Table of Contents
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934
For the month of
October 2019
Vale S.A.
Praia de Botafogo nº 186, 18º andar, Botafogo
22250-145 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
(Check One) Form 20-F x Form 40-F o
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))
(Check One) Yes o No x
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))
(Check One) Yes o No x
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
(Check One) Yes o No x
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82- .)
Table of Contents
Report of Independent Registered Public Accounting Firm
To the stockholders and Board of Directors of Vale S.A.
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated statement of financial position of Vale S.A. and its subsidiaries (the “Company”) as of September 30, 2019, the related consolidated income statement, statement of comprehensive income and statement of cash flows for the three and nine-month periods ended September 30, 2019, and the related consolidated statement of changes in equity for the nine-month period ended September 30, 2019, including the related notes (collectively referred to as the “interim financial statements”). Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Brumadinho’s dam failure
We draw attention to Note 3 to the interim financial statements that describes the actions taken by the Company and the impacts on the interim financial statements as a consequence of the Brumadinho’s Dam failure. As disclosed by Management, the Company has incurred costs and recorded provisions based on its best estimates and assumptions. Given the nature and uncertainties inherent in this type of event, the amounts recognized and/or disclosed will be reassessed by the Company and may be adjusted significantly in future periods, as new facts and circumstances become known. Our conclusion is not qualified in relation to this matter.
Basis for Review Results
These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
PricewaterhouseCoopers
Auditores Independentes
Rio de Janeiro, RJ, Brazil
October 24, 2019
PricewaterhouseCoopers Auditores Independentes, Rua do Russel 804, Edifício Manchete, 6º e 7º andares, Rio de Janeiro, RJ, Brasil 22210-907, T: (21) 3232-6112, F: (21) 3232-6113, www.pwc.com/br
3
Table of Contents
Consolidated Income Statement
In millions of United States dollars, except earnings per share data
|
|
|
|
|
Three-month period ended
September 30,
|
|
Nine-month period ended
September 30,
|
|
|
|
|
Notes
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenue
|
|
4(c)
|
|
10,217
|
|
9,543
|
|
27,606
|
|
26,762
|
|
|
Cost of goods sold and services rendered
|
|
5(a)
|
|
(5,681
|
)
|
(5,756
|
)
|
(15,555
|
)
|
(16,357
|
)
|
|
Gross profit
|
|
|
|
4,536
|
|
3,787
|
|
12,051
|
|
10,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses
|
|
5(b)
|
|
(128
|
)
|
(136
|
)
|
(348
|
)
|
(382
|
)
|
|
Research and evaluation expenses
|
|
|
|
(124
|
)
|
(87
|
)
|
(285
|
)
|
(248
|
)
|
|
Pre-operating and operational stoppage
|
|
3(d)
|
|
(290
|
)
|
(60
|
)
|
(839
|
)
|
(205
|
)
|
|
Brumadinho event
|
|
3
|
|
(225
|
)
|
—
|
|
(6,261
|
)
|
—
|
|
|
Other operating expenses, net
|
|
5(c)
|
|
(122
|
)
|
(61
|
)
|
(241
|
)
|
(295
|
)
|
|
|
|
|
|
(889
|
)
|
(344
|
)
|
(7,974
|
)
|
(1,130
|
)
|
|
Impairment and disposals of non-current assets
|
|
3
|
|
(30
|
)
|
(172
|
)
|
(343
|
)
|
(185
|
)
|
|
Operating income
|
|
|
|
3,617
|
|
3,271
|
|
3,734
|
|
9,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
|
|
6
|
|
132
|
|
111
|
|
351
|
|
310
|
|
|
Financial expenses
|
|
6
|
|
(1,084
|
)
|
(367
|
)
|
(2,643
|
)
|
(1,795
|
)
|
|
Other financial items, net
|
|
6
|
|
(187
|
)
|
(1,007
|
)
|
(281
|
)
|
(3,457
|
)
|
|
Equity results and other results in associates and joint ventures
|
|
13 and 17
|
|
132
|
|
12
|
|
(527
|
)
|
(287
|
)
|
|
Income before income taxes
|
|
|
|
2,610
|
|
2,020
|
|
634
|
|
3,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Current tax
|
|
|
|
(858
|
)
|
77
|
|
(1,471
|
)
|
(143
|
)
|
|
Deferred tax
|
|
|
|
(119
|
)
|
(724
|
)
|
653
|
|
(561
|
)
|
|
|
|
|
|
(977
|
)
|
(647
|
)
|
(818
|
)
|
(704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
|
1,633
|
|
1,373
|
|
(184
|
)
|
3,157
|
|
|
Loss attributable to noncontrolling interests
|
|
|
|
(21
|
)
|
(35
|
)
|
(63
|
)
|
(9
|
)
|
|
Net income (loss) from continuing operations attributable to Vale’s stockholders
|
|
|
|
1,654
|
|
1,408
|
|
(121
|
)
|
3,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
—
|
|
—
|
|
—
|
|
(92
|
)
|
|
Loss from discontinued operations attributable to Vale’s stockholders
|
|
|
|
—
|
|
—
|
|
—
|
|
(92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
1,633
|
|
1,373
|
|
(184
|
)
|
3,065
|
|
|
Loss attributable to noncontrolling interests
|
|
|
|
(21
|
)
|
(35
|
)
|
(63
|
)
|
(9
|
)
|
|
Net income (loss) attributable to Vale’s stockholders
|
|
|
|
1,654
|
|
1,408
|
|
(121
|
)
|
3,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to Vale’s stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share:
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Common share (US$)
|
|
|
|
0.32
|
|
0.27
|
|
(0.02
|
)
|
0.59
|
|
The accompanying notes are an integral part of these interim financial statements.
4
Table of Contents
Consolidated Statement of Comprehensive Income
In millions of United States dollars
|
|
|
Three-month period ended
September 30,
|
|
Nine-month period ended
September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Net income (loss)
|
|
1,633
|
|
1,373
|
|
(184
|
)
|
3,065
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Items that will not be subsequently reclassified to income statement
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
(4,173
|
)
|
(1,521
|
)
|
(3,675
|
)
|
(8,069
|
)
|
|
Retirement benefit obligations
|
|
(70
|
)
|
34
|
|
(212
|
)
|
32
|
|
|
Fair value adjustment to investment in equity securities
|
|
(108
|
)
|
170
|
|
(201
|
)
|
212
|
|
|
Transfer to reserve
|
|
—
|
|
—
|
|
—
|
|
(16
|
)
|
|
Total items that will not be subsequently reclassified to income statement, net of tax
|
|
(4,351
|
)
|
(1,317
|
)
|
(4,088
|
)
|
(7,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to income statement
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
2,225
|
|
1,323
|
|
2,295
|
|
5,218
|
|
|
Net investments hedge (note 20c)
|
|
(154
|
)
|
(81
|
)
|
(130
|
)
|
(646
|
)
|
|
Cash flow hedge
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|
|
|
Transfer of realized results to net income
|
|
—
|
|
—
|
|
—
|
|
(78
|
)
|
|
Total of items that may be subsequently reclassified to income statement, net of tax
|
|
2,070
|
|
1,242
|
|
2,164
|
|
4,494
|
|
|
Total comprehensive income (loss)
|
|
(648
|
)
|
1,298
|
|
(2,108
|
)
|
(282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to noncontrolling interests
|
|
(73
|
)
|
(80
|
)
|
(108
|
)
|
(150
|
)
|
|
Comprehensive income (loss) attributable to Vale’s stockholders
|
|
(575
|
)
|
1,378
|
|
(2,000
|
)
|
(132
|
)
|
|
From continuing operations
|
|
(575
|
)
|
1,378
|
|
(2,000
|
)
|
(124
|
)
|
|
From discontinued operations
|
|
—
|
|
—
|
|
—
|
|
(8
|
)
|
|
|
|
(575
|
)
|
1,378
|
|
(2,000
|
)
|
(132
|
)
|
Items above are stated net of tax and the related taxes are disclosed in note 7.
The accompanying notes are an integral part of these interim financial statements.
5
Table of Contents
Consolidated Statement of Cash Flows
In millions of United States dollars
|
|
|
Three-month period ended
September 30,
|
|
Nine-month period ended
September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes from continuing operations
|
|
2,610
|
|
2,020
|
|
634
|
|
3,861
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
Equity results and other results in associates and joint ventures
|
|
(132
|
)
|
(12
|
)
|
527
|
|
287
|
|
|
Impairment and disposal of non-current assets
|
|
30
|
|
172
|
|
343
|
|
185
|
|
|
Depreciation, amortization and depletion
|
|
927
|
|
849
|
|
2,694
|
|
2,583
|
|
|
Financial results, net
|
|
1,139
|
|
1,263
|
|
2,573
|
|
4,942
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
523
|
|
(149
|
)
|
271
|
|
69
|
|
|
Inventories
|
|
(69
|
)
|
(200
|
)
|
(301
|
)
|
(406
|
)
|
|
Suppliers and contractors (i)
|
|
412
|
|
336
|
|
743
|
|
(41
|
)
|
|
Provision - Payroll, related charges and other remunerations
|
|
187
|
|
200
|
|
(107
|
)
|
(166
|
)
|
|
Proceeds from cobalt stream transaction
|
|
—
|
|
—
|
|
—
|
|
690
|
|
|
Liabilities related to Brumadinho (note 3)
|
|
(346
|
)
|
—
|
|
3,146
|
|
—
|
|
|
De-characterization of the upstream dams (note 3)
|
|
(40
|
)
|
—
|
|
1,898
|
|
—
|
|
|
Other assets and liabilities, net
|
|
(113
|
)
|
10
|
|
(595
|
)
|
(535
|
)
|
|
|
|
5,128
|
|
4,489
|
|
11,826
|
|
11,469
|
|
|
Interest on loans and borrowings paid (ii) (note 16)
|
|
(467
|
)
|
(248
|
)
|
(950
|
)
|
(903
|
)
|
|
Derivatives received (paid), net
|
|
(88
|
)
|
(22
|
)
|
(209
|
)
|
(35
|
)
|
|
Interest on participative stockholders’ debentures paid
|
|
—
|
|
—
|
|
(90
|
)
|
(72
|
)
|
|
Income taxes (including settlement program)
|
|
(493
|
)
|
(324
|
)
|
(1,342
|
)
|
(848
|
)
|
|
Net cash provided by operating activities from continuing operations
|
|
4,080
|
|
3,895
|
|
9,235
|
|
9,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(891
|
)
|
(123
|
)
|
(2,232
|
)
|
(2,287
|
)
|
|
Additions to investments
|
|
(74
|
)
|
(569
|
)
|
(75
|
)
|
(23
|
)
|
|
Acquisition of subsidiary, net of cash (note 12)
|
|
(417
|
)
|
—
|
|
(913
|
)
|
—
|
|
|
Proceeds from disposal of assets and investments
|
|
20
|
|
116
|
|
124
|
|
1,476
|
|
|
Dividends received from associates and joint ventures
|
|
—
|
|
7
|
|
193
|
|
153
|
|
|
Judicial deposits and restricted (release) cash (note 3)
|
|
1,773
|
|
—
|
|
(1,593
|
)
|
—
|
|
|
Other investments activities, net (iii)
|
|
(929
|
)
|
(132
|
)
|
(1,081
|
)
|
2,383
|
|
|
Net cash provided by (used in) investing activities from continuing operations
|
|
(518
|
)
|
(701
|
)
|
(5,577
|
)
|
1,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings from third-parties (note 16)
|
|
1,000
|
|
211
|
|
3,142
|
|
976
|
|
|
Payments of loans and borrowings from third-parties (note 16)
|
|
(1,694
|
)
|
(1,169
|
)
|
(3,546
|
)
|
(6,045
|
)
|
|
Payments of leasing
|
|
(53
|
)
|
—
|
|
(131
|
)
|
—
|
|
|
Dividends and interest on capital paid to stockholders
|
|
—
|
|
(1,876
|
)
|
—
|
|
(3,313
|
)
|
|
Dividends and interest on capital paid to noncontrolling interest
|
|
(104
|
)
|
(82
|
)
|
(181
|
)
|
(179
|
)
|
|
Share buyback program
|
|
—
|
|
(489
|
)
|
—
|
|
(489
|
)
|
|
Transactions with noncontrolling stockholders
|
|
—
|
|
—
|
|
—
|
|
(17
|
)
|
|
Net cash used in financing activities from continuing operations
|
|
(851
|
)
|
(3,405
|
)
|
(716
|
)
|
(9,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in discontinued operations
|
|
—
|
|
—
|
|
—
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
2,711
|
|
(210
|
)
|
2,942
|
|
2,201
|
|
|
Cash and cash equivalents in the beginning of the period
|
|
6,048
|
|
6,369
|
|
5,784
|
|
4,328
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(200
|
)
|
(59
|
)
|
(167
|
)
|
(312
|
)
|
|
Effects of disposals of subsidiaries and merger, net of cash and cash equivalents
|
|
—
|
|
—
|
|
—
|
|
(117
|
)
|
|
Cash and cash equivalents at end of the period
|
|
8,559
|
|
6,100
|
|
8,559
|
|
6,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment - capitalized loans and borrowing costs
|
|
34
|
|
50
|
|
111
|
|
154
|
|
(i) Includes variable lease payments.
(ii) Includes interest with cash tender offer repurchased in the amount of US$246.
(iii) Includes loans and advances from/to related parties and US$901 related to short-term investment (LFTs) for the three and nine-month period ended September 2019. For the nine-month period ended September 30, 2018, includes proceeds received from Nacala project finance (note 25b) in the amount of US$2,572.
The accompanying notes are an integral part of these interim financial statements.
6
Table of Contents
Consolidated Statement of Financial Position
In millions of United States dollars
|
|
|
Notes
|
|
September 30,
2019
|
|
December 31,
2018
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
8,559
|
|
5,784
|
|
|
Short-term investments
|
|
16
|
|
906
|
|
32
|
|
|
Accounts receivable
|
|
9
|
|
2,297
|
|
2,648
|
|
|
Other financial assets
|
|
11
|
|
412
|
|
403
|
|
|
Inventories
|
|
10
|
|
4,629
|
|
4,443
|
|
|
Prepaid income taxes
|
|
|
|
559
|
|
543
|
|
|
Recoverable taxes
|
|
|
|
642
|
|
883
|
|
|
Others
|
|
|
|
482
|
|
556
|
|
|
|
|
|
|
18,486
|
|
15,292
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Judicial deposits
|
|
22(c)
|
|
3,044
|
|
1,716
|
|
|
Other financial assets
|
|
11
|
|
2,895
|
|
3,144
|
|
|
Prepaid income taxes
|
|
|
|
591
|
|
544
|
|
|
Recoverable taxes
|
|
|
|
514
|
|
751
|
|
|
Deferred income taxes
|
|
7(a)
|
|
7,786
|
|
6,908
|
|
|
Others
|
|
|
|
405
|
|
263
|
|
|
|
|
|
|
15,235
|
|
13,326
|
|
|
|
|
|
|
|
|
|
|
|
Investments in associates and joint ventures
|
|
13
|
|
2,998
|
|
3,225
|
|
|
Intangibles
|
|
14
|
|
8,308
|
|
7,962
|
|
|
Property, plant and equipment
|
|
15
|
|
48,869
|
|
48,385
|
|
|
|
|
|
|
75,410
|
|
72,898
|
|
|
Total assets
|
|
|
|
93,896
|
|
88,190
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Suppliers and contractors
|
|
|
|
4,251
|
|
3,512
|
|
|
Loans and borrowings
|
|
16
|
|
1,332
|
|
1,003
|
|
|
Leases
|
|
2(c)
|
|
236
|
|
—
|
|
|
Other financial liabilities
|
|
11
|
|
1,016
|
|
1,604
|
|
|
Taxes payable
|
|
|
|
1,066
|
|
428
|
|
|
Settlement program (“REFIS”)
|
|
7(c)
|
|
414
|
|
432
|
|
|
Liabilities related to associates and joint ventures
|
|
17
|
|
450
|
|
289
|
|
|
Provisions
|
|
21
|
|
1,019
|
|
1,363
|
|
|
Liabilities related to Brumadinho
|
|
3
|
|
2,085
|
|
—
|
|
|
De-characterization of dams
|
|
3
|
|
451
|
|
—
|
|
|
Others
|
|
|
|
1,110
|
|
480
|
|
|
|
|
|
|
13,430
|
|
9,111
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Loans and borrowings
|
|
16
|
|
13,454
|
|
14,463
|
|
|
Leases
|
|
2(c)
|
|
1,575
|
|
—
|
|
|
Other financial liabilities
|
|
11
|
|
3,571
|
|
2,711
|
|
|
Settlement program (“REFIS”)
|
|
7(c)
|
|
3,441
|
|
3,917
|
|
|
Deferred income taxes
|
|
7(a)
|
|
1,758
|
|
1,532
|
|
|
Provisions
|
|
21
|
|
8,043
|
|
7,095
|
|
|
Liabilities related to Brumadinho
|
|
3
|
|
846
|
|
—
|
|
|
De-characterization of dams
|
|
3
|
|
1,387
|
|
—
|
|
|
Liabilities related to associates and joint ventures
|
|
17
|
|
1,107
|
|
832
|
|
|
Deferred revenue - Gold stream
|
|
|
|
1,386
|
|
1,603
|
|
|
Others
|
|
|
|
1,217
|
|
2,094
|
|
|
|
|
|
|
37,785
|
|
34,247
|
|
|
Total liabilities
|
|
|
|
51,215
|
|
43,358
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
24
|
|
|
|
|
|
|
Equity attributable to Vale’s stockholders
|
|
|
|
42,007
|
|
43,985
|
|
|
Equity attributable to noncontrolling interests
|
|
|
|
674
|
|
847
|
|
|
Total stockholders’ equity
|
|
|
|
42,681
|
|
44,832
|
|
|
Total liabilities and stockholders’ equity
|
|
|
|
93,896
|
|
88,190
|
|
The accompanying notes are an integral part of these interim financial statements.
7
Table of Contents
Consolidated Statement of Changes in Equity
In millions of United States dollars
|
|
|
Share capital
|
|
Results on
conversion of
shares
|
|
Capital reserve
|
|
Net ownership
changes in
subsidiaries
|
|
Profit
reserves
|
|
Treasury
stocks
|
|
Unrealized
fair value
gain (losses)
|
|
Cumulative
translation
adjustments
|
|
Accumulated
deficit
|
|
Equity
attributable to
Vale’s
stockholders
|
|
Equity
attributable to
noncontrolling
interests
|
|
Total
stockholders’
equity
|
|
|
Balance at December 31, 2018
|
|
61,614
|
|
(152
|
)
|
1,139
|
|
(970
|
)
|
10,968
|
|
(2,477
|
)
|
(1,033
|
)
|
(25,104
|
)
|
—
|
|
43,985
|
|
847
|
|
44,832
|
|
|
Loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(121
|
)
|
(121
|
)
|
(63
|
)
|
(184
|
)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefit obligations
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(212
|
)
|
—
|
|
—
|
|
(212
|
)
|
—
|
|
(212
|
)
|
|
Cash flow hedge
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|
Net investments hedge (note 20c)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(130
|
)
|
—
|
|
(130
|
)
|
—
|
|
(130
|
)
|
|
Fair value adjustment to investment in equity securities
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(201
|
)
|
—
|
|
—
|
|
(201
|
)
|
—
|
|
(201
|
)
|
|
Translation adjustments
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(762
|
)
|
—
|
|
21
|
|
(594
|
)
|
—
|
|
(1,335
|
)
|
(45
|
)
|
(1,380
|
)
|
|
Transactions with stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends of noncontrolling interest
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(85
|
)
|
(85
|
)
|
|
Capitalization of noncontrolling interest advances
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20
|
|
20
|
|
|
Assignment and transfer of shares (note 24)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
22
|
|
—
|
|
—
|
|
—
|
|
22
|
|
—
|
|
22
|
|
|
Balance at September 30, 2019
|
|
61,614
|
|
(152
|
)
|
1,139
|
|
(970
|
)
|
10,206
|
|
(2,455
|
)
|
(1,426
|
)
|
(25,828
|
)
|
(121
|
)
|
42,007
|
|
674
|
|
42,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
Results on
conversion of
shares
|
|
Capital reserve
|
|
Net ownership
changes in
subsidiaries
|
|
Profit
reserves
|
|
Treasury
stocks
|
|
Unrealized
fair value
gain (losses)
|
|
Cumulative
translation
adjustments
|
|
Retained
earnings
|
|
Equity
attributable to
Vale’s
stockholders
|
|
Equity
attributable to
noncontrolling
interests
|
|
Total
stockholders’
equity
|
|
|
Balance at December 31, 2017
|
|
61,614
|
|
(152
|
)
|
1,139
|
|
(954
|
)
|
7,419
|
|
(1,477
|
)
|
(1,183
|
)
|
(22,948
|
)
|
—
|
|
43,458
|
|
1,314
|
|
44,772
|
|
|
Net income (loss)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,074
|
|
3,074
|
|
(9
|
)
|
3,065
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefit obligations
|
|
—
|
|
—
|
|
—
|
|
(16
|
)
|
—
|
|
—
|
|
32
|
|
—
|
|
—
|
|
16
|
|
—
|
|
16
|
|
|
Net investments hedge (note 20c)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(646
|
)
|
—
|
|
(646
|
)
|
—
|
|
(646
|
)
|
|
Fair value adjustment to investment in equity securities
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
212
|
|
—
|
|
—
|
|
212
|
|
—
|
|
212
|
|
|
Translation adjustments
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,289
|
)
|
—
|
|
58
|
|
(1,557
|
)
|
—
|
|
(2,788
|
)
|
(141
|
)
|
(2,929
|
)
|
|
Transactions with stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and interest on capital of Vale’s stockholders
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,054
|
)
|
(2,054
|
)
|
—
|
|
(2,054
|
)
|
|
Dividends of noncontrolling interest
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(83
|
)
|
(83
|
)
|
|
Acquisitions and disposal of noncontrolling interest
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(227
|
)
|
(227
|
)
|
|
Capitalization of noncontrolling interest advances
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
4
|
|
|
Share buyback program
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(489
|
)
|
—
|
|
—
|
|
—
|
|
(489
|
)
|
—
|
|
(489
|
)
|
|
Balance at September 30, 2018
|
|
61,614
|
|
(152
|
)
|
1,139
|
|
(970
|
)
|
6,130
|
|
(1,966
|
)
|
(881
|
)
|
(25,151
|
)
|
1,020
|
|
40,783
|
|
858
|
|
41,641
|
|
The accompanying notes are an integral part of these interim financial statements.
8
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
1. Corporate information
Vale S.A. and its direct and indirect subsidiaries (“Vale” or the “Company”) are global producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. The Company also produces copper, metallurgical and thermal coal, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 4.
Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo — B3 S.A. (VALE3), New York - NYSE (VALE), Paris - NYSE Euronext (VALE3) and Madrid — LATIBEX (XVALO).
2. Basis of preparation of the interim financial statements
a) Statement of compliance
The condensed consolidated interim financial statements of the Company (“interim financial statements”) have been prepared and are being presented in accordance with IAS 34 Interim Financial Reporting of the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
b) Basis of presentation
The interim financial statements have been prepared to update users about relevant events and transactions that occurred in the period and should be read in conjunction with the financial statements for the year ended December 31, 2018. The accounting policies, accounting estimates and judgements, risk management and measurement methods are the same as those applied when preparing the last annual financial statements, except for the critical judgements and estimates made in determining the financial impacts arising from the Brumadinho dam failure, as described in note 3, and the new accounting policy related to the application of IFRS 16 Leases, which has been adopted by the Company since January 1, 2019 and is described in note 2(c).
The interim financial statements of the Company and its associates and joint ventures are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian real (“R$”). For presentation purposes, these interim financial statements are presented in United States dollars (“US$”) as the Company believes that this is the relevant currency used by international investors.
The exchange rates used by the Company to translate its foreign operations are as follows:
|
|
|
|
|
|
|
Average rate
|
|
|
|
|
Closing rate
|
|
Three-month period ended
|
|
Nine-month period ended
|
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
September 30,
2019
|
|
September 30,
2018
|
|
September 30,
2019
|
|
September 30,
2018
|
|
|
US Dollar (“US$”)
|
|
4.1644
|
|
3.8748
|
|
3.9684
|
|
3.9505
|
|
3.8887
|
|
3.6055
|
|
|
Canadian dollar (“CAD”)
|
|
3.1451
|
|
2.8451
|
|
3.0051
|
|
3.0232
|
|
2.9258
|
|
2.7973
|
|
|
Euro (“EUR” or “€”)
|
|
4.5425
|
|
4.4390
|
|
4.4123
|
|
4.5950
|
|
4.3679
|
|
4.2969
|
|
The issue of these interim financial statements was authorized by the Executive Board on October 24, 2019.
c) Changes in significant accounting policies
· IFRIC 23 Uncertainty over income tax treatments — IFRIC 23 became effective for annual periods beginning on or after January 1, 2019 and clarifies the measurement and recognition requirements of IAS 12 Income taxes. The Company has assessed these requirements brought by the new interpretation and concluded there is no significant impact on its interim financial statements.
· IFRS 16 Leases — The Company has applied IFRS 16 from January 1, 2019, the date of initial application, using the modified retrospective approach. Accordingly, the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. As a result of the IFRS 16 adoption, the Company has changed its accounting policy for lease contracts and the details of these changes are summarized below.
9
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
The ferrous minerals produced in Brazil are mainly shipped to Asia. The Company has leased the Ponta da Madeira and Itaguaí maritime terminals in Brazil, that are primarily for the delivery of iron ore and iron ore pellets to bulk carrier vessels. The remaining lease terms are, respectively, 4 and 7 years for the ports in Brazil. Vale also has a lease agreement for a maritime terminal in Oman, which is used to deliver iron ore pellets produced in that location. The remaining lease term is 24 years for the port in Oman.
Some of the delivery of iron ore from Brazil to the Asian clients are made through five time charter agreements, which have 11 years remaining lease term on average. As part of the ferrous minerals segment, the Company also has long-term agreements for the exploration and processing of iron ore with its joint ventures, such as the agreements to lease the pelletizing plants in Brazil.
In addition, the Company leases an oxygen plant dedicated to the base metals operation, as part of its nickel operation run in Canada. The remaining period of this lease agreement is 11 years.
The Company also has a long-term contract related to the right of use of certain locomotives dedicated to the transportation of coal in Mozambique. This agreement has a remaining lease term of 7 years.
Vale has leased properties for its operational facilities and commercial and administrative offices in the various locations where the Company conducts its business.
Until December 31, 2018, these lease arrangements were classified as operating leases and were not recognized in the Company’s statement of financial position. The contractual payments were recognized in the income statement on a straight-line basis over the term of the lease.
As at January 1, 2019, these lease agreements were recognized in the statement of financial position and were measured discounting the remaining minimum contractual payments at the present value, using the Company’s incremental borrowing rate ranging from 3% to 6%, depending on the remaining lease term. The Company used the following practical expedients when applying IFRS 16:
· Applied a single discount rate to a portfolio of leases with similar characteristics;
· Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term and leases of low-value assets. The payments associated to these leases will be recognized as an expense on a straight-line basis over the lease term; and
· Used hindsight when determining the lease term, to determine if the contract contains options to extend or terminate the lease.
Following are the lease liabilities under IFRS 16 reconciled to the disclosed operating lease commitments under IAS 17 at December 31, 2018:
|
|
|
Lease commitments
disclosed on December
31, 2018
|
|
Contracts scoped out
|
|
Present value
adjustment
|
|
Lease liability recognized
on January 1, 2019
|
|
|
Ports
|
|
1,131
|
|
—
|
|
(364
|
)
|
767
|
|
|
Vessels
|
|
769
|
|
(1
|
)
|
(164
|
)
|
604
|
|
|
Pellets plants
|
|
218
|
|
(15
|
)
|
(52
|
)
|
151
|
|
|
Properties
|
|
162
|
|
(1
|
)
|
(24
|
)
|
137
|
|
|
Energy plants
|
|
94
|
|
—
|
|
(29
|
)
|
65
|
|
|
Locomotives
|
|
68
|
|
(7
|
)
|
(16
|
)
|
45
|
|
|
Mining equipment
|
|
55
|
|
(18
|
)
|
(5
|
)
|
32
|
|
|
Total
|
|
2,497
|
|
(42
|
)
|
(654
|
)
|
1,801
|
|
The total amount of the variable lease payments not included in the measurement of lease liabilities, which have been recognized straight to the income statement, for the three and nine-month periods ended September 30, 2019 were US$184 and US$492, respectively. The interest accretion recognized in the income statement is disclosed in note 6.
The lease liability is presented on the statement of financial position as “Leases” and the accounting policy related to leases is disclosed in note 15.
10
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
Changes in the recognized right-of-use assets and leases liabilities are as follows:
|
|
|
Assets
|
|
|
|
|
January 1, 2019
|
|
Additions and contract
modifications (i)
|
|
Depreciation
|
|
Translation
adjustment
|
|
September 30,
2019
|
|
|
Ports
|
|
767
|
|
2
|
|
(30
|
)
|
(10
|
)
|
729
|
|
|
Vessels
|
|
605
|
|
4
|
|
(37
|
)
|
—
|
|
572
|
|
|
Pellets plants
|
|
151
|
|
63
|
|
(26
|
)
|
(17
|
)
|
171
|
|
|
Properties
|
|
137
|
|
36
|
|
(20
|
)
|
(11
|
)
|
142
|
|
|
Energy plants
|
|
64
|
|
2
|
|
(5
|
)
|
1
|
|
62
|
|
|
Locomotives
|
|
45
|
|
—
|
|
(4
|
)
|
—
|
|
41
|
|
|
Mining equipment
|
|
32
|
|
2
|
|
(10
|
)
|
3
|
|
27
|
|
|
Total
|
|
1,801
|
|
109
|
|
(132
|
)
|
(34
|
)
|
1,744
|
|
|
|
|
Liabilities
|
|
|
|
|
January 1, 2019
|
|
Additions and
contract
modifications (i)
|
|
Payments
|
|
Interest
|
|
Translation
adjustment
|
|
September 30,
2019
|
|
|
Ports
|
|
767
|
|
2
|
|
(35
|
)
|
23
|
|
(11
|
)
|
746
|
|
|
Vessels
|
|
605
|
|
4
|
|
(54
|
)
|
17
|
|
—
|
|
572
|
|
|
Pellets plants
|
|
151
|
|
63
|
|
(7
|
)
|
5
|
|
(15
|
)
|
197
|
|
|
Properties
|
|
137
|
|
40
|
|
(18
|
)
|
6
|
|
1
|
|
166
|
|
|
Energy plants
|
|
64
|
|
2
|
|
(5
|
)
|
3
|
|
1
|
|
65
|
|
|
Locomotives
|
|
45
|
|
—
|
|
(5
|
)
|
2
|
|
—
|
|
42
|
|
|
Mining equipment
|
|
32
|
|
2
|
|
(7
|
)
|
1
|
|
(5
|
)
|
23
|
|
|
Total
|
|
1,801
|
|
113
|
|
(131
|
)
|
57
|
|
(29
|
)
|
1,811
|
|
(i) Additions mainly relates to new administrative offices lease and to renewal of the contract with Nibrasco, a pelletizing plant, which expires in December 2022.
Following is the lease liability maturity, presented by contract nature, in place as at September 30, 2019:
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023 onwards
|
|
Total
|
|
|
Ports
|
|
22
|
|
30
|
|
31
|
|
33
|
|
630
|
|
746
|
|
|
Vessels
|
|
17
|
|
43
|
|
41
|
|
42
|
|
429
|
|
572
|
|
|
Pellets plants
|
|
32
|
|
27
|
|
24
|
|
25
|
|
89
|
|
197
|
|
|
Properties
|
|
27
|
|
29
|
|
27
|
|
15
|
|
68
|
|
166
|
|
|
Energy plants
|
|
2
|
|
4
|
|
4
|
|
4
|
|
51
|
|
65
|
|
|
Locomotives
|
|
2
|
|
5
|
|
5
|
|
5
|
|
25
|
|
42
|
|
|
Mining equipment
|
|
3
|
|
8
|
|
5
|
|
5
|
|
2
|
|
23
|
|
|
Total
|
|
105
|
|
146
|
|
137
|
|
129
|
|
1,294
|
|
1,811
|
|
11
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
3. Brumadinho dam failure
On January 25, 2019, a failure has been experienced in the Dam I of the Córrego do Feijão mine, which belongs to the Paraopeba Complex in the Southern System, located in Brumadinho, Minas Gerais, Brazil (“Brumadinho dam”). This dam, built under the upstream method, was inactive since 2016 (that is, without additional tailings disposal) and there was no other operational activity in the structure.
Under the upstream method, a dam is raised by building successive layers (“lifts”) above the tailings accumulated in the reservoir. There are two other raising methods, the ‘‘downstream’’ method and the ‘‘centerline’’ method. Each of these methods presents a different risk profile.
Due to the Brumadinho dam failure (“event”), 270 people lost their lives or are missing. Around 11.7 million metric tons of iron ore waste were contained in the Brumadinho dam and it is not yet known the exact volume of iron ore waste that was released due to the dam failure. The tailings released have caused an impact of around 315 km in extension, destroying some of Vale’s facilities, affecting local communities and disturbing the environment. The Paraopeba river and its ecosystems have also been impacted by the event.
The Company has been taking the necessary actions to support the victims and to mitigate and recover the social and environmental damages resulting from the dam failure. Vale has provided support in multiple ways, aiming to ensure the humanitarian assistance to those affected by the dam failure.
The Company established three Extraordinary Independent Consulting Committees to support the Board of Directors. All members of these committees are independent and unrelated to management or to the Company’s operations, to ensure that the initiatives and actions are unbiased. Following are the committees:
a) The Extraordinary Independent Consulting Committee for Investigation (“CIAEA”), dedicated to investigating the causes and responsibilities for the Brumadinho dam failure;
b) The Extraordinary Independent Consulting Committee for Support and Recovery (“CIAEAR”), dedicated to follow-up on the measures taken to support and recover those impacted and the areas affected by the failure of the Brumadinho dam, assuring that all necessary resources will be applied; and
c) The Extraordinary Independent Consulting Committee for Dam Safety (“CIAESB”), dedicated to support the Board of Directors on questions related to the diagnosis of safety conditions, management and risk mitigation related to Vale’s tailings dams, also providing recommendations for actions to strengthen safety conditions of those dams.
In addition, Vale has determined the suspension (i) of the variable remuneration of its executives; (ii) the Shareholder’s Remuneration Policy and (iii) any other resolution related to shares buyback.
As a result of the dam failure, the Company recognized in the income statement a total impact of US$225 (R$893 million) and US$6,261 (R$24,129 million) for the three and nine-month periods ended September 30, 2019 to meet its assumed obligations, including indemnification and donations to those affected by the event, remediation of the affected areas and compensation to the society. The financial impacts recognized on the statement of financial position and income statement are presented as follows:
a) De-characterization of the dams
On January 29, 2019, the Company informed the market and Brazilian authorities the decision to speed up the plan to “de-characterize” all of its tailings dams built under the upstream method (same method as Brumadinho’s dam), located in Brazil. The “de-characterization” means that the structure will be dismantled so the structure is effectively no longer a dam. After the event, the Brazilian National Mining Agency (“Agência Nacional de Mineração — ANM”) set new safety criteria for dams, determining the de-characterization of structures built under the upstream method.
Following the Company’s decision and new standards set by ANM, the Company has undertaken an assessment of its dam structures since the event and recorded a provision for the de-characterization of certain upstream structures that have been identified to date.
Vale has developed engineering projects for the upstream structures and the total expected costs to carry out all de-characterization projects resulted in a provision of US$1,838 (R$7,652 million) as at September 30, 2019, discounted at the present value using the discount rate of 3.40%.
12
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
(a.i) Company’s dams
Before the event, the decommissioning plans of these dams were based on a method which aimed to ensure the physical and chemical stability of the structures, not necessarily, in all cases, removing in full and potentially reprocessing the tailings contained in the dams. Since the event, the Company has been working to develop detailed de-characterization engineering plan for each of these dams.
The updated plans indicate that for certain of these upstream dams, firstly, the Company will have to reinforce the downstream massive structures, and conclude the de-characterization subsequently, according to the geotechnical and geographic conditions of each of them. It was also considered whether additional containment structures should be built, depending on the safety level of the structure. The conceptual projects for the de-characterization were filed before the competent authorities and the conceptual developing projects are also expected to be concluded in 2020.
The Company is currently working on the development of the engineering solution to de-characterize all of these structures and the detailed engineering projects will be filed later this year, which might result in material changes on the provided amount. Moreover, these projects filed during the year are subject to further review and eventual approval by the relevant authorities.
The measurement of the costs and recognition of the provision takes into consideration several assumptions and estimates, which rely on factors, for which some are not under the Company’s control. The main critical assumptions and estimates applied considers, among others: (i) volume of the waste to be removed based on historical data available and interpretation of the enacted laws and regulations; (ii) location availability for the tailings disposal; and (iii) acceptance by the authorities of the proposed engineering methods and solution. Therefore, changes in the critical assumptions and estimates may result in a material change to the amount provided as at September 30, 2019.
(a.ii) Associates and joint ventures upstream dams
Some of our investees also operate similar dam structures and as detailed in the note 17 to these financial statements, the Company recognized a provision of US$257 (R$993 million) in the second quarter of 2019 as “Equity results and other results in associates and joint ventures” in relation to the de-characterization of the Germano tailings dam, owned by Samarco Mineração S.A.
b) Framework Agreements and donations
The Company has been working together with the authorities and society to remediate the environmental and social impacts of the event. Therefore, the Company has started negotiations and entered into agreements with the relevant authorities and affected people. Vale has also signed an instrument committing to donate to Brumadinho city, other institutions, to the families with missing members or affected by fatalities, to business owners of the region and families that resided in the Self-Saving Zone near to Brumadinho dam.
The agreements reached with the relevant authorities were signed with to compensate those affected by the event. As a result of these agreements outlined below, the Company has a provision of US$1,840 (R$7,662 million) recorded as at September 30, 2019.
Vale has also developed studies and projects to ensure geotechnical safety of the remaining structures at the Córrego do Feijão mine, in Brumadinho, and the removal and proper disposal of the tailings, especially alongside the Paraopeba river. In addition, Vale has set up an exclusive structure for treatment of the rescued animals, enabling emergency care and recovery.
These projects aiming to recover the environment and compensate the society resulted in a provision of U$1,066 (R$4,437 million) recorded as at September 30, 2019.
The total amount of this provision may vary due to the early stage of the ongoing negotiations, timing and scope of the measures currently being discussed, which are subject to the approval and consent by the relevant authorities.
13
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
The changes in the provision in the nine-month period ended September 30, 2019 are as follows:
|
|
|
2019
|
|
|
Provision increase
|
|
3,698
|
|
|
Payments
|
|
(556
|
)
|
|
Present value valuation
|
|
42
|
|
|
Translation adjustment
|
|
(253
|
)
|
|
Balance at September 30
|
|
2,931
|
|
|
|
|
|
|
|
Current liabilities
|
|
2,085
|
|
|
Non-current liabilities
|
|
846
|
|
|
Liabilities
|
|
2,931
|
|
(b.i) Public Defendants
On April 5, 2019, Vale and the Public Defendants of the State of Minas Gerais formalized an agreement under which those affected by the Brumadinho’s Dam failure may join an individual or family group out-of-Court settlement agreements for the indemnification of material, economic and moral damages. This agreement establishes the basis for a wide range of indemnification payments, which were defined according to the best practices and case law of Brazilian Courts.
(b.ii) Public Ministry of Labor
On July 15, 2019, Vale signed a final agreement with the Public Ministry of Labor to indemnify the direct and third-party employees of the Córrego do Feijão mine who were affected by the termination of this operation.
Under the terms of the final agreement, Vale will either maintain the jobs of its direct employees and third-party employees until January 25, 2023 or convert this benefit into a cash compensation. The agreement also includes indemnification payments to the relatives of the fatal victims of the event, which may vary depending on their relationship with the victims, and a lifelong medical insurance benefit to the widows and widowers and a similar benefit to the dependents of the victims until they are 25 years old.
In addition, the agreement set a collective moral damage indemnification payment in the amount of US$104 (R$400 million), which has been fully paid in the current quarter.
(b.iii) Brazilian Federal Government, State of Minas Gerais, Public Prosecutors
On February 20, 2019, Vale entered into a judicial preliminary agreement with the State of Minas Gerais, Federal Government, the Public Prosecutors of the State of Minas Gerais, the Federal Public Prosecutors and the Public Defenders of the State of Minas Gerais and representatives of Public Authorities in which the Company commits to make, subject to registration, emergency indemnification payments to the residents of Brumadinho and the communities that are located downstream up to one kilometer from the Paraopeba river bed, from Brumadinho to the city of Pompéu. Due to this agreement, the Company has been making monthly payments during a 12-month period, according to the age of the beneficiary, among other factors.
(b.iv) Environmental remediation and compensation
On July 8, 2019, Vale has entered into an agreement with Companhia de Saneamento de Minas Gerais (“COPASA”) to implement several actions to clean up the affected areas and to upgrade the retention water system alongside the Paraopeba River and some other water collection points nearby the affected area. In addition, the Company mobilized the dredging of part of the material released, including cleaning and de-sanding of the Paraopeba river channel.
c) Incurred expenses
The Company has incurred in expenses, which do not qualify for provision and have been recognized straight to the income statement, in the amounts of US$225 and US$487 for the three and nine-month periods ended September 30, 2019, respectively. These expenses include communication services, accommodation and humanitarian assistance, equipment, legal services, water, food aid, taxes, among others.
14
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
d) Operation stoppages
The Company has some suspended operations due to judicial decisions or technical analysis performed by the Company on its upstream dam structures. Such stoppage currently impacts 50 Mtpy of Vale’s production capacity of iron ore, which about 20 Mtpy is expected to be gradually resumed starting by the end of this fiscal year. The Company is working on legal and technical measures to resume these operations at the earliest.
The Company recorded a loss of US$179 and US$577 related to the operational stoppage and idle capacity of the ferrous mineral segment as “Pre-operating and operational stoppage” for the three and nine-month periods ended September 30, 2019, respectively.
e) Assets write-off
Following the event and the decision to speed up the de-characterization of the upstream dams, the Company recognized a loss of US$219 (R$836 million) as “Impairment and disposal of non-current assets” for the nine-month period ended September 30, 2019 in relation to the assets write-off of the Córrego do Feijão mine and those related to the other upstream dams in Brazil.
f) Contingencies and other legal matters
Vale is subject to significant contingencies due to the Brumadinho dam failure. Vale has already been named on several judicial and administrative proceedings brought by authorities and affected people and is currently under investigations. Vale is evaluating these contingencies and would recognize a provision based on the updates on the stage of these claims.
Following these contingencies, approximately US$1.5 billion (R$6.3 billion) of the Company’s assets are restricted as at September 30, 2019, of which approximately US$80 (R$334 million) of the Company’s bank accounts are restricted and US$1.4 billion (R$6 billion) were converted into judicial deposits.
For the Brumadinho event, the Company has additional guarantees in the amount of US$1.3 billion (R$5.6 billion), which were presented in court and used to release the respective judicial deposit during the period ended September 30, 2019.
(f.i) Administrative sanctions
The Company was notified of the imposition of administrative fines by the Brazilian Institute of the Environment and Renewable Natural Resources (“IBAMA”), in the amount of US$65 (R$250 million), which the Company expects to settle through environmental projects. Furthermore, the Secretary for Environment — SEMA Brumadinho imposed administrative fines, in the total amount of US$25 (R$109 million). Both amounts are also recorded as at September 30, 2019.
(f.ii) U.S. Securities class action suits
The Company became aware through public available information that Vale and certain of its current officers have been named as defendants in putative securities class action complaints in Federal Courts in New York brought by holders of Vale’s securities under U.S. federal securities laws. However, neither the Company nor its officers have been officially served of any of these Complaints.
The complaints allege that Vale made false and misleading statements or omitted to make disclosures concerning the risks and potential damage of a failure of the dam in the Córrego de Feijão mine. The plaintiffs have not specified an amount of alleged damages in these complaints. Vale intends to defend against these actions and mount a full defense against these claims. Based on the assessment of the Company´s legal consultants, although still in a very preliminary stage, the expectation of loss of this proceeding is classified as possible.
Considering that, no official service of process has been received to date, the very early stage of the aforementioned putative class action complaints and the fact that no amounts have been claimed by the plaintiffs against the defendants, it is not possible, at the moment, to reliably estimate the potential amounts involved.
15
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
g) Insurance
The Company is negotiating with insurers under its operational risk, general liability and engineering risk policies, but these negotiations are still at a preliminary stage. Any payment of insurance proceeds will depend on the coverage definitions under these policies and assessment of the amount of loss. Due to uncertainties, no indemnification to the Company was recognized in Vale’s interim financial statements.
Critical accounting estimates and judgments
The measurement of the provisions require the use of assumptions that may be mainly affected by: (i) changes in laws and regulations; (ii) changes in the current estimated market price of the direct and indirect cost related to products and services, (iii) changes in timing for cash outflows, (iv) changes in the technology considered in measuring the provision, (v) number of individuals entitled to the indemnification payments, (vi) resolution of existing and potential legal claims, (vii) demographic assumptions, (viii) actuarial assumptions, and (ix) updates in the discount rate.
Therefore, future expenditures may differ from the amounts currently provided because the realized assumptions and various other factors are not always under the Company’s control. These changes to key assumptions could result in a material impact to the amount of the provision in future reporting periods. At each reporting period, the Company will reassess the key assumptions used in the preparation of the projected cash flows and will adjust the provision, if required.
4. Information by business segment and by geographic area
The Company operated the following reportable segments during this quarter: Ferrous Minerals, Base Metals and Coal. The segments are aligned with products and reflect the structure used by Management to evaluate Company’s performance. The responsible bodies for making operational decisions, allocating resources and evaluating performance are the Executive Boards and the Board of Directors. The performance of the operating segments is assessed based on a measure of Adjusted EBITDA.
In 2019, due to the Brumadinho dam failure, the Company has created the Special Recovery and Development Board, which is in-charge of social, humanitarian, environmental and structural recovery measures that are implemented in Brumadinho and other affected areas. This Board reports to the CEO and assess the costs related to the Brumadinho event. These costs are not directly related to the Company’s operating activities and, therefore, were not allocated to any operating segment.
The Company allocate to “Others” the revenues and cost of other products, services, research and development, investments in joint ventures and associates of other business and unallocated corporate expenses.
16
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
a) Adjusted EBITDA
Adjusted EBITDA is calculated for each segment using operating income or loss plus dividends received and interest from associates and joint ventures, and excluding the amounts charged as (i) depreciation, depletion and amortization and (ii) impairment and disposal of non-current assets.
|
|
|
Three-month period ended September 30, 2019
|
|
|
|
|
Net operating
revenue
|
|
Cost of goods
sold and
services
rendered
|
|
Sales,
administrative
and other
operating
expenses
|
|
Research and
evaluation
|
|
Pre operating
and operational
stoppage
|
|
Dividends
received and
interest from
associates and
joint ventures
|
|
Adjusted
EBITDA
|
|
|
Ferrous minerals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron ore
|
|
6,566
|
|
(2,527
|
)
|
(80
|
)
|
(28
|
)
|
(166
|
)
|
—
|
|
3,765
|
|
|
Iron ore pellets
|
|
1,596
|
|
(723
|
)
|
(8
|
)
|
(5
|
)
|
(27
|
)
|
—
|
|
833
|
|
|
Ferroalloys and manganese
|
|
48
|
|
(38
|
)
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
8
|
|
|
Other ferrous products and services
|
|
117
|
|
(87
|
)
|
—
|
|
(2
|
)
|
—
|
|
—
|
|
28
|
|
|
|
|
8,327
|
|
(3,375
|
)
|
(90
|
)
|
(35
|
)
|
(193
|
)
|
—
|
|
4,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel and other products
|
|
1,034
|
|
(676
|
)
|
(12
|
)
|
(11
|
)
|
(16
|
)
|
—
|
|
319
|
|
|
Copper
|
|
495
|
|
(244
|
)
|
(2
|
)
|
(13
|
)
|
—
|
|
—
|
|
236
|
|
|
|
|
1,529
|
|
(920
|
)
|
(14
|
)
|
(24
|
)
|
(16
|
)
|
—
|
|
555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
|
|
241
|
|
(437
|
)
|
5
|
|
(10
|
)
|
—
|
|
29
|
|
(172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brumadinho event
|
|
—
|
|
—
|
|
(225
|
)
|
—
|
|
—
|
|
—
|
|
(225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
120
|
|
(112
|
)
|
(139
|
)
|
(55
|
)
|
(3
|
)
|
—
|
|
(189
|
)
|
|
Total
|
|
10,217
|
|
(4,844
|
)
|
(463
|
)
|
(124
|
)
|
(212
|
)
|
29
|
|
4,603
|
|
|
|
|
Three-month period ended September 30, 2018
|
|
|
|
|
Net operating
revenue
|
|
Cost of goods
sold and services
rendered
|
|
Sales,
administrative
and other
operating
expenses (i)
|
|
Research and
evaluation
|
|
Pre operating
and operational
stoppage
|
|
Dividends
received and
interest from
associates and
joint ventures
|
|
Adjusted
EBITDA
|
|
|
Ferrous minerals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron ore
|
|
5,594
|
|
(2,459
|
)
|
(1
|
)
|
(27
|
)
|
(24
|
)
|
—
|
|
3,083
|
|
|
Iron ore pellets
|
|
1,627
|
|
(811
|
)
|
(4
|
)
|
(6
|
)
|
(6
|
)
|
—
|
|
800
|
|
|
Ferroalloys and manganese
|
|
104
|
|
(72
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
32
|
|
|
Other ferrous products and services
|
|
114
|
|
(74
|
)
|
(1
|
)
|
(1
|
)
|
—
|
|
7
|
|
45
|
|
|
|
|
7,439
|
|
(3,416
|
)
|
(6
|
)
|
(34
|
)
|
(30
|
)
|
7
|
|
3,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel and other products
|
|
1,086
|
|
(804
|
)
|
(3
|
)
|
(11
|
)
|
(8
|
)
|
—
|
|
260
|
|
|
Copper
|
|
500
|
|
(226
|
)
|
(2
|
)
|
(4
|
)
|
—
|
|
—
|
|
268
|
|
|
|
|
1,586
|
|
(1,030
|
)
|
(5
|
)
|
(15
|
)
|
(8
|
)
|
—
|
|
528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
|
|
425
|
|
(433
|
)
|
2
|
|
(4
|
)
|
—
|
|
26
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
93
|
|
(63
|
)
|
(170
|
)
|
(34
|
)
|
(5
|
)
|
—
|
|
(179
|
)
|
|
Total from continuing operations
|
|
9,543
|
|
(4,942
|
)
|
(179
|
)
|
(87
|
)
|
(43
|
)
|
33
|
|
4,325
|
|
(i) Revised including in “Others” a loss of US$49 related to provision for litigation.
17
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
|
|
Nine-month period ended September 30, 2019
|
|
|
|
|
Net operating
revenue
|
|
Cost of goods
sold and
services
rendered
|
|
Sales,
administrative
and other
operating
expenses
|
|
Research and
evaluation
|
|
Pre operating
and operational
stoppage
|
|
Dividends
received and
interest from
associates and
joint ventures
|
|
Adjusted
EBITDA
|
|
|
Ferrous minerals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron ore
|
|
16,892
|
|
(6,264
|
)
|
(241
|
)
|
(71
|
)
|
(559
|
)
|
—
|
|
9,757
|
|
|
Iron ore pellets
|
|
4,570
|
|
(2,052
|
)
|
(15
|
)
|
(15
|
)
|
(50
|
)
|
144
|
|
2,582
|
|
|
Ferroalloys and manganese
|
|
202
|
|
(151
|
)
|
(4
|
)
|
(1
|
)
|
—
|
|
—
|
|
46
|
|
|
Other ferrous products and services
|
|
321
|
|
(246
|
)
|
1
|
|
(2
|
)
|
—
|
|
—
|
|
74
|
|
|
|
|
21,985
|
|
(8,713
|
)
|
(259
|
)
|
(89
|
)
|
(609
|
)
|
144
|
|
12,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel and other products
|
|
3,090
|
|
(2,158
|
)
|
(46
|
)
|
(26
|
)
|
(28
|
)
|
—
|
|
832
|
|
|
Copper
|
|
1,428
|
|
(705
|
)
|
(5
|
)
|
(25
|
)
|
—
|
|
—
|
|
693
|
|
|
|
|
4,518
|
|
(2,863
|
)
|
(51
|
)
|
(51
|
)
|
(28
|
)
|
—
|
|
1,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
|
|
830
|
|
(1,246
|
)
|
6
|
|
(22
|
)
|
—
|
|
85
|
|
(347
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brumadinho event
|
|
—
|
|
—
|
|
(6,261
|
)
|
—
|
|
—
|
|
—
|
|
(6,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
273
|
|
(277
|
)
|
(243
|
)
|
(123
|
)
|
(6
|
)
|
49
|
|
(327
|
)
|
|
Total
|
|
27,606
|
|
(13,099
|
)
|
(6,808
|
)
|
(285
|
)
|
(643
|
)
|
278
|
|
7,049
|
|
|
|
|
Nine-month period ended September 30, 2018
|
|
|
|
|
Net operating
revenue
|
|
Cost of goods
sold and services
rendered
|
|
Sales,
administrative
and other
operating
expenses (i)
|
|
Research and
evaluation
|
|
Pre operating
and operational
stoppage
|
|
Dividends
received and
interest from
associates and
joint ventures
|
|
Adjusted
EBITDA
|
|
|
Ferrous minerals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron ore
|
|
14,867
|
|
(6,681
|
)
|
(40
|
)
|
(72
|
)
|
(86
|
)
|
1
|
|
7,989
|
|
|
Iron ore pellets
|
|
4,730
|
|
(2,432
|
)
|
(11
|
)
|
(17
|
)
|
(15
|
)
|
105
|
|
2,360
|
|
|
Ferroalloys and manganese
|
|
343
|
|
(211
|
)
|
(3
|
)
|
(1
|
)
|
—
|
|
—
|
|
128
|
|
|
Other ferrous products and services
|
|
347
|
|
(231
|
)
|
(3
|
)
|
(1
|
)
|
—
|
|
7
|
|
119
|
|
|
|
|
20,287
|
|
(9,555
|
)
|
(57
|
)
|
(91
|
)
|
(101
|
)
|
113
|
|
10,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel and other products
|
|
3,558
|
|
(2,319
|
)
|
(36
|
)
|
(28
|
)
|
(23
|
)
|
—
|
|
1,152
|
|
|
Copper
|
|
1,532
|
|
(719
|
)
|
(3
|
)
|
(12
|
)
|
—
|
|
—
|
|
798
|
|
|
|
|
5,090
|
|
(3,038
|
)
|
(39
|
)
|
(40
|
)
|
(23
|
)
|
—
|
|
1,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
|
|
1,161
|
|
(1,095
|
)
|
(3
|
)
|
(13
|
)
|
—
|
|
115
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
224
|
|
(200
|
)
|
(528
|
)
|
(104
|
)
|
(17
|
)
|
40
|
|
(585
|
)
|
|
Total from continuing operations
|
|
26,762
|
|
(13,888
|
)
|
(627
|
)
|
(248
|
)
|
(141
|
)
|
268
|
|
12,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (Fertilizers)
|
|
121
|
|
(120
|
)
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
|
Total
|
|
26,883
|
|
(14,008
|
)
|
(631
|
)
|
(248
|
)
|
(141
|
)
|
268
|
|
12,123
|
|
(i) Revised including in “Others” a loss of US$121 related to provision for litigation.
18
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
Adjusted EBITDA is reconciled to net income (loss) for the period as follows:
From continuing operations
|
|
|
Three-month period ended
September 30,
|
|
Nine-month period ended
September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Net income (loss) from continuing operations
|
|
1,633
|
|
1,373
|
|
(184
|
)
|
3,157
|
|
|
Depreciation, depletion and amortization
|
|
927
|
|
849
|
|
2,694
|
|
2,583
|
|
|
Income taxes
|
|
977
|
|
647
|
|
818
|
|
704
|
|
|
Financial results
|
|
1,139
|
|
1,263
|
|
2,573
|
|
4,942
|
|
|
Equity results and other results in associates and joint ventures
|
|
(132
|
)
|
(12
|
)
|
527
|
|
287
|
|
|
Dividends received and interest from associates and joint ventures (i)
|
|
29
|
|
33
|
|
278
|
|
268
|
|
|
Impairment and disposal of non-current assets
|
|
30
|
|
172
|
|
343
|
|
185
|
|
|
Adjusted EBITDA from continuing operations
|
|
4,603
|
|
4,325
|
|
7,049
|
|
12,126
|
|
(i) Includes remuneration of the financial instrument in the coal segment.
From discontinued operations
|
|
|
Nine-month period ended September 30, 2018
|
|
|
Loss from discontinued operations
|
|
(92
|
)
|
|
Income taxes
|
|
(40
|
)
|
|
Financial results
|
|
5
|
|
|
Impairment of non-current assets
|
|
124
|
|
|
Adjusted EBITDA from discontinued operations
|
|
(3
|
)
|
b) Assets by segment
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Product inventory
|
|
Investments in
associates and
joint ventures
|
|
Property, plant
and equipment
and intangibles (i)
|
|
Product inventory
|
|
Investments in
associates and
joint ventures
|
|
Property, plant
and equipment
and intangibles (i)
|
|
|
Ferrous minerals
|
|
2,377
|
|
1,792
|
|
32,233
|
|
2,210
|
|
1,814
|
|
31,377
|
|
|
Base metals
|
|
1,224
|
|
14
|
|
21,812
|
|
1,147
|
|
14
|
|
21,295
|
|
|
Coal
|
|
84
|
|
156
|
|
1,617
|
|
119
|
|
317
|
|
1,589
|
|
|
Others
|
|
11
|
|
1,036
|
|
1,515
|
|
11
|
|
1,080
|
|
2,086
|
|
|
Total
|
|
3,696
|
|
2,998
|
|
57,177
|
|
3,487
|
|
3,225
|
|
56,347
|
|
|
|
|
Three-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
Capital expenditures (ii)
|
|
|
|
Capital expenditures (ii)
|
|
|
|
|
|
|
Sustaining capital
|
|
Project execution
|
|
Depreciation,
depletion and
amortization
|
|
Sustaining capital
|
|
Project execution
|
|
Depreciation,
depletion and
amortization
|
|
|
Ferrous minerals
|
|
401
|
|
90
|
|
546
|
|
315
|
|
123
|
|
408
|
|
|
Base metals
|
|
271
|
|
43
|
|
296
|
|
223
|
|
—
|
|
354
|
|
|
Coal
|
|
79
|
|
—
|
|
67
|
|
30
|
|
—
|
|
66
|
|
|
Others
|
|
5
|
|
2
|
|
18
|
|
1
|
|
—
|
|
21
|
|
|
Total
|
|
756
|
|
135
|
|
927
|
|
569
|
|
123
|
|
849
|
|
19
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
Capital expenditures (ii)
|
|
|
|
Capital expenditures (ii)
|
|
|
|
|
|
|
Sustaining capital
|
|
Project execution
|
|
Depreciation,
depletion and
amortization
|
|
Sustaining capital
|
|
Project execution
|
|
Depreciation,
depletion and
amortization
|
|
|
Ferrous minerals
|
|
992
|
|
263
|
|
1,506
|
|
928
|
|
627
|
|
1,265
|
|
|
Base metals
|
|
712
|
|
95
|
|
958
|
|
593
|
|
34
|
|
1,071
|
|
|
Coal
|
|
156
|
|
—
|
|
176
|
|
73
|
|
24
|
|
187
|
|
|
Others
|
|
8
|
|
6
|
|
54
|
|
3
|
|
5
|
|
60
|
|
|
Total
|
|
1,868
|
|
364
|
|
2,694
|
|
1,597
|
|
690
|
|
2,583
|
|
(i) Goodwill is allocated mainly to ferrous minerals and base metals segments in the amount of US$1,713 and US$1,859 in September 30, 2019 and US$1,841 and US$1,812 in December 31, 2018, respectively.
(ii) Cash outflows.
Base metals
Onça Puma
In September 2019, upon a favorable decision from the Brazilian Supreme Court (“STF”), the Company resumed its Onça Puma operation, which is comprised of mineral extraction and nickel processing activities. The mineral extraction operations had been suspended since September 2017 and nickel processing activities since June 2019.
Cobalt streaming transaction
In June 2018, the Company entered into two different agreements, one with Wheaton Precious Metals Corp (“Wheaton”) and the other with Cobalt 27 Capital Corp. (“Cobalt 27”), to sell a stream equivalent to 75% of the cobalt extracted as a by-product from the Voisey’s Bay mine, in Canada, starting on January 1, 2021. Upon completion of the transaction, the Company received an upfront payment of US$690 in cash (US$390 from Wheaton and US$300 from Cobalt 27), which has been recorded as others non-current liabilities. Vale will receive additional payments of 20%, on average, of the market reference price for cobalt, for each pound of finished cobalt delivered.
c) Net operating revenue, by destination
|
|
|
Three-month period ended September 30, 2019
|
|
|
|
|
Ferrous
minerals
|
|
Base metals
|
|
Coal
|
|
Others
|
|
Total
|
|
|
Americas, except United States and Brazil
|
|
141
|
|
221
|
|
—
|
|
—
|
|
362
|
|
|
United States of America
|
|
82
|
|
230
|
|
—
|
|
—
|
|
312
|
|
|
Germany
|
|
289
|
|
90
|
|
—
|
|
—
|
|
379
|
|
|
Europe, except Germany
|
|
301
|
|
474
|
|
90
|
|
—
|
|
865
|
|
|
Middle East, Africa and Oceania
|
|
564
|
|
5
|
|
26
|
|
—
|
|
595
|
|
|
Japan
|
|
466
|
|
114
|
|
6
|
|
—
|
|
586
|
|
|
China
|
|
5,287
|
|
186
|
|
—
|
|
—
|
|
5,473
|
|
|
Asia, except Japan and China
|
|
539
|
|
150
|
|
107
|
|
—
|
|
796
|
|
|
Brazil
|
|
658
|
|
59
|
|
12
|
|
120
|
|
849
|
|
|
Net operating revenue
|
|
8,327
|
|
1,529
|
|
241
|
|
120
|
|
10,217
|
|
|
|
|
Three-month period ended September 30, 2018
|
|
|
|
|
Ferrous
minerals
|
|
Base metals
|
|
Coal
|
|
Others
|
|
Total
|
|
|
Americas, except United States and Brazil
|
|
187
|
|
210
|
|
—
|
|
—
|
|
397
|
|
|
United States of America
|
|
130
|
|
222
|
|
—
|
|
—
|
|
352
|
|
|
Germany
|
|
262
|
|
106
|
|
—
|
|
—
|
|
368
|
|
|
Europe, except Germany
|
|
532
|
|
423
|
|
104
|
|
—
|
|
1,059
|
|
|
Middle East, Africa and Oceania
|
|
631
|
|
7
|
|
45
|
|
—
|
|
683
|
|
|
Japan
|
|
516
|
|
126
|
|
55
|
|
—
|
|
697
|
|
|
China
|
|
4,078
|
|
188
|
|
—
|
|
—
|
|
4,266
|
|
|
Asia, except Japan and China
|
|
520
|
|
234
|
|
192
|
|
—
|
|
946
|
|
|
Brazil
|
|
583
|
|
70
|
|
29
|
|
93
|
|
775
|
|
|
Net operating revenue
|
|
7,439
|
|
1,586
|
|
425
|
|
93
|
|
9,543
|
|
20
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
|
|
Nine-month period ended September 30, 2019
|
|
|
|
|
Ferrous
minerals
|
|
Base metals
|
|
Coal
|
|
Others
|
|
Total
|
|
|
Americas, except United States and Brazil
|
|
447
|
|
607
|
|
—
|
|
—
|
|
1,054
|
|
|
United States of America
|
|
303
|
|
683
|
|
—
|
|
—
|
|
986
|
|
|
Germany
|
|
858
|
|
354
|
|
—
|
|
—
|
|
1,212
|
|
|
Europe, except Germany
|
|
1,180
|
|
1,291
|
|
239
|
|
—
|
|
2,710
|
|
|
Middle East, Africa and Oceania
|
|
1,683
|
|
16
|
|
62
|
|
—
|
|
1,761
|
|
|
Japan
|
|
1,416
|
|
289
|
|
102
|
|
—
|
|
1,807
|
|
|
China
|
|
12,548
|
|
512
|
|
—
|
|
—
|
|
13,060
|
|
|
Asia, except Japan and China
|
|
1,485
|
|
607
|
|
369
|
|
—
|
|
2,461
|
|
|
Brazil
|
|
2,065
|
|
159
|
|
58
|
|
273
|
|
2,555
|
|
|
Net operating revenue
|
|
21,985
|
|
4,518
|
|
830
|
|
273
|
|
27,606
|
|
|
|
|
Nine-month period ended September 30, 2018
|
|
|
|
|
Ferrous
minerals
|
|
Base metals
|
|
Coal
|
|
Others
|
|
Total
|
|
|
Americas, except United States and Brazil
|
|
601
|
|
551
|
|
—
|
|
—
|
|
1,152
|
|
|
United States of America
|
|
301
|
|
731
|
|
—
|
|
8
|
|
1,040
|
|
|
Germany
|
|
873
|
|
318
|
|
—
|
|
—
|
|
1,191
|
|
|
Europe, except Germany
|
|
1,578
|
|
1,382
|
|
293
|
|
—
|
|
3,253
|
|
|
Middle East, Africa and Oceania
|
|
1,724
|
|
17
|
|
121
|
|
—
|
|
1,862
|
|
|
Japan
|
|
1,587
|
|
386
|
|
88
|
|
—
|
|
2,061
|
|
|
China
|
|
10,520
|
|
604
|
|
—
|
|
—
|
|
11,124
|
|
|
Asia, except Japan and China
|
|
1,289
|
|
875
|
|
564
|
|
—
|
|
2,728
|
|
|
Brazil
|
|
1,814
|
|
226
|
|
95
|
|
216
|
|
2,351
|
|
|
Net operating revenue
|
|
20,287
|
|
5,090
|
|
1,161
|
|
224
|
|
26,762
|
|
Provisionally priced commodities sales - At September 30, 2019, the Company had an estimated 19 million metric tons of iron ore and iron ore pellets (December 31, 2018: 27 million metric tons) and 82 thousand metric tons of copper (December 31, 2018: 78 thousand metric tons) provisionally priced based on forward prices.
The final price of these sales will be determined during the fourth quarter of 2019. A 10% change in the realized prices compared to the provisionally priced sales, all other factors held constant, would increase or reduce iron ore and iron ore pellets net income by US$171 and copper net income by US$59.
5. Costs and expenses by nature
a) Cost of goods sold and services rendered
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Personnel
|
|
505
|
|
572
|
|
1,497
|
|
1,698
|
|
|
Materials and services
|
|
950
|
|
1,001
|
|
2,875
|
|
2,849
|
|
|
Fuel oil and gas
|
|
353
|
|
382
|
|
1,037
|
|
1,113
|
|
|
Maintenance
|
|
739
|
|
685
|
|
2,080
|
|
2,098
|
|
|
Energy
|
|
225
|
|
210
|
|
638
|
|
688
|
|
|
Acquisition of products
|
|
208
|
|
114
|
|
452
|
|
337
|
|
|
Depreciation and depletion
|
|
837
|
|
814
|
|
2,456
|
|
2,469
|
|
|
Freight
|
|
1,217
|
|
1,272
|
|
2,822
|
|
3,113
|
|
|
Others
|
|
647
|
|
706
|
|
1,698
|
|
1,992
|
|
|
Total
|
|
5,681
|
|
5,756
|
|
15,555
|
|
16,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
5,488
|
|
5,624
|
|
15,029
|
|
15,916
|
|
|
Cost of services rendered
|
|
193
|
|
132
|
|
526
|
|
441
|
|
|
Total
|
|
5,681
|
|
5,756
|
|
15,555
|
|
16,357
|
|
21
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
b) Selling and administrative expenses
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Personnel
|
|
45
|
|
61
|
|
132
|
|
164
|
|
|
Services
|
|
25
|
|
21
|
|
52
|
|
58
|
|
|
Depreciation and amortization
|
|
12
|
|
18
|
|
42
|
|
50
|
|
|
Others
|
|
46
|
|
36
|
|
122
|
|
110
|
|
|
Total
|
|
128
|
|
136
|
|
348
|
|
382
|
|
c) Other operating (income) expenses, net
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Provision for litigations (i)
|
|
34
|
|
49
|
|
274
|
|
121
|
|
|
Profit sharing program (ii)
|
|
22
|
|
36
|
|
73
|
|
144
|
|
|
Others (iii)
|
|
66
|
|
(24
|
)
|
(106
|
)
|
30
|
|
|
Total
|
|
122
|
|
61
|
|
241
|
|
295
|
|
(i) Includes the change in the expected outcome of probable loss of the lawsuit related to the accident of ship loaders, at the Praia Mole maritime terminal, in Espírito Santo, for the nine-month period ended September 30, 2019.
(ii) Refers to profit sharing program for eligible employees, except for executives whose variable remuneration was suspended as described in note 3.
(iii) Includes the reversal of amounts provided for legal proceedings related to the Rede Ferroviária Federal S.A lawsuit, for the nine-month period ended September 30, 2019.
6. Financial result
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Financial income
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
79
|
|
50
|
|
171
|
|
125
|
|
|
Others
|
|
53
|
|
61
|
|
180
|
|
185
|
|
|
|
|
132
|
|
111
|
|
351
|
|
310
|
|
|
Financial expenses
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings gross interest
|
|
(258
|
)
|
(272
|
)
|
(784
|
)
|
(902
|
)
|
|
Capitalized loans and borrowing costs
|
|
34
|
|
50
|
|
111
|
|
154
|
|
|
Participative stockholders’ debentures
|
|
(486
|
)
|
(3
|
)
|
(1,114
|
)
|
(490
|
)
|
|
Interest on REFIS
|
|
(41
|
)
|
(48
|
)
|
(126
|
)
|
(157
|
)
|
|
Interest on lease liabilities
|
|
(13
|
)
|
—
|
|
(57
|
)
|
—
|
|
|
Others (i)
|
|
(320
|
)
|
(94
|
)
|
(673
|
)
|
(400
|
)
|
|
|
|
(1,084
|
)
|
(367
|
)
|
(2,643
|
)
|
(1,795
|
)
|
|
Other financial items, net
|
|
|
|
|
|
|
|
|
|
|
Net foreign exchange gains (losses) - Loans and borrowings
|
|
(245
|
)
|
(689
|
)
|
(198
|
)
|
(3,182
|
)
|
|
Derivative financial instruments
|
|
(74
|
)
|
(105
|
)
|
85
|
|
(321
|
)
|
|
Other foreign exchange gains (losses), net
|
|
270
|
|
4
|
|
237
|
|
487
|
|
|
Indexation losses, net
|
|
(138
|
)
|
(217
|
)
|
(405
|
)
|
(441
|
)
|
|
|
|
(187
|
)
|
(1,007
|
)
|
(281
|
)
|
(3,457
|
)
|
|
Financial results
|
|
(1,139
|
)
|
(1,263
|
)
|
(2,573
|
)
|
(4,942
|
)
|
(i) Includes expenses with cash tender offer repurchased in the amount of US$246 (note 16iv), for the three and nine-month period ended September 30, 2019.
Net investment of foreign operation
Since January 1, 2019, the Company has considered certain long-term loans payable to Vale International S.A., for which settlement is neither planned nor likely to occur in the foreseeable future, as part of its net investment in that foreign operation. The foreign exchange differences arising on the monetary item are recognized in other comprehensive income, in the “Cumulative translation adjustments”, and reclassified from stockholders’ equity to income statement at the moment of the disposal or partial disposal of the net investment. The Company recognized a loss of US$1,089 (US$719 net of taxes) and US$929 (US$613 net of taxes) for the three and nine-month period ended September 30, 2019, respectively, in the “Cumulative translation adjustments” in stockholders’ equity.
22
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
7. Income taxes
a) Deferred income tax assets and liabilities
Changes in deferred tax are as follow:
|
|
|
Assets
|
|
Liabilities
|
|
Deferred taxes, net
|
|
|
Balance at June 30, 2019
|
|
7,698
|
|
1,469
|
|
6,229
|
|
|
Effect in income statement
|
|
(25
|
)
|
94
|
|
(119
|
)
|
|
Acquisition of subsidiaries (i)
|
|
118
|
|
247
|
|
(129
|
)
|
|
Translation adjustment
|
|
(493
|
)
|
(24
|
)
|
(469
|
)
|
|
Other comprehensive income
|
|
488
|
|
(28
|
)
|
516
|
|
|
Balance at September 30, 2019
|
|
7,786
|
|
1,758
|
|
6,028
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Deferred taxes, net
|
|
|
Balance at June 30, 2018
|
|
6,535
|
|
1,678
|
|
4,857
|
|
|
Effect in income statement
|
|
(729
|
)
|
(5
|
)
|
(724
|
)
|
|
Translation adjustment
|
|
(119
|
)
|
23
|
|
(142
|
)
|
|
Other comprehensive income
|
|
26
|
|
15
|
|
11
|
|
|
Balance at September 30, 2018
|
|
5,713
|
|
1,711
|
|
4,002
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Deferred taxes, net
|
|
|
Balance at December 31, 2018
|
|
6,908
|
|
1,532
|
|
5,376
|
|
|
Effect in income statement
|
|
706
|
|
53
|
|
653
|
|
|
Acquisition of subsidiaries (i)
|
|
118
|
|
247
|
|
(129
|
)
|
|
Translation adjustment
|
|
(426
|
)
|
16
|
|
(442
|
)
|
|
Other comprehensive income
|
|
480
|
|
(90
|
)
|
570
|
|
|
Balance at September 30, 2019
|
|
7,786
|
|
1,758
|
|
6,028
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Deferred taxes, net
|
|
|
Balance at December 31, 2017
|
|
6,638
|
|
1,719
|
|
4,919
|
|
|
Effect in income statement
|
|
(549
|
)
|
12
|
|
(561
|
)
|
|
Transfers between asset and liabilities
|
|
9
|
|
9
|
|
—
|
|
|
Translation adjustment
|
|
(815
|
)
|
(40
|
)
|
(775
|
)
|
|
Other comprehensive income
|
|
402
|
|
11
|
|
391
|
|
|
Effect of discontinued operations
|
|
|
|
|
|
|
|
|
Effect in income statement
|
|
40
|
|
—
|
|
40
|
|
|
Transfer to net assets held for sale
|
|
(12
|
)
|
—
|
|
(12
|
)
|
|
Balance at September 30, 2018
|
|
5,713
|
|
1,711
|
|
4,002
|
|
(i) Refers to the acquisition of New Steel and Ferrous Resources Limited (note 12).
b) Income tax reconciliation — Income statement
The total amount presented as income taxes in the income statement for the period is reconciled to the statutory rate, as follows:
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Income before income taxes
|
|
2,610
|
|
2,020
|
|
634
|
|
3,861
|
|
|
Income taxes at statutory rate - 34%
|
|
(887
|
)
|
(687
|
)
|
(216
|
)
|
(1,313
|
)
|
|
Adjustments that affect the basis of taxes:
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit from interest on stockholders’ equity
|
|
—
|
|
201
|
|
—
|
|
665
|
|
|
Tax incentives
|
|
159
|
|
150
|
|
220
|
|
339
|
|
|
Equity results
|
|
9
|
|
11
|
|
76
|
|
55
|
|
|
Unrecognized tax losses of the period
|
|
(281
|
)
|
(205
|
)
|
(703
|
)
|
(461
|
)
|
|
Others
|
|
23
|
|
(117
|
)
|
(195
|
)
|
11
|
|
|
Income taxes
|
|
(977
|
)
|
(647
|
)
|
(818
|
)
|
(704
|
)
|
Income tax expense is recognized based on the estimate of the weighted average effective tax rate expected for the full year, adjusted for the tax effect of certain items recognized in full in the interim period. Therefore, the effective tax rate in the interim financial statement may differ from management’s estimate of the effective tax rate for the annual financial statement.
23
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
c) Income taxes - Settlement program (“REFIS”)
The balance mainly relates to REFIS to settle most of the claims related to the collection of income tax and social contribution on equity gains of foreign subsidiaries and affiliates from 2003 to 2012. At September 30, 2019, the balance of US$3,855 (US$414 classified as current liabilities and US$3,441 classified as non-current liabilities) is due in 109 remaining monthly installments, bearing the SELIC interest rate (Special System for Settlement and Custody), which is the Brazilian federal funds rate.
8. Basic and diluted earnings (loss) per share
The basic and diluted earnings (loss) per share are presented below:
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Net income (loss) attributable to Vale’s stockholders:
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
1,654
|
|
1,408
|
|
(121
|
)
|
3,166
|
|
|
Loss from discontinued operations
|
|
—
|
|
—
|
|
—
|
|
(92
|
)
|
|
Net income (loss)
|
|
1,654
|
|
1,408
|
|
(121
|
)
|
3,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of shares
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - common shares
|
|
5,181,093
|
|
5,180,238
|
|
5,180,866
|
|
5,191,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
Common share (US$)
|
|
0.32
|
|
0.27
|
|
(0.02
|
)
|
0.61
|
|
|
Basic and diluted loss per share from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
Common share (US$)
|
|
—
|
|
—
|
|
—
|
|
(0.02
|
)
|
|
Basic and diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
Common share (US$)
|
|
0.32
|
|
0.27
|
|
(0.02
|
)
|
0.59
|
|
The Company does not have potential outstanding shares or other instruments with dilutive effect on the earnings per share computation.
9. Accounts receivable
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Accounts receivable
|
|
2,363
|
|
2,710
|
|
|
Expected credit loss
|
|
(66
|
)
|
(62
|
)
|
|
|
|
2,297
|
|
2,648
|
|
|
|
|
|
|
|
|
|
Revenue related to the steel sector - %
|
|
88.72
|
%
|
85.50
|
%
|
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Impairment of accounts receivable recorded in the income statement
|
|
(2
|
)
|
2
|
|
(5
|
)
|
(2
|
)
|
There is no customer that individually represents more than 10% of the Company’s accounts receivable or revenues.
10. Inventories
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Finished products
|
|
2,935
|
|
2,797
|
|
|
Work in progress
|
|
761
|
|
690
|
|
|
Consumable inventory
|
|
933
|
|
956
|
|
|
Total
|
|
4,629
|
|
4,443
|
|
|
|
|
Three-month period ended September 30,
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Provision (reversal) for net realizable value
|
|
22
|
|
3
|
|
(32
|
)
|
(14
|
)
|
Finished and work in progress products inventories by segments are presented in note 4(b).
24
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
11. Other financial assets and liabilities
|
|
|
Current
|
|
Non-Current
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Other financial assets
|
|
|
|
|
|
|
|
|
|
|
Bank accounts restricted
|
|
—
|
|
—
|
|
80
|
|
—
|
|
|
Loans
|
|
—
|
|
—
|
|
89
|
|
153
|
|
|
Derivative financial instruments (note 20)
|
|
125
|
|
39
|
|
425
|
|
392
|
|
|
Investments in equity securities (note 12)
|
|
—
|
|
—
|
|
700
|
|
987
|
|
|
Related parties - Loans (note 25)
|
|
287
|
|
364
|
|
1,601
|
|
1,612
|
|
|
|
|
412
|
|
403
|
|
2,895
|
|
3,144
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments (note 20)
|
|
260
|
|
470
|
|
383
|
|
344
|
|
|
Related parties - Loans (note 25)
|
|
756
|
|
1,134
|
|
953
|
|
960
|
|
|
Participative stockholders’ debentures
|
|
—
|
|
—
|
|
2,235
|
|
1,407
|
|
|
|
|
1,016
|
|
1,604
|
|
3,571
|
|
2,711
|
|
Participative stockholders’ debentures
On October 1, 2019 (subsequent event), the Company provided US$95 (R$394 million) as remuneration on its stockholders’ debentures.
12. Acquisitions and divestitures
a) Fertilizers (discontinued operations)
In January 2018, the Company and The Mosaic Company (“Mosaic”) concluded the transaction entered in December 2016, to sell (i) the phosphate assets located in Brazil, except for those located in Cubatão, Brazil; (ii) the control of Compañia Minera Miski Mayo S.A.C., in Peru; (iii) the potassium assets located in Brazil; and (iv) the potash projects in Canada.
The Company received US$1,080 in cash and 34.2 million common shares, corresponding to 8.9% of Mosaic’s outstanding common shares after the issuance of these shares totaling US$899, based on the Mosaic’s quotation at closing date of the transaction and a loss of US$55 was recognized in the income statement from discontinued operations. Mosaic’s shares received have been accounted for as a financial investment measured at fair value through other comprehensive income.
In May 2018, the Company concluded the transaction entered with Yara International ASA to sell its assets located in Cubatão, Brazil and received US$255 in cash and a loss of US$69 was recognized in the income statement from discontinued operations.
b) New Steel
On January 24, 2019, the Company acquired 100% of the share capital of New Steel Global NV (“New Steel”) and gained its control for the total cash consideration of US$496. New Steel is a company that develops processing and beneficiating technologies for iron ore through a completely dry process.
The consideration paid is mainly attributable to research and development projects. When completed, the Company expects to use the beneficiation technique on its pelletizing operations.
At the current stage, the intangible assets are not subject to amortization, instead, they are reviewed for impairment annually, or more frequently when a trigger for impairment has been identified. When the projects are implemented, they will be subject to amortization, according to the useful life defined.
25
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
Details of the net assets acquired are as follows:
|
|
|
January 24, 2019
|
|
|
Acquired assets
|
|
18
|
|
|
Intangibles (note 14)
|
|
1
|
|
|
Other assets
|
|
17
|
|
|
Net identifiable assets acquired
|
|
18
|
|
|
Fair value adjustment of intangible research and development asset (note 14)
|
|
723
|
|
|
Fair value adjustment of property, plant and equipment
|
|
2
|
|
|
Deferred tax liability
|
|
(247
|
)
|
|
Total identifiable net assets at fair value
|
|
496
|
|
c) Ferrous Resources Limited
On August 1, 2019, the Company acquired 100% of the share capital of Ferrous Resources Limited (“Ferrous”), a Company that currently owns and operates iron ore mines nearby some Company’s operations in Minas Gerais, Brazil for cash consideration of US$509. Ferrous has been acquired to gain access to additional reserves for the Company.
The provisional fair values of identifiable assets acquired, and liabilities assumed of Ferrous, as at the date of acquisition, were:
|
|
|
August 1, 2019
|
|
|
Acquired assets
|
|
686
|
|
|
Cash and cash equivalents
|
|
92
|
|
|
Accounts receivable
|
|
7
|
|
|
Inventories
|
|
10
|
|
|
Intangibles
|
|
4
|
|
|
Property, plant and equipment
|
|
425
|
|
|
Others
|
|
148
|
|
|
Assumed liabilities
|
|
(213
|
)
|
|
Net identifiable assets acquired
|
|
473
|
|
|
Fair value adjustment on mineral properties
|
|
55
|
|
|
Deferred tax liability
|
|
(19
|
)
|
|
Total identifiable net assets at fair value
|
|
509
|
|
|
|
|
August 1, 2019
|
|
|
Cash consideration transferred
|
|
509
|
|
|
(-) Balances acquired
|
|
|
|
|
Cash and cash equivalents
|
|
92
|
|
|
Net consolidated cash outflow
|
|
417
|
|
d) Divestment agreement in compliance with PTVI’s Contract of Work
The Company´s subsidiary, PT Vale Indonesia Tbk (“PTVI”), a public company in Indonesia, has an agreement in place dated October 17, 2014 with the government of the Republic of Indonesia to operate its mining licenses which includes a commitment to divest an additional 20% of PTVI’s shares to Indonesian participants (approximately 20% of PTVI’s shares are already registered on the Indonesian Stock Exchange - IDX).
The existing major shareholders, Vale and Sumitomo Metal Mining, Co., Ltd. (“SMM”) hold 58.7% and 20.1%, respectively, of PTVI’s issued shares. Vale and SMM have signed a Heads of Agreement with PT Indonesia Asahan Aluminium (“Inalum”), an Indonesian state-owned company, to satisfy the 20% interest divestment obligation in relation to PTVI, proportionally to their interest. After the transaction, Vale and SMM will hold together approximately 59% of PTVI’s shares.
The Company expects to set and sign the final terms and conditions by December 31, 2019 and complete its divestment within six months from the execution of the divestment agreement.
26
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
13. Investments in associates and joint ventures
a) Changes during the period
Changes in investments in associates and joint ventures as follows:
|
|
|
Associates
|
|
Joint ventures
|
|
Total
|
|
|
Balance at December 31, 2018
|
|
1,392
|
|
1,833
|
|
3,225
|
|
|
Additions
|
|
—
|
|
75
|
|
75
|
|
|
Translation adjustment
|
|
(68
|
)
|
(123
|
)
|
(191
|
)
|
|
Equity results in income statement
|
|
6
|
|
216
|
|
222
|
|
|
Equity results in statement of comprehensive income
|
|
(4
|
)
|
—
|
|
(4
|
)
|
|
Impairment (i)
|
|
(163
|
)
|
—
|
|
(163
|
)
|
|
Dividends declared
|
|
(10
|
)
|
(170
|
)
|
(180
|
)
|
|
Others
|
|
1
|
|
13
|
|
14
|
|
|
Balance at September 30, 2019
|
|
1,154
|
|
1,844
|
|
2,998
|
|
|
|
|
Associates
|
|
Joint ventures
|
|
Total
|
|
|
Balance at December 31, 2017
|
|
1,441
|
|
2,127
|
|
3,568
|
|
|
Additions
|
|
—
|
|
23
|
|
23
|
|
|
Translation adjustment
|
|
(211
|
)
|
(324
|
)
|
(535
|
)
|
|
Equity results in income statement
|
|
28
|
|
130
|
|
158
|
|
|
Dividends declared
|
|
—
|
|
(154
|
)
|
(154
|
)
|
|
Transfer from non-current assets held for sale (ii)
|
|
87
|
|
—
|
|
87
|
|
|
Others
|
|
6
|
|
(7
|
)
|
(1
|
)
|
|
Balance at September 30, 2018
|
|
1,351
|
|
1,795
|
|
3,146
|
|
(i) The Company identified an impairment trigger on its investment in a coal business joint venture and recognized a loss of US$163 within “Equity results and other results in associates and joint ventures” for the period ended September 30, 2019.
(ii) Refers to 18% interest held by Vale Fertilizantes at Ultrafertil which was transferred to Vale as part of the final settlement in January 2018 (note 12).
The investments by segments are presented in note 4(b).
b) Guarantees provided
As of September 30, 2019, corporate financial guarantees provided by Vale (within the limit of its direct or indirect interest) for certain associates and joint ventures were US$1,625 (December 31, 2018 US$1,735).
27
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
Investments in associates and joint ventures (continued)
|
|
|
|
|
|
|
Investments in associates and
|
|
|
|
|
|
|
|
|
|
|
|
|
joint ventures
|
|
Equity results in the income statement
|
|
Dividends received
|
|
|
|
|
|
|
|
|
|
|
Three-month period ended
|
|
Nine-month period ended
|
|
Three-month period ended
|
|
Nine-month period ended
|
|
|
|
|
|
|
% voting
|
|
September
|
|
December 31,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
Associates and joint ventures
|
|
% ownership
|
|
capital
|
|
30, 2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Ferrous minerals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baovale Mineração S.A.
|
|
50.00
|
|
50.00
|
|
28
|
|
23
|
|
2
|
|
1
|
|
7
|
|
4
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|
Companhia Coreano-Brasileira de Pelotização
|
|
50.00
|
|
50.00
|
|
90
|
|
104
|
|
15
|
|
16
|
|
42
|
|
49
|
|
—
|
|
—
|
|
32
|
|
15
|
|
|
Companhia Hispano-Brasileira de Pelotização (i)
|
|
50.89
|
|
50.89
|
|
88
|
|
83
|
|
12
|
|
15
|
|
33
|
|
38
|
|
—
|
|
—
|
|
37
|
|
23
|
|
|
Companhia Ítalo-Brasileira de Pelotização (i)
|
|
50.90
|
|
51.00
|
|
100
|
|
81
|
|
12
|
|
14
|
|
27
|
|
45
|
|
—
|
|
—
|
|
27
|
|
33
|
|
|
Companhia Nipo-Brasileira de Pelotização (i)
|
|
51.00
|
|
51.11
|
|
178
|
|
148
|
|
27
|
|
31
|
|
78
|
|
92
|
|
—
|
|
—
|
|
47
|
|
34
|
|
|
MRS Logística S.A.
|
|
48.16
|
|
46.75
|
|
498
|
|
496
|
|
27
|
|
12
|
|
53
|
|
42
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
VLI S.A.
|
|
37.60
|
|
37.60
|
|
788
|
|
857
|
|
(5
|
)
|
21
|
|
3
|
|
22
|
|
—
|
|
7
|
|
—
|
|
7
|
|
|
Zhuhai YPM Pellet Co.
|
|
25.00
|
|
25.00
|
|
22
|
|
22
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
1,792
|
|
1,814
|
|
90
|
|
110
|
|
243
|
|
292
|
|
—
|
|
7
|
|
143
|
|
113
|
|
|
Coal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Longyu Energy Resources Co., Ltd.
|
|
25.00
|
|
25.00
|
|
156
|
|
317
|
|
—
|
|
1
|
|
(2
|
)
|
13
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
156
|
|
317
|
|
—
|
|
1
|
|
(2
|
)
|
13
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Base metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Korea Nickel Corp.
|
|
25.00
|
|
25.00
|
|
14
|
|
14
|
|
—
|
|
1
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
14
|
|
14
|
|
—
|
|
1
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aliança Geração de Energia S.A. (i)
|
|
55.00
|
|
55.00
|
|
449
|
|
486
|
|
3
|
|
2
|
|
26
|
|
27
|
|
—
|
|
—
|
|
28
|
|
25
|
|
|
Aliança Norte Energia Participações S.A. (i)
|
|
51.00
|
|
51.00
|
|
156
|
|
162
|
|
3
|
|
4
|
|
5
|
|
14
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
California Steel Industries, Inc.
|
|
50.00
|
|
50.00
|
|
255
|
|
247
|
|
2
|
|
24
|
|
29
|
|
64
|
|
—
|
|
—
|
|
21
|
|
15
|
|
|
Companhia Siderúrgica do Pecém (ii)
|
|
50.00
|
|
50.00
|
|
—
|
|
—
|
|
(71
|
)
|
(119
|
)
|
(70
|
)
|
(243
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Mineração Rio do Norte S.A.
|
|
40.00
|
|
40.00
|
|
95
|
|
93
|
|
6
|
|
2
|
|
9
|
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Others
|
|
|
|
|
|
81
|
|
92
|
|
(8
|
)
|
7
|
|
(18
|
)
|
(7
|
)
|
—
|
|
—
|
|
1
|
|
—
|
|
|
|
|
|
|
|
|
1,036
|
|
1,080
|
|
(65
|
)
|
(80
|
)
|
(19
|
)
|
(149
|
)
|
—
|
|
—
|
|
50
|
|
40
|
|
|
Total
|
|
|
|
|
|
2,998
|
|
3,225
|
|
25
|
|
32
|
|
222
|
|
158
|
|
—
|
|
7
|
|
193
|
|
153
|
|
(i) Although the Company held a majority of the voting capital, the entities are accounted under the equity method due to the stockholders’ agreement where relevant decisions are shared with other parties.
(ii) Companhia Siderúrgica do Pecém (“CSP”) is a joint venture and its results are accounted for under the equity method, in which the accumulated losses are capped to the Company’s interest in the investee’s capital based on the applicable law and requirements. That is, after the investment is reduced to zero, the Company does not recognize further losses nor liabilities associated with the investee.
Vale’s investment in Samarco was impaired in full and no provision was recognized in relation to the Samarco’s negative reserves (note 17).
28
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
14. Intangibles
Changes in intangibles are as follows:
|
|
|
Goodwill
|
|
Concessions (i)
|
|
Right of use
|
|
Software
|
|
Research &
development
project and
patents (ii)
|
|
Total
|
|
|
Balance at December 31, 2018
|
|
3,653
|
|
4,061
|
|
137
|
|
111
|
|
—
|
|
7,962
|
|
|
Additions
|
|
—
|
|
277
|
|
—
|
|
32
|
|
—
|
|
309
|
|
|
Disposals
|
|
—
|
|
(14
|
)
|
—
|
|
—
|
|
—
|
|
(14
|
)
|
|
Amortization
|
|
—
|
|
(196
|
)
|
(1
|
)
|
(57
|
)
|
—
|
|
(254
|
)
|
|
Acquisition of subsidiary
|
|
—
|
|
3
|
|
—
|
|
1
|
|
724
|
|
728
|
|
|
Translation adjustment
|
|
(81
|
)
|
(279
|
)
|
1
|
|
(2
|
)
|
(62
|
)
|
(423
|
)
|
|
Balance at September 30, 2019
|
|
3,572
|
|
3,852
|
|
137
|
|
85
|
|
662
|
|
8,308
|
|
|
Cost
|
|
3,572
|
|
4,888
|
|
205
|
|
914
|
|
662
|
|
10,241
|
|
|
Accumulated amortization
|
|
—
|
|
(1,036
|
)
|
(68
|
)
|
(829
|
)
|
—
|
|
(1,933
|
)
|
|
Balance at September 30, 2019
|
|
3,572
|
|
3,852
|
|
137
|
|
85
|
|
662
|
|
8,308
|
|
(i) Based on technical studies carried out by an independent company and after approval by the regulatory agency (ANTT), the Company reduced the useful life of its railroad tracks in 2019.
(ii) Refers mainly to the acquisition of New Steel Global N.V. (note 12b).
|
|
|
Goodwill
|
|
Concessions
|
|
Right of use
|
|
Software
|
|
Research &
development
project and
patents
|
|
Total
|
|
|
Balance at December 31, 2017
|
|
4,110
|
|
4,002
|
|
152
|
|
229
|
|
—
|
|
8,493
|
|
|
Additions
|
|
—
|
|
698
|
|
—
|
|
7
|
|
—
|
|
705
|
|
|
Disposals
|
|
—
|
|
(21
|
)
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
|
Amortization
|
|
—
|
|
(95
|
)
|
(6
|
)
|
(80
|
)
|
—
|
|
(181
|
)
|
|
Translation adjustment
|
|
(426
|
)
|
(747
|
)
|
(8
|
)
|
(25
|
)
|
—
|
|
(1,206
|
)
|
|
Balance at September 30, 2018
|
|
3,684
|
|
3,837
|
|
138
|
|
131
|
|
—
|
|
7,790
|
|
|
Cost
|
|
3,684
|
|
4,775
|
|
218
|
|
1,082
|
|
—
|
|
9,759
|
|
|
Accumulated amortization
|
|
—
|
|
(938
|
)
|
(80
|
)
|
(951
|
)
|
—
|
|
(1,969
|
)
|
|
Balance at September 30, 2018
|
|
3,684
|
|
3,837
|
|
138
|
|
131
|
|
—
|
|
7,790
|
|
Concessions
The technical studies and legal documents on early extension of the Vitória Minas Railroad (EFVM) and Carajás Railroad (EFC) concessions are currently under review by the Federal Court of Audit. Vale awaits the end of the process in the public sphere to submit the proposal, with the required counterparts, to its Board of Directors.
29
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
15. Property, plant and equipment
Changes in property, plant and equipment are as follows:
|
|
|
Land
|
|
Building
|
|
Facilities
|
|
Equipment
|
|
Mineral
properties
|
|
Lease
agreements
|
|
Others
|
|
Constructions
in progress
|
|
Total
|
|
|
Balance at December 31, 2018
|
|
635
|
|
10,952
|
|
11,236
|
|
6,407
|
|
8,499
|
|
—
|
|
7,269
|
|
3,387
|
|
48,385
|
|
|
Effects of IFRS 16 adoption (i)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,801
|
|
—
|
|
—
|
|
1,801
|
|
|
Additions (ii)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
113
|
|
—
|
|
2,756
|
|
2,869
|
|
|
Disposals
|
|
(22
|
)
|
(81
|
)
|
(36
|
)
|
(52
|
)
|
(157
|
)
|
(6
|
)
|
(208
|
)
|
(17
|
)
|
(579
|
)
|
|
Assets retirement obligation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
293
|
|
—
|
|
—
|
|
—
|
|
293
|
|
|
Depreciation, amortization and depletion
|
|
—
|
|
(393
|
)
|
(491
|
)
|
(644
|
)
|
(452
|
)
|
(132
|
)
|
(498
|
)
|
—
|
|
(2,610
|
)
|
|
Acquisition of subsidiary (iii)
|
|
62
|
|
15
|
|
41
|
|
46
|
|
277
|
|
2
|
|
—
|
|
46
|
|
489
|
|
|
Translation adjustment
|
|
(39
|
)
|
(490
|
)
|
(542
|
)
|
(202
|
)
|
(89
|
)
|
(34
|
)
|
(344
|
)
|
(39
|
)
|
(1,779
|
)
|
|
Transfers
|
|
2
|
|
175
|
|
249
|
|
709
|
|
380
|
|
—
|
|
536
|
|
(2,051
|
)
|
—
|
|
|
Balance at September 30, 2019
|
|
638
|
|
10,178
|
|
10,457
|
|
6,264
|
|
8,751
|
|
1,744
|
|
6,755
|
|
4,082
|
|
48,869
|
|
|
Cost
|
|
638
|
|
17,909
|
|
16,962
|
|
12,427
|
|
17,449
|
|
1,876
|
|
11,603
|
|
4,082
|
|
82,946
|
|
|
Accumulated depreciation
|
|
—
|
|
(7,731
|
)
|
(6,505
|
)
|
(6,163
|
)
|
(8,698
|
)
|
(132
|
)
|
(4,848
|
)
|
—
|
|
(34,077
|
)
|
|
Balance at September 30, 2019
|
|
638
|
|
10,178
|
|
10,457
|
|
6,264
|
|
8,751
|
|
1,744
|
|
6,755
|
|
4,082
|
|
48,869
|
|
|
|
|
Land
|
|
Building
|
|
Facilities
|
|
Equipment
|
|
Mineral
properties
|
|
Lease agreements
|
|
Others
|
|
Constructions
in progress
|
|
Total
|
|
|
Balance at December 31, 2017
|
|
718
|
|
12,100
|
|
11,786
|
|
6,893
|
|
9,069
|
|
—
|
|
8,193
|
|
6,119
|
|
54,878
|
|
|
Additions (ii)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,669
|
|
1,669
|
|
|
Disposals
|
|
—
|
|
(38
|
)
|
(41
|
)
|
(220
|
)
|
(5
|
)
|
—
|
|
(55
|
)
|
(14
|
)
|
(373
|
)
|
|
Assets retirement obligation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(125
|
)
|
—
|
|
—
|
|
—
|
|
(125
|
)
|
|
Depreciation, amortization and depletion
|
|
—
|
|
(429
|
)
|
(519
|
)
|
(628
|
)
|
(391
|
)
|
—
|
|
(503
|
)
|
—
|
|
(2,470
|
)
|
|
Translation adjustment
|
|
(97
|
)
|
(1,525
|
)
|
(1,668
|
)
|
(625
|
)
|
(678
|
)
|
—
|
|
(1,102
|
)
|
(451
|
)
|
(6,146
|
)
|
|
Transfers
|
|
7
|
|
534
|
|
1,286
|
|
942
|
|
339
|
|
—
|
|
739
|
|
(3,847
|
)
|
—
|
|
|
Balance at September 30, 2018
|
|
628
|
|
10,642
|
|
10,844
|
|
6,362
|
|
8,209
|
|
—
|
|
7,272
|
|
3,476
|
|
47,433
|
|
|
Cost
|
|
628
|
|
17,809
|
|
17,166
|
|
12,325
|
|
16,620
|
|
—
|
|
11,602
|
|
3,476
|
|
79,626
|
|
|
Accumulated depreciation
|
|
—
|
|
(7,167
|
)
|
(6,322
|
)
|
(5,963
|
)
|
(8,411
|
)
|
—
|
|
(4,330
|
)
|
—
|
|
(32,193
|
)
|
|
Balance at September 30, 2018
|
|
628
|
|
10,642
|
|
10,844
|
|
6,362
|
|
8,209
|
|
—
|
|
7,272
|
|
3,476
|
|
47,433
|
|
(i) Refers to the recognition of right-of-use assets related to lease agreements in accordance with IFRS 16. Changes in leases by asset class are disclosed in note 2(c).
(ii) Includes capitalized borrowing costs.
(iii) Refers mainly to the acquisition of Ferrous Resources Limited (note 12c).
There are no material changes to the net book value of consolidated property, plant and equipment pledged to secure judicial claims and loans and borrowings (note 16) compared to those disclosed in the financial statements as at December 31, 2018.
Accounting policy
Leases - At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the lease term or the end of the useful life of the right-of-use asset.
The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: (i) fixed payments, including in-substance fixed payments; (ii) variable lease payments that depend on an index or a rate; and (iii) the exercise price under a purchase option or renewal option that are under the Company’s control and is reasonably certain to be exercised.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
30
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
16. Loans, borrowings, cash and cash equivalents and short-term investments
a) Cash and cash equivalents
Cash and cash equivalents includes cash, immediately redeemable deposits and short-term investments with an insignificant risk of change in value. They are readily convertible to cash, part in R$, indexed to the Brazilian Interbank Interest rate (“DI Rate” or “CDI”) and part denominated in US$, mainly time deposits.
b) Short-term investments
At September 30, 2019, the balance of US$906 is mainly comprised by investments in Financial Treasury Bills (“LFTs”), which are Brazilian government bonds, issued by the National Treasury. LFTs are floating-rate securities, liquid in the secondary markets and are convertible to known amounts of cash subject to a low risk of changes in value.
c) Loans and borrowings
i) Total debt
|
|
|
Current liabilities
|
|
Non-current liabilities
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Principal in:
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
340
|
|
256
|
|
10,204
|
|
10,300
|
|
|
EUR
|
|
—
|
|
—
|
|
1,036
|
|
1,088
|
|
|
R$
|
|
774
|
|
492
|
|
2,107
|
|
2,940
|
|
|
Other currencies
|
|
15
|
|
25
|
|
104
|
|
127
|
|
|
Accrued charges
|
|
203
|
|
230
|
|
3
|
|
8
|
|
|
Total
|
|
1,332
|
|
1,003
|
|
13,454
|
|
14,463
|
|
The future flows of debt payments, principal and interest, are as follows:
|
|
|
Principal
|
|
Estimated future
interest payments (i)
|
|
|
2019
|
|
125
|
|
181
|
|
|
2020
|
|
1,122
|
|
789
|
|
|
2021
|
|
889
|
|
726
|
|
|
2022
|
|
2,326
|
|
649
|
|
|
Between 2023 and 2027
|
|
5,691
|
|
2,308
|
|
|
2028 onwards
|
|
4,427
|
|
3,022
|
|
|
Total
|
|
14,580
|
|
7,675
|
|
(i) Based on interest rate curves and foreign exchange rates applicable as at September 30, 2019 and considering that the payments of principal will be made on their contracted payments dates. The amount includes the estimated interest not yet accrued and the interest already recognized in the interim financial statements.
31
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
ii) Reconciliation of debt to cash flows arising from financing activities
|
|
|
Loans and borrowings
|
|
|
June 30, 2019
|
|
15,790
|
|
|
Additions
|
|
1,000
|
|
|
Repayments
|
|
(1,694
|
)
|
|
Interest paid
|
|
(244
|
)
|
|
Cash flow from financing activities
|
|
(938
|
)
|
|
|
|
|
|
|
Effect of exchange rate
|
|
(305
|
)
|
|
Interest accretion
|
|
239
|
|
|
Non-cash changes
|
|
(66
|
)
|
|
|
|
|
|
|
September 30, 2019
|
|
14,786
|
|
|
|
|
Loans and borrowings
|
|
|
December 31, 2018
|
|
15,466
|
|
|
Additions
|
|
3,142
|
|
|
Repayments
|
|
(3,546
|
)
|
|
Interest paid
|
|
(727
|
)
|
|
Cash flow from financing activities
|
|
(1,131
|
)
|
|
|
|
|
|
|
Effect of exchange rate
|
|
(288
|
)
|
|
Interest accretion
|
|
739
|
|
|
Non-cash changes
|
|
451
|
|
|
|
|
|
|
|
September 30, 2019
|
|
14,786
|
|
iii) Credit lines
To mitigate liquidity risk, Vale has two revolving credit facilities, which will mature in 2020 and 2022, in the available amount of US$5,000 to assist the short-term liquidity management and to enable more efficiency in cash management, being consistent with the strategic focus on cost of capital reduction. As of September 30, 2019, these lines are undrawn.
iv) Funding and Repayments
During the nine-month period ended September 30, 2019, the Company entered into export financing lines and long-term debts. Additionally, the Company conducted a repurchased for certain guaranteed notes issued by Vale a total of US$1,362.
v) Guarantees
As at September 30, 2019 and December 31, 2018, loans and borrowings are secured by property, plant and equipment in the amount of US$209 and US$221, respectively.
The securities issued through Vale’s wholly-owned finance subsidiary Vale Overseas Limited are fully and unconditionally guaranteed by Vale.
vi) Covenants
Some of the Company’s debt agreements with lenders contain financial covenants. The primary financial covenants in those agreements require maintaining certain ratios, such as debt to EBITDA and interest coverage. The Company has not identified any instances of noncompliance as at September 30, 2019.
32
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
17. Liabilities related to associates and joint ventures
On November 5, 2015, a rupture has been experienced in the Fundão tailings dam, in Mariana (MG), operated by Samarco Mineração S.A. (“Samarco”), a joint venture controlled by Vale S.A. and BHP Billiton Brasil Ltda. (“BHP”). In March 2016, Samarco and its shareholders entered into a Framework Agreement with governmental authorities, in which Samarco, Vale S.A. and BHP agreed to stablish the Fundação Renova, an entity responsible to develop and implement 42 long-term mitigation and compensation programs.
In addition to the Fundão tailings dam, Samarco owns the Germano dam, which was also built under the upstream method and has been inactive since the Fundão dam rupture.
Fundação Renova
During the second quarter of 2019, Fundação Renova reviewed the estimates of the costs required to mitigate and compensate the impacts from the rupture of Fundão dam. As a result, Vale recognized an additional provision of US$383 (R$1,477 million), which is the present value of the revised estimate in relation to Vale’s responsibility to support Fundação Renova and is equivalent to 50% of Samarco’s additional obligations over the next 11 years.
Overall, the programs depend on future actions for their definition, which indicates a broad range of possible estimates. Estimates of mitigation and compensation actions may vary according to the progress of the ongoing programs developed by the Fundação Renova and changes in scope. The amounts disclosed in these interim financial statements have been determined based on Management’s best estimates and consider the facts and circumstances known to date.
The contingencies related to the Fundão dam rupture are disclosed in note 22.
Germano dam
Due to the new safety requirements set by ANM, Samarco prepared a project for the de-characterization of this dam. During May 2019, the concept of a project for the de-characterization of the Germano dam was filed. The conceptual project was concluded in August 2019 and is subject to further review and eventual approval by the competent authorities. Accordingly, based on the information available on the preparation of these interim financial statements, the estimated amount discounted at the present value using the rate of 3.40% and based on the expected cash outflows resulted in a provision of US$257 (R$993 million) recognized in the second quarter of 2019.
The measurement of the costs and recognition of this provision takes into consideration several assumptions and estimates, which rely on factors, which some of that are not always under the Company’s control. The main critical assumptions and estimates applied considers, among others: (i) volume of the waste to be removed based on historical data available and interpretation of the enacted laws and regulations; (ii) location availability for the tailings disposal; and (iii) acceptance by the authorities of the proposed engineering methods and solution. Therefore, changes in the critical assumptions and estimates may result in a material change to the provided amount as at September 30, 2019.
The changes in the provision to meet the obligations under the agreement related to the Fundão dam rupture and to the de-characterization of Germano dam in the nine-month period ended September 30, 2019 and 2018 are as follows:
|
|
|
2019
|
|
2018
|
|
|
Balance at January 1
|
|
1,121
|
|
996
|
|
|
Payments
|
|
(188
|
)
|
(194
|
)
|
|
Present value valuation
|
|
101
|
|
47
|
|
|
Provision increase
|
|
640
|
|
391
|
|
|
Translation adjustment
|
|
(117
|
)
|
(187
|
)
|
|
Balance at September 30
|
|
1,557
|
|
1,053
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
450
|
|
292
|
|
|
Non-current liabilities
|
|
1,107
|
|
761
|
|
|
Liabilities
|
|
1,557
|
|
1,053
|
|
33
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
Samarco’s working capital
In addition to the provision, Vale S.A. made available US$60 (R$233 million) for the nine-month period ended September 30, 2019, and US$56 (R$194 million) for the nine-month period ended September 30, 2018, which was fully used to fund Samarco’s working capital. This amount was recognized in Vale´s income statement as an expense in “Equity results and other results in associates and joint ventures”.
Until December 31, 2019, Vale S.A. may provide a short-term credit facility up to US$98 (R$374 million) to support the Samarco’s cash needs, without any binding obligation to Samarco. The availability of funds by the shareholders — Vale S.A. and BHP — is subject to the fulfillment of certain conditions, being deliberated by the shareholders, in the same bases and concomitantly, if required.
Under Brazilian legislation and the terms of the joint venture agreement, Vale does not have an obligation to provide funding to Samarco. Accordingly, Vale’s investment in Samarco was fully impaired and no provision was recognized in relation to the Samarco’s negative equity.
Insurance
Since the Fundão dam rupture, the Company has been negotiating with insurers the indemnification payments based on its general liability policies. During the third quarter of 2019, the Company received payments in the amount of US$105 and recognized a gain in the income statement as “Equity results and other results in associates and joint ventures”.
Critical accounting estimates and judgments
The provision requires the use of assumptions that may be mainly affected by: (i) changes in scope of work required under the Framework Agreement as a result of further technical analysis and the ongoing negotiations with the Federal Prosecution Office, (ii) resolution of uncertainty in respect of the resumption of Samarco´s operations; (iii) updates of the discount rate; and (iv) resolution of existing and potential legal claims. As a result, future expenditures may differ from the amounts currently provided and changes to key assumptions could result in a material impact to the amount of the provision in future reporting periods. At each reporting period, the Company reassess the key assumptions used by Samarco in the preparation of the projected cash flows and adjust the provision, if required.
34
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
18. Financial instruments classification
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Amortized
cost
|
|
At fair value
through OCI
|
|
At fair value
through
profit or loss
|
|
Total
|
|
Amortized
cost
|
|
At fair value
through OCI
|
|
At fair value
through
profit or loss
|
|
Total
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
8,559
|
|
—
|
|
—
|
|
8,559
|
|
5,784
|
|
—
|
|
—
|
|
5,784
|
|
|
Short-term investments
|
|
—
|
|
—
|
|
906
|
|
906
|
|
—
|
|
—
|
|
32
|
|
32
|
|
|
Derivative financial instruments
|
|
—
|
|
—
|
|
125
|
|
125
|
|
—
|
|
—
|
|
39
|
|
39
|
|
|
Accounts receivable
|
|
2,285
|
|
—
|
|
12
|
|
2,297
|
|
2,756
|
|
—
|
|
(108
|
)
|
2,648
|
|
|
Related parties
|
|
287
|
|
—
|
|
—
|
|
287
|
|
364
|
|
—
|
|
—
|
|
364
|
|
|
|
|
11,131
|
|
—
|
|
1,043
|
|
12,174
|
|
8,904
|
|
—
|
|
(37
|
)
|
8,867
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank accounts restricted
|
|
80
|
|
—
|
|
—
|
|
80
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Derivative financial instruments
|
|
—
|
|
—
|
|
425
|
|
425
|
|
—
|
|
—
|
|
392
|
|
392
|
|
|
Investments in equity securities
|
|
—
|
|
700
|
|
—
|
|
700
|
|
—
|
|
987
|
|
—
|
|
987
|
|
|
Loans
|
|
89
|
|
—
|
|
—
|
|
89
|
|
153
|
|
—
|
|
—
|
|
153
|
|
|
Related parties
|
|
1,601
|
|
—
|
|
—
|
|
1,601
|
|
1,612
|
|
—
|
|
—
|
|
1,612
|
|
|
|
|
1,770
|
|
700
|
|
425
|
|
2,895
|
|
1,765
|
|
987
|
|
392
|
|
3,144
|
|
|
Total of financial assets
|
|
12,901
|
|
700
|
|
1,468
|
|
15,069
|
|
10,669
|
|
987
|
|
355
|
|
12,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suppliers and contractors
|
|
4,251
|
|
—
|
|
—
|
|
4,251
|
|
3,512
|
|
—
|
|
—
|
|
3,512
|
|
|
Leases
|
|
236
|
|
—
|
|
—
|
|
236
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Derivative financial instruments
|
|
—
|
|
—
|
|
260
|
|
260
|
|
—
|
|
—
|
|
470
|
|
470
|
|
|
Loans and borrowings
|
|
1,332
|
|
—
|
|
—
|
|
1,332
|
|
1,003
|
|
—
|
|
—
|
|
1,003
|
|
|
Related parties
|
|
756
|
|
—
|
|
—
|
|
756
|
|
1,134
|
|
—
|
|
—
|
|
1,134
|
|
|
|
|
6,575
|
|
—
|
|
260
|
|
6,835
|
|
5,649
|
|
—
|
|
470
|
|
6,119
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
1,575
|
|
—
|
|
—
|
|
1,575
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Derivative financial instruments
|
|
—
|
|
—
|
|
383
|
|
383
|
|
—
|
|
—
|
|
344
|
|
344
|
|
|
Loans and borrowings
|
|
13,454
|
|
—
|
|
—
|
|
13,454
|
|
14,463
|
|
—
|
|
—
|
|
14,463
|
|
|
Related parties
|
|
953
|
|
—
|
|
—
|
|
953
|
|
960
|
|
—
|
|
—
|
|
960
|
|
|
Participative stockholders’ debentures
|
|
—
|
|
—
|
|
2,235
|
|
2,235
|
|
—
|
|
—
|
|
1,407
|
|
1,407
|
|
|
|
|
15,982
|
|
—
|
|
2,618
|
|
18,600
|
|
15,423
|
|
—
|
|
1,751
|
|
17,174
|
|
|
Total of financial liabilities
|
|
22,557
|
|
—
|
|
2,878
|
|
25,435
|
|
21,072
|
|
—
|
|
2,221
|
|
23,293
|
|
19. Fair value estimate
a) Assets and liabilities measured and recognized at fair value:
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
906
|
|
—
|
|
—
|
|
906
|
|
32
|
|
—
|
|
—
|
|
32
|
|
|
Derivative financial instruments
|
|
—
|
|
256
|
|
294
|
|
550
|
|
—
|
|
136
|
|
295
|
|
431
|
|
|
Accounts receivable
|
|
—
|
|
12
|
|
—
|
|
12
|
|
—
|
|
(108
|
)
|
—
|
|
(108
|
)
|
|
Investments in equity securities
|
|
700
|
|
—
|
|
—
|
|
700
|
|
987
|
|
—
|
|
—
|
|
987
|
|
|
Total
|
|
1,606
|
|
268
|
|
294
|
|
2,168
|
|
1,019
|
|
28
|
|
295
|
|
1,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
—
|
|
525
|
|
118
|
|
643
|
|
—
|
|
636
|
|
178
|
|
814
|
|
|
Participative stockholders’ debentures
|
|
—
|
|
2,235
|
|
—
|
|
2,235
|
|
—
|
|
1,407
|
|
—
|
|
1,407
|
|
|
Total
|
|
—
|
|
2,760
|
|
118
|
|
2,878
|
|
—
|
|
2,043
|
|
178
|
|
2,221
|
|
There were no transfers between Level 1 and Level 2, or between Level 2 and Level 3 for the nine-month period ended in September 30, 2019.
35
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
The following table presents the changes in Level 3 assets and liabilities for the nine-month period ended in September 30, 2019:
|
|
|
Derivative financial instruments
|
|
|
|
|
Financial assets
|
|
Financial liabilities
|
|
|
Balance at December 31, 2018
|
|
295
|
|
178
|
|
|
Gain and losses recognized in income statement
|
|
24
|
|
(50
|
)
|
|
Translation adjustments
|
|
(25
|
)
|
(10
|
)
|
|
Balance at September 30, 2019
|
|
294
|
|
118
|
|
Methods and techniques of evaluation
Derivative financial instruments
Derivative financial instruments are evaluated through the use of market curves and prices impacting each instrument at the closing dates, detailed in the item “market curves” (note 26).
For the pricing of options, the Company often uses the Black & Scholes model. In this model, the fair value of the derivative is determined basically as a function of the volatility and the price of the underlying asset, the strike price of the option, the risk-free interest rate and the option maturity. In the case of options where payoff is a function of the average price of the underlying asset over a certain period during the life of the option, the Company uses Turnbull & Wakeman model. In this model, in addition to the factors that influence the option price in the Black-Scholes model, the formation period of the average price is also considered.
In the case of swaps, both the present value of the long and short positions are estimated by discounting their cash flows by the interest rate in the related currency. The fair value is determined by the difference between the present value of the long and short positions of the swap in the reference currency.
For the swaps indexed to TJLP, the calculation of the fair value assumes that TJLP is constant, that is, the projections of future cash flows in Brazilian Reais are made considering the last TJLP disclosed.
Forward and future contracts are priced using the future curves of their corresponding underlying assets. Typically, these curves are obtained on the stock exchanges where these assets are traded, such as the London Metals Exchange (“LME”), the Commodity Exchange (“COMEX”) or other providers of market prices. When there is no price for the desired maturity, Vale uses an interpolation between the available maturities.
The fair value of derivatives within level 3 is estimated using discounted cash flows and option model valuation techniques with unobservable inputs of discount rates, stock prices and commodities prices.
b) Fair value of financial instruments not measured at fair value
The fair values and carrying amounts of loans and borrowings are as follows:
|
Financial liabilities
|
|
Balance
|
|
Fair value
|
|
Level 1
|
|
Level 2
|
|
|
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Debt principal
|
|
14,580
|
|
16,183
|
|
9,731
|
|
6,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
Debt principal
|
|
15,228
|
|
16,262
|
|
10,686
|
|
5,576
|
|
Due to the short-term cycle, the fair value of cash and cash equivalents balances, short-term investments, accounts receivable and accounts payable approximate their book values.
36
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
20. Derivative financial instruments
a) Derivatives effects on statement of financial position
|
|
|
Assets
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Current
|
|
Non-current
|
|
Current
|
|
Non-current
|
|
|
Foreign exchange and interest rate risk
|
|
|
|
|
|
|
|
|
|
|
CDI & TJLP vs. US$ fixed and floating rate swap
|
|
9
|
|
—
|
|
9
|
|
—
|
|
|
IPCA swap
|
|
68
|
|
97
|
|
7
|
|
84
|
|
|
Eurobonds swap
|
|
—
|
|
—
|
|
—
|
|
4
|
|
|
Pre-dollar swap
|
|
18
|
|
—
|
|
19
|
|
1
|
|
|
|
|
95
|
|
97
|
|
35
|
|
89
|
|
|
Commodities price risk
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
29
|
|
16
|
|
2
|
|
—
|
|
|
Bunker oil
|
|
—
|
|
2
|
|
1
|
|
—
|
|
|
|
|
29
|
|
18
|
|
3
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options - MBR
|
|
—
|
|
282
|
|
—
|
|
295
|
|
|
Others
|
|
1
|
|
28
|
|
1
|
|
8
|
|
|
|
|
1
|
|
310
|
|
1
|
|
303
|
|
|
Total
|
|
125
|
|
425
|
|
39
|
|
392
|
|
|
|
|
Liabilities
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Current
|
|
Non-current
|
|
Current
|
|
Non-current
|
|
|
Foreign exchange and interest rate risk
|
|
|
|
|
|
|
|
|
|
|
CDI & TJLP vs. US$ fixed and floating rate swap
|
|
187
|
|
113
|
|
383
|
|
98
|
|
|
IPCA swap
|
|
15
|
|
45
|
|
35
|
|
47
|
|
|
Eurobonds swap
|
|
6
|
|
43
|
|
5
|
|
—
|
|
|
Pre-dollar swap
|
|
13
|
|
51
|
|
10
|
|
18
|
|
|
|
|
221
|
|
252
|
|
433
|
|
163
|
|
|
Commodities price risk
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
38
|
|
12
|
|
8
|
|
2
|
|
|
Bunker oil
|
|
—
|
|
—
|
|
29
|
|
—
|
|
|
|
|
38
|
|
12
|
|
37
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options - MBR
|
|
—
|
|
18
|
|
—
|
|
16
|
|
|
Conversion options - VLI
|
|
—
|
|
100
|
|
—
|
|
162
|
|
|
Others
|
|
1
|
|
1
|
|
—
|
|
1
|
|
|
|
|
1
|
|
119
|
|
—
|
|
179
|
|
|
Total
|
|
260
|
|
383
|
|
470
|
|
344
|
|
b) Effects of derivatives on the income statement and cash flow
|
|
|
Gain (loss) recognized in the income statement
|
|
|
|
|
Three-month period ended September
30,
|
|
Nine-month period ended September
30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Foreign exchange and interest rate risk
|
|
|
|
|
|
|
|
|
|
|
CDI & TJLP vs. US$ fixed and floating rate swap
|
|
(105
|
)
|
(67
|
)
|
(94
|
)
|
(264
|
)
|
|
IPCA swap
|
|
47
|
|
(5
|
)
|
75
|
|
(50
|
)
|
|
Eurobonds swap
|
|
(32
|
)
|
1
|
|
(53
|
)
|
(7
|
)
|
|
Pre-dollar swap
|
|
(25
|
)
|
(9
|
)
|
(27
|
)
|
(42
|
)
|
|
|
|
(115
|
)
|
(80
|
)
|
(99
|
)
|
(363
|
)
|
|
Commodities price risk
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
37
|
|
(20
|
)
|
53
|
|
(10
|
)
|
|
Bunker oil
|
|
—
|
|
(9
|
)
|
30
|
|
57
|
|
|
|
|
37
|
|
(29
|
)
|
83
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options - MBR
|
|
(30
|
)
|
13
|
|
8
|
|
63
|
|
|
Conversion options - VLI
|
|
11
|
|
5
|
|
52
|
|
35
|
|
|
Others
|
|
23
|
|
(14
|
)
|
41
|
|
(103
|
)
|
|
|
|
4
|
|
4
|
|
101
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
(74
|
)
|
(105
|
)
|
85
|
|
(321
|
)
|
37
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
|
|
Financial settlement inflows (outflows)
|
|
|
|
|
Three-month period ended September
30,
|
|
Nine-month period ended September
30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Foreign exchange and interest rate risk
|
|
|
|
|
|
|
|
|
|
|
CDI & TJLP vs. US$ fixed and floating rate swap
|
|
(149
|
)
|
(42
|
)
|
(255
|
)
|
(104
|
)
|
|
IPCA swap
|
|
—
|
|
—
|
|
(28
|
)
|
7
|
|
|
Eurobonds swap
|
|
—
|
|
—
|
|
(5
|
)
|
(4
|
)
|
|
Pre-dollar swap
|
|
(3
|
)
|
(3
|
)
|
11
|
|
13
|
|
|
|
|
(152
|
)
|
(45
|
)
|
(277
|
)
|
(88
|
)
|
|
Commodities price risk
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
44
|
|
(2
|
)
|
48
|
|
20
|
|
|
Bunker oil
|
|
—
|
|
25
|
|
—
|
|
33
|
|
|
|
|
44
|
|
23
|
|
48
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
20
|
|
—
|
|
20
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
(88
|
)
|
(22
|
)
|
(209
|
)
|
(35
|
)
|
The maturity dates of the derivative financial instruments are as follows:
|
|
|
Last maturity dates
|
|
Currencies and interest rates
|
|
September 2029
|
|
Nickel
|
|
December 2020
|
|
Brent
|
|
December 2019
|
|
Others
|
|
December 2027
|
c) Hedge in foreign operations
In January 2017, the Company implemented hedge accounting for the foreign currency risk arising from Vale S.A.’s net investments in Vale International S.A. and Vale International Holding GmbH. Under the hedge accounting program, the Company’s debt denominated in U.S. dollars and Euros serves as a hedge instrument for these investments. With the program, the impact of exchange rate variations on debt denominated in U.S. dollars and Euros has been partially recorded in other comprehensive income in the “Cumulative translation adjustments”. As at September 30, 2019, the carrying value of the debts designated as instrument hedge of these investments are US$2,468 and EUR750.
|
|
|
Consolidated
|
|
|
|
|
Loss recognized in the other comprehensive income
|
|
|
|
|
Three-month period ended September
30,
|
|
Nine-month period ended September
30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Hedge in foreign operation, net of tax
|
|
(154
|
)
|
(81
|
)
|
(130
|
)
|
(646
|
)
|
21. Provisions
|
|
|
Current liabilities
|
|
Non-current liabilities
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Payroll, related charges and other remunerations (i)
|
|
744
|
|
1,046
|
|
—
|
|
—
|
|
|
Onerous contracts
|
|
37
|
|
60
|
|
647
|
|
642
|
|
|
Environmental obligations
|
|
95
|
|
100
|
|
211
|
|
202
|
|
|
Asset retirement obligations
|
|
62
|
|
85
|
|
3,585
|
|
3,030
|
|
|
Provisions for litigation (note 22)
|
|
—
|
|
—
|
|
1,424
|
|
1,357
|
|
|
Employee postretirement obligations (note 23)
|
|
81
|
|
72
|
|
2,176
|
|
1,864
|
|
|
Provisions
|
|
1,019
|
|
1,363
|
|
8,043
|
|
7,095
|
|
(i) Change mainly due to payment of profit sharing program.
38
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
22. Litigations
a) Provision for litigations
Vale is party to labor, civil, tax and other ongoing lawsuits, at administrative and court levels. Provisions for losses resulting from lawsuits are estimated and updated by the Company, based on analysis from the Company’s legal consultants.
Changes in provision for litigations are as follows:
|
|
|
Tax litigation
|
|
Civil litigation
|
|
Labor litigation
|
|
Environmental litigation
|
|
Total of litigation provision
|
|
|
Balance at December 31, 2018
|
|
691
|
|
166
|
|
497
|
|
3
|
|
1,357
|
|
|
Additions and reversals, net (i)
|
|
15
|
|
166
|
|
87
|
|
6
|
|
274
|
|
|
Payments
|
|
(20
|
)
|
(37
|
)
|
(101
|
)
|
—
|
|
(158
|
)
|
|
Indexation and interest
|
|
4
|
|
32
|
|
13
|
|
1
|
|
50
|
|
|
Translation adjustment
|
|
(38
|
)
|
(24
|
)
|
(35
|
)
|
(2
|
)
|
(99
|
)
|
|
Balance at September 30, 2019
|
|
652
|
|
303
|
|
461
|
|
8
|
|
1,424
|
|
|
|
|
Tax litigation
|
|
Civil litigation
|
|
Labor litigation
|
|
Environmental litigation
|
|
Total of litigation provision
|
|
|
Balance at December 31, 2017
|
|
750
|
|
131
|
|
582
|
|
10
|
|
1,473
|
|
|
Additions and reversals, net
|
|
14
|
|
18
|
|
93
|
|
(4
|
)
|
121
|
|
|
Payments
|
|
(7
|
)
|
(17
|
)
|
(78
|
)
|
(2
|
)
|
(104
|
)
|
|
Additions - discontinued operations
|
|
21
|
|
1
|
|
16
|
|
—
|
|
38
|
|
|
Indexation and interest
|
|
18
|
|
15
|
|
(5
|
)
|
(1
|
)
|
27
|
|
|
Translation adjustment
|
|
(126
|
)
|
(30
|
)
|
(103
|
)
|
—
|
|
(259
|
)
|
|
Balance at September 30, 2018
|
|
670
|
|
118
|
|
505
|
|
3
|
|
1,296
|
|
(i) Includes the change in the expected outcome of probable loss of the civil lawsuit related to the accident of ship loaders, at the Praia Mole maritime terminal, in Espírito Santo, for the nine-month period ended September 30, 2019.
b) Contingent liabilities
Contingent liabilities of administrative and judicial claims, with expectation of loss classified as possible, and for which the recognition of a provision is not considered necessary by the Company, based on legal advice are as follows:
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Tax litigations
|
|
6,928
|
|
8,641
|
|
|
Civil litigations
|
|
1,615
|
|
1,957
|
|
|
Labor litigations
|
|
1,015
|
|
1,475
|
|
|
Environmental litigations
|
|
1,105
|
|
1,051
|
|
|
Total
|
|
10,663
|
|
13,124
|
|
i - Tax litigations - The most relevant contingent tax liabilities are associated with proceedings related to the (i) collection of IRPJ and CSLL, (ii) challenges of PIS and COFINS tax credits, (iii) assessments related to mining royalties (CFEM), and (iv) collection of ICMS, in particular related to credits we claimed in connection with the sale and transmission of electricity; collection of ICMS in connection with goods that enter into the State of Pará and collection of ICMS and penalties in connection with the transportation of iron ore by Vale itself. The changes over the period is mainly due to the new tax proceedings related to ICMS, the termination of the IRPJ, CSLL, ICMS and COFINS proceedings, the changes in the amount involved in the IRRF, CFEM and FAP cases as well as the imposition of the accrued interest and monetary updated on the amounts in dispute.
ii - Civil litigations - Most of those claims have been filed by suppliers for indemnification under construction contracts, primarily relating to certain alleged damages, payments and contractual penalties. A number of other claims related to contractual disputes regarding inflation index.
iii - Labor litigations - Represents individual claims by employees and service providers, primarily involving demands for additional compensation for overtime work, time spent commuting or health and safety conditions; and the Brazilian federal social security administration (“INSS”) regarding contributions on compensation programs based on profits.
iv - Environmental litigations - The most significant claims concern alleged procedural deficiencies in licensing processes, non-compliance with existing environmental licenses or damage to the environment.
39
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
c) Judicial deposits
In addition to the provisions and contingent liabilities, the Company is required, by law, to make judicial deposits to secure a potential adverse outcome of certain lawsuits. These court-ordered deposits are monetarily adjusted and reported as non-current assets until a judicial decision to draw the deposit occurs.
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Tax litigations
|
|
994
|
|
1,069
|
|
|
Civil litigations
|
|
97
|
|
60
|
|
|
Labor litigations
|
|
490
|
|
555
|
|
|
Environmental litigations
|
|
37
|
|
32
|
|
|
Brumadinho event
|
|
1,426
|
|
—
|
|
|
Total
|
|
3,044
|
|
1,716
|
|
In addition to the above-mentioned tax, civil, labor and environmental judicial deposits, the Company contracted US$2.5 billion (R$9.8 billion) in guarantees for its lawsuits, as an alternative to judicial deposits. For the Brumadinho event, the Company contracted guarantees in the amount of US$1.3 billion (R$5.6 billion) which were presented in court according agreement with Treasury Court of Minas Gerais and Public Prosecutor’s Office.
d) Contingencies related to Samarco accident
(i) Public civil claim filed by the Federal Government and others and Public civil claim filed by Federal Prosecution Office (“MPF”)
In 2016, the federal government, the Brazilian states of Espírito Santo and Minas Gerais and other governmental authorities have initiated a public civil lawsuit against Samarco and its shareholders, with an estimated value indicated by the plaintiffs of US$5.3 billion (R$20.2 billion). In the same year, MPF filed a public civil action against Samarco and its shareholders and presented several claims, including: (i) the adoption of measures for mitigating the social, economic and environmental impacts resulting from the dam failure and other emergency measures; (ii) the payment of compensation to the community; and (iii) payments for the collective moral damage. The action value indicated by MPF is US$40.5 billion (R$155 billion).
In June 2018, the parties entered into an agreement (“Term of Adjustment of Conduct”), which extinguishes (i) the public civil claim of US$5.3 billion (R$20.2 billion) filed by the Federal Government and others; and (ii) part of the claims included in the public civil claim of US$40.5 billion (R$155 billion) filed by MPF.
In September 2019, the Court approved the list of entities selected by the community to provide it with technical assistance to assure its participation on the debates regarding the measures to be adopted for mitigate the impacts, accordingly to the referred agreement.
(ii) United States class action lawsuits
In March 2017, holders of bonds issued by Samarco Mineração S.A., filed a class action suit in the Federal Court in New York against Samarco Mineração S.A., Vale S.A., BHP Billiton Limited, BHP Billiton PLC and BHP Brasil Ltda. under U.S. federal securities laws. The plaintiffs allege that Vale S.A. made false and misleading statements or not made disclosures concerning the risks and dangers of the operations of Samarco’s Fundão dam and the adequacy of related programs and procedures.
In June 2019, the Court issued a decision and order dismissing with prejudice the putative federal securities class action. Such decision is appealable and plaintiff’s legal deadline is still ongoing. Based on the assessment of the Company´s legal consultants, the defendants would have better arguments for a defense in case an appeal is filed by plaintiffs.
40
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
(iii) Criminal lawsuit
In 2016, the MPF brought a criminal lawsuit against Samarco and its shareholders, VogBr Recursos Hídricos e Geotecnia Ltda. and 22 individuals for the consequences related to Fundão dam failure. Currently, the progress of the criminal action is paralyzed due to the judgment of Habeas Corpus, with no decision.
On April 23, 2019, the Federal Court from the 1st Region (“TRF1”) issued an Habeas Corpus writ and granted it to dismiss the criminal charges of homicide and physical injuries committed by oblique intent held against one of the defendants on the criminal action. At the same opportunity, the Court extended the writ’s issuance to all other defendants on the case as the criminal information does not describe the crimes of homicide and physical injury, but the crime of flooding qualified by the result of death and physical injury as a consequence of the Fundão dam’s failure. Therefore, the Court dismissed the homicide and physical injuries charges held against all defendants.
After acknowledging the Court’s decisions, the Ponte Nova Court changed the process, withdrawing the case from the grand jury and putting it in the ordinary processing. In the same opportunity, the judge ruled to determine the parties to manifest themselves about this process alteration and, after the Federal Prosecution and the defenses presented their petitions, the criminal action currently awaits a new ruling. According to the due process of law, this new ruling will necessarily analyze the hypothesis of summary acquittal.
(iv) Tax proceedings
In 2018, the Office of the Attorney General for the National Treasury (PGFN) requested for a judicial order to secure the payment of alleged federal tax and social security debts regarding a Samarco. In May 2019, a favorable decision was issued dismissing the claim without prejudice, due to lack of procedural interest. The PGFN filed an appeal to the Local Court. The Company is waiting for the Court ruling.
e) Contingent Assets
(i) Compulsory loan
In 1999, the Company filed an ordinary suit in order to obtain the refund of the monetary adjustment and interests due over the compulsory loans paid in the period within 1977 and 1993. The Company has obtained a favorable unappealable decision, which partially recognized its right to be refunded about the difference of the monetary adjustment and interests due over the compulsory loans related to the third convertible bonds issued by Eletrobrás in the period within 1987 and 1993. The pleadings of the Company regarding the first and second convertible bonds (1978 to 1986) were refused by the Court. In 2015, the Company requested for the execution of the judgement in the amount of US$126 (R$524 million). A judicial decision determining the total amount to be refunded to the Company is still pending, then the related asset has not been accounted in Vale’s financial statements yet.
(ii) ICMS included in PIS and COFINS tax base
Vale had been litigating this issue of ICMS included in PIS and COFINS tax base in two judicial proceedings, related to taxable events after December 2001. In one of the proceedings, the company obtained a definitive favorable decision (res judicata). The current decision fixed on the second proceeding is also favorable to the company, but this proceeding did not reach the res judicata. Vale is waiting for the final decision on the leading case before the Supreme Court to measure the tax arising from both proceedings. The company did not record this asset in its financial statement.
41
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
(iii) Arbitral award related to Simandou
In 2010, Vale acquired a 51% stake in VBG - Vale BSGR Limited (“VBG”) (formerly BSG Resources (Guinea) Limited), which had iron ore concession rights in Simandou South (“Zogota”) and iron ore exploration permits over the areas known as Simandou Blocks 1 & 2 in Guinea. In 2014, the Republic of Guinea revoked those rights after a finding that BSGR had obtained them through bribery of Guinean government officials. The Republic of Guinea did not make any finding of any involvement or responsibility on Vale’s part.
Vale commenced arbitration proceedings against BSG Resources Limited (“BSGR”) in April 2014, and in April 2019, the arbitral tribunal in London ruled in Vale’s favor and ordered BSGR to pay to Vale the amount of US$1.2 billion plus costs and interest (with interest and costs, the award exceeds US$2.0 billion). The arbitral tribunal ruled that BSGR had defrauded Vale by inducing Vale to enter into the joint venture. On September 20, 2019, the English High Court ruled that Vale can proceed with enforcement of its US$2.0 billion arbitration award.
BSGR went into administration in March 2018, and Vale has commenced legal proceedings against BSGR before courts in London, England and in the United States District Court for the Southern District of New York to enforce the arbitral award against BSGR.
BSGR has also commenced proceedings in London challenging the enforcement of the award and has applied to the United States Bankruptcy Court to have its administration recognized in the United States. Vale intends to pursue the enforcement of the award and collection of the amounts due by all legally available means, but since there can be no assurance as to the timing and amount of any collections, the asset was not recognized in its financial statements.
(iv) Canadian Tax Litigation Matter
Vale Canada Limited (“VCL”) is in settlement discussions with the Department of Justice and Canada Revenue Agency regarding a tax litigation matter, related to the appropriate tax treatment of certain receipts received, and expenditures incurred, by VCL, in respect of some merge and acquisition transactions in 2006. If settlement discussions are successful, it will give rise to an income tax refund of approximately US$160 (CAD211 million), plus estimated interest refund, otherwise the court trial is set to December 2019. The Company has not recognized this asset in its financial statements.
23. Employee postretirement obligations
Reconciliation of net liabilities recognized in the statement of financial position
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Overfunded
pension plans
|
|
Underfunded
pension plans
|
|
Other benefits
|
|
Overfunded
pension plans
|
|
Underfunded
pension plans
|
|
Other benefits
|
|
|
Amount recognized in the statement of financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of actuarial liabilities
|
|
(3,138
|
)
|
(4,416
|
)
|
(1,444
|
)
|
(3,577
|
)
|
(3,929
|
)
|
(1,280
|
)
|
|
Fair value of assets
|
|
5,015
|
|
3,604
|
|
—
|
|
4,737
|
|
3,273
|
|
—
|
|
|
Effect of the asset ceiling
|
|
(1,877
|
)
|
—
|
|
—
|
|
(1,160
|
)
|
—
|
|
—
|
|
|
Liabilities
|
|
—
|
|
(812
|
)
|
(1,444
|
)
|
—
|
|
(656
|
)
|
(1,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
—
|
|
(8
|
)
|
(73
|
)
|
—
|
|
(20
|
)
|
(52
|
)
|
|
Non-current liabilities
|
|
—
|
|
(804
|
)
|
(1,372
|
)
|
—
|
|
(636
|
)
|
(1,228
|
)
|
|
Liabilities
|
|
—
|
|
(812
|
)
|
(1,445
|
)
|
—
|
|
(656
|
)
|
(1,280
|
)
|
42
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
24. Stockholders’ equity
a) Share capital
As at September 30, 2019, the share capital was US$61,614 corresponding to 5,284,474,782 shares issued and fully paid without par value.
|
|
|
September 30, 2019
|
|
|
Stockholders
|
|
ON
|
|
PNE
|
|
Total
|
|
|
Litel Participações S.A. and Litela Participações S.A.
|
|
980,605,889
|
|
—
|
|
980,605,889
|
|
|
BNDES Participações S.A.
|
|
323,496,276
|
|
—
|
|
323,496,276
|
|
|
Bradespar S.A.
|
|
293,907,266
|
|
—
|
|
293,907,266
|
|
|
Mitsui & Co., Ltd
|
|
286,347,055
|
|
—
|
|
286,347,055
|
|
|
Foreign investors - ADRs
|
|
1,162,282,011
|
|
—
|
|
1,162,282,011
|
|
|
Foreign institutional investors in local market
|
|
1,174,433,557
|
|
—
|
|
1,174,433,557
|
|
|
FMP - FGTS
|
|
50,044,298
|
|
—
|
|
50,044,298
|
|
|
PIBB - Fund
|
|
2,725,069
|
|
—
|
|
2,725,069
|
|
|
Institutional investors
|
|
507,888,198
|
|
—
|
|
507,888,198
|
|
|
Retail investors in Brazil
|
|
346,552,838
|
|
—
|
|
346,552,838
|
|
|
Brazilian Government (Golden Share)
|
|
—
|
|
12
|
|
12
|
|
|
Shares outstanding
|
|
5,128,282,457
|
|
12
|
|
5,128,282,469
|
|
|
Shares in treasury
|
|
156,192,313
|
|
—
|
|
156,192,313
|
|
|
Total issued shares
|
|
5,284,474,770
|
|
12
|
|
5,284,474,782
|
|
|
|
|
|
|
|
|
|
|
|
Share capital per class of shares (in millions)
|
|
61,614
|
|
—
|
|
61,614
|
|
|
|
|
|
|
|
|
|
|
|
Total authorized shares
|
|
7,000,000,000
|
|
—
|
|
7,000,000,000
|
|
b) Shares in treasury
The Company used 2,024,059 of its treasury shares to pay the Matching program of its eligible executives, except for those whose variable remuneration was suspended as described in note 3, in the amount of US$22. It was recognized as “assignment and transfer of shares”.
43
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
25. Related parties
The Company’s related parties are subsidiaries, joint ventures, associates, stockholders and its related entities and key management personnel of the Company. Transactions between the parent company and its subsidiaries are eliminated on consolidation and are not disclosed in this note.
Related party transactions were made by the Company on terms equivalent to those that prevail in arm´s-length transactions, with respect to price and market conditions that are no less favorable to the Company than those arranged with third parties.
Purchases, accounts receivable and other assets, and accounts payable and other liabilities relate largely to amounts charged by joint ventures and associates related to the pelletizing plants operational lease and railway transportation services.
Information about related party transactions and effects on the financial statements is set out below:
a) Transactions with related parties
|
|
|
Three-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
Joint
Ventures
|
|
Associates
|
|
Major
stockholders
|
|
Total
|
|
Joint
Ventures
|
|
Associates
|
|
Major
stockholders
|
|
Total
|
|
|
Net operating revenue
|
|
124
|
|
77
|
|
52
|
|
253
|
|
83
|
|
74
|
|
61
|
|
218
|
|
|
Cost and operating expenses
|
|
(464
|
)
|
(12
|
)
|
—
|
|
(476
|
)
|
(602
|
)
|
(6
|
)
|
—
|
|
(608
|
)
|
|
Financial result
|
|
54
|
|
(1
|
)
|
(35
|
)
|
18
|
|
22
|
|
—
|
|
(39
|
)
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-month period ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
Joint
Ventures
|
|
Associates
|
|
Major
stockholders
|
|
Total
|
|
Joint
Ventures
|
|
Associates
|
|
Major
stockholders
|
|
Total
|
|
|
Net operating revenue
|
|
284
|
|
213
|
|
142
|
|
639
|
|
259
|
|
229
|
|
162
|
|
650
|
|
|
Cost and operating expenses
|
|
(1,360
|
)
|
(27
|
)
|
—
|
|
(1,387
|
)
|
(1,610
|
)
|
(31
|
)
|
—
|
|
(1,641
|
)
|
|
Financial result
|
|
44
|
|
(1
|
)
|
(66
|
)
|
(23
|
)
|
124
|
|
—
|
|
(188
|
)
|
(64
|
)
|
Net operating revenue relates to sale of iron ore to the steelmakers and right to use capacity on railroads. Cost and operating expenses mostly relates to the leases of the pelletizing plants.
b) Outstanding balances with related parties
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Joint
Ventures
|
|
Associates
|
|
Major
stockholders (i)
|
|
Total
|
|
Joint
Ventures
|
|
Associates
|
|
Major
stockholders (i)
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
—
|
|
—
|
|
1,173
|
|
1,173
|
|
—
|
|
—
|
|
1,256
|
|
1,256
|
|
|
Accounts receivable
|
|
97
|
|
18
|
|
5
|
|
120
|
|
110
|
|
42
|
|
3
|
|
155
|
|
|
Dividends receivable
|
|
94
|
|
9
|
|
—
|
|
103
|
|
132
|
|
—
|
|
—
|
|
132
|
|
|
Loans
|
|
1,888
|
|
—
|
|
—
|
|
1,888
|
|
1,976
|
|
—
|
|
—
|
|
1,976
|
|
|
Derivatives financial instruments
|
|
—
|
|
—
|
|
322
|
|
322
|
|
—
|
|
—
|
|
297
|
|
297
|
|
|
Other assets
|
|
73
|
|
—
|
|
—
|
|
73
|
|
25
|
|
—
|
|
—
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier and contractors
|
|
626
|
|
29
|
|
7
|
|
662
|
|
221
|
|
21
|
|
24
|
|
266
|
|
|
Loans
|
|
—
|
|
1,369
|
|
2,203
|
|
3,572
|
|
—
|
|
1,325
|
|
2,650
|
|
3,975
|
|
|
Derivatives financial instruments
|
|
—
|
|
—
|
|
101
|
|
101
|
|
—
|
|
—
|
|
112
|
|
112
|
|
|
Other liabilities
|
|
340
|
|
30
|
|
—
|
|
370
|
|
769
|
|
—
|
|
—
|
|
769
|
|
(i) Refers to regular financial instruments with large financial institutions of which the stockholders are part of the controlling “shareholders’ agreement”.
Loans
In March 2018, Nacala BV, a joint venture between Vale and Mitsui on the Nacala’s logistic corridor, closed the project financing and repaid a portion of the shareholders loans from Vale, in the amount of US$2,572. The outstanding receivable of US1,888 carries interest at 7.44% p.a.
The loan from associates mainly relates to the loan from Pangea Emirates Ltd, part of the group of shareholders which owns 15% interest on Vale Moçambique which carries interest at 6.54% p.a.
44
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
26. Additional information about derivatives financial instruments
The risk of the derivatives portfolio is measured using the delta-Normal parametric approach and considers that the future distribution of the risk factors and its correlations tends to present the same statistic properties verified in the historical data. The value at risk estimate considers a 95% confidence level for a one-business day time horizon.
The following tables detail the derivatives positions for Vale and its controlled companies as of September 30, 2019, with the following information: notional amount, fair value including credit risk, gains or losses in the period, value at risk and the fair value breakdown by year of maturity.
a) Foreign exchange and interest rates derivative positions
(i) Protection programs for the R$ denominated debt instruments
To reduce cash flow volatility, swap transactions were implemented to convert into US$ the cash flows from certain debt instruments denominated in R$ with interest rates linked mainly to CDI, TJLP and IPCA. In those swaps, Vale pays fixed or floating rates in US$ and receives payments in R$ linked to the interest rates of the protected debt instruments.
The swap transactions were negotiated over-the-counter and the protected items are the cash flows from debt instruments linked to R$. These programs transform into US$ the obligations linked to R$ to achieve a currency offset in the Company’s cash flows, by matching its receivables - mainly linked to US$ - with its payables.
|
|
|
Notional
|
|
|
|
|
|
Fair value
|
|
Financial
Settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December
31, 2018
|
|
Index
|
|
Average
rate
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019
|
|
2020
|
|
2021+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDI vs. US$ fixed rate swap
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
(46
|
)
|
(19
|
)
|
8
|
|
1
|
|
(33
|
)
|
(30
|
)
|
|
Receivable
|
|
R$
|
2,160
|
|
R$
|
1,581
|
|
CDI
|
|
100.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
US$
|
569
|
|
US$
|
456
|
|
Fix
|
|
3.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TJLP vs. US$ fixed rate swap
|
|
|
|
|
|
|
|
|
|
(174
|
)
|
(370
|
)
|
(239
|
)
|
10
|
|
(78
|
)
|
(16
|
)
|
(80
|
)
|
|
Receivable
|
|
R$
|
2,808
|
|
R$
|
2,303
|
|
TJLP +
|
|
1.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
US$
|
866
|
|
US$
|
994
|
|
Fix
|
|
2.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TJLP vs. US$ floating rate swap
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
(56
|
)
|
(3
|
)
|
1
|
|
(55
|
)
|
—
|
|
—
|
|
|
Receivable
|
|
R$
|
164
|
|
R$
|
181
|
|
TJLP +
|
|
0.80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
US$
|
97
|
|
US$
|
107
|
|
Libor +
|
|
-1.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$ fixed rate vs. US$ fixed rate swap
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
(8
|
)
|
11
|
|
8
|
|
(3
|
)
|
6
|
|
(49
|
)
|
|
Receivable
|
|
R$
|
2,162
|
|
R$
|
1,078
|
|
Fix
|
|
6.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
US$
|
605
|
|
US$
|
351
|
|
Fix
|
|
0.71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPCA vs. US$ fixed rate swap
|
|
|
|
|
|
|
|
|
|
7
|
|
(80
|
)
|
(26
|
)
|
12
|
|
2
|
|
1
|
|
4
|
|
|
Receivable
|
|
R$
|
2,875
|
|
R$
|
1,315
|
|
IPCA +
|
|
5.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
US$
|
772
|
|
US$
|
434
|
|
Fix
|
|
4.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPCA vs. CDI swap
|
|
|
|
|
|
|
|
|
|
98
|
|
89
|
|
6
|
|
2
|
|
—
|
|
54
|
|
44
|
|
|
Receivable
|
|
R$
|
1,625
|
|
R$
|
1,350
|
|
IPCA +
|
|
6.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
R$
|
1,350
|
|
R$
|
1,350
|
|
CDI
|
|
98.58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(ii) Protection program for EUR denominated debt instruments
To reduce the cash flow volatility, swap transactions were implemented to convert into US$ the cash flows from certain debt instruments issued in Euros by Vale. In those swaps, Vale receives fixed rates in EUR and pays fixed rates in US$.
The swap transactions were negotiated over-the-counter and the protected items are the cash flows from debt instruments linked to EUR. The financial settlement inflows/outflows are offset by the protected items’ losses/gains due to EUR/US$ exchange rate.
45
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
|
|
Notional
|
|
|
|
|
|
Fair value
|
|
Financial
Settlement
Inflows
(Outflows)
|
|
Value at
Risk
|
|
Fair value by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December
31, 2018
|
|
Index
|
|
Average
rate
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019
|
|
2020
|
|
2021+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUR fixed rate vs. US$ fixed rate swap
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
(1
|
)
|
(5
|
)
|
5
|
|
—
|
|
(6
|
)
|
(43
|
)
|
|
Receivable
|
|
€
|
500
|
|
€
|
500
|
|
Fix
|
|
3.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
|
|
US$
|
613
|
|
US$
|
613
|
|
Fix
|
|
4.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(iii) Protection for treasury volatility related to tender offer transaction
To reduce the volatility of the premium to be paid to investors for the tender offer transaction issued on September 2019, treasury lock transactions were implemented and already settled.
|
|
|
Notional
|
|
|
|
Fair value
|
|
Financial
Settlement Inflows
(Outflows)
|
|
Fair value by
year
|
|
|
Flow
|
|
September 30,
2019
|
|
December 31, 2018
|
|
Bought /
Sold
|
|
September 30,
2019
|
|
December 31, 2018
|
|
September 30,
2019
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards
|
|
—
|
|
—
|
|
B
|
|
—
|
|
—
|
|
16
|
|
—
|
|
b) Commodities derivative positions
(i) Bunker Oil purchase cash flows protection program
To reduce the impact of bunker oil price fluctuation on maritime freight hiring/supply and, consequently, reducing the Company’s cash flow volatility, bunker oil hedging transactions were implemented, through options contracts on bunker oil and on Brent Crude Oil for different portions of the exposure.
The derivative transactions were negotiated over-the-counter and the protected item is part of the Vale’s costs linked to the price of fuel oil used on ships. The financial settlement inflows/outflows are offset by the protected items’ losses/gains due to fuel oil price changes.
Bunker Oil Contracts
|
|
|
Notional (ton)
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Fair value by
year
|
|
|
Flow
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Bought / Sold
|
|
September 30,
2019
|
|
December 31,
2018
|
|
September 30,
2019
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options
|
|
—
|
|
2,100,000
|
|
B
|
|
—
|
|
1
|
|
3
|
|
—
|
|
|
Put options
|
|
—
|
|
2,100,000
|
|
S
|
|
—
|
|
(29
|
)
|
—
|
|
—
|
|
|
Total
|
|
|
|
|
|
|
|
—
|
|
(28
|
)
|
3
|
|
—
|
|
As at September 30, 2019, includes US$3 of transactions in which the financial settlement occurs subsequently of the closing month.
Brent Crude Oil Contracts
|
|
|
Notional (bbl.)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value
by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December 31,
2018
|
|
Bought / Sold
|
|
Average strike
(US$/bbl.)
|
|
September
30, 2019
|
|
December 31,
2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options
|
|
6,286,500
|
|
—
|
|
B
|
|
79
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
|
Put options
|
|
6,286,500
|
|
—
|
|
S
|
|
43
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
46
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
(ii) Protection programs for base metals raw materials and products
Operational Hedging Programs
In the operational hedging program for nickel sales at fixed prices, derivatives transactions were implemented, usually through the purchase of nickel forwards, to convert into floating prices the contracts with clients that required a fixed price. During this quarter, the volumes were substantially unwound in accordance with our current strategy of reducing the cash flow exposure to nickel price fluctuations.
In the operational protection program for the purchase of raw materials and products, derivatives transactions were implemented, usually through the sale of nickel and copper forward or futures, in order to reduce the mismatch between the pricing period of purchases (concentrate, cathode, sinter, scrap and others) and the pricing period of the final product sales to the clients.
|
|
|
Notional (ton)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at
Risk
|
|
Fair value
by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December
31, 2018
|
|
Bought /
Sold
|
|
Average strike
(US$/ton)
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price sales protection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel forwards
|
|
47
|
|
7,244
|
|
S
|
|
15,935
|
|
—
|
|
(10
|
)
|
49
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw material purchase protection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel forwards
|
|
94
|
|
120
|
|
S
|
|
13,432
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
|
Copper forwards
|
|
30
|
|
81
|
|
S
|
|
5,964
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
(10
|
)
|
49
|
|
—
|
|
(1
|
)
|
Nickel Revenue Hedging Program
To reduce the volatility of its future cash flows arising from changes in nickel prices, the company implemented a Nickel Revenue Hedging Program. Under this program, hedge operations were executed using option contracts to protect a portion of the company highly probable forecast sales at floating prices, thus establishing a cushion to guarantee prices above our Nickel Average Unit Cash Cost and investments for the hedged volumes. A hedge accounting treatment is given to this program.
The derivative transactions under the program are negotiated over-the-counter and the financial settlement inflows/outflows are offset by the protected items’ losses/gains due to nickel prices changes.
|
|
|
Notional (ton)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December 31,
2018
|
|
Bought /
Sold
|
|
Average
strike
(US$/ton)
|
|
September
30, 2019
|
|
December 31,
2018
|
|
September 30,
2019
|
|
September
30, 2019
|
|
2019
|
|
2020+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options
|
|
87,854
|
|
—
|
|
S
|
|
18,681
|
|
(83
|
)
|
—
|
|
(2
|
)
|
15
|
|
(6
|
)
|
(77
|
)
|
|
Put options
|
|
87,854
|
|
—
|
|
B
|
|
15,677
|
|
81
|
|
—
|
|
—
|
|
12
|
|
3
|
|
78
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
—
|
|
(2
|
)
|
27
|
|
(3
|
)
|
1
|
|
47
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
c) Freight derivative positions
To reduce the impact of maritime freight price volatility on the Company’s cash flow, freight hedging transactions were implemented, through Forward Freight Agreements (FFAs). The protected item is part of Vale’s costs linked to maritime freight spot prices. The financial settlement inflows/outflows of the FFAs are offset by the protected items’ losses/gains due to freight prices changes.
The FFAs are contracts traded over the counter and can be cleared through a Clearing House, in this case subject to margin requirements.
|
|
|
Notional (days)
|
|
|
|
|
|
Fair value
|
|
Financial
Settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value
by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December 31,
2018
|
|
Bought /
Sold
|
|
Average
strike
(US$/day)
|
|
September
30, 2019
|
|
December 31,
2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight forwards
|
|
535
|
|
480
|
|
B
|
|
18,086
|
|
1
|
|
1
|
|
4
|
|
1
|
|
1
|
|
d) Wheaton Precious Metals Corp. warrants
The Company owns warrants issued by Wheaton Precious Metals Corp. (WPM), a Canadian company with stocks negotiated in Toronto Stock Exchange and New York Stock Exchange. Such warrants have payoff similar to that of an American call option and were received as part of the payment regarding the sale of part of gold payable flows produced as a sub product from Salobo copper mine and some nickel mines in Sudbury.
|
|
|
Notional (quantity of warranties)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value
by year
|
|
|
Flow
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Bought /
Sold
|
|
Average
strike
(US$/share)
|
|
September
30, 2019
|
|
December 31,
2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options
|
|
10,000,000
|
|
10,000,000
|
|
B
|
|
44
|
|
16
|
|
8
|
|
—
|
|
2
|
|
16
|
|
e) Debentures convertible into shares of Valor da Logística Integrada (“VLI”)
The Company has debentures which lenders have the option to convert the outstanding debt into a specified quantity of VLI’s shares, owned by the Company. This option may be fully, or part exercised, upon payment to the Company of the strike price, considering the terms, conditions and other limitations existing in the agreement, at any time and at the discretion of the creditor, as of December 2017 until the maturity date of the debentures, December 2027.
|
|
|
Notional (quantity)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value
by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December
31, 2018
|
|
Bought / Sold
|
|
Average strike
(R$/share)
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion options
|
|
140,239
|
|
140,239
|
|
S
|
|
7,690
|
|
(51
|
)
|
(59
|
)
|
—
|
|
3
|
|
(51
|
)
|
48
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
f) Options related to Minerações Brasileiras Reunidas S.A. (“MBR”) shares
In 2015, the Company entered into an agreement to sell a stake of its interest in MBR and under the terms agreed, the Company has a call option in place giving right to buy back this non-controlling interest at any time until 2025 for a consideration calculated based on terms set under the agreement. Moreover, under certain restrict and contingent conditions, which are beyond both acquirer’s and seller’s control, the contract gives the acquirer the right to sell back its stake to the Company.
|
|
|
Notional (quantity, in millions)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value by
year
|
|
|
Flow
|
|
September
30, 2019
|
|
December 31,
2018
|
|
Bought / Sold
|
|
Average
strike
(R$/share)
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
2,139
|
|
2,139
|
|
B/S
|
|
1.5
|
|
264
|
|
279
|
|
—
|
|
13
|
|
264
|
|
g) Option related to SPCs Casa dos Ventos
The Company acquired in January 2019 a call option related to shares of the special purpose companies Ventos de São Bento Energias Renováveis, Ventos São Galvão Energias Renováveis and Ventos de Santo Eloy Energias Renováveis (SPCs Casa dos Ventos), which are part of the wind farm of Folha Larga Sul project, in Campo Formoso, Bahia, with commercial operation scheduled for the first half of 2020. This option was acquired in the context of the Company’s signing of electric power purchase and sale agreements with Casa dos Ventos, supplied by this wind farm.
|
|
|
Notional (quantity)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at
Risk
|
|
Fair
value by
year
|
|
|
Flow
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Bought /
Sold
|
|
Average
strike
(R$/share)
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call option
|
|
137,751,623
|
|
—
|
|
B
|
|
2.77
|
|
12
|
|
—
|
|
—
|
|
1
|
|
12
|
|
h) Embedded derivatives in contracts
In August 2014 the Company sold part of its stake in Valor da Logística Integrada (“VLI”) to an investment fund managed by Brookfield Asset Management (“Brookfield”). The sales contract includes a clause that establishes, under certain conditions, a minimum return guarantee on Brookfield’s investment until August 2020. This clause is considered an embedded derivative, with payoff equivalent to that of a put option.
|
|
|
Notional (quantity)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at
Risk
|
|
Fair
value by
year
|
|
|
Flow
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Bought /
Sold
|
|
Average
strike
(R$/share)
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put option
|
|
1,105,070,863
|
|
1,105,070,863
|
|
S
|
|
3.88
|
|
(49
|
)
|
(103
|
)
|
—
|
|
8
|
|
(49
|
)
|
The Company has some nickel concentrate and raw materials purchase agreements in which there are provisions based on nickel and copper future prices behavior. These provisions are considered as embedded derivatives.
49
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
|
|
Notional (ton)
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value by
year
|
|
|
Flow
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Bought /
Sold
|
|
Average
strike
(US$/ton)
|
|
September 30,
2019
|
|
December 31,
2018
|
|
September 30,
2019
|
|
September 30,
2019
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel forwards
|
|
1,220
|
|
3,763
|
|
S
|
|
15,709
|
|
(3
|
)
|
2
|
|
—
|
|
0.7
|
|
(3
|
)
|
|
Copper forwards
|
|
945
|
|
2,035
|
|
S
|
|
5,801
|
|
—
|
|
—
|
|
—
|
|
0.1
|
|
—
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
2
|
|
—
|
|
0.8
|
|
(3
|
)
|
The Company has also a natural gas purchase agreement in which there´s a clause that defines that a premium can be charged if the Company’s pellet sales prices trade above a pre-defined level. This clause is considered an embedded derivative.
|
|
|
Notional (volume/month)
|
|
|
|
|
|
|
|
Fair value
|
|
Financial
settlement
Inflows
(Outflows)
|
|
Value at Risk
|
|
Fair value by year
|
|
|
Flow
|
|
September
30, 2019
|
|
December
31, 2018
|
|
Bought /
Sold
|
|
Average
strike
(US$/ton)
|
|
September
30, 2019
|
|
December
31, 2018
|
|
September
30, 2019
|
|
September
30, 2019
|
|
2019
|
|
2020+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call options
|
|
746,667
|
|
746,667
|
|
S
|
|
233
|
|
(2
|
)
|
(1
|
)
|
—
|
|
1
|
|
—
|
|
(2
|
)
|
50
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
i) Sensitivity analysis of derivative financial instruments
The following tables present the potential value of the instruments given hypothetical stress scenarios for the main market risk factors that impact the derivatives positions. The scenarios were defined as follows:
· Probable: the probable scenario was defined as the fair value of the derivative instruments as at September 30, 2019
· Scenario I: fair value estimated considering a 25% deterioration in the associated risk variables
· Scenario II: fair value estimated considering a 50% deterioration in the associated risk variables
|
Instrument
|
|
Instrument’s main risk events
|
|
Probable
|
|
Scenario I
|
|
Scenario II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDI vs. US$ fixed rate swap
|
|
R$depreciation
|
|
(62
|
)
|
(207
|
)
|
(353
|
)
|
|
|
|
US$interest rate inside Brazil decrease
|
|
(62
|
)
|
(64
|
)
|
(68
|
)
|
|
|
|
Brazilian interest rate increase
|
|
(62
|
)
|
(61
|
)
|
(61
|
)
|
|
Protected item: R$ denominated debt
|
|
R$depreciation
|
|
n.a.
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TJLP vs. US$ fixed rate swap
|
|
R$depreciation
|
|
(174
|
)
|
(345
|
)
|
(517
|
)
|
|
|
|
US$interest rate inside Brazil decrease
|
|
(174
|
)
|
(183
|
)
|
(193
|
)
|
|
|
|
Brazilian interest rate increase
|
|
(174
|
)
|
(195
|
)
|
(214
|
)
|
|
|
|
TJLP interest rate decrease
|
|
(174
|
)
|
(195
|
)
|
(217
|
)
|
|
Protected item: R$ denominated debt
|
|
R$depreciation
|
|
n.a.
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TJLP vs. US$ floating rate swap
|
|
R$depreciation
|
|
(55
|
)
|
(79
|
)
|
(104
|
)
|
|
|
|
US$interest rate inside Brazil decrease
|
|
(55
|
)
|
(55
|
)
|
(55
|
)
|
|
|
|
Brazilian interest rate increase
|
|
(55
|
)
|
(55
|
)
|
(55
|
)
|
|
|
|
TJLP interest rate decrease
|
|
(55
|
)
|
(55
|
)
|
(55
|
)
|
|
Protected item: R$ denominated debt
|
|
R$depreciation
|
|
n.a.
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$ fixed rate vs. US$ fixed rate swap
|
|
R$depreciation
|
|
(46
|
)
|
(194
|
)
|
(341
|
)
|
|
|
|
US$interest rate inside Brazil decrease
|
|
(46
|
)
|
(52
|
)
|
(57
|
)
|
|
|
|
Brazilian interest rate increase
|
|
(46
|
)
|
(56
|
)
|
(65
|
)
|
|
Protected item: R$ denominated debt
|
|
R$depreciation
|
|
n.a.
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPCA vs. US$ fixed rate swap
|
|
R$depreciation
|
|
7
|
|
(197
|
)
|
(401
|
)
|
|
|
|
US$interest rate inside Brazil decrease
|
|
7
|
|
(7
|
)
|
(22
|
)
|
|
|
|
Brazilian interest rate increase
|
|
7
|
|
(29
|
)
|
(63
|
)
|
|
|
|
IPCA index decrease
|
|
7
|
|
(16
|
)
|
(38
|
)
|
|
Protected item: R$ denominated debt
|
|
R$depreciation
|
|
n.a.
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPCA vs. CDI swap
|
|
Brazilian interest rate increase
|
|
98
|
|
89
|
|
80
|
|
|
|
|
IPCA index decrease
|
|
98
|
|
91
|
|
85
|
|
|
Protected item: R$ denominated debt linked to IPCA
|
|
IPCA index decrease
|
|
n.a.
|
|
(91
|
)
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
EUR fixed rate vs. US$ fixed rate swap
|
|
EUR depreciation
|
|
(49
|
)
|
(208
|
)
|
(367
|
)
|
|
|
|
Euribor increase
|
|
(49
|
)
|
(49
|
)
|
(48
|
)
|
|
|
|
US$Libor decrease
|
|
(49
|
)
|
(57
|
)
|
(66
|
)
|
|
Protected item: EUR denominated debt
|
|
EUR depreciation
|
|
n.a.
|
|
208
|
|
367
|
|
51
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
Instrument
|
|
Instrument’s main risk events
|
|
Probable
|
|
Scenario I
|
|
Scenario II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bunker Oil protection
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Bunker Oil price decrease
|
|
—
|
|
(11
|
)
|
(87
|
)
|
|
Protected item: Part of costs linked to bunker oil prices
|
|
Bunker Oil price decrease
|
|
n.a.
|
|
11
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maritime Freight protection
|
|
|
|
|
|
|
|
|
|
|
Forwards
|
|
Freight price decrease
|
|
1
|
|
(1
|
)
|
(3
|
)
|
|
Protected item: Part of costs linked to maritime freight prices
|
|
Freight price decrease
|
|
n.a.
|
|
1
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel Revenue Hedging Program
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Nickel price increase
|
|
(2
|
)
|
(272
|
)
|
(606
|
)
|
|
Protected item: Part of nickel future revenues
|
|
Nickel price increase
|
|
n.a.
|
|
272
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase protection program
|
|
|
|
|
|
|
|
|
|
|
Nickel forwards
|
|
Nickel price increase
|
|
—
|
|
(1
|
)
|
(1
|
)
|
|
Protected item: Part of costs linked to nickel prices
|
|
Nickel price increase
|
|
n.a.
|
|
1
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper forwards
|
|
Copper price increase
|
|
—
|
|
—
|
|
—
|
|
|
Protected item: Part of costs linked to copper prices
|
|
Copper price increase
|
|
n.a.
|
|
—
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wheaton Precious Metals Corp. warrants
|
|
WPM stock price decrease
|
|
16
|
|
4
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion options - VLI
|
|
VLI stock value increase
|
|
(51
|
)
|
(84
|
)
|
(132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options - MBR
|
|
Iron ore price decrease
|
|
264
|
|
235
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option - SPCs Casa dos Ventos
|
|
SPCs Casa dos Ventos stock value decrease
|
|
12
|
|
4
|
|
—
|
|
|
Instrument
|
|
Main risks
|
|
Probable
|
|
Scenario I
|
|
Scenario II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivatives - Raw material purchase (nickel)
|
|
Nickel price increase
|
|
(2
|
)
|
(8
|
)
|
(5
|
)
|
|
Embedded derivatives - Raw material purchase (copper)
|
|
Copper price increase
|
|
—
|
|
(1
|
)
|
(3
|
)
|
|
Embedded derivatives - Gas purchase
|
|
Pellet price increase
|
|
(1
|
)
|
(4
|
)
|
(8
|
)
|
|
Embedded derivatives - Guaranteed minimum return (VLI)
|
|
VLI stock value decrease
|
|
(50
|
)
|
(188
|
)
|
(434
|
)
|
52
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
j) Financial counterparties’ ratings
The transactions of derivative instruments, cash and cash equivalents as well as short-term investments are held with financial institutions whose exposure limits are periodically reviewed and approved by the delegated authority. The financial institutions credit risk is performed through a methodology that considers, among other information, ratings provided by international rating agencies.
The table below presents the ratings published by agencies Moody’s and S&P regarding the main financial institutions that we hire derivative instruments, cash and cash equivalents transactions.
|
Long term ratings by counterparty
|
|
Moody’s
|
|
S&P
|
|
|
Agricultural Bank of China
|
|
A1
|
|
A
|
|
|
ANZ Australia and New Zealand Banking
|
|
Aa3
|
|
AA-
|
|
|
Banco ABC
|
|
Ba3
|
|
BB-
|
|
|
Banco Bradesco
|
|
Ba3
|
|
BB-
|
|
|
Banco do Brasil
|
|
Ba3
|
|
BB-
|
|
|
Banco do Nordeste
|
|
Ba3
|
|
BB-
|
|
|
Banco Safra
|
|
Ba3
|
|
BB-
|
|
|
Banco Santander
|
|
A2
|
|
A
|
|
|
Banco Votorantim
|
|
Ba3
|
|
BB-
|
|
|
Bank of America
|
|
A2
|
|
A-
|
|
|
Bank of China
|
|
A1
|
|
A
|
|
|
Bank of Mandiri
|
|
Baa2
|
|
BBB-
|
|
|
Bank of Montreal
|
|
Aa2
|
|
A+
|
|
|
Bank of Nova Scotia
|
|
A2
|
|
A+
|
|
|
Bank of Shanghai
|
|
Baa2
|
|
—
|
|
|
Bank of Tokyo Mitsubishi UFJ
|
|
A1
|
|
A-
|
|
|
Bank Rakyat
|
|
Baa2
|
|
BBB-
|
|
|
Banpará
|
|
—
|
|
BB-
|
|
|
Barclays
|
|
Baa3
|
|
BBB
|
|
|
BBVA Banco Bilbao Vizcaya Argentaria
|
|
A3
|
|
A-
|
|
|
BNP Paribas
|
|
Aa3
|
|
A+
|
|
|
BTG Pactual
|
|
Ba3
|
|
BB-
|
|
|
Caixa Econômica Federal
|
|
Ba3
|
|
BB-
|
|
|
Calyon
|
|
A1
|
|
A+
|
|
|
Canadian Imperial Bank
|
|
Aa2
|
|
A+
|
|
|
China Construction Bank
|
|
A1
|
|
A
|
|
|
CIMB Bank
|
|
Baa1
|
|
A-
|
|
|
Citigroup
|
|
A3
|
|
BBB+
|
|
|
Long term ratings by counterparty
|
|
Moody’s
|
|
S&P
|
|
|
Credit Suisse
|
|
Baa2
|
|
BBB+
|
|
|
Deutsche Bank
|
|
A3
|
|
BBB+
|
|
|
Goldman Sachs
|
|
A3
|
|
BBB+
|
|
|
HSBC
|
|
A2
|
|
A
|
|
|
Industrial and Commercial Bank of China
|
|
A1
|
|
A
|
|
|
Intesa Sanpaolo Spa
|
|
Baa1
|
|
BBB
|
|
|
Itaú Unibanco
|
|
Ba3
|
|
BB-
|
|
|
JP Morgan Chase & Co
|
|
A2
|
|
A-
|
|
|
Macquarie Group Ltd
|
|
A3
|
|
BBB
|
|
|
Mega Int. Commercial Bank
|
|
A1
|
|
A
|
|
|
Millenium BIM
|
|
A1
|
|
A-
|
|
|
Mitsui & Co
|
|
A1
|
|
A-
|
|
|
Mizuho Financial
|
|
A1
|
|
A-
|
|
|
Morgan Stanley
|
|
A3
|
|
BBB+
|
|
|
Muscat Bank
|
|
Ba2
|
|
BB
|
|
|
National Australia Bank
|
|
Aa3
|
|
AA-
|
|
|
National Bank of Canada
|
|
Aa3
|
|
A
|
|
|
National Bank of Oman
|
|
Ba2
|
|
—
|
|
|
Natixis
|
|
A1
|
|
A+
|
|
|
Rabobank
|
|
Aa3
|
|
A+
|
|
|
Royal Bank of Canada
|
|
Aa2
|
|
AA-
|
|
|
Societe Generale
|
|
A1
|
|
A
|
|
|
Standard Bank Group
|
|
Ba1
|
|
—
|
|
|
Standard Chartered
|
|
A2
|
|
BBB+
|
|
|
Sumitomo Mitsui Financial
|
|
A1
|
|
A-
|
|
|
Toronto Dominion Bank
|
|
Aa3
|
|
AA-
|
|
|
UBS
|
|
Aa3
|
|
A-
|
|
|
Unicredit
|
|
Baa1
|
|
BBB
|
|
53
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
k) Market curves
The curves used on the pricing of derivatives instruments were developed based on data from B3, Central Bank of Brazil, London Metals Exchange and Bloomberg.
(i) Products
Nickel
|
Maturity
|
|
Price (US$/ton)
|
|
Maturity
|
|
Price (US$/ton)
|
|
Maturity
|
|
Price (US$/ton)
|
|
|
SPOT
|
|
17,219
|
|
MAR20
|
|
16,981
|
|
SEP20
|
|
16,952
|
|
|
OCT19
|
|
17,155
|
|
APR20
|
|
16,969
|
|
SEP21
|
|
17,008
|
|
|
NOV19
|
|
17,091
|
|
MAY20
|
|
16,966
|
|
SEP22
|
|
17,080
|
|
|
DEC19
|
|
17,054
|
|
JUN20
|
|
16,961
|
|
SEP23
|
|
17,229
|
|
|
JAN20
|
|
17,029
|
|
JUL20
|
|
16,956
|
|
|
|
|
|
|
FEB20
|
|
17,009
|
|
AUG20
|
|
16,953
|
|
|
|
|
|
Copper
|
Maturity
|
|
Price (US$/lb.)
|
|
Maturity
|
|
Price (US$/lb.)
|
|
Maturity
|
|
Price (US$/lb.)
|
|
|
SPOT
|
|
2.58
|
|
MAR20
|
|
2.60
|
|
SEP20
|
|
2.61
|
|
|
OCT19
|
|
2.59
|
|
APR20
|
|
2.60
|
|
SEP21
|
|
2.63
|
|
|
NOV19
|
|
2.59
|
|
MAY20
|
|
2.60
|
|
SEP22
|
|
2.66
|
|
|
DEC19
|
|
2.60
|
|
JUN20
|
|
2.61
|
|
SEP23
|
|
2.68
|
|
|
JAN20
|
|
2.60
|
|
JUL20
|
|
2.61
|
|
|
|
|
|
|
FEB20
|
|
2.60
|
|
AUG20
|
|
2.61
|
|
|
|
|
|
Bunker Oil
|
Maturity
|
|
Price (US$/ton)
|
|
Maturity
|
|
Price (US$/ton)
|
|
Maturity
|
|
Price (US$/ton)
|
|
|
SPOT
|
|
351
|
|
MAR20
|
|
224
|
|
SEP20
|
|
240
|
|
|
OCT19
|
|
317
|
|
APR20
|
|
226
|
|
SEP21
|
|
202
|
|
|
NOV19
|
|
256
|
|
MAY20
|
|
229
|
|
SEP22
|
|
153
|
|
|
DEC19
|
|
227
|
|
JUN20
|
|
232
|
|
SEP23
|
|
116
|
|
|
JAN20
|
|
221
|
|
JUL20
|
|
234
|
|
|
|
|
|
|
FEB20
|
|
221
|
|
AUG20
|
|
237
|
|
|
|
|
|
Brent Crude
|
Maturity
|
|
Price (US$/bbl.)
|
|
Maturity
|
|
Price (US$/bbl.)
|
|
Maturity
|
|
Price (US$/bbl.)
|
|
|
SPOT
|
|
61
|
|
MAR20
|
|
57
|
|
SEP20
|
|
56
|
|
|
OCT19
|
|
59
|
|
APR20
|
|
57
|
|
SEP21
|
|
53
|
|
|
NOV19
|
|
58
|
|
MAY20
|
|
57
|
|
SEP22
|
|
50
|
|
|
DEC19
|
|
58
|
|
JUN20
|
|
57
|
|
SEP23
|
|
47
|
|
|
JAN20
|
|
58
|
|
JUL20
|
|
56
|
|
|
|
|
|
|
FEB20
|
|
57
|
|
AUG20
|
|
56
|
|
|
|
|
|
Maritime Freight (Capesize 5TC)
|
Maturity
|
|
Price (US$/day)
|
|
Maturity
|
|
Price (US$/day)
|
|
Maturity
|
|
Price (US$/day)
|
|
|
SPOT
|
|
24,402
|
|
MAR20
|
|
13,943
|
|
SEP20
|
|
17,225
|
|
|
OCT19
|
|
23,308
|
|
APR20
|
|
13,867
|
|
Cal 2020
|
|
16,389
|
|
|
NOV19
|
|
24,350
|
|
MAY20
|
|
13,867
|
|
Cal 2021
|
|
13,654
|
|
|
DEC19
|
|
24,246
|
|
JUN20
|
|
13,867
|
|
Cal 2022
|
|
13,692
|
|
|
JAN20
|
|
18,467
|
|
JUL20
|
|
17,225
|
|
|
|
|
|
|
FEB20
|
|
16,304
|
|
AUG20
|
|
17,225
|
|
|
|
|
|
54
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
(ii) Foreign exchange and interest rates
US$-Brazil Interest Rate
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
11/01/19
|
|
3.08
|
|
09/01/20
|
|
2.45
|
|
01/02/23
|
|
2.32
|
|
|
12/02/19
|
|
2.85
|
|
10/01/20
|
|
2.43
|
|
04/03/23
|
|
2.33
|
|
|
01/02/20
|
|
2.86
|
|
01/04/21
|
|
2.41
|
|
07/03/23
|
|
2.34
|
|
|
02/03/20
|
|
2.78
|
|
04/01/21
|
|
2.40
|
|
10/02/23
|
|
2.38
|
|
|
03/02/20
|
|
2.71
|
|
07/01/21
|
|
2.36
|
|
01/02/24
|
|
2.39
|
|
|
04/01/20
|
|
2.64
|
|
10/01/21
|
|
2.36
|
|
04/01/24
|
|
2.43
|
|
|
05/04/20
|
|
2.61
|
|
01/03/22
|
|
2.32
|
|
07/01/24
|
|
2.49
|
|
|
06/01/20
|
|
2.57
|
|
04/01/22
|
|
2.33
|
|
01/02/25
|
|
2.55
|
|
|
07/01/20
|
|
2.52
|
|
07/01/22
|
|
2.32
|
|
07/01/25
|
|
2.59
|
|
|
08/03/20
|
|
2.48
|
|
10/03/22
|
|
2.34
|
|
01/02/26
|
|
2.67
|
|
US$ Interest Rate
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
1M
|
|
2.02
|
|
6M
|
|
1.92
|
|
11M
|
|
1.84
|
|
|
2M
|
|
2.06
|
|
7M
|
|
1.89
|
|
12M
|
|
1.83
|
|
|
3M
|
|
2.08
|
|
8M
|
|
1.88
|
|
2Y
|
|
1.65
|
|
|
4M
|
|
2.00
|
|
9M
|
|
1.86
|
|
3Y
|
|
1.58
|
|
|
5M
|
|
1.95
|
|
10M
|
|
1.85
|
|
4Y
|
|
1.55
|
|
TJLP
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
11/01/19
|
|
5.95
|
|
09/01/20
|
|
5.95
|
|
01/02/23
|
|
5.95
|
|
|
12/02/19
|
|
5.95
|
|
10/01/20
|
|
5.95
|
|
04/03/23
|
|
5.95
|
|
|
01/02/20
|
|
5.95
|
|
01/04/21
|
|
5.95
|
|
07/03/23
|
|
5.95
|
|
|
02/03/20
|
|
5.95
|
|
04/01/21
|
|
5.95
|
|
10/02/23
|
|
5.95
|
|
|
03/02/20
|
|
5.95
|
|
07/01/21
|
|
5.95
|
|
01/02/24
|
|
5.95
|
|
|
04/01/20
|
|
5.95
|
|
10/01/21
|
|
5.95
|
|
04/01/24
|
|
5.95
|
|
|
05/04/20
|
|
5.95
|
|
01/03/22
|
|
5.95
|
|
07/01/24
|
|
5.95
|
|
|
06/01/20
|
|
5.95
|
|
04/01/22
|
|
5.95
|
|
01/02/25
|
|
5.95
|
|
|
07/01/20
|
|
5.95
|
|
07/01/22
|
|
5.95
|
|
07/01/25
|
|
5.95
|
|
|
08/03/20
|
|
5.95
|
|
10/03/22
|
|
5.95
|
|
01/02/26
|
|
5.95
|
|
BRL Interest Rate
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
11/01/19
|
|
5.39
|
|
09/01/20
|
|
4.83
|
|
01/02/23
|
|
6.05
|
|
|
12/02/19
|
|
5.18
|
|
10/01/20
|
|
4.85
|
|
04/03/23
|
|
6.14
|
|
|
01/02/20
|
|
5.06
|
|
01/04/21
|
|
4.95
|
|
07/03/23
|
|
6.25
|
|
|
02/03/20
|
|
4.95
|
|
04/01/21
|
|
5.09
|
|
10/02/23
|
|
6.36
|
|
|
03/02/20
|
|
4.90
|
|
07/01/21
|
|
5.25
|
|
01/02/24
|
|
6.43
|
|
|
04/01/20
|
|
4.86
|
|
10/01/21
|
|
5.42
|
|
04/01/24
|
|
6.49
|
|
|
05/04/20
|
|
4.85
|
|
01/03/22
|
|
5.55
|
|
07/01/24
|
|
6.55
|
|
|
06/01/20
|
|
4.84
|
|
04/01/22
|
|
5.69
|
|
01/02/25
|
|
6.67
|
|
|
07/01/20
|
|
4.82
|
|
07/01/22
|
|
5.80
|
|
07/01/25
|
|
6.76
|
|
|
08/03/20
|
|
4.82
|
|
10/03/22
|
|
5.95
|
|
01/02/26
|
|
6.84
|
|
Implicit Inflation (IPCA)
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
11/01/19
|
|
3.94
|
|
09/01/20
|
|
3.39
|
|
01/02/23
|
|
3.83
|
|
|
12/02/19
|
|
3.74
|
|
10/01/20
|
|
3.41
|
|
04/03/23
|
|
3.84
|
|
|
01/02/20
|
|
3.62
|
|
01/04/21
|
|
3.54
|
|
07/03/23
|
|
3.86
|
|
|
02/03/20
|
|
3.51
|
|
04/01/21
|
|
3.70
|
|
10/02/23
|
|
3.90
|
|
|
03/02/20
|
|
3.46
|
|
07/01/21
|
|
3.73
|
|
01/02/24
|
|
3.90
|
|
|
04/01/20
|
|
3.43
|
|
10/01/21
|
|
3.79
|
|
04/01/24
|
|
3.91
|
|
|
05/04/20
|
|
3.41
|
|
01/03/22
|
|
3.78
|
|
07/01/24
|
|
3.90
|
|
|
06/01/20
|
|
3.40
|
|
04/01/22
|
|
3.80
|
|
01/02/25
|
|
3.92
|
|
|
07/01/20
|
|
3.39
|
|
07/01/22
|
|
3.79
|
|
07/01/25
|
|
3.93
|
|
|
08/03/20
|
|
3.38
|
|
10/03/22
|
|
3.83
|
|
01/02/26
|
|
3.93
|
|
55
Table of Contents
|
Selected Notes to the Interim Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
EUR Interest Rate
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
1M
|
|
(0.50
|
)
|
6M
|
|
(0.43
|
)
|
11M
|
|
(0.43
|
)
|
|
2M
|
|
(0.45
|
)
|
7M
|
|
(0.43
|
)
|
12M
|
|
(0.42
|
)
|
|
3M
|
|
(0.44
|
)
|
8M
|
|
(0.43
|
)
|
2Y
|
|
(0.45
|
)
|
|
4M
|
|
(0.44
|
)
|
9M
|
|
(0.43
|
)
|
3Y
|
|
(0.45
|
)
|
|
5M
|
|
(0.43
|
)
|
10M
|
|
(0.43
|
)
|
4Y
|
|
(0.43
|
)
|
CAD Interest Rate
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
Maturity
|
|
Rate (% p.a.)
|
|
|
1M
|
|
1.95
|
|
6M
|
|
2.00
|
|
11M
|
|
1.07
|
|
|
2M
|
|
1.96
|
|
7M
|
|
1.71
|
|
12M
|
|
0.97
|
|
|
3M
|
|
1.97
|
|
8M
|
|
1.50
|
|
2Y
|
|
1.88
|
|
|
4M
|
|
1.99
|
|
9M
|
|
1.32
|
|
3Y
|
|
1.84
|
|
|
5M
|
|
2.01
|
|
10M
|
|
1.18
|
|
4Y
|
|
1.80
|
|
Currencies - Ending rates
|
CAD/US$
|
|
0.7550
|
|
US$/BRL
|
|
4.1644
|
|
EUR/US$
|
|
1.0889
|
|
56
Table of Contents
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
Vale S.A.
|
|
|
(Registrant)
|
|
|
|
|
|
|
By:
|
/s/ André Figueiredo
|
|
Date: October 24, 2019
|
|
Director of Investor Relations
|
Vale (NYSE:VALE)
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From Mar 2024 to Apr 2024
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