Cia de Ferro Ligas da Bahia - FERBASA

Transcription

1 Cia de Ferro Ligas da Bahia - FERBASA Interim Financial Statements as at June 30, 2017 in Accordance with Accounting Practices Adopted in Brazil Deloitte Touche Tohmatsu Auditores Independentes

2 (Convenience Translation into English from the Original Previously Issued in Portuguese) Cia de Ferro Ligas da Bahia - FERBASA Balance Sheet (In thousands of Brazilian reais - R$) Notes 06/30/ /31/ /30/ /31/2016 Notes 06/30/ /31/ /30/ /31/2016 Current assets Current liabilities Cash and cash equivalents 4 360, , , ,400 Trade payables 15 54,075 45,225 54,075 45,188 Short-term investments 5 72,945 60,000 88,808 84,260 Borrowings and financing 18 1, , Trade receivables 6 121, , , ,061 Payroll and related taxes 16 49,340 39,643 16,840 39,671 Inventories 7 176, , , ,009 Taxes and social contributions 17 16,660 11,616 49,363 11,982 Recoverable taxes 8 11,158 17,205 12,260 17,749 Proposed dividends and interest on capital 1,898 72, ,496 Prepaid expenses Other liabilities 1,779 3,694 3,677 3,686 Advances to suppliers 9 11,917 12,082 11,917 12,082 Foreign exchange hedging instruments 19 1,721 16,311 1,721 16,311 Other assets 6,913 12,823 6,876 13, , , , , , , , ,712 Noncurrent assets Noncurrent liabilities Advances to suppliers 9 49,329 55,869 49,329 55,869 Provision for risks Deferred taxes 10-7,521-5,965 Provision for mine closure Short-term investments 5 2,212 22,190 24,629 44,226 Borrowings and financing Inventories 7 20,658 20,663 20,658 20,663 Labor and actuarial liabilities Recoverable taxes 8 6,102 6,774 6,102 6,774 Deferred taxes Escrow deposits 11 5,167 5,238 5,263 5,334 Taxes and social contributions Other receivables 12,641 8,548 12,648 8, ,508 45,231 48,508 45,231 15,706 16,222 15,706 16,222 52,081 38,680 52,081 38,680 25,934 25,934 25,934 25,934 3,973-5, , , , ,390 Total liabilities 146, , , ,464 Investments Property, plant and equipment Biological assets Equity 23 Capital 1,225,444 1,116,677 1,225,444 1,116,677 Earnings reserves 103, , , ,243 Valuation adjustments to equity 37,459 47,088 37,459 47, ,237 55, Treasury shares (25,754) (25,754) (25,754) (25,754) , , , ,935 Retained earnings 143, , , , , , , , , ,925 Equity attributable to owners of the Company 1,484,139 1,352,254 1,484,139 1,352,254 Total noncurrent assets 992,901 1,025, , ,315 Noncontrolling interests 5,436 5,190 Total equity 1,484,139 1,352,254 1,489,575 1,357,444 Total assets 1,756,401 1,651,870 1,763,806 1,657,620 Total liabilities and equity 1,756,401 1,651,870 1,763,806 1,657,620 The accompanying notes are an integral part of these financial statements.

3 (Convenience Translation into English from the Original Previously Issued in Portuguese) Cia de Ferro Ligas da Bahia - FERBASA Income Statement and Statement of Comprehensive Income For the Periods Ended June 30, 2017 and 2016 (In thousands of Brazilian reais - R$, except as otherwise indicated) Notes 06/30/ /30/ /30/ /31/2016 Net sales revenue , , , ,023 Cost of sales 26 (363,520) (496,139) (362,971) (495,592) Gross profit 210,088 75, ,576 76,431 Operating income (expenses) 26 Selling expenses (9,951) (11,898) (9,951) (11,898) General and administrative expenses (50,934) (35,543) (51,877) (36,087) Other operating income (expenses), net (7,361) (25,999) (7,505) (26,198) (68,246 ) (74,440) (69,333) (74,183) Share of profits of investees 12 1,369 1, Operating income 143,211 4, ,243 2,248 Finance income (costs) 27 Finance income 41,997 24,828 (45,009) 28,402 Finance costs (6,553) (39,187) (6,589) (39,249) 35,444 (14,359) 38,420 (10,847) Pretax income 178,655 (9,903) 179,663 (8,599) Income tax and social contribution 10 Exemption and reduction 23, Current (42,509) 228 (19,298) (833) Deferred (16,455) 725 (16,455) 725 (34,991 ) 953 (35,753) (108) Profit for the period 143,664 (8,950) 143,910 (8,707) Other comprehensive income (9,629) 18,134 (9,629) 18,134 Total comprehensive income 134,035 9, ,281 9,427 Profit attributable to owners of the Company 143,664 (8,950) Profit attributable to noncontrolling interests Basic/diluted earnings per common share (R$) Basic/diluted earnings per preferred share (R$) The accompanying notes are an integral part of these financial statements.

4 (Convenience Translation into English from the Original Previously Issued in Portuguese) Cia de Ferro Ligas da Bahia - FERBASA Statements of Changes in Equity (In thousands of Brazilian reais - R$) Notes Capital Legal Tax incentive Earnings reserves For investments Attributable to owners of the Company Proposed additional dividends Valuation adjustments to equity Treasury shares Retained earnings Total equity Attributable to noncontrolling interests Total consolidated equity Balance as at December 31, ,102,073 72,961 36, ,129 28,675 (12,664) (25,754) 1,331,479 4,792 1,336,271 Capitalization of reserves 14,604 (14,604) Recognition of reserves 64,359 (64,359) Reversal of reserves (227) (227) (227) Recognition of deferred taxes (3,302) (3,302) (3,302) Supplementary interest on capital (65,684) (28,675) (94,359) (94,359) Comprehensive income 59,752 59,752 59,752 Profit for the year 69,660 69, ,182 Allocation of profit Recognition of reserves 3,483 23,180 30,098 (56,761) Mandatory dividends (10,749) (10,749) (124) (10,873) Supplementary dividends 2,150 (2,150) Capitalization of reserves 14,604 (14,604) Recognition of reserves 64,359 (64,359) Balance as at December 31, ,116,677 76, ,767 26,882 2,150 47,088 (25,754) - 1,352,254 5,190 1,357,444 Capitalization of reserves 108,767 (108,767) Hedging financial Instruments (9,629) (9,629) (9,629) Profit for the period Allocation of profit 143, , ,910 Mandatory dividends (2,150) (2,150) Balance as at June 30, ,225,444 76,444-26,882-37,459 (25,754) 143,664 1,484,139 5,436 1,489,575 The accompanying notes are an integral part of these financial statements.

5 (Convenience Translation into English from the Original Previously Issued in Portuguese) Cia de Ferro Ligas da Bahia - FERBASA Statements of Cash Flows For the Periods Ended June 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Cash flow from operating activities Notes 06/30/ /30/ /30/ /30/2016 Profit for the period 143,664 (8,950) 143,910 (8,707) Adjustments to reconcile the profit to cash provided by operating activities Interest, inflation adjustments and exchange differences, net (2,980) 5,632 (3,766) 3,450 Depreciation, amortization, and depletion 13 33,475 30,336 33,574 30,436 Depletion of biological assets 8,629 1,763 8,629 1,763 Hedging financial Instruments 19 - (6,794) - (6,794) Share of profits of investees 12 (1,369) (1,951) - - Deferred taxes 10 16,455 (725) 16,455 (725) Profit sharing 14,887-14,887 - Recognition (reversal) of provision 2,153 5,684 2,153 5,684 Other (4,340) - (4,340) - Decrease (increase) in assets: Trade receivables 14,874 48,333 14,874 48,333 Inventories 8, ,376 8, ,376 Recoverable taxes, income tax and social contribution 6,063 1,398 5,505 1,449 Advance to supplier 6,705 5,667 6,705 5,667 Other assets 2,368 (5,096) 4,815 (5,079) Increase (decrease) in liabilities: Trade payables 9,358 (19,144) 9,406 (19,143) Taxes, fees and contributions 1,045 (3,723) 1,052 (3,743) Income tax and social contribution 19,556-20,274 (1,015) Income tax and social contribution paid (14,483) (2,074) (15,934) (2,972) Payroll and related taxes (5,190) (15,574) (5,195) (15,597) Other liabilities (1,264) (1) (1,398) (65) Interest paid (1,675) (486) (25) (135) Net cash provided by operating activities 210,574 24, ,502 25,107 Cash flow from investing activities Purchase of property, plant and equipment (28,329) (45,346) (28,329) (45,346) Cost of planting biological assets 14 (9,836) (10,850) (9,836) (10,850) Dividends received 4,468 5,490 - Proceeds from the sale of property, plant and equipment Short-term investments and redemptions 11,514 (5,432) 20,316 (4,085) Deposit for reinvestment Net cash used in investing activities (22,177 ) (56,098 ) (17,843) (60,241 ) Cash flows from financing activities Financing 15,681 4,313 15,681 4,313 Repayment of financing (1,097) (1,132) (646) (1,132) Dividends and interest on capital paid (74,522) (28,675) (74,522) (28,675) Net cash used in financing activities (61,588 ) (25,494 ) (61,588 ) (25,494 ) Increase in cash and cash equivalents, net 174,747 79, ,621 75,608 Cash and cash equivalents at the beginning of the period 186,042 21, ,400 40,641 Cash and cash equivalents at the end of the period 360, , , ,349 Increase in cash and cash equivalents, net 174,747 79, ,621 75,608 The accompanying notes are an integral part of these financial statements.

6 (Convenience Translation into English from the Original Previously Issued in Portuguese) Cia de Ferro Ligas da Bahia - FERBASA Statements of Added Value For the Periods Ended June 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Notes 06/30/ /30/ /30/ /30/2016 Sales revenue 689, , , ,145 Other income 36,346 24,542 36,486 24, , , , ,687 Inputs purchased from third parties Cost of sales (includes raw materials) (108,785) (251,945) (108,307) (251,379) Supplies, power, outside services and other inputs (235,731) (250,366) (236,039) (250,419) Gross added value 381, , , ,889 Depreciation, amortization, and depletion (42,104 ) (32,099 ) (42,203 ) (32,199) Net added value created by the Company 339, , , ,690 Added value received in transfer Finance income 27 41,997 24,828 45,009 28,402 Share of profits of investees 12 1,369 1, Total added value for distribution 382, , , ,092 Distribution of added value Employees Salaries and wages 85,425 88,125 85,921 88,491 Benefits 30,160 15,303 30,160 15,303 Social security charges - FGTS 5,750 8,571 5,750 8, , , , ,365 Taxes, fees and contributions Federal 79,921 48,952 80,989 50,304 State 26,528 21,288 26,528 21,388 Municipal 473 1, , ,922 71, ,995 72,957 Lenders and lessors 10,679 7,405 10,718 7,477 Shareholders Retained earnings 143,664 (8,950) 143,664 (8,707) Noncontrolling interests Added value distributed 382, , , ,092 The accompanying notes are an integral part of these financial statements.

7 (Convenience Translation into English from the Original Previously Issued in Portuguese) CIA DE FERRO LIGAS DA BAHIA FERBASA AND SUBSIDIARIES NOTES OF ADMINISTRATION TO THE CONDENSED INTERIM FINANCIAL INFORMATION FOR THE QUARTER ENDED JUNE 30, 2017 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated) 1. GENERAL INFORMATION Companhia de Ferro Ligas da Bahia S.A. ( Ferbasa or Company ) is a publicly-held corporation, headquartered in Pojuca, State of Bahia (BA), registered with the Brazilian Securities and Exchange Commission ("CVM") and listed on the BM&F BOVESPA (São Paulo Stock Exchange). Ferbasa is engaged in the mining of chromite in the Bahia State, the production of ferroalloys, and the management of renewable forestry resources to ensure the sustainability of the area. Its parent company is Fundação José Carvalho, a nonprofit entity established for an indefinite period, which is mainly engaged in providing quality education and technical and educational support and social assistance to underprivileged children and adolescents. This quarterly individual and consolidated condensed interim financial information was approved by the Company s Board of Directors and authorized for issue on August 14, The significant accounting policies applied in the preparation of these interim financial information are described in Note 6 to the Company s audited annual financial statements for the year ended December 31, These policies have been applied consistently for the reporting periods presented. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. Basis of preparation This interim financial information should be read together with the Company s audited financial statements for the year ended December 31, 2016, which have been prepared and are presented in accordance with accounting practices adopted in Brazil, including the pronouncements issued by the Accounting Pronouncements Committee ( CPCs ) and pursuant to International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ), disclosing all the information material to the financial statements, and only this information, which is consistent with that used by Management. (i) Condensed interim financial information The quarterly individual and consolidated interim financial information has been prepared and is being presented in accordance with CPC 21 (R1) and IAS 34 Interim Financial Reporting, the purpose of which is to establish the minimum content of an interim financial statement. The preparation of the interim financial information requires Management to use certain critical accounting estimates and to exercise judgment in the process of applying the Company s accounting policies. There were no significant changes in the assumptions and judgments adopted by the Company s management regarding the use of estimates for the preparation of this interim financial information as compared to that used in the financial statements for the year ended December 31, 2016.

8 2.2. Accounting policies There were no changes in the accounting policies used in the preparation of this interim financial information as compared to that disclosed in the audited financial statements for the year ended December 31, FINANCIAL INSTRUMENTS The table below shows the main asset and liability financial instruments: Assets Accounting measurement 06/30/ /31/ /30/ /31/2016 Cash and cash equivalents Amortized cost 360, , , ,400 Short-term investments (i) Fair value 72,945 60,000 88,808 84,260 Noncurrent short-term investments Fair value 2,212 22,190 24,629 44,226 Trade receivables Amortized cost 121, , , ,061 Escrow deposits Amortized cost 5,167 5,238 5,263 5,334 Foreign exchange hedging instruments (i) Fair value 1,721 16,311 1,721 16,311 Liabilities Trade payables Amortized cost 54,075 45,225 54,075 45,188 Financing Amortized cost 1, , Leasing Amortized cost Noncurrent financing Amortized cost 52,081 38,670 52,081 38,670 Noncurrent leases Amortized cost (i) Level 2 - financial instruments that are not traded in active markets (e.g., over-the-counter derivatives) using valuation techniques that, in addition to the prices quoted in active markets for assets or identical liability use other inputs adopted by the market for the asset or liability directly (such as prices) or indirectly (derived from prices). The Company s Financial Risk Management Policy provides for a hedging program for the foreign exchange risk arising on part of its revenue, both in the foreign market and the domestic market. For purposes of the sensitivity analysis required by the CVM, the Company adopted as scenario I (probable) the expected average foreign exchange rate for 2017 disclosed in the Focus Report issued on April 13, 2017, as scenario II (possible) a 25% appreciation of the Brazilian real against the US dollar, and as scenario III (remote) a 50% appreciation of the Brazilian real against the US dollar. 06/30/2017 Scenario I Scenario II Scenario III US$ R$ Rate Loss - R$ Rate Loss - R$ Rate Loss - R$ Trade receivables 4,867 16, (426) (4,344) (8,262) In the case of hedging derivatives (NDFs), we believe that the impact of a depreciation of the Brazilian real on these instruments need to be considered as a whole and, consequently, the changes in the exchange rate will entail fluctuations both in NDFs (30%) and in Dollar-indexed revenue (100%). Thus, this analysis should always be conducted on an integrated basis. 06/30/2017 Scenario I Scenario II Scenario III Gain/ Gain/ Gain/ US$ R$ US$ rate (loss) - R$ US$ rate (loss) - R$ US$ rate (loss) - R$ Foreign exchange hedging instruments 34, , , (20,444) (47,814)

9 For the balance analyzed as at June 30, 2017, the Company considers as scenario I (probable) the average basic interest rate for 2017 of 10.06% per year, as disclosed in the Focus Report of July 21, In projecting scenario II (possible), the basic average rate was decreased by 25% and for scenario III (remote) by 50%. Interest rate risks Closing rate 06/30/2017 p.a. Scenario I Probable Scenario II 25% decrease Scenario III 50% decrease Average basic interest rate (% p.a.) Balance of short-term investments 428, , , ,972 Net effect 17,872 13,404 8,936 For the balance of borrowings and financing as at June 30, 2017, the Company considers as scenario I (probable) the TJLP for 2017 of 7,0% per year. In projecting scenario II (possible), a TJLP was increased by 25% and for the scenario III (remote) by 50%. Interest rate risks Closing rate 06/30/2017 p.a. Scenario I Probable Scenario II 25% increase Scenario III 50% increase Interest rate TJLP Balance of borrowings and financing 21,365 21,365 26,707 32,048 Net effect (5,342) (10,683) 4. CASH AND CASH EQUIVALENTS 06/30/ /31/ /30/ /31/2016 Cash and banks 7,910 22,648 8,269 22,798 Short-term investments in CDB (i) ,943 3,812 Investment funds (ii) 352, , , , , , , ,400 (i) In the, refers to a short-term investment yielding interest of 90% of the interbank deposit rate (CDI), with daily liquidity, used as collateral for transactions in the Electric Power Trade Chamber (CCEE). In consolidated it also includes transactions with Bank Deposit Certificates (CDBs), yielding interest of 98.5% of the CDI rate (99% as at December 31, 2016). (ii) Securities transactions through investment funds, which have a daily liquidity. The average mark-to-market interest range from 99.4% to 104.3% of the CDI rate (99% to 104% as at December 31, 2016).

10 5. SHORT-TERM INVESTMENTS 06/30/ /31/ /30/ /31/2016 Current assets Investment funds (i) 72,945 60,000 88,808 84,260 Noncurrent assets Investment funds (i) 2,212 22,190 2,212 22,190 Financial bills (ii) ,417 22,036 2,212 22,190 24,629 44,226 Total short-term investments 75,157 82, , ,486 (i) Securities transactions whose maturities exceed 90 days and have average yield ranging from 101% to 104% of the CDI rate (between 97% and 135% - 12/31/2016). Even though the Company and its subsidiaries select liquid securities in the secondary market, the uncertainty surrounding market conditions and prices in a liquidity event suggests that these investments should not be not considered cash equivalents. (ii) Financial bills yielding interest between 101.5% and 104.4% of CDI (104% to 106% in December 2016). 6. TRADE RECEIVABLES and consolidated 06/30/ /31/2016 Domestic market 105,044 92,946 Foreign market 16,098 43, , ,061 Foreign trade receivables are denominated in US dollars and are translated into Brazilian reais at the end of the reporting period. As at June 30, 2017 and December 31, 2016, the Company did not have any transaction that would generate a material discount to present value impact. As at June 30, 2017, The Company has provision for estimated loss on doubtful debts amounting to R$307 (R$305 12/31/2016) relating to receivables past due for more than 180 days. 7. INVENTORIES Inventories are stated at the average acquisition or production cost, lower than replacement cost or realizable value. The Company recognizes an allowance for obsolescence relating to slow-moving items. 06/30/ /31/ /30/ /31/2016 Current Finished products 79,376 70,749 79,376 70,749

11 Raw materials 51,130 55,561 51,183 55,614 Chrome ore 18,422 23,868 18,422 23,868 Maintenance supplies (i) 25,133 30,983 25,191 31,040 Other 2,692 3,738 2,691 3, , , , ,009 Noncurrent Maintenance supplies (i) 32,532 32,532 32,532 32,532 Allowance for obsolescence (ii) (11,874) (11,869) (11,874) (11,869) 20,658 20,663 20,658 20, , , , ,672 (i) Inventories of maintenance supplies are classified as current or noncurrent assets, based on the history of consumption. (ii) The Company recognizes an allowance for obsolescence relating to slow-moving items when it does not expect to use such inventories in the coming periods. 8. RECOVERABLE TAXES 06/30/ /31/ /30/ /31/2016 Current COFINS/PIS (taxes on revenue) 6,380 3,541 6,387 3,546 Income tax (IRPJ) and social contribution (CSLL) 1,948 10,958 3,045 11,496 ICMS (State VAT) 2,415 2,293 2,413 2,294 Other ,158 17,205 12,260 17,749 Noncurrent ICMS (State VAT) 6,037 6,708 6,037 6,708 Other ,102 6,774 6,102 6,774 17,260 23,979 18,362 24,523

12 9. ADVANCES TO SUPPLIERS The information on advances to suppliers was disclosed in the Company s annual financial statements, in Note 14. and consolidated 06/30/ /31/2016 Current Advances to power suppliers (i) 2,000 2,167 Advances to power suppliers - CHESF (ii) 9,917 9,915 11,917 12,082 Noncurrent Adiantamentos a fornecedores de energia (i) 11,667 12,167 Adiantamentos a fornecedores de energia - CHESF (ii) 38,162 43,702 49,329 55,869 61,246 67,951 (i) For the six- month period, ended June 30, 2017, the appropriate amount at cost was R$1,667 (R$834 06/30/2016); (ii) For the six- month period, ended June 30, 2017, the appropriate amount at cost was R$ 5,538 (R$4,833 06/30/2016). 10. CURRENT AND DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION Deferred income tax and social contribution are calculated on the temporary differences between the tax bases and the carrying amounts of the assets and liabilities disclosed in the financial statements. The tax rates of these taxes used to determine deferred taxes are 25% for the corporate income tax (IRPJ) and 9% for the social contribution (CSLL). 06/30/ /31/ /30/ /31/2016 Deferred Taxes - Assets Provision for litigation (Note 21) (48,508) (45,231) (48,508) (45,231) Allowance for inventory losses (i) (11,874) (11,868) (11,874) (11,869) Accrued profit sharing (ii) (14,887) (12,457) (14,887) (12,457) Provision for environmental liability (11,609) (11,834) (11,609) (11,834) Labor and actuarial liabilities (Note 16) (25,934) (25,934) (25,934) (25,934) Tax loss carryforwards (iii) (2,822) (50,827) (2,822) (50,827) Other temporary provisions (5,434) (6,684) (5,434) (6,683) Tax base (121,068) (164,835) (121,068) (164,835) Deferred IRPJ at the 25% tax rate 28,612 39,652 28,612 39,652 Deferred CSLL at the 9% tax rate 10,896 14,835 10,896 14,835 Deferred IRPJ/CSLL assets 39,508 54,487 39,508 54,487 (i) Allowance for obsolescence related to slow-moving maintenance items and allowance for inventory losses. (ii) The amount of Management profit sharing of R$3,799 (2016 R$6,226) is tax base only to calculate deferred CSLL. In the case of IRPJ, this is a permanent difference.

13 (iii) The amount represented in June 30, 2017 refers exclusively to tax carryforwards of CSLL. The amount of tax carryforwards of IRPJ in December, 2016 was fully used during the first semester of /30/ /31/ /30/ /31/2016 Deferred Taxes - Liabilities Property, plant and equipment - deemed cost 58,810 58,810 63,385 63,385 Biological assets 54,325 49,985 54,325 49,985 Hedging financial instruments (Note 19) 1,721 16,311 1,721 16,311 Accelerated depreciation 13,029 13,029 13,029 13,029 Tax base 127, , , ,710 Deferred IRPJ at the 25% tax rate (31,971) (34,534) (33,115) (35,678) Deferred CSLL at the 9% tax rate (11,510) (12,432) (11,921) (12,844) Deferred IRPJ/CSLL liabilities (43,481) (46,966) (45,036) (48,522) Deferred IRPJ/CSLL, net (3,973) 7,521 (5,528) 5,965 Deferred IRPJ/CSLL, net Expenses (16,455) - (16,455) - Deferred IRPJ/CSLL, net - Equity 4,961-4,961 - Management, based on the individual analysis of the provisions, estimates that the tax credits arising from temporary differences will be realized as follows: Deferred IRPJ/CSLL Deferred IRPJ/CSLL Calendar year Assets Liabilities Assets Liabilities ,448 1,309 10,448 1, and thereafter 28,136 39,880 28,136 41,435 39,508 43,481 39,508 45,036 The projected realization may not materialize if the estimates used in the preparation of this interim financial information are different when the balances are realized. The income tax and social contribution that affected profit or loss for the periods are as follows: 06/30/ /30/ /30/ /30/2016 Pretax income 178,655 9, ,663 (8,599) Combined IRPJ/CSLL tax rate 34% 34% 34% 34% IRPJ/CSLL at statutory rates (60,743) 3,367 (61,085) 2,924 Share of profit of investees Endowments (240) (551) (242) (551) Other 1,553 (2,526) 1,601 (2,478) SUDENE tax incentive 23,973-23,973 - (34,991) 953 (35,753) (105)

14 06/30/ /30/ /30/ /30/2016 Income tax and social contribution SUDENE tax incentive 23,973-23,973 - Current (42,509) 228 (43,271) (833) Deferred (16,455) 725 (16,455) 725 Income tax and social contribution expenses (34,991) 953 (35,753) (108) The portion corresponding to the income tax relief is recognized in profit or loss and at the end of each year they are transferred from retained earnings to the earnings reserve (tax incentive), which cannot be distributed to shareholders. 11. ESCROW DEPOSITS 06/30/ /31/ /30/ /31/2016 Labor 3,623 3,738 3,632 3,747 Tax 1,544 1,500 1,631 1,587 5,167 5,238 5,263 5,334 Refer to deposits associated to tax and labor lawsuits and lawsuits challenging the legality and constitutionality of certain taxes, which are record in the non-current assets until the judicial resolution of redemption by one of involved parties. 12. INVESTMENTS The information on investments was disclosed in the Company s annual financial statements, in Note 17. Variations in investments are as follows: Silbasa Jacurici Reflora Damacal Total As at December 31, ,036 43,155 2,990 1,950 53,131 Dividends - (2,276) - - (2,276) Share of profit of investees 256 1, ,951 As at June 30, ,292 42,477 3,021 2,016 52,806 As at December 31, ,454 44,464 3,115 2,108 55,141 Dividends - (3,351) - - (3,351) Share of profit of investees 258 1, ,369 As at June 30, ,712 42,118 3,175 2,154 53,159 Beyond the investments on subsidiaries, the Company has others investments amounting to R$78.

15 The financial information on the subsidiaries is summarized as follows: % in equity Share of Profit of investees % Assets Liabilities Equity Revenue Expenses Profit As at June 30, 2017 Silbasa , , (441) 499 5, Jacurici ,052 1,575 42,477 2,950 (1,352) 1,598 42,477 1,598 Reflora , , (148) 31 3, Damacal 100 2, , (27) 66 2, ,062 1,951 As at June 30, 2017 Silbasa , , (362) 504 5, Jacurici ,645 1,527 42,118 2,354 (1,349) 1,005 42,118 1,005 Reflora , , (99) 60 3, Damacal 100 2, , (36) 46 2, ,159 1, PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS The information on property, plant and equipment and intangible assets was disclosed in the Company s annual financial statements, in Note /30/ /31/ /30/ /31/2016 Farming land 115, , , ,571 Land 5,961 5,961 11,130 11,130 Buildings 113, , , ,582 Machinery and equipment 249, , , ,177 Vehicles and tractors 10,289 12,877 10,289 12,877 Furniture and fixtures 4,014 3,992 4,014 3,992 IT 2,909 2,938 2,912 2,941 Mine development 45,422 42,694 45,422 42,694 Provision for mine closure 4,097 4,387 4,097 4,387 PP&E in progress, intangible assets and other 89, ,119 90, , , , , ,935 The balances and variations are as follows:

16 Farming land Land Buildings Machinery and equipment Vehicles and tractors Furniture and fixtures IT Mines Provision for mine closure PP&E in progress, intangible assets, and other Total Cost Balance as at December 31, ,419 5, , ,003 70,679 10,202 7,726 70,322 10, , ,487 Additions and transfers ,818 19,015 2, ,484 2,622 - (5,075) 45,346 Balance as at June 30, ,419 5, , ,018 72,934 10,529 9,210 72,944 10, ,270 1,008,833 Balance as at December 31, ,419 5, , ,427 73,817 10,766 9,552 74,474 10, , ,806 Additions and transfers ,517 18, ,321 - (8,283) 28,329 Write-offs and reclassifications (819) (819) Balance as at June 30, ,419 5, , ,578 74,566 11,175 10,017 78,795 10,792 97,649 1,081,316 Accumulated depreciation and depletion Balance as at December 31, 2015 (35,112) (214,431) (54,203) (5,952) (5,631) (29,330) (5,874) (5,558) (356,091) Depreciation and depletion (2,238) (16,245) (3,454) (450) (466) (1,240) (362) (540) (25,095) Balance as at June 30, 2016 (37,450) (230,676) (57,657) (6,402) (6,097) (30,570) (6,236) (6,098) (381,186) Balance as at December 31, 2016 (40,140) (248,413) (60,940) (6,774) (6,614) (31,780) (6,405) (6,632) (407,698) Depreciation and depletion (2,890) (22,770) (3,337) (387) (494) (1,593) (290) (1,714) (33,475) Balance as at June 30, 2017 (43,030) (271,183) (64,277) (7,161) (7,108) (33,373) (6,695) (8,346) (441,173) Net balances as at: June 30, ,419 5, , ,342 15,277 4,127 3,113 42,374 4,215 96, ,647 December 31, ,419 5, , ,014 12,877 3,992 2,938 42,694 4, , ,108 June 30, ,419 5, , ,395 10,289 4,014 2,909 45,422 4,097 89, ,143 Farming Land Buildings Vehicles and Furniture and IT Mines Provision for PP&E in progress, Total

17 Land Machinery and equipment tractors fixtures mine closure intangible assets, and other Cost Balance as at December 31, ,571 11, , ,565 79,466 10,266 7,959 70,322 10, , ,267 Additions and transfers ,618 19,015 2, ,484 2,622 - (5,075) 45,346 Balance as at June 30, ,571 11, , ,580 81,721 10,593 9,443 72,944 10, ,204 1,108,096 Balance as at December 31, ,571 11, , ,989 82,604 10,830 9,785 74,474 10, ,216 1,080,586 Additions and transfers ,517 18, ,321 - (8,283) 28,329 Write-offs and reclassifications (819) (819_ Balance as at June 30, ,571 11, , ,140 83,353 11,239 10,250 78,795 10,792 99,114 1,108,096 Accumulated depreciation and depletion Balance as at December 31, 2015 (38,430) (220,793) (62,990) (6,016) (5,853) (29,330) (5,874) (5,558) (374,844) Depreciation and depletion (2,416) (16,264) (1,749) (450) (469) (1,240) (362) (540) (25,195) Balance as at June 30, 2016 (40,846) (237,057) (64,739) (6,466) (6,322) (30,570) (6,236) (6,098) (400,039) Balance as at December 31, 2016 (43,613) (254,812) (69,727) (6,838) (6,844) (31,780) (6,405) (6,632) (426,651) Depreciation and depletion (2,970) (22,789) (3,337) (387) (494) (1,593) (290) (1,714) (33,574) Balance as at June 30, 2017 (46,583) (277,601) (73,064) (7,225) (7,338) (32,373) (6,695) (8,346) (460,225) Net balances as at: June 30, ,571 11, , ,523 15,277 4,127 3,121 42,374 4,215 98, ,574 December 31, ,571 11, , ,177 12,877 3,992 2,941 42,694 4, , ,935 June 30, ,571 11, , ,539 10,289 4,014 2,912 45,422 4,097 90, ,871

18 14. BIOLOGICAL ASSETS According to the Company s policy, the fair value measurement of biological assets is conducted annually. The information on biological assets is presented in Note 19 of the Company s annual financial statements. The variations in the balance of biological assets are as follows: and consolidated 06/30/ /31/2016 At the beginning of the period/ year 197, ,902 Plantation, maintenance and fair value 14,175 45,777 Depletion of the historical cost and fair value (8,629) (36,813) At the end of the period/ year 203, , TRADE PAYABLES 06/30/ /31/ /30/ /31/2016 Electric power 16,378 12,790 16,378 12,790 Raw material and inputs 17,746 16,802 17,746 16,802 Other suppliers 19,951 15,633 19,951 15,596 54,075 45,225 54,075 45, LABOR AND ACTUARIAL LIABILITIES The information on biological assets is presented in Note 22 to the Company s annual financial statements. 06/30/ /31/ /30/ /31/2016 Current Payroll and related taxes 10,911 11,158 10,934 11,186 Accrued payroll and related taxes 23,542 16,028 23,542 16,028 Profit sharing (i) 14,887 12,457 14,887 12,457 49,340 39,643 49,663 39,671 Noncurrent Labor and actuarial liabilities 25,934 25,934 25,934 25,934 75,274 65,577 75,297 65,605

19 (i) The Company s bylaw establishes that up to 10% (ten percent) of profit for the year will be distributed to employees and up to 10% (ten percent) of the remaining balance for management s gratifications. In the six-month period ended June 30, 2017, the Company recorded management and employee profit sharing in the amounts of R$ 3,799 (2016, R$ 6,226) and R$ 11,088 (2016, R$ 6,231) respectively. 17. TAXES AND SOCIAL CONTRIBUTIONS 06/30/ /31/ /30/ /31/2016 Current State VAT (ICMS) 4,817 3,182 4,817 3,182 Taxes on revenue (PIS and COFINS) 4,310 3,051 4,341 3,089 Federal VAT (IPI) 3,058 2,901 3,058 2,901 Income tax and social contribution 2,752-2, Withholding income tax (IRRF) 993 1,836 1,013 1,844 Other ,660 11,616 16,840 11,982 Noncurrent PIS and COFINS ICMS Desenvolve (tax relief) ,987 11,926 17,254 12, BORROWINGS AND FINANCING The information on borrowings and financing was disclosed in the Company s annual financial statements, in Note 21. and consolidated 06/30/ /31/2016 Current Financing 1, Leasing , Noncurrent Financing 52,081 38,670 Leasing ,081 38,680 54,062 39, FOREIGN EXCHANGE HEDGING INSTRUMENTS The Company contracted derivatives consisting of dollar forward sales (non-deliverable forward, or NDFs) to minimize risks involving the impact of foreign exchange fluctuations on the translation of its sales prices both in foreign markets and in the domestic market, as defined in an internal policy, approved by the Management. The methodology for determining the amount of the NDFs is the mark-to-market using the BMF&Bovespa benchmark rates.

20 The Company and its subsidiaries do not make investments involving derivatives or any other risk financial instruments for speculative purposes. The information on derivative transactions for hedging purposes as at July 30, 2017 are shown in the table below: Maturities and consolidated Hedging instrument Hedged item Notional amount Transaction (US$) Fair value Transaction Third quarter of 2017 NDF 15,000 1,197 Future sales Fourth quarter of 2017 NDF 15, Future sales First quarter of 2018 NDF 3, Future sales Second quarter of 2018 NDF 1, Future Sales 34,000 1,721 As at June 30, 2017, the Company valued its outstanding agreements (NDFs). The amount of R$1,721 was considered effective for hedge accounting purposes and credited to equity. In addition to the new mark-to-market ( MTM ), the Company reversed the MTM, provided for as at December 31, 2016, amounting to R$16,311, recorded in equity. In the period, the settled hedge contracts totaled R$19,028, whose gains have been recognized in the finance income. The information on derivative transactions as at December 31, 2016 are shown in the table below: Maturities and consolidated Hedging instrument Hedged item Notional amount Transaction (US$) Fair value Transaction First quarter of 2017 NDF 21,250 10,927 Future sales Second quarter of 2017 NDF 11,000 3,438 Future sales Third quarter of 2017 NDF 6,000 1,276 Future sales Fourth quarter of 2017 NDF 3, Future sales 41,250 16,311

21 20. PROVISION FOR MINE CLOSURE The Company makes judgments and assumptions when measuring its obligations relating to the provision for mine closure and the decommissioning of assets related to mining operations. The potential costs covered by insurance or indemnities are not deducted from the amount accrued, as their recovery is considered uncertain. The annual long-term interest rates used to discount to present value and adjust the provision for periods ended June 30, 2017 and December 31, 2016 is 14.68%. Variations in the provision are summarized as follows: and consolidated 30/06/ /12/2016 At the beginning of the period/year 16,222 15,384 Increase Derecognition (201) (594) Inflation adjustment (315) 1,091 At the end of the period/year 15,706 16,222 In the semester, the IGP-M was negative in 1.95%. The assumptions used do not differ from the assumptions used and described in Note 25 to the financial statements for the year ended December 31, PROVISION FOR RISKS The description of the Company s main contingent liabilities was presented in the 2016 financial statements, in Note 26, and there were no significant changes in their possible contingencies in this period. Variations in the provisions for risks are as follows: Controladora e Consolidado Labor Tax Civil Total Balance as at December 31, ,055 37,773 1,403 45,231 New lawsuits/increases - 2,148-2,148 Inflation adjustments - 1,129-1,129 Balance as at June 30, ,055 41,050 1,403 48,508

22 22. RELATED-PARTY BALANCES AND TRANSACTIONS Profit or loss Current assets Current liabilities Dividends and interest on Lease Sales Trade Dividends receivable capital payable costs (i) revenue (ii) receivables (ii) (iii) (iv) Subsidiaries Silício de Alta Pureza da Bahia S.A. - Silbasa Mineração Vale do Jacurici S.A Reflorestadora e Agrícola S.A Indústria de Minérios Damacal Ltda Related party Marubeni Corporation - 83,056 6, Total as at June 30, ,056 6, Total as at December 31, , ,427 9,210 1,247 41,310 Total as at June 30, ,192 8, (i) (ii) (iii) (iv) Refers to the leases for the subsidiaries operations. Sale of alloys (FeSi 75) to a foreign related company dividends receivable from subsidiaries dividends and interest on capital. The Company has not provided or received any guarantees to or from related parties. Pursuant to the Brazilian Corporate Law, shareholders are responsible for setting the overall annual management compensation at a shareholders meeting. The table below shows the costs allocated to profit or loss for the periods: 06/30/ /30/ /30/ /30/2016 Fees 3,992 3,786 4,489 4,091 Payroll taxes Benefits Profit sharing 3,799-3,799-9,092 4,987 9,688 5, EQUITY The information on the Company s equity is disclosed in the 2016 financial statements, in Note 28. The Board of Directors meeting, held on March 10, 2017, approved a capital increase to R$1,225,444 from R$1,116,677 through the capitalization of part of the earnings reserves, amounting to R$108,767. This capitalization was made without the issue of new shares. Subscribed and paid-in capital is represented by 88,320, thousand registered shares without par value, of which 29,440 thousand are common shares and 58,880

23 thousand are preferred shares, held as follows: 06/30/ /31/2016 Common Common shares Preferred shares shares Preferred shares Fundação José Carvalho 29,086,696 17,277,800 29,086,696 18,044,000 Dimensional Funds - 2,133,815-2,010,115 F.I. Fator Jaburá - 2,000,000-1,000,000 Credit Suisse Fund - 1,000,005-1,000,005 Norges Bank - 654,751-2,574,600 VBI Fundo Investimento ,000 Other shareholders 313,304 31,781, ,304 30,097,980 Treasury shares 40,000 3,183,300 40,000 3,183,300 29,440,000 58,880,000 29,440,000 58,880,000 Treasury shares The Company had a preferred share buyback program, limited at 10% of the outstanding shares (4,346,400 preferred shares), effective until July 30, The Board of Directors approved at the meeting held on July 29, 2016 the discontinuation of the program. The Company bought back 3,183,300 preferred shares for an average price of R$8.07 per share. The shares bought back under the program will remain in treasury and the decision on the sale and/or cancellation of these shares will be taken in due time, and will be then duly communicated to the market. The preferred shares held in the treasury are intended for subsequent sale or cancellation. The volume of treasury shares and their fair values, considering the quoted closing price on BM&FBOVESPA are as follows: 06/30/ /31/2016 Common Preferred shares Shares Preferred Shares Common shares Number of treasury shares 3,183,300 40,000 3,183,300 40,000 BM&FBOVESPA quotation (R$ per share) EARNINGS (LOSS) PER SHARE As established by CPC 41 Earnings per Share, basic earnings per share are calculated by dividing profit for the six-month period attributable to the holders of the Company s common and preferred shares by the weighted average number of common and preferred shares outstanding in the period. In the case of the Company, diluted earnings per share correspond to basic earnings per share as the Company has no potentially diluting common or preferred shares.

24 Continuing operations 25. NET 06/30/ /30/2016 SALES REVEN Profit (Loss) attributable to owners of the Company 143,664 (8,950) UE Reconciliation of distributable profits, per class (numerator): Profit attributable to common shares 46,585 (2,902) preferred shares 97,079 (6,048) Weighted average number of shares, per class (denominator): Weighted average number of common shares issued 29,400,000 29,400,000 preferred shares issued 55,696,700 55,696,700 Basic and diluted earnings per share (in R$) for common shares ( ) for preferred shares ( ) 06/30/ /30/ /30/ /30/2016 Gross sales revenue Domestic market 527, , , ,992 Foreign market 172, , , , , , , ,703 Sales deductions Returns and rebates (9,907) (8,558) (9,907) (8,558) Taxes on sales (115,900) (93,061) (115,961) (93,122) (125,807) (101,619) (125,868) (101,680) 573, , , ,023 In the first semester of 2017, the total sales volume was 105,817 thousand tons and has decreased by 27.4% when compared with the same period in 2016 (145,769 thousand tons), impacted by exports that decreased 52.3%, with 31,127 thousand tons against 65,221 thousand tons in the first semester of 2016 due to the strategy of reduction of the inventory witch led the Company to make an effort to make sales in that period. The consolidated net sales revenue totaled R$ 573,547 in the first semester of 2017, only a 0.3% increase related to the same period in 2016, a reflection of the increase in the FeCrAc reference prince which neutralized the sales volume decrease. 26. EXPENSES BY NATURE OPERATING, COST OF SALES, AND OTHER EXPENSES, NET

25 06/30/ /30/ /30/ /30/2016 Cost of sales (i) (363,520) (496,139) (362,971) (495,592) Selling expenses (9,951) (11,898) (9,951) (11,898) General and administrative expenses (30,753) (30,556) (31,101) (30,734) Management fees and profit sharing (9,092) (4,987) (9,688) (5,353) Employee profit sharing (11,088) - (11,088) - Other, net (iii) (7,362) (25,999) (7,505) (26,198) (431,766) (569,579) (432,304) (569,775) The table below shows the breakdown by nature of cost of sales and operating expenses: 06/30/ /30/ /30/ /30/2016 Variable costs and indirect production expenses (185,341) (282,496) (185,041) (282,759) Expenses on services provided (34,069) (38,694) (34,069) (38,694) Personnel expenses (ii) (132,617) (152,434) (133,213) (152,068) Rental expenses (4,115) (5,736) (4,115) (5,736) Maintenance and repair costs (20,067) (23,629) (20,067) (23,629) Depreciation and depletion expenses (42,104) (32,099) (42,203) (32,199) Fuel and lubricants (6,091) (8,492) (6,091) (8,492) Other income (expenses) (iii) (7,362) (25.999) (7,505) (26,198) (431,766 ) (569,579) (432,304 ) (569,775) (i) Cost of sales include: (a) Cost of the electricity supply for the 14 electric furnaces. In addition to the electric furnaces, there is energy consumption in auxiliary services and other functions, as well as in mining. (b) The Company imports reactive metallurgical coke (met coke) - a commodity available in the foreign market - for the production of ferrochrome. (c) Cost of chrome ore transportation between the mines (municipality of Campo Formoso) and the metal plant (Pojuca, BA), by rail. (ii) Includes personnel expenses, management compensation, and employee and management profit sharing. (iii) The table shows the breakdown per nature of other income (expenses), net: 06/30/ /30/ /30/ /30/2016 Taxes and contributions (3,447) (1,551) (3,305) (1,730) Corporate and social responsibility (684) (1,593) (684) (1,593) Sale of assets Provisions for risks (659) (6,595) (659) (6,595) Assignment of electricity 2,108 (14,769) 2,108 (14,769) Other operating expenses, net (4,686) (1,531) (4,971) (1,551) (7,362) (25,999 ) (7,505) (26,198) 27. FINANCE INCOME

26 06/30/ /30/ /30/ /30/2016 Finance income Income from short-term investments 18,530 7,378 21,538 10,938 Exchange differences 2,957 3,860 2,957 3,860 Adjustment to the provision for mine closure Other income ,772 11,585 25,784 15,159 Finance costs Exchange differences (2,825) (10,684) (2,825) (10,684) Adjustment to the provision for mine closure - (900) - (900) Interest incurred (2,910) (1,143) (2,909) (1,205) Other expenses (621) (1,367) (658) (1,367) (6,356 ) (14,094 ) (6,392) (14,156) Hedging financial instruments (Note 19) Foreign exchange gains 19,225 13,243 19, Foreign exchange losses (197) (25,093) (197) (25,093) 19,028 (11,850) 19,028 (11,850) 35,444 (14,359 ) 38,420 (10,847) 28. OPERATING SEGMENTS Chrome alloys Silicon alloys Other segments 06/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/2016 Net sales Domestic market 331, ,179 61,013 53,085 17,366 17, , ,775 Foreign market 72,527 72,343 72, ,662 18,951 8, , , , , , ,747 36, , , ,023 Cost of sales (233,135) (246,888) (107,408) (205,688) (22,428) (43,016) (362,971) (495,592) Gross profit 170,568 63,634 26,119 30,059 13,889 (17,262) 210,576 76,431 Operating expenses (48,801) (40,270) (16,141) (30,573) (4,391) (3,340) (69,333) (74,183) Operating profit from before finance income (costs) 121,767 23,364 9,978 (514) 9,498 (20,602) 141,243 2,248 Product sales (tonnes) Domestic market 60,079 65,265 14,611 14, ,690 80,548 Foreign market 13,165 11,836 17,962 51,290-2,095 31,127 65,221 73,244 77,101 32,573 65,862-2, , , SUBSEQUENT EVENTS As at July 11, 2017, the Board of Directors Meeting approved the distribution of interest on equity in the amount of R$ 24,559 (R$ for each common share; and R$ 0, for each preferred share) with shareholding position at the closing of São Paulo Stock Exchange s trading on July 17,2017 and to be paid starting on July 25, 2017.