolomeo, Chief

Executive Officer.

The Integral Reparation Plan has evolved

The reparation of Brumadinho is a priority for Vale. In August, search and rescue efforts were resumed after a five-monthsuspension on the wake of the COVID-19pandemic. We continue to support the Minas Gerais Fire Department in the search for 11 missing victims.

The indemnification process continues, making use of videoconferences during the pandemic. More than 8,200 people are related to indemnification agreements entered into by Vale, an increase of about 600 people since the 2Q20 Performance Report release.

Water supply initiatives - relevant to the reparation efforts - have also progressed. This year, Vale concluded the tailings containment structures at the Paraopeba river, cleaning over 68,500 m3 of sediments, about 30% of the total, through the dredging system installed. We also completed the water connection between the Paraobepa and the Rio das Velhas rivers and the water main to ensure the supply to the municipality of Pará de Minas, with a population close to 100,000 people. The new water pipeline for the Paraopeba river is 50% concluded and will be delivered by March 2021, as the COVID-19pandemic impacted its works.

Essential social infrastructure works were completed, with the delivery of a daycare facility and a health care unit to communities in Parque da Cachoeira1, and a school for 400 students to the community of Macacos2. In Brumadinho, we are renovating a multi-sportgymnasium complex and all 16 public schools. In September, the Integral Reparation Plan for Brumadinho, a solid plan for damage recovery and support to the city's development, was submitted to the appreciation of the municipal authority. In Antônio Pereira3, a public consultation led to 711 comments on the compensation plan, whose implementation is expected to start in early 2021.

Vale is committed to be fully compliant with the recommendations made by the

Extraordinary Independent Consulting Committee for Support and Reparation4 by 2021.

To date, the company has already addressed 57% of those recommendations, and that progress has been monitored by the committee. Vale is also in process of hiring an external and independent assessment for an annual review of the reparation progress.

  1. Parque da Cachoeira is a district of the municipality of Brumadinho, Minas Gerais.
  2. Macacos is a community of the municipality of Nova Lima, Minas Gerais.
  3. Antônio Pereira is community of the municipality of Ouro Preto, Minas Gerais.
  4. Final report issued in February 2020.

3

Our commitment to safety and operational excellence advances

Vale's dam management practices continue to evolve, with significant improvements already in place:

  • The new Tailings & Dams Management System is under implementation, in compliance with the ICMM standard, launched in August 2020. Vale's initial assessment indicates a level of adherence to the ICMM recommendations close to 60%, and the company expects to be fully compliant by 2021.
  • In Risk Management, the risk identification and treatment program, HIRA, continues to expand. Since 2019, 59 operational units were assessed, 42 of those only in 2020. Until the end of the year, other 12 operational units will be assessed. The HIRA methodology has also been adapted to assess Vale's projects: one pilot was completed in July and other three projects will be assessed this year. Finally, since August 2020, the methodology has also been applied to our dams, with two pilots underway on structures in Sudbury and Long Harbour. Vale expects to have all dam portfolio covered by HIRA by the end of 2022.
  • The Engineer of Record has already provided solid results this year, and is implemented for 100% of dams serving the Ferrous Minerals Business in Brazil - that means 935 dams, dikes and drained stacks.

The dam de-characterization plan has evolved to comprise a total of 29 geotechnical structures, as disclosed in September 2020.

  • The de-characterization of Fernandinho dam is expected to be completed in the coming months. The works related to Pondes de Rejeitos dam were completed in September, pending an assessment of the de-characterization by the National Mining Agency.
  • The back-up dam for Forquilhas and Grupo structures had phase 1 completed in September 2020, reaching the quota 949, or a height of 77 metres. Phase 2 will be completed in 2Q21, with total height of 93 metres.
  • As for the Sul Superior dam de-characterization, it had infrastructure works started in 3Q20, in preparation for the start of tailings removal.

Stabilization of iron ore production

The Northern System achieved a quarterly production record of 56.9 Mt while the Southern and Southeastern Systems improved performance across operating units, notably in the Itabira Complex and Timbopeba site that ran for a full quarter after restarting in June, and with the resumption at Fazendão mine in July.

For more details, please refer to our 3Q20 Sales and Production Report.

5 Geotechnical structures reported to the National Mining Agency and framed under the terms of the Ordinance No. 70.389, set by the agency.

4

Vale ESG approach

Environmental

In July, Vale signed a non-binding agreement with Kobe Steel and Mitsui for the creation of a new venture to deliver low CO2 metallics to the global market and new solutions to our clients. Additionally, as part of our PowerShift program to replace Vale's energy sources with clean ones, we developed, in partnership with Progress Rail, a new 100% electric, battery-powered switchyard locomotive, which is under tests. The equipment also reduces noise emission, which mitigates impacts on communities close to our operations. Also, Vale is installing at the Ilha Guaíba Port Terminal one of the country's largest lithium-ion battery energy storage systems to supply electrical demand as a strategy to replace fossil fuels, becoming operational by 1Q21.

In September, during Amazon Day, we disclosed our manifesto reaffirming our commitment to promote sustainable development in the Amazon region supporting indigenous culture, traditional communities and the fight against mining and illegal logging. We also endorse the inclusion of forests in carbon markets and environmental protection and restoration.

Social

We recognize the importance of the community's perception and the grievance mechanisms, serving to anticipate risks, impacts and possible conflicts and rights violations. From 2019 to 3Q20, we registered 22,300 community interactions in our channels globally, and we responded to 97% of them. During 2020, Vale integrated its grievance channels in Brazil and for 2021, will roll out the same initiative for the rest of its operations.

Vale liaises with local stakeholders to promote territorial development, preparing and implementing community engagement plans. Currently, we interact with 1,938 communities globally, of which 54% have community engagement plans developed in an active listening process.

Governance

Following the establishment of the Nomination Committee and aligned with best governance practices, in September, the Board of Directors approved the Nomination Policy, which sets principles, criteria and procedures to guide the choice of nominees for the positions of members of the Board of Directors, Advisory Committees and Executive Board. The Nomination Policy takes into consideration several aspects, including experience, knowledge, diversity and criteria for member independency. The policy is available at Vale's ESG Portal.

5

Vale's performance in 3Q20

Proforma adjusted EBITDA reached US$ 6.224 billion, US$ 2.638 billion higher than in 2Q20 and the highest since 4Q13. While EBITDA improved in all Vale's business, the better result was mainly driven by the 26% increase of iron ore realized prices and 20% higher iron ore sales volumes in 3Q20.

Adjusted EBITDA, after US$ 129 million of expenses related to Brumadinho and COVID-19- related donations to support initiatives to fight the pandemic, totaled US$ 6.095 billion.

Ferrous Minerals EBITDA of US$ 5.856 billion in 3Q20 was US$ 2.354 billion higher than

2Q20.

  • Vale's realized price for iron ore fines totaled US$ 112.1/t, an increase of US$ 23.2/t compared with 2Q20 reflecting the higher 62% Fe reference price and forward curve, on the back of strong Chinese demand.
  • Iron ore fines C1 cash cost improved US$ 2.2/t, totaling US$ 14.9/t in 3Q20. The lower C1 cash cost was achieved as a result of the higher dillution of fixed costs (US$ 1.5/t) and the normalization of demurrage costs (US$ 0.9/t), both effects antecipated in the 2Q20 report. The positive effects were partially offset by the higher cost of third-party purchased ore (US$ 0.6/t). C1 cash cost excluding third-party purchases was US$ 12.5/t in the quarter, US$2.9/t lower than 2Q20. As a consequence of the higher iron ore price environment, the achievement of US$ 14.5/t of C1 cash cost in 2H20 may be challenging due to its effect on third party purchase costs.
  • Maritime freight cost increased US$ 2.2/t, totaling US$ 15.7/t in 3Q20, driven mainly by the expected seasonally higher exposure to spot freight prices and the higher chartering and bunker oil fuel costs.

In August 2020, Vale approved the Serra Sul 120 Project, a multiyear investment of US$ 1.5 billion with start-up expected for 2024, including new mining areas in Serra Sul, duplication of the long-distance belt conveyor, new processing lines and the expansion of storage areas.

6

The project provides flexibility to Vale's operations in the Northern System and aggregates important elements for the reduction of operational risk, adding reliability to the Northern System.

Base Metals business adjusted EBITDA was US$ 770 million in 3Q20, US$ 207 million

higher than 2Q20, with the Copper business EBITDA reaching a record6 US$ 380 million, mainly due to (i) higher nickel and copper realized prices, on stronger LME reference price, (ii) higher byproduct credits, especially gold, rhodium and palladium, and (iii) lower stoppage

expenses with Voisey's Bay's resumption after care and maintenance.

In October 2020, Vale completed, together with Sumitomo Metal Mining Co., Ltd, the sale of 20% shareholding in PT Vale Indonesia to Inalum, therefore satisfying one of the requirements for the extension of PTVI's operations beyond 2025.

The Coal business EBITDA increased US$ 56 million in 3Q20 to negative US$ 213

million with higher metallurgical coal sales and fixed cost dilution after resumption of operations in June 2020. Vale expects to carry on its 3-month revamp plan starting in November 2020, after which a ramp up to 15 Mtpy run-rate production is expected.

Vale posted net income of US$ 2,908 million in 3Q20, US$ 1,913 million higher when

compared to US$ 995 million recorded in 2Q20. The better result was mostly driven by the higher EBITDA in the quarter and the improvement in equity results, as in 2Q20 this line was impacted by provisions for future expenditures with Samarco and Renova Foundation. The positive effects were partially offset by higher financial expenses, from mark-to-market of the participative shareholders' debentures and the revaluation of the fair value of financial guarantees issued by Vale.

Vale generated US$ 3,751 million in Free Cash Flow from Operations in 3Q20, US$

3,474 million higher than in 2Q20, following the strong EBITDA and the gradual normalization of working capital, whose impact was US$ 769 million lower than in 2Q20.

In September 2020, Vale repaid US$ 5 billion from its revolving credit lines, which were disbursed in March 2020 amid the increased risks and uncertainties presented by the COVID- 19 pandemic. The repayments fully reset the available funding from the revolving credit lines to its original amount.

Vale's liquidity position was also positively impacted by the proceeds from the notes issued in July 2020. Vale issued US$ 1.5 billion in notes due 2030 bearing a coupon of 3.75% per year, the lowest-ever yield for Vale's 10-year benchmark. It represented a successful return to the international debt capital market, from which it was absent since February 2017.

In 3Q20, Vale's Board of Directors approved the resumption of Shareholders Remuneration Policy and Vale distributed a total of US$ 3.327 billion in shareholders remuneration in relation to the company performance in 1H20 and the interest on equity announced in December 2019.

6 Not considering the effects of the Salobo goldstream recorded in 1Q15.

7

Selected financial indicators

US$ million

3Q20

2Q20

3Q19

Net operating revenues

10,762

7,518

10,217

Total costs and other expenses

5,349

4,901

6,345

Expenses related to Brumadinho

114

130

225

Adjusted EBIT

5,321

2,564

3,676

Adjusted EBIT margin (%)

49%

34%

36%

Adjusted EBITDA

6,095

3,371

4,603

Adjusted EBITDA margin (%)

57%

45%

45%

Proforma adjusted EBITDA¹

6,224

3,586

4,828

Iron ore - 62% Fe reference price

118.2

93.3

102.0

Net income (loss)

2,908

995

1,654

Net debt ²

4,474

4,697

5,321

Capital expenditures³

895

967

891

  • Excluding expenses related to Brumadinho and COVID-19. ² Does not include leases (IFRS 16).
    ³ Including recoverable taxes in 3Q20 (US$ 23 million).

US$ million

9M20

9M19

%

Net operating revenues

25,249

27,606

-9%

Total costs and other expenses

15,068

17,268

-13%

Expenses related to Brumadinho

403

6,261

-94%

Adjusted EBIT

9,952

4,355

129%

Adjusted EBIT margin (%)

39%

16%

23%

Adjusted EBITDA

12,348

7,049

75%

Adjusted EBITDA margin (%)

49%

26%

23%

Proforma adjusted EBITDA¹

12,851

13,310

-3%

Net income (loss)

4,142

(121)

-3523%

Capital expenditures²

2,986

2,232

34%

  • Excluding expenses related to Brumadinho and COVID-19.
    2 Including recoverable taxes in 3Q20 (US$ 23 million).

8

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Vale SA published this content on 28 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2020 23:14:08 UTC


© Publicnow 2020
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Financials (USD)
Sales 2020 37 310 M - -
Net income 2020 8 590 M - -
Net Debt 2020 3 329 M - -
P/E ratio 2020 52,5x
Yield 2020 0,79%
Capitalization 422 B 81 482 M -
EV / Sales 2020 11,4x
EV / Sales 2021 10,5x
Nbr of Employees 79 646
Free-Float 76,8%
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Technical analysis trends VALE S.A.
Short TermMid-TermLong Term
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Income Statement Evolution
Consensus
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Mean consensus BUY
Number of Analysts 6
Average target price 17,64 $
Last Close Price 81,98 $
Spread / Highest target -75,5%
Spread / Average Target -78,5%
Spread / Lowest Target -82,3%
EPS Revisions
Managers
NameTitle
Eduardo Bartolomeo Chief Executive Officer
José Maurício Pereira Coelho Chairman
Luciano Siani Pires Executive Director-Finance & Investor Relations
Oscar Augusto de Camargo Filho Director
Marcel Juviniano Barros Director
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