Vale S.a. · BMFBOVESPA:VALE3
Vale — Q3 2019 Earnings Presentation
32 slides from Vale's earnings presentation, Oct 25, 2019
Slide 1: Forward-looking statements disclaimer
“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 2: Agenda
1. Opening remarks 2. Highlights of Vale’s performance in 3Q19 3. Business segment performance Agendaa
Slide 3: 1. Opening remarks
1. Opening remarks 2. Highlights of Vale’s performance in 3Q19 3. Business segment performance
Slide 4: 3Q19 Results: Business stabilization
5 3Q19 Results: Business stabilization Eduardo Bartolomeo, Chief Executive Officer, commented: “In the third quarter of 2019, we made progress towards stabilizing our business and advanced with our objective of full reparation of Brumadinho. The de-characterization of 9 upstream dams is ongoing, wit
Slide 5: The reparation of Brumadinho and region advances
6 The reparation of Brumadinho and region advances Restoring dignity of people affected Compensating for damages Emergency support: R$ 2.25 billion already paid in compensations: Hospitals, health units and psychological support Supply of water, food, medicine and others Accommodation and transporta
Slide 6: The de-characterization of dam structures in Brazil is ongoing
7 The de-characterization of dam structures in Brazil is ongoing 2019 2020 2021 2022+ 3 dams to be completely de-characterized1 Grupo Fernandinho 8B 4 dams to be de-characterized as upstream dams with downstream embankments Forquilha I Forquilha II Forquilha III Vargem Grande 2 dams with safety inde
Slide 7: Our governance and dam management have evolved
8 Our governance and dam management have evolved Risk Governance - Overview Internal Lines of Defense Dam management Before Brumadinho After Brumadinho Consulting Committees 3. Investigations iness Units Non exhaustive Business Units Executive Committees 1. Geotechnical Risks 2. Operational Risks 3.
Slide 8: 3Q19 was a period of stabilization and sustaining cash flow generation
9 3Q19 was a period of stabilization and sustaining cash flow generation Iron Ore fines C1 cash cost US$/t Stoppage expenses related to Brumadinho US$/t 3Q18 2Q19 3Q19 3Q18 2Q19 3Q19 Vale expects that C1 cash cost will reduce between US$1.0-1.5/t in 4Q19 Looking forward, unitary stoppage expenses re
Slide 9: 3Q19 was a period of stabilization and sustaining cash flow generation
10 3Q19 was a period of stabilization and sustaining cash flow generation US$ million 611 939 467 493 891 355 417 4,828 3,412 2,950 Others 3 EBITDA proforma 3Q19 Working capital Brumadinho expenses1 Interest on loans 2 Income taxes & Refis Capex Free cash flow from operations Ferrous Acquisition Cas
Slide 10: Vale has great potential to be the preferred supplier in the low-carbon economy
11 Vale has great potential to be the preferred supplier in the low-carbon economy benchmark in different markets Vale’s current main portfolio Vale’s products considered Pellet GF88 BRBF IOCJ Think beyond Products to study the development with clients in a greener world HBI “Green” pig iron
Slide 11: Capital allocation relies on the progress of reparation, but cash will be preserved
12 Capital allocation relies on the progress of reparation, but cash will be preserved ~US$ 900 million ~US$ 1.8 billion In September, Vale announced cash tender offer for US$1 billion of notes Cash will be preserved, regardless the approval of dividends or buybacks Dividends / Buybacks TBD Bolt-on
Slide 12: The roadmap for de-risking Vale
13 The roadmap for de-risking Vale 1 Reparation of Brumadinho 2 Assuring dam safety and asset integrity Stabilizing production and leveraging 3 4 Sustaining solid cash flow generation competitiveness
Slide 13: Highlights of Vale's performance in 3Q19
Highlights of Vale’s performance in 3Q19
Slide 14: EBITDA proforma increased in 3Q19 due to higher sales volumes and lower stoppage expenses
15 EBITDA proforma increased in 3Q19 due to higher sales volumes and lower stoppage expenses related to Brumadinho US$ million 395 225 130 389 Others4 Volumes3 EBITDA 2Q19 proforma1 Brumadinho stoppage expenses 2 Prices EBITDA 3Q19 proforma Brumadinho incurred expenses EBITDA 3Q19 1 Net of Brumadinh
Slide 15: Net debt reached the lowest level since 4Q08
16 Net debt reached the lowest level since 4Q08 as a result of the release of frozen funds and strong cash generation during 3Q19 Net debt / LTM1 EBITDA Ratio 3Q18 4Q18 1Q19 2Q19 3Q19 1 LTM – last twelve months Average cost of debt: 4.71% per annum Average maturity: 8.04 years 1.0 0.9 0.7 0.6 0.5 LT
Slide 16: Gross debt decreased as a result of net debt repayment
17 Gross debt decreased by US$ 1 billion as a result of net debt repayment mostly related to the repurchase of bonds in 3Q19 Gross debt Gross debt amortization schedule1 US$ billion US$ billion 14.5 0.1 2019 2020 2021 2022 2023 onwards Gross debt 3Q18 2Q19 3Q19 1 As of September 30th, 2019. Does not
Slide 17: Business segment performance
Business segment performance
Slide 18: Ferrous Minerals delivered solid performance
18 Ferrous Minerals delivered solid performance due to the resumption of halted operations and strong performance in the Northern System US$ million 130 157 177 150 Volumes¹ C1 cash cost ² EBITDA 2Q19 Brumadinho stoppage expenses³ Prices Freight Others EBITDA 3Q19 ¹ Including resumption of halted op
Slide 19: Higher 62% Fe reference prices partially offset the decrease in Vale's realized price
19 Higher 62% Fe reference prices partially offset the decrease of US$ 5.4/t in Vale’s realized price US$/t, 3Q19 1.1 0.2 1.0 3.0 2.6 2.4 3.2 7.8 Average Reference Price 3Q19 (dmt) Quality Premium / discount and commercial conditions Provisional prices in prior quarter¹ Lagged prices Current Provisi
Slide 20: Base Metals EBITDA increased as a result of higher realized prices and lower costs
20 Base Metals EBITDA increased as a result of higher realized prices and lower costs Base Metals EBITDA Highlights 3Q19 Base Metals operations in the North Atlantic achieved a solid performance after the scheduled and unscheduled maintenance at its refineries during the previous quarter which were
Slide 21: Coal EBITDA was negatively impacted by lower prices and higher costs
21 Coal EBITDA was negatively impacted by lower prices, higher logistics costs and higher maintenance at the processing plants Coal Adjusted EBITDA Highlights 3Q19 Vale’s Coal operations demanded the reassessment of the business strategy, with the implementation of a new mining plan and a maintenanc
Slide 22: Coal EBITDA was negatively impacted by lower prices and higher costs
2 Coal EBITDA was negatively impacted by lower prices, higher logistics costs and higher maintenance at the processing plants Coal Adjusted EBITDA Highlights 3Q19 US$ million Vale's Coal operations demanded the reassessment of the business strategy, with a the implementation of a new mining plan and
Slide 23: Investments: Project execution and sustaining investments
23 Investments Project execution and sustaining investments US$ million Highlights 3Q19 Total investments of US$ 891 million in 3Q19 The Northern System 240 Mtpy project had some secondary crushers replaced at local plants and continued to receive mobile equipment. The project also had earthworks an
Slide 24: 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 3Q18 2Q19 3Q19 3Q18 2Q19 3Q19 1 Iron ore fines including ROM ² Composed by pellets, Carajás, Brazilian Blend Fin
Slide 25: Iron ore pricing systems
25 Iron ore pricing systems Impact of pricing mechanisms US$/t Pricing system breakdown (%) Lagged Current Provisional Provisional – prior quarter 3.0 Lagged 0.2 -1.1 -3.0 2Q19 2Q19 Current 3Q19 3Q19 Provisional - current quarter 2.1 -1.2 -2.4 -2.6 3Q19 2Q19 3Q19 2Q19 3Q18 2Q19 3Q19 28% 22% 23% 67%
Slide 26: Nickel premium/discount by product and sales product mix
26 Nickel premium/discount by product and sales product mix Nickel premium/discount by product and average aggregate premiums (US$/t) Nickel sales product mix (%) Class I Class II battery-suitable Class II Intermediates Class I Class II Battery-suitable Class II Intermediates Vale's average aggregat
Slide 27: Price realization – copper operations
27 Price realization – copper operations US$/t, 3Q19 9 Average LME copper price Current period price adjustments Copper gross realizedPrior period price Copper realized price TC/RCs, penalties, Average copper realized price price adjustments before discounts premiums and discounts 5,802 5,811255 5,5
Slide 28: Price realization – metallurgical coal
28 Price realization – metallurgical coal US$/t, 3Q19 16.4250 0.4 0.1 Average reference price 3Q19 Portfolio & quality Premium, discounts & commercial conditions Provisional prices in prior quarters Lagged and current prices Provisional pricesFreight differential in current quarter Vale price 3Q19 I
Slide 29: Price realization – thermal coal
29 Price realization – thermal coal US$/t, 3Q19 Average reference price 3Q19 Portfolio & quality Premium, discounts & commercial conditions Provisional prices in prior quarters Lagged and current prices Provisional prices in current quarter Freight differential Vale price 3Q19 Impact of pricing syst
Slide 30: Debt position breakdown
30 Debt position breakdown Debt breakdown by instrument (%) Debt breakdown by currency (after hedge) (%) 4% 16% 23% 26% 72% 58% Hedge to USD USD BRL Others Development Agencies Capital Markets Bank Loans
Slide 31: Debt position breakdown
30 Debt position breakdown Debt breakdown by instrument (%) Debt breakdown by currency (after hedge) (%) mHedge to USD USD = BRL = Others ™ Development Agencies Capital Markets Bank Loans Wve
Slide 32: Signatures
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: October 25, 2019 Director of Investor Relations