Cia de Ferro Ligas da Bahia - FERBASA

Transcription

1 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise p1 Operational Context Cia de Ferro Ligas da Bahia SA ("Ferbasa" or the "Company") is a publicly traded company, headquartered in Pojuca-BA, and is registered with the Brazilian Securities and Exchange Commission ("CVM") and listed on the São Paulo Stock Exchange (BM&F BOVESPA). Ferbasa operates in Bahia, in the sectors of chromite mining, metallurgy, in the production of ferroalloys, and in renewable forest resources, ensuring the sustainability in each one of its production processes. Its parent company is the Fundação José Carvalho, a nonprofit organization with the primary objectives of providing quality education, along with social assistance to low income children in the Northeast of Brazil. The interim, condensed and consolidated quarterly financial information presented here was authorized for release by the Board of Directors on June 29 th, The main accounting policies applied in the preparation these financial statements are set out in Note 6 of the annual audited financial statements of December 31st, Summary of the main accounting policies 2.1 Basis of Preparation These quarterly financial statements should be read in conjunction with the audited financial statements of the Company as of December 31, 2015, which were prepared and presented in accordance with the accounting practices adopted in Brazil, including the pronouncements issued by the Accounting Pronouncements Committee ("CPC") and in accordance with International Financial Reporting Standards IFRS- issued by the IASB (International Accounting Standards Board), reporting all the information relevant to the Financial Statements, which are consistent with those used by the Management. (i) Condensed Quarterly results The information, interim, condensed, quarterly and consolidated, of the Company has been prepared and are being presented according to the pronouncements CPC 21 - Interim Financial Statements and IAS 34 - Interim Financial Reporting, which aim to establish the minimum content of an interim financial report. The preparation of the quarterly financial statements requires the use of certain accounting estimates and the judgment of management in of applying its accounting practices. There were no significant changes in assumptions and judgments management in the use of estimates for the preparation of these financial statements, compared to those used in the financial statements of December 31st, 2015.

2 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise (ii) Policy of Hedge Accounting Derivative financial instruments are initially recognized at their fair value on the date the contract is signed and are subsequently re-measured to their fair values. The method of recognizing the accounting gain or loss resulting from this re-measurement depends on the whether the derivative is designated for accounting purposes as a hedging instrument or not, such as in the case of the adoption of hedge accounting. The Company designates certain derivatives as hedges of a highly probable predicted transaction (cash flow hedge). The Company documents at the start of the transaction the relationship between the hedging instruments and hedged items, as well as their objectives and risk management strategies to carry out the hedging transactions. The Company also documents, both at the inception of the hedge and on an ongoing basis, whether the derivatives which are used in the hedging transactions are highly effective in offsetting variations in the cash flows of the hedged items. The market values of the derivatives as a hedging instrument are disclosed in Note 18. The total fair value of the derivatives as a hedging instrument are classified as non-current assets or liabilities when the time until maturity of the hedged item exceeds 12 months. The effective group of variations in the fair value of the derivatives that are designated and qualified as cash flow hedges is recognized as "valuation adjustments" (other comprehensive income) in equity, net of deferred taxes. The gain or loss relating to the ineffective group is recognized immediately in the income statement. Amounts accumulated in the Net worth are re-classified for the income statement of the period when the hedging contracts are settled or no longer fit the effective criteria. When the designated contract for the hedge accounting propose is no longer expected to occur, the cumulative gains or losses which are reported in net worth are then immediately transferred to the income statement in "Financial result". 2.2 Accounting practices There were no changes in accounting policies applied to the preparation of this quarterly report, when compared to those presented in the audited financial statements for the year ending December 31st, Reclassification of comparative figures Cash flow Statement The Company reclassified the item "share repurchase" and the "Settlement of financial hedging instruments", previously included in financing activities to be part of the operational activities. The financial statements of June 30th, 2015, parent and consolidated, have been reclassified, where applicable, for comparison purposes:

3 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise CASH FLOW STATEMENTS After Before After Before Transfer Reclassificatio Reclassificatio Transfer Reclassification Reclassification n n Cash flow generated from operations Variation of the hedge fair value 8,413 (12,931) (4,518) 8,413 (12,931) (4,518) Net cash flow from operational activities 46,777 (12,931 ) 33,846 48,416 (12,931) 35,485 Cash flow from Investment activities Purchases of property and biological assets (32,649) (32,649) (32,649) (32,649) Financial investiment and withdrawals 43,509 43,509 45,790 45,790 Withdrawal(Deposit) of tax incentive 1,048 1,048 1,048 1,048 Share repurchase (10,510) 10,510 (10,510) 10,510 Net cash flow applied to investment activities 1,398 10,510 11,908 3,679 10,510 14,189 Cash flow of financing activities Financing 2,362 2,362 2,362 2,362 Repayment of debt (1,030) (1,030) (1,030) (1,030) Settlement hedging instruments (12,931) 12,931 (12,931) 12,931 Dividends and IOC paid (6,633) (6,633) (6,633) (6,633) Share repurchase (10,510) (10,510) (10,510) (10,510) Net cash flow applied to financing activities (18,232) 2,421 (15,811) (18,232) 2,421 (15,811) There was no impact on the balance sheet, income and earnings statement, the value added statement or the demonstration of changes in Shareholder equity on June 30th, Financial instruments We present the following financial instruments for the assets and liabilities of the company: Accounting measurement 06/30/ /31/ /30/ /31/2015 Assets Cash and cash equivalents Amortized cost 100,994 21, ,249 40,641 Investments (i) Fair value 34,095 26,247 70,064 42,178 Non current investments Fair value 19,340 18,178 19,340 37,386 Accounts receivable Amortized cost 97, ,046 97, ,046 Sales of Dolar (NDF) Fair value 26,152 26,152 Tax incentive deposit Amortized cost 4,617 3,231 4,713 3,327 Liabilities Suppliers Amortized cost 47,751 67,782 47,752 67,782 Bank Loans Amortized cost 1,575 1,226 1,575 1,226 Leasing Amortized cost Sales of Dolar (NDF) Fair value 85,375 85,375 Non current loans Amortized cost 19,309 15,865 19,309 15,865 Non current leasing Amortized cost (i) Used for financial instruments that are not traded on active markets (e.g. OTC derivatives), whose assessment is based on techniques that, in addition to the quoted prices on active markets for identical assets or liabilities, use other information adopted by the market for direct (for example, prices) or indirect (i.e. derived from prices) assets or liabilities. The Company's Financial Risk Management Policy establishes a hedging program for foreign exchange risk arising from part of its sales, both in foreign markets and on the domestic market.

4 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise For the purposes of the sensitivity analysis required by CVM, the Company adopted as scenario I (probable) the expectation of the average exchange rate in 2016, based on the Focus Report published on July 8 th, 2016: as scenario II (possible) an appreciation of the Real of 25% against the US dollar and scenario III (remote) an increase of 50% of the Real compared to the foreign currency. 06/30/2016 Scenario I Scenario II Scenario III US$ R$ Rate Profit/(Loss) - R$ Rate Profit/(Loss)- R$ Rate Profit/(Loss)- R$ Accounts receivable 5,834 18, , (3,553) 1.74 (8,570) In the case of derivative hedging financial instruments (NDF), we believe that the impact of a depreciation of the Real on these instruments needs to be evaluated together with the increase in revenues from sales indexed to the US dollar. 06/30/2016 Scenario I Scenario II Scenario III Profit/(Loss) - Profit/(Loss)- Profit/(Loss)- US$ R$ Rate R$ Rate R$ Rate R$ Financial hedging instrument 56, , , (29,504) 5.21 (78,659) For the balance invested on June 30 th, 2016, Company considers as scenario I (probable) the average base interest rate, for 2016, of 14.06% per annum, in line with the Focus Report. In the projection of scenario II (possible), the base rate was reduced by 25%; and in scenario III (remote) by 50%. Interest rate risks Rate at end of Period 06/30/2016 p.a Scenario I Scenario II Reduction of 25% Scenario III Reduction of 50% Average base interest rate (% p.a) Balance of investments 151, , , ,518 Net effect 8,749 6,562 4,374 4 Cash and cash equivalents 06/30/ /31/ /30/ /31/2015 Cash and bank deposits 3, , Investments in CDB (i) 107 3,730 3,587 Investment funds (ii) 97,602 20, ,097 36, ,994 21, ,249 40,641 (i) In the case of the, this refers to the financial investments with a rate of return of around 90% of the CDI, to guarantee energy contracts operations, with daily liquidity. In the case of consolidated, this also includes operations in CD - Certificate of bank Deposit, whose rate of return is 99% of CDI (100% in December 2015). (ii) Transactions in securities through investment funds, whose withdrawal can be daily. The average interest rates on the market are between 98% and 123% of CDI (between 95% and 116% in December 2015).

5 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise 5 Financial Investments 06/30/ /31/ /30/ /31/2015 Current Investment Funds (i) 34,095 26,247 49,501 42,178 Treasury bills (ii) 20,563 34,095 26,247 70,064 42,178 Non-current Investment Funds (i) 19,340 18,077 19,340 18,077 Treasury bills (ii) 19,208 Certificates of Deposit ,340 18,178 19,340 37,386 Total of financial applications 53,435 44,425 89,404 79,564 (i) Transactions in securities, with maturities exceeding 90 days, and average mark-to-market earnings of between 98% and 123% of CDI. Although the Company and its subsidiaries select shares with liquidity on the secondary market, uncertainty as to the market conditions and prices in the event of liquidity suggests that these applications are not considered cash equivalents. The investment funds classified in the item Non-current have a maturity predicted for between the July 1 st, 2016 and March 3 rd, (ii) Interest rate between 104% and 106% of CDI (between 104% and 106% in December 2015). 6 Accounts receivable from clients and 06/30/ /31/2015 Domestic Market 78, ,160 Foreign Market 18,721 19,886 97, ,046 The accounts receivable from foreign markets are in US dollars, which are converted to Reais (R$) on the date of preparation of the financial statements. On June 30 th, 2016 and on December 31 st, 2015 the Company had no operations that would generate a significant effect of adjustment to the present value. The Company has not recorded an allowance for doubtful accounts on June 30th, 2016 and December 31st, There are no material overdues considered unrecoverable. The amount overdue for more than 180 days was R$398 on june 30 th.

6 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise 7 Inventories Inventories are demonstrated at the average cost of purchases or production, lower than the replacement cost or realizable value. The Company maintains an allowance for obsolescence related to items with low turnover. 06/30/ /31/ /30/ /31/2015 Current Finished products (i) 143, , , ,939 Raw materials 50,630 37,777 50,683 37,830 Chrome ore 52,555 50,396 52,555 50,396 Maintenence materials (ii) 35,834 29,490 35,891 29,547 Others 1, , , , , ,603 Non-current Maintenance materials (ii) 32,532 32,532 32,532 32,532 (-)Allowance for obsolescence (ii) (13,539) (14,450) (13,539) (14,450) 18,993 18,082 18,993 18, , , , ,685 (i) (ii) The reduction in the balance of finished products for June 30 th, 2016 is justified by the new storage plan, which the Company has started operating within the new conditions of the electricity supply contract signed with Chesf, with a 30% lower volume. Inventories of maintenance materials are classified as a current or non-current asset, considering their history of use. The Company maintains an allowance for obsolescence related to items with low turnover for more than 12 months where there is no predicted use in the future periods. 8 Recoverable taxes 06/30/ /31/ /30/ /31/2015 Current COFINS/PIS to recover 5,052 5,324 5,057 5,329 IRPJ and CSLL 3,445 1,598 3,921 2,039 ICMS to recover 2, , Other ,402 7,458 11,883 7,905 Non current ICMS to recover 7,312 8,739 7,312 8,739 COFINS/PIS to recover Other ,378 8,804 7,459 8,965 18,780 16,262 19,342 16,870

7 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise 9 Advances to Suppliers and 06/30/ /31/2015 Current Advances to Energy Suppliers (i) 2,000 2,000 Advances to Energy Suppliers - CHESF 8,618 8,618 10,618 10,618 Non-current Advances to Energy Suppliers (i) 13,166 14,000 Advances to Energy Suppliers - CHESF (ii) 46,878 51,711 60,044 65,711 70,662 76,329 (i) Refers to an energy prepayment, contracted in February 2015, for which invoices will be issued monthly from January 31st, 2016, corresponding to R$167 per month in fixed and unadjustable installments for eight years. The value of the down payment corresponds to R$16,000, approximately 5% of the total contract, and is guaranteed by a bank guarantee from a top-level financial institution; (ii) This refers to the foreseen payment stipulated in law /15, which authorized the extension of the contracts signed between Chesf and the electricity intensive industries of the Northeast to That contract provides: (i) a reduction in the volumes supplied by 30% until February 8th, 2032; (ii) from February 9th, 2032 until 2037 a reduction of 1/6 of the previous year's volume; (iii) a real increase of 22.5% of the tariff on July 1 st, 2015; (iv) an annual adjustment from July 1 st, 2016, at a fixed index, that being 70% of IPCA + 30% LTN and NTN-B; (v) a down payment of R$65 million in the second half of 2015; and (vi) a discount of 8.8% on the tariff in the years , to offset the 2015 advance.

8 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise 10 Deferred income tax and social contributions Income tax and deferred social contribution are calculated on the temporary differences between the tax calculation base and the book value of the assets and liabilities of the financial statements. The tax rates to calculate deferred taxes and social contributions are 25% for income tax (IRPJ) and 9% for social contributions (CSLL). 06/30/ /31/2015 Allowance for judicial causes (39,887) (39,887) (32,102) (32,102) Allowance investory loss(i) (13,538) (13,538) (18,781) (18,781) Allowance for profit sharing (ii) (20,616) (20,616) Allowance for environmental liabilities (11,681) (11,681) (10,807) (10,807) Labour and actuarial liabilities (Note 16) (14,187) (14,187) (14,187) (14,187) Financial hedging instruments (Note 18) (85,375) (85,375) Fiscal loss/negative base of CSLL (31,122) (31,122) Other temporary allowances (10,576) (10,576) (19,775) (19,775) Base calculation (120,991 ) (120,991) (201,643) (201,643) IRPJ deferred at the rate of 25% 30,248 30,248 48,984 48,984 CSLL deferred at the rate of 9% 10,889 10,889 18,148 18,148 IRPJ/CSLL deferred asset 41,137 41,137 67,132 67,132 (i) The obsolescence provision related to items of maintenance, with low turnover and supply of inventories. (ii) The base for calculation of deferred social contributions. In the case of income tax, it is a permanent difference. The amount of profit participation for Directors in 2015 was R$5, /30/ /31/2015 Fixed assets- Deemed Cost 58,810 63,385 58,810 63,385 Biological assets 46,816 46,816 46,816 46,816 Financial hedging Instruments (Note 18) 26,152 26,152 Accelerated depreciation 5,623 5,623 5,623 5,623 Base calculation 137, , , ,824 IRPJ deferred at the rate of 25% (34,350) (35,494) (27,813) (28,956) CSLL deferred at the rate of 9% (12,366) (12,778) (10,012) (10,424) IRPJ/CSLL deferred liability (46,716) (48,272) (37,825 ) (39,380 ) Net IRPJ/CSLL deferred (5,579) (7,135) 29,307 27,752

9 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise The board, based on analysis of individual provisions, expects that tax credits arising from temporary differences will be as follows: IRPJ/CSLL - deferred IRPJ/CSLL - deferred Calendar year Asset Liability Asset Liability ,625 8,892 23,625 8, onwards 16,900 35,982 16,900 37,538 41,137 46,716 41,137 48,272 The projection is based on estimates and subject to uncertainties that may not materialize. The values of IRPJ and CSLL which affected the results of the respective periods are: 06/30/ /30/ /30/ /30/2015 Profit before IRPJ/CSLL (9,903) 132,061 (8,599) 133,318 Combined rate of IRPJ/CSLL 34% 34% 34% 34% IRPJ/CSLL at statutory rates 3,367 (44,901) 2,924 (45,328) Changes to taxable profit: Equity method Donations (551) (325) (551) (325) Others (2,526) 1,946 (2,478) 1,984 Tax incentive (SUDENE) 23,303 23, (19,323) (105) (20,366) Results of IRPJ and CSLL Tax incentive (SUDENE) 23,303 23,303 Current 228 (41,523) (830) (42,566) Deferred 725 (1,103) 725 (1,103) Despesa de IRPJ e CSLL 953 (19,323 ) (105 ) (20,366 ) The value relative to tax incentive of a reduction in income tax is recognized in the results, and at the end of each fiscal year is transferred from retained earnings to revenue reserves (tax incentives), not being permitted to be distributed to shareholders. 11 Depósitos judiciais 06/30/ /31/ /30/ /31/2015 Labour 3,170 1,837 3,179 1,846 Tax 1,447 1,394 1,534 1,481 4,617 3,231 4,713 3,327

10 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise These values refer to deposits associated with tax and labor lawsuits, and questions regarding the legality and constitutionality of certain taxes, with a probability of remote or possible loss. 12 Investments Information regarding the investments was presented in the annual financial reports, in Note 17. Changes in the investments are as follows: Silbasa Jacurici Reflora Damacal Total On 12/31/2014 4,655 43,174 2,917 1,843 52,589 Equity method 225 1, ,922 Discontinued projects charge (11 ) (11) On 06/30/2015 4,880 44,800 2,940 1,880 54,500 On 12/31/2015 5,036 43,155 2,990 1,950 53,131 Dividends (2,276) (2,276) Equity method 256 1, ,951 On 06/30/2016 5,292 42,477 3,021 2,016 52,806 The summarized financial information regarding the subsidiaries is as follows: % Assets Liabiliti es Net worth Income Expenses Profit % Net worth Equity method result On 06/30/2015 Silbasa , , (365) 439 4, Jacurici ,169 2,369 44,800 2,683 (1,057) 1,626 44,800 1,626 Reflora , , (129) 23 2, Damacal and others 100 2, , (31) 48 1, ,500 1,922 On 06/30/2016 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, Property, plant and equipment 52,806 1,951 The information relative to property, plant and equipment was presented in the Company's annual financial reports, in Note /30/ /31/ /30/ /31/2015 Land for planting 115, , , ,571 Land 5,961 5,861 11,130 11,030 Buildings 105,178 82, ,130 83,928 Machine and equipment 235, , , ,772 Vehicles and tractors 15,277 16,476 15,277 16,476 Furniture and utensils 4,127 4,250 4,127 4,250 Information technology 3,113 2,095 3,121 2,106 Development of mines 42,374 40,992 42,374 40,992 Allowance for the closure of mines 4,215 4,577 4,215 4,577 In progress, intangibles and others 96, ,256 98, , , , , ,423

11 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30 th, 2016 In thousands of Brazilian Reais (R$), unless stated otherwise The balances and changes are demonstrated as follows:

12 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise Land for planting Land Buildings Machines and equipment Vehicles and tractors Furniture and utensils Information technology Mines Allowance for the closing of mines Construction in progress, intangible assets and other Total Cost Balance on 12/31/ ,419 5, , ,320 65,924 8,582 7,443 63,358 10,220 81, ,913 Additions and transfers 12,414 23,686 1, ,380 (17,139) 24,884 Derecognition (1) (191) (192) Balance on 06/30/ ,419 5, , ,005 67,515 9,490 7,296 66,738 10,220 63, ,605 Balance on 12/31/ ,419 5, , ,003 70,679 10,202 7,726 70,322 10, , ,487 Additions and transfers ,618 19,015 2, ,484 2,622 - (5,075) 45,346 Balance on 06/30/ ,419 5, , ,018 72,934 10,529 9,210 72,944 10, ,739 1,008,833 Depreciation and depletion Balance on 12/31/2014 (30,920) (191,008) (48,005) (4,801) (5,073) (26,839) (4,713) (4,448) (315,807) Cost of depreciation and depletion (2,001) (10,428) (3,360) (596) (353) (1,218) (572) (530) (19,058) Derecognition Amortization of tax incentive Balance on 06/30/2015 (32,921) (201,069) (51,365) (5,397) (5,256) (28,057) (5,285) (4,978) (334,328) Balance on 12/31/2015 (35,112) (214,431) (54,203) (5,952) (5,631) (29,330) (5,874) (5,558) (356,091) Cost of depreciation and depletion (2,338) (16,245) (3,454) (450) (466) (1,240) (362) (540) (25,095) Balance on 06/30/2016 (37,450) (230,676) (57,657) (6,402) (6,097) (30,570) (6,236) (6,098) (381,186) Net balances on: 06/30/ ,419 5,861 85, ,936 16,150 4,093 2,040 38,681 4,935 58, ,277 12/31/ ,419 5,861 82, ,572 16,476 4,250 2,095 40,992 4, , ,396 06/30/ ,419 5, , ,342 15,277 4,127 3,113 42,374 4,215 96, ,647

13 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise Land for planting Land Buildings Machines and equipment Vehicles and tractors Furniture and utensils Information technology Mines Allowance for the closing of mines Construction in progress, intangible assets and other Total Cost Balance on 12/31/ ,571 11, , ,882 74,711 8,646 7,676 63,358 10,220 82,537 90,.693 Additions and transfers 12,414 23,686 1, ,380 (17,139) 24,884 Derecognition (1) (191) (192) Balance on 06/30/ ,571 11, , ,567 76,302 9,554 7,529 66,738 10,220 65, ,385 Balance on 12/31/ ,571 11, , ,565 79,466 10,266 7,959 70,322 10, , ,267 Additions and transfers ,618 19,015 2, , (5,075) 45,346 Balance on 06/30/ ,571 11, , ,580 81,721 10,593 9,443 72,944 10, ,204 1,035,613 Accumulated depreciation and depletion Balance on 12/31/2014 (34,079) (197,332) (56,792) (4,865) (5,291) (26,839) (4,713) (4,448) (334,359) Cost of depreciation and depletion (2,079) (10,446) (3,360) (596) (356) (1,218) (572) (530) (19,157) Derecognition Amortization of tax incentive Balance on 06/30/2015 (36,158) (207,411) (60,152) (5,461) (5,477) (28,057) (5,285) (4,978) (352,979) Balance on 12/31/2015 (38,430) (220,793) (62,990) (6,016) (5,853) (29,330) (5,874) (5,558) (374,844) Cost of depreciation and depletion (2,416) (16,264) (3,454) (450) (469) (1,240) (362) (540) (25,195) Balance on 06/30/2016 (40,846) (237,057) (66,444) (6,466) (6,322) (30,570) (6,236) (6,098) (400,039) Net balances on: 06/30/ ,571 11,030 86, ,156 16,150 4,093 2,052 38,681 4,935 60, , /31/ ,571 11,030 83, ,772 16,476 4,250 2,106 40,992 4, , , /30/ ,571 11, , ,523 15,277 4,127 3,121 42,374 4,215 98, ,574

14 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise 14 Biological assets The fair value assessment of biological assets is carried out annually. The information regarding biological assets were presented in Note 19 of the Company s annual financial reports. The change in the balance of the biological assets is demonstrated as follows: and 06/30/ /31/2015 At the beginning of the period 188, ,939 Planting and maintainence 10,850 21,379 Depletion of the historic cost and fair value (6,331) (30,894) Fair value variation 25,478 At the end of the period 193, , Suppliers 06/30/ /31/ /30/ /31/2015 Energy 13,629 28,595 13,629 28,595 Raw materials and supplies 6,855 20,244 6,856 20,244 Other suppliers 27,267 18,943 27,267 18,943 47,751 67,782 47,752 67, Provisions for Tax, labour and civil risk Information related to post-employment benefits was presented in Note 22 of the Company s annual financial reports. 06/30/ /31/ /30/ /31/2015 Current Salaries and expenses 12,100 11,771 12,115 11,808 Provisions for Tax, labour and civil risk 23,673 18,960 23,673 18,960 Profit participation 20,616 20,616 35,773 51,347 35,788 51,384 Non current Post-employment benefits 14,187 14,187 14,187 14,187 49,960 65,534 49,975 65,571 The profit partcipation in 2015 was paid in the following ways: the participation of employees in March 2016 and the participation of the management in April On June 30th, 2016, due to Corporate loss in the first half of 2016, the Company has not accrued any profit sharing.

15 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise 17 Tax and social obligations 06/30/ /31/ /30/ /31/2015 Current IRPJ/CSLL 1,499 5,056 1,693 5,136 IPI 2,563 2,057 2,563 2,057 ICMS 2,878 1,875 2,878 1,875 IRRF to recover 921 1, ,878 PIS and COFINS 2, , Others ,659 12,544 10,900 12,687 Non-current PIS and COFINS ICMS Desenvolve ,720 12,544 11,048 12, Derivative financial instruments The Company contracted derivative financial instruments for forward dollar sales (non deliverable forward - "NDF") to minimize risks involving the impact of currency fluctuations on the conversion of its sales prices, both in foreign markets and on the domestic market, according to the internal policy approved by the Board. The methodology for determining the value of the NDF is done by marking to market using the reference rates of the BMF & Bovespa. The Company and its subsidiaries do not make speculative investments in derivatives or any other high-risk financial instruments. Due to the change in the scenario previously predicted for 2016, when approving the contracting of hedging, the Board of Directors approved, on March 22 nd, 2016, the purchase of future dollar contracts, in NDF transactions, to the maximum limit of US$65.25 million, an operation which aims to neutralize the percentage of up to 50% of the position in future dollar sales contracts for the period between April and December 2016, and accommodate the Company's Risk Management Policy. In March 2016, US$55.5 million in future dollar purchase operations had been carried out, and in April 2016 an additional US$9 million were contracted. Information on the transactions with hedging derivatives up to June 30 th, 2016 is shown in the table below: and Hedging Instrument Hedging item Maturity Operation Sale (US$) Purchase (US$) Net (US$) Fair value Operação 3rd quarter of 2016 NDF 43,500 (21,750) 21,750 9,130 Future Sales 4th quarter of 2016 NDF 43,500 (21,750) 21,750 8,161 Future sales 1st quarter of 2017 NDF 10,000 10,000 7,629 Future sales 2nd quarter of 2017 NDF 3,000 3,000 1,232 Future sales 100,000 (43,500) 56,500 26,152

16 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise On June 30th, 2016, the Company proceeded with the evaluation of their open contracts (NDF). The amount of R$27,476 was considered effective for hedge accounting purposes and credited to net equity, and the amount of R$1,324 was considered ineffective and charged to the income statement for the period. In addition to the effect of the new mark to market -"MTM"- the Company carried out the reversal of MTM, accruing, on December 31st, 2015, the positive value of R$8,118. In the period, settled hedging contracts were R$18,644. Information on the derivative transactions as of December 31st, 2015, are shown in the table below: and Hedging instrument Hedging item Maturity Operation Notional (US$) Fair value Operation 1st quarter of 2016 NDF 43,500 (21,868) Future sales 2nd quarter of 2016 NDF 43,500 (20,483) Future sales 3rd quarter of 2016 NDF 43,500 (20,525) Future sales 4th quarter of 2016 NDF 43,500 (22,499) Future sales 174,000 (85,375) 19 Provision for mine closure The Company makes judgments and assumptions when measuring its obligations regarding the provisions for mine closure and the decommissioning of assets related to mining operations. Of the amount provisioned, the potential costs covered by insurance or indemnification arrangements are not deducted, as these recoveries are considered uncertain. The annual long-term interest rate used to discount the present value and update the provision for the period of June 30th, 2016 and December 31st, 2015 is 14.68%. Changes in the provision are summarized as follows: and 06/30/ /31/2015 At the start of the period 15,384 14,236 Addition 231 Derecognition (388) (656) Update 900 1,573 At the end of the period 15,896 15,384 The assumptions used do not differ from those used and described in Note 25 of the Financial Statements of December 31st, 2015.

17 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise 20 Provisions for contingencies The description of the main contingent liabilities of the Company was presented in Note 26 of the financial statements of 2015, and there were no significant changes in possible contingencies in this period. The changes in the provisions for contingencies is shown below: and Labour Tax Civil Total Balance on 12/31/2015 4,272 25,970 1,860 32,102 New cases/complements 6,595 6,595 Monetary update 1,190 1,190 Balance on 06/30/2016 4,272 33,755 1,860 39, Balances and transactions with related companies Result Current asset Costs of leasing (i ) Sales revenue (ii) Contas a receber de clientes (iii) Accounts receivable from clients Controlled interests Silício de Alta Pureza da Bahia S.A. - Silbasa Mineração Vale do Jacurici S.A. 180 Reflorestadora e Agrícola S.A. 30 Indústria de Minérios Damacal Ltda. 18 Part controlled Marubeni Corporation 46,192 8,353 Total on June 30th, ,192 8, Total on December 31st, , ,190 1,744 3,332 Total on June 30th, ,176 17, (i) (ii) (iii) Refers to leasing operations of the directly controlled subsidiaries. Revenue from sales of alloys (FeSi 75) to an associated company based abroad. Accounts receivable from the sale of alloys (FeSi 75) to an associated company based abroad The Company has no guarantees given or received from related companies. According to the Law of joint stock companies, it is the responsibility of the shareholders, at the AGM, to define the global total of annual payments to the management. The expenses allocated in the results are shown below:

18 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise 06/30/ /30/ /30/ /30/2015 Salaries 3,786 3,305 4,091 3,419 Social contributions Benefits Profit participation 2,856 2,856 4,987 7,179 5,353 7, Net equity Information on the net equity of the Company was presented in note 28 of the financial reports of At the Meeting of the Board of Directors held on March 2, 2016, an increase in capital from R$1,102,073 to R $ 1,116,677 was approved, through the capitalization of revenue reserves to the amount of R$14,604. This capitalization was made without issuing new shares. The subscribed and paid capital is represented by 88,320,000 registered shares with no nominal value, being 29,440,000 common shares and 58,880,000 preferred shares, distributed as follows: 06/30/ /31/2015 Ordinary shares Preferred shares Ordinary shares Preferred shares Fundação José Carvalho 29,086,696 18,115,600 29,086,696 18,115,600 VBI Fundo Investimento 1,100 1,077,000 6,600 4,661,500 Fundos Fator Sinergia 1,709,700 Norges Bank 2,649,600 2,649,600 Dimensional Funds 1,207,284 Una Capital Investimentos 1,186,930 Credit Suisse Fund 1,000,005 Skopos Fundos de Investimentos 511,200 Other shareholders 312,204 29,949, ,704 28,560,300 Shares in treasury 40,000 3,183,300 40,000 3,183,300 29,440,000 58,880,000 29,440,000 58,880,000 Shares in treasury A Prefered Share buyback program is in place for up to 10% of the outstanding shares (4,346,400 PS). On July 31st, 2015, the Board of Directors, extended the program until July 30st, Until June 30th, 2016, the Company has acquired 3,183,300 shares at an average cost of R$8.07 per share.

19 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise The preferred shares in the treasury are intended for subsequent sale or cancellation. The volume of treasury shares and their market values, considering the quoted closing price on BM & FBOVESPA are as follows: 06/30/ /31/2015 PS OS PS OS Amount of shares in treasury 3,183,300 40,000 3,183,300 40,000 Quoted price per share on BM&FBOVESPA - R$ per share Earnings (loss) per share As defined by CPC 41 - "Earnings per Share", the basic earnings per share calculation is made by dividing the net income for the three-month period attributable to holders of common and preferred shares of the Company by the weighted average number of common and preferred shares available during the period. In the case of the Company, diluted earnings (loss) per share are equal to basic earnings (loss) per share, as it does not have any potentially diluting common or preferred shares. Continued operations 06/30/ /30/2015 Earnings (loss) of the operations attributable to the shareholders (8,950) 112,738 Reconciliation of the distributable result, by share type (numerator): Earnings (loss) of the operations attributable to common shares (2,902) 36,303 to preferred shares (6,048) 76,435 Weighted average number of the quantity of shares, by type (denominator): Weighted number of: Common shares issued 29,400,000 29,400,000 Preferred shares issued 55,696,700 56,273,400 Basic earnings/diluted per share (in R$): Common shares (0.0987) Preferred shares (0.1086)

20 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise 24 Net Sales revenue 06/30/ /30/ /30/ /30/2015 Gross Sales revenue (i) Domestic market 402, , , ,374 Foreign market 270,711 93, ,711 93, , , , ,252 Deductions on sales Returns and reductions (8,558) (2,326) (8,558) (2,326) Tax on sales (93,061) (103,885) (93,122) (103,946) (101,619) (106,211 ) (101,680) (106,272) 572, , , ,980 (i) The consolidated net income for the first half of 2016 showed a 24.1% increase when compared to 2015, totaling R$572,023. Although the Company's sales volume had exceeded 39.6% in the same period of 2015 (due, especially, to a high volume of exports), and there has been an appreciation of the average dollar weighted against the Real, there was a reduction in the weighted average price of alloys, negatively impacting the growth of net revenue. 25 Expenses by nature - operational and costs of goods sold and other net 06/30/ /30/ /30/ /30/2015 Cost of goods sold (i) (496,139) (279,529) (495,592) (278,972) Sales expenses (11,898) (4,810) (11,898) (4,810) General and administrative expenses (30,556) (27,650) (30,734) (27,827) Total Managment compensation (4,987) (7,179) (5,353) (7,316) Staff profit sharing (8,679) (8,679) Other net (iii) (25,999) (6,569) (26,198) (6,641) (569,579 ) (334,416 ) (569,775 ) (334,245 ) Below we demonstrate a breakdown, by the nature of the costs of the goods sold and operating costs: 06/30/ /30/ /30/ /30/2015 Variable costs and indirect expenses of products (282,496) (161,546) (282,759) (161,341) Expenses with services (38,694) (20,477) (38,694) (20,477) Expenses with personnel (ii) (152,434) (102,943) (152,068) (102,806) Expenses with equipment hiring (5,736) (4,087) (5,736) (4,087) Expenses with maintenance and repairs (23,629) (12,977) (23,629) (12,977) Expenses depreciation and exhaustion (32,099) (20,750) (32,199) (20,849) Cession of electrical energy (14,769) (14,769) Reversion (Provision) for eventual liablities (6,595) (6,595) Fuel and lubricants (8,492) (5,067) (8,492) (5,067) Other revenue (expenses) (4,635) (6,569) (4,834) (6,641) (569,579 ) (334,416 ) (569,775 ) (334,245 )

21 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise (i) In the first half of 2016, the cost of goods sold totaled R$495,592, representing an increase of 77.6% over the same period in This growth is explained mainly by the increase of 39.6% in the volume of sales, increased electricity rates and the reduction in the Company's production scale of 29.8%, with an effect of an increase in the value of the fixed cost per unit of production. The costs of goods sold include: (a) The cost of electricity for use in the 14 electric furnaces. In addition to the electric furnaces, there is energy consumption in the areas of ancillary services and others, as well as in mining. (b) The Company imports reactive metallurgical coke ( met coke, a commodity available on the international market) for the production of ferrochrome. (c) The cost of chrome ore transport carried out between the mines (in the municipality of Campo Formoso) and metallurgy (Pojuca-BA) via rail. (ii) Includes personnel expenses, management fees, and profit sharing for employees and directors. (iii) Below we demonstrate the opening by nature of other net revenue (expenses): 06/30/ /30/ /30/ /30/2015 Tax and contributions (1,551) (948) (1,730) (948) Social and corporate responsibility (1,593) (956) (1,593) (956) Sale of assets Provisions for possible liabilities (6,595) (6) (6,595) (6) Concession of electrical energy (14,769) (14,769) Other net operational expenses (1,531) (4,659) (1,551) (4,731) (25,999 ) (6,569) (26,198) (6,641) 26 Financial results 06/30/ /30/ /30/ /30/2015 Financial revenue Income from investments 7,378 11,031 10,938 14,148 Exchange variation 3,860 1,730 3,860 1,730 Derivative Exchange variation (Note 18) 13,243 4,798 13,243 4,798 Other revenue 347 2, ,575 24,828 20,119 28,402 23,251 Financial expenses Exchange variation (10,684) (1,101) (10,684) (1,101) Update provision for mine closures (900) (628) (900) (628) Interest paid or incurred (1,143) (370) (1,205) (369) Derivative Exchange variation (Note 18) (25,093) (13,211) (25,093) (13,211) Other expenses (1,367) (1,295) (1,367) (1,359) (39,187 ) (16,605 ) (39,249 ) (16,668 ) (14,359 ) 3,514 (10,847 ) 6,583

22 Cia de Ferro Ligas da Bahia - FERBASA for the quarter ending on June 30th, 2016 In thousands of Reias (R$), unless stated otherwise 27 Operational segments Chrome alloys Silicon alloys Other segments 06/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/2015 Net sales Domestic market 238, ,684 53,085 97,855 17,511 21, , ,588 Foreign market 72,343 9, ,662 83,117 8, ,248 92, , , , ,972 25,754 21, , ,980 Cost of goods sold (246,888) (177,689 ) (205,688 ) (96,742 ) (43,016) (4,541 ) (495,592) (278,972) Gross profit (loss) 63,634 81,270 30,059 84,230 (17,262) 16,508 ) 76, ,008 Operational expenses (40,270) (31,140 ) (30,573 ) (21,762 ) (3,340 ) (2,531 ) (74,183 ) (55,433 ) Operational result before the financial result 23,364 50,130 (514 ) 62,468 (20,602 ) 13,977 2, ,575 Sales of goods (tonne) Domestic market 65,265 65,808 14,572 22, ,548 88,935 Foreign market 11,836 1,332 51,290 14,176 2,095 65,221 15,508 77,101 67,140 65,862 36,501 2, , , Signed commitments On June 29th, 2016, the Company signed a credit agreement with the bank Banco do Nordeste do Brazil SA, to finance bio-reducer production, with a limit of R$28,066.