Q4 2024 Vale SA Earnings Call
Enter your participant I D followed by pound. Please enter the meeting password followed by pound.
Speaker Change: You have joined the meeting as an attendee and will be muted throughout the meeting Mr. Marcelo Bacci Executive Vice President of Finance and Investor Relations. Mr. Jorge I don't know Gator Executive Vice President commercial and development Mr.
Gustavo Pimenta: Carbos Ms Davis Executive Vice President of operations and Mr. Sean use more CEO of value based models now I will turn the conference over to Mr. Gustavo Pimenta, Sir you may now begin.
Gustavo Pimenta: Hello, everyone and welcome to valleys fourth quarter 'twenty 'twenty four conference call.
Gustavo Pimenta: At validate we laid out our Joannie 30 vision with a clear focus on evolving our portfolio of assets to supply our clients needs with a highly competitive cost profile.
Gustavo Pimenta: We also presented our initiatives to advance on our cultural transformation, while positioning value as a trusted partner.
Gustavo Pimenta: I'm happy with the results, we were able to achieve thus far and very optimistic about the future of violin.
Gustavo Pimenta: We finished training 24 on a strong note.
Gustavo Pimenta: On safety, we lowered our injury frequency rate to 1.1 as a result of our continued focus to create an accident free work environment.
Gustavo Pimenta: We have also achieved 57% of the upstream dams the characterization program and expect to have no dams at level three by the end of 2025.
Gustavo Pimenta: We signed definitive agreements for the Mariana preparation as well as for the radio concessions renewal in our iron ore business. We delivered two of our three key projects Virgin Granddad started up in September ahead of.
Gustavo Pimenta: And on budget and in December we announced GAAP Animas startup.
Gustavo Pimenta: Also ahead of schedule.
Gustavo Pimenta: Both projects at 30 million tons of low cost production capacity.
Gustavo Pimenta: In base metals, we produce the first ore from the second deposit of the VB Ami project, an important milestone towards continued efficiency gains and fixed cost dilution in the nickel business.
Gustavo Pimenta: We have also made progress on our strategic partnerships with the closing of our 15% acquisition of men as rail as well as the initiation of construction of our concentration plant in saw her Oman, which is expected to come online into any China seven.
Gustavo Pimenta: Last but not least we delivered on all of our production and cost guidance for the year, reflecting our continued focus on operational excellence all of these achievements demonstrate that we're on the right path to deliver on our 2030 vision.
Gustavo Pimenta: Now looking into our production performs iron ore production reached 300 into 88 million tons.
Gustavo Pimenta: The highest level since joining a team and above our original guidance.
Gustavo Pimenta: In the fourth quarter of 'twenty 'twenty, four we proactively shifted our portfolio mix.
Gustavo Pimenta: Reducing direct sales of high silica material, while increasing the share of high quality products from carriage us.
Gustavo Pimenta: This resulted in higher realized iron ore premiums.
Gustavo Pimenta: But more importantly, higher margins and returns on invested capital.
Gustavo Pimenta: In base metals, we continue to make solid progress having achieved the highest copper production seems to any trading driven by Salobo, which produced roughly 200 kilo tons of copper in China 24.
Gustavo Pimenta: And Niko a significant milestone was achieved with the VBA me project completion.
Gustavo Pimenta: We have also announced the Thomson review as part of a process to optimize value based models asset base.
Gustavo Pimenta: We expect to conclude the review process in the second half of this year.
Gustavo Pimenta: We continue to be highly disciplined in our productivity efforts.
Gustavo Pimenta: Having delivered all of our cost guidance across the different commodities in 2024.
Gustavo Pimenta: In iron ore, particularly our C. One cash cost came in at the low end of the guidance range at around $22 per ton.
Gustavo Pimenta: In the fourth quarter, our C. One Richard 18.8 dollars per ton the lowest level since 2022.
Gustavo Pimenta: In copper we had the best year in terms of all in costs since China training on the back of Sal Lobos record production as well as higher byproduct prices, particularly gold.
Gustavo Pimenta: Legal costs are also trending downward with further support expected as a result of the <unk> ramp up.
Gustavo Pimenta: We remain highly committed to continue improving our cost competitiveness across the business and we are very confident on delivering our guidance is again in 2025 positioning valley at the very low end of the industry global cost curve.
Gustavo Pimenta: We are also laser focused on optimizing our capital expenditures.
Gustavo Pimenta: As a result of that we have reduced our capex guidance for 'twenty 'twenty $5 billion to $5.9 billion leveraging optimization initiatives in certain capital investments.
Gustavo Pimenta: In this context and given our strong confidence in a robust cash flow generation for China 25, Our board of directors approved $2 billion in dividends and interest on capital.
Gustavo Pimenta: Resulting in an annualized 10% yield.
Gustavo Pimenta: The board also approved the extension of our buyback program for up to 3% of our outstanding shares.
Gustavo Pimenta: Looking ahead, we will remain highly focused on our disciplined capital allocation approach.
Gustavo Pimenta: Balancing capex optimization accretive growth and strong shareholder returns.
Gustavo Pimenta: Before passing onto Marcello I'd like to talk about our announcement last week regarding the new carriages.
Gustavo Pimenta: As you know garage out as one of the best provinces of critical minerals in the war.
Gustavo Pimenta: Including for the highest grade iron ore.
Gustavo Pimenta: And that this new program, we are creating a dedicated multifunctional team with increased investments in exploration in order to accelerate the development of the regional endowment.
Gustavo Pimenta: We are confident this new approach will has substantially our ability to develop accretive projects to our shareholders in line with our long term strategy.
Gustavo Pimenta: We will be providing more color about the new carriage as initiative in the following quarters as the program evolves.
Speaker Change: Now I would like to welcome Marcello Bacci for his first conference call with Valley I'll be back for closing remarks before the Q&A session. Please marcello.
Marcello Bacci: Thanks, Gustavo and good morning, everyone. It's great to be here for my first quarterly conference call with volume let's.
Speaker Change: Let's take a look at our Q4 financial performance.
Speaker Change: Our pro forma EBITDA was just over $4.1 billion in four Q24, 9% higher quarter on quarter.
Speaker Change: You can assume those light there were two main factors that contributed to this performance first our portfolio optimization strategy allowed for an improvement in our realized all in premiums of $2 $9 per ton sequentially with a positive impact of $190 million and our EBITDA.
Speaker Change: And second our cost efficiency program continues to yield positive results with our unit cost declining across all of our commodities year on year.
Speaker Change: In the particular case of RC one the positive impact on our EBITDA was $180 million quarter on quarter.
Speaker Change: We think that cost competitiveness is a key element towards protecting your company from market cyclicality and I'm very pleased with the results that we're achieving.
Speaker Change: This quarter, our iron ore cone cash costs.
Speaker Change: Excluding third party purchases came in at $18 $8 per ton almost 10% lower year on year.
Speaker Change: This is the lowest Q1 cash costs since the fourth quarter of 2022.
Speaker Change: The improvement was primarily driven by our efficiency initiatives and are better production mix with higher volumes coming from the northern system.
Speaker Change: Our all in cost performance was solid with a reduction of over 5% year on year, reaching $49 $5 per ton in the quarter.
Speaker Change: The improvement was driven by lower <unk> costs as well as by our portfolio optimization strategy, which led to higher realized premiums as I explained earlier.
Speaker Change: Our strong performance in Q4 gives us confidence that we are on the right track to continue to improve while delivering Oliver our guidance is in 2025.
Speaker Change: Looking at our energy transition metals business.
Speaker Change: We also saw an overall decrease in all in costs in copper hauling costs were the lowest since Q4 2020, reaching about 1.1 thousand per metric ton driven by higher byproduct revenues from Salobo, primarily composed of gold as well as by improved operational performance.
Speaker Change: Hey, Mitchell hauling costs totaled about $13 $9000 per metric ton the lowest since <unk> 22, driven by higher byproduct revenues, especially from copper and PGS.
Speaker Change: The value base metals asset review led by Sean is progressing remarkably well, we are optimizing operations and achieving cost improvements across all business lines. Our focus is on unlocking the BMS who has a potential.
Speaker Change: Now moving onto cash generation I'll spend a bit more time on this slide to explain so movements in our free cash flow, particularly in light of our expanded commitments related to <unk> and <unk>.
Speaker Change: First our recurring free cash flow generation reached roughly $800 million in Q4 $300 million higher than in Q3.
Speaker Change: This increase was primarily driven by higher EBITDA and a positive impact from working capital. Thanks to strong cash collections in Q4 from Q3 iron ore sales.
Speaker Change: Our recurring free cash flow was used to address one off items, such as the advanced payment of $656 million for our railroad concession contracts.
Speaker Change: Renegotiating, a concession contract allowed us to reduce contract risks and optimize our obligations with a small impact in our provision while securing concessionary expansion until 2057.
Speaker Change: I would like to highlight that the cash outflows related to the sammarco in room audio commitments are already provisioned in our balance sheet and are part of our expanded net debt concept, which is a reference for capital allocation purposes, including dividends and buybacks.
Speaker Change: Having said that those outflows should not be considered in the free cash flow to equity calculations, they should rather be treated as a type of debt amortization.
Speaker Change: As you can see on the next slide our expanded net debt remained stable at 16, and a half a billion dollars in the quarter.
Speaker Change: Here, we present, the main cash and noncash factors that impacted our expanded net debt sequentially.
Speaker Change: We are maintaining our 10% to $20 billion expanded net debt range aiming to be at around the middle.
Speaker Change: This will be the reference for additional shareholder remuneration.
Speaker Change: As Gustavo mentioned earlier Vale will pay $2 billion in shareholder remuneration in March while our board also approved a new buyback program of up to 120 million shares. This shows our continued focus on returning value to shareholders with that I now pass the floor back to Gustavo.
Speaker Change: Thanks, Marcella before opening up for the Q&A session I would like to reform the key takeaways from today's call.
Gustavo Pimenta: We have made substantial progress in addressing the key overhang valuers facing in recent years.
Speaker Change: Well positioning us for the years to come.
Speaker Change: We continue to advance on our operational excellence agenda consistently delivering on the production guidance, while capturing sustainable efficiency gains.
Speaker Change: Our unique environment provide us with the flexibility and optionality to adapt our portfolio mix to any market scenario.
Speaker Change: Also we are strategically building the right portfolio by accelerating accretive growth opportunities such as with the new <unk> program, where we have a highly competitive value proposition.
Speaker Change: And finally, our disciplined approach towards capital location, we will continue to ensure healthy shareholder remuneration and value creation to all of our stakeholders now let's start the Q&A session.
Speaker Change: Thank you we are going to start the Q&A session of the call. If you have a question. Please click on the right hand button. If a question has already been answered you can leave the keel by clicking on the lower hand button. Please ask your questions in English and limit your question answered.
Speaker Change: Are you at a time.
Speaker Change: Our first question comes from Daniel Sasson from <unk> BBA.
Speaker Change: Please Mr session. Your microphone is open.
Speaker Change: Thank you so much good morning, everyone. Thank you for the opportunity.
Speaker Change: My first question is related to your make fewer sales sales mix, it's becoming clearer and clearer that <expletive>.
Speaker Change: The quality is increasing our increasing concentration.
Speaker Change: But it did.
Speaker Change: Did increase your your inventories by almost 6 million tonnes in the second half of last year right.
Speaker Change: Speaking protection sales.
If you could comment a little bit up on how are your inventory levels, if you're comfortable with them and how that is associated with the company's commercial strategy right. I mean, if maybe we could see Vale.
Speaker Change: More and more focusing on value over volumes over the next year. If that's the that's the the.
Speaker Change: North you are you're going to that would be great and my second question related.
Speaker Change: It related to two Gustavo as final remarks.
Speaker Change: Hugh you mentioned, the the ramp ups of Vars, and Grandin and company am I right that you commissioned.
Speaker Change: Between September and December last year, but when we look at your your prediction guidance for this year relatively flat versus 2024.
Speaker Change: Can we is hitting please see that you are thinking about lower purchases from third parties.
Speaker Change: Could actually help your cost per forma senora delivered in China cost I know that seasonality helped in the fourth quarter, but youre delivered in China. It was even lower than your mid to long term guidance for delivering in China cost right. So how can we think about this cost evolution for 2025 onwards.
Speaker Change: Thank you so much guys.
Danielle: Hey, Danielle.
Gustavo Pimenta: Gustavo here. So let me start with the second one and then I'll pass to triage area to talk about the sales mix.
Gustavo Pimenta: So the first thing is there is a ramp up of those projects right. Both for Biogen Granta MK, Panama, we will take some time to reach full capacity I think that's the first one and I think the way. We are looking into that is that this will give us more flexibility to play along the value over volume strategy as we mentioned last year, we could have.
Gustavo Pimenta: Done more volumes in Q4 than we actually did.
So we have taken a similar approach in our projections for this year. So if anything despite projecting something similar to last year I think does youll, probably have greater flexibility to play on the value over volume. So that's the way we're thinking about so have I have Roger to talking about the sales mix.
Gustavo Pimenta: Thank you Danielle I think earth.
Gustavo Pimenta: You put it exactly right when we discuss our product portfolio. Our focus is all value. So we're not looking only at price realization not only at volumes or costs not only edge.
Gustavo Pimenta: Inventories it is about the optimization of cash flows.
Gustavo Pimenta: Long term I think you know our our direction is not going to change your refocusing of de carbonization to Mega hubs.
Gustavo Pimenta: And that's a different story.
Gustavo Pimenta: Short term.
Gustavo Pimenta: We're looking into what the market is actually doing it right now what are the margins of our clients.
Gustavo Pimenta: What is the trend in terms of premiums we're looking together with our operations colleagues on the supply chain.
Gustavo Pimenta: What are the mines possibilities cost strained and opportunities and looking into the whole supply chain. We're trying to figure out what is the what is the portfolio design the maximizes value and that's exactly what's going on right now the decision at this point in time was to Beneficiate I don't know.
Gustavo Pimenta: Sure.
Gustavo Pimenta: Moving our our product portfolio more towards a mid grade product with even better results and that's what we've done.
Gustavo Pimenta: Our expectation for the coming quarters as ditch. This will be this will be the duration that we will take.
And then you should see some increase in inventories as a result of that but again keep in mind that our focus is to work with a flexible portfolio with a view of maximizing value.
Speaker Change: Our next question comes from Carlos de Alba from Morgan Stanley placements.
Speaker Change: Please Mr. Joe Bob Youre My phone is open.
Speaker Change: Yes, thank you very much.
Speaker Change: My first question and good morning, everyone.
Speaker Change: Is that a maybe if you could provide sean.
Speaker Change: Sean a later and this is for Sean on base metals, maybe a little bit more of details of the progress to date.
Speaker Change: That you are that you have achieved and what sort of results do you expect that we can see that I guess.
Speaker Change: On the cost side, but there are those who have been like that you mentioned already more in terms of production, perhaps shipments throughout the year and the sequence of getting to the cost target for the year and the second question maybe.
Speaker Change: Maybe for Costar always wore on and.
Speaker Change: And these are still I guess EM situation with the municipalities here in Brazil that were impacted by the Mariana accident.
We understand that May six is the deadline for them to decide whether they joined the agreement that the company. The comprehensive agreement that the company's reach with a further.
Speaker Change: State governments in the country.
Speaker Change: Or continue to pursue a plaintive lawsuit in the U K.
So what you.
Speaker Change: Even if it is a small chance or however, we want to frame it.
Speaker Change: And what is the company's strategy or what will the company do you have the majority of the municipalities decided not to join the Brazilian agreement. Thank you.
Carlos: Carlos Thank you for the questions.
Speaker Change: As far as my hair.
From cannabis metals.
Speaker Change: So your question is on cost competitiveness and progress to date.
Speaker Change: So I'd say look it's been four five months and I've been really impressed with the progress that the team has made over this period of time. So to give you a sense of that think about it you've got a vertically integrated.
Speaker Change: Local footprint and in nickel in certain and cover our priorities remain as we've said on valor data.
Speaker Change: To unlock the endowments, but the dominant needs to be enabled through lower costs higher productivity and agility.
Speaker Change: So in that period, you would've seen initiated very early on the restructuring the team has done incredibly well focused on overhead we are on track for about a third of our overhead reduction which is a run rate of nearly $200 million U S dollars a year.
Speaker Change: Which is in excess of what I would have anticipated and its really just the cost component. It's what it does to any.
Speaker Change: This decentralized.
Speaker Change: Operating model across the business to help that greater productivity and focus on cost and I'm already seeing that happening I think if you look in the last period and this goes to your points on what to expect.
Speaker Change: If you remember, we just had a record year in Salobo Salobo for example, even on things like shovel productivity has improved about 5% last year, especially the best performance on a shovel in Brazil. For example, the team has done a great job on that on truck availability is about 10% increase on that.
Speaker Change: We've seen significantly more meters drilled as they look to unlock the endowment that's been spoken about repeatedly now even to Sega as a more mature mine.
Speaker Change: We've seen a 28% improvement in utilization and Youre seeing that that's a focus on both hot seat changeovers at the at the end of shifts and they are being able to park four trucks at about 16% of their fleet. So this sort of focus on cost and productivity not just in overhead but not at the operational level is key and then as you think.
Speaker Change: Deliveries in cost I'd say copper is very much on track already for what we've sort of put out there for guidance for the year.
Speaker Change: You should expect volumes and also the cost improvement to improve as we ramp up.
Speaker Change: Good luck on Supreme over the second furnace in the second half of the year.
Speaker Change: We've announced I think of it as well the trials, where the nickel content on fair nickel alloy was increased from 25% to 35% now they've done a really really good job to be able to set ourselves up for the second furnace also improve our products and improve costs and very much on track with that and Ontario.
Speaker Change: The operation there.
Speaker Change: We've seen a big focus on development rates to play catch up with Underinvestment and productivity needs of the past and just to give you. An example, we saw earlier last year. They weren't doing at about 2023 in fact about 64 meters at down development, they're running now at about 84 and Craig.
Speaker Change: For example year on year has seen a 100% improvement in their development capability.
Speaker Change: So a very strong focus on that and so it's across the board.
Speaker Change: I think particularly on nickel you have seen this route.
Speaker Change: As she said this significant reduction in cost that has to continue and the focus for the team, particularly in this market.
Speaker Change: Get the cost structure down the overheads as well as the operating costs, we need to make sure that were sustainable in this sort of price environments and they can benefit when we see a recovery in.
Speaker Change: In the future.
Speaker Change: And a key focus for us is enabling that copper growth that we've spoken about and I think the team has done a remarkable job so far.
Speaker Change: So Carlos let me just complement them on your second question on Mariana look our view is is that the south comment in Brazil that we were able to successfully achieved last year is is fair comprehensive and it is the.
Speaker Change: The best alternative in the best path for the recreation to evolve and to move forward.
Speaker Change: We continue to believe this is the best alternative for all.
Speaker Change: Constituents.
Speaker Change: <unk> a fair expedite it.
Speaker Change: Payment mechanism for all related parties, we've seen very good traction in terms of delivering on the commitments that we've signed so we continue to believe that this is going to be the ideal and the preferred path for everybody at you.
Speaker Change:
Speaker Change: <unk> all of the operations that we are agreed among the parties.
Kai: Our next question comes from Kai <unk> from Bank of America. Please Mr. Roberto you know my own children.
Kai: Okay. Good morning, Thank you for the opportunity. So my first question is on your recent decision to launch it strategic review for Thompson.
Kai: Which you mentioned could include a potential sale of the asset.
Kai: So my question is could you also contemplate other assets in Canada, such as ebay or Sudbury as candidates for divestment as well.
Kai: What specifically about <unk> lead you to consider a potential sale there and then my second question is on the recent discussions in China once again implement supply side reforms for the steel industry.
Kai: Back in 2016, and 17 that was a big theme for the industry, which led to a significant curtailment of excess steel capacity and enhance the profitability for steelmakers.
Speaker Change: I'm around how do you see the supply side reform playing out and is that something that you see having a material impact for the iron ore business. Thank you.
Gustavo Pimenta: Gustavo K, if I can cover the first.
Speaker Change: Okay.
Speaker Change: And Sean Yes, I'm kayode, thanks for that question.
Yeah.
Speaker Change: Just on CIT and the last thing that focus that we have as you would appreciate particularly this environment.
Speaker Change: Is making sure firstly that the way to the unlock the potential of the portfolio and endowment that we know is there is to physically get the cost structures and productivity is right. So that's happening as table stakes across the board, but the concurrent if it needs to be what's the right portfolio for us to be able to optimize value for <unk>.
Speaker Change: Shareholders and as part of that.
Speaker Change: We're competing with capital across this portfolio and of course, we are competing with some very lucrative opportunities in iron ore and our priority remains in copper so specifically the Thompson.
Speaker Change: It's an operation that we've been in.
Speaker Change: We've worked through over 60 years generate a lot of wealth is we've sort of pointed out previously but the question really is as a non poly metallic opportunity. It's something that is at the moment not generating the highest returns when we look at the opportunity set for nickel.
Speaker Change: So we need to make sure that we don't make the mistake of trying to be all things to all people and spread our resources and our limited capital to widely which is the reason that we've initiated this process on Thompson.
Speaker Change: Can say so far we've had significant interest the data room open just yesterday and as we've indicated we expect to form a view in the second half and we haven't completely open mind as to what that path may entail in the future, including a potential sale. So this is very much a strict.
Speaker Change: Dispassionate view on how to optimize value.
Speaker Change: One worth noting.
Speaker Change: As you know who is.
Speaker Change: And I think we're getting an award in two weeks time at <unk>. He is the best.
The discovery of its current copper gold discovery in say the last 20 years, and it's incredible and the <unk> II study is just being concluded.
Speaker Change: Delta has a number of the sort of prior technical risks and.
Speaker Change: That will be unveiled shortly but it's illogical time as well for that to think about things like partnerships.
Speaker Change: Particularly if we were partners who are able to do have great experience in.
Speaker Change: <unk> for example, so that's something that I think you can think about again with a view to how do we manage risk focus on value and optimize the portfolio.
Speaker Change: <unk>.
Speaker Change: To your question on things like Boise has been others. Our short term focus we're going to look at everything across the portfolio.
Speaker Change: And particularly at different pricing scenarios, but the best thing we can do for our investors is really firstly to get the cost structure and productivity is correct to be able to then unveil their value potential. So that's the focus we're doing these things concurrently.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Kai on the supply side reform I think as you know today the industry is operating at the overcapacity with.
Speaker Change: Less furnace utilization at about 85% and margins are very low.
Speaker Change: For rebar producers for HRC producers, because there are two events going on simultaneously for capacity restaurant rationalization. The first one the people don't pay much attention to is the consolidation there.
Speaker Change: He is an ongoing consolidation in the Chinese industry and the second one is you just talked about is this potential supply side reform 2.0.
Speaker Change: Which I think we we don't know exactly whether this will come or not as you may recall, the first supply side reform.
Speaker Change: It was about $150 million of induction capacity there was an easier one to do because it was very old capacity very polluting capacity and back then you had a significant impact.
Speaker Change: And this impact is actually referred is actually see any premiums more than and in iron ore prices.
Speaker Change: Look I think this event will happen the rush capacity rationalization will happen.
Speaker Change: Through consolidation or does supply side reform two points of your question is timing.
Our next question comes from the unethical Heyer from BTG Pactual. Please Mr. Kohei, yeah microphone shopping.
Speaker Change: Please Mr. Kohei activate your microphone and you can start asking a question.
Kohei: Oh, Hello, sorry can you hear me now.
Speaker Change: Yes, yes, yes.
Speaker Change: Perfect, Yes, so sorry about that yeah. So a couple of questions on my side.
Speaker Change: And good morning, everyone. So the first one.
Speaker Change: I think my lessor, we talked a lot about the free cash flow was in housing.
Speaker Change: The free cash flow breakdown.
Speaker Change: Talked about the net debt and expanded net debt target, which remains between 10 and $20 billion.
Speaker Change: With a goal of.
Speaker Change: Keeping it at the middle of it which means something around 15 billion, so you're slightly above that level at 16 billion now and.
Speaker Change: An expanded net debt right.
Speaker Change: I think the one of the key positives.
Speaker Change: Water was clearly and cash returns right I think the company managed to positively surprise because quite welcomed.
Speaker Change: Announcing $2 billion in cash terms with.
Speaker Change: With a $500 million extraordinary dividend and so on.
Speaker Change: My first question is I mean is this is this something that assumes you war as a let's.
Speaker Change: Let's say a one off.
Speaker Change: Which.
Speaker Change: Then, let's say more of a function of the reduction in Capex.
Speaker Change: And does the.
Speaker Change: The stronger annual price level that we've been seeing in this first semester. So how should we think of extraordinary dividend going forward is my first question. My second question is.
Speaker Change: Yeah, and I understand that this is obviously a sensitive then theres nothing.
Speaker Change: Firmed.
Speaker Change: <unk> has been talking a lot about volume specifically a transaction as an asset.
Speaker Change: <unk>.
Speaker Change: I saw which pushed.
Speaker Change: We've been following for many years.
Speaker Change: It seems while it hasnt been doing our homework and of course this is all.
Speaker Change: Public information.
Speaker Change: So first off I just wanted to hear from you I mean exactly what the angle is where are the opportunities.
Speaker Change: What's the strategic rationale removal is there something that bothers me is considering so do you have any color additional color on this transaction, which has been wildly publicly talked about in the past I think it will be very helpful. Thank you very much guys. Those are the questions.
Speaker Change: Alright.
Marcellus: As Marcellus speaking thank you for your question.
Marcellus: We continue to have the same policy when it comes to.
Marcellus: Cash returns to shareholders and.
Marcellus: Looking at the expanded net debt concept.
We have this target between 10 and 20 billion aiming at the center of it which is <unk>. We are now at 16 and a half but when we project. This to the future we see that even with the additional dividend we're going to be inside that level. Given the fact that we have first a reduction in capex.
Marcellus: <unk>.
Marcellus: Which as you know very safe for this year, we are very.
Marcellus: We can make sure that for this year of $5 nine is a very reasonable number and we are still looking at how this is going to play in the coming years, but for this year, we have a very high level of certainty related to that.
Marcellus: And also we started the year with a higher cash flow generation than we expected. So we are confident that even with the.
Marcellus: Payment of dividend that we just announced we will be around $15 billion and we are not changing the target.
Marcellus: For the time being.
Marcellus: Okay.
Marcellus: So on your second question look.
Marcellus: Given our relevance in the country, it's almost our obligation to look at every single opportunity that.
Marcellus: Emerges right and we always assess those opportunities is this a V. Our strategic direction that we've laid out.
Marcellus: Florida for example, recently in terms of growing the share of high quality products and so on so we will look at those opportunities along those lines, but rest assured that any investment will only be done if they make strategic but also financial sense and if they deliver on all of the thresholds that we have.
Marcellus: Turn out in terms of returns in terms of risks that we pursue so percy. So we are always evaluating my answer to you there isn't any commitment on any particular project that we havent yet announced.
Marcellus: And we'll be looking at those under those lens, if they make sense, we'll bring it up if they don't we will not bring it up.
Speaker Change: Our next question comes from hostile Barcellos from Bradesco BVI placements of ourselves Youre My phones open.
Speaker Change: Good morning, and thanks for taking my questions and congratulations for the results. My first question is to establish Gustavo it's great to see you in the overall senior management, so confident in the company's operational performance which of course.
Speaker Change: Is reinforced by the extraordinary dividend announcements right. So so I just wanted to better understand how you're seeing the overall company evolution I mean, if you could split between cost performance or commercial strategy and institutional relationship. It would be very interesting to understand how are youre seeing.
Speaker Change: The overall company's evolution in these.
Speaker Change: Errors and then my second question is to Roche Andrew.
Speaker Change: You mentioned that your iron ore inventory should increase right. So so I'd like to better understand what is behind this statement I mean, and maybe if you could give us more color on your overall iron ore inventory strategy. It would be very helpful. Thank you.
Speaker Change: Well, let me let me take the first one so I said in my prepared remarks, I'm I'm highly optimistic about the future of the company I mean, we.
Speaker Change: We were laser focused in the initial four months to clear what we thought were key overhang. So we were able to address all of them.
Speaker Change: Operationally, we never been in the position that we are currently in and kudos to Carlos Medeiros and his teams they've been doing.
Speaker Change: Great work over the years to bring our operational excellence back when you look at all and we've said that before when you look at all the lead indicators.
Speaker Change: We track the companies performing substantially better it is probably the best time in the last five years in terms of operational performance.
Speaker Change: And I think we were able to give.
Speaker Change: The greater priority to cost in capital location management within the company recently, which I think.
Speaker Change: Combined with the operational excellence should allows us to deliver a very strong operation and financial performance, which then resulted in some of the recent decisions that we announced it.
Speaker Change: Like yesterday right. So this is I think this is making me and my team extremely confident on the future that we've laid out that valid day and our ability to deliver on the on that future in terms of the superior portfolio of assets continue to grow both iron ore the high quality share of iron ore, but also copper.
Speaker Change: As well as continue to advance on the other elements of our strategy. So that that's the way we see now a lot of work to do but I think we are in a great in a great position today.
Speaker Change: Okay helpful.
Speaker Change: Thank you on the on the second question just again just to reiterate that our strategy is about cash.
Speaker Change: Cash flow maximization and flexibility.
Speaker Change: Also before I answer your question directly I think are important to say that we have a sophisticated supply chain, having many mines, we have iron ores.
Speaker Change: Which are amenable to beneficiary, we have concentration in Brazil.
Speaker Change: Concentration outside of Brazil, we have a blending center and that provides us with the opportunity to opportunity to optimize value to optimize or maximize cash flows I think what I was referring to is that if and as we increase concentration outside Brazil, primarily so concentration in China.
Speaker Change: We have a longer cycle time.
Speaker Change: Between production and sales it is different from selling.
Speaker Change: Lower grade ore or outside of just the.
Speaker Change: As soon as the as the parts in Brazil, Okay, but don't show it at sea, but.
Speaker Change: We need to have maturing material in China.
Speaker Change: Look however, does inventory increase it is associated with the growth of volumes Beneficiate. It.
Speaker Change: Once we reached a steady state that stops.
Speaker Change: It is not as if we're continuing to grow inventory indefinitely.
Speaker Change: Thank you also should think about.
Speaker Change: The flexibility were talking you were talking about at some point in time, we might reverse there's a strategy. If it is not very maximizing and then inventories may even decrease.
Speaker Change: So it is flexibility that's what we're talking about and it is not about inventory price realization of volumes alone is about cash flow maximization and you might see inventories increase at times, you might see inventories decrease at times, but particularly this quarter is about the increased volumes and concentration outside.
Speaker Change: Brazil to have a longer cycle time.
Speaker Change: Maybe just two.
Speaker Change: Complement on.
Speaker Change: Or is that is no.
Speaker Change: You should then see a stronger sales in Q1 I think that's that's one of the things you should expect us to post.
Speaker Change: As a result of this change in our strategy in Q4 of last year.
Speaker Change: Our next question comes from Marcio Farid from Goldman Sachs. Please Mr for <unk> your microphone is open.
Speaker Change: Thank you good morning, everyone.
Speaker Change: A couple of follow ups on my side here Gustavo first one for you. Please I think since you took over as CEO has been talking about the importance of improving the <unk>.
Personal relationships between Raleigh, the Brazilian government and other stakeholders as well.
Speaker Change: Six months into the job if you cannot for data is on how you see the current relationship how much improvement has has.
Speaker Change: Hudson has showed so far and what you expect going forward as well, especially in a quarter solve the headlines of around I mean for instance around.
Speaker Change: The potential change in the <unk>.
Speaker Change: Card members in the next few weeks or next.
Speaker Change: A couple of months sorry.
Speaker Change: That will be great place.
Speaker Change: Currently maybe talk to bacci.
Speaker Change: But I mean, I think there's a lot of confidence and a lot of optimism on this call and I think for the right reasons as well.
Speaker Change: Our finger question is you know Neil buyback program announced.
Speaker Change: Actually the company has mentioned before that it could be a year, where cash return could be a little bit more conservative just because of how relevant the cash disbursements related to unemployment.
Speaker Change: We're gonna be potentially this year I understand we would not include that on the free cash flow to equity, but I mean, how should we think about.
Speaker Change: Buyback going into 2025, a stronger free cash flow generation potentially higher iron ore prices, but also see elevated macro assert that there's a lot of disbursement and you know how how do you balance that cash disbursement and and shareholder returns would be great. Please. Thank you.
Speaker Change: So so far so on your first question look this is something we've been spending a good amount of time.
Speaker Change: On I I've said that before I think there is a lot of.
Speaker Change: Opportunities and convergence in terms of what is good for the for Brazil and for the state and what is good for volume <unk> Valley.
Speaker Change: Can be an important investor.
Speaker Change: For critical minerals, as we announced it last week for example, the new carriage as it's good for Brazil generates employment income, but also allows the company to continue to grow.
Speaker Change: And deliver on the long term strategy for us I'm finding.
Speaker Change: A lot of support for those conversations.
Speaker Change: And which I think it's showing up in a more.
Speaker Change:
Speaker Change: Our ability to move some of those agendas that are important for us and you've seen that recently, so I'm optimistic about that and I'm seen again, an opportunity for us to continue to converge and do investments that makes sense for the company, but it also makes sense for the environment that we are <unk>.
Speaker Change: <unk> invested in so so you should expect us to continue to be highly focused on what makes sense for the company, but also understanding that many of those investments also makes sense for the country.
Speaker Change: Marshall on your second question I think it's important to emphasize that our target off expanded net debt around 15 billion will be.
Speaker Change: The most important reference when it comes to deciding whether or not we're going to be operating on the buyback program.
Speaker Change: We are the idea and the announcement that we made was to make sure that we have a program open that we will operate on doctor on that program, depending on what happens with our cash flow generation.
Speaker Change: And we will be you know.
Speaker Change: Closely monitoring that and we are for sure.
Speaker Change: The opportunities are there we will start operating on the buyback program, but we are not going to be for obvious reasons very clear about the strategy of the buybacks.
Speaker Change: Our next question comes from Myles Allsop from UBS.
Speaker Change: Please Mr Asaf <unk> backbone shopping.
Speaker Change: Great. Thank you yeah, just a couple of questions maybe just on that buyback.
Speaker Change: Why why.
Speaker Change: Don't go for the buyback rather than the special dividend the share price doesn't really get much lower through the cycle and where we are today why not just execute $500 million buyback and.
Speaker Change: Push cash back to shareholders that way and then maybe.
Sean: And for Sean on the base metal side.
Speaker Change: Okay.
Speaker Change: Gross options encourage us for many many many years, but when are we actually going to get visibility on the permitting.
Speaker Change: So we can start having more confidence in that growth coming through in Brazil. Thank you.
Speaker Change: Okay.
Speaker Change: Myles.
Speaker Change: Regarding dividends and buybacks, we tried to come.
Speaker Change: Come with a balanced approach between the two things.
Speaker Change: Depending on the moment, if you look in the past in the recent past the company has done.
Speaker Change: More buybacks, then then dividend payments and now we come with the with the additional dividend payment, but you can expect in the future that if we have the opportunity coming from the cash flow to return more cash to the shareholders. We will probably have a balanced approach between.
Speaker Change: Dividends and buybacks, depending on where the share prices for sure.
Speaker Change: Yes, Sean on your question I think similar to what we talked about it fell at a focus in the short term as we've seen with Salobo <unk> drive productivity and get these up.
Speaker Change: To their entitlements and actually continue to expand it through to the extent we can the next one that we're focusing on where we are expecting permits in Q2 of this year is on macabre and Theres a lot of focus on that and you would've seen low capital intensity about $10000 a ton and that's the sort of core <unk>.
Speaker Change: Beyond that we're taking a slightly longer timeline with projects that we'd indicated things like LMS crystal in or and also are you would have seen the announcements in Congress and material last week on courage us and so I think the work that Gustavo and the team are doing particularly on the government relation.
Speaker Change: And institutional side is really a core focus to help unlock that and to ensure that we can demonstrate that.
Our stakeholders I'm sure Gustavo and if there's anything you wanted to add to that.
Gustavo Pimenta: I think you covered well may be the only point I would like to add this.
Gustavo Pimenta: What is different right. We've got this question and I think what we are changing is the approach for development in the region. So we put together.
Gustavo Pimenta: With the support of Sean Sean and the team a dedicated leadership team.
Gustavo Pimenta: To focus only on the Neocart agile development.
Gustavo Pimenta: More investments in drilling and exploration understanding of the ore body. So we think this is going to allows us to be more expedited have better understanding about each one of the projects. You know we have several projects in the region that we're not able to develop over the years.
Gustavo Pimenta: And I'm confident that now with this different approach, we will be able to show.
Gustavo Pimenta: And the idea is that over the following quarters, we start to bring those.
Gustavo Pimenta: Milestones and the evolution of the program to you to show you that that we've been able to achieve.
Gustavo Pimenta: Those developments and targets that we had laid out so I'm optimistic I think the different approach will certainly result in a greater focus and therefore, the ability for us to grow faster in that region.
Speaker Change: Our next question comes from Timna Tanners.
Speaker Change: Wolfe research centers.
Speaker Change: <unk> Europe.
Speaker Change: Microphone seven.
Speaker Change: Great. Thank you and good morning, I wanted to ask now that we're more than halfway through Q1, what you can tell us about volume so far this quarter any trends in comp. So that's my first question on Q1, and then looking at cash cost has certainly been benefiting of course from the weaker currency byproduct credits the question Dave.
Speaker Change: But what can you do to elaborate on these measures that you are working on to lower costs and any progress there would be great. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Scott.
Speaker Change: Carlos to talk about the operational performance and expectations for Q1.
Speaker Change: And then but you maybe you can talk about the cost optimization.
Speaker Change: Yeah.
Timna: Hi, Timna.
Speaker Change: On Q1, our Q1 performance.
Speaker Change: Sure.
Speaker Change: Similar to last year's performance, although we are having.
Speaker Change: More intense rainfall this year.
Speaker Change: Our LDR fits preparations that we have been doing over the last two years.
Speaker Change: Is paying dividends to us so in spite of that where we are we foresee a similar performance year on year.
Speaker Change: On the other.
Speaker Change: Cash cost performance I think we have youre right. There is an effect coming from BRL, which is not a major one.
Speaker Change: But it is there.
The currency is volatile so we cannot count on that for the future.
Speaker Change: I think the main measures that we're taking and are paying off in terms of cost management.
Speaker Change: First is production stability and operational stability that always brink's.
Good news when it comes to cost.
Speaker Change: The second one is the new projects that came on line with a lower cost.
Speaker Change: Or especially for iron ore.
Speaker Change: And third we continue to move on on our program of the specs on the.
Speaker Change: Suppliers.
Speaker Change: Relationship.
Speaker Change: That gradually all those measures together are starting to pay off and you can see the result of that in the C. One now it's important to mention that the <unk> is not linear through the year.
Speaker Change: We have some volatility in the different quarters, but if you look at the at the moving average.
Speaker Change: We continue to see the <unk> declining throughout the year.
Speaker Change: Our next question comes from Liam Fitzpatrick from Deutsche Bank.
Speaker Change: Please Mr feedback Fitzpatrick your microphone is open.
Speaker Change: Mr. Fitzpatrick you can now activate your microphone and ask a question.
Speaker Change: Good morning, everyone first.
Speaker Change: First question is just another one on the buyback. Unfortunately, I just wanted to clarify.
Speaker Change: Trying to understand how you want us in the market to think about it is this just to give you flexibility later in the year and we shouldn't expect to pick up.
Speaker Change: Over the next one to two quarters or is this buyback effectively in place from from today. That's the first question.
Speaker Change: The buyback is in place already and how we're going to operate in the market is something that we cannot be very clear about that for obvious reasons, but yes, we have the ability to operate whenever you want from now up to 18 months.
Speaker Change: Our next question comes from Marina, Colorado from RBC, Let's Mrs. Marina, Yes, my phone is open.
Marina: Hello can you hear me.
Speaker Change: Yes, yes, we can Marina hi, good afternoon, thanks for the call.
Speaker Change: A question on your Capex guidance it looks like most of the savings were on growth Capex can you provide more details.
Speaker Change: Different drivers behind that.
Speaker Change: As an extension of that do you see potential for more efficiencies after 2020.
Speaker Change: Youre right most of the reductions are on the growth part.
Speaker Change: We are not changing the scope of the Capex program, but rather working on.
Speaker Change: Powerful partially on timing on partially on efficiency.
Speaker Change: And this is something that for the time B is all really related to 2025. So we are very confident that the in 25, we're going to deliver this $5 9 billion. We are still working on what is going to beat the guidance for the future for the coming years, we're not prepared.
Speaker Change: For that discussion yet, but we're working on that.
Speaker Change: Our next question comes from Europe at Ada for instance, and their place Mr. Ferreira Your microphone is open.
Speaker Change: Hi, guys. Good morning, Thank you.
Speaker Change: First question is two so about the Capex revision for 2025.
Speaker Change: Is there anything other than the new effects assumption. If you could please explore a bit more about it and the second question is considering current iron ore prices.
Speaker Change: See room for a financial debt inquiries in order to achieve the expanded net debt target. Thank you.
Judy on the Capex side, we are assuming the currency at the current level around five seven.
Speaker Change: So theres not a significant effect coming from from FX on that.
Speaker Change: When it comes to financial that we're going to be monitoring the opportunities in the market. We may come with the transactions, but again the target is to have the net debt expanded net debt around $15 billion at the end of the year.
Speaker Change: Thank you. This concludes today's Q&A session Valley's conference as now conclude with thank you for your participation and wish you a very good day.
Speaker Change: Oh.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Goodbye.