Building a Stronger Organization Murilo Ferreira, Vale CEO Bank of - - PowerPoint PPT Presentation

▶
building a stronger organization
SMART_READER_LITE
LIVE PREVIEW

Building a Stronger Organization Murilo Ferreira, Vale CEO Bank of - - PowerPoint PPT Presentation

Sep 25, 2023 6 likes •182 views

0 Building a Stronger Organization Murilo Ferreira, Vale CEO Bank of America / Merrill Lynch Global Metals, Mining & Steels CEO Conference Barcelona, May 12, 2015 Disclaimer 1 This presentation may include statements that present

slide-1
SLIDE 1

Building a Stronger Organization

Murilo Ferreira, Vale CEO Bank of America / Merrill Lynch – Global Metals, Mining & Steels CEO Conference Barcelona, May 12, 2015

slide-2
SLIDE 2 1

Disclaimer

“This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct. These risks and uncertainties include factors related to the following: (a) the countries where we operate, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF) and The Stock Exchange of Hong Kong Limited, and in particular the factors discussed under “Forward-Looking Statements” and “Risk Factors” in Vale’s annual report on Form 20-F.”

slide-3
SLIDE 3 2

We have been working in several dimensions to further improve Vale´s highly competitive position in the mining industry

Delivering projects Increasing Volumes Reducing Costs and expenses Increasing productivity Strengthening

  • ur license

to operate Setting the basis for strong Free Cash Flows

slide-4
SLIDE 4 3 7.117 4,521³ 3.547 2012 2013 2014
  • 50%

We have reduced expenses1,2 significantly but we are not there yet…

¹ Net of depreciation and amortization. ² Includes SG&A, R&D, Pre-operating and stoppage and Other expenses. ³ Excludes the positive one off impact of US$ 244 million of the goldstream transaction in 1Q13 4 Excludes the positive one off impact of US$ 230 million of the goldstream transaction in 1Q15.
  • 21%
808 638 1Q14 1Q15 4 US$ million
slide-5
SLIDE 5 4

We have also made significant progress on cost reductions but we are still not satisfied

Cash Cost FOB¹ port Brazil Freight Costs 19,9 18,3 22.7 19.8 1Q14 1Q15 23,9 17,2 1Q14 1Q15² Iron ore unit costs and expenses, US$/t
  • 13%
¹ Ex-ROM and third party acquisitions. ² Excludes US$ 2,3/t of the bunker oil hedge. Royalties
  • 28%
Expenses 7,5 4,0 1Q14 1Q15
  • 47%
slide-6
SLIDE 6 5

We remain committed to delivering additional productivity gains

  • Improvement in availability of the transportation fleet

in the Northern System

  • Resizing of infrastructure, drilling and transportation

fleets

  • Optimization of mine plans
  • Ramp up of the Itabirites projects
  • Improvement in the yield of the concentration plants
  • Extension of the natural screening process to older

plants in Carajás

  • Full automatic operation of reclaimers
  • Automated operation of trains
  • Implementation of innovative technology:

− Distributed traction technology − Energy control systems at the ports − Reverse routes at the ports

Mine Beneficiation Logistics corridors

Example of initiatives Status

Completed In implementation
slide-7
SLIDE 7 6

High quality products will replace lower grade material and improve margins

And we are about to operate some of the most competitive assets in the world

Itabirites Projects N4WS in Carajás

N4WS

Waste Dump Plant 2 Plant 2 Primary Crusher N5W N5S N4E N4W
  • N4WS licensed in 2014
  • Pre-stripping completed
  • Already mining the first layer of product (“canga”)
  • Vargem Grande Itabiritos started up in 4Q14
  • Conceição Itabiritos II and Cauê Itabiritos will
start up in 2015
slide-8
SLIDE 8 7

Our differentiated and further improved product quality will drive price realization up

Alumina Content % 1,4 1,3 2014 2018 Fe Content % Silica Content %
  • 0.1 pp
63,7 64,6 2014 2018 +0.9 pp
  • 1.3 pp
4,6 3,3 2014 2018 9,5% 8,3% 10,1% 11,6% 12,6% 1Q14 2Q14 3Q14 4Q14 1Q15 Delta premium IOCJ 65% vs. Platts 62% %, premium over Platts
slide-9
SLIDE 9 8

And our iron ore break-even will reduce even further as early as 2015

43 2-3 0-1 0-1 0-1 37- 41 1Q15 FOB Cash Costs Expenses Quality Freight Average 2015 US$ / dmt, average costs and expenses landed in China¹ 1 Adjusted for quality (Fe content differential and other elements such as silica, alumina and phosphorus) ² Excludes the impact of the bunker hedge accounting (US$ 2.3 /t at 1Q15) ³ Assumes 3.05 BRL/USD 4 Assumes VIU ranging from US$ 1.0/t to US$ 1.1/t 5 Assumes spot freight rates Brazil-China ranging from US$ 10.5 /t to US$14.0/t 2 2 4 5 3 3
slide-10
SLIDE 10 9
  • 8 projects delivered in 2014
  • S11D advancing as planned: mine and logistics
physical progress of 64% and 36%, respectively
  • Conceição Itabirites II: 97% of physical progress
  • Cauê Itabirites: 82% of physical progress
  • Mozambique: mine and logistics physical progress
  • f 86% and 85%, respectively
  • Investment cycle completed in Base Metals
14 12 9 7 5 4 2013 2014 2015 2016 2017 2018 Vale capex¹ profile @ 3 BRL/USD US$ billion

In the coming years our capex will reduce sharply as we complete our investment cycle

Forecast Status of Vale’s project portfolio ¹ Growth plus sustaining capex
slide-11
SLIDE 11 10 4 4 5 8 17 22 26 26 2012 2013 2014 2015 2016 2017 2018 2019

And upon completion of projects our production volumes will grow across all business segments

Copper Kt Coal Mt Nickel Kt Iron Ore¹ Mt 319 310 332 340 376 411 453 459 2012 2013 2014 2015 2016 2017 2018 2019 237 260 275 303 316 2012 2013 2014 2015 2016 292 370 380 449 450 2012 2013 2014 2015 2016 ¹ Own production only, excluding Samarco’s attributable production
slide-12
SLIDE 12 11

Helping us reach our ebitda targets¹ in base metals for 2015 and 2016

3.1-4.6 0-1.0 0.1-0.3 0.5-0.8 2.5 2015-2016 Canada & PTVI Operations VNC Salobo 2014 US$ billion Reach 37 Ktpa at VNC 1 Considering 3,00 BRL/USD, 1,28 CAD/USD, copper prices ranging from US$ 5,800 to 6,800 /t and nickel prices ranging from US$ 14,500 to 21,000 /t Complete the ramp up
  • f Salobo (200 Ktpa)
Increase volumes and reduce cost and expenses in Canada and Indonesia
slide-13
SLIDE 13 12 3,3 2,0 1,2 0,5 7,0 Costs reduction Expenses reduction Quality²/Pricing improvement CFR freight reduction Total

And helping us reach even higher margins in iron ore

Increase in EBITDA unit margins (US$/t), 2018 vs. 2015 1 Excluding ore from third parties, ROM and pellets ² Based on Fe content differential between 2015 and 2018
slide-14
SLIDE 14 13 Aluminium Logistics Oil & Gas Gold Copper Fertilizers Kaolin Coal Shipping Manganese Energy

Meanwhile, we continue to divest non-core assets and form strategic partnerships

¹ Including the impact of capex avoided by VALE 2011 US$ 1.1 billion 10 Very Large Ore Carriers El Hatillo Araucária Ferroalloy plants in Europe Oil & Gas Concessions I CADAM Gold streaming I Gold streaming II VLI Log-in Fosbrasil Tres Valles Oil & Gas Concessions II Mozambique deal with Mitsui¹ Belo Monte participation Aluminium assets Norsk Hydro 2012 US$ 1.5 billion 2013 US$ 6.0 billion 2015 US$ 5.0 billion Reference US$ 1 billion
slide-15
SLIDE 15 14

From these divestments and partnerships we expect to raise US$ 6-7 billion in cash proceeds in 2015

Timing Cash Impact in 2015 Status Initiatives
  • Mozambique
Coal
  • Project Finance in advanced stage
  • f discussion
  • Government authorizations and
direct agreements with lenders under discussion
  • VLOCs
  • Progress on the previously
announced negotiation with COSCO and other undisclosed partners and
  • n the development of a financial
structure for the sale of vessels
  • Non-voting
shares
  • Transaction structure and contracts
being prepared
  • Goldstream
  • Completed with US$ 900 million
received in March 2015 4Q 2Q/3Q 2Q/3Q Done Transaction details
  • Investment agreement with
Mitsui for partnering in the Mozambique coal project
  • Sale of Valemaxes with the
signature of long-term, low cost freight agreements
  • Issuance of redeemable non-
voting shares on specific assets
  • Sale of an additional 25% of
the payable gold stream from the Salobo mine
slide-16
SLIDE 16 15

Results from our initiatives are already setting the basis for strong free cash flow generation as of 2018

  • Capex will be around US$ 4 billion
  • Volumes will increase by about 40% in iron ore, 20% in copper

and 15% in nickel

  • Costs will decrease with higher productivity, further dilution of

fixed costs and expenses, and organizational restructuring

  • Iron ore quality will support an increase in price realization
  • Freight costs will decrease
  • Free cash flow and dividends will reach unprecedented levels

and debt will reduce gradually

slide-17
SLIDE 17 16