Vale goes to the BM&F Bovespa Stock Exchange August 2015 - - PowerPoint PPT Presentation

▶
vale goes to the bm f bovespa stock exchange
SMART_READER_LITE
LIVE PREVIEW

Vale goes to the BM&F Bovespa Stock Exchange August 2015 - - PowerPoint PPT Presentation

Jun 26, 2023 577 likes •798 views

0 Vale goes to the BM&F Bovespa Stock Exchange August 2015 Luciano Siani Vale CFO Disclaimer 1 This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon

slide-1
SLIDE 1

Vale goes to the BM&F Bovespa Stock Exchange

Luciano Siani Vale CFO

August 2015

slide-2
SLIDE 2 1

Disclaimer

“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.”

slide-3
SLIDE 3 2

We have been working in several dimensions to further improve Vale´s highly competitive position

Delivering projects Increasing Volumes Reducing Costs and expenses Increasing productivity Strengthening

  • ur license

to operate Setting the basis for strong Free Cash Flows

slide-4
SLIDE 4 3 7,117 4,521 3,547 2012 2013 2014
  • 51%

We have reduced our expenses1,2 significantly

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 Includes US$ 107 million of provisions from environmental obligations, US$ 98 million due to the write-down of thermal coal stocks and US$ 90 million due to the write-down of the ICMS credits. Source: Company reports of 2012, 2013, 2014 and 2Q15.
  • 22%
809 1,204 638 633 295 3Q14 4Q14 1Q15 2Q15 4 US$ millions 3 5 One off impact
slide-5
SLIDE 5 4

We have also made significant progress on cost reductions, as per the example of iron ore

C1 Cash Cost FOB¹ port Brazil US$/t Freight Costs US$/t 22.5 21.5 18.3 15.8 3Q14 4Q14 1Q15 2Q15 22.3 21.7 17.2 16.8 3Q14 4Q14 1Q15 2Q15
  • 30%
¹ Cost of mine, plant, railway and port, excluding ROM, third party acquisitions and royalties (US$ 2,2/t in 3Q14, US$ 1,7/t in 4Q14, US$ 1,5/t in 1Q15 and US$ 1.2/t in 2Q15). Source: Company reports of 2014 and 2Q15
  • 25%
Expenses US$/t 5.9 9.3 4.0 3.9 3Q14 4Q14 1Q15 2Q15
  • 34%
slide-6
SLIDE 6 5

And we remain committed to delivering additional productivity gains

  • Improvement in availability of the transportation fleet

in the Northern System

  • 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
  • Extension of the natural screening process to older

plants in Carajás

  • Full automatic operation of reclaimers
  • Automated operation of trains
  • Implementation of innovative technology:

− Distributed traction technology − Energy control systems at the ports − Reverse routes at the ports

Mine Beneficiation Logistics corridors

Example of initiatives Status

Completed In implementation
slide-7
SLIDE 7 6

High quality products will replace lower grade material

We obtained the operational licenses for new mines and started the ramp up of three Itabiritos projects

Itabirites Projects N4WS and N5S in Carajás

N4WS

Waste Dump Plant 2 Plant 2 Primary Crusher N5W N5S N4E N4W
  • N4WS licensed in 2014
―Pre-stripping completed ―Already mining the first layer of product (“canga”)
  • N5S extension licensed in May 2015
  • Conceição Itabiritos I started up in 4T13
  • Vargem Grande Itabiritos started up in 4Q14
  • Conceição Itabiritos II started up in 2T15
  • Cauê Itabiritos will start up 2S15
slide-8
SLIDE 8 7

And our iron ore break-even is being reduced

1Q15 18.3 1.5 17.2 4.0 3.6 1.2 43.4 C1 Cash Cost Port Royalties Freight Expenses Moisture Quality Total 2Q15
  • Break-even¹
reduced to US$ 39.1/dmt
  • Carajás’
  • perational cost
in June, 2015 already at US$ 12/t US$/dmt, adjusted by quality 15.8 1.2 16.8 3.9 3.4 2.0 39.1 Delta vs 1Q15 2.5 0.4 0.1 4.3 Base case price US$ 50/t ¹ Iron ore fines unit cost and expenses landed in China
slide-9
SLIDE 9 8 Mozambique Coal Mt 2.0 2.2 2.4 1H13 1H14 1H15 Copper Kt Nickel Kt Iron Ore¹ Mt 130 129 136 1H13 1H14 1H15 181 169 212 1H13 1H14 1H15 ¹ Own production, excluding Samarco’s attributable production Source: Company reports of 2Q13, 2Q14 and 2Q15. 135 151 160 1H13 1H14 1H15

Our production volumes have increased across all business segments with the completion of our projects

slide-10
SLIDE 10 9

The iron ore supply in 2016 will be defined according to margins

340 340 376 Iron ore Supply 2015 Potential increase in 2016 Iron ore Supply 2016 Mt
  • The installed
capacity will be 376 Mt in 2016
  • The potential
production increase will be defined according to the margins
  • ptimizations plan
  • Inventories will be
  • ptimized along the
supply chain
slide-11
SLIDE 11 10

We expect nickel production to increase in 2H15

69 67 136 167 303 1Q15 2Q15 1H15 2H15 Nickel's total production guidance 2015 Nickel Kt
  • Ramp-up of VNC
  • Increase in PTVI’s production after the
maintenance of furnaces
  • Higher production in Canada in 2H15 with the
anticipation of the preventive maintenance in Sudbury originally planned for 2H15
slide-12
SLIDE 12 11 7.3 7.2 5.1 4.3 1H12 1H13 1H14 1H15 Capex¹ US$ billion

Our capex¹ has reduced as we completed our projects

Status of Vale’s project portfolio 2Q15
  • 8 projects delivered in 2014
  • S11D advancing as planned: mine and logistics
physical progress of 67% and 41%, respectively
  • Conceição Itabiritos II: delivered in 2Q15 and
started up in the quarter
  • Cauê Itabiritos: 86% of physical progress
  • Mozambique: mine and logistics physical progress
  • f 93% and 89%, respectively
¹ Growth plus sustaining capex. Source: Company reports of 2012, 2013, 2014 and 2Q15.
slide-13
SLIDE 13 12

And we are seeking to further reduce our capex in 2015

2.2 2.1 4.3 ~4.0 8.0-8.5 1Q15 2Q15 1H15 2H15 Capex 2015 Capex¹ US$ billion
  • Structural reduction in sustaining capex
  • Change in scope of some projects
  • Positive impact from BRL depreciation
slide-14
SLIDE 14 13 Project Capacity Mtpy Estimated start-up Executed capex US$ million 2015 Total Estimated capex US$ million 2015 Total Physical progress Carajás Serra Sul S11D 90 2H16 568 4,060 1,321 6,878² 67% CLN S11D 230 (80¹) 1H14 to 2H18 924 3,577 2,375 9,484² 41% Cauê Itabiritos 24 (4¹) 2H15 139 825 350 1,317³ 86% CSP4 1.5 1H16
  • 1,055
185 1,2244 87% Moatize II 11 2H15 289 1,673 629 2,068 93% Nacala corridor5 18 2H14 431 3,324 648 4,444 89%

Our investment cycle is almost over

¹ Net additional capacity ² Original capex budget for S11D of US$ 8.089 billion and for CLN S11D of US$ 11.582 billion ³ Original capex budget of US$ 1.504 billion 4 Original capex of US$ 2.734 billion; out of the original capex – US$ 1.491 billion financed directly by CSP project. 5 Completion of the greenfield sections of the Nacala corridor occurred in 4Q14 while brownfield section 7 (500Km) is still being upgraded.
slide-15
SLIDE 15 14

The S11D project is at an advanced stage of implementation

Main facts (mine and processing plants)

  • Start-up: 2H16
  • Capacity: 90 Mtpy
  • Estimated cash cost1: US$ 10/t
  • Fe %: 66.7%
  • Production process: truckless mining

system and dry processing.

  • Dry processing plant, reducing operating

costs as it avoids the need for tailing dams.

1 Cash cost FOB port (mine, plant, railway and port, including royalties). Truckless system Processing plants
slide-16
SLIDE 16 15

The S11D project will help us further reduce our costs

US$/dmt, adjusted by quality, 2018(F) with S11D 12.5 1.5 16.2 1.5 2.8 3.7 30.8 C1 Cash Cost FOB Port Royalties Freight Expenses Moisture Quality Total Gap in relation to 2Q15 3.3 0.6 2.4 1.7 8.3 Base case price: US$ 50/t
slide-17
SLIDE 17 16

Meanwhile, we continue to divest non-core assets and form strategic partnerships

El Hatillo Araucária Ferroalloy plants in Europe Oil and Gas Concessions I CADAM Goldstream I Goldstream II VLI Log-in Fosbrasil Tres Valles Mozambique deal with Mitsui Belo Monte Aluminium assets Norsk Hydro Reference US$ 1 billion 8 VLOCs¹ MBR preffered shares 2011 US$ 1.1 billion 2012 US$ 1.5 billion 2013 US$ 6.0 billion 2015 US$ 5.0 billion 10 Very Large Ore Carriers Source: Company reports of 2012, 2013, 2014 and 2Q15.
slide-18
SLIDE 18 17

From these divestments and partnerships we expect to raise US$ 6-7 billion in cash proceeds in 2015

Timing Cash Impact in 2015 Status Initiatives
  • Mozambique
Coal
  • Project Finance in advanced stage
  • f discussion
  • Government authorizations and
direct agreements with lenders under discussion
  • Goldstream
  • Completed with US$ 900 million
received in March 2015 4Q 1Q Transaction details
  • Investment agreement with
Mitsui for partnering in the Mozambique coal project
  • Sale of an additional 25% of
the payable gold stream from the Salobo mine
  • VLOCs
  • Sale of four vessels to COSCO and
  • ther four vessels to China
Merchants Energy Shipping for US$ 445 million and US$ 448 million, respectively 1Q/2Q
  • Sale of Valemaxes with the
signature of long-term, low cost freight agreements
  • Preffered
shares
  • Sale of 36,4% of MBR’s total capital in
preferred shares with call option
  • Cash proceeds of R$ 4 billion are
expected until the end 3Q15. 3Q
  • Issuance of non-voting shares
  • n specific assets
slide-19
SLIDE 19 18

In parallel we continue to manage our current debt profile

7.3 5.0 0.7 1.6 Revolvinig credit lines Financing unrelated to projects³ Financing of projects Total Committed lines of credit² US$ 7,3 billion available in lines of credit Schedule of amortization of the debt¹ 80% of the debt settlement will occur after 2018 ¹ On the 30th of July of 2015. ² Amount not withdrawn yet ³ Export – Import Bank of China e Bank of China Limited: credit related to the construction of Valemaxes vessels. 4 BNDES: related to several projects in Brazil. 1.4 1.9 2.4 3.8 19.9 29.4 2015 2016 2017 2018 2019
  • nwards
Gross debt US$ billion 4
slide-20
SLIDE 20 19

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

slide-21
SLIDE 21 20