Ricardo Teles / Agência Vale. Vale s Performance in 1Q17

Transcription

1 Ricardo Teles / Agência Vale Vale s Performance in 1Q17 Rio de Janeiro, April 27 th,

2 Agenda 2 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. These risks and uncertainties include factors related to the following: (a) the countries where we operate, 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. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF) 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

3 Agenda Agenda 1. Vale s performance in 1Q17 2. Capital expenditures 3. Capital structure 4. Business segment performance 3

4 4 Vale s performance in 1Q17

5 5 Record production performance in iron ore and coal Production highlights 1Q17 % Quarterly record & Record for a first quarter Fe Pellets Ni Cu Coal & Total: 86.2 Mt & Carajás: 36.0 Mt Total: 12.4 Mt Total: 71.4 kt Total: kt % & VNC: 10.2 kt Salobo: 42.6 kt % Mozambique: 2.4 Mt 5

6 6 Seasonally lower sales volumes led to lower q-o-q revenues Net operating revenues by destination in 1Q % 18% 7% 3% 4% 14% China Europe North America Rest of the World 45% Other Asia Brazil Middle East Highlights 1Q17 Net operating revenues of US$ billion Revenues were 8.1% lower vs. 4Q16 mainly due to seasonally lower sales volumes of Ferrous Minerals 59% sales to Asia and 10% domestic sales Ferrous Minerals accounted for 76% of revenues Base Metals accounted for 19% of revenues

7 7 Lower costs achieved driven by lower sales despite exchange rate and inflation Costs and expenses 1Q17 vs. 4Q16 US$ billion Highlights Total costs and expenses decreased by US$ 517 million COGS was impacted by higher pricerelated cost factors such as the leasing of pellet plants, royalties, feed purchased from third-parties and higher bunker oil prices Higher costs were partially offset by lower expenses 4Q16 Sales volumes Higher costs FX Expenses 1Q17 7

8 8 EBITDA impacted by seasonally lower volumes and higher prices EBITDA, q-o-q US$ billion 123% Highlights 1Q17 Overall EBITDA increased 123% vs. 1Q16; and decreased 9% vs. 4Q EBITDA decreased driven by seasonally lower sales volumes (US$ 828 million) partially offset by higher prices (US$ 672 million) Iron ore sales volumes were planned to take into account the build-up of inventory due to blending activities 1Q16 4Q16 1Q17 8

9 9 Capital expenditures

10 10 Steady reduction of investments Project and sustaining capex US$ million 1,410 1, , Q16 4Q16 1Q17 Highlights 1Q17 Total capex was US$ billion in 1Q17, decreasing US$ 210 million vs. 4Q16 Ferrous Minerals and Base Metals business segments represented 57% and 38% of sustaining capex Base Metals sustaining will be higher in 2017 due to the transition to a single furnace operation in Sudbury and the Air Emission Reduction project Growth projects Sustaining 10

11 11 Vale s capex guidance excluding investments in Fertilizers segment US$ billion E 2018E 2019E 11 Note: BRL/USD exchange rate of BRL/USD 3.37 from 2017 onwards

12 12 S11D continued its successful ramp-up, advancing according to plan Highlights 88% of combined physical progress in 1Q17 with 98% progress at the mine site and 80% at the logistic infrastructure sites The duplication of the railway reached 66% physical progress with 367 km duplicated S11D Mine In operation Onshore expansion reached 89% physical progress 12

13 13 Capital structure

14 14 Delivering net debt reduction to achieve US$ billion target US$ million Net debt Cash position on March 31 st, 2017 US$ billion 27,661 25,042 22,777 1Q16 4Q16 1Q17 14

15 15 A significant improvement in Net Debt / EBITDA ratio Net debt / LTM 1 EBITDA Ratio Net debt in 1Q17: US$ billion Cash position in 1Q17: US$ billion Q16 2Q16 3Q16 4Q16 1Q17 Average maturity: 8.0 years Average cost of debt: 4.71% per annum 15 1 LTM last twelve months, excluding non-recurring items.

16 16 Cash balance will be used to implement a liability management program to reduce Gross Debt in 2017 US$ million Gross debt US$ billion Gross debt amortization schedule 1 31, ,322 29, onwards Gross debt 1Q16 4Q16 1Q17 61% of our debt settlement will occur after As of March 31 st, Does not include accrued charges.

17 17 We concluded the equity transaction with Mitsui in March 2017 US$ billion CADAM Oil and gas concessions Ferroalloys in Europe Araucária Tres Valles Fosbrasil Log-In Norsk Hydro Belo Monte stake 8 VLOCs¹ Reference US$ 1 billion El Hatillo 10 VLOCs¹ GoldstreamI Goldstream II Paragominas Capesizes 3 VLOCs 1 Global Coal Mitsui Equity Aluminum assets VLI MBR preferred shares Goldstream III Fertilizers US$ 2.6 billion 2013 US$ 6.0 billion 2015 US$ 3.0 billion 2016 US$ 1.3 billion 2017 US$ 3.2 billion 17 1 Very Large Ore Carriers 2 Total value of transaction is US$ 2.5 billion with US$ 1.25 billion in cash and the remainder in Mosaic s shares; the deal was announced in December 2016 and is expected to be completed late 2017 as conditions precedent are fulfilled

18 18 Business segment performance

19 Ferrous Minerals EBITDA was practically in line with 4Q16, despite seasonally lower sales volumes US$ million, 4Q16 vs. 1Q US$ 183M 4, , EBITDA 4Q16 Price FX Bunker Volume Commercial initiatives CFR Freight Sales Unit costs Others EBITDA 1Q17

20 20 1Q17 cash break-even cost landed in China for iron ore and pellets US$/t, 1Q C1 cash cost¹ Freight Royalties & expenses 20 1 Ex-ROM Distribution Moisture Quality EBITDA breakeven iron ore fines Pellet adjustment EBITDA breakeven (pellets & fines) Cost landed in China Sustaining Iron ore & pellets cash breakeven

21 21 Cash cost 1 in BRL remained at low levels despite inflationary pressures R$/t -15.6% Non-recurring costs % Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q figures were adjusted to the new allocation criteria, as reported in the 4Q15, and include acquisition costs of third party purchased ore

22 22 Price realization continued to improve in 1Q17 US$/t, 1Q US$/t Average Platts 1Q17 (dmt) Quality Premium / discount and commercial conditions Provisional prices in prior quarter¹ Lagged prices Current Provisional prices in current quarter² CFR reference price (dmt) Adjustment for FOB sales Moisture Vale CFR/FOB price (wmt)³ Impact of pricing system adjustments 22 1 Adjustment as a result of provisional prices booked in 4Q16 at US$ 74.6/t. 2 Difference between the weighted average of the prices provisionally set at the end of 1Q17 at US$ 77.9/t based on forward curves and US$ 85.6/t from the 1Q17 IODEX. 3 Vale price is net of taxes.

23 23 Base Metals EBITDA decreased as a result of planned lower volumes Quarterly EBITDA comparison US$ million Highlights 1Q17 Base Metals EBITDA decreased US$ 133 million q-o-q EBITDA was mainly impacted by planned lower volumes (US$ 82 million), and a one-off cost normalization in Thompson (US$ 32 million) Copper and cobalt prices realization improved in the period 4Q16 Volume Costs Ni prices FX Cu & Co prices Expenses Other 1Q17 Expenses were down q-o-q 23

24 24 Coal production cost per ton through Nacala decreased driven by the quarterly production record Moatize coal production 000 t Moatize production cost through Nacala US$/t ,434 1, Q16 4Q16 1Q17 1Q16 4Q16 1Q17 24

25 Additional information 25

26 26 Evolution of iron ore fines cash cost, freight and expenses US$/t C1 Cash Cost FOB Port 1 Non-recurring costs Freight Expenses 2 & Royalties Positive one-off impact % +25.7% -5.0% Q16 4Q16 1Q17 1Q16 4Q16 1Q17 1Q16 4Q16 1Q Ex-ROM and ex-royalties; all figures as per new managerial allocation changes, as reported in 4Q15, and include acquisition costs of third party purchased ore. 2 Net of depreciation. 3 Positive one-off impact of insurance recoveries of US$ 85 million in 1Q17.

27 27 Iron ore pricing systems Pricing system breakdown Lagged Current Provisional Impact of pricing mechanisms US$/t Provisional - prior quarter Lagged % 41% 4Q16 1Q Q16 1Q17 45% 49% Current 1.0 Provisional - current quarter % 10% Q16 1Q17 4Q16 1Q17 4Q Q17 27

28 28 Price realization nickel US$/t, 1Q17 10, ,547 Average LME nickel price Price premium on refined products Price discount on intermediate products Average nickel realized price 28

29 29 Price realization copper US$/t, 1Q , , ,740 5,661 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 price 29

30 30 Unit cost of sales per operation, net of byproduct credits 1 Operation (US$ / t) 1Q17 4Q16 4 1Q16 4 North Atlantic Operations 2 (nickel) 6,699 5,125 4,008 PTVI 2 (nickel) 6,821 5,770 6,636 VNC 3 (nickel) 11,232 11,375 13,691 Onça Puma (nickel) 9,341 9,204 8,064 Sossego (copper) 2,941 3,207 2,692 Salobo (copper) 1, North Atlantic figures includes Clydach and Acton refining costs. 2 Prior periods restated to include royalties, freight and other period costs. 3 Unit cash cost restated for periods prior to 1Q17 to exclude pre-operating and other operating expenses. 4 We realigned our unit cash cost of sales methodology in 1Q17 to include all freight, royalty and other costs reported as cost of goods sold and to exclude other operating expenses and pre-operating expenses for certain operations. Considering the previous criteria, the unit cash cost figures in prior periods would be: North Atlantic, US$ 3,412/t and US$ 3,218/t in 4Q16 and 1Q16, respectively; PTVI, US$ 5,695/t and US$ 5,806/t in 4Q16 and 1Q16, respectively; VNC, US$ 11,017/t and US$ 12,711/t in 4Q16 and 1Q16, respectively.

31 31 Price realization metallurgical coal from Mozambique US$/t, 1Q Average reference price 1Q17 31 Quality Current Lagged price index Lagged price quarterly benchmark Impact of pricing system adjustments Freight differential Others Vale price

32 32 Price realization thermal coal from Mozambique US$/t, 1Q Average reference price 1Q17 32 Quality Current Lagged price index Impact of pricing system adjustments Freight margin Others Vale price

33 33 Debt position breakdown by currency Debt position breakdown by currency (before hedge) Debt position breakdown by currency (after hedge) 3% 5% 23% 21% 73% 73% USD BRL EUR Others USD Hedge to USD BRL Others 33

34 34