United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934
For the month of
March 2018
Vale S.A.
Praia de Botafogo, No 186
Botafogo, 22250-145 - Rio de Janeiro RJ - Brasil
(Address of principal executive office)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
|
|
(Check One) Form 20-F x Form 40-F o |
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))
|
|
(Check One) Yes o No x |
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))
|
|
(Check One) Yes o No x |
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
|
|
(Check One) Yes o No x |
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82- .)
The accompanying financial statements presented in U.S. dollars were prepared in accordance with International Financial Reporting Standards - IFRS and are unaudited. When we file our annual report on Form 20-F with the U.S. Securities and Exchange Commission, which is due on April 30, 2019, we expect to include a report of our independent auditor, prepared in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), on the consolidated financial statements included in such annual report and on the effectiveness of our internal control over financial reporting as of December 31, 2018. As a result of the developments described in note 3 to the accompanying financial statements, our assessment of the effectiveness of our internal control over financial reporting is not complete as of the date of publication of the accompanying financial statements.
On March 27, 2019, we published consolidated financial statements presented in Brazilian reais, in accordance with International Financial Reporting Standards, with an audit report prepared under International Standards of Auditing (ISA) by our independent auditor KPMG, and a free translation was furnished to the SEC on a current report on Form 6-K on the same date.
Vale S.A. Financial Statements
|
|
Page |
|
4 | |
|
5 | |
|
6 | |
|
7 | |
|
8 | |
|
9 | |
|
9 | |
|
9 | |
|
13 | |
|
17 | |
|
21 | |
|
22 | |
|
23 | |
|
24 | |
|
26 | |
|
26 | |
|
27 | |
|
27 | |
|
28 | |
|
14. Non-current assets and liabilities held for sale and discontinued operations |
28 |
|
30 | |
|
32 | |
|
36 | |
|
37 | |
|
38 | |
|
40 | |
|
42 | |
|
43 | |
|
45 | |
|
47 | |
|
49 | |
|
51 | |
|
52 | |
|
53 | |
|
55 | |
|
62 | |
|
66 | |
|
67 | |
|
68 | |
|
34. Additional information about derivatives financial instruments |
71 |
In millions of United States dollars, except earnings per share data
|
|
|
|
|
Year ended December 31 |
| ||||
|
|
|
Notes |
|
2018 |
|
2017 |
|
2016 |
|
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
Net operating revenue |
|
4(e) |
|
36,575 |
|
33,967 |
|
27,488 |
|
|
Cost of goods sold and services rendered |
|
5(a) |
|
(22,109 |
) |
(21,039 |
) |
(17,650 |
) |
|
Gross profit |
|
|
|
14,466 |
|
12,928 |
|
9,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
5(b) |
|
(523 |
) |
(531 |
) |
(507 |
) |
|
Research and evaluation expenses |
|
|
|
(373 |
) |
(340 |
) |
(319 |
) |
|
Pre operating and operational stoppage |
|
|
|
(271 |
) |
(413 |
) |
(453 |
) |
|
Other operating expenses, net |
|
5(c) |
|
(445 |
) |
(420 |
) |
(267 |
) |
|
|
|
|
|
(1,612 |
) |
(1,704 |
) |
(1,546 |
) |
|
Impairment and disposal of non-current assets |
|
16, 19 and 20 |
|
(899 |
) |
(294 |
) |
(1,240 |
) |
|
Operating income |
|
|
|
11,955 |
|
10,930 |
|
7,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income |
|
6 |
|
423 |
|
478 |
|
170 |
|
|
Financial expenses |
|
6 |
|
(2,345 |
) |
(3,273 |
) |
(2,677 |
) |
|
Other financial items |
|
6 |
|
(3,035 |
) |
(224 |
) |
4,350 |
|
|
Equity results and other results in associates and joint ventures |
|
16 and 22 |
|
(182 |
) |
(82 |
) |
(911 |
) |
|
Income before income taxes |
|
|
|
6,816 |
|
7,829 |
|
7,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
8 |
|
|
|
|
|
|
|
|
Current tax |
|
|
|
(752 |
) |
(849 |
) |
(943 |
) |
|
Deferred tax |
|
|
|
924 |
|
(646 |
) |
(1,838 |
) |
|
|
|
|
|
172 |
|
(1,495 |
) |
(2,781 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
|
|
|
6,988 |
|
6,334 |
|
5,203 |
|
|
Net income (loss) attributable to noncontrolling interests |
|
|
|
36 |
|
21 |
|
(8 |
) |
|
Net income from continuing operations attributable to Vale’s stockholders |
|
|
|
6,952 |
|
6,313 |
|
5,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
14 |
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
|
|
(92 |
) |
(813 |
) |
(1,227 |
) |
|
Net income (loss) attributable to noncontrolling interests |
|
|
|
— |
|
(7 |
) |
2 |
|
|
Loss from discontinued operations attributable to Vale’s stockholders |
|
|
|
(92 |
) |
(806 |
) |
(1,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
6,896 |
|
5,521 |
|
3,976 |
|
|
Net income (loss) attributable to noncontrolling interests |
|
|
|
36 |
|
14 |
|
(6 |
) |
|
Net income attributable to Vale’s stockholders |
|
|
|
6,860 |
|
5,507 |
|
3,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Vale’s stockholders: |
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share: |
|
9 |
|
|
|
|
|
|
|
|
Common share (US$) |
|
|
|
1.32 |
|
1.05 |
|
0.77 |
|
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
In millions of United States dollars
|
|
|
Year ended December 31 |
| ||||
|
|
|
2018 |
|
2017 |
|
2016 |
|
|
Net income |
|
6,896 |
|
5,521 |
|
3,976 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Items that will not be reclassified subsequently to the income statement |
|
|
|
|
|
|
|
|
Translation adjustments |
|
(6,762 |
) |
(717 |
) |
6,460 |
|
|
Retirement benefit obligations |
|
41 |
|
(46 |
) |
(70 |
) |
|
Fair value adjustment to investment in equity securities |
|
60 |
|
— |
|
— |
|
|
Transfer to reserve |
|
(16 |
) |
— |
|
— |
|
|
Total items that will not be reclassified subsequently to the income statement, net of tax |
|
(6,677 |
) |
(763 |
) |
6,390 |
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to the income statement |
|
|
|
|
|
|
|
|
Translation adjustments |
|
3,899 |
|
1,026 |
|
(3,677 |
) |
|
Fair value adjustment to debt instruments |
|
— |
|
— |
|
1 |
|
|
Cash flow hedge |
|
— |
|
— |
|
10 |
|
|
Net investments hedge |
|
(543 |
) |
(95 |
) |
— |
|
|
Transfer of realized results to net income |
|
(78 |
) |
(11 |
) |
(78 |
) |
|
Total of items that may be reclassified subsequently to the income statement, net of tax |
|
3,278 |
|
920 |
|
(3,744 |
) |
|
Total comprehensive income |
|
3,497 |
|
5,678 |
|
6,622 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to noncontrolling interests |
|
(84 |
) |
13 |
|
111 |
|
|
Comprehensive income (loss) attributable to Vale’s stockholders |
|
3,581 |
|
5,665 |
|
6,511 |
|
|
From continuing operations |
|
3,589 |
|
5,696 |
|
6,642 |
|
|
From discontinued operations |
|
(8 |
) |
(31 |
) |
(131 |
) |
|
|
|
3,581 |
|
5,665 |
|
6,511 |
|
Items above are stated net of tax and the related taxes are disclosed in note 8.
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash Flows
In millions of United States dollars
|
|
|
Year ended December 31 |
| ||||
|
|
|
2018 |
|
2017 |
|
2016 |
|
|
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
Income before income taxes from continuing operations |
|
6,816 |
|
7,829 |
|
7,984 |
|
|
Adjusted for: |
|
|
|
|
|
|
|
|
Equity results and other results in associates and joint ventures |
|
182 |
|
82 |
|
911 |
|
|
Impairment and disposal of non-current assets |
|
899 |
|
294 |
|
1,240 |
|
|
Depreciation, amortization and depletion |
|
3,351 |
|
3,708 |
|
3,487 |
|
|
Financial results, net |
|
4,957 |
|
3,019 |
|
(1,843 |
) |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(156 |
) |
1,277 |
|
(2,744 |
) |
|
Inventories |
|
(817 |
) |
(339 |
) |
288 |
|
|
Suppliers and contractors |
|
(376 |
) |
232 |
|
243 |
|
|
Provision - Payroll, related charges and others remunerations |
|
(11 |
) |
372 |
|
133 |
|
|
Proceeds from cobalt and gold stream transactions |
|
690 |
|
— |
|
524 |
|
|
Other assets and liabilities, net |
|
(205 |
) |
(912 |
) |
332 |
|
|
|
|
15,330 |
|
15,562 |
|
10,555 |
|
|
Interest on loans and borrowings paid (note 21) |
|
(1,121 |
) |
(1,686 |
) |
(1,663 |
) |
|
Derivatives paid, net |
|
(67 |
) |
(240 |
) |
(1,602 |
) |
|
Interest on participative stockholders’ debentures paid |
|
(113 |
) |
(135 |
) |
(84 |
) |
|
Income taxes (including settlement program) |
|
(1,128 |
) |
(1,051 |
) |
(805 |
) |
|
Net cash provided by operating activities from continuing operations |
|
12,901 |
|
12,450 |
|
6,401 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
(3,784 |
) |
(3,831 |
) |
(4,951 |
) |
|
Additions to investments |
|
(23 |
) |
(93 |
) |
(239 |
) |
|
Proceeds from disposal of assets and investments |
|
1,481 |
|
922 |
|
543 |
|
|
Dividends and interest on capital received from associates and joint ventures |
|
245 |
|
227 |
|
193 |
|
|
Others investments activities, net (1) |
|
2,240 |
|
(583 |
) |
(239 |
) |
|
Proceeds from gold stream transaction |
|
— |
|
— |
|
276 |
|
|
Net cash provided by (used in) investing activities from continuing operations |
|
159 |
|
(3,358 |
) |
(4,417 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
Loans and borrowings from third-parties (note 21) |
|
1,225 |
|
1,976 |
|
6,994 |
|
|
Payments of loans and borrowings from third-parties (note 21) |
|
(7,841 |
) |
(8,998 |
) |
(7,717 |
) |
|
Dividends and interest on capital paid to stockholders |
|
(3,313 |
) |
(1,456 |
) |
(250 |
) |
|
Dividends and interest on capital paid to noncontrolling interest |
|
(182 |
) |
(126 |
) |
(291 |
) |
|
Share buyback program (note 30) |
|
(1,000 |
) |
— |
|
— |
|
|
Transactions with noncontrolling stockholders |
|
(17 |
) |
(98 |
) |
(17 |
) |
|
Net cash used in financing activities from continuing operations |
|
(11,128 |
) |
(8,702 |
) |
(1,281 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in discontinued operations (note 14) |
|
(46 |
) |
(252 |
) |
(118 |
) |
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
1,886 |
|
138 |
|
585 |
|
|
Cash and cash equivalents in the beginning of the year |
|
4,328 |
|
4,262 |
|
3,591 |
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
(313 |
) |
(60 |
) |
86 |
|
|
Effects of disposals of subsidiaries and merger, net of cash and cash equivalents |
|
(117 |
) |
(12 |
) |
— |
|
|
Cash and cash equivalents at end of the year |
|
5,784 |
|
4,328 |
|
4,262 |
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment - capitalized loans and borrowing costs |
|
194 |
|
370 |
|
653 |
|
(1) Includes loans and advances from/to related parties. For the year ended December 31, 2018, includes proceeds received from Nacala project finance (note 31b) in the amount of US$2,572.
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial Position
In millions of United States dollars
|
|
|
Notes |
|
December 31, 2018 |
|
December 31, 2017 |
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
5,784 |
|
4,328 |
|
|
Accounts receivable |
|
10 |
|
2,648 |
|
2,600 |
|
|
Other financial assets |
|
13 |
|
435 |
|
2,022 |
|
|
Inventories |
|
11 |
|
4,443 |
|
3,926 |
|
|
Prepaid income taxes |
|
|
|
543 |
|
781 |
|
|
Recoverable taxes |
|
12 |
|
883 |
|
1,172 |
|
|
Others |
|
|
|
556 |
|
538 |
|
|
|
|
|
|
15,292 |
|
15,367 |
|
|
|
|
|
|
|
|
|
|
|
Non-current assets held for sale |
|
14 |
|
— |
|
3,587 |
|
|
|
|
|
|
15,292 |
|
18,954 |
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Judicial deposits |
|
28(c) |
|
1,716 |
|
1,986 |
|
|
Other financial assets |
|
13 |
|
3,144 |
|
3,232 |
|
|
Prepaid income taxes |
|
|
|
544 |
|
530 |
|
|
Recoverable taxes |
|
12 |
|
751 |
|
638 |
|
|
Deferred income taxes |
|
8(a) |
|
6,908 |
|
6,638 |
|
|
Others |
|
|
|
263 |
|
267 |
|
|
|
|
|
|
13,326 |
|
13,291 |
|
|
|
|
|
|
|
|
|
|
|
Investments in associates and joint ventures |
|
16 |
|
3,225 |
|
3,568 |
|
|
Intangibles |
|
18 |
|
7,962 |
|
8,493 |
|
|
Property, plant and equipment |
|
19 |
|
48,385 |
|
54,878 |
|
|
|
|
|
|
72,898 |
|
80,230 |
|
|
Total assets |
|
|
|
88,190 |
|
99,184 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Suppliers and contractors |
|
|
|
3,512 |
|
4,041 |
|
|
Loans and borrowings |
|
21 |
|
1,003 |
|
1,703 |
|
|
Other financial liabilities |
|
13 |
|
1,604 |
|
986 |
|
|
Taxes payable |
|
8(d) |
|
650 |
|
697 |
|
|
Provision for income taxes |
|
|
|
210 |
|
355 |
|
|
Liabilities related to associates and joint ventures |
|
22 |
|
289 |
|
326 |
|
|
Provisions |
|
26 |
|
1,363 |
|
1,394 |
|
|
Dividends and interest on capital |
|
30(d) |
|
— |
|
1,441 |
|
|
Others |
|
|
|
480 |
|
992 |
|
|
|
|
|
|
9,111 |
|
11,935 |
|
|
Liabilities associated with non-current assets held for sale |
|
14 |
|
— |
|
1,179 |
|
|
|
|
|
|
9,111 |
|
13,114 |
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Loans and borrowings |
|
21 |
|
14,463 |
|
20,786 |
|
|
Other financial liabilities |
|
13 |
|
2,711 |
|
2,894 |
|
|
Taxes payable |
|
8(d) |
|
3,917 |
|
4,890 |
|
|
Deferred income taxes |
|
8(a) |
|
1,532 |
|
1,719 |
|
|
Provisions |
|
26 |
|
7,095 |
|
7,027 |
|
|
Liabilities related to associates and joint ventures |
|
22 |
|
832 |
|
670 |
|
|
Deferred revenue - Gold stream |
|
|
|
1,603 |
|
1,849 |
|
|
Others |
|
|
|
2,094 |
|
1,463 |
|
|
|
|
|
|
34,247 |
|
41,298 |
|
|
Total liabilities |
|
|
|
43,358 |
|
54,412 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
30 |
|
|
|
|
|
|
Equity attributable to Vale’s stockholders |
|
|
|
43,985 |
|
43,458 |
|
|
Equity attributable to noncontrolling interests |
|
|
|
847 |
|
1,314 |
|
|
Total stockholders’ equity |
|
|
|
44,832 |
|
44,772 |
|
|
Total liabilities and stockholders’ equity |
|
|
|
88,190 |
|
99,184 |
|
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in Equity
In millions of United States dollars
|
|
|
Share capital |
|
Results on |
|
Capital reserve |
|
Net ownership |
|
Profit |
|
Treasury |
|
Unrealized |
|
Cumulative |
|
Retained |
|
Equity |
|
Equity |
|
Total |
|
|
Balance at December 31, 2015 |
|
61,614 |
|
(152 |
) |
— |
|
(702 |
) |
985 |
|
(1,477 |
) |
(992 |
) |
(25,687 |
) |
— |
|
33,589 |
|
2,115 |
|
35,704 |
|
|
Net income (loss) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3,982 |
|
3,982 |
|
(6 |
) |
3,976 |
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefit obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(70 |
) |
— |
|
— |
|
(70 |
) |
— |
|
(70 |
) |
|
Cash flow hedge |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
7 |
|
— |
|
— |
|
7 |
|
— |
|
7 |
|
|
Available-for-sale financial instruments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1 |
|
— |
|
— |
|
1 |
|
— |
|
1 |
|
|
Translation adjustments |
|
— |
|
— |
|
— |
|
— |
|
195 |
|
— |
|
(93 |
) |
2,387 |
|
102 |
|
2,591 |
|
117 |
|
2,708 |
|
|
Transactions with stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and interest on capital of Vale’s stockholders |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1,061 |
) |
(1,061 |
) |
— |
|
(1,061 |
) |
|
Dividends of noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(268 |
) |
(268 |
) |
|
Acquisitions and disposal of noncontrolling interest |
|
— |
|
— |
|
— |
|
3 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3 |
|
(1 |
) |
2 |
|
|
Capitalization of noncontrolling interest advances |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
25 |
|
25 |
|
|
Appropriation to undistributed retained earnings |
|
— |
|
— |
|
— |
|
— |
|
3,023 |
|
— |
|
— |
|
— |
|
(3,023 |
) |
— |
|
— |
|
— |
|
|
Balance at December 31, 2016 |
|
61,614 |
|
(152 |
) |
— |
|
(699 |
) |
4,203 |
|
(1,477 |
) |
(1,147 |
) |
(23,300 |
) |
— |
|
39,042 |
|
1,982 |
|
41,024 |
|
|
Net income |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
5,507 |
|
5,507 |
|
14 |
|
5,521 |
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefit obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(46 |
) |
— |
|
— |
|
(46 |
) |
— |
|
(46 |
) |
|
Net investments hedge |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(95 |
) |
— |
|
(95 |
) |
— |
|
(95 |
) |
|
Translation adjustments |
|
— |
|
— |
|
— |
|
— |
|
(158 |
) |
— |
|
10 |
|
447 |
|
— |
|
299 |
|
(1 |
) |
298 |
|
|
Transactions with stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and interest on capital of Vale’s stockholders |
|
— |
|
— |
|
— |
|
— |
|
(658 |
) |
— |
|
— |
|
— |
|
(1,475 |
) |
(2,133 |
) |
— |
|
(2,133 |
) |
|
Dividends of noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(202 |
) |
(202 |
) |
|
Acquisitions and disposal of noncontrolling interest |
|
— |
|
— |
|
— |
|
(255 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
(255 |
) |
(512 |
) |
(767 |
) |
|
Capitalization of noncontrolling interest advances |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
33 |
|
33 |
|
|
Appropriation to undistributed retained earnings |
|
— |
|
— |
|
— |
|
— |
|
4,032 |
|
— |
|
— |
|
— |
|
(4,032 |
) |
— |
|
— |
|
— |
|
|
Merger of Valepar (note 30) |
|
— |
|
— |
|
1,139 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1,139 |
|
— |
|
1,139 |
|
|
Balance at December 31, 2017 |
|
61,614 |
|
(152 |
) |
1,139 |
|
(954 |
) |
7,419 |
|
(1,477 |
) |
(1,183 |
) |
(22,948 |
) |
— |
|
43,458 |
|
1,314 |
|
44,772 |
|
|
Net income |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
6,860 |
|
6,860 |
|
36 |
|
6,896 |
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefit obligations |
|
— |
|
— |
|
— |
|
(16 |
) |
— |
|
— |
|
41 |
|
— |
|
— |
|
25 |
|
— |
|
25 |
|
|
Fair value adjustment to investment in equity securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
60 |
|
— |
|
— |
|
60 |
|
— |
|
60 |
|
|
Net investments hedge |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(543 |
) |
— |
|
(543 |
) |
— |
|
(543 |
) |
|
Translation adjustments |
|
— |
|
— |
|
— |
|
— |
|
(1,257 |
) |
— |
|
49 |
|
(1,613 |
) |
— |
|
(2,821 |
) |
(120 |
) |
(2,941 |
) |
|
Transactions with stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and interest on capital of Vale’s stockholders |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(2,054 |
) |
(2,054 |
) |
— |
|
(2,054 |
) |
|
Dividends of noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(166 |
) |
(166 |
) |
|
Acquisitions and disposal of noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(229 |
) |
(229 |
) |
|
Capitalization of noncontrolling interest advances |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
12 |
|
12 |
|
|
Appropriation to undistributed retained earnings |
|
— |
|
— |
|
— |
|
— |
|
4,806 |
|
— |
|
|
|
|
|
(4,806 |
) |
— |
|
|
|
— |
|
|
Share buyback program |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1,000 |
) |
— |
|
— |
|
— |
|
(1,000 |
) |
— |
|
(1,000 |
) |
|
Balance at December 31, 2018 |
|
61,614 |
|
(152 |
) |
1,139 |
|
(970 |
) |
10,968 |
|
(2,477 |
) |
(1,033 |
) |
(25,104 |
) |
— |
|
43,985 |
|
847 |
|
44,832 |
|
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
Vale S.A. and its direct and indirect subsidiaries (“Vale” or “Company”) are global producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. The Company also produces copper, metallurgical and thermal coal, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 4.
Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo — B3 S.A. (VALE3), New York - NYSE (VALE), Paris - NYSE Euronext (VALE3) and Madrid — LATIBEX (XVALO).
On December 22, 2017 after the conversion of the class “A” preferred shares into common shares, the Company migrated to the special listing segment of B3 S.A. (“Novo Mercado”) (further details in note 30).
2. Basis for preparation of the financial statements
a) Statement of compliance
The consolidated financial statements of the Company (“financial statements”) have been prepared and are being presented in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
b) Basis of presentation
The financial statements have been prepared under the historical cost convention as adjusted to reflect: (i) the fair value of financial instruments measured at fair value through income statement or at fair value through the statement of comprehensive income; and (ii) impairment of assets.
The issue of these financial statements was authorized by the Board of Directors on March 27, 2019.
c) Functional currency and presentation currency
The financial statements of the Company and its associates and joint ventures are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian real (“R$”). For presentation purposes, these financial statements are presented in United States dollar (“US$”) as the Company believes that this is how international investors analyze the financial statements.
The exchange rates used by the Company to translate its foreign operations are as follows:
|
|
|
Closing rate |
|
Average rate for the year ended |
| ||||||||
|
|
|
2018 |
|
2017 |
|
2016 |
|
2018 |
|
2017 |
|
2016 |
|
|
US Dollar (“US$”) |
|
3.8748 |
|
3.3080 |
|
3.2591 |
|
3.6558 |
|
3.1925 |
|
3.4833 |
|
|
Canadian dollar (“CAD”) |
|
2.8451 |
|
2.6344 |
|
2.4258 |
|
2.8190 |
|
2.4618 |
|
2.6280 |
|
|
Euro (“EUR” or “€”) |
|
4.4390 |
|
3.9693 |
|
3.4384 |
|
4.3094 |
|
3.6088 |
|
3.8543 |
|
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
d) Significant accounting policies
Significant and relevant accounting policies for the understanding of the recognition and measurement basis used in the preparation of these financial statements were included in the respective notes. The accounting polices applied in the preparations of these financial statements are consistent with those adopted and disclosed in the financial statements of prior years, except for new accounting policies related to the application of IFRS 9 — Financial Instruments and IFRS 15 — Revenue from Contracts with Customers, which were adopted by the Company from January 1, 2018.
The nature and effect of the changes as a result of adoption of these new accounting standards are described below:
IFRS 9 Financial Instrument — This standard addresses the classification and measurement of financial assets and liabilities, new impairment model and new rules for hedge accounting. The Company applied IFRS 9 prospectively, with an initial application date of January 1, 2018. The Company has not restated the comparative information, which continues to be reported under IAS 39 - Financial Instruments. The main changes are described below:
Classification and measurement - Under IFRS 9, debt instruments are subsequently measured at fair value through profit or loss (“FVTPL”), through amortized cost, or fair value through other comprehensive income (“FVOCI”). The classification is based on the Company’s business model for managing the assets and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ (“SPPI”) on the principal amount outstanding.
On the date of initial application of IFRS 9, the Company has assessed which business models apply to the financial assets held by the Company and has classified its financial instruments into the appropriate IFRS 9 categories. The reclassification of the financial instruments of the Company on January 1, 2018 were as follows:
|
|
|
Measurement category |
|
Carrying amount |
| ||||||
|
|
|
IAS 39 |
|
IFRS 9 |
|
IAS 39 |
|
IFRS 9 |
|
Difference |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
Financial investments |
|
Loans and receivables |
|
FVTPL |
|
18 |
|
18 |
|
— |
|
|
Derivative financial instruments |
|
FVTPL |
|
FVTPL |
|
106 |
|
106 |
|
— |
|
|
Accounts receivable |
|
Loans and receivables |
|
Amortized cost |
|
2,600 |
|
2,600 |
|
— |
|
|
Related parties |
|
Loans and receivables |
|
Amortized cost |
|
1,898 |
|
1,898 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
FVTPL |
|
FVTPL |
|
453 |
|
453 |
|
— |
|
|
Loans |
|
Loans and receivables |
|
Amortized cost |
|
151 |
|
151 |
|
— |
|
|
Related parties |
|
Loans and receivables |
|
Amortized cost |
|
2,628 |
|
2,628 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
Suppliers and contractors |
|
Loans and receivables |
|
Amortized cost |
|
4,041 |
|
4,041 |
|
— |
|
|
Derivative financial instruments |
|
FVTPL |
|
FVTPL |
|
104 |
|
104 |
|
— |
|
|
Loans and borrowings |
|
Loans and receivables |
|
Amortized cost |
|
1,703 |
|
1,703 |
|
— |
|
|
Related parties |
|
Loans and receivables |
|
Amortized cost |
|
882 |
|
882 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
FVTPL |
|
FVTPL |
|
686 |
|
686 |
|
— |
|
|
Loans and borrowings |
|
Loans and receivables |
|
Amortized cost |
|
20,786 |
|
20,786 |
|
— |
|
|
Related parties |
|
Loans and receivables |
|
Amortized cost |
|
975 |
|
975 |
|
— |
|
|
Participative stockholders’ debentures |
|
Loans and receivables |
|
Amortized cost |
|
1,233 |
|
1,233 |
|
— |
|
These reclassifications have no impact on the measurement categories. The financial instruments that were classified as “Loans and receivables” under IAS 39 did meet the IFRS 9 criteria for classification at amortized cost, because these financial instruments are held within a business model whose objective is to hold to collect the cash flows, which represent solely payments of principal and interest. The derivatives held for trading are required to be held as FVTPL under IFRS 9, therefore there were no changes in relation to these instruments from the adoption of IFRS 9.
Impairment - IFRS 9 has replaced the IAS 39’s incurred loss approach with a forward-looking expected credit loss (“ECL”) approach.
For accounts receivables, the Company has applied the standard’s simplified approach and has calculated ECLs based on lifetime expected credit losses and the identified loss is deemed not significant. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the economic environment and by any financial guarantees related to these accounts receivables.
At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit-impaired. Information about the Company’s exposure to credit risk is set out in note 33.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
The new impairment approach of IFRS 9 did not have a significant impact to the Company for the year ended December 31, 2018.
Hedge accounting - The Company has elected to adopt the new general hedge accounting model in IFRS 9. The changes introduced by IFRS 9 relating to hedge accounting currently have no impact, as the Company does not currently apply cash flow or fair value hedge accounting. The Company currently applies the net investment hedge for which there are no changes introduced by this new standard (note 25).
IFRS 15 Revenue from Contracts with Customers — This standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. The Company has adopted the new standard using the modified retrospective method. Accordingly, the comparative information presented has not been restated.
The Company has assessed its revenue streams and the nature and effect of the changes as a result of adoption of IFRS 15 is described below:
· Sales of products - Under IFRS 15, there is no significant impact on the timing of products revenue recognition since usually the transfer of risks and rewards and the transfer of control under the sales contracts are at the same point in time.
· Shipping services - A proportion of Vale’s sales are under Cost and Freight (“CFR”) and Cost, Insurance and Freight (“CIF”) Incoterms, in which the Company is responsible for providing shipping services after the date that Vale transfers control of the goods to the customers. According to the previous standard (IAS 18), the revenue from shipping services was recognized upon loading, as well as the related costs, and was not considered a separate service.
Under IFRS 15, the provision of shipping services for CFR and CIF contracts should be considered as a separate performance obligation in which a proportion of the transaction price would be allocated and recognized over time as the shipping services are provided. The impact on the timing of revenue recognition of the proportion that would have been allocated to the shipping service to the Company’s income statement for the year ended December 31, 2018 is deemed not significant. Therefore, such revenue has not been presented separately in these financial statements.
· Provisionally priced commodities sales - Under IFRS 9 and 15, the treatment of the provisional pricing mechanisms embedded within the provisionally priced commodities sales remains unmodified. Therefore, these revenues are recognized based on the estimated fair value of the total consideration receivable, and the provisionally priced sales mechanism embedded within these sale arrangements has the character of a derivative. The fair value of the sales price adjustment is recognized as operational revenue in the income statement.
Overall, there was no material impact on the Company’s financial statement from the IFRS 15 adoption for the year ended December 31, 2018.
e) Accounting standards issued but not yet effective
· IFRS 16 Lease — IFRS 16 was issued in January 2016. It will result in vast majority of leases being recognized in the balance sheet by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. There are recognition exemptions for short-term leases and leases of low-value items.
The Company will apply the standard from its mandatory adoption date of January 1, 2019. Vale will apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets will be measured at the amount of the lease liability on adoption.
As at December 31, 2018, the Company has non-cancellable operating lease commitments in the nominal amount of US$2,498 (note 32). The Company has set up a project team which has reviewed these leasing commitments over the last year in light of the new lease accounting rules in IFRS 16. Of these commitments, the Company expects to recognize right-of-use assets and lease liabilities an amount ranging from US$1.8 billion to US$2 billion at present value on January 1, 2019, an amount ranging from US$240 to US$260 on current liabilities and US$1,560 to US$1,740 on non-current liabilities.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
The actual impacts of adopting the standard may be subject to further changes because the Company has not finalized the testing, assessment of controls over its new IT systems and the new accounting policies are subject to change until the Company presents its first financial statements from the date of initial application.
The Company has not early adopted any standards and interpretations that have been issued or amended but are not yet effective for the year ended December 31, 2018. Therefore, there are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods.
f) Critical accounting estimates and judgments
The preparation of financial statements requires the use of critical accounting estimates and the application of judgment by management in applying the Company’s accounting policies. These estimates are based on the experience, best knowledge, information available at the statement of financial position date and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in facts and circumstances may lead to the revision of these estimates. Actual future results may differ from the estimates.
The significant estimates and judgments applied by Company in the preparation of these financial statements are as follows:
|
Note |
|
Significant estimates and judgments |
|
7 |
|
Deferred revenue |
|
8 |
|
Deferred income taxes |
|
16 |
|
Consolidation |
|
19 |
|
Mineral reserves and mines useful life |
|
20 |
|
Impairment of non-current assets |
|
22 |
|
Liabilities related to associates and joint ventures |
|
24 |
|
Fair values estimate |
|
27 |
|
Asset retirement obligations |
|
28 |
|
Litigation |
|
29 |
|
Employee post-retirement obligations |
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
On January 25, 2019 (subsequent event), a breach has been experienced in the Dam I of the Córrego do Feijão mine, which belongs to the Paraopebas Complex in the Southern System, located in Brumadinho, Minas Gerais, Brasil (“Brumadinho dam”). This dam was inactive since 2016 (without additional tailings disposal) and there was no other operational activity in this structure.
Due to the dam failure, 306 people lost their lives or are missing and ecosystems were affected. Around 11.7 million metric tons of iron ore waste were contained in the Brumadinho dam. It is not yet known the exact volume of iron ore waste that was released due to the dam failure. The tailings contained in the Dam I have caused an impact of around 270 km in extension, destroying some of Vale’s facilities, affecting local communities and disturbing the environment. The Paraopeba river and its ecosystems have also been impacted by the event.
The Company has not been sparing efforts to support the victims and to mitigate and recover the social and environmental damages resulting from the breach of the dam. Vale has provided support in multiple ways, aiming to ensure the humanitarian assistance to those affected by the dam breach.
To determine the causes for the event, Vale has engaged a panel of independent experts. Furthermore, the Company established three Extraordinary Independent Consulting Committees to support the Board of Directors, which are composed by independent members that are unrelated to the management or to the Company’s operations to ensure that the initiatives by the committees be unbiased. Following are the committees:
(i) The Extraordinary Independent Consulting Committee for Investigation (“CIAEA”), dedicated to investigating the causes and responsibilities for the Brumadinho dam breach;
(ii) The Extraordinary Independent Consulting Committee for Support and Recovery (“CIAEAR”), dedicated to follow-up on the measures taken to support the victims and the recovery of the areas affected by the breach of the Brumadinho dam, assuring that all necessary resources will be applied; and
(iii) The Extraordinary Independent Consulting Committee for Dam Safety (“CIAESB”), which will provide support to the Board of Directors in questions related to the diagnosis of safety conditions, management and risk mitigation related to Vale’s tailings dams, also providing recommendations of actions to strengthen safety conditions of those dams.
In addition, Vale has determined the suspension (i) of the variable remuneration of its executives; (ii) the Shareholder’s Remuneration Policy and (iii) any other resolution related to shares buyback. The Company paid the shareholders in anticipation of the remuneration for the year, the amount of US$1,876 in September 2018, approved by the Board of Directors on July 25, 2018. This payment was higher than the minimum mandatory remuneration for the year ended December 31, 2018 and consequently no additional dividends to shareholders is required (note 30).
a) Financial impacts arising from the dam failure
The Company has concluded for the purpose of these financial statements that the dam breach and the following events are not a condition that existed at the end of the reporting period, and therefore does not require adjustments in the book values recognized in the financial statements prepared for the year ended December 31, 2018. Therefore, all accounting impacts will be recorded in 2019.
At the current stage of the investigations, assessments of the causes and possible third parties lawsuits, it is not possible to have a reliable measure of all cost that the Company may incur for the purpose of disclosure in the financial statements. The amounts that are being disclosed took into consideration the best estimates by the Company´s management.
i) Operation stoppages and de-characterization of the upstream dams
On January 29, 2019 the Company has informed the market and Brazilian authorities its decision to speed up the plan to “de-characterize” all of its tailings dams built by the upstream method (same method as Brumadinho dam), located in Brazil. The “de-characterizing” means that the structure will be dismantled and will no longer have its original operational characteristics.
The Company is developing specific studies for the de-characterization of these dams which will be submitted for approval by the relevant authorities when concluded, in accordance with regulations and legal requirements. The estimate on January 29, 2019, based on a preliminary assessment, resulted in a total amount of US$1.3 billion (R$5 billion) assuming the removal and reprocessing of all tailings contained in the upstream dams, followed by the fully recovery of the sites in the “de-characterization” method.
Before the event, the decommissioning plans of these dams were based on a method which aimed to ensure the physical and chemical stability of the structures, not necessarily, in all cases, removing and reprocessing the tailings contained in the dams. Since the event, the Company has been working on an individual detailed engineering plans to each of these dams to allow the total de-characterization of the structures. The Company is still developing the revised estimate for the costs to de-characterize the upstream dams and, therefore, the additional amount to the provision that will be recognized and disclosed in 2019 could not be reliably estimated.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
In order to carry out safely the de-characterization of the dams, the Company has temporarily stopped the production of the units where the upstream dams are located, as already disclosed to the market. The stoppage results in a reduction in production of approximately 40 million tons of iron ore on annual basis.
In addition, the Company has other operations that are temporarily suspended due to judicial decisions or technical analysis performed by the Company on the dams, which represents a potential reduction in sales of 52.8 million tons of iron ore. The Company is working on legal and technical measures to resume these operations.
For reference, the Company sold 365 million tons of iron ore and pellets in 2018.
Due to the dam failure and review undertaken on the safety requirements for other dams in the Minas Gerais region, when necessary people were placed in temporary accommodation.
ii) Assets write-offs
Following the event and the decision to speed up the de-characterization of the upstream dams, the Company will write-off assets of the Córrego do Feijão mine and those related to the upstream dams in Brazil, resulting in a loss of US$124 (R$480 million) in 2019, which will impact the Company’s balance sheet and income statement.
iii) Framework Agreements
The Company has been working together with the authorities and society to remediate the environmental and social impacts of the event. As a result, the Company has started negotiations and entered into agreements with the relevant authorities and affected people.
Public Ministry of Labor
On February 15, 2019, Vale entered into a preliminary agreement with the Public Ministry of Labor to indemnify the direct and third-party employees of the Córrego do Feijão mine who were affected by the termination of this operation. Under the terms of the agreement, Vale will maintain the jobs of its direct employees until December 31, 2019 and will either assist terminated third party employees with a replacement or pay their salaries until December 31, 2019.
The Company will also keep paying wages regularly to the missing people until the authorities have considered them as fatal victims of the event and will pay to the families of the fatal victims an amount equivalent to two thirds of their wages until December 31, 2019 or until Vale reaches the final agreement with the Public Ministry of Labor.
Under the terms proposed by Vale and considering the uncertainties related to the necessary procedures to estimate the amount to be spent, including the number of individuals entitled to indemnification, the Company has estimated that this agreement will result in a provision of approximately US$220 (R$850 million) in 2019.
Moreover, the Company will provide a lifelong medical insurance benefit to the widows and widowers and a similar benefit to the dependents of the victims until they are 22 years old. Due to the preliminary stage of this agreement and considering the complexity of an actuarial estimate, it is not possible yet to determine a range of outcomes or reliable estimates and, therefore, the amount of the provision related to this obligation could not be estimated. The Company expects to have this information during the course of 2019.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
Brazilian Federal Government, State of Minas Gerais, Public Prosecutors and Public Defendants
On a judicial hearing that took place on February 20, 2019, in the scope of the public civil action n° 5010709-36.2019.8.13.0024, in process of the 6th Public Treasury Lower Court of Belo Horizonte, Vale entered into a preliminary agreement with the State of Minas Gerais, Federal Government and representatives of Public Authorities in which the Company commits to make emergency indemnification payments to the residents of Brumadinho and the communities that are located up to one kilometer from the Paraopeba river bed, from Brumadinho to the city of Pompéu, subject to registration.
Due to this agreement, the Company will anticipate indemnification to each family member through monthly payments during a 12-month period, which changes based, among other factors, on the age of the beneficiary. The Company has initially estimated a provision ranging from US$260 (R$1 billion) to US$520 (R$2 billion) related to these payments, depending on the number of beneficiaries that will be registered.
The agreement also includes the following measures: (i) independent technical assistance to support on the individual indemnities of those affected, if requested; and (ii) reimbursement or direct funding of the extraordinary expenses of the State of Minas Gerais and its governmental bodies due to the dam failure, including transportation, accommodation and food expenses of the employees involved in the rescue and other emergency actions. The respective amounts are still being estimated by the State of Minas Gerais and will be presented in Court.
iv) Donations and other incurred expenses
Donations
Vale has offered donations of US$26 thousand (R$100 thousand) to each of the families with missing members or affected by fatalities, US$13 thousand (R$50 thousand) to families that resided in the Self-Saving Zone (“ZAS”) near to Brumadinho dam, US$4 thousand (R$15 thousand) to business owners of the region and US$1 thousand (R$5 thousand) for each family that resided in the ZAS of Sul Superior dam, which belongs to the Gongo Soco mine, in Barão de Cocais. The estimated amount spent to date is around US$16 (R$62 million). These humanitarian donations will not be subject to any compensation with eventual indemnification obligations that the Company may have with its beneficiaries.
Vale also entered into an agreement with the Brumadinho city, in which the Company will donate to the city an amount of approximately US$21 (R$80 million) over the next 2 years.
Environment and fauna
The Company is building a retention dike for the tailings on the affected areas. The Company has also installed anti-turbidity barriers for sediment retention alongside the Paraopeba River. In addition, Vale has mobilized cleaning, de-sanding and dredging the Paraopeba river channel.
Daily collection points of water and barriers for sediment retention were installed alongside the Paraopeba River, Três Maias reservoir and São Francisco river.
Vale also has set up an exclusive structure for treatment of the rescued animals, enabling emergency care and recovery before the animals are authorized, after veterinarian assessment, to be returned to their tutors.
Furthermore, the Company has agreed to pay the administrative fines imposed by the State Secretary for Environment and Sustainable Development — SEMAD MG, in the total approximated amount of US$26 (R$99 million).
The Company has incurred the following expenses up to the present moment:
|
|
|
2019 |
|
|
Incurred expenses |
|
|
|
|
Administrative sanctions |
|
26 |
|
|
Donations to the affected people and to the city |
|
16 |
|
|
Drilling and infrastructure |
|
5 |
|
|
Environmental recovery |
|
4 |
|
|
Medical aid and other materials |
|
2 |
|
|
Fuel and transportation |
|
2 |
|
|
Others (*) |
|
22 |
|
|
|
|
78 |
|
(*) Includes expenses with communication, accommodation, humanitarian assistance, equipment, legal services, water, food aid, taxes, among others.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
Off the events identified at this stage, a significant portion has not been disbursed or measured. The total costs incurred with Vale’s employees dedicated to providing support with matters related to the event (including wages), equipment and materials were not measured yet.
b) Contingencies and other legal matters
Vale is subject to significant contingencies due to the Brumadinho dam failure. Vale has already been named on several judicial and administrative proceedings brought by authorities and affected people and is currently under investigations. New contingencies are expected to come in the future. Vale is still evaluating these contingencies and will recognize a provision based on the stage of these claims. Due to the preliminary stage of the investigations and claims, it is not possible to determine a range of reliable results or estimates of potential exposure related to dam breach at this point in time.
Lawsuits
On January 27, 2019, following the injunctions granted upon the requests of the Public Prosecutors of the State of Minas Gerais and the State of Minas Gerais, the Company had restricted US$2.8 billion (R$11 billion) on its bank accounts to take the necessary measures to reassure the stability of the other dams of the Córrego do Feijão Mine Complex, provide accommodation and assistance to the affected people, remediate environmental impacts, among other obligations.
On January 31, 2019, the Public Ministry of Labor filed a Public Civil Action and a couple of preliminary injunctions were granted determining the freezing of US$400 (R$1.6 billion) on the Company’s bank accounts to secure the indemnification of direct and third-party employees that worked in the Córrego de Feijão mine at the time of the Brumadinho dam breach.
On March 18, 2019 the Public Prosecutor of the State of Minas Gerais filed a Public Civil Action and a preliminary injunction was granted to freeze US$258 (R$1 billion) of the Company’s assets, aiming to grant funds that could be required to indemnify for losses that may arise from the evacuation of the community of Sebastião de Águas Claras — Macacos community.
On March 25, 2019, the Public Prosecutor of the State of Minas Gerais filed a Public Civil Action and a preliminary injunction was granted to freeze US$761 (R$2.95 billion) of the Company’s assets, to grant funds that might be required to indemnify for losses that may arise from evacuation of the communities in Gongo Soco, Barão de Cocais.
In total, approximately US$4.4 billion (R$16.9 billion) of the Company’s assets were blocked, of which approximately US$121 (R$468 million) were freeze on the Company’s bank accounts, US$3.3 billion (R$12.6 billion) were converted into judicial deposits and US$1 billion (R$3.75 billion) was guaranteed using 75,312,728 treasury shares out of the 158,216,372 treasury shares held by Vale as at December 31, 2018.
Other collective and individual claims related to the Brumadinho dam breach were filed. Some collective claims were extinguished by the applicable court.
Administrative sanctions
In addition, the Company was notified of the imposition of administrative fines by Brazilian Institute of the Environment and Renewable Natural Resources (“IBAMA”), in the amount of US$65 (R$250 million) and a daily fine of US$26 thousand (R$100 thousand), drawn up on February 7, 2019, which Vale has presented defenses against all of them. In addition, the Brumadinho Municipal Department of the Environment has also imposed fines totaling approximately US$28 (R$108 million), which the Company has also presented a defense.
U.S. Securities class action suits
Vale and certain of its current officers have been named as defendants in securities class action complaints in Federal Courts in New York brought by holders of Vale’s securities under U.S. federal securities laws. The complaints allege that Vale made false and misleading statements or omitted to make disclosures concerning the risks and potential damage of a breach of the dam in the Córrego de Feijão mine. The plaintiffs have not specified an amount of alleged damages in these complaints. Vale intends to defend these actions and mount a full defense against these claims. As a consequence of the preliminary nature of these proceedings, it is not possible to determine a range of outcomes or reliable estimates of the potential exposure at this time, and the amount of provision that will be recognized in 2019 could not be estimated.
The Company is negotiating with insurers under its operational risk, general liability and engineering risk policies, but these negotiations are still at a preliminary stage. Any payment of insurance proceeds will depend on the coverage definitions under these policies and assessment of the amount of loss. In light of the uncertainties, no indemnification to the Company was recognized in Vale’s financial statements.
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
4. Information by business segment and by geographic area
The Company operated the following reportable segments during this year: Ferrous Minerals, Coal, Base Metals and Fertilizers (presented as discontinued operations). The segments are aligned with products and reflect the structure used by Management to evaluate Company’s performance. The responsible bodies for making operational decisions, allocating resources and evaluating performance are the Executive Boards and the Board of Directors. The performance of the operating segments is assessed based on a measure of adjusted EBITDA.
The information presented to the Executive Board on the performance of each segment is derived from the accounting records, adjusted for reallocations between segments.
The main activities of the operating segments are as follows:
Ferrous minerals — comprise of the production and extraction of iron ore, iron ore pellets, manganese, ferroalloys, other ferrous products and its logistic services.
Coal — comprise of the production and extraction of metallurgical and thermal coal and its logistic services.
Base metals - include the production and extraction of nickel and its by-products (copper, gold, silver, cobalt, precious metals and others) and copper, as well as their by-products (gold and silver).
Fertilizers (Discontinued operations) - include the production of potash, phosphate, nitrogen and other fertilizer products (note 14).
a) Adjusted EBITDA
The definition of adjusted EBITDA for the Company is the operating income or loss plus dividends received and interest from associates and joint ventures, and excluding the amounts charged as (i) depreciation, depletion and amortization and (ii) special events (note 4b).
The Company allocate in “Others” the sales and expenses of other products, services, research and development, investments in joint ventures and associates of other business and unallocated corporate expenses.
In 2018, the Company has allocated general and corporate expenses to “Others” as these are not directly related to the performance of each business segment. The comparative periods were restated to reflect this change in the allocation criteria.
|
|
|
Year ended December 31, 2018 |
| ||||||||||||
|
|
|
Net operating |
|
Cost of goods |
|
Selling, |
|
Research and |
|
Pre operating |
|
Dividends received |
|
Adjusted |
|
|
Ferrous minerals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron ore |
|
20,354 |
|
(9,048 |
) |
(76 |
) |
(110 |
) |
(115 |
) |
28 |
|
11,033 |
|
|
Iron ore Pellets |
|
6,651 |
|
(3,393 |
) |
(11 |
) |
(26 |
) |
(19 |
) |
154 |
|
3,356 |
|
|
Ferroalloys and manganese |
|
454 |
|
(290 |
) |
(3 |
) |
(1 |
) |
— |
|
— |
|
160 |
|
|
Other ferrous products and services |
|
474 |
|
(313 |
) |
(4 |
) |
(1 |
) |
(1 |
) |
7 |
|
162 |
|
|
|
|
27,933 |
|
(13,044 |
) |
(94 |
) |
(138 |
) |
(135 |
) |
189 |
|
14,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal |
|
1,643 |
|
(1,575 |
) |
(9 |
) |
(21 |
) |
— |
|
143 |
|
181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base metals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel and other products |
|
4,610 |
|
(3,060 |
) |
(47 |
) |
(39 |
) |
(33 |
) |
— |
|
1,431 |
|
|
Copper |
|
2,093 |
|
(960 |
) |
(4 |
) |
(18 |
) |
— |
|
— |
|
1,111 |
|
|
|
|
6,703 |
|
(4,020 |
) |
(51 |
) |
(57 |
) |
(33 |
) |
— |
|
2,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
296 |
|
(263 |
) |
(752 |
) |
(157 |
) |
(21 |
) |
56 |
|
(841 |
) |
|
Total of continuing operations |
|
36,575 |
|
(18,902 |
) |
(906 |
) |
(373 |
) |
(189 |
) |
388 |
|
(16,593 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (Fertilizers) |
|
121 |
|
(120 |
) |
(4 |
) |
— |
|
— |
|
— |
|
(3 |
) |
|
Total |
|
36,696 |
|
(19,022 |
) |
(910 |
) |
(373 |
) |
(189 |
) |
388 |
|
(16,590 |
) |
Notes to the Financial Statements
Expressed in millions of United States dollar, unless otherwise stated
|
|
|
Year ended December 31, 2017 |
| ||||||||||||
|
|
|
Net operating |
|
Cost of goods |
|
Selling, |
|
Research and |
|
Pre operating |
|
Dividends received |
|
Adjusted |
|
|
Ferrous minerals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron ore |
|
18,524 |
|
(7,950 |
) |
11 |
|
(88 |
) |
(181 |
) |
30 |
|
10,346 |
|
|
Iron ore Pellets |
|
5,653 |
|
(2,876 |
) |
(9 |
) |
(19 |
) |
(7 |
) |
81 |
|
2,823 |
|
|
Ferroalloys and manganese |
|
469 |
|
(278 |
) |
(8 |
) |
— |
|
(4 |
) |
— |
|
179 |
|
|
Other ferrous products and services |
|
483 |
|
(306 |
) |
11 |
|
(2 |
) |
— |
|
19 |
|
205 |
|
|
|
|
25,129 |
|
(11,410 |
) |
5 |
|
(109 |
) |
(192 |
) |
130 |
|
13,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal |
|
1,567 |
|
(1,354 |
) |
(12 |
) |
(14 |
) |
(4 |
) |
179 |
|
362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base metals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel and other products |
|
4,667 |
|
(3,437 |
) |
(47 |
) |
(49 |
) |
(75 |
) |
— |
|
1,059 |
|
|
Copper |
|
2,204 |
|
(979 |
) |
(15 |
) |
(13 |
) |
— |
|
— |
|
1,197 |
|
|
|
|
6,871 |
|
(4,416 |
) |
(62 |
) |
(62 |
) |
(75 |
) |
— |
|
2,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
400 |
|
(375 |
) |
(791 |
) |
(155 |
) |
(9 |
) |
97 |
|
(833 |
) |
|
Total of continuing operations |
|
33,967 |
|
(17,555 |
) |
(860 |
) |
(340 |
) |
(280 |
) |
406 |
|
15,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (Fertilizers) |
|
1,746 |
|
(1,606 |
) |
(102 |
) |
(12 |
) |
(25 |
) |
3 |
|
4 |
|
|
Total |
|
35,713 |
|
(19,161 |
) |
(962 |
) |
(352 |
) |
(305 |
) |
409 |
|
15,342 |
|
|
|
|
Year ended December 31, 2016 |
| ||||||||||||
|
|
|
Net operating |
|
Cost of goods |
|
Selling, |
|
Research and |
|
||||||