Ricardo Teles / Agência Vale. Vale s Performance in 1Q18

Transcription

1 Ricardo Teles / Agência Vale Vale s Performance in 1Q18 Rio de Janeiro, April 26 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 1Q18 2. Capital expenditures 3. Capital structure 4. Business segment performance 3

4 4 Vale s performance in 1Q18

5 Performance highlights in 1Q18 5 US$ 4.0 bi Total EBITDA US$ 890 mi Capital Expenditures 9% US$ 104 mi Coal EBITDA 41% US$ 39.8/t Ferrous Minerals EBITDA Margin 1 10% US$ 5.0 bi Free Cash Flow 77% US$ 14.9 bi 18% Net Debt 5 1 Excluding Manganese and Ferroalloys

6 EBITDA was leveraged by our premium and flexible product portfolio in 1Q18 6 Adjusted EBITDA Highlights 1Q18 US$ billion Adjusted EBITDA was US$ billion in 1Q18, remaining practically in line with 4Q17, despite the challenge of seasonally lower volumes Improved sales mix for Ferrous Minerals and Base Metals leveraged higher realized prices 1Q17 4Q17 1Q18 The flexibility of Vale`s supply chain led to a record sales volume for a first quarter of iron ore and pellets 6

7 Strong cash generated from operations and proceeds from divestments led to an increase in FCF in 1Q18 7 US$ million 2, ,015 (2,277) 2,943 (381) (365) (890) 1,084 (1,437) (261) 1,040 Cash generated from operations Interest on loans Income taxes & Refis settlement program Capex Net disposal/ acquisition of assets and investments Nacala Project Finance Others 1 Free cash flow Debt repayment, net 2 3 Shareholder remuneration 1 Includes derivatives and financial instruments, dividends and interest on capital from associates and JVs and other loans, advances and investments activities 2 Net cash provided by operating and investing activities from continuing operations 3 Includes the premium paid in the tender offer of the 2022 notes 4 Includes dividends and interest on capital paid to noncontrolling interest, transactions with noncontrolling stockholders, net cash 7 from discontinued operations, effects of disposals of subsidiaries and merger, net cash used in discontinued operations and foreign exchange effect on cash and cash equivalents Others 4 Increase (decrease) in cash & cash equivalents

8 8 Capital expenditures

9 Capital expenditures were reduced to the lowest level for a first quarter since Project and sustaining capex 1Q18 Highlights US$ million 1, Q17 4Q17 1Q18 Growth projects Sustaining Capital expenditures totaled US$ 890 million in 1Q18, following the trend of remaining sub US$ 1 billion per quarter Capital expenditures guidance of US$ 3.8 billion for 2018 is reinforced S11D achieved combined physical progress of 95% in 1Q18 with the mine site concluded and 91% progress at the logistic infrastructure sites 9

10 Sustaining capex segmentation is consistent with the rigorous capital allocation process 10 US$ million Highlights 1Q18 Coal Copper Nickel Ferrous Minerals Total Sustaining Q17 2Q17 3Q17 4Q17 1Q18 Ferrous Minerals and Base Metals business segments represented 61% and 34% of sustaining capex, respectively Lower nickel sustaining investments, as non-performing assets in nickel were placed in care & maintenance Higher investment in Ferrous Minerals due to restart of pelletizing plants, leveraging on the higher pellet premium 10

11 11 Capital structure

12 Substantial net debt reduction of US$ 3.2 billion quarteron-quarter 12 Net debt US$ million Cash position on March 31 st, 2018 US$ billion 22,777 18,143 14,901 1Q17 4Q17 1Q18 12

13 Leverage decreased to 1.0x and will reduce further as net debt target of US$ 10 bi is reached in the short term 13 Net debt / LTM 1 EBITDA Ratio Net debt in 1Q18: US$ billion Cash position in 1Q18: US$ billion 1Q17 2Q17 3Q17 4Q17 1Q18 Average maturity: 9.3 years Average cost of debt: 4.97% per annum 13 1 LTM last twelve months

14 Cash balance will be used to implement a liability management program to reduce gross debt in Gross debt US$ million Gross debt amortization schedule 1 US$ billion ,570 22,489 20, onwards Gross debt 1Q17 4Q17 1Q18 67% of our debt settlement will occur after As of March 31 st, Does not include accrued charges.

15 15 Business segment performance

16 Vale s premium and flexible portfolio of products leads, and profits from, the structural flight to quality trend Premiums and discounts US$/t Título do Gráfico 65%-62% 58%-62% US$17/t 10 0 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr US$ 44/t US$ 27/t Source: Bloomberg and Mysteel

17 Active supply chain management, higher quality and average premium offset seasonally lower sales volumes 18 Ferrous Minerals Adjusted EBITDA US$ million ,408 3,427 EBITDA 4Q17 17 IODEX 62% Fe¹ FX Bunker Volume Premiums & commercial initiatives 1 IODEX 62% Fe net effect in both revenues (US$ 238 million) and costs (US$ 86 million). Freight & distribution costs Unit costs Others EBITDA 1Q18

18 Improved product sales mix drove the quality and premium contributions up to US$ 5.2/t 18 US$/t, 1Q % Average Platts 1Q18 (dmt) Quality Premium / discount and commercial conditions Provisional prices in prior quarter¹ Lagged prices Current Provisional prices in current quarter² CFR reference price (dmt) Adjustment for FOB sales Moisture Vale CFR/FOB price (wmt)³ 18 Impact of pricing system adjustments 1 Adjustment as a result of provisional prices booked in 4Q17 at US$ 72.8/t. 2 Difference between the weighted average of the prices provisionally set at the end of 1Q18 at US$ 64.8/t based on forward curves and the average of US$ 74.3/t from the 1Q18 IODEX. 3 Vale price is net of taxes.

19 EBITDA breakeven decreased by US$ 1.7/t as a result of higher quality and premiums 19 US$/t, 1Q C1 cash cost¹ Freight Royalties & expenses 19 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

20 Base Metals EBITDA was positively impacted by improved sales mix and higher premiums 20 Nickel sales product mix Class I Class II battery-suitable Class II Intermediates Nickel premium/discount by product and average aggregate realized premiums US$/t, 1Q18 1,390 55% 56% 63% % 30% 22% 10% 7% 7% 8% 12% 7% 1Q17 4Q17 1Q18 Class I premium Class II batterysuitable discount Class II premium -2,360 Intermediates Vale's average aggregate realized premium Vale's average aggregate realized premium after timing and pricing adjustments 20

21 Coal EBITDA continued to improve in 1Q18, driven by higher realized prices 21 Coal EBITDA Highlights 1Q18 US$ million Coal adjusted EBITDA increased 41%, despite lower sales volumes Higher realized prices were due to the increase of the share of contracts linked to index reference price 92% of the metallurgical coal sales were priced based on market index, including index-lagged prices, vs. 77% in 4Q17 99% of thermal coal sales were priced based on index prices vs. 86% in 4Q17 1Q17 4Q17 1Q18 21

22 Additional information 22

23 Production and sales highlights 23 % Quarterly record & Record for a first quarter Fe Pellets Ni Cu Coal Total: 82.0 Mt Total: 12.8 Mt Total: 58.6 Mt Total: 93.3 Mt Mozambique: 2.4 Mt & N. System: 40.6 Mt % Long Harbour: & Sales volumes IO & Pel: 84.3 Mt 8.6 Mt 23

24 Revenues 24 Net operating revenues by destination in 1Q18 7% 10% 6% 9% 6% 3% 17% 42% Highlights 1Q18 Net operating revenues of US$ billion Revenues were US$ 88 million higher than in 1Q17, mainly due to higher sales volumes for Ferrous Minerals and higher sales prices for Base Metals 58% sales to Asia and 10% domestic sales Ferrous Minerals accounted for 76% of revenues China Other Asia Japan Rest of the World Europe Brazil North America Middle East Base Metals accounted for 19% of revenues 24

25 Costs and expenses 25 Costs and expenses 1 1Q18 vs. 4Q17 Highlights 1Q18 US$ million 5, COGS remained practically in line with 4Q17, after excluding the effects of: seasonally lower sales volumes; ,747 higher commodities prices, resulting in higher pelletizing plants leasing costs and higher royalties; other exogenous factors, such as the negative impact of exchange rate variation and higher oil costs 4Q17 Sales volumes Commodities linked costs Exogenous factors Expenses 1Q18 Higher bunker oil prices were partially offset by lower spot freight rates in 1Q Excluding depreciation.

26 Evolution of iron ore fines cash cost, freight and expenses 26 US$/t C1 cash cost FOB port 1 Freight Expenses 2 & royalties Positive one-off impact Q17 4Q17 1Q18 1Q17 4Q17 1Q18 1Q17³ 4Q17 1Q18 1 Ex-ROM and ex-royalties. 2 Including dividends received. Net of depreciation. Considers the new allocation criteria for general and administrative expenses as described in the box Managerial Allocation Changes of this Earnings Release Expenses per ton totaled a positive amount in 1Q17, mainly due to the recovery of the insurance (US$ 85 million) associated with the destruction of the Fábrica Nova Timbopeba long distance belt conveyor.

27 Iron ore fines sales composition 27 Premium products¹ Southern Southeastern Others 67% 70% 76% 16% 14% 13% 16% 15% 9% 1Q17 4Q17 1Q Composed of pellets, Carajás and Brazilian Blend Fines.

28 Iron ore pricing systems 28 Pricing system breakdown 41% 40% Lagged Current Provisional 35% Impact of pricing mechanisms US$/t Provisional - prior quarter Lagged Q17 1Q18 4Q17 1Q18 49% 49% 56% Current 1.0 Provisional - current quarter % 11% 9% 1Q17 4Q17 1Q18 4Q Q18 4Q Q18 28

29 Price realization copper 29 US$/t, 1Q18 6, , , ,827 Average LME copper price 29 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

30 Unit cost of sales per operation, net of by-product credits 30 Operation (US$ / t) 1Q18 4Q17 1Q17 North Atlantic Operations 1 (nickel) 6,756 4,624 6,699 PTVI (nickel) 7,246 6,609 6,821 VNC (nickel) 8,874 8,420 11,232 Onça Puma (nickel) 7,685 7,536 9,341 Sossego (copper) 3,267 3,270 2,941 Salobo (copper) 1, , North Atlantic figures include Clydach and Acton refining costs.

31 Price realization metallurgical coal from Mozambique 31 US$/t, 1Q Average reference price 1Q18 (7.4) Quality (6.4) Premium, discounts & commercial conditions (4.7) (3.7) (1.6) (0.1) Provisional prices in prior quarters Lagged and current prices Provisional prices in current quarters Freight differential Vale price 1Q18 31 Impact of pricing system adjustments

32 Price realization thermal coal from Mozambique 32 US$/t, 1Q (13.5) 0.8 (0.3) 0.5 (0.0) 0.2 Average reference price 1Q18 Quality Premium, discounts & commercial conditions Provisional prices in prior quarters Lagged and current prices Provisional prices in current quarters Freight differential 82.0 Vale price 1Q18 32 Impact of pricing system adjustments

33 Debt position breakdown 33 Debt breakdown by instrument Debt breakdown by currency (after hedge) 13% 23% 8% 17% 63% 74% Development Agencies Bank Loans Capital Markets Hedge to USD USD BRL Others 33

34 34