Vale announced this Wednesday, April 27th, its financial result for the
first trimester of 2022. In 1Q22, Vale reported a proforma adjusted EBITDA
from continued operations of US$ 6.374 billion, US$ 483 million lower than
4Q21.
Despite the challenging quarter in our operations, we are on track to
deliver on our commitments for 2022. In 1Q22, we faced heavy rainfall in
Minas Gerais, licensing delays in the North and performance below par at
some assets. Nevertheless, we took the opportunity of the
seasonally-lower volumes to concentrate our maintenance activities that
will lead the way for a safer operational environment and solid
production ahead. Confident about our business outlook, we are
announcing a third share-buyback program, as another lever of value
creation for our shareholders.
Eduardo Bartolomeo, Chief Executive Officer
- Our operations
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- In March, we entered into a multi-year agreement to supply
low-carbon nickel products to Swedish lithium-cell producer
Northvolt AB, reinforcing our commitment to sustainability in the
electric vehicle supply chain and electrification of the broader
mining industry and reaffirming our position as a supplier of choice
to the fast-growing electric vehicle industry.
- In April, we started the construction works of Tecnored’s first
commercial plant in the state of Pará. Tecnored is 100% owned by us
and focuses on developing a low-carbon pig iron process through
energy sources that emit less CO2 than coal and coke, the
traditional ironmaking methods. The plant will initially have a
capacity of 250 ktpy of green pig iron and may reach 500 ktpy in the
future. We plan the start-up for 2025 with an estimated investment
of approximately R$ 1.6 billion.
- Our commitments to reparation and society
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- The actions provided for in the Integral Reparation Agreement are
well in progress. After judicial authorization, Vale began to detail
information to implement socio-economic repair projects, selected by
the parties based on the results of popular consultation. These
projects are part of the Fast Response Package and cover the areas
of health, social development, infrastructure, agriculture and
livestock, in Brumadinho and in the other 25 municipalities in the
Paraopeba basin. The details of the scope of each project will be
evaluated by the other parties to the Integral Reparation Agreement
and, once approved, will allow the effective execution of the
projects.
- Dam safety
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- In February, we signed an agreement with the state of Minas
Gerais, regulatory agencies and state and federal public
prosecutors, establishing a schedule and reinforcing the commitment
to de-characterize all our upstream structures in Brazil. The
agreement brings more legal and technical certainty to the process,
extending the original deadline for the conclusion and reflecting
the required actions to increase safety during the works. We agreed
to hire an independent consulting firm to confirm technical
feasibility of deadlines for de-characterizing each structure
included in our plan. We will also contribute with a value of R$ 236
million for investments in social and environmental projects, with
disbursement over eight years.
- In April, we began the de-characterization of the Dique Auxiliar
da Barragem 5, at the Águas Claras Mine, in Nova Lima (MG). The dike
is one of the five upstream structures to be eliminated in 2022. By
the end of the year, Vale expects to have eliminated a total of 12
upstream structures under the De-characterization Program in Brazil.
- Focusing on the core business
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- In February, we concluded the sale of the 50% stake we had at
California Steel Industries – CSI to Nucor Corporation, and, in
April, we successfully completed the sale of the Moatize coal mine
and the Nacala Logistics Corridor to Vulcan Resources, following the
completion of all conditions precedent.
- In April, we also entered into a binding agreement to divest our
iron ore, manganese ore and logistics assets in the Midwestern
System. Under the terms agreed, the enterprise value of the
transaction is approximately US$ 1.2 billion for a set of assets
that produced 2.7Mt of iron ore and 0.2Mt of manganese, and that
contributed to Vale with US$ 110 million of adjusted EBITDA in 2021.
At closing, we expect to receive approximately US$ 150 million, in
addition to transferring the obligations related to the take-or-pay
logistics contracts, subject to the consent of the applicable
counterparties and customary conditions precedent.
- Sharing value creation
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- Aligned with our drive to deliver superior value to our
shareholders, we paid dividends of US$ 3.5 billion and advanced with
our share buyback program, which is 84% complete as of the date of
this report.
- In continuity with the 2021 share buyback programs, our Board of
Directors approved a new program of up to 500 million shares,
equivalent to around 10% of the currently outstanding shares of the
company, to be executed in the following 18 months and after the
conclusion of the current program. Upon conclusion of the third
sequential buyback, Vale’s shareholders interest in the company’s
results will have increased by more than 22% since the approval of
the first program in 2021.
The main drivers for 1Q22 performance compared to 4Q21 were: the lower
sales volume for iron ore and pellets, mainly due to the intense rainy
season in 1Q22 and the weaker performance of the northern system (US$
2.192 billion), and the higher realized prices for iron ore and
pellets (US$ 1.812 billion), following the US$ 32/t increase in the
62% benchmark price and higher quality premium, working to partially
offset the weaker iron ore volumes.
Net income in 1Q22 was US$ 4.458 billion, US$ 969 million lower than
4Q21. The seasonally lower EBITDA and the higher 4Q21 financial
results explain the decline, which was partially offset by the US$ 1.1
billion positive impact of the binding agreement to sell the
Midwestern iron ore and manganese operations and the provisions for
dams’ de-characterization and Renova Foundation charged in 4Q21.
In 1Q22, we invested US$ 1.1 billion in growth projects and
sustaining, US$ 615 million lower than in 4Q21, due to seasonally
higher investments during the drier season at the end of the year.
Gross debt and leases totaled US$ 14.0 billion at the end of 1Q22, in
line with 4Q21. Expanded net debt increased to US$ 19.4 billion,
mainly attributed to the Brazilian Real appreciation effect on the
commitments denominated in local currency, partially offset by the
mark-to-market gains on the foreign exchange hedge positions. During
this quarter, we reviewed with our Board of Directors a change in our
optimal leverage from US$ 15 billion to a range of US$10 - 20 billion,
under the expanded net debt concept.
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