Vale S.a. · BMFBOVESPA:VALE3
Vale — Q4 2019 Earnings Presentation
32 slides from Vale's earnings presentation, Feb 24, 2020
Slide 1: Vale's Performance in 4Q19
Ground Zero Project for environmental recovery in Brumadinho (MG) Vale’s Performance in 4Q19 Rio de Janeiro, February 21st, 2020
Slide 2: Forward-looking statements and cautionary note
“This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct
Slide 3: The reparation of Brumadinho advances with agility and quality
3 The reparation of Brumadinho advances with agility and quality R$ 3.2 billion in indemnifications paid¹ 24 agreements entered into Environmental recovery Infrastructure works ¹ Approximate figures, as of February 20th, 2020. +106,000 beneficiaries +4,450 beneficiaries1 +1,570 beneficiaries1 Emerge
Slide 4: Vale is on track to be one of the safest and most reliable mining companies
Vale is on track to be one of the safest and most reliable mining companies in the world Every accident is preventable Cultural transformation Global risk assessment Review Tailings Management System VPS revised and relaunched Strengthen our global maintenance structure
Slide 5: Our new pact with society sets bold commitments
Our new pact with society sets bold commitments New 2030 targets: leading the transition to a carbon neutral mining Reduce new collection by contribution education generation Socioeconomic Health care, and income Forests Recover and protect 500,000 ha of degraded land beyond our boundaries ESG Gaps
Slide 6: Production stabilization is underway
6 Production stabilization is underway Iron ore production, in Mt 390-400 385 375-395 340-355 312 2018 2019 sales 2020E 2021E 2022E onwards
Slide 7: We remain disciplined in allocating capital
7 We remain disciplined in allocating capital We will no longer pay annual dividends of ~US$ 160 million Relevant reduction of our debt level Cash will be preserved, regardless the approval of dividends or buybacks Dividends / buybacks TBD Bolt-on acquisitions Major organic projects Accumulated FCF
Slide 8: In 2020, we continue de-risking Vale
8 In 2020, we continue de-risking Vale Discipline in capital allocation Stabilizing dam safety and levereging competitiveness Assuring dam safety and asset integrity Reparation of Brumadinho
Slide 9: Highlights of Vale's performance in 4Q19 and 2019
Highlights of Vale’s performance in 4Q19 and 2019
Slide 10: Vale's iron ore production guidance for 2020 is 340-355 Mt
10 Vale’s iron ore production guidance for 2020 is 340-355 Mt Iron ore production Mt Production 2019 Northern System / S11D ramp-up Additional from Alegria and dry processing at VGR Timbopeba, Fábrica and wet processing at VGR Brucutu Production gains in other operations Production 2020 Higher uncer
Slide 11: In 2019 EBITDA proforma increased mainly due to higher prices
11 In 2019 EBITDA proforma increased mainly due to higher prices US$ million 571 2,796 1,404 968 Adjusted EBITDA 2018 Prices Foreign exchange effect Volume Cost and Brumadinho stoppage Proforma EBITDA 2019 3 Brumadinho provisions and incurred expenses Adjusted EBITDA 2019 expenses and others 1 expen
Slide 12: In 4Q19 EBITDA proforma decreased due to lower prices
12 In 4Q19 EBITDA proforma decreased due to lower prices, which were partially offset by higher sales volumes US$ million 532 220 66 227 Other 2 EBITDA 3Q19 proforma 1 Prices Volume Costs and expenses EBITDA 4Q19 proforma 1 Brumadinho Adjusted provisions and EBITDA 4Q19 incurred expenses 1 Net of Br
Slide 13: Vale generated US$ 8.105 billion in Free Cash Flow from Operations in 2019
13 Vale generated US$ 8.105 billion in Free Cash Flow from Operations in 2019 US$ million 17,987 3,704 1,809 1,719 1,186 1,464 1,740 8,105 3,913 2,452 Others1 Acquisitions 3 EBITDA proforma 2019 Capex Income taxes & Refis Payments related to Brumadinho Interest on loans 2 Free cash flow from operati
Slide 14: 4Q19 Free cash flow was affected by Brumadinho related expenses
14 4Q19 Free cash flow was affected by Brumadinho related expenses and seasonally higher investments US$ million 624 236 4,677 467 1,472 551 1,327 2,743 (1,416) Others 2 EBITDA proforma 4Q19 Brumadinho expenses1 Interest on loans Income taxes & Refis Capex Free cash flow from operations Cash Decreas
Slide 15: Gross debt decreased by US$ 1.7 billion
15 Gross debt decreased by US$ 1.7 billion as a result of net debt repayment mostly related to the repurchase of bonds in 4Q19 Gross debt Gross debt amortization schedule1 US$ billion US$ billion 12.8 2020 2021 2022 2023 2024 onwards Gross debt 4Q18 3Q19 4Q19 1 As of December 31th, 2019. Does not in
Slide 16: Net debt reached the lowest level since 2008
16 Net debt reached the lowest level since 2008 as a result of strong cash generation during the year… Net debt / LTM1 EBITDA Ratio 4Q18 1Q19 2Q19 3Q19 4Q19 1 LTM – last twelve months Average cost of debt: 4.87% per annum Average maturity: 8.5 years 1.0 0.9 0.6 0.5 0.5 LTM EBITDA / LTM gross interes
Slide 17: Total amount would be US$ 17.8 billion including other commitments
17 … nevertheless, in a broader view and considering other relevant commitments, the total amount would be US$ 17.8 billion 1 Expanded net debt US$ million Expanded net debt + commitments 1,700 17,750 5,472 3,907 10,578 1,791 4,880 Net debt Leases Refis Expanded net debt Brumadinho provisions Samarc
Slide 18: Business segment performance
Business segment performance
Slide 19: In 4Q19 Ferrous Minerals continued to deliver solid performance
18 In 4Q19 Ferrous Minerals continued to deliver solid performance despite a meaningful decrease in prices US$ million ² Others ³ Volumes ¹ EBITDA 3Q19 Prices Costs Dividends EBITDA 4Q19 ¹ Including resumption of halted operations related to Brumadinho event. ² Excluding volume and FX effect and fre
Slide 20: Realized prices decreased only 6% in 4Q19
19 Despite the 13% drop in 62% Fe reference prices vs. 3Q19, Vale’s realized prices decreased only 6% in 4Q19 US$/t, 4Q19 -6% 0.9 2.8 0.3 1.4 1.3 1.3 2.5 93.7 Average Reference Price 4Q19 (dmt) Quality Premium / discount and commercial conditions Provisional prices in prior quarter¹ Lagged prices Cu
Slide 21: Base Metals EBITDA increased on higher realized prices
20 Base Metals EBITDA increased as a result of higher realized prices and higher by-products volumes Base Metals EBITDA Highlights 4Q19 US$ million Nickel: Operations are progressing towards higher reliability with production at the refineries going back to regular operating rates after scheduled an
Slide 22: Coal EBITDA was mainly impacted by lower prices and volumes
21 Coal EBITDA was mainly impacted by lower prices and volumes Coal Adjusted EBITDA Highlights 4Q19 Vale reviewed its business plan in 2019 and has been implementing two initiatives, which are expected to produce sustainable results – a new mining plan and a new operational strategy for the processi
Slide 23: Additional Information
Additional Information
Slide 24: Investments
23 Investments Project execution and sustaining investments US$ million Highlights 4Q19 Total investments of US$ 1,472 million in 4Q19 and US$ 3,704 million in 2019, in line with 2018. 1,496 1,472 In 2019, investments in dams management reached US$ 102 million, an increase of 67% compared to 2018. I
Slide 25: Iron ore and pellets sales volumes and sales mix composition
24 Iron ore and pellets sales volumes and sales mix composition Iron ore¹ and pellets sales volumes (Mt) Iron ore sales product mix (%) Iron Ore Pellets Premium Products² Other Products ³ 4Q18 3Q19 4Q19 4Q18 3Q19 4Q19 1 Iron ore fines including ROM ² Composed by pellets, Carajás, Brazilian Blend Fin
Slide 26: Iron ore pricing systems
25 Iron ore pricing systems Impact of pricing mechanisms US$/t Pricing system breakdown (%) Lagged Current Provisional Provisional – prior quarter Lagged 1.4 0.2 -1.1 -1.3 3Q19 4Q19 3Q19 Current 4Q19 Provisional - current quarter 0.9 0.3 -2.4 -2.6 3Q19 3Q19 4Q19 4Q19 4Q18 3Q19 4Q19 28% 23% 19% 72% 6
Slide 27: Nickel premium/discount by product and sales product mix
26 Nickel premium/discount by product and sales product mix Nickel sales product mix (%) Upper Class I Lower Class I Class II Intermediates 4Q18 3Q19 4Q19 40% 49% 45% 12% 13% 12% 32% 26% 25% 17% 17% 14% Nickel premium/discount by product and average aggregate premiums US$/t, 4Q19 1,450 340 800 73 -2
Slide 28: Price realization – copper operations
27 Price realization – copper operations US$/t, 4Q19 111 6,407 675 415 6,296 Average LME copper price Current period price adjustments Copper gross realized price Prior period price adjustments Copper realized price before discounts TC/RCs, penalties, premiums and discounts Average copper realized p
Slide 29: Price realization – metallurgical coal
28 Price realization – metallurgical coal US$/t, 4Q19 0.4 1.5 1.4 0.1 - Average reference price 4Q19 Portfolio & quality Premium, discounts & commercial conditions Provisional prices in prior quarters Lagged and current prices Provisional prices in current quarters Freight differential Vale price 4Q
Slide 30: Price realization – thermal coal
29 Price realization – thermal coal US$/t, 4Q19 0.1 - Average reference price 4Q19 Portfolio & quality Premium, discounts & commercial conditions Provisional prices in prior quarter Lagged and current prices Provisional prices in current quarters Freight differential Vale price 4Q19 Impact of pricin
Slide 31: Debt position breakdown
30 Debt position breakdown Debt breakdown by instrument (%) Debt breakdown by currency (after hedge) (%) 14% 27% 27% 72% 59% Hedge to USD USD Others Development Agencies Capital Markets Bank Loans
Slide 32: Vale
VALE Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Vale S.A. (Registrant) By: /s/ André Figueiredo Date: February 21, 2020 Director of Investor Relat