Q1 2025 Vale SA Earnings Call
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You have joined the meeting as an attendee and will be muted throughout the meeting each of any 25, securing adherence to our production guidance as well as greater portfolio flexibility. Both projects are expected to reach full capacity in the first half of 'twenty 'twenty.
Six.
Furthermore, the expansion of our blessed to empty project at S. 11, D is advancing well.
Having achieved 73% of its physical progress by March.
We are confident that this key project will begin operations in the second half of joining twenty-six delivering high quality volumes at remarkably low production cost with an expected C. One in dollars per ton at mid teens.
We are advancing in the mining of the future agenda investing in cutting edge technology, and fostering innovation to enhance the safety and efficiency of our operations. We're currently operating three mines with autonomous equipment, including heavy haul trucks and drilling rigs and risks.
Italy, we extended this technology to the loading yard at the Guangxi Billboard in the Southern system. This technology has led to a 12% increase in recovery rates at the board, allowing us to reallocate personnel on higher risk activities to a safer work environment.
We will gradually increase our our tunnel MS program expanding from 40 to 70 autonomous trucks at San Arthur over the next three years delivering substantial productivity improvements on the site.
In our energy transition metals business, we continued to see solid and consistent progress across all operations.
Corporate production increased 11% year on year, achieving the highest output for first quarter six training training.
The strong performance came from Salobo as to stable operations as well as from the ramp up of the voices Bay project in Canada.
A nickel Visors Bay announced Puma have contributed to an 11% increase in production E. On year, we are glad to see that his strong operational performance together with the positive impact of byproduct prices have contributed to more than doubling the EBITDA of the base metals.
Organization compared to the same period last year.
Together with Shaun and his leadership team, we remain highly committed to delivering continued improvements to our operational performance as well as on accelerating our value accretive growth on copper.
Our Novo garage as initiative was put in place early in the year, we have dedicated leadership team and I'm very excited with the initial insights, which only we forced the great opportunity. We have ahead of us.
Now I'd like to comment on the strategic partnership we announced with G. A pea at <unk> Energia.
As you know valley has been dedicated to sourcing all of its energy needs from renewables for many years and Richard This milestone in Brazil in 2023 two years ahead of schedule.
Have an access to clean and competitive power is crucial for us and by bringing a strategic partner like G. I B, we can create an asset light business that can help us deliver on our long term decarbonization goals.
With the closing expected in the second half of the year value hold 30% of the new joint venture and we received $1 billion in cash proceeds.
Finally, I would like to highlight that we recently published our 'twenty 'twenty four integrated report.
This disclosure spot of our commitment to transparent and comparable reporting on our ESG progress and challenges.
In 2020 for valley invested over $250 million in de Carbonization initiatives.
As part of our journey to net zero scope, one and two by 2050 in the circle of mining front, we recovered almost 30 million tons of iron ore by reusing tailings and northern matures for in our operations, reducing waste and creating value the.
The report also touches on our community relationship plans, which are channels designed to share information about our operations and implied risks and impacts.
It is also a way for us to listen to the perspectives and concerns of the local communities incorporating those each of our business decisions.
I invite you to read the full report to get a better understanding of our sustainability journey and how we're working to build an even better value.
Now I'll turn to Marcelo Bacci to talk about our financial performance I'll be back for closing remarks before the Q&A session. Thank you.
Marcelo Bacci: Thanks, Gustavo and good morning, everyone. As you can see our pro forma EBITDA reached $3 2 billion in the quarter, 8% lower year over year, which we see as a solid performance, particularly considering that iron ore prices fell 16% in the same period.
Marcelo Bacci: The combination of the continued see one cost reduction and an encouraging performance from volume base metals, which doubled its EBITDA in the period were the key factors for the resilience in the quarter.
Marcelo Bacci: Let's take a closer look at our cost performance on the next slide.
Marcelo Bacci: Our costs continue on a very positive momentum in Q1 R&R C. One cash costs, excluding third party purchases reached $21 per tonne, 11% lower year on year, driven by our efficiency initiatives and a favorable exchange rate.
Marcelo Bacci: With this strong start in 2025, we're even more confident in achieving our C. One cost guidance for the year of 20.5 to $22 per ton.
Marcelo Bacci: Our all in cost performance was also solid with a 7% year on year reduction, reaching 54.4 dollars per ton.
Marcelo Bacci: The improvement was not only driven by a lower <unk>, but also by lower freight costs and expenses.
Marcelo Bacci: This was our lowest hauling costs for a first quarter since 2022.
Marcelo Bacci: Turning to our energy transitional metals business, we observe the significant year on year improvement in both operational and financial metrics already reflecting some initiatives from the asset review.
Marcelo Bacci: In copper our all in costs decreased by 63%, reaching $1 $2000 per ton substantially below our 2.8 to $3 $3000 per ton guidance range. This was due to a strong performances at Salobo Enzo signal.
Marcelo Bacci: And increased byproduct revenues benefiting from higher gold prices.
Marcelo Bacci: We are highly confident on delivering our copper all in guidance in 2025.
Marcelo Bacci: In nickel the all in cost decreased by 4% year on year, driven by solid operating performance and higher volumes, leading to fixed cost dilution.
Marcelo Bacci: <unk> costs should decrease in the upcoming quarters, driven by the ramp up of the voices Bay underground mine and by our continued efforts towards efficiency gains.
Marcelo Bacci: Now moving on to cash generation recurring free cash flow reached roughly $500 million in the quarter lower than the $800 million generated in Q4, mostly driven by seasonally lower EBITDA and lower than usual working capital variation.
Marcelo Bacci: During Q1, we had a lower than normal cash collection as we opted to ship less in December of 'twenty four given our portfolio optimization strategy. Lastly, total capex was slightly lower year on year trending in line with our guidance for 2025 of approximately $5 9 billion.
Marcelo Bacci: Our free cash flow generation and strong cash position.
Marcelo Bacci: Were primarily used to return value to our shareholders with the payment of $2 billion in dividends and interest on capital in March.
Marcelo Bacci: As you can see on the next slide this payments led to a seasonally and expectedly higher expanded net debt, which reached $18 $2 billion in the quarter.
Marcelo Bacci: Our expanded net debt range remains between 10 and $20 billion, we will gradually bring it back to the mid level. This target in the coming quarters supported by higher cash flow generation and along with a $1.1 billion positive impact from the Allianz synergy deal which includes both cash.
Marcelo Bacci: And the consolidated debt to conclude I would like to reinforce our focus on disciplined capital allocation, maintaining net debt within our targets utilizing asset light strategies and delivering strong shareholder returns through dividends and buybacks.
Speaker Change: As Gustavo mentioned earlier, we also remain highly committed to improving cost and capex efficiencies, making sure we become an even more competitive company.
Speaker Change: With that I now pass the floor back to Gustaf. Thanks, Marcella before we open up for the Q&A session I would like to reinforce the key takeaways from today's call.
Speaker Change: We will continue to leverage our supply chain flexibility in iron ore our ability to adapt the portfolio. According to market conditions puts us in a unique position to maximize value. Additionally, the ramp up of the Virgin Grande and Capa name of projects will further enhance this position.
Speaker Change: At Valley base metals, we are already seeing the benefits of the asset review initiatives.
Speaker Change: Our operational performance and EBITDA generation improved quarter on quarter and year on year and I'm highly confident that we will continue to make significant progress in the coming quarters, creating a leading energy transition metals business.
Speaker Change: Driving cost competitiveness across our businesses is a key priority for us and I'm happy to see our Q1 performance demonstrating that the actions. We are taking are already generating results and we will continue to do so in order to create value through the cycle.
Speaker Change: On our sustainability journey. The recently published integrated report brings updates on our progress towards our ESG targets.
Speaker Change: We remain committed to our long term goals and to continuously increasing transparency and keeping an open dialogue with our stakeholders.
Speaker Change: And finally, our disciplined capital allocation approach combined with his strategic asset light initiatives.
Speaker Change: As was the case of the Alere asset joint venture, we will continue to ensure health of remuneration to our shareholders now lets move to the Q&A session.
Speaker Change: We are going to start the question and answer section of the call. If you have a question. Please click on the Raytheon button.
Speaker Change: If your question has already been answering you can leave the queue by clicking on the lower right hand button.
Speaker Change: Please ask your question in English and limit your questions to <unk>.
Speaker Change: Time.
Speaker Change: Our first question comes from her file that sells with Bradesco BBA.
Speaker Change: Okay.
Speaker Change: Good morning, and thanks for taking my questions. My first question is about the iron ore market. So iron ore prices have been holding up pretty well around the $100 per ton level, which is quite different from the pressure we have seen.
Speaker Change: In other commodities right. So so just wanted to check what kind of feedback you're getting from China. How healthy do you think the iron ore market is right now.
Speaker Change: Gustavo issue can complement here I mean, what has changed it at this point in your capital allocation strategy. Given these macro uncertainties. We are dealing with and then my second question is for Jorge about wireless commercial strategy. So looking at the release in your product mix, we have seen I O C J volumes.
Speaker Change: Dow concentration in China, going up and the others line and becoming more relevant. So so it would be very helpful. If you could talk a bit more about these movements explain what is behind the others line and of course give us more color on the overall commercial strategy. Thank you.
Speaker Change: That will establish here I'll start with that.
Speaker Change: Question on the capital location, given the macro environment.
Speaker Change: Look it's certainly.
Speaker Change: Something we are watching closely.
Speaker Change: We haven't.
Speaker Change: Haven't yet seen immature impact on our operations or financial results as you know we sell.
Speaker Change: Very little for example into the U S Navy.
Speaker Change: Nico has been exam.
Speaker Change: But we are monitoring closely the situation is highly fluid and certainly if there is an overall impact in the GDP Global GDP performance. This will certainly have an impact on commodities.
Speaker Change: So why do we can do and what we are doing is to be highly focused on cost efficiency and highly disciplined on how we allocate capital to make sure we preserve liquidity.
Speaker Change: And we continue to deliver on our efficiency initiatives, we had a good Q1 I think there was.
Speaker Change: Highly encouraging for all of Us and we will continue to do so.
Speaker Change: Vis vis the current macro environment, So I'll pass to.
Raj Ada: Raj Ada took over.
Speaker Change: The market question.
Speaker Change: Okay.
Speaker Change: Good morning, Phil. Thank you for the question I think the market as Gustavo said is fluid its a volatile difficult to predict as you know.
Speaker Change: But we see reactions.
Speaker Change: Reactions differently in different geographies, let me go over some of them, let me start with China, which is the most important one I think coming out of China, we see a mix of confidence and caution a lot of declines that we just visited recently there improve having their margins improved and were.
Speaker Change: Heading from some news from the Goldman, especially on this new political or meeting, which is expected to come in in the coming weeks.
Speaker Change: But we had real signals.
Speaker Change: That the market was moving in the right direction. So the first quarter 2025.
Speaker Change: We have the GDP of five 4%, which was actually higher than expected.
Speaker Change: On the steel market crude steel production was up 0.6% big.
Speaker Change: Big Iron production was even higher.
Speaker Change: Fixed asset income which has.
Speaker Change: Something that we always look at what an aggregate basis was up 4% with manufacturing and infrastructure company very strong out of incentives from the Chinese government. I think you all know properties are still struggling but there are some.
Speaker Change: Good day wins, especially when you look into property sales, which is action decelerating, but at a much lower pace. So this was actually gives us an indication did.
Speaker Change: The market might have been at the board.
Speaker Change: On our client side as I said a lot of declines that we have talked to are actually doing good margins of around 200 renminbi per tone, but on average that.
Speaker Change: Laura.
Speaker Change: The general market case, but they're actually it's actually improving their heavy margins above zero.
Speaker Change: So theres a bit.
Speaker Change: <unk> I think the other indicator, which is important when you're looking to join as the blast furnace utilization rates, which is going up over 90%.
Speaker Change: Also in terms of the steel market as you may see inventory at music creators have come down so all in all I think very positive from our steel side.
Speaker Change: When you look and when we translate this to into iron ore, we have seen that our imports.
Speaker Change: Actually in this quarter, a decrease of slightly because of the situation in Australia has faced.
Speaker Change: But at.
Speaker Change: At the same token inventory has decreased so we see a bit of a balanced market.
In China, but with.
Speaker Change: As I said, a lot of expectations that the Chinese government would actually react to any impact of the tariffs the tariffs would would have.
Speaker Change: And incentivize domestic consumption to offset the exports.
Speaker Change: Ex Joy and I think it's a little bit different we see different markets reacted differently.
Speaker Change: Ban in Korea for example.
Speaker Change: Have a difficult challenge.
Speaker Change: We have been there talking to our clients Japan. There is a construction situation reaches which the market is depressed Korea. The alto manufacturing is facing some difficulties. They also facing the election of the new Prime Minister.
Speaker Change: And then you know we're.
Speaker Change: I have some closure of some plants, but.
Speaker Change: But we expect that lose monetary policy.
Speaker Change: There might be some reaction.
Speaker Change: Our auto regions Asia, and southeast Asia somewhat countries going up.
Speaker Change: But the rest of the rest of the world is a bit wireless.
Speaker Change: So, but all in all when you look into the global supply demand. We believe it's gonna be ballast Brazilian cruising production, India decreasing supply as Stuart about one 6 billion tons, but with that with a slight oversupply, we expect prices to still be at the levels of 100.
Speaker Change: Loss per ton.
Speaker Change: Our next question comes from Tayo Greener with UBS.
Speaker Change: You can open your microphone.
Tayo Greener: Hello, Good morning, everyone. Thank you.
Tayo Greener: My first question I wanted to get an update on your value over volume strategy.
Tayo Greener: I know you mentioned that that iron ore markets are our resilient, so far but I mean, well, what we're saying is that the.
The Chinese <unk>.
Tayo Greener: <unk> environment and the economy is likely to weaken over the coming quarters. So I mean, if in a scenario in which iron ore prices are in fact, and then start to move lower.
Tayo Greener: At what level of prices with Vale start cutting its kind of its high cost capacity and how much capacity or are we talking about here. This has been a question we have been getting a lot from investors and my my second question for Bacci in terms of the Capex efficiency program.
Tayo Greener: We were very glad to see the capex moving lower on an year over year basis.
Tayo Greener: It's in the right direction for a frame a reduction.
Tayo Greener: Compared to the to the previous guidance that you had.
Speaker Change: So I just wanted it to so just wondering if you could give us an update on how the program is evolving if you could elaborate a bit more on the main initiative is and I know you already revised the gout their guidance downwards, but I was just wondering if vale still see room for more.
Speaker Change: There is still room to revise down the capex figure for closer to two 5 billion or $45 5 billion that'll be helpful. Thank you.
Speaker Change: Okay.
Speaker Change: Okay before I go to the to the price question. Let me just talk briefly about the portfolio, which was the question that was raised previously and I ended up not answering.
Speaker Change: Look I think.
Speaker Change: We have indeed sort of conceptualize redesigned our portfolio.
Speaker Change: And with Don does under current market conditions, and we are beginning to implement is no changes.
Speaker Change: So let me provide the context and background of what I say and what I call. The current market conditions. As you know our clients are operating under very low margins coking coal prices are very low so what we see today is less of a need for productivity and thus qual.
Speaker Change: Quality premiums are at their lowest.
Speaker Change: And what clients are actually seeking for.
Speaker Change: Is for mid grade iron ores.
Speaker Change: So in that regard and in that context, let me give you a few examples of what we're trying to do is we're starting to do.
Speaker Change: First I think we're moving towards concentrating the most we can of our low grade iron ore to providers meet great products.
Speaker Change: It is an accretive movement in terms of the tours that we beneficiate, but it is also very accretive when you look into the broader portfolio and it's extremely important. We're also looking how to optimize this concentration of value chain outside Brazil looking for plants that have good logistics blessed that have good op.
Speaker Change: Rational performance, where we have very good a metallic yields so that we can make it even more profitable.
Speaker Change: I think the second initiative that I would like to highlight.
Speaker Change: Is the launch of our mid grade products out of colleges.
Speaker Change: Why mid grade again this is much more appropriate to what the market is looking for.
Speaker Change: And being from carriage us as we understand it it actually would still have the good metallurgical properties, which are delivered by the colleges or because of its crystalline structure.
Speaker Change: So it suits the market, but it also.
Speaker Change: Helps us with providing some flexibility at the operational sites. So what we what we mean by a flexibility. This means that we can operate with a lower strip ratios eventually reduce costs eventually increase production, but not only that actually allows us to increase our reserve base. So it's a very.
Speaker Change: Sensible move at a point that the market is actually not bad for we're not actually providing us with very high premiums last but not least we will need to have a transition period and in doing that transition you will see so far into it checks a lot under our nose Thunderbolt for us though.
Speaker Change: We will need to sell.
Speaker Change: But this it will be during the transition process okay.
Speaker Change: But I'd like just to let you rest assured that our objective function and this is always has always and will always be to maximize value. So it's not about only price realization or all the volumes are only costs is about so the product of unit margin times volume so.
Speaker Change: It's an absolute value maximization. This is what we're looking for.
Speaker Change: And again as we do it and as we go through the exercise we're flexing our supply chain, we are creating the broad portfolio that we can always come back to and if the market changes that we can't we can't change and adjust ourselves very quickly. So that's the whole the whole picture here.
Speaker Change: The question will.
Speaker Change: Iron ore prices coming lowered this is a more difficult one because when we look what's going on in the world.
Speaker Change: And we see all of those measures coming from the tariffs we don't know exactly what the reaction is going to be so for example, if if China reacts.
Speaker Change: It actually puts a lot of incentive to the domestic economy, which is something quite likely a lot of this a lot of this steel which is which.
Speaker Change: Which is currently being exported my revert back into China, and quite frankly, this can be even more positive given the fact that our steel produced in China as essentially produced out of bigger and I think the other element that people escalade is okay prices may come down because currencies are depreciating oil prices are coming.
Speaker Change: No.
Speaker Change: It's still too early to talk about it and to see it seeks OCA some currencies have depreciated, but now coming back my general view on.
Speaker Change: My General feeling is that we will have a year, which has various similar to in which prices are going to be stable at the various same levels that we're seeing right now.
Speaker Change: Okay.
Speaker Change: In relation to the Capex question.
Speaker Change: The first quarter is seasonally lower normally so you shouldn't be annualizing. These are mark we're still shooting for the $5 9 billion.
Speaker Change: We are working constantly is seeing if we can find additional efficiencies, but we keep the guidance at $5 nine for the time.
Speaker Change: Our next question comes from <unk> <unk> with Bank of America, you can open your microphone.
Speaker Change: Alright, good morning, everyone. Thank you for the opportunity. So my first question is on dividends in the past years Vale has announced extraordinary dividend payments such as when the 10% stake in the base metals Division was sold.
Speaker Change: And more recently as well in the fourth quarter right. So my question is with that announced transaction related to audience and its year, writing, which the company should receive a $1 billion cash influx, whether you see room to return that to shareholders in the form of dividends.
Speaker Change: Given that your expanded net debt is still below the ceiling of yourself and both GAAP, but now it is at $18 $2 billion, which is closer to the top of that.
Speaker Change: Polls range versus the $16 5 billion that you had in the fourth quarter, which is the last thing that you announced an extraordinary dividend is there a particular level of expanded net debt. There you see the likelihood of those extraordinary dividend being.
Speaker Change: Highly likely and then secondly, as you ramp up lodging good engine company and you should be extracting more volumes higher grade volumes, which should help with your cash cost performance just given the higher cost dilution and you already started the year with a C. One closer to the lower part of the guided range for the year in a seasonally weak.
A period of production and shipments so I wanted to see if you could share some color on whether you see room throughout this year to revise your cash cost guidance for the year lower and whether you see room to beat that flattish year on year production guidance. Those are my questions. Thank you.
Marcelo Bacci: Okay. This is Marcelo speaking.
Speaker Change: In relation to dividends, we are as discussed by my colleagues before we are in a very uncertain period in terms of market conditions. So it is not the right moment to discuss extraordinary dividends at this point.
Cash inflow from the Alianza deal is already considered in our.
Speaker Change: Our program for the year in which we intend to reduce the net debt level. The expanded net debt level towards the 15 billion mid range.
Speaker Change: So we already counting on that and you should expect that if given market conditions and our performance. If our expanded net debt trends below 15 billion, we have a higher probability of having extraordinary dividends for more buybacks, but other than that I.
Speaker Change: I think it's too early to discuss that.
Speaker Change: In relation to your second question, we had indeed, a very good first quarter in terms of costs.
Speaker Change: The second quarter I would like to highlight that that's seasonally worse than the first quarter. Historically, so we expect because it carries the production cost of the first quarter, which is given the lower volume with a higher cost.
Speaker Change: So the C. One on Q2 is going to be probably higher than in the first quarter, but still lower than the same period of last year. So looking at the year full year performance. We are very confident about the guidance that we gave and again, it's too early at the beginning of the year to be thinking about the revision.
Speaker Change: But our level of confidence has increased Ah indeed.
Speaker Change: Indeed.
Speaker Change: Our next question comes from Danielle fossil <unk> BBA.
Speaker Change: You can open your microphone.
Speaker Change: Okay.
Speaker Change: Hi, good morning, everyone. Thanks for taking my questions some of them have actually been answered.
Speaker Change: Just.
Speaker Change: If you could give.
Speaker Change: Give us more details on your strategy by ore from third party is saying Oh that Jose I did mentioned about having flexibility and to.
Speaker Change: Deal with different types of different property itself or to maximize absolute value.
Speaker Change: How how are you thinking about the volumes that you're gone up buy from third parties, especially considering that they are going through the ramp up of providing ingredient company.
Speaker Change: That could be that would be my my question. Thank you so much.
Speaker Change: Yeah.
Speaker Change: Hi, Danielle Thanks for the question I think first of all.
Speaker Change: Just would like to make it clear that we will only buy it.
Speaker Change: If it is value accretive.
Speaker Change: If prices are at or above 100, those per ton as they are today.
Speaker Change: We expect volumes to be close to the to what we've done last year around 25 minutes per ton right, but if market prices decrease we will curb non profitable, whereas I think just to make it clear and obviously that are.
Speaker Change: Different miners with different kinds of wars different types of cost. So there's a gradation in terms of course, so as prices come down probably will reduce volumes, but it will reduce it gradually.
Margins differ based on product quality railway.
Speaker Change: For its used freight costs, so, but again rest assured that if prices come down it will we'll cut it accordingly.
Speaker Change: So there we always keep value accretive ones.
Speaker Change: Our next question comes from Carlos de Alba with Morgan Stanley You can open your microphone.
Speaker Change: Yes.
Speaker Change: You may now.
Speaker Change: Okay.
Speaker Change: Yes, Sir.
Speaker Change: Thank you very much just a couple of questions.
Speaker Change: One day for Roberto can you give us a little more color. Please on the ramp up expected ramp up or at least the.
Speaker Change: Progress in this organization works of the platitude of debris.
Speaker Change: And any color as to how the conversations with clients and acceptance by the end of this product is evolving and the second question.
Gustavo.
Gustavo: It will step back and look at what is happening in the iron ore market what is happening in China from a demand perspective, what's going to happen in Guinea with routine undue under supply.
Speaker Change: Spansion there.
Speaker Change: Hum.
Speaker Change: Is there any circumstances under which you would feel that Vale will need to increase it.
Speaker Change: Exposure to iron ore deposits in Brazil.
Or are these mom and do you think that focusing on what you already have.
Speaker Change: With the great environment of your reserves and the efficiencies that you have already put in place.
Speaker Change: Put the company in a very strong position.
Speaker Change: Okay.
Speaker Change: Let me start with the ramp up of <unk>.
Speaker Change: Ore pellet plant beta zero, one and then I'll pass it to him it is.
Speaker Change: From a client point of view, we have a very long lineup of clients try and looking for testing to break its because the industrial trials have been very successful.
Speaker Change: And we're now starting to produce for.
Speaker Change: The shortened vessels right now are starting to produce for longer industrial trials, what I can tell you, though we have a batch right now.
Speaker Change: Our blast furnace clients.
Speaker Change: We shouldn't be.
Speaker Change: Able to try it as a second generation of the other brackets to try within the next couple of months and also there's a there's a lot which is in a direct reduction client.
Speaker Change: We're also expecting to test it within the next couple of months so.
Speaker Change: So we have been successful in producing commercial products out of it easier one.
Speaker Change: And as soon as we have these initial results we will start actually sending sending lots for clients around the globe, but I will let midyear to spoke about.
Speaker Change: The ramp up situations.
Speaker Change: Good morning, Hello, Carlos So talking about the briquette plant, it's ramping up according to our expectations as foreshadowed mentioned, we have produced a true batches of commercial products one for direct reduction another one for blast furnaces last month, we produced 40000 tons of these.
Speaker Change: Of Briquettes now we have the plant down for some adjustments in the mixers and other parts of the plant and.
Speaker Change: Maybe in a week or 10 days, we'll be ready to start production again, and our expectations is that until the year end, we should be producing about 600000 tons of briquette.
Gustavo: I'll hand over now to Gustavo.
Gustavo: So Carlos to your question on the iron ore deposits.
Gustavo: Youre right I think we have a very unique endowment.
Gustavo: Not only base metals, but also in iron ore we've launch it early in the year, the new carriage Us initiative.
Gustavo: And we have seen.
Gustavo: A lot of good insights from the team on our ability to.
Gustavo: Increased copper, but also.
Gustavo: Make sure we bring back the northern range to about 200 million tons, a year, which would be highly accretive for our shareholders. So we are very focused on that.
Gustavo: You know we are always looking for things beyond that in our portfolio if they make sense, but they are if they if we consider that they will make sense they have to make sure and they have to fit within our capital allocation framework.
Gustavo: Our return thresholds, our risk assessment and so on.
Gustavo: But youre right I think most of the opportunities today reside on the development of our own endowment.
Speaker Change: Our next question comes from hurdle from Shirley <unk> with J P. Morgan.
Speaker Change: Open your microphone.
Speaker Change: Hi.
Good morning, everyone.
Speaker Change: My two questions here. The first is on the nickel business we see.
Speaker Change: Iron ore are doing well.
Speaker Change: And of course going down.
Speaker Change: The results from corporate were quite impressive.
Speaker Change: Nico remained.
Speaker Change: Even though you were able to cut costs.
Speaker Change: It's a business that is generating very very literal EBITDA and we know it comes with a.
Speaker Change: Cardinal mistake include $5 billion in Capex every year so can.
Speaker Change: Can you talk a little bit more.
Speaker Change: About you know what can be done.
Speaker Change: On that front.
Speaker Change: And my second question is.
Speaker Change: Is towards that Oh is it.
Speaker Change: Florida has always been very creative in it.
Speaker Change: Terms of a.
Speaker Change: Commercial strategy and we don't have to discuss.
Speaker Change: It'd be African blending.
Speaker Change: Which was really really smart.
But as we look into the future with it coming off Simandou.
Speaker Change: What can be done there because I feel like.
Speaker Change: Break cats are great for a time when.
Speaker Change: Clearly we are moving to decarbonization.
Decarbonization, but there may be a gap in terms of.
Speaker Change: Timing, where.
Speaker Change: More and more high quality material.
Speaker Change: Not only that but in the hands of Chinese than your competitors.
Speaker Change: So what can be done on that front.
Speaker Change: Well those are my two questions. Thank you very much.
Yeah.
Rodolfo: Rodolfo Good morning, it's shown in Toronto.
Speaker Change: To your question on nickel.
Speaker Change: I think I'll zoom out for a second and just take you back to the journey, we talked about on the last earnings call.
Speaker Change: You may recall, we talked about starting off with <unk>.
Speaker Change: <unk>, our overhead to reduce the burden on our operations and both copper and nickel.
Speaker Change: We turned this internally project catalyst and we talked about achieving a run rate.
Speaker Change: Around 200 million USD year of cost reduction.
Speaker Change: We've achieved that in fact, I think we've exceeded what we had expected.
Speaker Change: And we've actually tried to take that further just given the uncertainty that we're seeing.
Speaker Change: Geopolitically and in the markets and so to give you a sense.
Speaker Change: Relative to our plans.
Speaker Change: Including the avid reductions which of course have one off costs that run rate is around a third of our global overhead reduction and just far greater levels of engagement and opportunity and focus on business.
Speaker Change: We're at around about $285 million U S for the year. So the team has exceeded really what I thought they could achieve and we're going to continue on that sort of cost efficiency program, which looks at just cash flow opportunities across the board and that includes the nickel business now you've seen that.
Speaker Change: There's a lag between production and sales I think as you look to nickel.
Speaker Change: Bear in mind.
Speaker Change: Not only are we focusing on the overhead reduction programs.
Speaker Change: May recall, we have this year will have a full year of answer Puma furnace, one which will contribute to fixed cost dilution on volumes, we will and we are on track to bring on.
Speaker Change: The second furnace at answer Puma, which will take place during Q3, and we should start seeing volumes by the end of Q3.
Speaker Change: <unk>, which will again add to fixed cost dilution and you'll recall, we announced around the time of valid day last year that we just finished the Boise space mine expansion.
Speaker Change: I was at site to few weeks ago. The team is doing remarkably well on that ramp up I think there are about 108%. So it just above where they plan to be.
Speaker Change: Through Q1 and are doing well and then in February you'll recall, we are focusing on are ramping up our productivity as we're targeting about a 30% productivity improvement and to maximize the utilization of our Mo at $5 5 million tons. This year and then to go beyond so my.
Speaker Change: My message to you you should start seeing more of those cost improvements because our focus for this business under any scenario is not to try and buy our way to a sustainable future and Nicole it's the firstly extract the potential.
Speaker Change: Going beyond what was identified in es contribute minimizing cost maximizing our internal throughput focusing in a very disciplined way on <unk>.
Speaker Change: Cash margins and our ability to make sure we can generate value through the cycle and then I'd say the residual focus is to make sure that given the uncertainty and oversupply.
Speaker Change: For the next several years at least coming out of Indonesia is to position our portfolio through these activities in the lower half of that cost curve to be able to be resilient and to be able to give.
Speaker Change: Give us and our investors the benefit.
Speaker Change: And better price environments in the future and lastly, you'll recall as part of that initiative. We're also looking at.
Speaker Change: The portfolio optimization, and we had announced previously.
Speaker Change: The review strategic could be on Thompson I, just got back yesterday from Thomson spent time on the ground in there with the team and they are focusing on not just the progress of that.
Speaker Change: Initiative, which we've just finished the first round of and where we're at and I will be progressing that through to the next phase and then making a decision as to what our future holds with that asset in the second half of the year.
So hopefully that answer your question, but I think you should expect volumes to be increasing through this year nickel overheads are down that'll be flowing through in our results as we go forward and you'll see the fixed cost dilution as our volumes come up and Nicole through this year and then we will continue to find ways to maximize value from our portfolio.
Speaker Change: Dominant so hopefully that gives you a good sense.
Okay.
Speaker Change: First of all thank you very much for your comments on our innovative commercial strategy I think that's a very good to hear about it.
Speaker Change: <unk> I think youre right.
Speaker Change: Even though they can be used with good results and good performance in blast furnace is the real transformation.
Speaker Change: Real breakthrough comes when it's used together with direct reduction, which is going to be more and more used during.
Speaker Change: During the Decarbonization journey.
But oh Simandou, we specifically.
Speaker Change: Simandou is has been in the market for quite some time.
Speaker Change: Obviously, one is such a big project is actually put for.
Speaker Change: Forward in the market a lot of other investments they get actually postponed. So this is just one element.
Speaker Change: One that I would like to highlight is what we have talked about doing a revolver today, which is.
Speaker Change: If you're looking to the industry you have a natural depletion.
Speaker Change: Between 3% to 4% that year.
Speaker Change: And if you calculate this on top of $1 6 billion tonnes of seaborne iron ore, we're talking about a 50 to 60.
Speaker Change: Millions daus depletion per year per ear, which actually offsets at the entry of Cmos due to the marketing in a couple of years. So this is this is important too to first point that I would like to highlight second one is that.
Speaker Change: It is not only simandou high quality ore, which is coming to the market a lot of the.
Speaker Change: A lot of the players who are developing two of the players who are developing simandou and also planning to bring lower quality ores into the market to to provide their blends.
Speaker Change: So.
Speaker Change: What I want to say here is that ultimately the amount of the surplus of high grade iron ore to the market might not S might not be as just purely simple looking to the amount of simandou and that actually allows us a room to play.
Speaker Change: Having said that.
Speaker Change: What were the decision on the portfolio.
Speaker Change: Flex utilization the supply chain will come in very handy, because depending on how the market evolves.
Speaker Change: We will have a <unk>.
Speaker Change: Portfolio of products that we can tap into a comprehensive portfolio of products that we can tap into the maximize value.
Speaker Change: Although focused Gustavo here, maybe just a quick note to add hours with Roger and our commercial team recently in Asia.
Speaker Change: And despite all of the noise in here in terms of delay the carbonization in Salon, our clients in China Korea, Japan remain highly focused on Decarbonizing the air.
Speaker Change: Production processes. So this is something for me was was good to hear.
Speaker Change: Certainly I'm not I'm, not saying, we don't have challenges.
Speaker Change: On that agenda globally, but I continue to see our key clients highly focused on pursuing decarbonize routes, which I think it was encouraging for us to see a lot of momentum for example that we are seeing the mega hubs. This strategy, but we're not moving back so that was I think a good data point that we got recently from.
Speaker Change: And our clients.
Speaker Change: Next question from Martina, Colorado with RBC.
Speaker Change: Open your microphone.
Martina: Good morning, Thanks for the call.
Speaker Change: Had a couple of questions from my side.
Speaker Change: The first one your production performance it looks like rain levels in the north system.
Speaker Change: Heavier than usual Q1 can you give us some color on how production has been progressing so far in Q2 and then my second question is can you remind us how much that is.
Speaker Change: Two IV aren't finished yet.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Martina Thanks for your question so the.
Speaker Change: Rainfall during Q1 was unusually high just to put some context in the port in February.
Speaker Change: The the rainfall levels were the highest insurance years. So in March, particularly in March we had.
Speaker Change: Rainfall that was three times higher than the average so all these had an impact in our infrastructure that explains.
Part of the lower volume that we saw all these problems were fixed and I must say that all the everything that we have in place and our board walk the drainage systems worked.
Speaker Change: But the issue here was being close to the TMA all we had to be extra careful in the way we handle our product so.
Speaker Change: This is behind the the rainfall now is back to normal levels in our minds.
Speaker Change: In the North and also we expect the rainy season to be over the next two or three weeks apart. So so far in Q2 in maple.
Speaker Change: We have produced.
Speaker Change: Around one 1 million 1.1 million more than the same period of last year. So I'm talking about the first train two tranche one days of April. So that's confirms that we are in the right path as far as our reliability and the stability of our production processes. Okay.
Speaker Change: Yes.
Speaker Change: Marina in terms of the Alianza view, the mildly impact on death as minor is around $100 million of the consolidated debt.
Speaker Change: In addition to the $1 billion of cash that we're going to receive of course.
Speaker Change: Our next question comes from Christopher <unk> with Jefferies.
Speaker Change: You can open your microphone.
Christopher: Hi, guys hopefully can you hear me Okay, alright. Thanks for taking my question most of my questions on operations have been answered.
Christopher: But I wanted to ask about capital allocation and other mining companies are talking more about kind of stepping up their capital returns Valley. Obviously has a really strong track record in terms of dividends and even buybacks.
Christopher: And you're trading at an extraordinarily inexpensive valuation. So if we're if we go into 2026.
Christopher: And the art market is as resilient as we expect generating good cash flow. Your net debt is approaching the middle of that that net debt target range do you step up the pace of buybacks, how do you look at buybacks versus dividends because it seems like buying.
Christopher: Buying back shares at the current price of our current valuation is very compelling option for you. That's that's my first question and secondly.
Christopher: It's interesting how it feels like in the world of Iron ore were always playing defense and trying to understand strategic.
Christopher: Decisions in a weaker market than what might prevent that we can market them happening but of course, we don't know where prices are going to grow and it's possible that we get higher prices and I'm wondering.
Speaker Change: You've been a leader in terms of value of volumes and generally estimate taking capacity offline in weaker markets, but how does valley change operationally in the in the event that prices materially in somewhere sustainably surprised to the upside. So if we're in 120 <unk> hundred $30 price range for a period of time.
Christopher: What do you do differently in that case. Thank you.
Marcelo Bacci: Christopher This is Marcello speaking thank you for your questions.
Christopher: In terms of capital allocation.
Christopher: We are now in a phase as I mentioned before that our intention is to bring our expanded net debt back to the middle of the range of around $15 billion. If we approach that faster than we expect and of course, you're right that there's a lot of uncertainty on the market scenario and prices could go higher than we are seeing today.
Christopher: The trend of having extraordinary dividends and buybacks is of course higher.
Christopher: And the choice between the two alternatives will depend a lot on where the share prices.
Christopher: If you remember last quarter, we decided to.
Christopher: Prove a new.
Christopher: Volume of buyback program.
Christopher: Considering that the share price was very attractive for that so.
Christopher: You should be monitoring the combination of the share price and the level of expanded net debt and given.
Christopher: The fact that we are when we are back to the 15 billion dollar level and if price levels are.
Christopher: Attractive as they are today.
Christopher: We have a higher chance of having a more buybacks.
Speaker Change: So so Christopher Gustavo here I think on your on your second question I think one of the unique advantages in.
Speaker Change: And characteristic of Valley is the fact that will have a very wide flexible portfolio right and if you look last year just to give you. An example, we removed 8 million tons from the market in Q4, because prices were not there.
Speaker Change: Now that we are having biogen grand a cut in Irma and later plus two anti come in online.
Speaker Change: Think we're finally, having after many years.
Speaker Change: A greater flex in even greater flexibility.
Speaker Change: To play value over volume.
Speaker Change: So in a positive scenario like the one you quoted I'm sure you're going to have the opportunity to go further.
Speaker Change: In our in our supply chain and capture value as we can do when the markets are down. So I think the three projects. We are bringing online they will be critical for us to have increased flexibility to.
Speaker Change: To play even more developed volume in every single ship that we sell every single vessel that goes out to the market.
Speaker Change: We make money on it. So we are very disciplined on how we allocate our cargoes in volumes into the market and we'll continue to do so.
Speaker Change: In addition to Gustave say.
Speaker Change: Working on a more comprehensive.
Speaker Change: New products. If you will there we can access and change our mine plans, our logistics very quickly by adjusted to the market reality. So if prices go up we can't change it quickly if prices come down we can react similarly quickly. So that's exactly what we're.
Speaker Change: Building, we have the capabilities, we have the systems that we're trying to make it more fluid.
Raj Ada: Our next question comes from Europe at Ada with something that you can open your microphone.
Speaker Change: Hi, guys. Good morning, and thank you for the question to Charles do you have any sensitivity of gold prices on companies copper costs.
Speaker Change: And maybe to Gustavo regarding the <unk> agreement.
Speaker Change: We essentially more municipalities searching for an agreement with you. Thank you.
Speaker Change: Hi.
Nicole: Yes, Nicole sensitivity obviously.
Nicole: We are experiencing pretty good gold environment right now.
Nicole: You'll see that for every 100 dollar announced move in.
Nicole: And gold price.
Nicole: What that does for our all in cost for copper is about $135 a ton.
Nicole: Okay.
Nicole: On the on your question on the municipalities at the time.
Nicole: Hess has passed so we had a deadline for the municipalities to join.
Nicole: So the majority of it joined and the ones that have not joined we would not be able to enjoy.
Nicole: The payments that have been already made to the to the other ones.
Nicole: Yeah.
Speaker Change: This concludes today's question and answer session. Sarlis Conference is now concluded we thank you for your participation and wish you a nice day.
Speaker Change: [music] Goodbye.