building a stronger organization

Building a Stronger Organization Murilo Ferreira, Vale CEO Bank of - PowerPoint PPT Presentation

0 Building a Stronger Organization Murilo Ferreira, Vale CEO Bank of America / Merrill Lynch Global Metals, Mining & Steels CEO Conference Barcelona, May 12, 2015 Disclaimer 1 This presentation may include statements that present

  1. 0 Building a Stronger Organization Murilo Ferreira, Vale CEO Bank of America / Merrill Lynch – Global Metals, Mining & Steels CEO Conference Barcelona, May 12, 2015

  2. Disclaimer 1 “ This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct. These risks and uncertainties include factors related to the following: (a) the countries where we operate, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF) and The Stock Exchange of Hong Kong Limited, and in particular the factors discussed under “Forward -Looking Statements” and “Risk Factors” in Vale’s annual report on Form 20-F. ”

  3. 2 We have been working in several dimensions to further improve Vale´s highly competitive position in the mining industry Increasing Volumes Reducing Costs and expenses Setting the basis for strong Free Delivering Cash Flows projects Increasing productivity Strengthening our license to operate

  4. 3 We have reduced expenses 1,2 significantly but we are not there yet… US$ million -50% -21% 808 7.117 4 638 4,521³ 3.547 2012 2013 2014 1Q14 1Q15 ¹ Net of depreciation and amortization. ² Includes SG&A, R&D, Pre-operating and stoppage and Other expenses. ³ Excludes the positive one off impact of US$ 244 million of the goldstream transaction in 1Q13 4 Excludes the positive one off impact of US$ 230 million of the goldstream transaction in 1Q15.

  5. 4 We have also made significant progress on cost reductions but we are still not satisfied Iron ore unit costs and expenses, US$/t Royalties Freight Costs Expenses Cash Cost FOB¹ port Brazil -13% -28% -47% 22.7 7,5 23,9 19.8 17,2 4,0 19,9 18,3 1Q14 1Q15 1Q14 1Q15² 1Q14 1Q15 ¹ Ex-ROM and third party acquisitions. ² Excludes US$ 2,3/t of the bunker oil hedge.

  6. 5 We remain committed to delivering additional productivity gains Completed In implementation Example of initiatives Status • Improvement in availability of the transportation fleet in the Northern System Mine • Resizing of infrastructure, drilling and transportation fleets • Optimization of mine plans • Ramp up of the Itabirites projects • Improvement in the yield of the concentration plants Beneficiation • Extension of the natural screening process to older plants in Carajás • Full automatic operation of reclaimers • Automated operation of trains Logistics • Implementation of innovative technology: corridors − Distributed traction technology − Energy control systems at the ports − Reverse routes at the ports

  7. 6 And we are about to operate some of the most competitive assets in the world High quality products will replace lower grade material and improve margins N4WS in Carajás Itabirites Projects Plant 2 N4W Plant 2 Primary N4E Crusher N5W N4WS Waste Dump N5S • N4WS licensed in 2014 • Vargem Grande Itabiritos started up in 4Q14 • Pre-stripping completed • Conceição Itabiritos II and Cauê Itabiritos will • Already mining the first layer of product (“ canga ”) start up in 2015

  8. 7 Our differentiated and further improved product quality will drive price realization up Delta premium IOCJ 65% vs. Platts 62% Fe Content % %, premium over Platts +0.9 pp 12,6% 64,6 11,6% 63,7 10,1% 9,5% 2014 2018 8,3% Silica Content Alumina Content % % -0.1 pp -1.3 pp 1,4 4,6 3,3 1,3 1Q14 2Q14 3Q14 4Q14 1Q15 2014 2018 2014 2018

  9. 8 And our iron ore break-even will reduce even further as early as 2015 US$ / dmt, average costs and expenses landed in China¹ 43 2-3 0-1 0-1 0-1 37- 41 2 3 3 4 5 2 1Q15 FOB Cash Costs Expenses Quality Freight Average 2015 1 Adjusted for quality (Fe content differential and other elements such as silica, alumina and phosphorus) ² Excludes the impact of the bunker hedge accounting (US$ 2.3 /t at 1Q15) ³ Assumes 3.05 BRL/USD 4 Assumes VIU ranging from US$ 1.0/t to US$ 1.1/t 5 Assumes spot freight rates Brazil-China ranging from US$ 10.5 /t to US$14.0/t

  10. 9 In the coming years our capex will reduce sharply as we complete our investment cycle Status of Vale’s project portfolio Vale capex¹ profile @ 3 BRL/USD US$ billion • 8 projects delivered in 2014 • S11D advancing as planned: mine and logistics physical progress of 64% and 36%, respectively • Conceição Itabirites II: 97% of physical progress 14 12 • Cauê Itabirites: 82% of physical progress 9 • Mozambique: mine and logistics physical progress 7 5 of 86% and 85%, respectively 4 • Investment cycle completed in Base Metals 2013 2014 2015 2016 2017 2018 Forecast ¹ Growth plus sustaining capex

  11. 10 And upon completion of projects our production volumes will grow across all business segments Iron Ore¹ Nickel Mt Kt 459 316 453 303 411 376 275 340 332 260 319 310 237 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 Coal Copper Mt Kt 26 26 450 449 22 380 370 17 292 8 5 4 4 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 ¹ Own production only, excluding Samarco’s attributable production

  12. 11 Helping us reach our ebitda targets¹ in base metals for 2015 and 2016 US$ billion Increase volumes and reduce cost and expenses in Canada and Indonesia Reach 37 Ktpa at VNC Complete the ramp up 0-1.0 3.1-4.6 of Salobo (200 Ktpa) 0.1-0.3 0.5-0.8 2.5 2014 Salobo VNC Canada & PTVI 2015-2016 Operations 1 Considering 3,00 BRL/USD, 1,28 CAD/USD, copper prices ranging from US$ 5,800 to 6,800 /t and nickel prices ranging from US$ 14,500 to 21,000 /t

  13. 12 And helping us reach even higher margins in iron ore Increase in EBITDA unit margins (US$/t), 2018 vs. 2015 0,5 1,2 2,0 7,0 3,3 Costs reduction Expenses reduction Quality²/Pricing CFR freight reduction Total improvement 1 Excluding ore from third parties, ROM and pellets ² Based on Fe content differential between 2015 and 2018

  14. 13 Meanwhile, we continue to divest non-core assets and form strategic partnerships Aluminium Oil & Gas Logistics Concessions II Oil & Gas Tres Valles Gold Fosbrasil Copper Fertilizers Log-in Kaolin Reference Coal US$ 1 billion Shipping Norsk Hydro Manganese Energy CADAM Belo Monte participation Oil & Gas Concessions I Gold Ferroalloy plants in streaming II Gold Europe streaming I Araucária El Hatillo Mozambique deal with Mitsui¹ VLI Aluminium 10 Very assets Large Ore Carriers 2011 2012 2013 2015 US$ 1.1 billion US$ 1.5 billion US$ 6.0 billion US$ 5.0 billion ¹ Including the impact of capex avoided by VALE

  15. 14 From these divestments and partnerships we expect to raise US$ 6-7 billion in cash proceeds in 2015 Cash Impact Initiatives Transaction details Status Timing in 2015 • Goldstream • Sale of an additional 25% of • Completed with US$ 900 million Done the payable gold stream from received in March 2015 the Salobo mine • Non-voting • Issuance of redeemable non- • Transaction structure and contracts 2Q/3Q shares voting shares on specific being prepared assets • VLOCs • Sale of Valemaxes with the • Progress on the previously 2Q/3Q signature of long-term, low announced negotiation with COSCO cost freight agreements and other undisclosed partners and on the development of a financial structure for the sale of vessels • Mozambique • Investment agreement with • Project Finance in advanced stage 4Q Coal Mitsui for partnering in the of discussion Mozambique coal project • Government authorizations and direct agreements with lenders under discussion

  16. 15 Results from our initiatives are already setting the basis for strong free cash flow generation as of 2018 • Capex will be around US$ 4 billion • Volumes will increase by about 40% in iron ore, 20% in copper and 15% in nickel • Costs will decrease with higher productivity, further dilution of fixed costs and expenses, and organizational restructuring • Iron ore quality will support an increase in price realization • Freight costs will decrease • Free cash flow and dividends will reach unprecedented levels and debt will reduce gradually

  17. 16

Download Presentation
Download Policy: The content available on the website is offered to you 'AS IS' for your personal information and use only. It cannot be commercialized, licensed, or distributed on other websites without prior consent from the author. To download a presentation, simply click this link. If you encounter any difficulties during the download process, it's possible that the publisher has removed the file from their server.


More recommend