Q3 2024 Vale SA Earnings Call
Good morning, ladies and gentlemen, welcome to Valley's third quarter 2024 earnings call.
This conference is being recorded and a replay will be available on our website at <unk> Dot com.
The presentation is also available for download in English and Portuguese from our website.
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Select huge original audio today, you won't hear the English version in the background.
Would like to inform that all participants are currently in a listen only mode for the presentations.
Further instructions will be provided before we begin the question and answer section of our call. We would like to advise that forward looking statements may be provided in this presentation, including bodies expectation about future events or results encompassing those matters listed in the respective presentation.
We caution you that forward looking statements are not guarantees of future performance and involve risks and uncertainties.
To obtain information on factors that may lead to results different from those forecast by body. Please consult the reports <unk> files with the U S Securities and Exchange Commission, the Brazilian Commies Celgene by Lloyd's mobile.
And in particular, the factors discussed under forward looking statements and risk factors in values annual report on form 20-F.
Speaker Change: With us today are Mr. Gustavo <unk> CEO, Mr. Modular Mullett, acting executive Vice President of Finance and Investor Relations.
Speaker Change: Mr. Jose I don't know Gator, acting executive Vice President Iron ore solutions.
Speaker Change: It's the catalyst mid Data's executive Vice President of operations, Mr. Shaun Hughes Martin CEO of body base metals and Mr. Alex Shandrydan Brown executive Vice President of corporate and external affairs.
Now I will turn the conference over to Mr. Gustavo Pimenta, Sir you may now begin.
Gustavo Pimenta: Hello, everyone and welcome to Valley's third quarter 'twenty 'twenty four conference call.
Gustavo Pimenta: I am pleased to present <unk> results for the first time as the company's CEO.
Before I start I would like to take a moment to thank Eduardo Bartolomeo for his tenure as CEO of Vale in the last five years.
Gustavo Pimenta: It's where the lab values through one of the most difficult periods of our history.
Gustavo Pimenta: It drove a series of significant changes within the company and today, we are in a much stronger position being safer more stable and better prepared for an even greater future.
Gustavo Pimenta: So on behalf of the entire valid team we thank you Eduardo for that.
Speaker Change: I also want to express my gratitude to the board of directors for their trust and confidence. It is an honor for me to lead this great company and I'm highly confident and optimistic about our future.
Speaker Change: So in my initial weeks as CEO I have outlined the key areas of focus that will guide us going forward.
Speaker Change: While it has an immense potential and I firmly believe that we can position ourselves as a reference in the sector.
Speaker Change: For that we are building on our solid progress to develop a valid to any dirty vision, which.
Speaker Change: Which we plan on detailing at validate in early December.
Speaker Change: This vision will be based on three key pillars.
Speaker Change: First a performance driven culture.
Speaker Change: We will accelerate our cultural transformation, maintaining our focus on safety and operational excellence.
While also becoming a more agile efficient organization.
Speaker Change: As such we will be taking decisive actions to materially improve our competitiveness.
Speaker Change: And once again position valley in the very low end of the industry global cost curve.
We will provide more details about our cost efficiency initiatives and associated targets at validate.
Second a superior portfolio, we will accelerate the execution of our premium iron ore strategy leveraging on our unique endowment while it has one of the richest iron ore resources in the world and we aim just structurally produced about 350 million tons of iron ore.
Speaker Change: Of which 80% to 90% will be high quality products like <unk> cottage us and Agglomerated products. This flexible portfolio will allow us to support our clients in the decarbonization journey, while maintaining optionality to capture value under different market conditions.
Speaker Change: Also have a very unique based matto splatter form.
Speaker Change: With significant growth potential, particularly in copper I am very.
Speaker Change: Pleased with our strategic decision to carve out the business last year.
Speaker Change: Have a world class dedicated team under the leadership of Sean.
Speaker Change: I'm highly confident we will take this business to the next level in the following years.
Speaker Change: Third it is essential that our stakeholders sees us as a trusted partner.
Speaker Change: For that we will be working closely with society to leave a positive legacy for an hour activities, while creating responsible and trustworthy relationships.
Speaker Change: This will be a critical priority of mine and my leadership team and I'm certain it will give us a competitive advantage going forward.
Speaker Change: We are working as a team to detail what each one of these levers meet in terms of concrete goals targets and initiatives and we will be providing the details at validate.
Speaker Change: Now, let's take a look at our recent performance in the next slides.
Speaker Change: We are making steady progress on our commitment to eliminate upstream dams in Brazil.
Our day characterization program includes 30 structures and this month, we achieved another important milestone by eliminating the 16th structure <unk> on October 11th about two months ahead of schedule.
Speaker Change: The dam elimination process requires a lot of innovation and it is complex and unique for each structure.
Speaker Change: We have gained incredible experience and knowledge through this process and this has allowed US just celebrate the characterization of managed structures, while upholding the highest standards of safety and risk management.
Speaker Change: We will continue to deliver on our den safety commitments with a disciplined approach.
Speaker Change: Alongside the decommissioning process, we are working to enhance the safety of our structures. The chart on the next slide shows our progress on removing dense front emergence levels.
Speaker Change: In August we remove with the superior them from the emergence level III and currently there is just one of them left at this level, which is there for Q3 then.
Speaker Change: And we are making very good progress to reduce these dams emergence levels soon.
Speaker Change: On track to deliver on our commitment to have no dams at level three by 2025.
Speaker Change: The future of mining will require companies to reduce its footprint and minimize even further they backed off their operations.
Speaker Change: At Valley, we have been working on a series of initiatives to create more singular operations, such as our <unk> plant in <unk>, which.
Speaker Change: Would you be able to produce up to 5 million tons per year of high quality iron ore by reprocessing existing tailings.
Speaker Change: Other initiatives include processing waste from piles and generating co products for other industries.
Speaker Change: In addition to minimizing the impact of our operations. These initiatives usually have quicker time to market and lower unit costs once they reach at scale now.
Speaker Change: Now, let's talk about the performance of our portfolio in the next two slides.
Speaker Change: This quarter, we delivered the highest iron ore production of six 2018, underscoring our focus on operational excellence.
Speaker Change: Aligned with our strategy to grow and Agglomerated products.
Speaker Change: Our pellet production reached its highest level for any quarter since 2019, increasing 13% year on year.
Speaker Change: Last month, we increased our production guidance for the year and we are now confident we can deliver at the top end of the 323 to 330 million tons range for 2020 for.
Speaker Change: Iron ore sales in the quarter were in line year on year with an important quality improvement in our product mix on the back of the higher <unk> sales and the proactive decision to reduce direct sales of high silica or delivering on our growth projects in iron ore is critical for us to improve the flexibility.
Speaker Change: Of our portfolio.
To that end I'm very pleased to see the successful startup of barging Randy within budget and one month ahead of schedule. This is a 15 million tons iron ore project, which shoot us increased iron ore content by about 2% at this site.
Speaker Change: The next relevant project to come online as cap on Irma with another 15 million tons. The project is already 91% complete and it is scheduled to start up in the first half of 2025.
Speaker Change: This demonstrates that we are effectively delivering on our commitments regaining not only volumes, but more importantly, commercial flexibility, which will help us maximize value creation.
Speaker Change: Looking at our energy transition metals business. We also saw a strong production performance year on year in both copper and nickel as the asset review initiatives start to generating results.
Speaker Change: Ore processed at Salobo, one and two plants increased by 30% year on year, and our Sudbury mines had a 20% increase in mill throughput year on year.
Speaker Change: Sean <unk> has recently joined as <unk>, CEO and who continue the implementation of the asset review and the execution of the company's long term strategy I.
Speaker Change: I am confident we have the best team in place to take the energy transition matters business to the next level.
Speaker Change: Last but not least after two years of negotiation today marks an important chapter in our history, we signed the binding terms for the full reparation of San Marcos phone down dam collapse.
Speaker Change: Terms agreed or a resort and dialogue based on social environmental and technical criteria and reinforces <unk> commitment to a fair and definitive reparation the toe.
Speaker Change: Total value of the agreement is 170 billion Reais, which will be divided into 100 billion rising cash payments payable over 20 years to the federal government. They states of managed horizon Espirito Santo and the municipalities to fund compensatory programs and actions.
Speaker Change: Tied to the public policies.
Speaker Change: So study 2 billion reais and obligations to be performed by some market over the next years, including ongoing programs for individual indemnification risks adelman and environmental recovery.
Speaker Change: Which will be gradually transferred from the Renova Foundation.
Speaker Change: The total amount also considers the 38 billion reais already disbursed in <unk> compensation programs over the years.
Gather with all the key stakeholders, we reached a mutually beneficial solution for all parties, especially for the impacted people communities and the environment, while creating definitiveness and legal certainty for the companies.
Speaker Change: Now I'd like to invite Murillo Miller, our acting CFO to talk about our financial performance. Please murillo.
Murillo Miller: Thank you Gustavo and good morning, everyone.
Murillo Miller: And she'll be here to present, our third quarter 2024 results. So let's start with our EBITDA performance.
Murillo Miller: As you can see our pro forma EBITDA reached $3 $7 billion in the quarter with some encouraging factors that helped to mitigate the impact of lower iron ore prices.
Murillo Miller: In Q3, 'twenty 'twenty four we achieved higher sales volumes, particularly in pellets, our highest quality products we have.
Murillo Miller: Also delivered a much better performance on costs and expenses, while the weaker Brazilian real provided further supports that.
Speaker Change: As Gustavo mentioned earlier, we are extremely focused on regaining our competitiveness and our <unk> cost performance is particularly important in this journey.
Speaker Change: Take a closer look at our <unk> in the next slides.
Speaker Change: Iron ore, our <unk> cash costs, excluding third party purchases was $286 per ton.
Speaker Change: 17% lower quarter on quarter, and 6% lower year on year.
Speaker Change: We were pleased to see that this is the first year on year decrease in cone cash costs since the first quarter of <unk> to anyone given us confidence that we are on the right path to becoming a more efficient company.
Speaker Change: The sequential improvement.
Speaker Change: By the results of our efficiency initiatives lower maintenance expenses fixed cost dilution as well as a better production mix with more volumes come from the northern system, where we have our most competitive operations.
Speaker Change: We are highly confident in delivering our Q1 cost guidance for 2024 of 21 five to $283 per tonne.
Speaker Change: And that outperformance is actually pointing towards achieving the low end of this guidance in 2024.
Speaker Change: In Q4, we expect sequentially lower costs for reference our <unk> September reached $18 $2 per ton excluding inventory effects.
Speaker Change: Now moving to the energy transition metal business, we observed an overall decrease in our all in costs year on year.
Speaker Change: Steve Kaufer, 13% year on year reduction was driven by higher unit byproduct revenues and lower unit Cogs, resulting in an all in below $3 per ton.
Speaker Change: As a result of this solid performance in Q3, we are once again revising our 2024 all in cost guidance downwards.
Speaker Change: New range being now between 2930 to $300 per ton.
Speaker Change: Niko despite due to consolidation of <unk> operations, which have lower average costs all in costs decreased by 3% year on year.
Speaker Change: <unk> on track to meet our cost guidance for 2024.
Speaker Change: This improvement was a result of the ongoing ramp up of <unk> operations, which allowed us to reduce third party purchases in our Canadian refineries, coupled with higher unit byproduct revenues.
Speaker Change: Now moving on to cash generation.
Free cash flow generation was zero point $2 billion, mostly impacted by lower EBITDA and by negative working capital. We saw an increase in accounts receivables due to 40 million tons of iron ore sales accrued <unk> end of the quarter as well as to any 3 million tons of sales that were booked at a forward.
Speaker Change: Price of $109 per ton.
Speaker Change: Our capital expenditures remained steady quarter on quarter at $1 3 billion.
Speaker Change: Trading below our guidance for 2024 of our personally $6 $5 billion.
Speaker Change: Lastly, our free cash flow generation and strong cash position.
Speaker Change: <unk> used to return value to our shareholders with the payment of $1 6 billion and interest on capital in September.
Speaker Change: In Q3, we also acquired the remaining stake in <unk>.
Briefly mentioned our intention is to look for potential partners for our energy assets.
Speaker Change: Keeping a minority stake we hope to be able to bring more news on this in the coming months.
Speaker Change: Before passing the floor back to Gustavo for the key takeaways I'd like to comment on the agreement we signed today.
Speaker Change: As <unk> mentioned in his opening remarks, the agreement outlines the reparation and compensation measures related to the <unk> dam collapse.
Speaker Change: In addition to the 30 <unk> 2015, the agreement established 100 beta and payments obligations over a period of 20 years and.
Speaker Change: <unk> and performance obligations by Submarket.
Speaker Change: <unk> initiatives for individual indemnification rich settlement and environmental recovery.
Speaker Change: This table outlines our expectations of cash commitments as you can see in the short term, we will have a higher concentration of obligations to perform and overtime the effect on cash we gradually reduce.
This cash outflow projection considers that some mark will continue to pay for a portion of the requirements payments Aspira <unk> approved business plan.
As such we have recognized an extra provision of approximately $1 billion, bringing our expanded net debt to $16 $5 billion.
Regarding our optimal leverage targets, we are maintaining the $10 million to $20 million range under the same expanded net debt concept.
Gustavo Pimenta: Now I pass the floor to Gustavo.
Gustavo Pimenta: Thanks, Marcelo before opening up for the Q&A session I would like to reform the key messages from today's call. We remain highly focused on safety and operational excellence.
Gustavo Pimenta: As you have seen we delivered a robust operational performance the fourth consecutive quarter with year on year increase in iron ore production.
Gustavo Pimenta: We are accelerating our cost efficiency program now expecting to reach the low end of our <unk> guidance range for the year in iron ore, while lowering once again, our all linked cost guidance for copper.
I can assure you we will be laser focused on our efficiency efforts in the years to come.
On our strategic objectives to deliver a superior portfolio, we are progressing with our transformational projects version and granted startup in September on budget and ahead of schedule.
Gustavo Pimenta: He will come online in the next months, providing us with further flexibility within our iron ore operations at a very low capital intensity.
Gustavo Pimenta: At <unk> the asset review execution is gradually bearing fruit with strong year on year operational performance at both copper and nickel and I'm very confident that under Sean's leadership, we will continue to make substantial progress towards creating a leading energy transition metals business.
Gustavo Pimenta: Finally today is an important day for Brazil for <unk>.
Gustavo Pimenta: And for the people impacted by the collapse of some mark with them <unk>, the signing of definitive settlement for full reparation.
Gustavo Pimenta: Firms that the Brazilian institutions are solid.
And legitimate for resolving our issues.
Gustavo Pimenta: The agreement also reinforces our commitment to the purple the communities and the environment.
Gustavo Pimenta: Thank you all and let's start the Q&A session.
Speaker Change: We are going to start the question and answer session of the call. If you have a question. Please click on the raise hand button.
Speaker Change: Your question has already been answered you can leave the queue by clicking on the lower hand, but.
Speaker Change: Please ask your question in English and limit your questions to two at a time.
Speaker Change: Our first question comes from hurdle for Anjali <unk> with JP Morgan.
Speaker Change: You can open your microphone.
Speaker Change: Okay.
Speaker Change: Good afternoon, everyone.
Speaker Change: First of all.
Speaker Change: My first question goes to Gustavo and Gustavo I Couldnt.
Speaker Change: Let's start by wishing you the best of luck in Europe.
Speaker Change: As a CEO.
Speaker Change: My question is you touched on a few points around your ambitions.
Speaker Change: The new leader of the company at the beginning of the call and I understand that more details will be provided at the holiday, but I wonder if you could discuss with us a little bit more of what are your short term <unk>.
Speaker Change: Because we will be with Significative.
Speaker Change: See that could represent the biggest opportunities.
Speaker Change: To be capture, especially in the lower or in the earlier part of your thing. So that's my first question and my second question.
Speaker Change: Also couldn't.
Not to take the opportunity to ask a question for Ed.
Great to hear from you.
I wanted to go here from you a little bit more on the portfolio strategy.
Speaker Change: And the work that we're starting to hear more about so can you give us some more details on what exactly do you expect to be the next steps in that direction. What is the evolution of the portfolio of iron ore Vale in the future and that's it from me. Thank you very much.
Thanks, Sordo focused staff here, thanks for the best with wishes.
Speaker Change: Yes look I think the way we are thinking about is under three.
Speaker Change: Key levers right one.
Speaker Change: In terms of portfolio.
Speaker Change: We've talked about it but.
We are pushing hard to be able to resume the capacity that we think we can add in a very accretive way to our iron ore portfolio getting issued 350 million tons.
Speaker Change: Which will give us more than the volumes it will give us flexibility to operate under different market conditions, plus growing BBA, especially grow any copper right. So one of the key mandates that Sean has is how can we bring.
Speaker Change: Copper volumes sooner.
Speaker Change: Especially given the endowment that valley has so that is going to be a key element.
Speaker Change: Our strategy and we will push that agenda.
Speaker Change: Sure.
Speaker Change: Forward in a very decisive way the other one which is super important and you've seen some of it already in this quarter is to really drive a performance oriented culture within valley, Matt. So we appreciate that we lost some competitiveness over the last years as a result of many things including.
Speaker Change: Some of the constraints, we had in our operations, but I am very optimistic we'll be able to drive the company back into a much more competitive.
Speaker Change: Government Laurie in our S. One we've talked about that right Louis and RSC went below $20. So we'll push that agenda.
Speaker Change: Forward and I'm very optimistic about our ability to deliver on that and the third one which is probably a more short term.
Speaker Change: Focus is how can we.
Speaker Change: Continue to build strong and trustworthy relationships.
Speaker Change: With several stakeholders that we have.
Speaker Change: And I'm very happy with the solution that we just announced the settlement of my DNA is an element towards that future. So I'm being very focused on.
Speaker Change: <unk> and those issues because we know they wait on the stock and we're working very hard to resolve them. So that agenda is going to be super important for me for my leadership team.
Speaker Change: So we can bring the key stakeholders, along our journey, so with that outburst to Roger took over on the commercial strategy.
Speaker Change: Hello, Hello, Overdorf good to hear from you.
Roger: I guess, when we talk about portfolio strategy, which should devoted in short term.
Roger: And long term I guess in the short term, we will focus more optimizing our project our product portfolio and maximizing value.
Roger: In the long term it has to do a lot with the <unk>.
Roger: The carbonization of this two industry and.
Roger: And how are we positioned ourselves to be the primary supplier for the decarbonize steelmaking industry or the steel industry.
Roger: I mean, I think I would like to highlight that.
Roger: When you talk about portfolio optimization in the short term, we talk a lot about.
Roger: Hello about the iron ore premiums.
Roger: And as you know at premiums.
Roger: Premiums depend a lot.
Roger: On steel margins, which are currently low.
Roger: But based on our market outlook, we believe that there is a potential upside.
Roger: But I think more than that we believe that we do.
Roger: Do have a lot of action in terms of product portfolio and what we're trying to do it trying to build as a portfolio, which is flexible that we can adjust to maximize value I think here, it's important that we.
Make it clear that our objective function is value maximization right.
Roger: More specifically I think understanding for example, the total balance of <unk>.
Roger: FTE content silica alumina.
Roger: Alumina silica ratio in the global market is going to be fundamental for portfolio quick portfolio adjustments.
Roger: Just to give you that because as of today, we have very high silica penalties.
Roger: Ed.
Roger: $4 $7 per ton for every what every each percentage point of silica right. So.
Roger: We would like for example to work and redo.
Roger: Our offering of high silica products.
And then reduce that kind of impact.
Not only not only that but we also may take advantage of our higher production.
Roger: <unk> high quality pellet feed from broker to version good vintage of what processing and more production from us.
Roger: Ultimately I think we believe that the understanding of the global market combined with our flexibility is going to Lois to optimize maximize value.
In the short term.
Roger: So we are very much driven.
Roger: Very much driven by our value maximization, and our flexible product portfolio.
Speaker Change: Our next question comes from Danielle fossil with it that will be big.
Speaker Change: You can open your microphone.
Speaker Change: Okay.
Speaker Change: Thank you. Thank you so much everyone.
Danielle Fossil: Good luck on your on your new role Gustavo. It's also good to hear Youre again Jose.
Danielle Fossil: My first question would be related to Judy and first of all first and foremost congratulations on signing the agreement for the resettlement agreement first of all Marco definitely a win win situation for the populations and for violate that Ken can move ahead from these from this chapter.
Danielle Fossil: In regards to that I would like to know your perceptions Gustave if anything has changed at all in regards to <unk>.
Discussions on going in the UK and the Netherlands related to Judy.
Danielle Fossil: The legal proceedings going on.
Danielle Fossil: And related to some out of course, you could give us an update.
Danielle Fossil: And also on the <unk>.
Danielle Fossil: Talks with the government related to the renew of the railway concessions I think that would be great.
Danielle Fossil: And maybe my second question would be related to your.
Danielle Fossil: Expanded net debt target.
$20 billion target towards set at a different time for value right.
Danielle Fossil: A lot of other things that were going on but maybe now that you have a clearer view on your disbursements four by the end of <unk> sales over the next years. If you could think about changing that target. If it makes sense at all to even discuss that are you. If you remain comfortable with your $10 million to $20 million expanded.
Danielle Fossil: That target for for the time being thank you so much.
Speaker Change: Thank you Danielle.
Speaker Change: So let me I'll cover.
Speaker Change: Oh items of your question and then probably send to <unk>.
Speaker Change: Alex to complement especially the UK case right.
Speaker Change: So.
Speaker Change: The decision today and the signing of the agreement today is an important step and we always believed and I think today, we're able to.
Speaker Change: <unk> that the right jurisdiction for the settlement.
Speaker Change: Was in Brazil.
Speaker Change: And we were able to successfully achieve that so we think that that is the right jurisdiction.
Speaker Change: Where the decision needs to be.
Speaker Change: Hold and delivered and so we are happy with the outcome that we're able to achieve today I'll ask Alex After my my answer here to also complement if I missed anything.
Speaker Change: On the renewal of the concession renewal.
Speaker Change: We have advanced as we've mentioned before a lot on the potential at <unk>.
Speaker Change: <unk>.
Speaker Change: With the government with the potential settlement.
Speaker Change: Domestic we will be able to finalize that item as well there is some internal procedures and legal procedures that needs to be followed. So we are hopeful that by year end, we'll be able to resolve that discussion and finally on the expanded and that that concept I think it's early for us to revisit.
I think the concept as designed.
Speaker Change: Served as well and I think it was the right one so for now we are keeping.
And you can always revisit but today, we think that's the right metric in the right range.
Speaker Change: As to operate under so I'll ask Alex to complement my.
Speaker Change: Answer on the UK case, Alex please.
Alex Shandrydan: Thank you Gustavo and thank you Danielle for the question.
Alex Shandrydan: I will start by speaking about the UK case the trial in the U K K started last week. Many people are aware of that and it's ongoing for the next few weeks.
Alex Shandrydan: UK trial deals with our comps.
Alex Shandrydan: Compensation for individuals, but that issue itself will only be discussed.
Alex Shandrydan: Next year, so it's a long discussion still about.
Alex Shandrydan: Whether BHP holding can be liable for some of our coal. So thats discussion underway now the issues that are being discussed about compensation in the UK that will be discussed about compensation are fully covered by the Brazil settlement that we signed today.
Alex Shandrydan: For that reason, we understand that.
Alex Shandrydan: The position for the defendants will be much strengthened in the U K also because not only because the <unk>.
Alex Shandrydan: Claimants will have streamlined settlement.
Option in Brazil agreement, but mostly because the Brazil agreement deconstruct the lawyers principal arguments in the UK, which is that these types of issues are not.
Alex Shandrydan: Rapidly resolved in Brazil, and this is just.
Alex Shandrydan: The agreement this proves that point and prove that in fact.
Alex Shandrydan: Resolution is possible and that's.
Alex Shandrydan: <unk>.
And that fast.
The Netherlands claim.
Mentioned that will only begin in the middle of next year. The first hearings in court will be in the middle of next year and the issue of whether there is jurisdiction over Vale has yet to be addressed so.
So that's really far along the road. Thank you.
Alex Shandrydan: Yeah.
Speaker Change: Our next question comes from Leonardo Correa with BTG.
Speaker Change: You can open your microphone.
Speaker Change: Okay.
Speaker Change: Good afternoon guys.
Leonardo Correa: So a couple of questions on my side.
Leonardo Correa: The first one on cash cost for iron ore clearly.
Leonardo Correa: <unk> progress over the past quarters.
The message is that you guys are confident in reaching the low end of the guidance of $21.
Speaker Change: Gustavo you mentioned.
Leonardo Correa: Introduction of that.
Leonardo Correa: Reaching sub $20.
Leonardo Correa: Going forward.
Just to try to get a better job.
Leonardo Correa: And your sense I mean is this possible already 2025.
Leonardo Correa: Of initiatives also advising that engine ramping up I think more volumes.
So I just wanted to hear you on that front.
Leonardo Correa: If those targets are achievable in 2025.
Leonardo Correa: My second question on nickel, alright, specifically on the transmission business Theyre, putting me as a dual speed Anthony copper, which is the focus needs to be the focus super bright long term I think every single landlord is.
Leonardo Correa: So we're bullish on copper.
Speaker Change: Rightfully so right I mean it is.
Speaker Change: Yes.
Speaker Change: Warranted.
Speaker Change: On the nickel side of the business I mean, clearly theres a tolling model.
Speaker Change: From Vale.
Speaker Change: Vincent.
Speaker Change: It might be we might reception.
Speaker Change: Over the last quarters.
Speaker Change: Nickel prices haven't been helping of course.
Speaker Change: But in this environment.
Speaker Change: EBITDA is negative on some lines.
Speaker Change: Hum.
Speaker Change: Clearly there is room for some streamlining I just wanted to hear your thoughts on what exactly you guys are thinking for nickel and whether capacity come to Ron.
Speaker Change: The next year, considering this pressured environment. Thank you.
Speaker Change: Okay.
Speaker Change: So I'll do the first one and a little bit of the second one but I also want to have.
Speaker Change: Shawn and take the benefit of having shown on the line for him to also talk about the nickel one look in terms of cost what I, what I meant of come in below 20.
Speaker Change: By 2026, which is that prior guidance we have given.
Speaker Change: The more I look into our cost base, the more confident I get on our ability to get to that point.
Speaker Change: And as I mentioned is going to be a key priority of mine and one thing we have to appreciate this.
Speaker Change: There are several levers too.
Speaker Change: To get us to a more efficient position one is.
Speaker Change: And the last couple of years, we've introduced a series of processes or new process to.
Speaker Change: Deal with restrictions that we had in our operations. So that the team today those are a lot more about how to manage those processes. Then they use it to do and that is we have seen a lot of improvements in our ability to remove costs from the system just by operating better right.
Speaker Change: There is the benefit of ramping up production, where we've just reset guidance.
Speaker Change: 323% 330, but we've said we went I got your 350 with higher quality and some volume coming from the north.
Speaker Change: That also helps us too.
Speaker Change: Drive the unit cost plus the regular efficient programs that we've been pursuing and it's getting more and more mature by the day. So that's what makes me feel confident than we are seeing some of it this year with pointed to the low end of the C. One guidance, which just I.
Speaker Change: I think highlights that we are on the right track our nikko.
Speaker Change: Look we continue to believe that nickel is critical.
Speaker Change: The energy transition.
Speaker Change: And has a space on that certainly we have to make sure. We have the right portfolio of Nico given market conditions and be as efficient as possible to navigate and be profitable through the cycle right.
Speaker Change: <unk>.
Speaker Change: One of the key mandates that Sean has but I'll stop here I'd love to hear also his thoughts about it.
Speaker Change: Thanks.
Speaker Change: Thanks for the question.
Speaker Change: The distinction of being my first valid base metals question on an earnings call. So thanks.
Speaker Change: Gustavo has touched on the high points and I think we've just gone through a quarterly high from.
Speaker Change: From a unit cost perspective, with some of the maintenance.
Speaker Change: In February which was scheduled.
Speaker Change: Would have seen a lot of significant investment that has been occurring in this space and some of the initiatives that have been put in place across the business from a productivity point of view with what could a funny in the management team, which youre seeing bearing fruit, 20% to 30% productivity improvements.
Speaker Change: Lots of opportunity for fixed cost dilution.
Speaker Change: So this is a long term capital deployment business, we're seeing roughly 40% of the cost curve at the moment under water and you are seeing supply being curtailed in certain areas.
Speaker Change: At the end of the day, we have a strategically significant business.
Particularly from a western lens, which has probably one of the best mineral and dominance I've seen in my career. It is under explored underutilized and I think the opportunity for us to allocate capital wisely, while doing a lot more to continue to drive cost reductions productivity improvements and maximize value for this business through the cycle.
Speaker Change: Really what the party looks like and we Shouldnt lose sight of the fact that.
Speaker Change: Really what we're talking about we talk about nickel, but the vast.
A portion of this of this particular part of the portfolio is poly metallic we've got a lot of Golden Pgm's gold is at record prices more or less and so I think for this.
Speaker Change: This phenomenon to continue and for us to unlock value, particularly.
Speaker Change: Particularly at this point in the cycle was really the focus for us.
Beyond this.
Speaker Change: A huge amount of underappreciated optionality as we look at this portfolio and that's our job to do is ready to unlock that on refill that to the market.
That answers your question.
Speaker Change: Can we move on to the next question Mr. Gustavo.
Our next question comes from <unk> <unk> with Bank of America.
Gustavo Pimenta: You can open your microphone.
Speaker Change: Great. Thank you. Thank you for the opportunity. So my first question is on cash return perspectives ahead right.
Speaker Change: The final agreement related to the <unk>. The company still has expanded net debt below $20 billion.
Yet the obligations of disbursement related to money on my view of the correct radiation the amount to nearly $3 $7 billion or 2025.
Speaker Change: Which reduced in a material way the company's free cash flow generation potential for that year, right and I know that from an expanded net debt perspective.
Speaker Change: Since related to money on it but in my view should in theory be neutral, Matt as Youre disbursing that cash to cover those obligations.
Speaker Change: Disbursed those amounts you reduce your provisions amount, which is reflected in your expanded net debt right. Yes. If you look at it solely from a free cash flow perspective, there is a cash disbursement related to those items that.
Speaker Change: That reduces the free cash flow yield, which the company ultimately can deliver so my question is.
Speaker Change: You look solely to your expanded net debt level in an isolated manner.
Speaker Change: Thurman, whether you can announce you announced an extraordinary dividend head or will you also look at debt free cash flow yield incorporating those obligations related to <unk>.
Speaker Change: Andy correct realizations to make that decision and then a second question on a different topic deer Valley has a JV structure with copper.
Speaker Change: Which depends on exploratory success. Then you also have that fund that was recently established.
Speaker Change: Further these types of partnerships.
Speaker Change: So my question is other than for copper assets could you use that model of partnerships.
Speaker Change: For iron ore as well within Brazil. Thank you.
Speaker Change: Yeah.
Okay.
Speaker Change: Starting with the expanded net debt concept right.
Speaker Change: Looking fact, we always look at the free cash flow projection.
Speaker Change: The company under different scenarios.
Speaker Change: To make that assessment and then judge.
Speaker Change: How we allocate our cap alright, so the net debt for the expanded net debt concept is one of the elements, but we're looking to others and we look at especially to your point, where the expected cash flow generation of the company is vis vis vis the commitments, we have and if we have an opportunity.
Speaker Change: To remunerate, our shareholders. We will do is as we've been doing over the years. So that that is the way we look at several variables before making those decisions.
Speaker Change: Only one.
Speaker Change: In terms of partnerships and funds.
Speaker Change: Those those ones are transactions, where we can accelerate our access to offtake and volume.
Speaker Change: Where it makes sense for valley to instead of doing ourselves, having someone to do and we benefit from that partnership.
In many of the case or most of the other cases, we do ourselves, especially in the in VPN.
Speaker Change: On iron ore I think there is less of that.
Speaker Change: Opportunity I think you've seen us doing some of the we call them.
Speaker Change: In EMEA.
Speaker Change: Many mines those are his mall mines, where we don't think we are as competitive as our competitors to developed and therefore, we pursue some sort of a commercial agreement with them to be able to have access to those to those volumes, especially higher quality materials. So we will continue to think.
Speaker Change: About that one.
Speaker Change: I'd say its probably in a different format as compared to the way we look at base metals.
Speaker Change: Next question from <unk> <unk> with Bradesco BBA.
Speaker Change: You can open your microphone.
Hello, Thanks for taking my questions and of course, good luck with Starwood congratulations for the results and the Ford definitive settlement also Roche had real good good to hear from you again.
Speaker Change: And then Mike My first question Gustavo.
Speaker Change: Could you please share with us your thoughts on the on how the regulatory environment for mining activity in Brazil was evolving.
Speaker Change: That I mean, how are the discussions related to our new cave decree in Brazil, or even the modernization of the escape regulation and of course, whether you you believe that it could happen in the coming years and then my second question is about the base metals Division.
As these are the first conference call at Vale, Sean Good luck, so Sean if you could share with US your first impressions. The many opportunities that you see at Vale base metals I mean, it could be very interesting. Thank you.
Speaker Change: Thanks Rafael.
So let me do the first one addition, Ken just kind of stepping look.
As you know, Brazil has and then norm enormous potential in terms of.
Speaker Change: Mineral potential right not only.
Speaker Change: By having the highest quality iron ore.
Speaker Change: And the planet, but also by having a lot of deposits for energy transition models.
Speaker Change: Commodities right, so and our push in our discussion has been.
Speaker Change: How can we accelerate those developments as a country and many of those require discussions and modernization for example, as you've mentioned on the caves degree right. Then they're less is it less installation of it I'm optimistic that we'll be able to advance on those discussions I think there is a recognition.
Speaker Change: That the current legislation can be improved by all parties and we are hopeful that this is going to be addressed.
Speaker Change: In the near future.
Speaker Change: Hopefully sooner rather than later and that will be fundamental for us to unlock the potential that we have in the country in the petition that valley has.
Speaker Change: To grow on those commodities.
Speaker Change: So I'll pass to shown for the second question.
Speaker Change: Yeah.
Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Sean we can hear you I don't know if youre speaking.
Speaker Change: Okay.
Speaker Change: Where are the utilization.
Speaker Change: Yeah, we can hear you now okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Look division up to three and half weeks I think is very similar to the reason I took on this opportunity with with available metals, which is honestly believe that it's probably one of the most underappreciated assets of its kind in the battery metals through energy metal space.
Speaker Change: If you are building a business like this one of the biggest barriers that.
Speaker Change: People organizations face.
Speaker Change: Ultimately the mineral endowment it all starts with the geology.
Speaker Change: Three days of the Gms and some of the business leaders last week and.
Speaker Change: And I would say that I walked away from that time actually.
Speaker Change: It exceeded my most optimistic assumptions on the potential.
Speaker Change: Therein lies the opportunity for us as we look to allocate capital and run this business as efficiently as we can now.
Speaker Change: <unk> has already pointed out that particularly in Brazil.
Speaker Change: Everybody loves Copa it's very difficult to find high quality copper assets. This business has an underappreciated and incredible minerals and dominance in Brazil.
Speaker Change: And even prior to this call we are working already with the team.
Speaker Change: Trying to see if we remove the constraints, what's our ability to be able to actually truly unlock and partnership.
Speaker Change: The opportunities with government and other stakeholders.
Speaker Change: That mineral potential we've got established businesses like Salobo Sega.
Speaker Change: Salobo is open at depth and opened in various directions and then we've got so many other opportunities in that particular district to sort of embark upon.
Speaker Change: Looking at hubs and other things to unlock some of that mineral wealth and so yes.
Speaker Change: I guess for me as we look at it this time in a business where people are trying to buy what we've got.
Speaker Change: Our chances to really unlock the productivity cost and other things that are within our control and then ultimately unlock the value in the longer term that exist in this portfolio and then go beyond that when we once we've been able to achieve that I think we really have the foundation to create a true sector leader.
Speaker Change: In time.
Our next question comes from Martina, Colorado with RBC.
Speaker Change: You can open your microphone.
Speaker Change: Good afternoon. Thanks for the call I have a follow up question on your corporate strategy.
Thank you.
Speaker Change: Marcus on your internal clock tenancies or would you be open team.
Well in organically as well.
Thanks, Brian.
Oh go.
Speaker Change: Go ahead, Sean oncology No go ahead go ahead.
Speaker Change: Yeah Marina thanks.
Speaker Change: Look I come out of businesses like extra that essentially grew through M&A and I spent a large part of my career doing M&A.
Speaker Change: When I look at the M&A landscape every business has to have that capability and always look at different times of the cycle and to make it through a make or buy land.
Speaker Change: Just going back to my earlier answer our biggest and most valuable opportunity is the one that we actually have and so I think certainly for the foreseeable future. Although we will always continue to look at what's in the market I.
Speaker Change: I think we really have a lot of what the market is looking for and it's incumbent upon us to be able to actually capture and unlock that value I would go so far to say I suspect most of the organizations from what I can see that model valet really havent got visibility of the pipeline. When you look at your on net asset value breakdowns.
Speaker Change: And the opportunity set that this business has thats part of our job is not only to deliver that and to show this quarter on quarter and beyond but really the showcase that potential which I think is invisible at this stage.
Speaker Change: I will just complement I'll just complement.
Speaker Change: And I would echo Shawn's view, especially.
Given where we trade at currently.
Speaker Change: It is hard for us to do any.
Speaker Change: Transaction that makes sense for our shareholders now.
The unique advantage of our portfolio is the endowment in base metals has mentioned is one but also in iron ore. So we think we can make a lot more money and generate a lot more value to our shareholders.
Speaker Change: By developing our own endowment.
Speaker Change: Sometimes there'll be an opportunity for us to share infrastructure and do deals that are accretive.
Speaker Change: For both partners like the one we did recently admin Israel that is an example of deals that we like to do it's capital light if you will.
And those those deals make sense.
Speaker Change: Large deals are things differently from that are harder for us to do it and I would rather put our money to do.
Speaker Change: Our own development.
Speaker Change: Our next question from Timna Tanners with Wolfe research.
Speaker Change: Can open your microphone.
Timna Tanners: Yes, Thanks, good afternoon happy Friday.
Timna Tanners: To start out asking about Capex, just because as you point out in the branch.
Timna Tanners: Quite a bit of a gap.
Timna Tanners: A big amount that needs to be spent to meet your target in Q4, So is that happening or should we think about maybe later spend.
Timna Tanners: And then a bigger picture question I had was just that comment I heard earlier about how you have confidence that global steel margins are going to rebound and I'm. Just curious what drives that would be great to get your high level thinking in light of the property sector content. Thanks.
Timna Tanners: Yeah.
Hey, Timna happy Friday for you as well.
Speaker Change: We are looking to close the year.
Speaker Change: Within the guidance of around six three to $6 $5 billion.
Speaker Change: So it's looking very much in line with what we had guided to.
Speaker Change: Throughout the year, there's always some variances within quarters, but you should look at that full year.
Speaker Change: As the final number will be expecting to deliver in 2024.
Speaker Change: So I'll pass to Raj added to talk about margins.
Speaker Change: Hi, Jana I think.
Speaker Change: When youre looking to do I don't know what market.
We do believe that the market will stabilize but we see potential upsides.
Speaker Change: On a more broadly basis on a worldwide basis, you see CSP crude steel production reached $1 9 billion tons with China being responsible for over $1 billion in 2024.
Speaker Change: And we do expect the same figures for 2000 22025.
Speaker Change: And as you know I think this has been talked to over the Chinese Goldman is working to boost consumer confidence.
Fiscal and monetary stimulus Israel have been hearing about.
Speaker Change: We believe that with that steel consumption will stabilize.
Speaker Change: And the decline in fixed asset investments in the property sector will be compensated will more will be offset by fixed asset investments and the mile effect shrink and infrastructure sector.
Speaker Change: As a result, we expect a stable iron ore supply by bonds.
Speaker Change: We currently see inventory levels stable across the whole supply chain. Despite the fact that we see high inventory levels at ports.
Speaker Change: We see very low inventory levels at the steel mills.
Speaker Change: So when you look at on a more comprehensive basis, we believe that inventory levels are stable.
Speaker Change: Not only that but when we are looking to their cost curve, we see that over 15 million tons of supply have support at $95 per ton.
Speaker Change: In the cost curve and close to $150 million those have support to 90.
Speaker Change: So.
Speaker Change: If prices come down a lot of a lot of capacity a lot of production will leave the market.
Speaker Change: But more specifically to your question in the short term, we see some positive data.
If you look into blast furnace utilization the figures are increasing to 87%.
Speaker Change: As steel margins are.
Speaker Change: About a plus $20 per ton in rebar.
Speaker Change: It's about neutral in HRC and Youll see some regions, specifically the regions which are.
Speaker Change: Where are they face less competition in China or have less Jo mill is already growing more significantly.
Speaker Change: Outside China, I think the market or the steelmakers are struggling specifically with the Chinese exports.
Speaker Change: But.
Speaker Change: If if that actually exports reduce demand will still be there and we believe that there will be good.
Growing marginally.
Speaker Change: Okay.
Speaker Change: Our next question comes from Christopher <unk> with Jefferies.
Speaker Change: You can open your microphone.
Hey, Thanks for taking my question. This is kind of a follow up to it with Tinder just asked if we look at.
Speaker Change: The historic Valley strategy, including in the last quarter you have at times.
Speaker Change: Taken higher cross lower margin capacity offline I guess basically the value over volume approach.
Speaker Change: Which has probably been a pretty supportive factor in the market.
Speaker Change: And other companies have done this as well.
Speaker Change: And my question is how does the strategy change even if you are shifting your production mix.
Speaker Change: And more high quality high margin or does that imply that prices would have to fall. Further before you took capacity offline I'm, just kind of thinking of not necessarily where the market is going to be in 2020 for 2025 and where it might be.
Speaker Change: Later in the decade with Simandou coming in with your own production mix shift BHP has got some growth as well and if we are in a scenario where the iron ore market is declining if demand in China is weakening.
Alright, and that kind of downside scenario at what point do we start to see a supply response later in the decade and again with your costs coming down it's going to be coming on line.
Concern that maybe it's not 90 to 100, but it could be considerably lower than that.
Speaker Change: The question is where the downside would be later in the decade, if demand isn't the declining thank you.
Let me maybe go over a few elements and then raise that issue on a and I think the one.
Speaker Change: One thing, which I think fundamentally is important.
Speaker Change: Even with Tim undo the amount of depletion that youre seeing in the market. This is enormous and the degrading that we are also seeing.
Speaker Change: In the market from our competitors is very relevant and I think that sometimes it's overlooked.
Speaker Change: So that's one element to take into consideration. That's why we are not as negative long term.
Speaker Change: With the entrance of Simandou is when would that would probably be.
Speaker Change: In terms of the VAT over volume strategy I think they will.
Speaker Change: That will continue.
Speaker Change: Certainly that will continue or not I think that will continue.
Speaker Change: The good thing of resuming capacities that finally, we start you have flexibility because exposed boumediene. We've lost a lot of the flexibility that we had in our.
Speaker Change: Our offerings.
Speaker Change: So now that we are bringing Virgin ground their company and we are back to 350 more than the volume per se.
Which is not what we chase.
As Ed said.
Speaker Change: We will have the ability to then play within.
Speaker Change: The market conditions to maximize value that flexibility with did they have.
Speaker Change: Just a few years ago and I think now finally, we are having.
Speaker Change: Youll give us the ability to remove volumes whenever they don't make sense.
Speaker Change: We've mentioned this last time.
We could have gone beyond the 330 million tons, we are removing.
Speaker Change: And the market this year, probably seven to 8 million tons of high silica products that we could be putting into market and we decided not to do because it's not the right.
Speaker Change: Thanks, you do from a market perspective, so we will continue to be extremely disciplined on how we add volume to the market. The beauty of what we are doing here I think is the fact that we now have flexibility to play along depending on the different market conditions, and we will continue to do so.
Speaker Change: Our next question comes from Jon Brandt with HSBC.
You can open your microphone.
Jon Brandt: Just one question for me just as it relates to your overall metals portfolio. Obviously, if we look over the past 20 years volume has really transformed.
Sort of three main metals from many more.
Jon Brandt: But recently, we've seen some of your competitors.
Jon Brandt: Maybe doing some M&A and adding to their product portfolio either in lithium or fertilizers. So I'm just I'm wondering if we look out over the next five to 10 years are you were you happy with your.
Jon Brandt: Your portfolio of iron ore nickel and copper or would you look to add things like lithium fertilizers potentially uranium.
Jon Brandt: That's my question. Thank you.
Gustavo Pimenta: Hey, Hey, John Gustavo here look where we are halfway there portfolio we have.
I would certainly like we'd like to have more copper than we have but that will be working on that so I think we.
Gustavo Pimenta: If we have anything in our portfolio. It has to have scale, we need to be well positioned for any cost curve perspective.
Gustavo Pimenta: And why do we have today are.
Gustavo Pimenta: Are the commodities that we believe we can deliver that at the end it's about value creation.
Gustavo Pimenta: So we like what we have.
Gustavo Pimenta: As a company we are always assessing alternatives and opportunities, but we are happy with the commodities, we have and it's a question of how we can continue to grow them.
Speaker Change: This concludes today's question and answer session. Valley's Conference is now concluded we thank you for your participation and wish you a nice day.
Speaker Change: [music] Hey, guys.
Speaker Change: Sean.
Sean Oncology: Thank you so much.
Jonathan: Thank you Jonathan.
Jonathan: Thank you.
Jonathan: Goodbye.