Vale S.A 6-K, filed Apr 27, 2022
Vale S.A. (VALE)
About this 6-K
Vale S.A filed this 6-K on April 27, 2022.
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
April 2022
Vale S.A.
Praia de Botafogo nº 186, 18º andar,
Botafogo
22250-145 Rio de Janeiro, RJ, Brazil
(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 ¨
(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 ¨ 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 ¨ 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 ¨ No x
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82- .)
Vale S.A. Financial Statements
Contents
2
(A free translation of the original in Portuguese)
Report on review of quarterly information
To the Board of Directors and Stockholders
Vale S.A.
Introduction
We have reviewed the accompanying parent company and consolidated interim accounting information of Vale S.A. ("Company"), included in the Quarterly Information Form (ITR) for the quarter ended March 31, 2022, comprising the statement of financial position at that date and the income statement and the statements of comprehensive income, changes in equity and cash flows for the quarter then ended, and a summary of significant accounting policies and other explanatory information.
Management is responsible for the preparation of the parent company and consolidated interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC) and International Accounting Standard (IAS) 34, Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review.
Scope of review
We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently did not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the interim information
Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company and consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the quarterly information, and presented in accordance with the standards issued by the CVM.
3
(A free translation of the original in Portuguese)
Other matters
Value added statements
The quarterly information referred to above includes the parent company and consolidated statements of value added for the quarter ended March 31, 2022. These statements are the responsibility of the Company's management and are presented as supplementary information under IAS 34. These statements have been subjected to review procedures performed together with the review of the quarterly information for the purpose of concluding whether they are reconciled with the interim accounting information and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in the accounting standard CPC 09 - "Statement of Value Added". Based on our review, nothing has come to our attention that causes us to believe that these statements of value added have not been properly prepared, in all material respects, in accordance with the criteria established in this accounting standard, and consistent with the parent company and consolidated interim accounting information taken as a whole.
Rio de Janeiro, April 27, 2022
PricewaterhouseCoopers |
Patricio Marques Roche |
Auditores Independentes Ltda. |
Contador CRC 1RJ081115/O-4 |
CRC 2SP000160/O-5 |
|
4
In millions of Brazilian reais, except earnings per share data
| Consolidated | Parent Company | |||||||||
| Three-month period ended March 31, | ||||||||||
| Notes | 2022 | 2021 | 2022 | 2021 | ||||||
| Continuing operations | ||||||||||
| Net operating revenue | 4(d) | 56,719 | 68,792 | 31,244 | 46,075 | |||||
| Cost of goods sold and services rendered | 5(a) | (24,174) | (23,587) | (12,468) | (12,439) | |||||
| Gross profit | 32,545 | 45,205 | 18,776 | 33,636 | ||||||
| Operating expenses | ||||||||||
| Selling and administrative | 5(b) | (629) | (572) | (301) | (323) | |||||
| Research and development | (631) | (541) | (309) | (252) | ||||||
| Pre-operating and operational stoppage | 23 | (800) | (792) | (788) | (748) | |||||
| Equity results and others results from subsidiaries | 29 | - | - | 15,483 | 13,820 | |||||
| Brumadinho event and de-characterization of dams | 21 and 23 | (832) | (637) | (832) | (637) | |||||
| Other operating expenses, net | 5(c) | (581) | (54) | (551) | (487) | |||||
| (3,473) | (2,596) | 12,702 | 11,373 | |||||||
| Impairment reversal (impairment and disposals) of non-current assets | 14 | 5,328 | (654) | (264) | (8) | |||||
| Operating income | 34,400 | 41,955 | 31,214 | 45,001 | ||||||
| Financial income | 6 | 788 | 312 | 608 | 93 | |||||
| Financial expenses | 6 | (2,358) | (7,416) | (2,039) | (7,442) | |||||
| Other financial items, net | 6 | 194 | 6,919 | (252) | 652 | |||||
| Equity results and other results in associates and joint ventures | 13,14 and 22 | 1,119 | (12) | 1,119 | (12) | |||||
| Income before income taxes | 34,143 | 41,758 | 30,650 | 38,292 | ||||||
| Income taxes | 7 | |||||||||
| Current tax | (1,284) | (8,270) | (981) | (7,489) | ||||||
| Deferred tax | (9,702) | (1,680) | (6,623) | (239) | ||||||
| (10,986) | (9,950) | (7,604) | (7,728) | |||||||
| Net income of continuing operations | 23,157 | 31,808 | 23,046 | 30,564 | ||||||
| Net income attributable to noncontrolling interests | 117 | 73 | - | - | ||||||
| Net income from continuing operations attributable to Vale's stockholders | 23,040 | 31,735 | 23,046 | 30,564 | ||||||
| Discontinued operations | 14(a) | |||||||||
| Net income (loss) from discontinued operations | 6 | (1,619) | - | - | ||||||
| Loss attributable to noncontrolling interests | - | (448) | - | - | ||||||
| Net income (Loss) from discontinued operations attributable to Vale's stockholders | 6 | (1,171) | - | - | ||||||
| Net income | 23,163 | 30,189 | 23,046 | 30,564 | ||||||
| Net income (loss) attributable to noncontrolling interests | 117 | (375) | - | - | ||||||
| Net income attributable to Vale's stockholders | 23,046 | 30,564 | 23,046 | 30,564 | ||||||
| Basic and diluted earnings per share attributable to Vale's stockholders: | 8 | |||||||||
| Common share (R$) | 4.79 | 5.96 | 4.79 | 5.96 | ||||||
As described in note 14, the coal segment is presented in these interim financial statements as discontinued operation, therefore, the comparative balances in the income statement were also reclassified.
The accompanying notes are an integral part of these interim financial statements.
5
Statement of Comprehensive Income
In millions of Brazilian reais
| Consolidated | Parent Company | |||||||
| Three-month period ended March 31, | ||||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Net income | 23,163 | 30,189 | 23,046 | 30,564 | ||||
| Other comprehensive income: | ||||||||
| Items that will not be reclassified to income statement | ||||||||
| Retirement benefit obligations (note 26) | 158 | 1,642 | (6) | (7) | ||||
| Fair value adjustment to investment in equity securities (i) | - | 1,553 | - | 1,279 | ||||
| Equity results (note 13) | - | - | 164 | 1,923 | ||||
| 158 | 3,195 | 158 | 3,195 | |||||
| Items that may be reclassified to income statement | ||||||||
| Translation adjustments | (9,808) | 10,023 | (9,091) | 10,501 | ||||
| Net investment hedge (note 17) | 1,129 | (851) | 1,129 | (851) | ||||
| Cash flow hedge (note 17) | (1,554) | 88 | 12 | - | ||||
| Equity results (note 13) | - | - | (1,566) | 88 | ||||
| Reclassification of cumulative translation adjustment to income statement (note 14) | (779) | (6,308) | (779) | (6,308) | ||||
| (11,012) | 2,952 | (10,295) | 3,430 | |||||
| Total comprehensive income | 12,309 | 36,336 | 12,909 | 37,189 | ||||
| Comprehensive income (loss) attributable to noncontrolling interests | (600) | (853) | ||||||
| Comprehensive income attributable to Vale's stockholders | 12,909 | 37,189 | ||||||
(i) Refers to the fair value adjustment of the shares the Company has received as part of the consideration for the sale of Vale’s fertilizer business to The Mosaic Company in 2016. In November 2021, the Company sold all these shares for R$6,919 (US$1,259 million) in a block trade.
Items above are stated net of tax and the related taxes are disclosed in note 7.
The accompanying notes are an integral part of these interim financial statements.
6
In millions of Brazilian reais
| Consolidated | Parent Company | |||||||
| Three-month period ended March 31, | ||||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Cash flow from operations (a) | 29,182 | 49,604 | 23,311 | 56,680 | ||||
| Interest on loans and borrowings paid (note 20) | (946) | (1,585) | (1,207) | (1,989) | ||||
| Cash received (paid) on settlement of derivatives, net (note 17) | (394) | (1,094) | 30 | (831) | ||||
| Payments related to Brumadinho event (note 21) | (334) | (352) | (334) | (352) | ||||
| Payments related to de-characterization of dams (note 23) | (357) | (461) | (357) | (461) | ||||
| Income taxes (including settlement program) | (13,589) | (6,433) | (13,139) | (5,118) | ||||
| Net cash provided by operating activities from continuing operations | 13,562 | 39,679 | 8,304 | 47,929 | ||||
| Net cash provided (used) in operating activities from discontinued operations (note 14a) | 213 | (1,370) | - | - | ||||
| Net cash provided by operating activities | 13,775 | 38,309 | 8,304 | 47,929 | ||||
| Cash flow from investing activities: | ||||||||
| Capital expenditures | (5,964) | (5,382) | (4,249) | (3,183) | ||||
| Additions to investments (note 13) | (1) | (237) | (167) | (403) | ||||
| Proceeds from disposal of CSI (note 14d) | 2,269 | - | - | - | ||||
| Disbursement related to VNC sale (note 14d) | - | (3,134) | - | - | ||||
| Dividends received from associates and joint ventures (note 13) | 362 | - | 2 | - | ||||
| Short-term investment | (16) | (4,069) | (11) | (2,682) | ||||
| Other investments activities, net | (2) | (513) | (16) | (10,657) | ||||
| Net cash used in investing activities from continuing operations | (3,352) | (13,335) | (4,441) | (16,925) | ||||
| Net cash used in investing activities from discontinued operations (note 14a) | (201) | 214 | - | - | ||||
| Net cash used in investing activities | (3,553) | (13,121) | (4,441) | (16,925) | ||||
| Cash flow from financing activities: | ||||||||
| Loans and borrowings from third parties (note 20) | 2,361 | 1,633 | - | 1,633 | ||||
| Payments of loans and borrowings from third parties (note 20) | (2,170) | (6,913) | (2,112) | (6,401) | ||||
| Payments of leasing (note 20) | (216) | (282) | (29) | (102) | ||||
| Dividends and interest on capital paid to stockholders (note 27c) | (17,849) | (21,866) | (17,849) | (21,866) | ||||
| Dividends and interest on capital paid to noncontrolling interest | (16) | (15) | - | - | ||||
| Share buyback program (note 27d) | (9,176) | - | (4,227) | - | ||||
| Net cash used in financing activities from continuing operations | (27,066) | (27,443) | (24,217) | (26,736) | ||||
| Net cash used in financing activities from discontinued operations (note 14a) | (54) | (22) | - | - | ||||
| Net cash used in financing activities | (27,120) | (27,465) | (24,217) | (26,736) | ||||
| Increase (reduction) in cash and cash equivalents | (16,898) | (2,277) | (20,354) | 4,268 | ||||
| Cash and cash equivalents at the beginning of the period | 65,409 | 70,086 | 34,266 | 14,609 | ||||
| Effect of exchange rate changes on cash and cash equivalents | (5,519) | 5,590 | - | - | ||||
| Cash and cash equivalents from subsidiaries sold, net (note 14b) | (61) | - | - | - | ||||
| Cash and cash equivalents at end of the period | 42,931 | 73,399 | 13,912 | 18,877 | ||||
| Cash flow from operating activities: | ||||||||
| Income before income taxes | 34,143 | 41,758 | 30,650 | 38,292 | ||||
| Adjusted for: | ||||||||
| Equity results and other results in associates and joint ventures (note 13) | (1,119) | 12 | (16,602) | (13,808) | ||||
| Impairment reversal (impairment and disposals) of non-current assets (note 14) | (5,328) | 654 | 264 | 8 | ||||
| Depreciation, depletion and amortization | 3,591 | 4,012 | 2,128 | 2,047 | ||||
| Financial results, net (note 6) | 1,376 | 185 | 1,683 | 6,697 | ||||
| De-characterization of dams | 192 | - | 192 | - | ||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable (note 9) | 4,724 | 7,722 | 8,780 | 25,884 | ||||
| Inventories (note 10) | (1,423) | (1,018) | (137) | (111) | ||||
| Suppliers and contractors (note 11) (i) | (3,837) | (1,697) | (2,258) | (1,749) | ||||
| Payroll, related charges and other remunerations | (1,618) | (1,597) | (958) | (882) | ||||
| Other assets and liabilities, net | (1,519) | (427) | (431) | 302 | ||||
| Cash flow from operations (a) | 29,182 | 49,604 | 23,311 | 56,680 | ||||
| Non-cash transactions: | ||||||||
| Additions to property, plant and equipment - capitalized loans and borrowing costs | 71 | 87 | 71 | 87 | ||||
(i) Includes variable lease payments.
The accompanying notes are an integral part of these interim financial statements.
7
Statement of Financial Position
In millions of Brazilian reais
| Consolidated | Parent Company | |||||||||
| Notes | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 20 | 42,931 | 65,409 | 13,912 | 34,266 | |||||
| Short-term investments | 20 | 204 | 1,028 | 8 | 906 | |||||
| Accounts receivable | 9 | 14,797 | 21,840 | 32,433 | 47,912 | |||||
| Other financial assets | 12 | 1,272 | 619 | 1,026 | 410 | |||||
| Inventories | 10 | 23,871 | 24,429 | 7,774 | 7,246 | |||||
| Recoverable taxes | 7(d) | 3,943 | 4,809 | 2,928 | 3,519 | |||||
| Others | 1,370 | 1,198 | 5,166 | 1,867 | ||||||
| 88,388 | 119,332 | 63,247 | 96,126 | |||||||
| Non-current assets held for sale | 14 | 3,831 | 5,468 | 1,190 | 35 | |||||
| 92,219 | 124,800 | 64,437 | 96,161 | |||||||
| Non-current assets | ||||||||||
| Judicial deposits | 25(c) | 6,891 | 6,808 | 6,648 | 6,543 | |||||
| Other financial assets | 12 | 1,850 | 796 | 1,310 | 480 | |||||
| Recoverable taxes | 7(d) | 5,480 | 5,220 | 3,262 | 2,650 | |||||
| Deferred income taxes | 7(a) | 53,029 | 63,847 | 47,489 | 54,119 | |||||
| Others | 4,676 | 3,604 | 2,312 | 894 | ||||||
| 71,926 | 80,275 | 61,021 | 64,686 | |||||||
| Investments | 13 | 9,130 | 9,771 | 130,593 | 143,640 | |||||
| Intangible | 15 | 48,641 | 50,287 | 29,282 | 29,440 | |||||
| Property, plant, and equipment | 16 | 219,400 | 233,995 | 125,603 | 123,959 | |||||
| 349,097 | 374,328 | 346,499 | 361,725 | |||||||
| Total assets | 441,316 | 499,128 | 410,936 | 457,886 | ||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Suppliers and contractors | 11 | 16,327 | 19,393 | 8,263 | 10,603 | |||||
| Loans, borrowings and leases | 20 | 5,228 | 6,720 | 2,488 | 3,415 | |||||
| Other financial liabilities | 12 | 11,147 | 10,946 | 18,757 | 11,954 | |||||
| Taxes payable | 7(d) | 4,393 | 12,150 | 3,969 | 11,129 | |||||
| Settlement program ("REFIS") | 7(c) | 1,835 | 1,810 | 1,835 | 1,810 | |||||
| Liabilities related to associates and joint ventures | 22 | 11,186 | 9,964 | 11,186 | 9,964 | |||||
| Provisions | 24 | 3,554 | 5,830 | 2,671 | 4,019 | |||||
| Liabilities related to Brumadinho | 21 | 6,561 | 6,449 | 6,561 | 6,449 | |||||
| De-characterization of dams and asset retirement obligations | 23 | 3,063 | 3,468 | 2,740 | 3,126 | |||||
| Others | 4,041 | 6,106 | 3,005 | 2,744 | ||||||
| 67,335 | 82,836 | 61,475 | 65,213 | |||||||
| Liabilities associated with non-current assets held for sale | 14 | 2,157 | 1,978 | - | - | |||||
| 69,492 | 84,814 | 61,475 | 65,213 | |||||||
| Non-current liabilities | ||||||||||
| Loans, borrowings, and leases | 20 | 61,175 | 70,189 | 13,682 | 16,520 | |||||
| Participative stockholders' debentures | 19 | 20,366 | 19,078 | 20,366 | 19,078 | |||||
| Other financial liabilities | 12 | 11,125 | 14,344 | 71,779 | 95,636 | |||||
| Settlement program ("REFIS") | 7(c) | 10,647 | 10,962 | 10,647 | 10,962 | |||||
| Deferred income taxes | 7(a) | 8,670 | 10,494 | - | - | |||||
| Provisions | 24 | 13,182 | 19,082 | 7,541 | 7,496 | |||||
| Liabilities related to Brumadinho | 21 | 13,301 | 13,288 | 13,301 | 13,288 | |||||
| De-characterization of dams and asset retirement obligations | 23 | 36,055 | 41,753 | 23,535 | 23,658 | |||||
| Liabilities related to associates and joint ventures | 22 | 6,105 | 7,407 | 6,105 | 7,407 | |||||
| Streaming transactions | 7,972 | 9,927 | - | - | ||||||
| Others | 865 | 732 | 4,191 | 6,225 | ||||||
| 189,463 | 217,256 | 171,147 | 200,270 | |||||||
| Total liabilities | 258,955 | 302,070 | 232,622 | 265,483 | ||||||
| Stockholders' equity | 27 | |||||||||
| Equity attributable to Vale's stockholders | 178,314 | 192,403 | 178,314 | 192,403 | ||||||
| Equity attributable to noncontrolling interests | 4,047 | 4,655 | - | - | ||||||
| Total stockholders' equity | 182,361 | 197,058 | 178,314 | 192,403 | ||||||
| Total liabilities and stockholders' equity | 441,316 | 499,128 | 410,936 | 457,886 | ||||||
The accompanying notes are an integral part of these interim financial statements.
8
Statement of Changes in Equity
In millions of Brazilian reais
| Share capital | Capital reserve | Profit reserves | Treasury stocks | Other reserves | Cumulative translation adjustments | Retained earnings | Equity attributable to Vale’s stockholders | Equity attributable to noncontrolling interests | Total stockholders' equity | |||||||||||
| Balance at December 31, 2021 | 77,300 | 3,634 | 87,621 | (29,189) | (6,899) | 59,936 | - | 192,403 | 4,655 | 197,058 | ||||||||||
| Net income | - | - | - | - | - | - | 23,046 | 23,046 | 117 | 23,163 | ||||||||||
| Other comprehensive income | - | - | - | - | (1,231) | (8,906) | - | (10,137) | (717) | (10,854) | ||||||||||
| Dividends and interest on capital of Vale's stockholders (note 27c) | - | - | (17,849) | - | - | - | - | (17,849) | - | (17,849) | ||||||||||
| Dividends of noncontrolling interest | - | - | - | - | - | - | - | - | (8) | (8) | ||||||||||
| Share buyback program (note 27d) | - | - | - | (9,176) | - | - | - | (9,176) | - | (9,176) | ||||||||||
| Share-based payment program | - | - | - | - | (72) | - | - | (72) | - | (72) | ||||||||||
| Treasury shares utilized and canceled (note 27b) | - | - | (14,589) | 14,688 | - | - | - | 99 | - | 99 | ||||||||||
| Balance at March 31, 2022 | 77,300 | 3,634 | 55,183 | (23,677) | (8,202) | 51,030 | 23,046 | 178,314 | 4,047 | 182,361 | ||||||||||
| Share capital | Capital reserve | Profit reserves | Treasury stocks | Other reserves | Cumulative translation adjustments | Retained earnings | Equity attributable to Vale’s stockholders | Equity attributable to noncontrolling interests | Total stockholders' equity | |||||||||||
| Balance at December 31, 2020 | 77,300 | 3,634 | 36,598 | (6,452) | (7,307) | 82,012 | - | 185,785 | (4,799) | 180,986 | ||||||||||
| Net income (loss) | - | - | - | - | - | - | 30,564 | 30,564 | (375) | 30,189 | ||||||||||
| Other comprehensive income | - | - | - | - | 3,012 | 3,613 | - | 6,625 | (478) | 6,147 | ||||||||||
| Dividends and interest on capital of Vale's stockholders | - | - | (15,524) | - | - | - | - | (15,524) | - | (15,524) | ||||||||||
| Dividends of noncontrolling interest | - | - | - | - | - | - | - | - | (9) | (9) | ||||||||||
| Acquisitions and disposal of noncontrolling interest | - | - | - | - | - | - | - | - | 76 | 76 | ||||||||||
| Treasury shares utilized (note 27b) | - | - | - | 37 | - | - | - | 37 | - | 37 | ||||||||||
| Balance at March 31, 2021 | 77,300 | 3,634 | 21,074 | (6,415) | (4,295) | 85,625 | 30,564 | 207,487 | (5,585) | 201,902 |
The accompanying notes are an integral part of these interim financial statements.
9
In millions of Brazilian reais
| Consolidated | Parent Company | |||||||
| Three-month period ended March 31, | ||||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Generation of value added | ||||||||
| Gross revenue | ||||||||
| Revenue from products and services | 57,375 | 69,595 | 31,865 | 46,835 | ||||
| Revenue from the construction of own assets | 1,582 | 1,824 | 1,249 | 661 | ||||
| Other revenues | 356 | 599 | 196 | 485 | ||||
| Less: | ||||||||
| Cost of products, goods and services sold | (7,675) | (7,380) | (4,334) | (4,214) | ||||
| Material, energy, third party services and other | (9,653) | (9,069) | (3,805) | (3,124) | ||||
| Impairment of non-current assets and other results | 5,328 | (654) | (264) | (8) | ||||
| Brumadinho event and de-characterization of dams | (832) | (637) | (832) | (637) | ||||
| Other costs and expenses | (3,606) | (2,877) | (2,331) | (2,204) | ||||
| Gross value added | 42,875 | 51,401 | 21,744 | 37,794 | ||||
| Depreciation, amortization and depletion | (3,591) | (4,012) | (2,128) | (2,047) | ||||
| Net value added | 39,284 | 47,389 | 19,616 | 35,747 | ||||
| Received from third parties | ||||||||
| Equity results from entities | 1,119 | (12) | 16,602 | 13,808 | ||||
| Financial income | (6,275) | 4,310 | (6,128) | 3,938 | ||||
| Total value added from continuing operations to be distributed | 34,128 | 51,687 | 30,090 | 53,493 | ||||
| Value added from discontinued operations to be distributed (note 14) | 305 | (1,453) | - | |||||
| Total value added to be distributed | 34,433 | 50,234 | 30,090 | 53,493 | ||||
| Personnel and charges | 2,216 | 2,169 | 1,283 | 1,102 | ||||
| Taxes and contributions | 13,374 | 13,032 | 9,950 | 10,629 | ||||
| Interest (net derivatives and monetary and exchange rate variation) | (5,013) | 4,422 | (4,589) | 10,608 | ||||
| Other remunerations of third party funds | 394 | 256 | 400 | 590 | ||||
| Reinvested net income from continuing operations | 23,040 | 31,735 | 23,046 | 30,564 | ||||
| Income (loss) from continuing operations attributable to noncontrolling interest | 117 | 73 | - | |||||
| Distributed value added from continuing operations | 34,128 | 51,687 | 30,090 | 53,493 | ||||
| Distributed value added from discontinued operations (note 14) | 305 | (1,453) | - | |||||
| Distributed value added | 34,433 | 50,234 | 30,090 | 53,493 | ||||
The accompanying notes are an integral part of these interim financial statements.
10
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
Vale S.A. and its subsidiaries (“Vale” or the “Company”) are global producers of: (i) iron ore and iron ore pellets, which are key raw materials for steelmaking, (ii) nickel, that is used to produce stainless steel, electric vehicle manufacturing and metal alloys employed in the production process of several products, and (iii) copper, used in the construction sector to produce pipes and electrical wires. Vale also produces platinum group metals, gold, silver, and cobalt as by-products and operates a railroad and port logistics system in Brazil to outflow its production. Additionally, Vale produces thermal and metallurgical coal, which has been considered as a discontinued operation since December 31, 2021 (note 14a).
Most of the Company’s products are sold to international markets by Vale International S.A. (“VISA”), a trading company located in Switzerland.
The Company also has investments and assets to meet self-consumption of electric energy, with the objective of reducing energy costs, minimizing the risk of shortages and meeting its consumption needs through renewable sources.
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) and Madrid – LATIBEX (XVALO).
2. Basis of preparation of interim financial statements
The consolidated and individual interim financial statements of the Company (“interim financial statements”) have been prepared and are being presented in accordance with IAS 34 Interim Financial Reporting (CPC 21) of the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), as implemented in Brazil by the Brazilian Accountant Pronouncements Committee ("CPC"), approved by the Brazilian Securities Exchange Commission ("CVM") and by the Brazilian Federal Accounting Council (“CFC”). All relevant information for the interim financial statements, and only this information, are presented and consistent to those used by the Company's Management.
The interim financial statements have been prepared to update users on the relevant events and transactions that occurred in the period and must be analyzed together with the financial statements for the year ended December 31, 2021. Accounting policies, accounting estimates and judgments, management of risk and measurement methods are the same as those adopted in the preparation of the latest annual financial statements.
These interim financial statements were authorized for issue by the Executive Committee on April 27, 2022.
a) Statement of Value Added
The presentation of the parent company and consolidated statements of value added is required by the Brazilian corporate legislation and the accounting practices adopted in Brazil for listed companies, while it is not required by IFRS. Therefore, under the IFRS, the presentation of such statements is considered supplementary information, and not part of the set of financial statements. The Statement of Value Added was prepared in accordance with the criteria defined in Technical Pronouncement CPC 09 - "Statement of Value Added".
b) Functional currency and presentation currency
The interim 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”), in the case of the Parent Company and its associates and joint ventures in Brazil, is the Brazilian real (“R$”). The functional currency of direct subsidiaries operating in an international economic environment is the US dollar (“US$”).
The income statement and cash flows statements of the investees, with a different functional currency from the Parent Company, are translated into Brazilian real at the average monthly exchange rate, the assets and liabilities are translated at the final rate and the other equity items are translated at the historical rate. All monetary exchange differences are recognized in comprehensive income as “Translation adjustments”.
When a foreign operation is totally or partially disposed, the monetary exchange differences that were recorded in the stockholders’ equity are recognized in the income statement for the year.
The main exchange rates used by the Company to translate its foreign operations are as follows:
11
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Average rate | ||||||||
| Closing rate | Three-month period ended March 31, | |||||||
| March 31, 2022 | December 31, 2021 | 2022 | 2021 | |||||
| US Dollar ("US$") | 4.7378 | 5.5805 | 5.2299 | 5.4833 | ||||
| Canadian dollar ("CAD") | 3.7960 | 4.3882 | 4.1302 | 4.3323 | ||||
| Euro ("EUR") | 5.2561 | 6.3210 | 5.8726 | 6.6033 | ||||
c) Russia-Ukraine conflict
The Company’s business is subject to external risk factors related to our global operations and the global profile of our client portfolio and supply chains. Global markets are experiencing volatility and disruption following the escalation of geopolitical tensions in connection with the military conflict between Russia and Ukraine.
The resulting economic sanctions imposed by the United States, the European Union, the UK and other countries as a direct consequence of this conflict may continue to significantly impact supply chains, lead to market disruptions including significant volatility in commodities’ prices and bring heightened near-term uncertainty to the global financial system, including through instability of credit and of capital markets.
At this time, the effects of the of the Russia-Ukraine conflict have not caused significant impacts on the Company’s operations nor on the fair value of its assets and liabilities. However, escalation of the Russia-Ukraine conflict may adversely affect the Company’s business, such as disruption of international trade flows, extreme market pricing volatility, with particular impact on the energy sector, industrial and agricultural supply chains, shipping, and regulatory and contractual uncertainty, and increased geopolitical tensions around the world.
3. Significant events in the current period
Financial Position, Cash Flows and Income Statement for the period ended March 31, 2022 were particularly affected by the following events and transactions:
Sale of Midwestern System assets (note 14c). In April 2022, the Company entered into a binding agreement with J&F Mineração Ltda. (“J&F”) for the sale of all interests held on Vale’s iron ore, manganese ore and logistics assets in the Midwestern System. At closing, the Company expects to receive approximately R$711 (US$150 million), in addition to transferring to J&F the obligations related to the take-or-pay logistics contracts. These assets were classified as held for sale during the reporting period, which resulted in a gain in the amount of R$5,632 (US$1,134 million) recorded in the three-month period ended March 31, 2022, due to the reversal of the impairment of property, plant and equipment and the provision related to take-or-pay logistics contracts.
Sale of ownership in California Steel Industries (“CSI”) (note 14d). In February 2022, the Company sold its 50% ownership interest in CSI to Nucor Corporation, for R$2,269 (US$437 million). Upon completion of the transaction, Vale recorded a gain of R$1,545 (US$297 million) in the three-month period ended March 31, 2022, mainly due to the reclassification of cumulative translation adjustment to income statement during the period.
Discontinued operation (note 14a). In April 2022 (subsequent event), the Company concluded the sale of its equity interest in coal and logistics operations to Vulcan Minerals and received R$1,280 (US$270 million) for the net assets of these operations. Following the completion of the transaction, the Company will recognize a gain of approximately R$11,500 (US$2,427 million) in the second quarter of 2022, which is mainly due to the reclassification of the cumulative translation adjustments from equity to net income.
Remuneration to stockholders (note 27c). In March 2022, the Company paid dividends and interest on equity to its shareholders in the amount of R$17,849 (US$3,480 million).
Share buyback (note 27d). Following the common share buyback programs, of up to 470,000,000 shares, as approved in 2021, the Company had repurchased 100,156,362 common shares and their respective ADRs as of March 31, 2022, corresponding to the total amount of R$9,176 (US$1,788 million).
Railroad Concession (note 12a). In April, 2022 (subsequent event), the Company paid in advance R$796 (US$168 million) of its concession grant obligation related to the Estrada de Ferro Carajás (“EFC”).
12
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
Cancellation of common shares held in treasury (note 27b). In February 2022, the Company approved the cancellation of 133,418,347 common shares held in treasury, with the effect of R$14,589 (US$2,801 million) recorded as a reclassification in the shareholders' equity presented as “Treasury shares used and cancelled”.
4. Information by business segment and geographic area
The Company operates the following reportable segments: Ferrous Minerals, Base Metals and Coal (presented as discontinued operations). The segments are aligned with products and reflect the structure used by Management to evaluate the Company’s performance. The responsible bodies for making operational decisions, allocating resources and evaluating performance are the Executive Boards and Board of Directors. Accordingly, the performance of the operating segments is assessed based on a measure of adjusted LAJIDA (EBITDA), among other measures.
The Company allocates to “Other” the revenues and cost of other products, services, research and development, investments in joint ventures and associates of other business and unallocated corporate expenses. Costs related to the Brumadinho event are allocated to "Other" as well.
In the current period, the Company has allocated the financial information of the Midwestern System to “Other” as this operation is no longer analyzed by the chief operating decision maker as part of to the performance of the Ferrous Minerals business segment due to the binding agreement to sell this operation. The comparative periods were revised to reflect this change in the allocation criteria.
a) Adjusted LAJIDA (EBITDA)
The definition of Adjusted LAJIDA (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) Impairment reversal (impairment and disposals) of non-current assets.
| Consolidated | ||||||||||||||
| Three-month period ended March 31, 2022 | ||||||||||||||
| Net operating revenue | Cost of goods sold and services rendered | Sales, administrative and other operating expenses | Research and evaluation | Pre operating and operational stoppage | Dividends received and interest from associates and joint ventures | Adjusted LAJIDA (EBITDA) | ||||||||
| Ferrous minerals | ||||||||||||||
| Iron ore | 38,116 | (11,090) | (285) | (179) | (584) | - | 25,978 | |||||||
| Iron ore pellets | 7,161 | (2,755) | 27 | (3) | (29) | - | 4,401 | |||||||
| Ferroalloys and manganese | 77 | (77) | (14) | (3) | (12) | - | (29) | |||||||
| Other ferrous products and services | 519 | (328) | 2 | (1) | (4) | - | 188 | |||||||
| 45,873 | (14,250) | (270) | (186) | (629) | - | 30,538 | ||||||||
| Base metals | ||||||||||||||
| Nickel and other products | 7,594 | (4,741) | (41) | (86) | (1) | - | 2,725 | |||||||
| Copper | 2,488 | (1,189) | 37 | (133) | (9) | - | 1,194 | |||||||
| 10,082 | (5,930) | (4) | (219) | (10) | - | 3,919 | ||||||||
| Brumadinho event and de-characterization of dams | - | - | (832) | - | - | - | (832) | |||||||
| COVID-19 | - | - | - | - | - | - | - | |||||||
| Other | 764 | (620) | (876) | (225) | (5) | 2 | (960) | |||||||
| Total of continuing operations | 56,719 | (20,800) | (1,982) | (630) | (644) | 2 | 32,665 | |||||||
| Discontinued operations – Coal | 2,308 | (1,370) | (57) | (7) | - | - | 874 | |||||||
| Total | 59,027 | (22,170) | (2,039) | (637) | (644) | 2 | 33,539 | |||||||
13
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||||||||||||
| Three-month period ended March 31, 2021 | ||||||||||||||
| Net operating revenue | Cost of goods sold and services rendered | Sales, administrative and other operating expenses | Research and evaluation | Pre operating and operational stoppage | Dividends received and interest from associates and joint ventures | Adjusted LAJIDA (EBITDA) | ||||||||
| Ferrous minerals | ||||||||||||||
| Iron ore | 49,636 | (11,128) | (121) | (184) | (501) | - | 37,702 | |||||||
| Iron ore pellets | 6,637 | (2,105) | 160 | (4) | (72) | - | 4,616 | |||||||
| Ferroalloys and manganese | 250 | (122) | (5) | (1) | (23) | - | 99 | |||||||
| Other ferrous products and services | 536 | (362) | 10 | (1) | - | - | 183 | |||||||
| 57,059 | (13,717) | 44 | (190) | (596) | - | 42,600 | ||||||||
| Base metals | ||||||||||||||
| Nickel and other products | 7,880 | (4,238) | (54) | (60) | (2) | - | 3,526 | |||||||
| Copper | 3,010 | (904) | 1 | (102) | (3) | - | 2,002 | |||||||
| 10,890 | (5,142) | (53) | (162) | (5) | - | 5,528 | ||||||||
| Brumadinho event and de-characterization of dams | - | - | (637) | - | - | - | (637) | |||||||
| COVID-19 | - | - | (9) | - | - | - | (9) | |||||||
| Other (i) | 843 | (949) | (560) | (188) | (7) | - | (861) | |||||||
| Total of continuing operations | 68,792 | (19,808) | (1,215) | (540) | (608) | - | 46,621 | |||||||
| Discontinued operations – Coal | 509 | (1,810) | 8 | (11) | - | 424 | (880) | |||||||
| Total | 69,301 | (21,618) | (1,207) | (551) | (608) | 424 | 45,741 | |||||||
(i) Includes the reclassification of the EBITDA of Midwestern System in the amount of R$191 (US$34 million).
Adjusted LAJIDA (EBITDA) is reconciled to net income as follows:
Continuing operations
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Net income from continuing operations attributable to Vale's stockholders | 23,040 | 31,735 | ||
| Net income attributable to noncontrolling interests | 117 | 73 | ||
| Net income | 23,157 | 31,808 | ||
| Depreciation, depletion and amortization | 3,591 | 4,012 | ||
| Income taxes | 10,986 | 9,950 | ||
| Financial results | 1,376 | 185 | ||
| LAJIDA (EBITDA) from continuing operations | 39,110 | 45,955 | ||
| Items to reconciled adjusted LAJIDA (EBITDA) | ||||
| Equity results and other results in associates and joint ventures | (1,119) | 12 | ||
| Dividends received from associates and joint ventures | 2 | - | ||
| Impairment reversal (impairment and disposals) of non-current assets | (5,328) | 654 | ||
| Adjusted LAJIDA (EBITDA) from continuing operations | 32,665 | 46,621 | ||
Discontinued operations (Coal)
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Net income (loss) from discontinued operations attributable to Vale's stockholders | 6 | (1,171) | ||
| Loss attributable to noncontrolling interests | - | (448) | ||
| Net income (loss) | 6 | (1,619) | ||
| Income taxes | 9 | - | ||
| Financial results | 33 | (9) | ||
| LAJIDA (EBITDA) from discontinued operations | 48 | (1,628) | ||
| Items to reconciled adjusted LAJIDA (EBITDA) | ||||
| Equity results in associates and joint ventures | - | 81 | ||
| Dividends received and interest from associates and joint ventures (i) | - | 424 | ||
| Impairment of non-current assets | 826 | 243 | ||
| Adjusted LAJIDA (EBITDA) from discontinued operations | 874 | (880) | ||
(i) Includes the remuneration of the financial instrument of the Coal segment.
14
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
b) Assets by segment
| Consolidated | ||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||
| Product inventory | Investments in associates and joint ventures | Property, plant and equipment and intangible | Product inventory | Investments in associates and joint ventures | Property, plant and equipment and intangible | |||||||
| Ferrous minerals | 12,147 | 6,371 | 159,488 | 12,199 | 6,214 | 161,770 | ||||||
| Base metals | 7,393 | 85 | 97,363 | 7,725 | 95 | 112,317 | ||||||
| Others | - | 2,674 | 11,190 | 120 | 3,462 | 10,195 | ||||||
| Total | 19,540 | 9,130 | 268,041 | 20,044 | 9,771 | 284,282 | ||||||
| Consolidated | ||||||||||||
| Three-month period ended March 31, | ||||||||||||
| 2022 | 2021 | |||||||||||
| Capital expenditures | Capital expenditures | |||||||||||
| Sustaining capital (i) | Project execution | Depreciation, depletion and amortization | Sustaining capital (i) | Project execution | Depreciation, depletion and amortization | |||||||
| Ferrous minerals | 2,641 | 933 | 2,172 | 2,893 | 446 | 2,150 | ||||||
| Base metals | 1,410 | 353 | 1,343 | 1,594 | 374 | 1,738 | ||||||
| Others | 163 | 464 | 76 | 63 | 12 | 124 | ||||||
| Total | 4,214 | 1,750 | 3,591 | 4,550 | 832 | 4,012 | ||||||
(i) According to the Company's remuneration policy, the sustaining capital investments are deducted from the 30% of the adjusted EBITDA. The calculation also considers the current investment of discontinued coal operations, which was R$201 (US$38 million) in the three-month period ended March 31, 2022.
c) Assets by geographic area
| Consolidated | ||||||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| Investments in associates and joint ventures | Intangible | Property, plant and equipment | Total | Investments in associates and joint ventures | Intangible | Property, plant and equipment | Total | |||||||||
| Brazil | 9,028 | 39,182 | 135,201 | 183,411 | 9,656 | 39,339 | 132,772 | 181,767 | ||||||||
| Canada | - | 9,426 | 57,503 | 66,929 | - | 10,927 | 69,429 | 80,356 | ||||||||
| Americas, except Brazil and Canada | - | - | 17 | 17 | - | - | 15 | 15 | ||||||||
| Europe | - | - | 3,428 | 3,428 | - | - | 4,124 | 4,124 | ||||||||
| Indonesia | - | 23 | 12,838 | 12,861 | - | 8 | 15,197 | 15,205 | ||||||||
| Asia, except Indonesia and China | 102 | - | 4,049 | 4,151 | 115 | - | 4,879 | 4,994 | ||||||||
| China | - | 8 | 113 | 121 | - | 11 | 117 | 128 | ||||||||
| Oman | - | 2 | 6,251 | 6,253 | - | 2 | 7,462 | 7,464 | ||||||||
| Total | 9,130 | 48,641 | 219,400 | 277,171 | 9,771 | 50,287 | 233,995 | 294,053 | ||||||||
d) Net operating revenue by geographic area
| Consolidated | ||||||||
| Three-month period ended March 31, 2022 | ||||||||
| Ferrous minerals | Base metals | Others | Total | |||||
| Americas, except United States and Brazil | 681 | 864 | 250 | 1,795 | ||||
| United States of America | 141 | 1,496 | - | 1,637 | ||||
| Germany | 672 | 2,002 | - | 2,674 | ||||
| Europe, except Germany | 2,819 | 2,170 | - | 4,989 | ||||
| Middle East, Africa, and Oceania | 2,607 | 18 | - | 2,625 | ||||
| Japan | 3,556 | 995 | - | 4,551 | ||||
| China | 26,824 | 1,501 | - | 28,325 | ||||
| Asia, except Japan and China | 3,291 | 963 | - | 4,254 | ||||
| Brazil | 5,282 | 73 | 514 | 5,869 | ||||
| Net operating revenue | 45,873 | 10,082 | 764 | 56,719 | ||||
15
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||||||
| Three-month period ended March 31, 2021 | ||||||||
| Ferrous minerals | Base metals | Others | Total | |||||
| Americas, except United States and Brazil | 983 | 520 | 238 | 1,741 | ||||
| United States of America | 544 | 1,567 | - | 2,111 | ||||
| Germany | 937 | 2,546 | - | 3,483 | ||||
| Europe, except Germany | 3,234 | 3,864 | - | 7,098 | ||||
| Middle East, Africa, and Oceania | 1,499 | 2 | - | 1,501 | ||||
| Japan | 2,893 | 527 | - | 3,420 | ||||
| China | 37,208 | 875 | - | 38,083 | ||||
| Asia, except Japan and China | 4,279 | 865 | - | 5,144 | ||||
| Brazil | 5,482 | 124 | 605 | 6,211 | ||||
| Net operating revenue | 57,059 | 10,890 | 843 | 68,792 | ||||
5. Costs and expenses by nature
a) Cost of goods sold, and services rendered
| Consolidated | |||
| Three-month period ended March 31, | |||
| 2022 | 2021 | ||
| Personnel | 1,991 | 2,103 | |
| Materials and services | 3,557 | 3,466 | |
| Fuel oil and gas | 1,490 | 1,033 | |
| Maintenance | 3,283 | 3,427 | |
| Royalties | 1,097 | 1,379 | |
| Energy | 793 | 775 | |
| Acquisition of products | 2,395 | 1,878 | |
| Depreciation, depletion and amortization | 3,374 | 3,779 | |
| Freight | 4,332 | 4,293 | |
| Others | 1,862 | 1,454 | |
| Total | 24,174 | 23,587 | |
| Cost of goods sold | 23,481 | 22,855 | |
| Cost of services rendered | 693 | 732 | |
| Total | 24,174 | 23,587 | |
b) Selling and administrative expenses
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Selling | 98 | 93 | ||
| Personnel | 279 | 260 | ||
| Services | 115 | 92 | ||
| Depreciation and amortization | 60 | 48 | ||
| Others | 77 | 79 | ||
| Total | 629 | 572 | ||
c) Other operating expenses, net
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Provision for litigations | 85 | 88 | ||
| Profit sharing program | 247 | 121 | ||
| Others | 249 | (155) | ||
| Total | 581 | 54 | ||
16
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Financial income | ||||
| Short-term investments | 678 | 149 | ||
| Others | 110 | 163 | ||
| 788 | 312 | |||
| Financial expenses | ||||
| Loans and borrowings gross interest | (843) | (1,026) | ||
| Capitalized loans and borrowing costs | 71 | 87 | ||
| Participative stockholders' debentures (note 19) | (1,311) | (5,314) | ||
| Interest on REFIS | (111) | (38) | ||
| Interest on lease liabilities (note 20) | (79) | (92) | ||
| Financial guarantees | 613 | (201) | ||
| Expenses with cash tender offer repurchased | - | (354) | ||
| Others | (698) | (478) | ||
| (2,358) | (7,416) | |||
| Other financial items, net | ||||
| Net foreign exchange gains (losses) | (4,273) | 1,782 | ||
| Derivative financial instruments (note 17) | 4,421 | (2,422) | ||
| Reclassification of cumulative translation adjustments to the income statement (note 13) | - | 6,308 | ||
| Indexation gains, net | 46 | 1,251 | ||
| 194 | 6,919 | |||
| Total | (1,376) | (185) | ||
a) Financial guarantees
As of March 31, 2022, the total guarantees granted by the Company (within the limit of its direct or indirect interest) for certain associates and joint ventures totaled R$7,405 (US$1,563 million) (December 31, 2021: R$8,443 (US$1,513 million)). The fair value of these financial guarantees was recorded under “Other non-current liabilities” in the amount of R$2,412 (US$509 million) (December 31, 2021: R$3,026 (US$542 million)).
a) Deferred income tax assets and liabilities
| Consolidated | ||||||
| Assets | Liabilities | Deferred taxes, net | ||||
| Balance at December 31, 2021 | 63,847 | 10,494 | 53,353 | |||
| Effect in income statement | (9,532) | 170 | (9,702) | |||
| Translation adjustment | (1,112) | (1,292) | 180 | |||
| Other comprehensive income | (174) | (555) | 381 | |||
| Sale of ownership in California Steel Industries (note 14d) | - | (147) | 147 | |||
| Balance at March 31, 2022 | 53,029 | 8,670 | 44,359 | |||
| Consolidated | ||||||
| Assets | Liabilities | Deferred taxes, net | ||||
| Balance at December 31, 2020 | 53,711 | 9,198 | 44,513 | |||
| Effect in income statement | (1,406) | 274 | (1,680) | |||
| Translation adjustment | 840 | 916 | (76) | |||
| Other comprehensive income | (686) | 690 | (1,376) | |||
| Balance at March 31, 2021 | 52,459 | 11,078 | 41,381 | |||
b) Income tax reconciliation – Income statement
Income tax expense is recognized based on the estimate of the weighted average effective tax rate expected for the full year, adjusted for the tax effect of certain items that are recognized in full on the interim tax calculation. Therefore, the effective tax rate in the interim financial statements may differ from management’s estimate of the effective tax rate for the year.
Income tax expense is recognized based on the estimate of the weighted average effective tax rate expected for the full year. The total amount presented as income taxes in the income statement is reconciled to the statutory rate, as follows:
17
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Income before income taxes | 34,143 | 41,758 | ||
| Income taxes at statutory rate – 34% | (11,609) | (14,198) | ||
| Adjustments that affect the basis of taxes: | ||||
| Tax incentives | 2,546 | 2,501 | ||
| Equity results | 44 | (28) | ||
| Foreign exchange variation on tax losses carryforward | (3,572) | (5) | ||
| Others | 1,605 | 1,780 | ||
| Income taxes | (10,986) | (9,950) | ||
c) Income taxes - Settlement program (“REFIS”)
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Current liabilities | 1,835 | 1,810 | ||
| Non-current liabilities | 10,647 | 10,962 | ||
| REFIS liabilities | 12,482 | 12,772 | ||
| SELIC rate | 11.75% | 9.25% | ||
It mainly relates to the settlement program of claims regarding the collection of income tax and social contribution on equity gains of foreign subsidiaries and affiliates from 2003 to 2012. This amount bears SELIC interest rate (Special System for Settlement and Custody) and will be paid in monthly installments until October 2028.
d) Uncertain tax positions
There have been no developments on matters related to the uncertain tax positions since the December 31, 2021 financial statements.
e) Recoverable and payable taxes
| Consolidated | ||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||
| Current assets | Non-current assets | Current liabilities | Current assets | Non-current assets | Current liabilities | |||||||
| Value-added tax | 950 | - | 142 | 1,209 | 60 | 906 | ||||||
| Brazilian federal contributions | 2,536 | 3,058 | 71 | 2,903 | 2,851 | 66 | ||||||
| Income taxes | 394 | 2,421 | 3,075 | 630 | 2,309 | 10,385 | ||||||
| Financial compensation for the exploration of mineral resources - CFEM | - | - | 326 | - | - | 328 | ||||||
| Others | 63 | 1 | 779 | 67 | - | 465 | ||||||
| Total | 3,943 | 5,480 | 4,393 | 4,809 | 5,220 | 12,150 | ||||||
8. Basic and diluted earnings per share
The basic and diluted earnings per share are presented below:
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Net income attributable to Vale's stockholders: | ||||
| Net income from continuing operations | 23,040 | 31,735 | ||
| Net income (loss) from discontinued operations | 6 | (1,171) | ||
| 23,046 | 30,564 | |||
| Thousands of shares | ||||
| Weighted average number of common shares outstanding | 4,807,641 | 5,130,188 | ||
| Weighted average number of common shares outstanding and potential ordinary shares | 4,811,926 | 5,134,612 | ||
| Basic and diluted earnings per share from continuing operations: | ||||
| Common share (R$) | 4.79 | 6.19 | ||
| Basic and diluted loss per share from discontinued operations: | ||||
| Common share (R$) | - | (0.23) | ||
| Basic and diluted earnings per share: | ||||
| Common share (R$) | 4.79 | 5.96 | ||
18
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Receivables from customer contracts | ||||
| Related parties (note 28) | 1,416 | 608 | ||
| Third parties | ||||
| Ferrous minerals | 9,530 | 16,868 | ||
| Base metals | 3,254 | 3,730 | ||
| Others | 829 | 900 | ||
| Accounts receivable | 15,029 | 22,106 | ||
| Expected credit loss | (232) | (266) | ||
| Accounts receivable, net | 14,797 | 21,840 | ||
No customer individually represented 10% or more of the Company’s accounts receivable or revenues for both periods presented above.
Provisionally priced commodities sales – The commodity price risk arises from volatility of iron ore, nickel, copper and coal prices. The Company is mostly exposed to the fluctuations in the iron ore and copper price (note 17). The selling price of these products can be measured reliably at each period since the price is quoted in an active market.
The sensitivity of the Company’s risk on final settlement of provisionally priced accounts receivables are presented below:
| March 31, 2022 | ||||||||
| Thousand metric tons | Provisional price (US$/ton) | Change | Effect on Revenue | |||||
| Iron ore | 15,431 | 150.3 | +/-10% | +/- 1.213 | ||||
| Copper | 66 | 12,610.4 | +/-10% | +/- 437 | ||||
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Finished products | 15,437 | 15,615 | ||
| Work in progress | 4,233 | 4,566 | ||
| Consumable inventory | 4,718 | 4,777 | ||
| Allowance to net realizable value (i) | (517) | (529) | ||
| Total | 23,871 | 24,429 | ||
(i) In the period ended March 31, 2022, the effect of provision for net realizable value was R$53 (US$10 million) (March 31, 2021: reversal of R$66 (US$12 million)).
Finished and work in progress products inventories by segments are presented in note 4(b) and the cost of goods sold is presented in note 5(a).
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Third parties - Brazil | 7,447 | 9,856 | ||
| Third parties - Abroad | 8,136 | 9,038 | ||
| Related parties (note 28) | 744 | 499 | ||
| Total | 16,327 | 19,393 | ||
19
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
12. Other financial assets and liabilities
| Consolidated | ||||||||
| Current | Non-Current | |||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | |||||
| Other financial assets | ||||||||
| Restricted cash | - | - | 722 | 653 | ||||
| Derivative financial instruments (note 17a) | 1,272 | 619 | 1,100 | 110 | ||||
| Investments in equity securities (i) | - | - | 28 | 33 | ||||
| 1,272 | 619 | 1,850 | 796 | |||||
| Other financial liabilities | ||||||||
| Derivative financial instruments (note 17a) | 2,650 | 1,355 | 1,213 | 3,301 | ||||
| Other financial liabilities - Related parties (note 28) | 1,800 | 2,192 | - | - | ||||
| Financial guarantees provided (note 6a) | - | - | 2,412 | 3,026 | ||||
| Liabilities related to the concession grant | 4,348 | 4,241 | 7,500 | 8,017 | ||||
| Contract liability | 2,349 | 3,158 | - | - | ||||
| 11,147 | 10,946 | 11,125 | 14,344 | |||||
(i) The Company has an investment of R$28 (US$6 million), corresponding to a 3.24% non-controlling interest in Boston Electrometallurgical Company, which is working on the development of a technology focused on reducing carbon dioxide emissions in steel production.
a) Liabilities related to the concession grant
The Board of Directors approved on October 28, 2021 the prepayment in the amount of R$2,104 (US$444 million) of the grant obligation and, on April 14, 2022 (subsequent event), the Company paid R$796 (US$168 million), out of the approved prepayment, which corresponds to its full concession grant obligation of the Estrada de Ferro Carajás ("EFC"). The outstanding balance of the concession grant obligation after the prepayment will be approximately R$2,389 (US$504 million), of which R$1,308 (US$276 million) could be settled in advance as already approved by the Board of Directors, and the remaining amount will be settled in quarterly instalments until 2057.
| Liability | Discount rate | |||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | |||||
| Concession grant | 3,185 | 3,271 | 11.04% | 11.04% | ||||
| Midwest Integration Railway ("FICO") | 6,685 | 6,730 | 5.29% | 5.11% | ||||
| Infrastructure program | 1,838 | 1,910 | 5.43% | 5.22% | ||||
| West-East Integration Railway ("FIOL") | 140 | 347 | 5.81% | 5.75% | ||||
| Total | 11,848 | 12,258 | ||||||
20
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
13. Investments in subsidiaries, associates, and joint ventures
| Investments in associates and joint ventures | Equity results in the income statement | Dividends received | ||||||||||||||
| Three-month period ended March 31, | Three-month period ended March 31, | |||||||||||||||
| % ownership | % voting capital | March 31, 2022 | December 31, 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||
| Associates and joint ventures | ||||||||||||||||
| Ferrous minerals | ||||||||||||||||
| Baovale Mineração S.A. | 50.00 | 50.00 | 120 | 117 | 3 | 7 | - | - | ||||||||
| Companhia Coreano-Brasileira de Pelotização | 50.00 | 50.00 | 382 | 284 | 62 | 29 | - | - | ||||||||
| Companhia Hispano-Brasileira de Pelotização | 50.89 | 50.89 | 213 | 211 | 2 | - | - | - | ||||||||
| Companhia Ítalo-Brasileira de Pelotização | 50.90 | 51.00 | 316 | 270 | 7 | 22 | - | - | ||||||||
| Companhia Nipo-Brasileira de Pelotização | 51.00 | 51.11 | 773 | 720 | 53 | 18 | - | - | ||||||||
| MRS Logística S.A. | 48.16 | 46.75 | 2,383 | 2,334 | 49 | 93 | - | - | ||||||||
| Samarco Mineração S.A. (note 22) | 50.00 | 50.00 | - | - | - | - | - | - | ||||||||
| VLI S.A. | 29.60 | 29.60 | 2,184 | 2,278 | (94) | (83) | - | - | ||||||||
| 6,371 | 6,214 | 82 | 86 | - | - | |||||||||||
| Base metals | ||||||||||||||||
| Korea Nickel Corp. | 25.00 | 25.00 | 85 | 95 | 8 | - | - | - | ||||||||
| 85 | 95 | 8 | - | - | - | |||||||||||
| Others | ||||||||||||||||
| Aliança Geração de Energia S.A. | 55.00 | 55.00 | 1,809 | 2,046 | 41 | 56 | - | - | ||||||||
| Aliança Norte Energia Participações S.A. | 51.00 | 51.00 | 578 | 586 | (8) | (6) | - | - | ||||||||
| California Steel Industries, Inc. | 50.00 | 50.00 | - | - | - | 68 | 360 | - | ||||||||
| Companhia Siderúrgica do Pecém ("CSP") | 50.00 | 50.00 | - | 553 | - | (237) | - | - | ||||||||
| Mineração Rio do Norte S.A. | 40.00 | 40.00 | - | - | - | (51) | - | - | ||||||||
| Others | - | - | 287 | 277 | 14 | 3 | 2 | - | ||||||||
| 2,674 | 3,462 | 47 | (167) | 362 | - | |||||||||||
| Total | 9,130 | 9,771 | 137 | (81) | 362 | - | ||||||||||
21
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
a) Changes in the period
| Consolidated | ||||
| 2022 | 2021 | |||
| Balance at January 1, | 9,771 | 10,557 | ||
| Capital contributions to CSP | 1 | 237 | ||
| Translation adjustment | (22) | 134 | ||
| Equity results in income statement | 137 | (81) | ||
| Dividends declared | (206) | (195) | ||
| Transfer of the equity results to discontinued operations (note 14a) | - | (81) | ||
| Impairment of CSP | (553) | - | ||
| Others | 2 | 87 | ||
| Balance at March 31, | 9,130 | 10,658 | ||
14. Non-current assets and liabilities held for sales and discontinued operations
| March 31, 2022 | ||||||||||
| Coal (Discontinued operation) | Manganese assets | Midwestern System assets | Other | Total | ||||||
| Assets | ||||||||||
| Accounts receivable | - | - | 147 | - | 147 | |||||
| Inventories | 1,164 | - | 79 | - | 1,243 | |||||
| Taxes | 1,186 | - | 52 | - | 1,238 | |||||
| Other assets | 128 | - | 45 | - | 173 | |||||
| Property, plant and equipment | - | - | 995 | 35 | 1,030 | |||||
| 2,478 | - | 1,318 | 35 | 3,831 | ||||||
| Liabilities | ||||||||||
| Suppliers and contractors | 494 | - | 184 | - | 678 | |||||
| Other liabilities | 1,033 | - | 446 | - | 1,479 | |||||
| 1,527 | - | 630 | - | 2,157 | ||||||
| Net assets held for sale | 951 | - | 688 | 35 | 1,674 | |||||
| December 31, 2021 | ||||||||||
| Coal (Discontinued operation) | Manganese assets | Midwestern System assets | Other | Total | ||||||
| Assets | ||||||||||
| Accounts receivable | 2 | 59 | - | - | 61 | |||||
| Inventories | 933 | 66 | - | - | 999 | |||||
| Taxes | 2,031 | 95 | - | - | 2,126 | |||||
| Investments | - | - | - | 2,131 | 2,131 | |||||
| Other assets | 112 | 4 | - | - | 116 | |||||
| Property, plant and equipment | - | - | - | 35 | 35 | |||||
| 3,078 | 224 | - | 2,166 | 5,468 | ||||||
| Liabilities | ||||||||||
| Suppliers and contractors | 613 | 54 | - | - | 667 | |||||
| Other liabilities | 1,292 | 19 | - | - | 1,311 | |||||
| 1,905 | 73 | - | - | 1,978 | ||||||
| Net assets held for sale | 1,173 | 151 | - | 2,166 | 3,490 | |||||
a) Coal (Discontinued operation)
In June 2021, in preparation for a sale of the coal operation in connection with the sustainable mining strategic agenda, the Company carried out a corporate reorganization by acquiring the interests held by Mitsui in the coal assets, which consist of Moatize mine and the Nacala Logistics Corridor (“NLC”).
Following the acquisition of Mitsui’s stakes, and therefore simplification of governance and asset management, the Company started the process of divesting its participation in the coal business, which resulted in a binding agreement with Vulcan Resources (formerly known as Vulcan Minerals - “Vulcan”) in December 2021.
22
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
Under the terms of this transaction, Vulcan has committed to pay R$1,280 (US$270 million), in addition of a 10-year royalty agreement subject to certain mine production and coal price conditions, and so due to the nature and uncertainties related to the measurement of these royalties, gains will be recognized as incurred. Therefore, the Company adjusted the net assets of the coal business to the fair value less cost of disposal, which resulted in an impairment loss of R$13.298 (US$2,511 million) and started presenting the coal segment as a discontinued operation from December 2021.
In 2022, the Company recorded additional losses of R$826 (US$160 million) in the net income from discontinued operations for the three-month period ended March 31, 2022, mainly due to the impairment of assets acquired in the current period of R$270 (US$48 million) (2021: R$ 243 (US$ 44 million)) and other working capital adjustments in the amount of R$556 (US$112 million).
On April 25, 2022 (subsequent event), the transaction was completed after the satisfaction of the conditions precedent and the Company will recognize a gain of approximately R$11,500 (US$2,427 million) in the second quarter of 2022 mainly due to the reclassification of the cumulative translation adjustments net off the disposal of the minority interest balance and the de-consolidation of the coal business.
(a.i) Net income and cash flows from discontinued operations
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Net income from discontinued operations | ||||
| Net operating revenue | 2,308 | 509 | ||
| Cost of goods sold and services rendered | (1,370) | (1,810) | ||
| Operating expenses | (64) | (3) | ||
| Impairment and disposals of non-current assets | (826) | (243) | ||
| Operating income (loss) | 48 | (1,547) | ||
| Financial Results, net | (33) | 9 | ||
| Equity results in associates and joint ventures | - | (81) | ||
| Net income (loss) before income taxes | 15 | (1,619) | ||
| Income taxes | (9) | - | ||
| Net income (loss) from discontinued operations | 6 | (1,619) | ||
| Loss attributable to noncontrolling interests | - | (448) | ||
| Net income (loss) attributable to Vale's stockholders | 6 | (1,171) | ||
| Consolidated | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Cash flow from discontinued operations | ||||
| Operating activities | ||||
| Net income (loss) before income taxes | 15 | (1,619) | ||
| Adjustments: | ||||
| Equity results in associates and joint ventures | - | 81 | ||
| Impairment and disposals of non-current assets | 826 | 243 | ||
| Financial Results, net | 33 | (9) | ||
| Decrease in assets and liabilities | (661) | (66) | ||
| Net cash provided (used) by operating activities | 213 | (1,370) | ||
| Investing activities | ||||
| Additions to property, plant and equipment | (201) | (159) | ||
| Others | - | 373 | ||
| Net cash provided (used) in investing activities | (201) | 214 | ||
| Financing activities | ||||
| Payments | (54) | (22) | ||
| Net cash used in financing activities | (54) | (22) | ||
| Net cash used by discontinued operations | (42) | (1,178) | ||
b) Manganese ferroalloys operations in Minas Gerais
In January 2022, the Company completed the sale of its ferroalloys operations in Barbacena and Ouro Preto and its manganese mining operations at Morro da Mina, in the state of Minas Gerais, to VDL Group (“VDL”) for a total consideration of R$210 (US$40 million). As the Company had already adjusted the net assets to the fair value less cost of disposal, the closing did not result in an additional impact on the income statement for the three-month period ended March 31, 2022. As a result, the Company no longer has manganese ferroalloys operations.
23
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
c) Midwestern System assets
During the first quarter of 2022, the Company classified the assets and liabilities related to the Midwestern System as held for sale due to the negotiations with interested parties in Vale’s iron ore, manganese and logistics assets in the Midwestern System, through its equity interests in Mineração Corumbaense Reunida S.A., Mineração Mato Grosso S.A., International Iron Company, Inc. and Transbarge Navegación Sociedad Anónima. These negotiations resulted in the execution of a binding agreement with J&F Mineração Ltda. (“J&F”) for the sale of these assets, which was signed on April 6, 2022, for the sale of these assets. At closing, the Company expects to receive approximately R$711 (US$150 million), in addition to transferring to J&F all assets and liabilities, including the obligations related to the take-or-pay logistics contracts.
The carrying amount of those assets were fully impaired in past years and the Company had a liability related to take-or-pay logistics contracts in the amount of R$4,629 (US$932 million) that were deemed onerous contracts under the Company’s business model for the Midwestern System, which has a negative net asset of R$4,226 (US$892 million) before reclassification to “Non-current assets and liabilities held for sale” on March 31, 2022.
These offers received during the sale process of the assets represented an objective evidence of impairment reversal and the remeasurement of the existing provision, which led to a gain of R$5,632 (US$1,134 million) recorded as “Impairment reversal (impairment and disposals) of non-current assets”, of which R$1,003 (US$202 million) relates to the impairment reversal on the Property, plant and equipment and R$4,629 (US$932 million) is due to the remeasurement of the onerous contract liability.
The closing of the transaction with J&F is expected to be completed in 2022 and is subject to customary conditions precedent, including but not limited to the approval by antitrust authorities (“CADE”), the National Agency for Waterway Transportation (“ANTAQ”), the National Defense Council (“CDN”) and other authorities.
d) Other
California Steel Industries (“CSI”): In December 2021, the Company entered into a binding agreement with Nucor Corporation (“Nucor”) for the sale of its 50% interest in CSI for R$2,269 (US$437 million). In February 2022, the Company concluded the sale and recorded a gain of R$1,545 (US$297 million) for the three-month period ended March 31, 2022, as “Equity results and other results in associates and joint ventures”, of which R$766 (US$147 million) relates to a gain from the sale and R$779 (US$150 million) is due the reclassification of the cumulative translation adjustments from the stockholders’ equity to the income statement.
Vale Nouvelle-Calédonie S.A.S. (“VNC”): In December 2020, the Company signed a binding put option agreement to sell its interest in VNC for an immaterial consideration to Prony Resources consortium. Under the terms of agreement, the Company has assumed an obligation to pay to the buyers an amount of R$2,573 (US$500 million) upon closing of the transaction and this amount has been provided for as of December 31, 2020.
With the final agreement signed in March 2021, the assumed obligation has increased, and the Company disbursed R$3,134 (US$555 million) at closing of the transaction. The additional provision combined with other working capital adjustments, resulted in an additional loss in the amount of R$549 (US$98 million), presented as “Impairment reversal (impairment and disposals) of non-current assets” in the income statement for the three-month period ended March 31, 2021. Upon closing of the transaction, the Company also recognized a gain of R$6,391 (US$1,132 million) arising from the cumulative translation adjustments reclassified from the stockholders’ equity to the income statement under “Other financial items, net”.
24
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||||||||
| Goodwill | Concessions | Software | Research and development project and patents | Total | ||||||
| Balance at December 31, 2021 | 17,905 | 29,149 | 479 | 2,754 | 50,287 | |||||
| Additions | - | 186 | 46 | 18 | 250 | |||||
| Disposals | - | (43) | - | - | (43) | |||||
| Amortization | - | (305) | (55) | - | (360) | |||||
| Translation adjustment | (1,469) | - | (24) | - | (1,493) | |||||
| Balance at March 31, 2022 | 16,436 | 28,987 | 446 | 2,772 | 48,641 | |||||
| Cost | 16,436 | 35,387 | 2,739 | 2,772 | 57,334 | |||||
| Accumulated amortization | - | (6,400) | (2,293) | - | (8,693) | |||||
| Balance at March 31, 2022 | 16,436 | 28,987 | 446 | 2,772 | 48,641 | |||||
| Consolidated | ||||||||||
| Goodwill | Concessions | Software | Research and development project and patents | Total | ||||||
| Balance at December 31, 2020 | 17,141 | 28,015 | 396 | 2,757 | 48,309 | |||||
| Additions | - | 183 | 78 | - | 261 | |||||
| Disposals | - | (13) | - | - | (13) | |||||
| Amortization | - | (297) | (41) | - | (338) | |||||
| Translation adjustment | 1,106 | - | 18 | - | 1,124 | |||||
| Balance at March 31, 2021 | 18,247 | 27,888 | 451 | 2,757 | 49,343 | |||||
| Cost | 18,247 | 33,330 | 4,077 | 2,757 | 58,411 | |||||
| Accumulated amortization | - | (5,442) | (3,626) | - | (9,068) | |||||
| Balance at March 31, 2021 | 18,247 | 27,888 | 451 | 2,757 | 49,343 | |||||
16. Property, plant and equipment
| Consolidated | ||||||||||||||||||
| Building and land | Facilities | Equipment | Mineral properties | Railway equipment | Right of use assets | Others | Constructions in progress | Total | ||||||||||
| Balance at December 31, 2021 | 45,408 | 40,357 | 26,463 | 43,206 | 13,024 | 8,579 | 13,864 | 43,094 | 233,995 | |||||||||
| Additions (i) | - | - | - | - | - | 140 | - | 5,298 | 5,438 | |||||||||
| Disposals | (9) | (36) | (5) | - | (16) | - | (1) | (153) | (220) | |||||||||
| Asset retirement obligation (note 23b) | - | - | - | (2,757) | - | - | - | - | (2,757) | |||||||||
| Depreciation, depletion and amortization | (528) | (631) | (901) | (635) | (209) | (243) | (363) | - | (3,510) | |||||||||
| Impairment reversal | 261 | 156 | 303 | 175 | - | - | 100 | - | 995 | |||||||||
| Transfer to asset held for sale - Midwestern System | (261) | (156) | (303) | (175) | - | - | (100) | - | (995) | |||||||||
| Translation adjustment | (1,934) | (999) | (2,062) | (4,179) | (52) | (964) | (808) | (2,548) | (13,546) | |||||||||
| Transfers | 126 | 759 | 456 | 28 | 294 | - | 487 | (2,150) | - | |||||||||
| Balance at March 31, 2022 | 43,063 | 39,450 | 23,951 | 35,663 | 13,041 | 7,512 | 13,179 | 43,541 | 219,400 | |||||||||
| Cost | 78,077 | 62,931 | 55,502 | 81,795 | 20,928 | 10,098 | 29,292 | 43,541 | 382,164 | |||||||||
| Accumulated depreciation | (35,014) | (23,481) | (31,551) | (46,132) | (7,887) | (2,586) | (16,113) | - | (162,764) | |||||||||
| Balance at March 31, 2022 | 43,063 | 39,450 | 23,951 | 35,663 | 13,041 | 7,512 | 13,179 | 43,541 | 219,400 | |||||||||
| Consolidated | |||||||||||||||||
| Building and land | Facilities | Equipment | Mineral properties | Railway equipment | Right of use assets | Others | Constructions in progress | Total | |||||||||
| Balance at December 31, 2020 | 44,646 | 39,448 | 25,637 | 41,853 | 13,108 | 8,121 | 12,968 | 28,055 | 213,836 | ||||||||
| Additions (i) | - | - | - | - | - | 209 | - | 5,144 | 5,353 | ||||||||
| Disposals | (2) | - | (4) | - | - | - | - | (101) | (107) | ||||||||
| Asset retirement obligation | - | - | - | (2,101) | - | - | - | - | (2,101) | ||||||||
| Depreciation, depletion and amortization | (562) | (623) | (872) | (759) | (211) | (223) | (346) | - | (3,596) | ||||||||
| Impairment | - | - | - | - | - | - | - | (244) | (244) | ||||||||
| Translation adjustment | 1,396 | 767 | 1,390 | 3,121 | 35 | 614 | 572 | 1,511 | 9,406 | ||||||||
| Transfers | 189 | 416 | 773 | 123 | 102 | - | 355 | (1,958) | - | ||||||||
| Balance at March 31, 2021 | 45,667 | 40,008 | 26,924 | 42,237 | 13,034 | 8,721 | 13,549 | 32,407 | 222,547 | ||||||||
| Cost | 82,652 | 62,826 | 59,196 | 94,445 | 20,186 | 11,186 | 32,447 | 32,407 | 395,345 | ||||||||
| Accumulated depreciation | (36,985) | (22,818) | (32,272) | (52,208) | (7,152) | (2,465) | (18,898) | - | (172,798) | ||||||||
| Balance at March 31, 2021 | 45,667 | 40,008 | 26,924 | 42,237 | 13,034 | 8,721 | 13,549 | 32,407 | 222,547 | ||||||||
(i) Includes capitalized interests.
25
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
Right-of-use assets (leases)
| December 31, 2021 | Additions and contract modifications | Depreciation | Translation adjustment | March 31, 2022 | ||||||
| Ports | 3,797 | 4 | (69) | (485) | 3,247 | |||||
| Vessels | 2,744 | - | (56) | (407) | 2,281 | |||||
| Pelletizing plants | 1,203 | 42 | (60) | - | 1,185 | |||||
| Properties | 468 | 94 | (40) | (13) | 509 | |||||
| Energy plants | 271 | - | (9) | (35) | 227 | |||||
| Mining equipment | 96 | - | (9) | (24) | 63 | |||||
| Total | 8,579 | 140 | (243) | (964) | 7,512 |
Lease liabilities are presented in note 20.
17. Financial and capital risk management
a) Effects of derivatives on the balance sheet
| Consolidated | ||||||||
| Assets | ||||||||
| March 31, 2022 | December 31, 2021 | |||||||
| Current | Non-current | Current | Non-current | |||||
| Foreign exchange and interest rate risk | ||||||||
| CDI & TJLP vs. US$ fixed and floating rate swap | 18 | 40 | - | - | ||||
| IPCA swap | 278 | - | 228 | - | ||||
| Pre-dollar swap and forward transactions | 680 | 839 | 112 | 46 | ||||
| Libor swap | 52 | 167 | 6 | 62 | ||||
| 1028 | 1046 | 346 | 108 | |||||
| Commodities price risk | ||||||||
| Base metals products | 94 | 54 | 156 | 2 | ||||
| Gasoil, Brent and freight | 92 | - | 47 | - | ||||
| 186 | 54 | 203 | 2 | |||||
| Others | 58 | - | 70 | - | ||||
| 58 | - | 70 | - | |||||
| Total | 1,272 | 1,100 | 619 | 110 | ||||
| Consolidated | ||||||||
| Liabilities | ||||||||
| March 31, 2022 | December 31, 2021 | |||||||
| Current | Non-current | Current | Non-current | |||||
| Foreign exchange and interest rate risk | ||||||||
| CDI & TJLP vs. US$ fixed and floating rate swap | 295 | 842 | 842 | 2,453 | ||||
| IPCA swap | - | 325 | 26 | 629 | ||||
| Pre-dollar swap and forward transactions | 178 | 12 | 321 | 213 | ||||
| Libor swap | - | - | - | 6 | ||||
| 473 | 1,179 | 1,189 | 3,301 | |||||
| Commodities price risk | ||||||||
| Base metals products | 2,169 | - | 149 | - | ||||
| Gasoil, Brent and freight | 5 | - | 14 | - | ||||
| 2,174 | - | 163 | - | |||||
| Others | 3 | 34 | 3 | - | ||||
| Total | 2,650 | 1,213 | 1,355 | 3,301 | ||||
26
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
b) Net exposure
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Foreign exchange and interest rate risk | ||||
| CDI & TJLP vs. US$ fixed and floating rate swap | (1,079) | (3,295) | ||
| IPCA swap | (47) | (427) | ||
| Pre-dollar swap and forward transactions | 1,329 | (376) | ||
| Libor swap (i) | 219 | 62 | ||
| 422 | (4,036) | |||
| Commodities price risk | ||||
| Base metals products | (2,021) | 9 | ||
| Gasoil, Brent and freight | 87 | 33 | ||
| (1934) | 42 | |||
| Others | 21 | 67 | ||
| 21 | 67 | |||
| Total | (1,491) | (3,927) | ||
(i) In March 2021, the UK Financial Conduct Authority (“FCA”), the financial regulator in the United Kingdom, announced the discontinuation of the LIBOR rate for all terms in pounds, euros, Swiss francs, yen and for terms of one week and two months in dollars at the end of December 2021 and the other terms at the end of June 2023. The Company has a multidisciplinary group dedicated to studying the rate transition and its potential impacts and is monitoring and advising various areas of Vale on the necessary initiatives.
c) Effects of derivatives on the income statement
| Consolidated | ||||
| Gain (loss) recognized in the income statement | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Foreign exchange and interest rate risk | ||||
| CDI & TJLP vs. US$ fixed and floating rate swap | 2,154 | (1,489) | ||
| IPCA swap | 381 | 80 | ||
| Eurobonds swap | - | (154) | ||
| Pre-dollar swap and forward operations | 1,718 | (1,136) | ||
| Libor swap | 178 | 53 | ||
| 4,431 | (2,646) | |||
| Commodities price risk | ||||
| Base metals products | (39) | (13) | ||
| Gasoil, Brent and freight | 76 | 229 | ||
| 37 | 216 | |||
| Others | (47) | 8 | ||
| (47) | 8 | |||
| Total | 4,421 | (2,422) | ||
d) Effects of derivatives on the cash flows
| Consolidated | ||||
| Financial settlement inflows (outflows) | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Foreign exchange and interest rate risk | ||||
| CDI & TJLP vs. US$ fixed and floating rate swap | 6 | (486) | ||
| IPCA swap | - | (97) | ||
| Eurobonds swap | - | (162) | ||
| Pre-dollar swap and forward operations | 13 | (423) | ||
| Libor swap | (3) | (2) | ||
| 16 | (1,170) | |||
| Commodities price risk | ||||
| Base metals products | (426) | (33) | ||
| Gasoil, Brent and freight | 16 | 109 | ||
| (410) | 76 | |||
| Total | (394) | (1,094) | ||
e) Hedge accounting
| Consolidated | ||||
| Gain (loss) recognized in the other comprehensive income | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Net investment hedge | 1,129 | (851) | ||
| Cash flow hedge (Nickel and Palladium) | (1,554) | 88 | ||
27
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
Cash flow hedge (Nickel)
| Notional (ton) | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year | |||||||||||||||
| Flow | March 31, 2022 | December 31, 2021 | Bought / Sold | Average strike (US$/ton) | March 31, 2022 | December 31, 2021 | March 31, 2022 | March 31, 2022 | 2022 | 2023+ | |||||||||
| Nickel Revenue Hedge Program | |||||||||||||||||||
| Forward | 41,475 | 39,575 | S | 21,436 | (2,078) | (143) | (379) | 334 | (2,146) | 68 | |||||||||
| Total | (2,078) | (143) | (379) | 334 | (2,146) | 68 | |||||||||||||
In 2022, the Company renewed hedge nickel program due to the high volatility of nickel prices linked to future cash flows forecast for the period. In this program, hedging operations were executed, through option contracts, to protect a portion of the projected volume of sales at floating, highly probable realization prices, guaranteeing prices above the average unit cost of nickel production for the protected volumes. The contracts are traded on the London Metal Exchange or over-the-counter market and the hedged item's P&L is offset by the hedged item’s P&L due to Nickel price variation.
Cash flow hedge (Palladium)
| Notional (t oz) | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year | ||||||||||||||
| Flow | March 31, 2022 | December 31, 2021 | Bought / Sold | Average strike (US$/t oz) | March 31, 2022 | December 31, 2021 | March 31, 2022 | March 31, 2022 | 2022 | |||||||||
| Palladium Revenue Hedge Program | ||||||||||||||||||
| Call Options | 33,171 | 44,228 | S | 3,369 | (3) | (5) | - | 6 | (3) | |||||||||
| Put Options | 33,171 | 44,228 | B | 2,436 | 56 | 146 | 10 | 36 | 56 | |||||||||
| Total | 53 | 141 | 10 | 42 | 53 | |||||||||||||
f) Protection programs for the R$ denominated debt instruments and other liabilities
| Notional | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year | ||||||||||||||||||
| Flow | March 31, 2022 | December 31, 2021 | Index | Average rate | March 31, 2022 | December 31, 2021 | March 31, 2022 | March 31, 2022 | 2022 | 2023 | 2024+ | |||||||||||
| CDI vs. US$ fixed rate swap | (715) | (2,572) | (73) | 174 | (157) | (90) | (467) | |||||||||||||||
| Receivable | R$ 7,780 | R$ 8,142 | CDI | 100.32% | ||||||||||||||||||
| Payable | US$ 1,820 | US$ 1,906 | Fix | 2.51% | ||||||||||||||||||
| TJLP vs. US$ fixed rate swap | (365) | (723) | (60) | 29 | (102) | (28) | (235) | |||||||||||||||
| Receivable | R$ 1,104 | R$ 1,192 | TJLP + | 1.08% | ||||||||||||||||||
| Payable | US$ 291 | US$ 320 | Fix | 3.25% | ||||||||||||||||||
| R$ fixed rate vs. US$ fixed rate swap | 587 | (354) | 13 | 98 | (2) | 228 | 361 | |||||||||||||||
| Receivable | R$ 5,592 | R$ 5,730 | Fix | 3.86% | ||||||||||||||||||
| Payable | US$ 1,053 | US$ 1,084 | Fix | -1.56% | ||||||||||||||||||
| IPCA vs. US$ fixed rate swap | (291) | (656) | 14 | 36 | 30 | (3) | (318) | |||||||||||||||
| Receivable | R$ 1,456 | R$ 1,508 | IPCA + | 4.54% | ||||||||||||||||||
| Payable | US$ 360 | US$ 373 | Fix | 3.88% | ||||||||||||||||||
| IPCA vs. CDI swap | 244 | 228 | - | 1 | 244 | - | - | |||||||||||||||
| Receivable | R$ 786 | R$ 769 | IPCA + | 6.63% | ||||||||||||||||||
| Payable | R$ 1,350 | R$ 1,350 | CDI | 98.76% | ||||||||||||||||||
| Forward | R$ 5,330 | R$ 6,013 | B | 4.82 | 742 | (22) | 132 | 81 | 401 | 292 | 49 | |||||||||||
28
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
g) Protection program for Libor floating interest rate US$ denominated debt
| Notional | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year | ||||||||||||||||||
| Flow | March 31, 2022 | December 31, 2021 | Index | Average rate | March 31, 2022 | December 31, 2021 | March 31, 2022 | March 31, 2022 | 2022 | 2023 | 2024+ | |||||||||||
| Libor vs. US$ fixed rate swap | 219 | 62 | (3) | 11 | 34 | 110 | 75 | |||||||||||||||
| Receivable | US$ 950 | US$ 950 | Libor | 0.13% | ||||||||||||||||||
| Payable | US$ 950 | US$ 950 | Fix | 0.48% | ||||||||||||||||||
h) Protection program for product prices and input costs
| Notional | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year | ||||||||||||||
| Flow | March 31, 2022 | December 31, 2021 | Bought / Sold | Average strike (US$/bbl) | March 31, 2022 | December 31, 2021 | March 31, 2022 | March 31, 2022 | 2022 | |||||||||
| Brent crude oil (bbl) | ||||||||||||||||||
| Call options | 571,500 | 762,000 | B | 81 | 71 | 39 | 16 | 9 | 71 | |||||||||
| Put options | 571,500 | 762,000 | S | 55 | (5) | (14) | - | 1 | (5) | |||||||||
| Forward Freight Agreement (days) | ||||||||||||||||||
| Freight forwards (days) | 330 | 330 | B | 23,650 | 16 | 8 | - | 2 | 16 | |||||||||
i) Other derivatives, including embedded derivatives in contracts
| Notional | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value | ||||||||||||||
| Flow | March 31, 2022 | December 31, 2021 | Bought / Sold | Average strike (US$/bbl) | March 31, 2022 | December 31, 2021 | March 31, 2022 | March 31, 2022 | 2022+ | |||||||||
| Option related to a Special Purpose Entity “SPE” (quantity) | ||||||||||||||||||
| Call option | 137,751,623 | 137,751,623 | B | 3.17 | 58 | 70 | - | 12 | 58 | |||||||||
| Embedded derivative in natural gas purchase agreement (volume/month) | ||||||||||||||||||
| Call options | 746,667 | 729,571 | S | 233 | (37) | (3) | - | 26 | (37) | |||||||||
| Fixed price sales protection (ton) | ||||||||||||||||||
| Nickel forwards | 288 | 342 | B | 16,285 | 21 | 8 | 3 | 2 | 21 | |||||||||
| Hedge program for products acquisition for resale (tons) | ||||||||||||||||||
| Nickel forwards | 910 | 1,206 | S | 32,694 | 2 | (6) | (60) | 7 | 2 | |||||||||
j) Sensitivity analysis of derivative financial instruments
The following tables present the potential value of the instruments given hypothetical stress scenarios for the main market risk factors that impact the derivatives positions. The scenarios were defined as follows:
- Probable: the probable scenario was defined as the fair value of the derivative instruments as of March 31, 2022.
- Scenario I: fair value estimated considering a 25% deterioration in the associated risk variables.
- Scenario II: fair value estimated considering a 50% deterioration in the associated risk variables.
29
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Instrument | Instrument's main risk events | Probable | Scenario I | Scenario II | ||||
| CDI vs. US$ fixed rate swap | R$ depreciation | (715) | (2,863) | (5,011) | ||||
| US$ interest rate inside Brazil decrease | (715) | (898) | (1,093) | |||||
| Brazilian interest rate increase | (715) | (924) | (1,136) | |||||
| Protected item: R$ denominated liabilities | R$ depreciation | n.a. | - | - | ||||
| TJLP vs. US$ fixed rate swap | R$ depreciation | (365) | (716) | (1,067) | ||||
| US$ interest rate inside Brazil decrease | (365) | (385) | (406) | |||||
| Brazilian interest rate increase | (365) | (421) | (472) | |||||
| TJLP interest rate decrease | (365) | (401) | (437) | |||||
| Protected item: R$ denominated debt | R$ depreciation | n.a. | - | - | ||||
| R$ fixed rate vs. US$ fixed rate swap | R$ depreciation | 587 | (608) | (1,803) | ||||
| US$ interest rate inside Brazil decrease | 587 | 538 | 486 | |||||
| Brazilian interest rate increase | 587 | 384 | 198 | |||||
| Protected item: R$ denominated debt | R$ depreciation | n.a. | - | - | ||||
| IPCA swap vs. US$ fixed rate swap | R$ depreciation | (291) | (731) | (1,170) | ||||
| US$ interest rate inside Brazil decrease | (291) | (331) | (372) | |||||
| Brazilian interest rate increase | (291) | (389) | (483) | |||||
| IPCA index decrease | (291) | (345) | (399) | |||||
| Protected item: R$ denominated debt | R$ depreciation | n.a. | - | - | ||||
| IPCA swap vs. CDI swap | Brazilian interest rate increase | 244 | 235 | 227 | ||||
| IPCA index decrease | 244 | 239 | 234 | |||||
| Protected item: R$ denominated debt linked to IPCA | IPCA index decrease | n.a. | (239) | (234) | ||||
| US$ floating rate vs. US$ fixed rate swap | US$ Libor decrease | 219 | 137 | 53 | ||||
| Protected item: Libor US$ indexed debt | US$ Libor decrease | n.a. | (137) | (53) | ||||
| NDF BRL/USD | R$ depreciation | 742 | (266) | (1,274) | ||||
| US$ interest rate inside Brazil decrease | 742 | 716 | 689 | |||||
| Brazilian interest rate increase | 742 | 625 | 515 | |||||
| Protected item: R$ denominated liabilities | R$ depreciation | n.a. | - | - |
| Instrument | Instrument's main risk events | Probable | Scenario I | Scenario II | ||||
| Fuel oil protection | ||||||||
| Options | Price input decrease | 67 | 15 | (26) | ||||
| Protected item: Part of costs linked to fuel oil prices | Price input decrease | n.a. | (15) | 26 | ||||
| Forward Freight Agreement | ||||||||
| Forwards | Freight price decrease | 16 | 3 | (11) | ||||
| Protected item: Part of costs linked to maritime freight prices | Freight price decrease | n.a. | (3) | 11 | ||||
| Nickel sales fixed price protection | ||||||||
| Forwards | Nickel price decrease | 21 | 10 | - | ||||
| Protected item: Part of nickel revenues with fixed prices | Nickel price decrease | n.a. | (10) | - | ||||
| Hedge program for products acquisition for resale (tons) | ||||||||
| Forwards | Nickel price increase | 2 | (13) | (48) | ||||
| Protected item: Part of revenues from products for resale | Nickel price increase | n.a. | 13 | 48 | ||||
| Nickel Revenue Hedging Program | ||||||||
| Options | Nickel price increase | (2,078) | (3,678) | (5,277) | ||||
| Protected item: Part of nickel revenues with fixed sales prices | Nickel price increase | n.a. | 3,678 | 5,277 | ||||
| Palladium Revenue Hedging Program | ||||||||
| Options | Palladium price increase | 53 | 5 | (40) | ||||
| Protected item: Part of palladium future revenues | Palladium price increase | n.a. | (5) | 40 | ||||
| Option - SPCs | SPCs stock value decrease | 58 | 7 | - |
| Instrument | Main risks | Probable | Scenario I | Scenario II | ||||
| Embedded derivatives - Gas purchase | Pellet price increase | (37) | (88) | (155) |
30
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
k) Financial counterparties’ ratings
The transactions of derivative instruments, cash and cash equivalents as well as short-term investments are held with financial institutions whose exposure limits are periodically reviewed and approved by the delegated authority. The financial institutions credit risk is performed through a methodology that considers, among other information, ratings provided by international rating agencies.
The table below presents the ratings in foreign currency as published by Moody’s regarding the main financial institutions used by the Company to contract derivative instruments, cash and cash equivalents transaction.
| Consolidated | ||||||||
| March 31, 2022 | December 31, 2021 | |||||||
| Cash and cash equivalents and investment | Derivatives | Cash and cash equivalents and investment | Derivatives | |||||
| Aa1 | 665 | - | 712 | - | ||||
| Aa2 | 1,779 | 33 | 1,592 | 81 | ||||
| Aa3 | 1,809 | 200 | 2,761 | 187 | ||||
| A1 | 7,811 | 199 | 6,387 | 19 | ||||
| A2 | 14,107 | 967 | 19,408 | 220 | ||||
| A3 | 7,799 | 427 | 8,471 | 111 | ||||
| Baa1 | 514 | - | 500 | - | ||||
| Baa2 | 66 | - | 59 | - | ||||
| Ba2 (i) | 3,433 | 403 | 15,420 | 28 | ||||
| Ba3 (i) | 5,012 | 99 | 11,096 | - | ||||
| Others | 140 | 44 | 31 | 83 | ||||
| 43,135 | 2,372 | 66,437 | 729 | |||||
(i) A substantial part of the balances is held with financial institutions in Brazil and, in local currency, they are deemed investment grade.
18. Financial assets and liabilities
The Company classifies its financial instruments in accordance with the purpose for which they were acquired, and determines the classification and initial recognition according to the following categories:
31
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | ||||||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| Financial assets | Amortized cost | At fair value through OCI |
At fair value through profit or loss |
Total | Amortized cost | At fair value through OCI |
At fair value through profit or loss |
Total | ||||||||
| Current | ||||||||||||||||
| Cash and cash equivalents (note 20) | 42,931 | - | - | 42,931 | 65,409 | - | - | 65,409 | ||||||||
| Short-term investments (note 20) | - | - | 204 | 204 | - | - | 1,028 | 1,028 | ||||||||
| Derivative financial instruments (note 17a) | - | - | 1,272 | 1,272 | - | - | 619 | 619 | ||||||||
| Accounts receivable (note 9) | 3,464 | - | 11,333 | 14,797 | 3,921 | - | 17,919 | 21,840 | ||||||||
| 46,395 | - | 12,809 | 59,204 | 69,330 | - | 19,566 | 88,896 | |||||||||
| Non-current | ||||||||||||||||
| Judicial deposits (note 25c) | 6,891 | - | - | 6,891 | 6,808 | - | - | 6,808 | ||||||||
| Restricted cash | 722 | - | - | 722 | 653 | - | - | 653 | ||||||||
| Derivative financial instruments (note 17a) | - | - | 1,100 | 1,100 | - | - | 110 | 110 | ||||||||
| Investments in equity securities (note 12) | - | 28 | - | 28 | - | 33 | - | 33 | ||||||||
| 7,613 | 28 | 1,100 | 8,741 | 7,461 | 33 | 110 | 7,604 | |||||||||
| Total of financial assets | 54,008 | 28 | 13,909 | 67,945 | 76,791 | 33 | 19,676 | 96,500 | ||||||||
| Financial liabilities | ||||||||||||||||
| Current | ||||||||||||||||
| Suppliers and contractors (note 11) | 16,327 | - | - | 16,327 | 19,393 | - | - | 19,393 | ||||||||
| Derivative financial instruments (note 17a) | - | - | 2,650 | 2,650 | - | - | 1,355 | 1,355 | ||||||||
| Loans, borrowings and leases (note 20) | 5,228 | - | - | 5,228 | 6,720 | - | - | 6,720 | ||||||||
| Liabilities related to the concession grant (note 12a) | 4,348 | - | - | 4,348 | 4,241 | - | - | 4,241 | ||||||||
| Other financial liabilities - Related parties (note 28) | 1,800 | - | - | 1,800 | 2,192 | - | - | 2,192 | ||||||||
| Contract liability | 2,349 | 2,349 | 3,158 | - | - | 3,158 | ||||||||||
| 30,052 | - | 2,650 | 32,702 | 35,704 | - | 1,355 | 37,059 | |||||||||
| Non-current | ||||||||||||||||
| Derivative financial instruments (note 17a) | - | - | 1,213 | 1,213 | - | - | 3,301 | 3,301 | ||||||||
| Loans, borrowings and leases (note 20) | 61,175 | 61,175 | 70,189 | - | - | 70,189 | ||||||||||
| Participative stockholders' debentures (note 19) | - | - | 20,366 | 20,366 | - | - | 19,078 | 19,078 | ||||||||
| Liabilities related to the concession grant (note 12a) | 7,500 | 7,500 | 8,017 | - | - | 8,017 | ||||||||||
| Financial guarantees (note 6a) | - | - | 2,412 | 2,412 | - | - | 3,026 | 3,026 | ||||||||
| 68,675 | - | 23,991 | 92,666 | 78,206 | - | 25,405 | 103,611 | |||||||||
| Total of financial liabilities | 98,727 | - | 26,641 | 125,368 | 113,910 | - | 26,760 | 140,670 | ||||||||
a) Hierarchy of fair value
| Consolidated | ||||||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||
| Financial assets | ||||||||||||||||
| Short-term investments (note 20) | 204 | - | - | 204 | 1,028 | - | - | 1,028 | ||||||||
| Derivative financial instruments (note 17) | - | 2,314 | 58 | 2,372 | - | 659 | 70 | 729 | ||||||||
| Accounts receivable (note 9) | - | 11,333 | - | 11,333 | - | 17,919 | - | 17,919 | ||||||||
| Investments in equity securities (note 12) | 28 | - | - | 28 | 33 | - | - | 33 | ||||||||
| 232 | 13,647 | 58 | 13,937 | 1,061 | 18,578 | 70 | 19,709 | |||||||||
| Financial liabilities | ||||||||||||||||
| Derivative financial instruments (note 17) | - | 3,863 | - | 3,863 | - | 4,656 | - | 4,656 | ||||||||
| Participative stockholders' debentures (note 19) | - | 20,366 | - | 20,366 | - | 19,078 | - | 19,078 | ||||||||
| Financial guarantees (note 6) | 2,412 | 2,412 | - | 3,026 | - | 3,026 | ||||||||||
| - | 26,641 | - | 26,641 | - | 26,760 | - | 26,760 | |||||||||
There were no transfers between levels 1, 2 and 3 of the fair value hierarchy during the periods presented.
32
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
a.i) Changes in Level 3 assets and liabilities during the period
| Consolidated | ||||
| Derivative financial instruments | ||||
| Financial assets | Financial liabilities | |||
| Balance at December 31, 2021 | 70 | - | ||
| Gain and losses recognized in income statement | (12) | |||
| Balance at March 31, 2022 | 58 | - | ||
b) Fair value of loans and borrowings
| Consolidated | ||||||||
| March 31, 2022 | December 31, 2021 | |||||||
| Quoted in the secondary market: | ||||||||
| Bonds | 35,286 | 39,810 | 41,564 | 51,068 | ||||
| Eurobonds | - | - | - | - | ||||
| Debentures | 2,103 | 2,103 | 2,160 | 2,160 | ||||
| Debt contracts in Brazil in: | ||||||||
| R$, indexed to TJLP, TR, IPCA, IGP-M and CDI | 1,813 | 2,360 | 1,975 | 2,508 | ||||
| R$, with fixed interest | 51 | 51 | 73 | - | ||||
| Basket of currencies and bonds in US$ indexed to LIBOR | - | - | 61 | 61 | ||||
| Debt contracts in the international market in: | ||||||||
| US$, with variable and fixed interest | 17,593 | 16,558 | 20,173 | 18,030 | ||||
| Other currencies, with variable interest | 488 | 49 | 486 | 299 | ||||
| Other currencies, with fixed interest | 463 | 917 | 597 | 654 | ||||
| Total | 57,797 | 61,848 | 67,089 | 74,780 | ||||
19. Participative stockholders’ debentures
At the time of its privatization in 1997, the Company issued a total of 388,559,056 debentures to then-existing stockholders, including the Brazilian Government. The debentures’ terms were set to ensure that pre-privatization stockholders would participate in potential future benefits that might be obtained from exploration of mineral resources. This obligation related to the debentures will cease when all the relevant mineral resources are exhausted, sold or otherwise disposed of by the Company.
Holders of participative stockholders’ debentures have the right to receive semi-annual payments equal to an agreed percentage of revenues less value-added tax, transport fee and insurance expenses related to the trading of the products, derived from these mineral resources. On April 1, 2022 (subsequent event), the Company made available for withdrawal as remuneration the amount of R$1,120 (US$225 million) for the second semester of 2021, as disclosed on the “Shareholders’ debentures report” made available on the Company’s website.
To calculate the fair value of the liability, the Company uses the weighted average price of trades in the secondary market for the last month of the quarter. The average price increased from R$49.10 per debenture for the year ended December 31, 2021, to R$52.41 per debenture for the period ended March 31, 2022, resulting in an expense of R$1,311 (US$249 million) recorded in the income statement for the three-month period ended March 31, 2022. As of March 31, 2022, the liability was R$20.366 (US$4,299 million) (R$19.078 (US$3,419 million) as of December 31, 2021).
20. Loans, borrowings, leases, cash and cash equivalents and short-term investments
a) Net debt
The Company evaluates the net debt with the objective of ensuring the continuity of its business in the long term.
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Debt contracts | 58,509 | 67,967 | ||
| Leases | 7,894 | 8,942 | ||
| Total of loans, borrowings and leases | 66,403 | 76,909 | ||
| (-) Cash and cash equivalents | 42,931 | 65,409 | ||
| (-) Short-term investments | 204 | 1,028 | ||
| Net debt | 23,268 | 10,472 | ||
33
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
b) Cash and cash equivalents
Cash and cash equivalents include cash, immediately redeemable deposits, and short-term investments with an insignificant risk of change in value. They are readily convertible to cash, being R$17,393 (US$5,013 million) (R$37,468 (US$6,714 million) in December 31, 2021) denominated in R$, indexed to the CDI), R$23,752 (US$3,671 million) R$26,613 (US$4,769 million) in December 31, 2021) denominated in US$ and R$1,786 (US$377 million) (R$1,328 (US$238 million) in December 31, 2021) denominated in other currencies as of March 31, 2022.
c) Short-term investments
As of March 31, 2022, the balance of R$204 (US$43 million) (R$1,028 (US$184 million) as of December 31, 2021) substantially comprises investments in exclusive investment fund immediately liquidity, whose portfolio is composed of committed transactions and Financial Treasury Bills (“LFTs”), which are floating-rate securities issued by the Brazilian government.
d) Loans, borrowings and leases
i) Total debt
| Consolidated | ||||||||||
| Current liabilities | Non-current liabilities | |||||||||
| Average interest rate (i) | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||||
| Quoted in the secondary market: | ||||||||||
| US$ Bonds | 6.02% | - | - | 35,286 | 41,564 | |||||
| R$, Debentures (ii) | 10.48% | 1,023 | 1,038 | 1,080 | 1,122 | |||||
| Debt contracts in Brazil in (iii): | ||||||||||
| R$, indexed to TJLP, TR, IPCA, IGP-M and CDI | 9.29% | 431 | 530 | 1,382 | 1,445 | |||||
| R$, with fixed interest | 2.86% | 47 | 67 | 4 | 6 | |||||
| Basket of currencies and bonds in US$ indexed to LIBOR | - | - | 61 | - | - | |||||
| Debt contracts in the international market in: | ||||||||||
| US$, with variable and fixed interest | 2.36% | 1,681 | 2,673 | 15,912 | 17,500 | |||||
| Other currencies, with variable interest | 4.11% | 431 | 430 | 57 | 56 | |||||
| Other currencies, with fixed interest | 3.72% | 9 | 67 | 454 | 530 | |||||
| Accrued charges | 712 | 878 | - | - | ||||||
| Total | 4,334 | 5,744 | 54,175 | 62,223 | ||||||
(i) In order to determine the average interest rate for debt contracts with floating rates, the Company used the rate applicable as of March 31, 2022.
(ii) The Company has debentures in Brazil with BNDES raised for the Company's infrastructure investment projects.
(iii) The Company entered into derivatives to mitigate the exposure to cash flow variations of all floating rate debt contracted in Brazil, resulting in an average cost of 2.93% per year in US$.
Future flows of debt payments, principal and interest
| Consolidated | |||||
| Principal |
Estimated future interest payments (i) | ||||
| 2022 | 3,445 | 2,172 | |||
| 2023 | 548 | 2,869 | |||
| 2024 | 9,575 | 2,713 | |||
| 2025 | 761 | 2,524 | |||
| Between 2026 and 2030 | 13,831 | 8,043 | |||
| 2031 onwards | 29,637 | 11,960 | |||
| Total | 57,797 | 30,281 | |||
(i) Based on interest rate curves and foreign exchange rates applicable as of March 31, 2022, and considering that the payments of principal will be made on their contracted payments dates. The amount includes the estimated interest not yet accrued and the interest already recognized in the financial statements.
Covenants
Some of the Company’s debt agreements with lenders contain financial covenants. The primary financial covenants in those agreements require maintaining certain ratios, such as debt to EBITDA, which is defined in note 4, and interest coverage. The Company did not identify any instances of noncompliance as of March 31, 2022.
34
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
Reconciliation of debt to cash flows arising from financing activities
| Consolidated | ||||||||
| Quoted in the secondary market | Debt contracts in Brazil | Debt contracts on the international market | Total | |||||
| December 31, 2021 | 44,501 | 2,120 | 21,346 | 67,967 | ||||
| Additions | - | - | 2,361 | 2,361 | ||||
| Repayments | (80) | (249) | (1,841) | (2,170) | ||||
| Interest paid (i) | (800) | (62) | (84) | (946) | ||||
| Cash flow from financing activities | (880) | (311) | 436 | (755) | ||||
| Effect of exchange rate | (7,511) | (144) | (1,884) | (9,539) | ||||
| Interest accretion | 552 | 203 | 81 | 836 | ||||
| Non-cash changes | (6,959) | 59 | (1,803) | (8,703) | ||||
| March 31, 2022 | 36,662 | 1,868 | 19,979 | 58,509 | ||||
(i) Classified as cash flow due to operational activities.
Funding and repayments
In January 2022, the Company contracted two lines of credit indexed to Libor, in the amount of US$425 (R$2,361 million) with maturity in 2027 with The Bank of Nova Scotia, and prepaid US$200 (R$993 million) of a line of credit maturing in 2023 with the same bank.
Lease liabilities
| Consolidated | ||||||||||||||
| December 31, 2021 | Additions and contract modifications | Payments (i) | Interest | Transfer to liabilities held for sale | Translation adjustment | March 31, 2022 | ||||||||
| Ports | 3,982 | 4 | (91) | 34 | (79) | (507) | 3,343 | |||||||
| Vessels | 2,731 | - | (83) | 24 | - | (405) | 2,267 | |||||||
| Pelletizing plants | 1,253 | 42 | (6) | 13 | - | - | 1,302 | |||||||
| Properties | 577 | 94 | (17) | - | - | (7) | 647 | |||||||
| Energy plants | 328 | - | (5) | 3 | - | (47) | 279 | |||||||
| Mining equipment | 71 | - | (14) | 5 | - | (6) | 56 | |||||||
| Total | 8,942 | 140 | (216) | 79 | (79) | (972) | 7,894 | |||||||
(i) The total amount of the variable lease payments not included in the measurement of lease liabilities for the period ended March 31, 2022 was R$304 (US$58 million) (2021: R$180 (US$33 million)).
Discount rates
| Discount rate | ||
| Ports | 3% to 6% | |
| Vessels | 3% to 4% | |
| Pelletizing plants | 3% to 5% | |
| Properties | 3% to 7% | |
| Energy plants | 4% to 5% | |
| Mining equipment | 3% to 7% |
Annual minimum payments and remaining lease term
The following table presents the undiscounted lease obligation by maturity date. The lease liability recognized in the balance sheet is measured at the present value of such obligations.
| 2022 | 2023 | 2024 | 2025 | 2026 onwards | Total | Average remaining term (years) | |||||||
| Ports | 238 | 311 | 308 | 308 | 3,531 | 4,696 | 4 to 21 | ||||||
| Vessels | 225 | 293 | 286 | 279 | 1,637 | 2,720 | 3 to 11 | ||||||
| Pelletizing plants | 265 | 230 | 217 | 217 | 612 | 1,541 | 2 to 11 | ||||||
| Properties | 211 | 129 | 111 | 67 | 228 | 746 | 2 to 9 | ||||||
| Energy plants | 25 | 31 | 27 | 27 | 269 | 379 | 8 | ||||||
| Mining equipment | 23 | 18 | 14 | 10 | 3 | 68 | 2 to 6 | ||||||
| Total | 987 | 1,012 | 963 | 908 | 6,280 | 10,150 | - |
35
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
e) Guarantees
As of March 31, 2022 and December 31, 2021, loans and borrowings are secured by property, plant and equipment in the amount of R$469 (US$99 million) and R$458 (US$82 million), respectively. The securities issued through Vale’s wholly owned finance subsidiary Vale Overseas Limited are fully and unconditionally guaranteed by Vale.
On January 25, 2019, a tailings dam (“Dam I”) failed at the Córrego do Feijão mine, in the city of Brumadinho, state of Minas Gerais. The failure released a flow of tailings debris, destroying some of Vale’s facilities, affecting local communities and disturbing the environment. The tailings released have caused an impact of around 315 km in extension, reaching the nearby Paraopeba River. The dam failure in Brumadinho (“event”) resulted in 270 fatalities or presumed fatalities, including 6 victims still missing, and caused extensive property and environmental damage in the region.
As a result, on February 4, 2021, the Company entered into a Judicial Settlement for Integral Reparation (“Global Settlement”), which was under negotiations since 2019, with the State of Minas Gerais, the Public Defender of the State of Minas Gerais and the Federal and the State of Minas Gerais Public Prosecutors Offices, to repair the environmental and social damage resulting from the Dam I rupture.
Changes on the provisions in the period
| Consolidated | ||||||||
| December 31, 2021 | Present value adjustment | Disbursements (i) | March 31, 2022 | |||||
| Global Settlement for Brumadinho | ||||||||
| Payment obligations | 7,964 | 162 | - | 8,126 | ||||
| Provision for socio-economic reparation and others | 4,757 | 51 | (4) | 4,804 | ||||
| Provision for social and environmental reparation | 3,933 | 240 | (40) | 4,133 | ||||
| 16,654 | 453 | (44) | 17,063 | |||||
| Commitments | ||||||||
| Tailings containment and geotechnical safety | 1,772 | 8 | (108) | 1,672 | ||||
| Individual indemnification | 640 | - | (160) | 480 | ||||
| Other commitments | 671 | (2) | (22) | 647 | ||||
| 3,083 | 6 | (290) | 2,799 | |||||
| 19,737 | 459 | (334) | 19,862 | |||||
| Current liabilities | 6,449 | - | - | 6,561 | ||||
| Non-current liabilities | 13,288 | - | - | 13,301 | ||||
| Liabilities | 19,737 | - | - | 19,862 | ||||
| Discount rate | 8.08% | 8.25% | ||||||
(i) Disbursement is presented net of the judicial deposits utilization.
The Company has incurred expenses, which have been recognized straight to the income statement, in relation to communication services, accommodation and humanitarian assistance, equipment, legal services, water, food aid, taxes, among others. In the three-month period ended March 31, 2022, the Company incurred expenses in the amount of R$640 (US$123 million) (2021: R$637 (US$115 million)).
a) Global Settlement for Brumadinho
The Global Agreement is segmented between: (i) obligations payable directly by the State of Minas Gerais and Institutions of Justice, for the execution of socio-economic repair and socio-environmental compensation projects whose that will be carried out or managed by these institutions; (ii) socioeconomic repair projects in Brumadinho and other municipalities; and (iii) development of the environmental reparation plan, and projects for the compensation of environmental damage already known, which aim to repair the damage caused, restore the ecosystems disruption, restore local infrastructure, repair social and economic losses, recover affected areas and repair the loss of memory and cultural heritage caused by the dam rupture. These measures and compensation projects will be carried out directly by the Company for an average period of 5 years. Variations in the estimated amounts for project execution, although defined in the agreement, are Vale's responsibility and changes in relation to the original budgets may change the balance of the provision in the future.
36
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
The estimated amount to carry out the environmental recovery actions is part of the Global Settlement. However, it has no cap due to the Company's legal obligation to fully repair the environmental damage caused by the dam rupture. Therefore, although Vale monitors this provision, the amount recorded may change depending on several factors that are not under the control of the Company.
b) Contingencies and other legal matters
(b.i) Public civil actions brought by the State of Minas Gerais and state public prosecutors for damages resulting from the rupture of Dam I
The Company is party to public civil actions brought by the State of Minas Gerais and justice institutions, claiming compensation for socioeconomic and socio-environmental damages resulting from the dam failure and seeking a broad range of preliminary injunctions ordering Vale to take specific remediation and reparation actions. As a result of the Global Settlement, the requests for the reparation of socio-environmental and socioeconomic damages caused by the dam rupture were substantially resolved. Indemnifications for individual damages was excluded from the Global Settlement, and the parties ratified the agreement with the Public Defendants of the State of Minas Gerais. Thus, the Company is continuing to enter into individual agreements.
b.ii) Collective Labor Civil Action
In 2021, public civil actions were filed in the Betim Labor Court in the state of Minas Gerais, by a workers' union claiming the payment of compensation for death damages to own and outsourced employees, who died as a result of the rupture of Dam I. An initial sentence was published condemning Vale to pay R$1 (US$211 thousand) per fatal victim. Vale is defending itself on the lawsuits and understands that the likelihood of loss is possible.
(b.iii) U.S. Securities putative class action suit
Vale is defending itself in a putative class action brought before a Federal Court in New York and filed by holders of securities - American Depositary Receipts ("ADRs") - issued by Vale. The Lead Plaintiff alleges that Vale made false and misleading statements or omitted to make disclosures concerning the risks of the operations of Dam I in the Córrego de Feijão mine and the adequacy of the related programs and procedures. Following the decision of the Court, in May 2020, that denied the Motion to Dismiss presented by the Company, the Discovery phase has started and is expected to be concluded in 2022.
On November 24, 2021, a new Complaint was filed before the same Court by eight Plaintiffs, all investment funds, as an “opt-out” litigation from the putative class action already pending in the Eastern District of New York court, asserting virtually the same claims against the same defendants as those in the putative class case.
Based on the evaluation of the Company's legal counsel and given the very preliminary stage, the expectation of loss of these processes is classified as possible. However, considering the initial stage of this putative class action, it is not possible at this time to reliably estimate the amount of a potential loss. The Plaintiff did not specify the amounts alleged in this demand.
(b.iv) Arbitration proceedings in Brazil filed by minority stockholders and a class association
In Brazil, Vale is a defendant in (i) one arbitration filed by 385 minority stockholders, (ii) two arbitrations filed by a class association allegedly representing all Vale’s minority stockholders, and (iii) three arbitrations filed by foreign investment funds.
In the six proceedings, the Claimants argue Vale was aware of the risks associated with the dam, and failed to disclose it to the stockholders, which would be required under the Brazilian applicable laws and the rules of Comissão de Valores Mobiliários (Securities and Exchange Commission in Brazil). Based on such argument, they claim compensation for losses caused by the decrease of the value of the shares.
Based on the assessment of the Company's legal advisors, the expectation of loss is classified as possible for the six procedures and, considering the initial phase, it is not possible at this time to reliably estimate the amount of a possible loss.
In one of the proceedings filed by foreign funds, the Claimants initially estimated the amount of the alleged losses would be approximately R$1,800 (US$380 million). In another proceeding filed by foreign funds, the Claimants initially estimated the amount of the alleged losses would be approximately R$3,900 (US$823 million). The Company disagrees with the ongoing proceedings and understands that, in this case and at the current stage of the proceedings, the probability of loss in the amount claimed by the foreign funds is remote.
37
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
(b.v) Investigations conducted by CVM and the Securities and Exchange Commission (“SEC”)
Vale expects that the SEC will commence proceedings against Vale alleging violations of U.S. securities laws arising from Vale’s disclosures about its dam safety management and the dam at Brumadinho. The SEC could seek an injunction against future violations of U.S. federal securities laws, the imposition of civil monetary penalties, disgorgement and other relief within the SEC’s authority in a lawsuit filed in a federal court. At this time, it is not yet possible to estimate the amount or range of potential loss to the Company or to state with certainty the timing for commencement of an action. Vale believes that its disclosures did not violate U.S. law and will vigorously contest any such allegations.
The CVM is also conducting investigations relating to Vale's disclosure of relevant information to shareholders, investors and the market in general, especially regarding the conditions and management of Vale's dams. At this time, it is not yet possible to estimate the value or a range of potential loss to the Company.
(b.vi) Criminal proceedings and investigations
In January 2020, the State Prosecutors of Minas Gerais (“MPMG”) filed criminal charges against 16 individuals (including former executive officers of Vale and former employees) for a number of potential crimes, including homicide, and against Vale S.A. for alleged environmental crimes. In November 2021, the federal police concluded an investigation on potential criminal liability for the Brumadinho dam rupture. The investigation has been sent to the MPF, which has not brought criminal charges against Vale. The MPF and the federal police conducted a separate investigation into the causes of the dam rupture in Brumadinho, which may result in new criminal proceedings Vale is defending itself against the criminal claims and is no possible to estimate when a decision will be issued.
c) Insurance
The Company is negotiating with insurers the payment of indemnification under its civil liability and Directors and Officers Liability Insurance. However, these negotiations are still in progress, therefore any payment of insurance proceeds will depend on the coverage definitions under these policies and assessment of the amount of loss. Due to uncertainties, no indemnification related to these insurers was recognized in these financial statements.
22. Liabilities related to associates and joint ventures
a) Rupture of Samarco dam
In November 2015, the Fundão tailings dam owned by Samarco Mineração S.A. (Samarco) failed, releasing tailings downstream, flooding certain communities and causing impacts on communities and the environment along the Doce river. The rupture resulted in 19 fatalities and caused property and environmental damage to the affected areas. Samarco is a joint venture equally owned by Vale S.A. and BHP Billiton Brasil Ltda. (‘‘BHPB’’).
In June 2016, Samarco, Vale and BHPB created the Fundação Renova, a not-for-profit private foundation, to develop and implement (i) social and economic remediation and compensation programs and (ii) environmental remediation and compensation programs in the region affected by the dam rupture. The creation of Fundação Renova was provided for under the agreement for settlement and conduct adjustment (the ‘‘Framework Agreement’’) signed in March 2016 by Vale, BHPB, Samarco, the Brazilian federal government, the two Brazilian states affected by the rupture (Minas Gerais and Espírito Santo) and other governmental authorities.
In June 2018, Samarco, Vale and BHPB entered into a comprehensive agreement with the offices of the federal and state (Minas Gerais and Espírito Santo) prosecutors, public defenders and attorney general, among other parties (“TacGov Agreement”), improving the governance mechanism of Fundação Renova and establishing, among other things, a process for potential revisions to the remediation programs provided under the Framework Agreement.
Judicial recovery of Samarco
Under the Framework Agreement, the TacGov Agreement and Renova’s bylaws, Fundação Renova must be funded by Samarco, but to the extent that Samarco is unable to fund, Vale and BHPB must ratably bear the funding requirements Under the Framework Agreement.
In April 2021, Samarco announced the request for Judicial Reorganization (“RJ”) that was filed with the Minas Gerais Court to renegotiate its debt, which is held by bondholders abroad. The purpose of RJ is to restructure Samarco’s debts and establish an independent and sustainable financial position, allowing Samarco to keep working to resume its operations safely and to fulfill its obligations related to the Fundação Renova.
38
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
The RJ does not affect Samarco’s obligation to remediate and compensate the impacts of the Fundão tailings dam failure. However, as Samarco began the gradual resumption of operations in December 2020, it is not yet possible to reliably estimate when Samarco will generate cash to comply with its assumed obligation in the Framework Agreement. Thus, the liability recorded by Vale on December 31, 2021 are recognized base on the assumption that Samarco does not have the capacity to generate cash enough to make all cash contributions to the Fundação Renova.
In addition, ongoing discussions in the context of the RJ may lead to the loss of deductibility of part of the expenses incurred with the Fundação Renova and of the deferred taxes over the total provision, depending on the method determined for restructuring Samarco's debts. The total amount exposed as of March 31, 2022 is R$8,476 (US$1,789 million), of which R$2,376 (US$502 million) refers to expenses already incurred and considered as part of the Company’s uncertain tax positions.
The Company works in the perspective that the mechanisms resulting from the RJ will continue to allow the deductibility of these expenses, however, future decisions resulting from the negotiations regarding Samarco's capital structure, which are not under Vale's control, could materially change the value of the deferred tax recognized by the Company.
Changes on the provisions in the period
| Consolidated | ||||
| 2022 | 2021 | |||
| Balance at January 1, | 17,371 | 10,782 | ||
| Disbursements | - | (568) | ||
| Present value valuation | (80) | (348) | ||
| Balance at March 31, | 17,291 | 9,866 | ||
| March 31, 2022 | December 31, 2021 | |||
| Current liabilities | 11,186 | 9,964 | ||
| Non-current liabilities | 6,105 | 7,407 | ||
| Liabilities | 17,291 | 17,371 | ||
Germano Dam
In addition to the Fundão tailings dam, Samarco owns the Germano dam, which was also built under the upstream method and has been inactive since the Fundão dam rupture. Due to the new safety requirements set by the Brazilian National Mining Agency (“Agência Nacional de Mineração – ANM”), Samarco prepared a project for the de-characterization of this dam, resulting in a provision for the de-characterization of the Germano tailings dam. As of March 31, 2022, Vale total provision is R$1,127 (US$ 238 million) R$1,126 (US$ 202 million) as of December 31, 2021), for de-characterization of Germano tailings dam.
Samarco’s working capital
In addition to the provision, Vale S.A. made available R$113 (US$21 million) during the three-month period ended March 31, 2021, which was fully used to fund Samarco’s working capital. This amount was recognized in Vale´s income statement as an expense in “Equity results and other results in associates and joint ventures”. For the three-month period ended March 31, 2022, Vale was not required to fund Samarco’s working capital.
Contingencies related to Samarco accident
These proceedings include public civil actions brought by Brazilian authorities and multiple proceedings involving claims for significant amounts of damages and remediation measures. The Framework Agreements represents a model for the settlement of the public civil action brought by the MPF and other related proceedings. There are also putative securities class actions in the United States against Vale and some of its current and former officers and a criminal proceeding in Brazil. The main updates regarding the lawsuits in the period were as follows:
(i) Public Civil Action filed by the Federal Government and others and public civil action filed by the Federal Public Ministry ("MPF")
The Framework Agreement established a possible renegotiation of Fundação Renova reparation programs upon the completion of studies carried by specialist engaged to assist the Public Prosecutor's Office in this process. In October 2020, the MPF requested the resumption of its public civil action of R$155 billion (US$32.7 billion) , due to a difficulty in hiring of technical advisors. Discussion for the renegotiation began in April 2021, and a letter of principles was finalized and signed in June 2021 by the companies Vale, BHPB and Samarco, as well as representatives of the Government and various Justice Institutions. Depending on the conclusion of the specialists hired and the court decision in this regard, the Company may recognize additional provisions for the fulfillment of the programs determined in the Framework Agreement.
39
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
(ii) Criminal proceeding
In September 2019, the federal court of Ponte Nova dismissed all criminal charges against Vale representatives relating to the first group of charges, which concerns the results of the Fundão dam failure, remaining only the legal entity in the passive pole. The second group of charges against Vale S.A. and one of the Company’s employees, which concerns the accusation of alleged crimes committed against the Environmental Public Administration, remained unchanged. The Company cannot estimate when a final decision on the case will be issued.
Insurance
Since the Fundão dam rupture, the Company has been negotiating with insurers the indemnification payments based on its general liability policies. In the three-month period ended March 31, 2021, the Company received US$33 (R$174 million). The Company recorded a gain in the income statement as “Equity results and other results in associates and joint ventures”.
23. Provision for de-characterization of dam structures and asset retirement obligations
The Company is subject to regulations, which requires the decommissioning of the assets and mine sites that Vale operates at the end of their useful lives. Depending on the geotechnical characteristics of the structures, the Company is required to de-characterize the structures, as described below.
a) De-characterization of dam structures located in Brazil
As a result of the Brumadinho dam rupture (note 21), the Company has decided to speed up the plan to “de-characterize” of all its tailings dams built under the upstream method, certain “centerline structures” and dikes, located in Brazil. The Company also operates tailings dams in Canada, including upstream compacted dams, however, there are no safety, technical or regulatory reasons for these dams to be de-characterized. Therefore, these dams will be decommissioned using other methods, as presented in item (b) below.
In September 2020, the federal government enacted Law no. 14,066, which modified the National Dam Safety Policy (Law no. 12,334/2020), reinforcing the prohibition of constructing and raising upstream dams in Brazil. The statute also requires companies to de-characterize the structures built using the upstream method by 2022, or by a later date if it is proven that the de-characterization is not technically feasible by 2022. A substantial part of the Company's de-characterization projects will be completed in 15 years, which exceeds the date established in the regulation due to the characteristics and safety levels of the Company's geotechnical structures.
Thus, on February 21, 2022, the Company filed with the relevant bodies a request for an extension to perform the projects and, as a result, signed a Term of Commitment establishing legal and technical certainty for the process of de-characterization of the upstream dams, considering that the deadline defined was technically unfeasible, especially due to the necessary actions to increase safety during the works. With the signing of the agreement, the Company recorded an additional provision of R$192 (US$37 million) to make investments in social and environmental projects over a period of 8 years.
Changes on the provisions in the period
| Consolidated | ||||
| 2022 | 2021 | |||
| Balance at January 1, | 19,666 | 11,897 | ||
| Additional provision | 192 | - | ||
| Disbursements | (357) | (461) | ||
| Present value valuation | (188) | (258) | ||
| Balance at March 31, | 19,313 | 11,178 | ||
| March 31, 2022 | December 31, 2021 | |||
| Current liabilities | 2,088 | 2,518 | ||
| Non-current liabilities | 17,225 | 17,148 | ||
| Liabilities | 19,313 | 19,666 | ||
40
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
In addition, due to the de-characterization projects, the Company has suspended some operations due to judicial decisions or technical analysis performed by Vale on its upstream dam structures located in Brazil. The Company has been recording losses in relation to the operational stoppage and idle capacity of the ferrous mineral segment in the amounts of R$559 (US$107 million) for the period ended March 31, 2022 (2021: R$619 (US$113 million)). The Company is working on legal and technical measures to resume all operations at full capacity.
b) Asset retirement obligations and environmental obligations
| Consolidated | ||||||||||
| Liability | Discount rate | |||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | Cash flow duration | ||||||
| Liability by geographical area | ||||||||||
| Brazil | 7,357 | 7,786 | 5.61% | 5.48% | 2119 | |||||
| Canada | 10,320 | 15,221 | 0.55% | 0.00% | 2151 | |||||
| Oman | 581 | 684 | 2.88% | 3.03% | 2035 | |||||
| Indonesia | 366 | 432 | 4.22% | 4.20% | 2061 | |||||
| Other | 1,181 | 1,432 | 0.00 - 10.33% | 0.00 - 7.79% | - | |||||
| 19,805 | 25,555 | |||||||||
Provision changes during the period
| Consolidated | ||||||||||||
| 2022 | 2021 | |||||||||||
| Asset retirement obligations | Environmental obligations | Total | Asset retirement obligations | Environmental obligations | Total | |||||||
| Balance at January 1, | 23,906 | 1,649 | 25,555 | 21,929 | 1,571 | 23,500 | ||||||
| Adjustment to present value (i) | (2,955) | (4) | (2,959) | 622 | 108 | 730 | ||||||
| Disbursements | (100) | (84) | (184) | (475) | (310) | (785) | ||||||
| Revisions on projected cash flows | - | - | - | 1,000 | 276 | 1,276 | ||||||
| Translation adjustment | (2,345) | (22) | (2,367) | 1,108 | 4 | 1,112 | ||||||
| Transfer to assets held for sale (note 14) | (231) | (9) | (240) | (278) | - | (278) | ||||||
| Balance at March 31, | 18,275 | 1,530 | 19,805 | 23,906 | 1,649 | 25,555 | ||||||
| March 31, 2022 | December 31, 2021 | |||||||||||
| Asset retirement obligations | Environmental obligations | Total | Asset retirement obligations | Environmental obligations | Total | |||||||
| Current | 444 | 531 | 975 | 400 | 550 | 950 | ||||||
| Non-current | 17,831 | 999 | 18,830 | 23,506 | 1,099 | 24,605 | ||||||
| Liability | 18,275 | 1,530 | 19,805 | 23,906 | 1,649 | 25,555 | ||||||
(i) Mainly refers to the increase in the discount rate of the asset retirement obligation in Canada, which increased from 0.00% to 0.55% in the three-month period ended March 31, 2022. The adjustment in provision was capitalized to the property, plant and equipment (note 16).
Financial guarantees
The Company has issued letters of credit and surety bonds for R$3,800 (US$802 million) as of March 31, 2022 (2021: R$3,373 (US$605 million), in connection with the asset retirement obligations for its base metals operations.
| Consolidated | ||||||||
| Current liabilities | Non-current liabilities | |||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | |||||
| Provisions for litigation (note 25) | 519 | 516 | 5,647 | 5,647 | ||||
| Employee postretirement obligations (note 26) | 486 | 553 | 7,535 | 8,556 | ||||
| Payroll, related charges and other remunerations | 2,549 | 4,553 | - | - | ||||
| Onerous contracts (note 14) | - | 208 | - | 4,879 | ||||
| 3,554 | 5,830 | 13,182 | 19,082 | |||||
The Company is defendant in numerous legal actions in the ordinary course of business, including civil, tax, environmental and labor proceedings.
41
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
The Company makes use of estimates to recognize the amounts and the probability of outflow of resources, based on reports and technical assessments and on management’s assessment. Provisions are recognized for probable losses of which a reliable estimate can be made.
Arbitral, legal and administrative decisions against the Company, new jurisprudence and changes of existing evidence can result in changes regarding the probability of outflow of resources and on the estimated amounts, according to the assessment of the legal basis.
a) Provision for legal proceedings
The Company has considered all information available to assess the likelihood of an outflow of resources and in the preparation on the estimate of the costs that may be required to settle the obligations.
Tax litigations - Mainly refers to the lawsuit filed in 2011 by Valepar (merged by Vale) seeking the right to exclude the amount of dividends received in the form of interest on stockholders’ equity (“JCP”) from the PIS and COFINS tax base. The amount reserved for this proceeding as of March 31, 2022 is R$2,271 (US$479 million) (2021: R$2,243 (US$402 million)). This proceeding is guaranteed by a judicial deposit in the amount of R$2,621 (US$553 million) recorded as of March 31, 2022 (2021: R$2,586 (US$463 million)).
Civil litigations - Refers to lawsuits for: (i) indemnities for losses, payments and contractual fines due to contractual imbalance or non-compliance that are alleged by suppliers, and (ii) land claims referring to real estate Vale's operational activities.
Labor litigations - Refers to lawsuits for individual claims by in-house employees and service providers, primarily involving demands for additional compensation for overtime work, moral damages or health and safety conditions.
Environmental litigations - Refers mainly to proceedings for environmental damages and issues related to environmental licensing.
| Consolidated | ||||||||||
| Tax litigation | Civil litigation | Labor litigation | Environmental litigation | Total of litigation provision | ||||||
| Balance at December 31, 2021 | 2,542 | 1,579 | 2,000 | 42 | 6,163 | |||||
| Additions and reversals, net | 9 | (16) | 93 | (1) | 85 | |||||
| Payments | (2) | (109) | (45) | - | (156) | |||||
| Indexation and interest | 33 | 53 | 40 | 1 | 127 | |||||
| Translation adjustment | - | (3) | - | - | (3) | |||||
| Discontinued operations (note 14a) | (5) | (37) | (8) | (50) | ||||||
| Balance at March 31, 2022 | 2,577 | 1,467 | 2,080 | 42 | 6,166 | |||||
| Current liabilities | 79 | 106 | 327 | 7 | 519 | |||||
| Non-current liabilities | 2,498 | 1,361 | 1,753 | 35 | 5,647 | |||||
| 2,577 | 1,467 | 2,080 | 42 | 6,166 | ||||||
| Consolidated | ||||||||||
| Tax litigation | Civil litigation | Labor litigation | Environmental litigation | Total of litigation provision | ||||||
| Balance at December 31, 2020 | 2,520 | 1,354 | 1,741 | 56 | 5,671 | |||||
| Additions and reversals, net | (9) | (7) | 105 | (1) | 88 | |||||
| Payments | - | (63) | (51) | (1) | (115) | |||||
| Indexation and interest | 21 | 55 | 30 | 2 | 108 | |||||
| Balance at March 31, 2021 | 2,532 | 1,339 | 1,825 | 56 | 5,752 | |||||
| Current liabilities | 40 | 75 | 354 | 1 | 470 | |||||
| Non-current liabilities | 2,492 | 1,264 | 1,471 | 55 | 5,282 | |||||
| 2,532 | 1,339 | 1,825 | 56 | 5,752 | ||||||
(i) Includes amounts regarding to social security claims that were classified as labor claims.
b) Contingent liabilities
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Tax litigations | 31,915 | 28,891 | ||
| Civil litigations | 8,416 | 8,384 | ||
| Labor litigations | 3,021 | 2,882 | ||
| Environmental litigations | 5,449 | 5,322 | ||
| Total | 48,801 | 45,479 | ||
42
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
As reported in the annual financial statements for 2021, the Company is a counterparty in several actions and the main updates on contingent liabilities since then, are discussed as follows:
(b.i) Tax proceedings - PIS/COFINS
The Company is a party to several collections related to the alleged improper use of PIS and COFINS credits (federal taxes levied on the companies' gross revenue). Brazilian tax legislation authorizes taxpayers to use PIS and COFINS tax credits, such as those referring to the acquisition of inputs for the production process and other items. The tax authorities mainly claim that (i) some credits were not related to the production process, and (ii) the right to use the tax credits was not adequately proven. In the current period the Company received new proceedings in the amount of R$2,070 (US$437 million), for which the likelihood of loss is deemed possible.
(b.ii) Tax proceedings - Value added tax on services and circulation of goods (“ICMS”)
Vale is engaged in several administrative and court proceedings relating to additional charges of ICMS by the tax authorities of different Brazilian states. In each of these proceedings, the tax authorities claim that (i) use of undue tax credit; (ii) failing to comply with certain accessory obligations; (iii) the Company is required to pay the ICMS on acquisition of electricity (iv) operations related to the collection of tax rate differential (“DIFAL”) and (v) incidence of ICMS on its own transportation. During 2022, the Company received new proceedings in the amount of R$187 (US$40 million), for which the likelihood of loss is deemed possible.
c) Judicial deposits
| Consolidated | ||||
| March 31, 2022 | December 31, 2021 | |||
| Tax litigations | 5,399 | 5,341 | ||
| Civil litigations | 586 | 559 | ||
| Labor litigations | 776 | 783 | ||
| Environmental litigations | 130 | 125 | ||
| Total | 6,891 | 6,808 | ||
d) Guarantees contracted for legal proceedings
In addition to the above-mentioned tax, civil, labor and environmental judicial deposits, the Company contracted R$11.5 billion (US$2.4 billion) in guarantees for its lawsuits, as an alternative to judicial deposits.
a) Long-term incentive programs
The Company has long-term reward mechanisms that include the Matching Program and the Performance Shares Units (“PSU”) for eligible executives, whose objective is to encourage the permanence of employees and stimulate performance.
On March 30, 2022, a new cycle of the Matching program started, and the fair value estimate was based on the Company's share price and ADR at the grant date, R$95.87 and US$20.03 per share. The number of shares that will be granted for the 2022 cycle was 1,084,065 (2021: 1,046,255 shares). The fair value of the program will be recognized on a straight-line basis over the required three-month period of service, net of estimated losses.
43
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
b) Reconciliation of assets and liabilities recognized in the statement of financial position
| Consolidated | ||||||||||||
| Total | ||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||
| Overfunded pension plans | Underfunded pension plans | Other benefits | Overfunded pension plans | Underfunded pension plans | Other benefits | |||||||
| Balance at beginning of the period | 5,135 | - | - | 4,488 | - | - | ||||||
| Interest income | 106 | - | - | 313 | - | - | ||||||
| Changes on asset ceiling | 1,149 | - | - | 326 | - | - | ||||||
| Translation adjustment | (145) | - | - | 8 | - | - | ||||||
| Balance at end of the period | 6,245 | - | - | 5,135 | - | - | ||||||
| Amount recognized in the statement of financial position | ||||||||||||
| Present value of actuarial liabilities | (29,356) | (3,428) | (6,464) | (15,808) | (22,228) | (7,967) | ||||||
| Fair value of assets | 35,601 | 1,871 | - | 20,943 | 21,086 | - | ||||||
| Effect of the asset ceiling | (6,245) | - | - | (5,135) | - | - | ||||||
| Liabilities | - | (1,557) | (6,464) | - | (1,142) | (7,967) | ||||||
| Current liabilities | - | (151) | (335) | - | (266) | (287) | ||||||
| Non-current liabilities | - | (1,406) | (6,129) | - | (876) | (7,680) | ||||||
| Liabilities | - | (1,557) | (6,464) | - | (1,142) | (7,967) | ||||||
a) Share capital
As of March 31, 2022, the share capital was R$77,300 (US$61,614 million) corresponding to 4,999,040,063 shares issued and fully paid without par value.
| March 31, 2022 | ||||||
| Stockholders | Common shares | Golden shares | Total | |||
| Shareholders with more than 5% of total capital | 1,633,137,500 | - | 1,633,137,500 | |||
| Previ | 413,493,256 | - | 413,493,256 | |||
| Capital World Investors | 360,598,669 | - | 360,598,669 | |||
| Capital Research Global Investors | 293,135,748 | - | 293,135,748 | |||
| Mitsui&co | 286,347,055 | - | 286,347,055 | |||
| Blackrock, Inc | 279,562,772 | - | 279,562,772 | |||
| Others | 3,107,227,415 | - | 3,107,227,415 | |||
| Golden shares | - | 12 | 12 | |||
| Total outstanding (without shares in treasury) | 4,740,364,915 | 12 | 4,740,364,927 | |||
| Shares in treasury | 258,675,136 | - | 258,675,136 | |||
| Total capital | 4,999,040,051 | 12 | 4,999,040,063 | |||
The information presented above is based on communications sent by stockholders pursuant to Instruction 358 issued by the Brazilian Securities Exchange Commission (“CVM”).
b) Cancellation of treasury shares
On February 24, 2022, the Board of Directors approved the cancellation of 133,418,347 common shares issued by the Company and held in treasury, without reducing the value of its share capital. The effect of R$14,589 (US$2,801 million) was recorded in shareholders' equity as “Treasury shares used and cancelled”.
c) Remuneration approved
In February 2022, the Board of Directors approved the remuneration to shareholders in the amount of R$17,849 (US$3,500 million), which was fully paid on March 16, 2022.
d) Share buyback
In 2021, the Board of Directors approved a share buyback program to repurchase 470,000,000 common shares. During the period ended March 31, 2022, the Company repurchased 100,156,362 common shares and their respective ADRs, corresponding to a total amount of R$9,176 (US$1,788 million), of which R$4,949 (US$958 million) were acquired through wholly owned subsidiaries and R$4,227 (US$830 million) by the Parent Company. (2021: 291,184,500 shares, corresponding to R$29,121 (US$5,546 million), of which R$13,547 (US$2,538 million) were acquired through wholly owned subsidiaries and R$15,574 (US$3,008 million) by the Parent Company). The subsidiaries continue to hold the acquired shares as of March 31, 2022.
On April 27, 2022 (subsequent event), the Board of Directors approved a new share buyback program for Vale’s common share which will be limited to a maximum of 500,000,000 common shares, and their respective ADRs. The program will be carried out over up to an 18-month period.
44
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
The Company’s related parties are subsidiaries, joint ventures, associates, stockholders and its related entities and key management personnel of the Company.
Related party transactions were made by the Company on terms equivalent to those that prevail in arm´s-length transactions, with respect to price and market conditions that are no less favorable to the Company than those arranged with third parties.
Net operating revenue relates to sale of iron ore to the steelmakers and right to use capacity on railroads. Cost and operating expenses mostly relates to the variable lease payments of the pelletizing plants.
Purchases, accounts receivable and other assets, and accounts payable and other liabilities relate largely to amounts charged by joint ventures and associates related to the pelletizing plants operational lease and railway transportation services.
45
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
a) Transactions with related parties
| Consolidated | ||||||||||||
| Three-month period ended March 31, 2022 | Three-month period ended March 31, 2021 | |||||||||||
| Net operating revenue | Cost and operating expenses | Financial result | Net operating revenue | Cost and operating expenses | Financial result | |||||||
| Joint Ventures | 700 | (1,018) | (81) | 888 | (690) | 2 | ||||||
| Companhia Siderúrgica do Pecém | 670 | - | (33) | 876 | - | 18 | ||||||
| Aliança Geração de Energia S.A. | - | (132) | - | 12 | (153) | - | ||||||
| Pelletizing companies (i) | - | (367) | (48) | - | (117) | (15) | ||||||
| MRS Logística S.A. | - | (344) | - | - | (270) | - | ||||||
| Norte Energia S.A. | - | (162) | - | - | (134) | - | ||||||
| Others | 30 | (13) | - | - | (16) | (1) | ||||||
| Associates | 330 | (25) | (13) | 326 | (30) | (2) | ||||||
| VLI | 328 | (25) | (3) | 325 | (30) | (3) | ||||||
| Others | 2 | - | (10) | 1 | - | 1 | ||||||
| Major stockholders | 404 | - | 1,494 | 295 | - | (530) | ||||||
| Bradesco | - | - | 1,493 | - | - | (535) | ||||||
| Banco do Brasil | - | - | 1 | - | - | 5 | ||||||
| Mitsui | 404 | - | - | 295 | - | - | ||||||
| Total of continuing operations | 1,434 | (1,043) | 1,400 | 1,509 | (720) | (530) | ||||||
| Discontinued operation - Coal (note 14) | - | - | - | - | (277) | 70 | ||||||
| Total | 1,434 | (1,043) | 1,400 | 1,509 | (997) | (460) | ||||||
(i) Aggregated entities: Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização.
46
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
b) Outstanding balances with related parties
| Consolidated | |||||||||
| March 31, 2022 | December 31, 2021 | ||||||||
| Assets | Assets | ||||||||
| Cash and cash equivalents | Accounts receivable | Dividends receivable, financial instruments and other assets | Cash and cash equivalents | Accounts receivable | Dividends receivable, financial instruments and other assets | ||||
| Joint Ventures | - | 452 | 705 | - | 419 | 536 | |||
| Companhia Siderúrgica do Pecém | - | 427 | 189 | - | 414 | 219 | |||
| Pelletizing companies (i) | - | 133 | - | - | 208 | ||||
| MRS Logística S.A. | - | 101 | - | - | 105 | ||||
| Others | - | 25 | 282 | - | 5 | 4 | |||
| Associates | - | 860 | - | - | 102 | 17 | |||
| VLI | - | 846 | - | 87 | - | ||||
| Others | - | 14 | - | 15 | 17 | ||||
| Major stockholders | 1,749 | 26 | 401 | 10,184 | 23 | 28 | |||
| Bradesco | 1,668 | 401 | 9,744 | - | 28 | ||||
| Mitsui | - | 26 | - | - | 23 | - | |||
| Banco do Brasil | 81 | - | 440 | - | - | ||||
| Pension plan | 78 | - | - | 64 | - | ||||
| Total | 1,749 | 1,416 | 1,106 | 10,184 | 608 | 581 | |||
(i) Aggregated entities: Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização.
47
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Consolidated | |||||
| March 31, 2022 | December 31, 2021 | ||||
| Liabilities | Liabilities | ||||
| Supplier and contractors | Financial instruments and other liabilities | Supplier and contractors | Financial instruments and other liabilities | ||
| Joint Ventures | 607 | 1,800 | 388 | 2,192 | |
| Pelletizing companies (i) | 307 | 1,800 | 73 | 2,192 | |
| MRS Logística S.A. | 228 | - | 228 | - | |
| Others | 72 | - | 87 | - | |
| Associates | 85 | 835 | 57 | 262 | |
| VLI | 30 | 835 | 32 | 262 | |
| Others | 55 | - | 25 | - | |
| Major stockholders | - | 530 | - | 1,488 | |
| Bradesco | - | 493 | - | 1,479 | |
| Mitsui | - | 37 | - | 9 | |
| Pension plan | 52 | 54 | - | ||
| Total | 744 | 3,165 | 499 | 3,942 | |
(i) Aggregated entities: Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização.
48
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
29. Select notes to Parent Company information (individual interim information)
a) Income tax reconciliation
| Parent Company | ||||
| Three-month period ended March 31, | ||||
| 2022 | 2021 | |||
| Income before income taxes | 30,650 | 38,292 | ||
| Income taxes at statutory rate – 34% | (10,421) | (13,019) | ||
| Adjustments that affect the basis of taxes: | ||||
| Tax incentives | 2,448 | 2,312 | ||
| Equity results | 5,832 | 4,674 | ||
| Others | (5,463) | (1,695) | ||
| Income taxes | (7,604) | (7,728) | ||
b) Recoverable and payable taxes
| Parent Company | ||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||
| Current assets | Non-current assets | Current liabilities | Current assets | Non-current assets | Current liabilities | |||||||
| Value-added tax | 147 | - | 7 | 217 | - | 451 | ||||||
| Brazilian federal contributions | 2,378 | 2,828 | 42 | 2,730 | 2,650 | 47 | ||||||
| Income taxes | 345 | 434 | 2,901 | 516 | - | 9,935 | ||||||
| Financial compensation for the exploration of mineral resources - CFEM | - | - | 318 | - | - | 306 | ||||||
| Others | 58 | - | 701 | 56 | - | 390 | ||||||
| Total | 2,928 | 3,262 | 3,969 | 3,519 | 2,650 | 11,129 | ||||||
c) Accounts receivable
| Parent Company | ||||
| March 31, 2022 | December 31, 2021 | |||
| Receivables from customer contracts | ||||
| Related parties | 30,760 | 46,044 | ||
| Third parties | ||||
| Ferrous minerals | 1,689 | 1,897 | ||
| Base metals | 13 | 9 | ||
| Others | 29 | 23 | ||
| Accounts receivable | 32,491 | 47,973 | ||
| Expected credit loss | (58) | (61) | ||
| Accounts receivable, net | 32,433 | 47,912 | ||
d) Suppliers and contractors
| Parent Company | ||||
| March 31, 2022 | December 31, 2021 | |||
| Third parties – Brazil | 6,725 | 8,979 | ||
| Third parties – Abroad | 697 | 1,006 | ||
| Related parties | 841 | 618 | ||
| Total | 8,263 | 10,603 | ||
e) Other financial assets and liabilities
| Parent Company | ||||||||
| Current | Non-Current | |||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | |||||
| Other financial assets | ||||||||
| Restricted cash | - | - | 359 | 358 | ||||
| Derivative financial instruments | 1,026 | 410 | 879 | 46 | ||||
| Investments in equity securities | - | - | 28 | 33 | ||||
| Related parties - Loans | - | - | 44 | 43 | ||||
| 1,026 | 410 | 1,310 | 480 | |||||
| Other financial liabilities | ||||||||
| Derivative financial instruments | 346 | 879 | 1,041 | 3,042 | ||||
| Related parties - Loans | 12,147 | 4,574 | 60,826 | 81,551 | ||||
| Related parties - Other financial liabilities | 1,885 | 2,235 | - | - | ||||
| Financial guarantees | - | - | 2,412 | 3,026 | ||||
| Liabilities related to the concession grant | 4,348 | 4,241 | 7,500 | 8,017 | ||||
| Advance receipts | 31 | 25 | - | - | ||||
| 18,757 | 11,954 | 71,779 | 95,636 | |||||
f) Investments
| Parent Company | ||||
| 2022 | 2021 | |||
| Balance at January 1st, | 143,640 | 181,319 | ||
| Additions and capitalizations | 167 | 403 | ||
| Disposals | - | (2) | ||
| Translation adjustment | (17,307) | 8,609 | ||
| Equity results and others results from subsidiaries | 15,483 | 13,820 | ||
| Equity results and other results in associates and joint ventures | 1,672 | (72) | ||
| Equity results in statement of comprehensive income | (1,377) | 2,021 | ||
| Dividends declared | (3,363) | (228) | ||
| Divestments | (210) | - | ||
| Share buyback programs | (4,949) | - | ||
| Impairment of CSP | (553) | - | ||
| Transfer to asset held for sale - Midwestern System | (1,155) | - | ||
| Others | (1,455) | 91 | ||
| Balance at March 31, | 130,593 | 205,961 | ||
49
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
g) Intangibles
| Parent Company | ||||||
| Concessions | Software | Total | ||||
| Balance at December 31, 2021 | 29,149 | 291 | 29,440 | |||
| Additions | 186 | 31 | 217 | |||
| Disposals | (43) | - | (43) | |||
| Amortization | (306) | (26) | (332) | |||
| Balance at March 31, 2022 | 28,986 | 296 | 29,282 | |||
| Cost | 35,386 | 1,502 | 36,888 | |||
| Accumulated amortization | (6,400) | (1,206) | (7,606) | |||
| Balance at March 31, 2022 | 28,986 | 296 | 29,282 | |||
| Parent Company | ||||||
| Concessions | Software | Total | ||||
| Balance at December 31, 2020 | 28,015 | 228 | 28,243 | |||
| Additions | 183 | 36 | 219 | |||
| Disposals | (13) | - | (13) | |||
| Amortization | (297) | (19) | (316) | |||
| Balance at March 31, 2021 | 27,888 | 245 | 28,133 | |||
| Cost | 33,330 | 2,654 | 35,984 | |||
| Accumulated amortization | (5,442) | (2,409) | (7,851) | |||
| Balance at March 31, 2021 | 27,888 | 245 | 28,133 | |||
h) Property, plant and equipment
| Parent Company | ||||||||||||||||||
|
Building and land |
Facilities | Equipment | Mineral properties |
Railway equipment |
Right of use assets |
Others | Constructions in progress | Total | ||||||||||
| Balance at December 31, 2021 | 29,235 | 31,458 | 11,188 | 9,236 | 12,653 | 1,659 | 7,543 | 20,987 | 123,959 | |||||||||
| Additions (i) | 139 | 3,598 | 3,737 | |||||||||||||||
| Disposals | (4) | (34) | (4) | - | (16) | (9) | - | (108) | (175) | |||||||||
| Assets retirement obligation | - | - | - | (6) | - | - | - | - | (6) | |||||||||
| Depreciation, amortization and depletion | (300) | (436) | (406) | (177) | (198) | (100) | (295) | - | (1,912) | |||||||||
| Transfers | 88 | 666 | 297 | (35) | 286 | 470 | (1,772) | - | ||||||||||
| Balance at March 31, 2022 | 29,019 | 31,654 | 11,075 | 9,018 | 12,725 | 1,689 | 7,718 | 22,705 | 125,603 | |||||||||
| Cost | 41,634 | 45,817 | 23,095 | 13,278 | 20,219 | 2,580 | 17,425 | 22,705 | 186,753 | |||||||||
| Accumulated depreciation | (12,615) | (14,163) | (12,020) | (4,260) | (7,494) | (891) | (9,707) | - | (61,150) | |||||||||
| Balance at March 31, 2022 | 29,019 | 31,654 | 11,075 | 9,018 | 12,725 | 1,689 | 7,718 | 22,705 | 125,603 | |||||||||
| Parent Company | ||||||||||||||||||
|
Building and land |
Facilities | Equipment | Mineral properties |
Railway equipment |
Right of use assets |
Others | Constructions in progress | Total | ||||||||||
| Balance at December 31, 2020 | 28,299 | 30,567 | 10,232 | 9,016 | 12,713 | 2,115 | 7,065 | 11,331 | 111,338 | |||||||||
| Additions (i) | - | - | - | - | - | 193 | - | 2,652 | 2,845 | |||||||||
| Disposals | - | - | (3) | - | - | - | - | (12) | (15) | |||||||||
| Assets retirement obligation | - | - | - | (335) | - | - | - | - | (335) | |||||||||
| Depreciation, amortization and depletion | (314) | (404) | (370) | (199) | (200) | (96) | (267) | - | (1,850) | |||||||||
| Transfers | 123 | 188 | 580 | 74 | 94 | - | 317 | (1,376) | - | |||||||||
| Balance at March 31, 2021 | 28,108 | 30,351 | 10,439 | 8,556 | 12,607 | 2,212 | 7,115 | 12,595 | 111,983 | |||||||||
| Cost | 37,640 | 41,814 | 20,447 | 11,864 | 19,247 | 2,966 | 15,929 | 12,595 | 162,502 | |||||||||
| Accumulated depreciation | (9,532) | (11,463) | (10,008) | (3,308) | (6,640) | (754) | (8,814) | - | (50,519) | |||||||||
| Balance at March 31, 2021 | 28,108 | 30,351 | 10,439 | 8,556 | 12,607 | 2,212 | 7,115 | 12,595 | 111,983 | |||||||||
(i) Includes capitalized borrowing costs.
50
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
i) Loans and borrowings
| Parent Company | ||||||||||
| Current liabilities | Non-current liabilities | |||||||||
| Average interest rate | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||||
| Quoted in the secondary market: | ||||||||||
| Bonds | 6.02% | - | - | 2,466 | 2,904 | |||||
| Eurobonds | - | - | - | - | - | |||||
| R$, Debentures | 10.48% | 1,026 | 1,037 | 1,079 | 1,122 | |||||
| Debt contracts in Brazil in: | ||||||||||
| R$, indexed to TJLP, TR, IPCA, IGP-M and CDI | 9.29% | 434 | 532 | 1,385 | 1,444 | |||||
| R$, with fixed interest | 2.86% | 46 | 63 | 5 | 8 | |||||
| Basket of currencies and bonds in US$ indexed to LIBOR | - | - | 62 | - | - | |||||
| Debt contracts in the international market in: | ||||||||||
| US$, with variable interest | 2.36% | 432 | 698 | 7,201 | 9,600 | |||||
| Other, with variable interest | 3.72% | - | 432 | 48 | 57 | |||||
| Accrued charges | 128 | 191 | - | |||||||
| Total | 2,066 | 3,015 | 12,184 | 15,135 | ||||||
The future flows of debt payments (principal) are as follows:
| Parent Company | ||
| Debt principal | ||
| 2022 | 1,761 | |
| 2023 | 484 | |
| 2024 | 4,772 | |
| 2025 | 695 | |
| Between 2026 and 2030 | 1,856 | |
| 2031 onwards | 4,554 | |
| 14,122 | ||
j) Provisions
| Parent Company | |||||||
| Current liabilities | Non-current liabilities | ||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||
| Provisions for litigation | 515 | 511 | 5,254 | 5,260 | |||
| Employee postretirement obligations | 220 | 249 | 2,287 | 2,236 | |||
| Payroll, related charges and other remunerations | 1,936 | 3,259 | - | - | |||
| 2,671 | 4,019 | 7,541 | 7,496 | ||||
k) Litigations
| Parent Company | ||||||||||
| Tax litigation | Civil litigation | Labor litigation | Environmental litigation | Total of litigation provision | ||||||
| Balance at December 31, 2021 | 2,513 | 1,259 | 1,960 | 39 | 5,771 | |||||
| Additions and reversals, net | 8 | (36) | 93 | - | 65 | |||||
| Payments | (2) | (110) | (41) | 2 | (151) | |||||
| Indexation and interest | 30 | 16 | 38 | 84 | ||||||
| Balance at March 31, 2022 | 2,549 | 1,129 | 2,050 | 41 | 5,769 | |||||
| Current liabilities | 78 | 102 | 328 | 7 | 515 | |||||
| Non-current liabilities | 2,471 | 1,027 | 1,722 | 34 | 5,254 | |||||
| 2,549 | 1,129 | 2,050 | 41 | 5,769 | ||||||
| Parent Company | ||||||||||
| Tax litigation | Civil litigation | Labor litigation | Environmental litigation | Total of litigation provision | ||||||
| Balance at December 31, 2020 | 2,410 | 1,090 | 1,687 | 50 | 5,237 | |||||
| Additions and reversals, net | (7) | (7) | 105 | - | 91 | |||||
| Payments | - | (63) | (51) | (1) | (115) | |||||
| Indexation and interest | 21 | 48 | 30 | 2 | 101 | |||||
| Balance at March 31, 2021 | 2,424 | 1,068 | 1,771 | 51 | 5,314 | |||||
| Current liabilities | 40 | 75 | 354 | 1 | 470 | |||||
| Non-current liabilities | 2,384 | 993 | 1,417 | 50 | 4,844 | |||||
| 2,424 | 1,068 | 1,771 | 51 | 5,314 | ||||||
51
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
l) Contingent liabilities
| Parent Company | ||||
| March 31, 2022 | December 31, 2021 | |||
| Tax litigations | 31,287 | 28,377 | ||
| Civil litigations | 6,596 | 6,461 | ||
| Labor litigations | 2,909 | 2,785 | ||
| Environmental litigations | 4,534 | 4,391 | ||
| Total | 45,326 | 42,014 | ||
52
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
m) Transactions with related parties
| Parent Company | ||||||||||||
| Three-month period ended March 31, 2022 | Three-month period ended March 31, 2021 | |||||||||||
| Net operating revenue | Cost and operating expenses | Financial result | Net operating revenue | Cost and operating expenses | Financial result | |||||||
| Subsidiaries | 25,724 | (174) | (4,621) | 40,160 | (1,088) | 327 | ||||||
| Vale International | 25,670 | - | (4,585) | 40,117 | - | 345 | ||||||
| Others | 54 | (174) | (36) | 43 | (1,088) | (18) | ||||||
| Joint Ventures | 687 | (1,018) | (37) | 867 | (690) | 8 | ||||||
| Companhia Siderúrgica do Pecém | 657 | - | (33) | 867 | - | 18 | ||||||
| Aliança Geração de Energia S.A. | - | (132) | - | - | (153) | - | ||||||
| Pelletizing companies (i) | - | (367) | (4) | - | (117) | (9) | ||||||
| MRS Logística S.A. | - | (344) | - | - | (270) | - | ||||||
| Norte Energia S.A. | - | (162) | - | - | (134) | - | ||||||
| Others | 30 | (13) | - | - | (16) | (1) | ||||||
| Associates | 328 | (25) | (13) | 326 | (30) | (2) | ||||||
| VLI | 328 | (25) | (3) | 325 | (30) | (3) | ||||||
| Others | - | - | (10) | 1 | - | 1 | ||||||
| Major stockholders | - | - | 1,483 | - | - | (568) | ||||||
| Bradesco | - | - | 1,482 | - | - | (569) | ||||||
| Banco do Brasil | - | - | 1 | - | - | 1 | ||||||
| Total | 26,739 | (1,217) | (3,188) | 41,353 | (1,808) | (235) | ||||||
(i) Aggregated entities: Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização.
53
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
n) Outstanding balances with related parties
| Parent Company | |||||||
| March 31, 2022 | December 31, 2021 | ||||||
| Assets | Assets | ||||||
| Cash and cash equivalents | Accounts receivable | Dividends receivable, financial instruments and other assets | Cash and cash equivalents | Accounts receivable | Dividends receivable, financial instruments and other assets | ||
| Subsidiaries | - | 29,370 | 4,194 | - | 45,475 | 1,036 | |
| Vale International S.A. | - | 29,320 | - | - | 45,430 | - | |
| Minerações Brasileiras Reunidas S.A. | - | 3,370 | - | - | 213 | ||
| Other | - | 50 | 824 | - | 45 | 823 | |
| Joint Ventures | - | 452 | 623 | - | 403 | 449 | |
| Companhia Siderúrgica do Pecém | - | 427 | 189 | - | 401 | 219 | |
| Pelletizing companies (i) | - | - | 133 | - | - | 208 | |
| MRS Logistica S.A. | - | - | 19 | - | - | 18 | |
| Other | - | 25 | 282 | - | 2 | 4 | |
| Associates | - | 860 | - | - | 102 | 17 | |
| VLI | - | 846 | - | - | 87 | - | |
| Other | - | 14 | - | - | 15 | 17 | |
| Major stockholders | 360 | - | 401 | 8,355 | - | 28 | |
| Bradesco | 308 | - | 401 | 7,970 | - | 28 | |
| Banco do Brasil | 52 | - | - | 385 | - | - | |
| Pension Plan | - | 78 | - | - | 64 | - | |
| Total | 360 | 30,760 | 5,218 | 8,355 | 46,044 | 1,530 | |
(i) Aggregated entities: Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização.
54
Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated | |
| Parent Company | |||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Liabilities | Liabilities | ||||||||||
| Supplier and contractors | Loans | Financial instruments and other liabilities | Supplier and contractors | Loans | Financial instruments and other liabilities | ||||||
| Subsidiaries | 109 | 72,973 | 6,588 | 135 | 86,125 | 7,704 | |||||
| Vale International S.A. | - | 72,973 | 4,601 | - | 86,125 | 5,367 | |||||
| Others | 109 | - | 1,987 | 135 | - | 2,337 | |||||
| Joint Ventures | 607 | - | - | 387 | - | - | |||||
| Pelletizing companies (i) | 307 | - | - | 73 | - | - | |||||
| MRS Logística S.A. | 228 | - | - | 228 | - | - | |||||
| Others | 72 | - | - | 86 | - | - | |||||
| Associates | 73 | - | 835 | 42 | - | 262 | |||||
| VLI | 30 | - | 835 | 32 | - | 262 | |||||
| Others | 43 | - | - | 10 | - | - | |||||
| Major stockholders | - | - | 530 | - | - | 1,479 | |||||
| Bradesco | - | - | 493 | - | - | 1,479 | |||||
| Others | - | - | 37 | - | - | - | |||||
| Pension plan | 52 | - | - | 54 | - | - | |||||
| Total | 841 | 72,973 | 7,953 | 618 | 86,125 | 9,445 | |||||
(i) Aggregated entities: Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização.
55
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Vale S.A. (Registrant) | ||
| Date: April 27, 2022 | ||