Q2 2025 Vale SA Earnings Call
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Good morning, ladies and gentlemen. Welcome to Vale's second quarter 2025 earnings call.
This conference is being recorded and the replay will be available on our website at valley.com.
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For the instructions we'll be provided. Before we begin the question and answer section of our call.
We would like to advise that forward-looking statements may be provided in this presentation, including values expectation about future events or results encompassing. Those matters listed in the respective presentation.
We caution you that forward-looking statements are not guarantees of future performance. And involve risks and uncertainties,
To obtain formation and factors that may lead to results. Different from those forecasts by Valley, please consult the reports Valley files with the US Securities and Exchange Commission. The Brazilian Commission
And in particular, the factors discussed under forward-looking statements and risk factors in values, annual report on form 20f.
with us today, are
Mr. Gustavo Bachi, Executive, Vice President of Finance and investor relations.
Mr. Joe no Executive Vice President commercial and development.
Mr. Carlos meduse Executive, Vice President of Operations.
And Mr. Champs Omar CEO of Valley based metals.
Now, I will turn the conference over to Mr. Gustavo, sir, you may now begin.
Hello everyone and welcome to Vale's second quarter 2025 conference call.
First, I would like to take a moment to remind you of our strategic direction as defined by our Valley 2030 vision.
We're building a leading mining platform with the right portfolio of assets.
As we leverage our unique endowment to deliver a creative growth opportunities in both copper and iron ore.
We are also highly focused on continued to gain competitiveness across all commodities.
And this quarter's performance, only reinforces that we are on the right track to achieve our stated goals.
Another key element of our strategy is to increase focus on talent development and Leadership.
To that end, I'm very happy to have a world-class executive committee team fully in place. Now, with the recent arrivals of Samurai as our General Counsel and Gratzi Parenti as our VP of Sustainability,
both professionals bring enormous experience and expertise and you certainly help us to deliver on our long-term strategy.
Now, let's move on to the highlights of this quarter.
Our safety indicators for the first half of 2025 have clearly improved compared to last year.
As represented by a 55% reduction, in the high potential recordable injuries indicator.
And we continue to lead our peers in 3 phere.
These results are reassuring and confirmed that we are on the right path to becoming the safest Mining Company in the world.
This quarter was also marked by another solid operational performance across all business segments.
This shows that our focus on operational excellence and on building a superior portfolio are paying off.
Putting us on track to meet all of our guidance for the year.
on our production, Richard 84 million tons, this quarter
4% higher, on year.
And our highest second quarter output since 2018.
Growth was mainly driven by the ramp up of new assets such as kappanna along with a strong and consistent performance from other sites.
S11 D, for example, hit another production record, this quarter.
We remain committed to increasing the flexibility of our product portfolio, which allows us to respond more effectively to market conditions and capture greater value through our commercial strategy.
In our energy transition metals business, we continue to make solid progress.
No production roles. 44% year.
Driven by productivity initiatives and the successful ramp up of the voices Bay and the ground. Mine
I'm also happy to announce that we have started on sap. Puma's second furnace commissioning.
The furnace when fully wrapped up, we contribute with 12 to 15 kilotons of Nico production and will be very cost competitive.
Corporate production also performed strongly, increasing 18%, compared to the same period last year. Our best second quarter since 2019.
The strong performance at vbm highlights, the great work shown in the team are doing to unlock value, from our existing assets and position the company to deliver on our long-term goals, including the highly promising copper growth.
Early in the year, we launched the new carajas program with the vision to accelerate the development of essential projects in 1 of the most attractive mineral deposits globally.
Since then the team has been working on several fronts to advance those projects including increasing the exploration and spend to better understand the endowment in the region with very promising results today.
The first important milestone for the new kajas program was the preliminary license for bakaba granted in June,
Baba will extend the life of our sgo plant with 50 kilo, tons a year and a very competitive Gap to intensity of 5.4 thousand dollars per ton, a clear demonstration of the potential value creation we have in the region.
As we advance on our growth story, one thing remains clear.
Being a performance-driven company is at the core of our strategy.
Our efficiency program driven by Innovation and technology is enabling us to consistently reduce costs at a time when much of the industry is struggling to contain inflation.
This was the fourth consecutive quarter of reduction in our C1 cash cost, putting us on track to meet our 2025 guidance of $20.5 to $22 per ton.
Becoming more competitive and efficient is a top priority for our team and we will continue to pursue this objective as a key element of our strategy and cultural evolution.
Finally, talking about the third pillar of our vision, which is on becoming a trusted partner for society.
Valley recently, published its first sustainability related, financial information report being the first company in Brazil and the first major Mining Company globally to do so.
The report outlines.
Report, which reflects our commitment to Leading the industry in transparency and sustainable mining initiatives.
I will now pass the floor to Marcelo Bacci to discuss our financial performance. I will be back for closing remarks before the Q&A. Marcelo, please go ahead.
Thanks, Gustavo, and good morning everyone. Our performer may be Doc reached 3.4 billion dollars in the second quarter of 25 improving 7% quarter on quarter, but down 14% year, on year, driven by the 13% decline in our on our reference prices.
We once again, delivered a solid operating performance with production volumes rising and cost declining year-over-year across all commodities.
These efficiency driven mindset is increasingly shaping the way we operate and our results reflect the commitment and discipline of our teams. Let's take a closer look at the details of this quarter.
Starting in Iron, ore our cost performance continues to show strong momentum marking the fourth consecutive quarter of year-on-year decline.
In Q2 our C1 cash cost reached 22.2 dollars per ton.
Down 11% year-on-year, driven by our efficiency initiatives and a favorable exchange rate.
Y'all in cost decline, 10% year on year, reaching 55.3 dollars per ton. This Improvement was not only driven by a lower C1 but also by lower expenses and improved premium realization on our on our finest
We are starting to see the benefits of our portfolio. Optimization strategy with more to come in the coming quarters, we remain highly confident in achieving our full year, guidance for both, our C1 and all in cost implying year-over-year cost reductions despite inflationary pressures.
Our energy transition methods, business delivered. Another strong quarterly result with substantial improvements across all assets, reflecting the impact of the asset review, initiative, led by Sha,
In Copper the all-in cost, decreased by 60% reaching 1.4 thousand dollars per ton.
This reduction was driven by strong performance at both sallow. And so along with higher byproduct revenues benefiting from higher gold prices.
The lower than expected costs. In the first half of the Year combined, with a more favorable outlook for byproduct revenues. Allow us to revise down our 2025 all-in cost guidance for copper.
We now expect a range of 1.5 to 2,000 per ton which considering everything else constant would imply. A 300 million eida Improvement for the year.
In nickel, the all-in cost decreased by 30% year-on-year, as a result of robust operating improvements in Sudbury and Voisey's Bay, with the ramp-up of the underground mines as well as higher revenues from byproducts.
Now, moving on to cash generation.
Recurring free cash flow reached $1 billion in Q2, $500 million higher than in Q1, driven by a higher performance in Aida and a lower working capital variation.
Our topics continues to Trend downward reflecting gains from our efficiency program and the completion of key projects, like, vbma and kappanna. We remain confident in delivering the 5.9 billion, capex, guidance for the year.
Additionally yesterday, our board of directors approved, the distribution of 1.4 billion dollars in interest on Capital to be paid in September in line with our dividend policy reinforcing your continued commitment to return, value to shareholders.
As you can see on this slide, our recurring, free cash flow enabled, the reduction in our expanded, net debt, which ended the quarter at 17.4 billion.
Our target range for expanding net, debt remains between 10 and 20 billion dollars. We expect to gradually move back towards the midpoint of that range. In the coming quarters supported by strong cash flow generation, and the second half of the year and the positive impact of the allion energy deal, which we expect to close in Q3
To conclude. I would like to reinforce our continued discipline Capital, allocation approach. Keeping our expanded. Net debt within our target range. Controlling capex investing in a creative projects and delivering strong shareholder returns through dividends and BuyBacks.
As Gustavo mentioned earlier, we also remain firmly committed to our efficiency program ensuring, we become an even more competitive company.
With that, I would like to pass the floor back to Gustavo for the key takeaways.
Session, I would like to highlight the key. Takeaways from today's call.
Safety and sustainability are core values and we are committed to continuously improve our performance while also increasing transparency and keeping an open dialogue with all of our stakeholders.
We continue to consistently Advance on our operational excellence efforts which are enabling us to reach record production levels across all of our businesses.
Competitiveness and efficiency remain a top priority as the resulting all-in cost reductions will make us more resilient to generate value through. The cycle is 1 of the best copper provinces globally through our new carajas program. We are accelerating copper growth by developing a creative projects in the region, such as bakaba creating long-term value for our shareholders.
And finally, our discipline Capital location approach. We continue to ensure Health shareholder, remuneration and value creation, for all of our stakeholders. Now, let's move on to the Q&A session. Thank you.
We are going to start the question and answer section of the call. If you have a question, please, click on the raise hand button.
If your question has already been answered, you can leave the queue by clicking on the lower hand button.
Please ask your question in English and limit your questions to 2 at a time.
Our first question comes from Mari with Goldman Sachs.
You can open your microphone.
Thank you, good morning everyone, thanks for the opportunity. Um, maybe my first question to Joe please. Um, when you look at the production report, it was very clear that while this commercial and and product strategy was very adapted to the environment. So we saw big swings in terms of uh, product delivery, right? Ioc J was basically cutting half low grade basically doubled pellets of both quite now. A bit in line with the guidance. Um, so trying to understand, you know, how you're thinking about product mix going forward. When you consider, where consider where premiums are, uh, that someone do is probably ramping up high grade or into next year. Um, and obviously, uh, considering Vols asset based in Brazil and also the, the blending facilities as well, pleased. And secondly, secondly, my my second, uh, question to to Sean on the base metal side. Um, Nico was quite robust, obviously from low levels, but even adjusting for
Recording items were very strong, and Abida basically increased four times, right? So, just wondering, you know, if it's a new recurring level, can we expect more cost savings and more profitability improvement, both on Niko and corporate as well, generally speaking? Thank you.
Oh, good morning Marcus. Thank you for the question. Um, on the product portfolio. I think what I would like to reinforce is that we are focusing on value. As we said last time and more broadly, optimizing total contribution considering premiums costs volume. So it's not only, it's a complete understanding of where we can generate value.
We keep working on the, on building flexibility in our supply chain. We are looking to adjust product offering dynamically. As you just mentioned, as Market changes as premium changes is still margin changes. We need to adjust our portfolio.
And in order to enhance this flexibility, we are uh, seeking to increase our concentration capacity and blending capacity. Not only in China, but also outside China, but just to give you some examples of supply chain flexibility. As you just asked, you know, as a steel margins declined. Uh, in the past, uh, you know, couple of, uh, months, uh, we in in quality premiums,
The arrows, we revise completely our portfolio. As an example, we have revised our IO, CJ our from Kaja specification.
We introduced as I just mentioned last time. A mid-range kajas or
We increase our concentration of high. Silica or
So all this uh with a goal of not only uh simply not only in adjusting the products to the market but also of simplifying, our mining operations.
Improving this way the conversion of resources also helps us decrease costs.
Decrease the number of products. So, it is a total optimization of the system. And so that, you know, today we just tendered new projects of Kajas and new products of mid-grade very successfully. I think, uh, you may be able to see this impact, uh, which has been quite positive. For example, if you look into BRBF premiums versus the premiums on an index 62, uh, we have had a tremendous change and a tremendous increase in the premiums on BRBF.
Uh, the premiums on concentrates also increase, especially on the spot Market in China.
And more remarkably uh silica penalties married by about 2 dollars per ton on on a percentage Point relative to alumna ores from April to July. This all are very significant uh, improvements in price realization.
so,
this actually, when you look into Vols overall portfolio has a, a very significant impact primarily because all our ores are relatively higher in silica
But obviously, I think you also asked about Simon do. Simon do will will change the dynamic into the market. But what I can tell you is that we are prepared to make the necessary adjustments. Change your product mix changing Channel. Allocation as simma, do comes into the market.
And Mia. Good morning. Um,
it's Sean speaking. So to your question,
I think you may recall um, late last year, valid day and then in q1, you know, we set about with the base Metals business
uh, doing a few things, the first was looking to lower our Global overhead uh through efficiency programs
Uh to make the organization as effective as possible, uh, and re-engage the operations so that they can effectively be as productive as possible. And successfully compete for Capital. We call that internally project catalyst
What we've seen today on that initiative, has been quite remarkable with the teams responding, so you're calling q1. We said that we'd removed about um a third of our Global overhead in GNA
We've actually gone beyond that. I think at the time in q1, it was about a 285 million uh cash flow improvements on our internal budgets from last year. We're looking now at about 340 million and I see more opportunity. And I think what you see in this quarter is the first with the lag between what appears in our, our actual accounts. And then the timing on cost of goods, sold, you're seeing the flow through. So, our latest numbers. Now in our forecast, we, we're banking about 340 million of cash, improvements. Where more than half of that is in Opex, the rest in capex,
Um, to your point at nickel, not a necessity, just given the point in the cycle. I think we're seeing, um, as a disproportionate amount of those savings. Um, and we're also seeing a, a large impact from fixed cost dilution, and also the benefit of poly metallics. So, just a few things to consider, I think we're on track for certainly the, um, on the copper side, the best performance we've seen in um, um, certainly at salobo and it's a SEO uh, with the productivity improvements, the unit cost improvements alone. We're seeing nearly a 40% improvements uh, with the work that the new systems and his team is doing so despite the copper price environments and gold price environment, being very supportive those in efficiency and programs are driving. So you're seeing fixed cost Solution, that's occurring, that's increased volumes. But also low overhead. So there's that double whammy plus the benefit of
Um, of the byproducts and to put that in context for you. Um, I think we'd mentioned this in the last call, but it's worth just re, uh, reiterating it for every hundred dollar announced move in gold price. It's about 135 a ton improvements in, um, in all in cost for for copper, for example. Um, importantly, when you go to Nickel, we're seeing a big volume effect. In addition to a very large fixed cost reduction that we're just starting to, um, reveal for these Bay is gustavo's mentioned, we're seeing a very successful ramp up of the underground there. Um, Peter and his team are about 30% ahead of our internal plans and are well, set to continue.
Operation, um, in in May. And, uh, you know, we look forward to seeing those teams continue to deliver the throughputs particularly driven through our own feed, which uh, has cash flow benefits for our business.
Summary. We've seen significant improvements, not just in overhead, reductions, but throughputs. Um, you'll see that uh, Tottenham for example, is the highest or hoist that we've seen in the first half of the Year there, in over 6 years. And in Creighton, it's the highest metal produced month in June, since nearly a decade. Uh, and Ontario itself, when you look at Copper and just to remind you, I think it in these pricing environments only about 40% of our Revenue. Uh, coming from that complex is actually nickel. The rest is copper, Cobalt pgms and that diversification is really helpful, um, about we're seeing about 6% more copper in the first half versus the same period in the last year and just going back to that poly metallic piece, as you consider the sustainability and a potential going forward.
For every thousand dollar in ton of movement copper, I will in costs move for about 460 dollars a tonne platinum for every hundred dollars. It's about 55 Palladium for every hundred dollars an ounce. It's about $50, a ton and gold for every hundred dollars an ounce is about $25 a ton. So, I'm I'm seeing across the board performance. Um, on super, Pumas Gustavo mentioned that just started. The second furnace even before then Kilmer and her team are hitting second quarter,
Improvements and we should be on track for Metal by the end of Q3 and that operation and a very competitive position.
So um I'm very proud of the team. I think we're on track and I think you should expect to see, uh, continuation of us focusing on. On delivery of increased volumes. Fixed cost dilution reduce reduction of fixed costs and improvements in productivity.
Next question from Hulu Anjali with JP Morgan.
Hey, uh,
Thank you very much.
so um, I have a couple of questions I think uh, more towards back but, um,
uh, you know, feel free to, to jump in, whoever wants to help, but, um, I think, uh, I, I want to explore a little bit more the, the side of, of course, it's, uh, it's clearly the highlight of the quarter,
Um, uh, as Gustavo mentioned, uh, 10% lower and, or more, 60% on corporate, 30% on nickel. That's quite impressive. Um, and I wanted to explore, uh, a little bit of, uh, you know, the future on the cost side. So, um,
What is the you know, structural here.
Um, and, and probably more important, um, is, is the Baseline of opportunities on the cost side? Is it, um, still, uh, pretty healthy. Can you give us a little bit more caller? Um, you do seem very, um, comfortable on the guidance, but I just wanted to to hear a little bit more detail on on the cost opportunity, um, on on vpm and, and on iron ore as well. Uh, that's my first question and the second is on, on Fair holder return. Um,
you know, this is, uh, recurring question that I get from investors.
Uh the company is is doing well um clearly. We're seeing the performance stable, a company's generating cash.
Um, and um, it, the stock is, is steep, at least, that's how our assessment. So, uh, the question is once I hold the return. It's not about yourself, uh, looking forward. Um, what do we have to see, um, to see, you know, a buyback program, uh, being uh, something that uh, the company will be pursuing more aggressively with, those are my 2 questions. Uh, thank you very much.
Hi Rudolfo, thank you for the questions. Uh on the cost side. Uh we feel very confident about delivering the guidance for this year in Iron ore.
Uh, the operational performance has been very stable and the new operations are coming in at a very good pace. And we we feel very good about continuing to deliver according to the guidance, of course, in the second half of this year, we have tougher comps, uh, since the, uh, the performance at the end of last year, was very good. Uh, but we are feeling very, very confident about the guidance that we have for our North.
Of cost and Nico around the same level that we have today in the second half of the year. Uh, and we have this new guidance that we published for copper, uh, that we also feel very confident about that. So, uh, the, uh, the performance and the stability of our operations are, uh, you know, making us believe that, um, you know, the the cost performance will continue, uh, to be within, uh, the ranges of the guidance is that we, we provided to the market.
When it comes to shareholder return, we just announced the dividend in the form of interest on capital for this first half, which is related to the minimum policy that we have: 30% of operating cash flow.
Uh, we will, during the second half of this year, uh, depending on how, uh, we perform on cash flow. We will decide about potential additional dividends and or BuyBacks, we just announced today, uh, the approval by our board. For also the usage, uh, potentially for the BuyBacks of derivative instruments that could enable us to manage the cash flow on a better way.
So, uh, I would say that, um, we continue to see mismatch between, uh, the operating performance and, uh, the valuation that we see in the market. So we are getting prepared, uh, to, um, move forward with some of these actions during the second half of this year.
Next question from Amos Fletcher with Berkeley.
Thank you for the opportunity. Um, I had two questions. Um, the first one actually just following up on that last answer. Um, just around the use of financial instruments and derivatives to do the buyback, could you just go into a bit more detail to explain um, exactly how that would work and the potential quantum of it? And does it enable you to start a buyback, um, you know, earlier than you might otherwise have done potentially in the second half of the year? Um, and then my second question was just about Vale Metals. Um, I just wanted to ask about the recent departure of Mark Cutifani and whether that indicates any potential change in strategy for VBM over the long term. Thank you very much.
Thank you. Amos uh, in relation to the derivatives usage, it's important to mention that according to the regulations of the Brazilian authorities, we have to, uh, be very precise about what kind of derivatives that we use for the buyback program. So, the approval that we got yesterday from our board was just, uh, you know, an explanation of what would be the different kind of derivatives that we are authorized to use.
Basically, uh, the uh decision between buying straight in the market or using derivatives, is related to the cost of capital and also related to the cash flow management of the company. So we uh, wanted to have the options open to go 1 way or the other uh, depending on on, on the how how the market performs in the second half of this year. Uh, but uh, you know, in in relation to the decision of actually going to the market and Performing the BuyBacks. This will depend of course on on how comfortable. We feel uh in terms of cash flow generation and uh the the room that we have on our net debt policy
Almost uh, Gustavo here on on the vbm board. Um, and the departure of Mark? No, no changing. His strategy that was always the design when we invited Mark to join us. Uh, the idea there was to set up the asset review, uh, help us build the team and that has been achieved. So he he was extremely helpful and we are very grateful for other work that he did and it was the design. Once we had the team in place that they would then take over and and move their strategy along. So no no change in strategy. If anything what you want to do is just accelerate the future that we laid out for vbm.
Next question from Leonardo koha with btg.
Hello everyone. Uh, good morning. Yeah. So a couple a couple questions on my side. Um, number 1, um,
Just just moving back to to perhaps to, to hold off for this question on, on the, on the cash returns, right? Um, which I think is the, let's say the the central element.
7% yield. Um, so we sent, this is, uh, higher than than the Australian peers, right? Uh, however, uh, lower than some Brazilian peers and, and, and much lower than the CDI rates, which are the the reference interest rates in the country, right? So so the question always ends up being, I mean what what V needs to see uh what needs to happen? Uh for for Extraordinary dividends and provided to return to those, let's say to those brighter days.
A very strong cash return, uh, double digits, uh, with Violet paying quite a lot of extraordinary dividends, right? Um, so maybe a bit redundant again, but we've been seeing in our prices, um, surprise on the upside. Uh, I think many observers.
Have been waiting and waiting for a correction which, which hasn't come and and maybe will not come, who knows, right? Um, it's, it's very difficult to forecast. Um, but would it be, would it be fair to say that in the current environment, uh, with some of the proceeds coming in uh in the third quarter from Alianza? And with the, let's say,
With the resilient annual price. Um, would you see valet back to to actually ordinary dividends um, towards the end of the year? So that's my first question again, trying to address uh the marginal buyer at Valley right with that with that in in in
And in the mindset, right? I mean um it depends on who you talk to people. See the the dividend as um higher low, right? Or relatively low.
Um, the second question.
Uh, to Marcelo specifically, right on the capex guidance. Um, I mean, the free cash flow number in the quarter was solid, right? 10% yield. Uh, it was based off of...
A relatively low capex figure in the quarter, right? I mean, $1 billion of outflows in capex. I know it's wrong to annualize this, but it's natural to do, right? I mean, $4 billion. Your guidance is almost $6 billion, slightly under $6 billion for the year.
I know there's an erratic Pace to capex, but
I think the natural question would be um why not reduce the guidance or uh what are the the risks that um that you end up um with with lower outlays versus your guidance? Those are the 2 the 2 questions. Thank you very much.
Thank you, Leo, uh, on the cash returns. I think first. Uh, I don't think it's fair to compare with CDI, right? This is not our cost of capital but I understand where where you come from. Uh, the um, the scenario is 1 that uh, if we continue to see iron ore prices around the hundred dollars, I think there's a good chance that we have room for uh, additional payouts in, in the form of BuyBacks or or additional dividends in in the in the second half of this year as we did last year. Uh, but
We're going to have to see how the market performs. Uh, we are very confident on on the tools that are under our control on the cost side. But of course, we depend on market prices to determine, uh, the cash flow that we're going to have available in our hands to, uh, determine the uh, uh, the, uh, the allocation of capital that will most likely include more returns to shareholders. If we are more towards a situation where, uh, our net debt, expanded net, debt moves, uh, towards the midpoint of our range, which is 15 billion dollars. So, if we feel that we are going in, in the direction of going below, 15 billion, the increase, the the the chances of additional payouts will probably increase and we're going to have to decide if we're going to go in the direction of BuyBacks or additional dividends depending on how the market is performing.
Uh, on the capex side, uh, we do recognize that the number for this quarter was relatively low. That was a a seasonal effect. We feel very confident about the 5.9 billion dollars, uh, guidance that we have for the year at this point. Uh, there's no, uh, uh, indication of a change in the guidance for the year. Uh, but rather only a seasonal effect for this quarter.
Next question comes from Danielle, son with it.
Hi everyone. Thank you so much for for um, your time. Uh my first question is related to a pallets and maybe I don't get talked about the maxim.
Strategy of maximizing value.
See that happening at some point given that you're all in, uh, guidance for for premiums this year is, um, would likely imply a significant Improvement in the second half.
And and maybe my my second question to to Sean, uh, you, um, you talked a little bit about the, the reduction in your guidance for uh, copper production costs. And you mentioned that, uh, a chunk of that came on the back of higher gold prices, right? Or higher by products sales. Uh, but specifically for gold, uh, a big chunk of that, uh, or almost all of it is, um, you, you don't get to keep it right? Because of the streaming transactions. You, you, you made in the past. Do you think, or are you interested at all in, in, maybe renegotiating, uh, some of the terms of those acquisition of those, um, um, deals or do do you see, or in any way, the possibility of increasing your exposure to, to gold? Or is it something that you'd like to to, to do? Thank you so much.
Um, Daniel, thank you very much for the question on Pilots. I think, first, the market that we serve is the market of the Atlantic. We also serve the Mena region, the US, and Japan, and Korea, and Taiwan not so much, join us. So the dynamic is a little bit different. I think what we're facing and we when we look
Look into the short. Uh, short term is a decrease in demand, because China has been exporting as a significant amount of Steel.
And that those products are actually coming into the regions that I just mentioned. And they are, uh, reducing the nessus, the necessity for higher production and in these regions, thus, with less productivity requirements. Most of our clients are reducing the amount of payloads they use in their burden.
So, this is, uh, a lot related to the steel exports going to those regions. In addition to that, I think there is also the increase in supply from Sama and some from LKAB, and we're monitoring this situation very closely. I mean, obviously, we expect this to change, and gradually more demand will come from pellets. When you look into the medium to long term, we see a significant increase in demand. There are several electric car furnaces being planned around the world in different geographies. Just to name a few, if you think about Europe, you may see Hoogeven's Tuscan group as getters.
If you go for the minor region so you go North Africa Tosi ali um some some meals in in Oman as well in the US. You might we're just following the decision from Hyundai to install a new electric car furnace in Louisiana, turn, New. Mexico is expanding. There's also a big river. Uh number 2 in Japan and Korea nepon. Jfe post code, they're all looking into electric car furnaces
So, I think the view is that.
A gradual and these projects that I'm talking about, they're all.
Planned to come into place by 2030.
So what we see is that despite the exports from China, which is impacting primarily the blast furnace Market, we see that there's going to be a lot of demand. Uh, coming on board, gradually and pellet prices should actually recover. I mean, how fast is recovery. Will be is still a bit difficult to to Define, but we're monitoring that closely and taking the necessary Solutions. Uh, in terms of a capacity in terms of production of our pallets.
Actions, going back to 2013. Excluding the ongoing payments are about 4.1 billion, uh, that um, yeah, the business has received and to your point. You know, our Focus here is on really what we can control. We've actually outperformed on gold in the first half uh just with the ABS and flows of both the performances uh solo as well as the sort of Mind sequence. Uh, we expect that to be a bit less in the second half, but um, you know,
Really the focus for us is on uh the optimizing the production as a whole. We are the beneficiary of the residual gold regardless and um you know, if we were able to look at financing Alternatives in the future for future growth, you know, we consider all options as we have, um, albeit using a lot of the experience, obviously that I've got from having done these before. So, um, yeah, I hopefully that answers your question, but, you know, our main focus is on optimizing free cash and allocating our Capital. Well, and, uh, honoring our contracts.
Next question from Carlos De Alba with Morgan Stanley.
So you can open your microphone.
Yeah, yes, I'm here, sorry. Yeah, um, all right, yeah, maybe a follow up on on, on what we just discussed, uh, for Carlos Madero, maybe rogerio, um, on the briquette projects that, uh, you you finish, um, given that it's no longer, um, there as part of of the pressure, you are working on, um, how does the the given the current market situation, the area, just elaborated. How are your customers accepting and and buying the brigades that you are now producing? And how is the ramp up of the project? When do you think you can achieve, stable, performance, and maybe Optimum cost and any, um, any, any comments that you can give us in terms of the margins that you could potentially achieve in in, in this in in this in this products? And then maybe for Sean uh just a continuation of of of the the last uh response. Um sure. Let me look fantastic performance. Uh, very good to see the 2020.
25, all-in cash cost guidance declining as dramatically as he did. Um, I just would like to see if you can share some color on how you see the sequential performance in the third quarter and the fourth quarter. The all-in cash cost is, uh, in the second quarter, at $1,450. It's slightly lower than the new, um, you know, the low end of the range that you provided. Um, when you...
We looked at the 6 months, you are a 1336, uh, dollars per ton. So again is, is the new guidance a little bit conservative or because the lower gold production that I understood you mentioned, you may see in the second half of the year, uh, it is prudent to to have a, a new range that again, fantastic decline. Uh, but, uh, would suggest maybe an increase from from where we are from where you were in the second quarter. Thank you.
Thanks for your question, Carlos. I was starting with 3, and then I will hand over to Roger to talk about the market aspects and the tests with our customers.
So the brickheadz lines so far is stabilizing. So Joel in July, we produced a 40,000 tons, so which was our best Mark in a month. We had the line down during the the month of June to to correct a few things that we believed were necessary. And what we see is that the line will ramp up and also quality is improving on a daily basis. So we are confident that we will come up, uh, that we are coming up with a product, that will be, uh, helpful to our customers. So what should I do? If you compliment that? Well, thank thank you Miss. Thank you Carlos on the
Break it. So it goes, we have a lot of interest from our clients. Uh, we have a, a huge backlog of backlog of clients uh, looking to test it, but let me give you the current status. We need to separate this between
Or the mix with a larger blast furnace. I think, uh, what I can tell you is that the results were excellent in terms of productivity and in terms of co-creation, uh, better than running with pallets, right? And we're now planning, uh, for still this year, another two, uh, very large industrial trees, which is the final product validation.
Uh, direct reduction, we have run. I think we didn't have a chance to talk about this before, but we have run more than 10,000 basket tests with different clients around the globe. All baskets have been extremely successful, most of them actually extremely successful with a very high metallization on the product, much better than actually impalets. We have also had very good indications of productivity. This is one of the things that we've noticed, especially in direct reduction, that the bricks, because of their configuration, are more forgey. They actually use a much higher productivity of the shot furnaces. We're now completing and going to larger industrial trials as well with selected clients. Upon confirmation of the results, we believe that this is going to be a real breakthrough for the industry.
Yeah, call us at Sean. Um, on your question on the second half. Um, I know, um, my Chief Operating Officer is online listening to this call and feeling the heat in the second half as we go into this. And I think, um, I say that because clearly each of our operations have stepped up in the performance, you've seen today, uh, is not isolated to just copper or nickel or just a lobo or say, uh, Ontario. We're seeing, uh, these opportunities across the board. Um, I would caution that as you think about the second half, we are looking at more plan maintenance, which will impact volumes, and obviously some cost in Q3. So, uh, you should think about H2 as being somewhat similar, but more back-end loaded. And um, I think the only other thing to frame is bear in mind. We're ramping several operations right now. And so we, we are factoring that into our risk Assessments. In the numbers, we're putting our publicly. We've, uh, as we've just communicated, we've just started. Uh, the second furnace, uh, at our
Puma. We are still in the midst through for the next, you know, many many months uh for expansion at the underground in Boise Bay and effectively. We're expanding um production in our own minds in subre uh in in several of them, we're aiming at 5.5 million tons this year through the mill. We'll be looking to take that to 7. There's a significant amount of development and work that's going through there. So we have really flexible.
That in.
I think the last bit of context I mentioned before is that the actions we took in late last year and this year, uh, that were identifying and delivering cost improvements. There is a lag between what we produce and what we sell, and so you're seeing that starting to manifest in this quarter with cost of goods sold. Um, our internal targets on that, what I mentioned earlier, this project Catalyst, where we've identified and delivered in our forecast so far about $340 million of improvement this year. Um, we are internally continuing to push beyond those numbers, but we will only bake those into forecasts and actually communicate those later as we indeed deliver, as opposed to, um, you know, things that we have identified but yet have to succeed. So, to summarize, um, you should see more of this; it should be more back-end loaded. And as you'd appreciate in this industry, with this volatility, it's essential that we use productive as we can be and as cost competitive, and that's our focus.
next question from havea with BBI,
Good morning, and thanks for for taking my questions. Uh, my first question is for hiyo, uh, it would be interesting to understand, uh, how the new volumes from capanna, and even from the sahu project will change your overall, uh, commercial strategy.
And then my second question is, is really about your views on, on the iron ore markets. I mean, despite the fact that we are dealing with several macro uncertainties, uh, key data points, uh, remain very solid for iron, ore and Steel with steel prices and margins increasing in recent months. So, so just wanted to hear your thoughts on on, on the, on the second half for, I don't know, markets particularly where you see in terms of demand trends for for the second half. Thank you.
Um, when you look into the Global Steel Market, it's still volatile, as some of you just pointed out.
But, uh, we feel it's more stable after these intense rounds of tariff negotiations.
If we divide this in China, next China, just in China. I think you all might have seen the recent reports from the Politburo meeting suggesting major economic incentives. And this is because in the first half of 2025,
The Chinese government has achieved a GDP growth of over 5%.
So this is, we don't expect a lot of change, but mild incentives.
Secondly I think they also emphasized uh industry capacity, rationalization under the anti-evolution policy, which affects still I think some might think this is negative for us but quite on the contrary what happens is the muse which are left outstanding. They will probably going to have higher margins with higher margins. They will need more productivity and uh with the more productivity they will need um higher quality of voice and that actually is very positive for us involved a specifically um more specifically looking into the Chinese steel mill and starting with crude steel production.
You may see that, according to the National Bureau of Statistics in China.
Uh, crude steel production has declined by 3% year on year. But here's the caveat. When we look into Big Iron production, which is the which is the steel which is produced with iron ore, the decline has been only of 0.8%
The indicates that the bulk.
Of the crude steel decline, a significant portion has come from scrap-based electric arc furnaces.
I think it's important to consider that blast furnaces and the integrated processes are more competitive these days than electric cars. When you factor in the demand for seaborne iron ore, these aspects become even more evident.
I think, other than that, the more traditional.
Indicators did not offer much of a surprise when you look into fixed assets and investments.
I still miss profitability, or even still inventory. I mean, there was no surprise there. I think there has been not much change in the Chinese market.
Uh, regarding, I don't know. Um, still in China, and I think you still very stable, from what we've seen in the past. Imports of, I don't know.
Uh I had a lawyer inventory reports uh handing hanging around 140 million tons so no no real surprise. I think the point uh to highlight here is the X Joyner and that connects a bit with the the previous question on on pallets.
Um, the exports coming out of China, which we forecast will exceed 100 million tons for this year, are impacting negatively crude steel production and productivity requirements to that extent outside of China. But, uh, what I would like to highlight on the positive side is India.
India's crude steel production has increased by over 9% this year.
Um, which is very significant and thus, uh, a lot of, I don't know where from India, which was going to the C board market, is actually coming out.
And more importantly, in this opening up for imports, especially for our kind of ores, which are very complementary to their ores in terms of chemistry and size distribution. This year, we anticipate there will be sales to India of more than 10 million tons.
And we expect to grow this over the next few years as we partner with some of the Chinese players.
Um, but oh, you know, I think the way we look at it is that despite the volatility that I mentioned in the beginning, the global iron ore market is balanced.
Um, to your second question, I think it's a very good one.
Uh, cap will be part of a broader portfolio design when we look into how we define products. Um, uh, mark regions to sell.
A marketing channels cap will be integrated into the broader supply chain and will define how to better allocate it. So, depending obviously on steel margins and premiums, this is part of the broader portfolio optimization.
Next question from Cayo Greener with UBS.
Hello, good morning everyone. Thank you. Uh, so, 2 questions on on iron ore, uh, the first 1, the, on the production Outlook. Uh, it's actually great to see uh, the higher production coming in uh kapan and and the northern range also performing quite well. Uh, but I mean production growth here today has has been quite low, right? So I just wanted to get an update from you uh on the ramp up expectations of your of your of your uh multiple assets. Looking into the second half of the year and into 2026, you're arguably tracking in line with your 2025 guidance. But for 2026 the the question is, I mean it it implies a 20 million T growth when you think about the, the mid-range. Uh, so I just wanted to hear from you if you remain confident on your 340 to 36060 million, tons guidance, which again implies uh, implies the relevant growth from from from where, where we are.
And uh, is, is that vales plan under pretty much any iron ore price scenario or, or could we see lower depending on on market conditions? If if we see iron ore prices, moving to to 90 per ton next year, for example, is this still going to be uh, with the level of production that we should be looking at?
And the second 1 which is also related but on on the Cave's decree, just just wanted to get an update from from you. Uh, in terms of how the conversations and and engagement with the government has been evolving in recent months. Uh, it's are arguably taking longer than expected. So, I wanted to get this update and also, uh, also hear from you if V is already working with the possibility of not getting this decree and what could be the eventual implications for the company. If that's the case, thank you very much.
So regarding the the new projects company name and version they continue to ramp up as planned. So to give you numbers uh at kappanna, we have already produced a little bit more than 1 million tons.
And as a matter of fact, we are ahead of schedule in our ramp up, curve in caping grandi we are slightly below our ramp up curve, but all in all we remain confident that we will achieve the 325 335.
Guidance for 2025.
As far as 2026 is concerned, we remain also confident uh, that the 3423 60 guidance is achievable.
And will provide a, a more, uh, accurate number, uh, during the valid day later in the year.
On the cape's decrease, I will hand over now to Gustavo that will talk about it. Thank you.
Uh, Cayo Gustavo here, just to compliment on the prior one, and then I'll talk about the caves. But um,
you know, we'll continue to play value of the volume as we always did, right? Remember last year, Q4 we removed it. 8 million tons from the market because it didn't make sense for us to to place those volumes.
So we continue to be highly disciplined, I think 1 of the beauties.
Of Valley Visa V competitors is that we can bring projects online uh with the substantially lower Capital intensity. If you look at cap version Grand is the ones we brought. It is probably a 4th of a typical
Gap to intensity that you're going to see in similar iono projects globally. So that allows us, for example, to operate.
Federal levels. And if we look at the status today, is that the licensing process for Valley projects have improved with everywhere. We were 2 years ago. And, and, and you're seeing this, uh, as part of the operation of stability of the company, we think we can improve even further by more than using the caves decree. And that's what we are working and hopeful that we can um uh have as as an outcome to your question on. Uh, are we prepared for a new caves decrease scenario? Yes, uh, the team.
And ourselves, we continue to work under any scenario even under a new cave. Decrease scenario, we will make sure that we deliver on our long-term targets and we're developing Alternatives plans, as as we go along. To make sure we have a very resilient master plan and production, uh, uh, plan.
next question from Cayo with Bank of America,
Hello everyone, thanks for the opportunity. So my first question is on copper, it's pretty clear that the company is focused on extracting growth from projects, in Brazil, like bakaba Pola and Pino among others. And these, uh, they tend to be smaller deposits especially in comparison to who, in Indonesia, right? So, I just wanted to see if you could, uh, provide some color as to what drives that preference to develop, uh, several relatively smaller deposits as opposed to, uh, for
Focusing on 1 larger project uh like who in Indonesia and and possibly even under a uh JV structure right to mitigate the execution risk of developing a larger project similar to uh what other miners uh, have been doing. And then, uh, secondly, on Thompson. If you could discuss, uh, how the Strategic review of that asset is going. Uh, what would be the preferred Avenue, uh, to to it, to explore, uh, with this asset and, uh, if whatever option is chosen, uh, with Thompson, if that could be an indication of uh, future plans with other assets in in Canada, thank you.
Hi. Hi. I have some some good questions. So
Firstly, on the copper side, I wouldn't think of these things as a bipolar Choice. Like, it's, I'm only going to do big or I'm only going to do small, I think you have to be focused on value and if you folk and execution. So if you think of the sector,
I do believe the data will show that the sector's ability to deliver new projects has been pretty bad and I think the capital of Verizon's particularly on large projects has been in the order on average of about 40%.
And so when we look at our best way to unlock uh, copper growth and create value, you know, we heard from, um, Gustavo earlier on the capital intensity of bakaba, it's quite clear that, you know, we've got, uh, Regional presence we've had for decades. There we have infrastructure. We've got to know how we got capability. So I think about
Risk as much as anything on our ability to deliver into that and what can we do about ways of returns? And so those, um, projects that we're looking at, and I'll use boob as an example because when I first arrived here in October, it would have been my second week. I looked at what was presented on that project and it was a very different construct at that time with nearly double the capital intensity to what we've been able to do through working through that. And we're seeing lots of opportunities we look at um, nuba carajas and we look at para as a whole to look at these things in a way, which is, are we best placed on some of these to build them ourselves? Are we like we've done elsewhere with? There are copper better place to partner or are we better place to perhaps contract mine? And I guess my point is we have to look at this as both Miners and investors to find the best path forward. We've just finished the life of business planning uh we're going to evolve that we're seeing opportunities to um significantly improve. I think the risk profile and the economic
And that's something we'll talk about more at valid day so stay tuned, but I do think you shouldn't underestimate both the capital intensity the risk and the value potential of that District.
Uh, in there. And that's the reason we're focusing on that.
A Century of life. You don't get off assets like that every day, uh, obviously there's a lot of work to do and, you know, we'll communicate that at the right time. We have not built that into the guidance, on the projections that we shared at valid day, but it's clearly an intrinsically valuable asset. So, just to summarize, we can walk and chew gum. Uh, we are looking at these things as investors and portfolio managers as much as we are as Miners. And, um, I think the themes that you've drawn out are very consistent with how we're trying to grow copper, not just in power, but but in General on Thompson, you know, we around a similar time initiated that review, it's at an advanced stage. Um, we are still looking at multiple Futures in there and um, we'll look to communicate where we get to and that because it'll be inappropriate commercially to update you at this stage. Um but we should be able to update you in the next quarter. Um that's progressing. Well I just want to pay tribute to my GM and the teams there who have
Had to deal with devastating wildfires in the province and have done a remarkable job of safety leadership and keeping, uh, both employees and communities safe, but, um, that's well Advanced and is on track. And I think you shouldn't read across necessarily any 1 action from a portfolio optimization point of view whether it's Thompson or others. Recall Thompson has a huge endowment, it's 1 of the assets that is not poly metallic. We're looking to optimize um, our portfolio and our Capital allocation and we're
Continuing to look Beyond these to see. Um what are the right things to do with our projects portfolio, exploration portfolio on our assets before our Focus now is on optimizing each asset in the portfolio.
This concludes today's question and answer session values conference is now concluded. We thank you for your participation and wish you a nice day.