Table of Contents

 

 

 

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, 2015

 

Vale S.A.

 

Avenida Graça Aranha, No. 26
20030-900 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 o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

 

(Check One) Yes o No x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

 

(Check One) Yes o No x

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

(Check One) Yes o No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82-      .

 

 

 



Table of Contents

 

GRAPHIC

 

Interim Financial Statements

 

March 31, 2015

 

IFRS

 

 

Filed with the CVM, SEC and HKEx on

April 30, 2015

 

1



Table of Contents

 

GRAPHIC

 

Vale S.A.

Index to the Interim Financial Statements

 

 

Page

 

 

Report of independent registered public accounting firm

3

 

 

Condensed Consolidated Balance Sheet as at March 31, 2015 and December 31, 2014

4

 

 

Condensed Consolidated Statement of Income for the three-months period ended March 31, 2015 and 2014

6

 

 

Condensed Consolidated Statement of Comprehensive Income for the three-months period ended March 31, 2015 and 2014

7

 

 

Condensed Consolidated Statement of Changes in Stockholder’s Equity for the three-months period ended March 31, 2015 and 2014

8

 

 

Condensed Consolidated Statement of Cash Flow for the three-months period ended March 31, 2015 and 2014

9

 

 

Selected Notes to the Interim Financial Statements

10

 

 

Board of Directors, Fiscal Council, Advisory Committees and Executive Officers

46

 

2



Table of Contents

 

GRAPHIC

 

Report of independent registered public accounting firm

 

GRAPHIC

 

KPMG Auditores Independentes
Av. Almirante Barroso, 52 - 4º
20031-000 - Rio de Janeiro, RJ - Brasil

Caixa Postal 2888

20001-970 - Rio de Janeiro, RJ - Brasil

 

Central Tel
Fax
Internet

55 (21) 3515-9400

55 (21) 3515-9000

www.kpmg.com.br

 

Report of independent registered public accounting firm

 

To the Board of Directors and Stockholders of

Vale S.A.

Rio de Janeiro - RJ

 

We have reviewed the accompanying condensed consolidated balance sheet of Vale S.A. (“the Company”) and its subsidiaries as of March 31, 2015 and the related condensed consolidated statements of loss, comprehensive loss, changes in stockholders’ equity and cash flows for the tree-month period then ended. These condensed consolidated financial statements are responsibility of Company’s management.

 

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express an audit opinion.

 

Based on our review, we are not aware of any material modification that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vale S.A. and its subsidiaries as of December 31, 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended, and in our report dated February 25, 2015, we expressed an unqualified opinion on those consolidated financial statements.

 

The condensed consolidated financial statement of the Company for the quarter ended March 31, 2014 presented for comparison purposes, were reviewed by other independent auditors, who issued an unqualified report dated April 30, 2014.

 

KPMG Auditores Independentes

Rio de Janeiro, Brazil

April 29, 2015

 

 

 

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.

 

KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

 

3



Table of Contents

 

GRAPHIC

 

Condensed Consolidated Balance Sheet

 

In millions of United States dollars

 

 

 

Notes

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

8

 

3,684

 

3,974

 

Financial investments

 

 

 

1

 

148

 

Derivative financial instruments

 

23

 

189

 

166

 

Accounts receivable

 

9

 

2,291

 

3,275

 

Related parties

 

30

 

522

 

579

 

Inventories

 

10

 

4,064

 

4,501

 

Prepaid income taxes

 

 

 

1,284

 

1,581

 

Recoverable taxes

 

11

 

1,548

 

1,700

 

Others

 

 

 

740

 

670

 

 

 

 

 

14,323

 

16,594

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

6

 

3,380

 

3,640

 

 

 

 

 

17,703

 

20,234

 

Non-current assets

 

 

 

 

 

 

 

Related parties

 

30

 

23

 

35

 

Loans and financing

 

 

 

217

 

229

 

Judicial deposits

 

17

(c)

1,102

 

1,269

 

Recoverable income taxes

 

 

 

455

 

478

 

Deferred income taxes

 

19

 

4,374

 

3,976

 

Recoverable taxes

 

11

 

434

 

401

 

Derivative financial instruments

 

23

 

34

 

87

 

Others

 

 

 

662

 

705

 

 

 

 

 

7,301

 

7,180

 

 

 

 

 

 

 

 

 

Investments

 

12

 

3,812

 

4,133

 

Intangible assets, net

 

13

 

6,026

 

6,820

 

Property, plant and equipment, net

 

14

 

69,708

 

78,122

 

 

 

 

 

86,847

 

96,255

 

Total

 

 

 

104,550

 

116,489

 

 

4



Table of Contents

 

GRAPHIC

 

Condensed Consolidated Balance Sheet

 

In millions of United States dollars

(continued)

 

 

 

Notes

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

(unaudited)

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Suppliers and contractors

 

 

 

3,429

 

4,354

 

Payroll and related charges

 

 

 

526

 

1,163

 

Derivative financial instruments

 

23

 

904

 

1,416

 

Loans and financing

 

15

 

3,195

 

1,419

 

Related parties

 

30

 

267

 

306

 

Income taxes - Settlement program

 

18

 

388

 

457

 

Taxes payable and royalties

 

 

 

471

 

550

 

Provision for income taxes

 

 

 

171

 

353

 

Employee postretirement obligations

 

20

(a)

68

 

67

 

Asset retirement obligations

 

16

 

124

 

136

 

Others

 

 

 

339

 

405

 

 

 

 

 

9,882

 

10,626

 

 

 

 

 

 

 

 

 

Liabilities associated with non-current assets held for sale

 

6

 

144

 

111

 

 

 

 

 

10,026

 

10,737

 

Non-current liabilities

 

 

 

 

 

 

 

Derivative financial instruments

 

23

 

2,496

 

1,610

 

Loans and financing

 

15

 

25,292

 

27,388

 

Related parties

 

30

 

90

 

109

 

Employee postretirement obligations

 

20

(a)

2,121

 

2,236

 

Provisions for litigation

 

17

(a)

1,087

 

1,282

 

Income taxes - Settlement program

 

18

 

4,876

 

5,863

 

Deferred income taxes

 

19

 

3,099

 

3,341

 

Asset retirement obligations

 

16

 

2,888

 

3,233

 

Participative stockholders’ debentures

 

29

(c)

1,165

 

1,726

 

Redeemable noncontrolling interest

 

 

 

196

 

243

 

Deferred revenue - Gold stream

 

28

 

1,841

 

1,323

 

Others

 

 

 

1,056

 

1,077

 

 

 

 

 

46,207

 

49,431

 

Total liabilities

 

 

 

56,233

 

60,168

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

24

 

 

 

 

 

Preferred class A stock — 7,200,000,000 no-par-value shares authorized and 2,027,127,718 shares issued

 

 

 

23,089

 

23,089

 

Common stock — 3,600,000,000 no-par-value shares authorized and 3,217,188,402 shares issued

 

 

 

38,525

 

38,525

 

Treasury stock — 59,405,792 preferred and 31,535,402 common shares

 

 

 

(1,477

)

(1,477

)

Results from operations with noncontrolling stockholders

 

 

 

(451

)

(449

)

Results on conversion of shares

 

 

 

(152

)

(152

)

Unrealized fair value gain (losses)

 

 

 

(1,547

)

(1,713

)

Cumulative translation adjustments

 

 

 

(24,393

)

(22,686

)

Profit reserves

 

 

 

13,575

 

19,985

 

Total company stockholders’ equity

 

 

 

47,169

 

55,122

 

Noncontrolling stockholders’ interests

 

 

 

1,148

 

1,199

 

Total stockholders’ equity

 

 

 

48,317

 

56,321

 

Total liabilities and stockholders’ equity

 

 

 

104,550

 

116,489

 

 

The accompanying notes are an integral part of these interim financial statements.

 

5



Table of Contents

 

GRAPHIC

 

Condensed Consolidated Statement of Income

 

In millions of United States dollars, except as otherwise stated

 

 

 

 

 

Three-months period ended (unaudited)

 

 

 

Notes

 

March 31, 2015

 

March 31, 2014

 

 

 

 

 

 

 

 

 

Net operating revenue

 

25

(c)

6,240

 

9,503

 

Cost of goods sold and services rendered

 

26

(a)

(5,168

)

(5,590

)

Gross profit

 

 

 

1,072

 

3,913

 

 

 

 

 

 

 

 

 

Operating (expenses) income

 

 

 

 

 

 

 

Selling and administrative expenses

 

26

(b)

(195

)

(282

)

Research and evaluation expenses

 

 

 

(119

)

(145

)

Pre operating and stoppage operation

 

 

 

(264

)

(248

)

Other operating expenses, net

 

26

(c)

46

 

(217

)

 

 

 

 

(532

)

(892

)

Gain on measurement or sale of non-current assets

 

6

 

193

 

 

Operating income

 

 

 

733

 

3,021

 

 

 

 

 

 

 

 

 

Financial income

 

27

 

2,350

 

1,339

 

Financial expenses

 

27

 

(6,860

)

(1,190

)

Equity results from joint ventures and associates

 

12

 

(271

)

195

 

Results on sale or disposal of investments from joint ventures and associates

 

6

 

18

 

 

Net income (loss) before income taxes

 

 

 

(4,030

)

3,365

 

 

 

 

 

 

 

 

 

Income taxes

 

19

 

 

 

 

 

Current tax

 

 

 

(70

)

(928

)

Deferred tax

 

 

 

930

 

(61

)

 

 

 

 

860

 

(989

)

Net income (loss)

 

 

 

(3,170

)

2,376

 

Loss attributable to noncontrolling interests

 

 

 

(52

)

(139

)

Net income (loss) attributable to the Company’s stockholders

 

 

 

(3,118

)

2,515

 

 

 

 

 

 

 

 

 

Earnings per share attributable to the Company’s stockholders:

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

24

(b)

 

 

 

 

Preferred share (USD)

 

 

 

(0.61

)

0.49

 

Common share (USD)

 

 

 

(0.61

)

0.49

 

 

The accompanying notes are an integral part of these interim financial statements.

 

6



Table of Contents

 

GRAPHIC

 

Condensed Consolidated Statement of Comprehensive Income

 

In millions of United States dollars

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Net income (loss)

 

(3,170

)

2,376

 

Other comprehensive income

 

 

 

 

 

Items that will not be reclassified subsequently to income

 

 

 

 

 

Cumulative translation adjustments

 

(9,494

)

2,311

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

Gross balance for the period

 

(101

)

24

 

Effect of taxes

 

50

 

(3

)

Equity results from joint ventures and associates, net taxes

 

 

1

 

 

 

(51

)

22

 

Total items that will not be reclassified subsequently to income

 

(9,545

)

2,333

 

 

 

 

 

 

 

Items that will be reclassified subsequently to income

 

 

 

 

 

Cumulative translation adjustments

 

 

 

 

 

Gross balance for the period

 

4,593

 

(1,765

)

 

 

 

 

 

 

Cash flow hedge

 

 

 

 

 

Gross balance for the period

 

260

 

(4

)

Effect of taxes

 

 

3

 

Equity results from joint ventures and associates, net taxes

 

(2

)

 

Transfer of realized results to income, net of taxes

 

(145

)

(16

)

 

 

113

 

(17

)

Total of items that will be reclassified subsequently to income

 

4,706

 

(1,782

)

Total comprehensive income (loss)

 

(8,009

)

2,927

 

Comprehensive loss attributable to noncontrolling interests

 

(58

)

(141

)

Comprehensive income (loss) attributable to the Company’s stockholders

 

(7,951

)

3,068

 

 

 

(8,009

)

2,927

 

 

The accompanying notes are an integral part of these interim financial statements.

 

7



Table of Contents

 

GRAPHIC

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity

 

In millions of United States dollars

 

 

 

Three-months period ended

 

 

 

Capital

 

Results on
conversion of
shares

 

Results from
operation with
noncontrolling
stockholders

 

Profit
reserves

 

Treasury
stocks

 

Unrealized fair
value gain
(losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Total
Company
stockholder’s
equity

 

Noncontrolling
stockholders’
interests

 

Total
stockholder’s
equity

 

December 31, 2013

 

60,578

 

(152

)

(400

)

29,566

 

(4,477

)

(1,202

)

(20,588

)

 

63,325

 

1,611

 

64,936

 

Net income (loss)

 

 

 

 

 

 

 

 

2,515

 

2,515

 

(139

)

2,376

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

22

 

 

 

22

 

 

22

 

Cash flow hedge

 

 

 

 

 

 

(17

)

 

 

(17

)

 

(17

)

Translation adjustments

 

 

 

 

1,040

 

 

(22

)

(566

)

96

 

548

 

(2

)

546

 

Contribution and distribution to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalization of noncontrolling stockholders advances

 

 

 

 

 

 

 

 

 

 

38

 

38

 

Dividends of noncontrolling stockholders

 

 

 

 

 

 

 

 

 

 

(2

)

(2

)

March 31, 2014 (unaudited)

 

60,578

 

(152

)

(400

)

30,606

 

(4,477

)

(1,219

)

(21,154

)

2,611

 

66,393

 

1,506

 

67,899

 

 

 

 

Three-months period ended

 

 

 

Capital

 

Results on
conversion of
shares

 

Results from
operation with
noncontrolling
stockholders

 

Profit
reserves

 

Treasury
stocks

 

Unrealized fair
value gain
(losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Total
Company
stockholder’s
equity

 

Noncontrolling
stockholders’
interests

 

Total
stockholder’s
equity

 

December 31, 2014

 

61,614

 

(152

)

(449

)

19,985

 

(1,477

)

(1,713

)

(22,686

)

 

55,122

 

1,199

 

56,321

 

Loss

 

 

 

 

 

 

 

 

(3,118

)

(3,118

)

(52

)

(3,170

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

(51

)

 

 

(51

)

 

(51

)

Cash flow hedge

 

 

 

 

 

 

113

 

 

 

113

 

 

113

 

Translation adjustments

 

 

 

 

(3,437

)

 

104

 

(1,707

)

145

 

(4,895

)

(6

)

(4,901

)

Contribution and distribution to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions and disposal of participation of noncontrolling stockholders

 

 

 

(2

)

 

 

 

 

 

(2

)

2

 

 

Capitalization of noncontrolling stockholders advances

 

 

 

 

 

 

 

 

 

 

7

 

7

 

Dividends of noncontrolling stockholders

 

 

 

 

 

 

 

 

 

 

(2

)

(2

)

March 31, 2015 (unaudited)

 

61,614

 

(152

)

(451

)

16,548

 

(1,477

)

(1,547

)

(24,393

)

(2,973

)

47,169

 

1,148

 

48,317

 

 

The accompanying notes are an integral part of these interim financial statements.

 

8



Table of Contents

 

GRAPHIC

 

Condensed Consolidated Statement of Cash Flow

 

In millions of United States dollars

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Cash flow from operating activities:

 

 

 

 

 

Net income (loss)

 

(3,170

)

2,376

 

Adjustments for:

 

 

 

 

 

Equity results from joint ventures and associates

 

271

 

(195

)

Gain on measurement or sale of non-current assets

 

(211

)

 

Gain on disposal of property, plant and equipment and intangibles

 

(215

)

 

Depreciation, amortization and depletion

 

1,035

 

1,026

 

Deferred income taxes

 

(930

)

61

 

Foreign exchange and indexation, net

 

3,290

 

(311

)

Unrealized derivative losses, net

 

803

 

(195

)

Participative stockholders’ debentures

 

(275

)

22

 

Others

 

(348

)

9

 

Decrease (increase) in assets:

 

 

 

 

 

Accounts receivable

 

817

 

1,822

 

Inventories

 

189

 

(811

)

Recoverable taxes

 

(149

)

765

 

Others

 

(59

)

53

 

Increase (decrease) in liabilities:

 

 

 

 

 

Suppliers and contractors

 

(387

)

20

 

Payroll and related charges

 

(567

)

(594

)

Taxes and contributions

 

148

 

(99

)

Deferred revenue - Gold stream

 

532

 

 

Income taxes - Settlement program

 

35

 

47

 

Others

 

(278

)

86

 

Net cash provided by operating activities

 

531

 

4,082

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Financial investments redeemed

 

145

 

1

 

Loans and advances granted

 

(5

)

(97

)

Guarantees and deposits granted

 

(26

)

(32

)

Additions to investments

 

(10

)

(121

)

Acquisition of subsidiary (note 7(b))

 

(90

)

 

Additions to property, plant and equipment and intangible

 

(2,200

)

(2,383

)

Dividends and interest on capital received from joint ventures and associates

 

27

 

11

 

Proceeds from disposal of assets and investments

 

107

 

 

Proceeds from gold stream transaction

 

368

 

 

Net cash used in investing activities

 

(1,684

)

(2,621

)

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

Loans and financing

 

 

 

 

 

Additions

 

1,342

 

651

 

Repayments

 

(301

)

(293

)

Repayments to stockholders:

 

 

 

 

 

Dividends and interest on capital attributed to noncontrolling interest

 

(3

)

 

Net cash provided by (used in) financing activities

 

1,038

 

358

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(115

)

1,819

 

Cash and cash equivalents in the beginning of the period

 

3,974

 

5,321

 

Effect of exchange rate changes on cash and cash equivalents

 

(175

)

42

 

Cash and cash equivalents at end of the period

 

3,684

 

7,182

 

 

 

 

 

 

 

Cash paid during the period for (i):

 

 

 

 

 

Interest on loans and financing

 

(471

)

(453

)

Income taxes

 

(244

)

(159

)

Income taxes - Settlement program

 

(106

)

(118

)

Derivatives settlement

 

(657

)

17

 

Non-cash transactions:

 

 

 

 

 

Additions to property, plant and equipment - interest capitalization

 

196

 

15

 

 


(i) Amounts paid are classified as cash flows from operating activities.

 

The accompanying notes are an integral part of these interim financial statements.

 

9



Table of Contents

 

GRAPHIC

 

Selected Notes to Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

1.                                     Corporate information

 

Vale S.A. (the “Parent Company”) is a public company headquartered at 26, Av. Graça Aranha, Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo (“BM&F BOVESPA”), New York (“NYSE”), Paris (“NYSE Euronext”) and Hong Kong (“HKEx”).

 

Vale S.A. and its direct and indirect subsidiaries (“Vale”, “Group” or “Company”) are principally engaged in the research, production and sale of iron ore and pellets, nickel, fertilizer, copper, coal, manganese, ferroalloys, cobalt, platinum group metals and precious metals. The Company also operates in the segments of energy and steel. The information by segment is presented in note 25.

 

2.                                      Summary of the main accounting practices and accounting estimates

 

a)                                     Basis of presentation

 

The condensed consolidated interim financial statements of the Company (“interim financial statements”) have been prepared in accordance with IAS 34 Interim Financial Reporting of the International Financial Reporting Standards (“IFRS”) as adopted by the International Accounting Standards Board (“IASB”).

 

The interim financial statements have been prepared under the historical cost convention as adjusted to reflect: (i) the fair value of held for trading financial instruments measured at fair value through the statement of income or available-for-sale financial instruments measured at fair value through the statement of comprehensive income; and (ii) impairment of assets.

 

These interim financial statements have been reviewed, not audited. However, principles, estimates, accounting practices, measurement methods and standards adopted are consistent with those presented on the financial statements for the year ended December 31, 2014. These interim financial statements were prepared by Vale to update users about relevant information presented in the period and should be read in conjunction with the financial statements for the year ended December 31, 2014.

 

The Company evaluated subsequent events through April 29, 2015, which is the date the interim financial statements were approved by the Board of Directors.

 

b)                                     Functional currency and presentation currency

 

The interim financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian Real (“BRL” or “R$”). For presentation purposes, these interim financial statements are presented in United States dollar (“USD” or “US$”) as the Company believes that this is how international investors analyze the interim financial statements.

 

Operations in other currencies are translated into the functional currency using the actual exchange rates in force on the respective transactions dates. The foreign exchange gains and losses resulting from the translation at the exchange rates in force at the end of the period are recognized in the statement of income as financial expense or financial income. The exceptions are transactions for which gains and losses are recognized in the comprehensive income.

 

The statement of income and balance sheet of the Group’s entities which functional currency is different from the presentation currency are translated into the presentation currency as follows: (i) assets, liabilities and stockholders’ equity (except components described in item (iii)) are translated at the closing rate at the balance sheet date; (ii) income and expenses are translated at the average exchange rates, except for specific transactions that, considering their significance, are translated at the rate at the transaction date and; (iii) capital, capital reserves and treasury stock are translated at the rate at the date of each transaction. All resulting exchange differences are recognized in comprehensive income as cumulative translation adjustment, and transferred to the statement of income when the operations are realized.

 

10



Table of Contents

 

GRAPHIC

 

The exchange rates of the major currencies that impact the operations are:

 

 

 

Exchange rates used for conversions into Brazilian reais

 

 

 

Closing rate as of

 

Average rate for the three-months period ended

 

 

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2014

 

 

 

(unaudited)

 

 

 

(unaudited)

 

(unaudited)

 

US dollar (“US$”)

 

3.2080

 

2.6562

 

2.8702

 

2.3652

 

Canadian dollar (“CAD”)

 

2.5292

 

2.2920

 

2.3120

 

2.1456

 

Australian dollar (“AUD”)

 

2.4464

 

2.1765

 

2.2543

 

2.1222

 

Euro (“EUR” or “€”)

 

3.4457

 

3.2270

 

3.2212

 

3.2399

 

 

3.                                      Critical accounting estimates and judgment

 

The critical accounting estimates and judgment are the same as those adopted when preparing the financial statements for the year ended December 31, 2014.

 

4.                                      Accounting standards issued but not yet effective

 

The standards and interpretations issued by IASB but not yet effective are disclosed below:

 

IFRS 9 Financial instruments - In July 2014 the IASB issued IFRS 9 — Financial instruments, sets out the requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This Standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption will be required from January 1, 2018 and the Company is currently analyzing potential impacts regarding this pronouncement on the financial statements.

 

IFRS 15 Revenue from contracts with customers - In May 2014 the IASB issued IFRS 15 statement - Revenue from Contracts with customers, sets out the requirements for revenue recognition that apply to all contracts with customer (except for contracts that are within the scope of the Standards on leases, insurance contracts and financial instruments), and replaces the current pronouncements IAS 18 - revenue, IAS 11 - Construction contracts and interpretations related to revenue recognition. The principle core in that framework is that a company should recognize revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The adoption will be required from January 1, 2017 and the Company is currently analyzing potential impacts regarding this pronouncement on the financial statements.

 

5.                                      Risk management

 

There was no significant change in relation to risk management policies disclosed in the financial statements for the year ended December 31, 2014.

 

6.                                      Non-current assets and liabilities held for sale

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

Nacala

 

Energy

 

Nacala

 

Total

 

 

 

(unaudited)

 

 

 

 

 

 

 

Non-current assets held for sale

 

 

 

 

 

 

 

 

 

Accounts receivable

 

5

 

 

8

 

8

 

Other current assets

 

169

 

 

157

 

157

 

Investments

 

 

88

 

 

88

 

Property, plant and equipment, net

 

3,206

 

477

 

2,910

 

3,387

 

Total assets

 

3,380

 

565

 

3,075

 

3,640

 

 

 

 

 

 

 

 

 

 

 

Liabilities associated with non-current assets held for sale

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

128

 

 

54

 

54

 

Other current liabilities

 

16

 

 

57

 

57

 

Total liabilities

 

144

 

 

111

 

111

 

Net assets held for sale

 

3,236

 

565

 

2,964

 

3,529

 

 

11



Table of Contents

 

GRAPHIC

 

Nacala logistic corridor (“Nacala”)

 

In December 2014, the Company signed an agreement with Mitsui & Co., Ltd. (“Mitsui”) to sell 50% of its stake of 70% in the Nacala corridor, Nacala is a combination of railroad and port concessions under construction located in Mozambique and Malawi.

 

After completion of the transaction, Vale will share control of Nacala with Mitsui and therefore will not consolidate the assets, liabilities and results of those entities. The net asset was transferred to assets held for sale with no impact in the statement of income.

 

Energy generation assets

 

In December 2013, the Company signed agreements with CEMIG Geração e Transmissão S.A. (“CEMIG GT”), as follows:

 

(a) A new entity Aliança Norte Participações S.A., was incorporated and Vale contributed its 9% investment in Norte Energia S.A. (“Norte Energia”), which is the company in charge of construction and operation of the Belo Monte Hydroelectric facility. Vale committed to sell 49% and share control of the new entity to CEMIG GT. In the first quarter of 2015, after receiving all regulatory approvals and other customary precedent conditions the Company concluded the transaction and received cash proceeds of US$97, recognizing US$18 as a result on sale of investment in associates in the income statement.

 

(b) A new entity Aliança Geração de Energia S.A. (“Aliança Geração”) was incorporated and Vale committed to contribute its shares over several power generation assets which use to supply energy for the Company’s operations. In exchange CEMIG GT committed to contribute its stakes in some of its power generation assets.  In the first quarter of 2015, after receiving all regulatory approvals and other customary precedent conditions, the exchange of assets was completed and Vale holds 55% and shares control of the new entity with CEMIG GT. A long term contract was signed between Vale and Aliança Geração for the energy supply. Due to the completion of this transaction, the Company (i) derecognized the assets held for sale related to this transaction; (ii) recognized as investment its share in the joint venture Aliança Geração; and (iii) recognized US$193 in the income statement as a gain on measurement or sales of non-current asset based on the fair value of the transferred by CEMIG GT. This transaction has no cash proceeds or disbursements.

 

7.                                      Acquisitions and divestitures

 

a)        Divestiture of VBG-Vale BSGR Limited (“VBG”)

 

VBG is the holding company which held the Simandou mining rights located in Guinea. In April 2014, the Government of Guinea revoked VBG mining rights, without any finding of wrongdoing on the part of Vale. During 2014, as a result of the loss of the mining rights, Vale recognized full impairment of the assets related to VBG. During the first quarter of 2015, the Company sold its stake on VBG to its partner in the project and kept its right to any recoverable amount it may derive from the Simandou project by the partner. The transaction had no impact in cash or in the statement of income.

 

b)       Acquisition of Facon Construção e Mineração S.A. (“Facon”)

 

During the first quarter of 2015, the Company acquired all shares of Facon, a wholly owned subsidiary of Fagundes Construção e Mineração S.A. (“FCM”). FCM is a logistic service provider for Vale Fertilizantes S.A. The Facon business was carved out from FCM with assets and liabilities directly related to the Vale Fertilizantes S.A. business being transferred to it. The purchase price allocation based on the fair values of acquired assets and liabilities was calculated on studies performed by the Company. Subsequently, Facon was merged to Vale Fertilizantes S.A.

 

Purchase price

 

90

 

Book value of property, plant and equipment

 

77

 

Book value of other assets acquired and liabilities assumed, net

 

(69

)

Adjustment to fair value of property, plant and equipment and mining rights

 

43

 

Goodwill

 

39

 

 

12



Table of Contents

 

GRAPHIC

 

8.                                      Cash and cash equivalents

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Cash and bank deposits

 

2,347

 

2,109

 

Short-term investments

 

1,337

 

1,865

 

 

 

3,684

 

3,974

 

 

Cash and cash equivalents includes cash, immediately redeemable deposits and short-term investments with an insignificant risk of changes in value and readily convertible to cash, part in Brazilian Real, indexed to the Brazilian Interbank Interest rate (“DI Rate”or”CDI”) and part denominated in US dollar, mainly time deposits.

 

9.                                      Accounts receivable

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Ferrous minerals

 

1,309

 

2,155

 

Coal

 

104

 

122

 

Base metals

 

733

 

777

 

Fertilizers

 

162

 

136

 

Others

 

57

 

172

 

 

 

2,365

 

3,362

 

 

 

 

 

 

 

Provision for doubtful debts

 

(74

)

(87

)

 

 

2,291

 

3,275

 

 

Accounts receivable related to the steel sector represented 74.17% and 77.97% of total receivables on March 31, 2015 and December 31, 2014, respectively.

 

No individual customer represents over 10% of receivables or revenues.

 

The provision for doubtful debts recorded in the consolidated statement of income as at March 31, 2015 and 2014 totaled US$2 and US23, respectively. The Company recognized write-offs as at March 31, 2015 and 2014 in the amount of US$0 and US$2, respectively.

 

13



Table of Contents

 

GRAPHIC

 

10.                               Inventories

 

Inventories are comprised as follows:

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Inventories of products

 

 

 

 

 

 

 

 

 

 

 

Ferrous minerals

 

 

 

 

 

Iron ore

 

936

 

1,110

 

Pellets

 

81

 

187

 

Manganese and ferroalloys

 

55

 

69

 

 

 

1,072

 

1,366

 

 

 

 

 

 

 

Coal

 

144

 

155

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

Nickel and other products

 

1,319

 

1,435

 

Copper

 

29

 

26

 

 

 

1,348

 

1,461

 

Fertilizers

 

 

 

 

 

Potash

 

17

 

12

 

Phosphates

 

337

 

309

 

Nitrogen

 

15

 

23

 

 

 

369

 

344

 

Other products

 

5

 

4

 

Total of inventories of products

 

2,938

 

3,330

 

 

 

 

 

 

 

Inventories of consumables

 

1,126

 

1,171

 

Total

 

4,064

 

4,501

 

 

As of March 31, 2015 consolidated inventories are stated net of provisions for nickel and coal products in the amount of US$42 (US$19 as of December 31, 2014) and US$325 (US$285 as of December 31, 2014), respectively.

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Inventories of products

 

 

 

 

 

Balance at beginning of the period

 

3,330

 

2,896

 

Production and acquisition

 

4,590

 

4,958

 

Transfer from inventories of consumables

 

705

 

810

 

Cost of goods sold

 

(5,022

)

(5,326

)

Provision for market value adjustment

 

(63

)

(14

)

Translation adjustments

 

(602

)

122

 

Balance at end of the period

 

2,938

 

3,446

 

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Inventories of consumables

 

 

 

 

 

Balance at beginning of the period

 

1,171

 

1,229

 

Acquisition

 

858

 

844

 

Transfer to inventories of products

 

(705

)

(810

)

Transfer to held for sale

 

(1

)

 

Translation adjustments

 

(197

)

45

 

Balance at end of the period

 

1,126

 

1,308

 

 

14



Table of Contents

 

GRAPHIC

 

11.                               Recoverable taxes

 

The recoverable taxes, net of provision for losses on tax credits, are as follows:

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Value-added tax

 

1,002

 

1,057

 

Brazilian federal contributions

 

952

 

1,010

 

Others

 

28

 

34

 

Total

 

1,982

 

2,101

 

 

 

 

 

 

 

Current

 

1,548

 

1,700

 

Non-current

 

434

 

401

 

Total

 

1,982

 

2,101

 

 

12.                               Investments

 

The changes of investments in associates and joint ventures are as follow:

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Balance at beginning of the period

 

4,133

 

3,584

 

Aquisitions (i)

 

579

 

 

Additions

 

10

 

121

 

Transfer due to acquisition of control

 

 

79

 

Translation adjustment

 

(605

)

122

 

Equity results on statement of income

 

(271

)

195

 

Equity results on statement of comprehensive income

 

(2

)

1

 

Dividends declared

 

(27

)

(42

)

Transfer to held for sale

 

(5

)

 

Transfer to held for sale - VLI S.A.

 

 

1,255

 

Balance at end of the period

 

3,812

 

5,315

 

 


(i) Refers to Aliança Geração de Energia S.A., see note 6.

 

15



Table of Contents

 

GRAPHIC

 

Investments (Continued)

 

 

 

 

 

 

 

Investments

 

Equity results

 

Received dividends

 

 

 

 

 

% voting

 

As of

 

Three-months period ended (unaudited)

 

Joint ventures and associates

 

% ownership

 

capital

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2014

 

March 31, 2015

 

March 31, 2014

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baovale Mineração S.A.

 

50.00

 

50.00

 

15

 

16

 

1

 

1

 

 

 

Companhia Coreano-Brasileira de Pelotização

 

50.00

 

50.00

 

74

 

86

 

4

 

8

 

 

 

Companhia Hispano-Brasileira de Pelotização (i)

 

50.89

 

51.00

 

64

 

80

 

4

 

3

 

13

 

11

 

Companhia Ítalo-Brasileira de Pelotização (i)

 

50.90

 

51.00

 

43

 

61

 

5

 

4

 

13

 

 

Companhia Nipo-Brasileira de Pelotização (i)

 

51.00

 

51.11

 

128

 

142

 

11

 

13

 

 

 

Minas da Serra Geral S.A.

 

50.00

 

50.00

 

17

 

20

 

 

1

 

 

 

MRS Logística S.A.

 

47.59

 

46.75

 

431

 

510

 

9

 

14

 

 

 

Samarco Mineração S.A.

 

50.00

 

50.00

 

2

 

200

 

(173

)

174

 

 

 

VLI S.A.

 

37.61

 

37.61

 

908

 

1,109

 

(3

)

 

 

 

Zhuhai YPM Pellet Co.

 

25.00

 

25.00

 

21

 

24

 

 

 

 

 

Others

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

1,703

 

2,248

 

(142

)

217

 

26

 

11

 

Coal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henan Longyu Energy Resources Co., Ltd.

 

25.00

 

25.00

 

356

 

355

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Korea Nickel Corp.

 

25.00

 

25.00

 

19

 

21

 

(1

)

(1

)

 

 

Teal Minerals Inc.

 

50.00

 

50.00

 

189

 

194

 

(4

)

(5

)

 

 

 

 

 

 

 

 

208

 

215

 

(5

)

(6

)

 

 

Others

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aliança Geração de Energia S.A.

 

55.00

 

55.00

 

568

 

 

1

 

 

 

 

Aliança Norte Energia Participações S.A.

 

51.00

 

51.00

 

82

 

 

2

 

 

 

 

California Steel Industries, Inc.

 

50.00

 

50.00

 

179

 

184

 

(5

)

2

 

 

 

Companhia Siderúrgica do Pecém (ii)

 

50.00

 

50.00

 

488

 

725

 

(120

)

(3

)

 

 

Mineração Rio Grande do Norte S.A.

 

40.00

 

40.00

 

72

 

91

 

(3

)

6

 

 

 

Norte Energia S.A. (ii) (iii)

 

 

 

 

91

 

 

 

 

 

Thyssenkrupp Companhia Siderúrgica do Atlântico Ltd.

 

26.87

 

26.87

 

154

 

205

 

 

(18

)

 

 

Others

 

 

 

 

 

2

 

19

 

1

 

(15

)

1

 

 

 

 

 

 

 

 

1,545

 

1,315

 

(124

)

(28

)

1

 

 

Total

 

 

 

 

 

3,812

 

4,133

 

(271

)

195

 

27

 

11

 

 


(i)             Although the Company held majority of the voting capital, the entities are accounted under equity method due to existing veto rights held by other stockholders.

(ii)          Pre-operational stage.

(iii)       The Company’s interest in Norte Energia S.A. is indirectly owned by Aliança Norte Energia Participações S.A. (note 6).

 

16



Table of Contents

 

GRAPHIC

 

13.                               Intangible assets

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Cost

 

Amortization

 

Net

 

Cost

 

Amortization

 

Net

 

Indefinite useful life

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

3,394

 

 

3,394

 

3,760

 

 

3,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finite useful life

 

 

 

 

 

 

 

 

 

 

 

 

 

Concessions

 

2,925

 

(1,033

)

1,892

 

3,421

 

(1,208

)

2,213

 

Right of use

 

466

 

(209

)

257

 

518

 

(221

)

297

 

Software

 

1,189

 

(706

)

483

 

1,356

 

(806

)

550

 

 

 

4,580

 

(1,948

)

2,632

 

5,295

 

(2,235

)

3,060

 

Total

 

7,974

 

(1,948

)

6,026

 

9,055

 

(2,235

)

6,820

 

 

The table below shows the changes of intangible assets:

 

 

 

Three-months period ended (unaudited)

 

 

 

Goodwill

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance on December 31, 2013

 

4,140

 

1,907

 

253

 

571

 

6,871

 

Additions

 

 

184

 

 

5

 

189

 

Disposals

 

 

(3

)

 

 

(3

)

Amortization

 

 

(45

)

(7

)

(14

)

(66

)

Translation adjustment

 

36

 

73

 

(5

)

(1

)

103

 

Balance on March 31, 2014 (unaudited)

 

4,176

 

2,116

 

241

 

561

 

7,094

 

 

 

 

Three-months period ended (unaudited)

 

 

 

Goodwill

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance on December 31, 2014

 

3,760

 

2,213

 

297

 

550

 

6,820

 

Additions

 

 

122

 

 

74

 

196

 

Disposals

 

 

(13

)

 

 

(13

)

Amortization

 

 

(42

)

(11

)

(44

)

(97

)

Translation adjustment

 

(405

)

(388

)

(29

)

(97

)

(919

)

Acquisition of subsidiary (note 7(b))

 

39

 

 

 

 

39

 

Balance on March 31, 2015 (unaudited)

 

3,394

 

1,892

 

257

 

483

 

6,026

 

 

17



Table of Contents

 

GRAPHIC

 

14.                               Property, plant and equipment

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Cost

 

Accumulated
Depreciation

 

Net

 

Cost

 

Accumulated
Depreciation

 

Net

 

Land

 

923

 

 

923

 

1,069

 

 

1,069

 

Buildings

 

13,766

 

(2,424

)

11,342

 

14,144

 

(2,490

)

11,654

 

Facilities

 

14,637

 

(4,817

)

9,820

 

15,749

 

(4,936

)

10,813

 

Equipment

 

13,711

 

(4,745

)

8,966

 

14,381

 

(5,094

)

9,287

 

Mineral properties

 

18,288

 

(5,613

)

12,675

 

20,965

 

(6,036

)

14,929

 

Others

 

13,851

 

(3,870

)

9,981

 

14,888

 

(3,934

)

10,954

 

Construction in progress

 

16,001

 

 

16,001

 

19,416

 

 

19,416

 

 

 

91,177

 

(21,469

)

69,708

 

100,612

 

(22,490

)

78,122

 

 

Property, plant and equipment (net book value) pledged as guarantees for judicial claims on March 31, 2015 and December 31, 2014 were to US$51 and US$63, respectively.

 

The table below shows the movement of property, plant and equipment:

 

 

 

Three-months period ended

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance on December 31, 2013

 

945

 

7,785

 

10,937

 

8,404

 

16,276

 

10,519

 

26,799

 

81,665

 

Additions (i)

 

 

 

 

 

 

 

2,209

 

2,209

 

Disposals

 

 

(10

)

(3

)

(4

)

(58

)

(29

)

(19

)

(123

)

Depreciation and amortization

 

 

(76

)

(267

)

(304

)

(222

)

(185

)

 

(1,054

)

Translation adjustment

 

100

 

192

 

115

 

28

 

(98

)

513

 

215

 

1,065

 

Transfers

 

58

 

293

 

1,732

 

283

 

300

 

301

 

(2,967

)

 

Balance on March 31, 2014 (unaudited)

 

1,103

 

8,184

 

12,514

 

8,407

 

16,198

 

11,119

 

26,237

 

83,762

 

 

 

 

Three-months period ended

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance on December 31, 2014

 

1,069

 

11,654

 

10,813

 

9,287

 

14,929

 

10,954

 

19,416

 

78,122

 

Additions (i)

 

 

 

 

 

 

 

2,097

 

2,097

 

Disposals

 

 

(5

)

(1

)

(5

)

(151

)

(6

)

(2

)

(170

)

Depreciation and amortization

 

 

(135

)

(208

)

(308

)

(217

)

(198

)

 

(1,066

)

Translation adjustment

 

(156

)

(1,623

)

(1,558

)

(935

)

(1,429

)

(1,285

)

(2,409

)

(9,395

)

Transfers

 

10

 

1,451

 

774

 

926

 

(457

)

397

 

(3,101

)

 

Acquisition of subsidiary (note 7(b))

 

 

 

 

1

 

 

119

 

 

120

 

Balance on March 31, 2015 (unaudited)

 

923

 

11,342

 

9,820

 

8,966

 

12,675

 

9,981

 

16,001

 

69,708

 

 


(i) Includes interest capitalized and ARO, see cash flow.

 

15.                               Loans and financing

 

a)                                    Total debt

 

 

 

Current liabilities

 

Non-current liabilities

 

 

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

(unaudited)

 

 

 

Debt contracts in the international markets

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

US dollars

 

262

 

358

 

5,199

 

5,095

 

Others currencies

 

 

 

 

 

3

 

2

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

US dollars

 

2,115

 

69

 

12,140

 

13,239

 

Euro

 

 

 

1,611

 

1,822

 

Accrued charges

 

211

 

334

 

 

 

 

 

2,588

 

761

 

18,953

 

20,158

 

Debt contracts in Brazil

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

Brazilian Reais, indexed to TJLP, TR, IPCA, IGP-M and CDI

 

247

 

296

 

4,516

 

5,503

 

Basket of currencies and US dollars indexed to LIBOR

 

222

 

211

 

1,533

 

1,364

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

Brazilian Reais

 

45

 

48

 

290

 

363

 

Accrued charges

 

93

 

103

 

 

 

 

 

607

 

658

 

6,339

 

7,230

 

 

 

3,195

 

1,419

 

25,292

 

27,388

 

 

18



Table of Contents

 

GRAPHIC

 

Below are the future flows of debt payments (principal and interest) per nature of funding:

 

 

 

Bank loans (i)

 

Capital market (i)

 

Development
agencies (i)

 

Debt principal (i)

 

Estimated future
payments of
interest (ii)

 

2015

 

1,078

 

 

633

 

1,711

 

996

 

2016

 

35

 

951

 

931

 

1,917

 

1,439

 

2017

 

185

 

1,212

 

1,007

 

2,404

 

1,348

 

2018

 

1,759

 

806

 

1,126

 

3,691

 

1,259

 

2019

 

510

 

1,000

 

1,299

 

2,809

 

1,086

 

2020

 

442

 

1,100

 

833

 

2,375

 

962

 

Between 2021 and 2025

 

1,000

 

3,245

 

1,997

 

6,242

 

3,200

 

2026 onwards

 

361

 

6,494

 

179

 

7,034

 

5,820

 

 

 

5,370

 

14,808

 

8,005

 

28,183

 

16,110

 

 


(i)             Does not include accrued charges.

(ii)          Consists of estimated future payments of interest on loans, financings and debentures, calculated based on interest rate curves and foreign exchange rates applicable as of March 31, 2015 and considering that all amortization payments and payments at maturity on loans, financings and debentures will be made on their contracted payments dates. The amount includes the estimated values of future interest payments (not yet accrued), in addition to interest already recognized in the financial statements.

 

At March 31, 2015, the average annual interest rates by currency are as follows:

 

 

 

Average interest rate (i)

 

Total debt

 

Loans and financing in US dollars

 

4.36

%

21,415

 

Loans and financing in Brazilian Reais (ii)

 

10.06

%

5,184

 

Loans and financing in Euros (iii)

 

4.06

%

1,619

 

Loans and financing in others currencies

 

6.36

%

269

 

 

 

 

 

28,487

 

 


(i)   In order to determine the average interest rate for debt contracts with floating rates, the Company used the last renegotiated rate at March 31, 2015.

(ii)  Brazilian Real denominated debt that bears interest at IPCA, CDI or TJLP, plus spread. For a total of US$4,340, the Company entered into derivative transactions to mitigate the exposure to the cash flow variations of the floating rate debt denominated in Brazilian Real, resulting in an average cost of 2.2% per year in US dollars.

(iii) Eurobonds, for which the Company entered into derivatives to mitigate the exposure to the cash flow variations of the debt denominated in Euros, resulting in an average cost of 4.42% per year in US dollars.

 

b)                                     Credit lines

 

 

 

Contractual

 

Date of

 

Available

 

 

 

Amounts drawn on

 

Type

 

currency

 

agreement

 

until

 

Total amount

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

Revolving credit lines

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

US$

 

April 2011

 

5 years

 

3,000

 

 

 

Revolving credit facility

 

US$

 

July 2013

 

5 years

 

2,000

 

 

 

Credit lines

 

 

 

 

 

 

 

 

 

 

 

 

 

Export-Import Bank of China and Bank of China Limited

 

US$

 

September 2010

(i)

13 years

 

1,229

 

1,076

 

1,062

 

BNDES

 

R$

 

April 2008

(ii)

10 years

 

2,276

 

1,728

 

1,516

 

Financing

 

 

 

 

 

 

 

 

 

 

 

 

 

BNDES - CLN 150

 

R$

 

September 2012

(iii)

10 years

 

1,210

 

1,041

 

1,041

 

BNDES - Tecnored 3.5%

 

R$

 

December 2013

(iv)

8 years

 

43

 

26

 

23

 

BNDES - S11D e S11D Logística

 

R$

 

May 2014

(v)

10 years

 

1,921

 

582

 

582

 

 


(i)             Acquisition of twelve large ore carriers from chinese shipyards.

(ii)          Memorandum of understanding signature date, however term is considered from the signature date of each contract amendment.

(iii)       Capacitação Logística Norte 150 Project (“CLN 150”).

(iv)      Support to Tecnored’s investment plan from 2013 to 2015.

(v)         Iron ore project S11D and S11D Logistica implementation.

 

Total amounts and amounts disbursed, when not contracted in the reporting currency, are affected by exchange rate variation.

 

c)                                      Guarantees

 

As of March 31, 2015 and December 31, 2014 financing and loans in the amount of US$1,254 and US$1,312, respectively, were secured by property, plant and equipment and receivables.

 

19



Table of Contents

 

GRAPHIC

 

16.                               Asset retirement obligations

 

The Company applies judgment and assumptions when measuring its asset retirement obligation. The accrued amounts of these obligations are not deducted from the potential costs covered by insurance or indemnities.

 

The long term interest rates used to discount these obligations to present value and to update the provisions at March 31, 2015 was of 5.51% p.a. in Brazil, 2.05% p.a. in Canada and between 1.61% - 8.81% p.a. for the others locations.

 

Changes in the provision for asset retirement obligation are as follows:

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Balance at beginning of the period

 

3,369

 

2,644

 

Increase expense

 

71

 

68

 

Settlements

 

(23

)

(4

)

Revisions on cash flows estimates

 

8

 

52

 

Translation adjustment

 

(413

)

33

 

Balance at end of the period

 

3,012

 

2,793

 

 

17.                               Litigation

 

a)                                     Provision for litigation

 

Vale is party to labor, civil, tax and other ongoing lawsuits and is discussing these issues both at administrative and court levels.  When applicable, lawsuits are supported by judicial deposits. Provisions for losses resulting from processes are estimated and updated by the Company, supported by legal consultants.

 

 

 

Three-months period ended

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance on December 31, 2013

 

330

 

209

 

709

 

28

 

1,276

 

Additions

 

40

 

9

 

53

 

18

 

120

 

Reversals

 

(27

)

(9

)

(24

)

(4

)

(64

)

Payments

 

(1

)

(3

)

(6

)

 

(10

)

Indexation and interest

 

(4

)

2

 

6

 

(3

)

1

 

Translation adjustment

 

10

 

8

 

29

 

3

 

50

 

Balance on March 31, 2014 (unaudited)

 

348

 

216

 

767

 

42

 

1,373

 

 

 

 

Three-months period ended

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance on December 31, 2014

 

366

 

118

 

706

 

92

 

1,282

 

Additions

 

145

 

16

 

34

 

 

195

 

Reversals

 

(174

)

(12

)

(26

)

 

(212

)

Payments

 

(8

)

2

 

(4

)

(11

)

(21

)

Indexation and interest

 

19

 

11

 

7

 

(2

)

35

 

Translation adjustment

 

(43

)

(21

)

(121

)

(7

)

(192

)

Balance on March 31, 2015 (unaudited)

 

305

 

114

 

596

 

72

 

1,087

 

 

b)                                     Contingent liabilities

 

The Company discusses, at administrative and judicial levels, claims where the expectation of loss is classified as possible and accordingly no provision was recorded.

 

These possible contingent liabilities are as follows:

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Tax litigations

 

6,241

 

6,094

 

Civil litigations

 

1,236

 

1,406

 

Labor litigations

 

1,610

 

1,955

 

Environmental litigations

 

957

 

1,122

 

Total

 

10,044

 

10,577

 

 

20



Table of Contents

 

GRAPHIC

 

c)                                      Judicial deposits

 

In addition to those provisions and contingent liabilities, there are also judicial deposits. These court-ordered deposits are legally required and are monetarily updated and reported in non-current assets until a judicial decision to draw the deposit occurs.

 

Judicial deposits are as follows:

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Tax litigations

 

298

 

354

 

Civil litigations

 

135

 

126

 

Labor litigations

 

669

 

789

 

Total

 

1,102

 

1,269

 

 

18.                               Income taxes - Settlement program (“REFIS”)

 

In November 2013 the Company elected to participate in the REFIS, a federal tax settlement program with respect to most of the claims related to the collection of income tax and social contribution on equity gain of foreign subsidiaries and affiliates from 2003 to 2012.

 

On March 31, 2015, the balance of US$5,264 (US$388 in current and US$4,876 in non-current) is due in 163 monthly installments, bearing interest at the SELIC rate.

 

19.                               Income taxes

 

The balances were as follows:

 

 

 

Assets

 

Liabilities

 

Total

 

Balance on December 31, 2013

 

4,523

 

3,228

 

1,295

 

Net income effect

 

(28

)

33

 

(61

)

Translation adjustment

 

186

 

(60

)

246

 

Other comprehensive income

 

9

 

9

 

 

Balance on March 31, 2014 (unaudited)

 

4,690

 

3,210

 

1,480

 

 

 

 

Assets

 

Liabilities

 

Total

 

Balance on December 31, 2014

 

3,976

 

3,341

 

635

 

Net income effect

 

923

 

(7

)

930

 

Translation adjustment

 

(515

)

(186

)

(329

)

Other comprehensive income

 

1

 

(49

)

50

 

Acquisition of subsidiary

 

(11

)

 

(11

)

Balance on March 31, 2015 (unaudited)

 

4,374

 

3,099

 

1,275

 

 

Deferred tax assets arising from tax losses, negative social contribution basis and temporary differences are registered taking into consideration the analysis of future performance, based on economic and financial projections, prepared based on internal assumptions and macroeconomic, trade and tax scenarios that may be subject to changes in future.

 

The income tax in Brazil comprises taxation on income and social contribution on profit. The statutory rate applicable in the period presented is 34%. In other countries where the Company has operations, it is subject to various rates, depending on jurisdiction.

 

21



Table of Contents

 

GRAPHIC

 

The total amount presented as income taxes in the statement of income is reconciled to the rate established by law, as follows:

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

 

 

 

 

Net income before income taxes

 

(4,030

)

3,365

 

Income taxes at statutory rates - 34%

 

1,370

 

(1,144

)

Adjustments that affect the basis of taxes:

 

 

 

 

 

Income tax benefit from interest on stockholders’ equity

 

190

 

279

 

Results of overseas companies taxed by different rates which differs from the parent company rate

 

(349

)

(282

)

Equity results on statement of income

 

(92

)

66

 

Tax loss not recognized

 

(71

)

(81

)

Constitution or reversal for tax loss carryforward

 

 

7

 

Others

 

(188

)

166

 

Income taxes

 

860

 

(989

)

 

20.                     Employee benefits obligations

 

At March 31, 2015 the Company contributed US$46 and do not expects significant changes in relation to the estimate disclosed in the financial statements for the year ended December 31, 2014.

 

a)        Employee postretirements obligations

 

i.            Reconciliation of assets and liabilities in balance sheet

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
underfunded
pension plans

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
underfunded
pension plans

 

Ceiling recognition of an asset (ceiling) and onerous liability

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of the period

 

1,301

 

 

 

1,191

 

 

 

Interest income

 

37

 

 

 

142

 

 

 

Changes on asset ceiling and onerous liability

 

(79

)

 

 

140

 

 

 

Translation adjustment

 

(220

)

 

 

(172

)

 

 

Balance at end of the period

 

1,039

 

 

 

1,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount recognized in the balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

Present value of actuarial liabilities

 

(3,125

)

(4,297

)

(1,440

)

(3,728

)

(4,521

)

(1,498

)

Fair value of assets

 

4,164

 

3,548

 

 

5,029

 

3,716

 

 

Effect of the asset ceiling

 

(1,039

)

 

 

(1,301

)

 

 

Liabilities provisioned

 

 

(749

)

(1,440

)

 

(805

)

(1,498

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

(18

)

(50

)

 

(16

)

(51

)

Non-current liabilities

 

 

(731

)

(1,390

)

 

(789

)

(1,447

)

Liabilities provisioned

 

 

(749

)

(1,440

)

 

(805

)

(1,498

)

 

ii.        Costs recognized in the statement of income

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
underfunded
pension plans

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
underfunded
pension plans

 

Current service cost

 

5

 

15

 

7

 

7

 

15

 

8

 

Interest on expense on liabilities

 

102

 

45

 

18

 

118

 

52

 

23

 

Interest income on plan assets

 

(140

)

(38

)

 

(120

)

(38

)

 

Interest expense on effect of asset (ceiling) and onerous liability

 

37

 

 

 

 

 

 

Total of cost, net

 

4

 

22

 

25

 

5

 

29

 

31

 

 

22



Table of Contents

 

GRAPHIC

 

iii.    Costs recognized in the statement of comprehensive income

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
underfunded
pension plans

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
underfunded
pension plans

 

Balance at beginning of the period

 

(143

)

(570

)

(132

)

(94

)

(395

)

(196

)

Return on plan assets (excluding interest income)

 

(87

)

(20

)

(78

)

(18

)

50

 

 

Changes on asset ceiling and onerous liability

 

84

 

 

 

(8

)

 

 

Gross balance for the period

 

(3

)

(20

)

(78

)

(26

)

50

 

 

Deferred income tax

 

1

 

22

 

27

 

9

 

(12

)

 

Other comprehensive income

 

(2

)

2

 

(51

)

(17

)

38

 

 

Translation adjustment

 

25

 

2

 

7

 

(4

)

1

 

(2

)

Accumulated comprehensive income

 

(120

)

(566

)

(176

)

(115

)

(356

)

(198

)

 

b)                                     Profit sharing program (“PLR”)

 

The Company accrued as cost of goods sold and services rendered and other operating expenses related to PLR US$60 in March 31, 2015 (US$131 in March 31, 2014).

 

c)                                      Long-term compensation plan

 

In order to promote stockholder cultures, in addition to increasing the ability to retain executives and to strengthen the culture of sustainability performance, Vale has a long-term incentive programs (Matching plan and long-term incentive plan — ILP) for some executives of the Company, covering 3 to 4 years cycles.

 

Liabilities of the plans are measured at fair value on the date of each issuance of the report, based on market rates. Compensation costs incurred are recognized by the defined vesting period of three years. At March 31, 2015 and December 31, 2014 the Company recorded a liability with impact in the statement of income of US$41 and US$61, respectively.

 

21.                     Classification of financial instruments

 

The classification of financial assets and liabilities is as follows:

 

 

 

March 31, 2015 (unaudited)

 

 

 

Loans and receivables (i)

 

At fair value through profit
or loss (ii)

 

Derivatives designated as
hedge (iii)

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

3,684

 

 

 

3,684

 

Financial investments

 

1

 

 

 

1

 

Derivative financial instruments

 

 

189

 

 

189

 

Accounts receivable

 

2,291

 

 

 

2,291

 

Related parties

 

522

 

 

 

522

 

 

 

6,498

 

189

 

 

6,687

 

Non-current

 

 

 

 

 

 

 

 

 

Related parties

 

23

 

 

 

23

 

Loans and financing

 

217

 

 

 

217

 

Derivative financial instruments

 

 

34

 

 

34

 

 

 

240

 

34

 

 

308

 

Total of financial assets

 

6,738

 

223

 

 

6,995

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

3,429

 

 

 

3,429

 

Derivative financial instruments

 

 

557

 

347

 

904

 

Loans and financing

 

3,195

 

 

 

3,195

 

Related parties

 

267

 

 

 

267

 

 

 

6,891

 

557

 

347

 

7,795

 

Non-current

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

2,496

 

 

2,496

 

Loans and financing

 

25,292

 

 

 

25,292

 

Related parties

 

90

 

 

 

90

 

Participative stockholders’ debentures

 

 

1,165

 

 

1,165

 

Others (iv)

 

 

94

 

 

94

 

 

 

25,382

 

3,755

 

 

29,137

 

Total of financial liabilities

 

32,273

 

4,312

 

347

 

36,932

 

 


(i) Non-derivative financial instruments with determinable cash flow.

(ii) Financial instruments for trading in short-term.

(iii) See note 23(a).

(iv) See note 22(a).

 

23



Table of Contents

 

GRAPHIC

 

 

 

December 31, 2014

 

 

 

Loans and receivables (i)

 

At fair value through profit
or loss (ii)

 

Derivatives designated as
hedge (iii)

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

3,974

 

 

 

3,974

 

Financial investments

 

148

 

 

 

148

 

Derivative financial instruments

 

 

166

 

 

166

 

Accounts receivable

 

3,275

 

 

 

3,275

 

Related parties

 

579

 

 

 

579

 

 

 

7,976

 

166

 

 

8,142

 

Non-current

 

 

 

 

 

 

 

 

 

Related parties

 

35

 

 

 

35

 

Loans and financing

 

229

 

 

 

229

 

Derivative financial instruments

 

 

87

 

 

87

 

 

 

264

 

87

 

 

351

 

Total of financial assets

 

8,240

 

253

 

 

8,493

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

4,354

 

 

 

4,354

 

Derivative financial instruments

 

 

956

 

460

 

1,416

 

Loans and financing

 

1,419

 

 

 

1,419

 

Related parties

 

306

 

 

 

306

 

 

 

6,079

 

956

 

460

 

7,495

 

Non-current

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

1,609

 

1

 

1,610

 

Loans and financing

 

27,388

 

 

 

27,388

 

Related parties

 

109

 

 

 

109

 

Participative stockholders’ debentures

 

 

1,726

 

 

1,726

 

Others (iv)

 

 

115

 

 

115

 

 

 

27,497

 

3,450

 

1

 

30,948

 

Total of financial liabilities

 

33,576

 

4,406

 

461

 

38,443

 

 


(i) Non-derivative financial instruments with determinable cash flow.

(ii) Financial instruments for trading in short-term.

(iii) See note 23(a).

(iv) See note 22(a).

 

22.                     Fair value estimate

 

The Company considered the same assumptions and calculation methods as presented on the financial statements for the year ended December 31, 2014, to measure the fair value of assets and liabilities for the period.

 

a)        Assets and liabilities measured and recognized at fair value

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Level 2

 

Level 3

 

Total

 

Level 2

 

Level 3

 

Total (i)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives at fair value through profit or loss

 

189

 

 

189

 

166

 

 

166

 

 

 

189

 

 

189

 

166

 

 

166

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives at fair value through profit or loss

 

34

 

 

34

 

87

 

 

87

 

 

 

34

 

 

34

 

87

 

 

87

 

Total of financial assets

 

223

 

 

223

 

253

 

 

253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives at fair value through profit or loss

 

557

 

 

557

 

956

 

 

956

 

Derivatives designated as hedge

 

347

 

 

347

 

460

 

 

460

 

 

 

904

 

 

904

 

1,416

 

 

1,416

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives at fair value through profit or loss

 

2,496

 

 

2,496

 

1,609

 

 

1,609

 

Derivatives designated as hedge

 

 

 

 

1

 

 

1

 

Participative stockholders’ debentures

 

1,165

 

 

1,165

 

1,726

 

 

1,726

 

Others (minimum return instrument)

 

 

94

 

94

 

 

115

 

115

 

 

 

3,661

 

94

 

3,755

 

3,336

 

115

 

3,451

 

Total of financial liabilities

 

4,565

 

94

 

4,659

 

4,752

 

115

 

4,867

 

 

24



Table of Contents

 

GRAPHIC

 

b)             Fair value measurement compared to book value

 

The fair value estimate for level 1 is based on market approach considering the secondary market contracts. For loans allocated on level 2, the income approach is adopted and the fair value for both fixed-indexed rate debt and floating rate debt is determined on a discounted cash flows basis using LIBOR future values and Vale’s bonds curve.

 

The fair values and carrying amounts of non-current loans (net of interest) are shown in the table below:

 

 

 

Balance

 

Fair value (ii)

 

Level 1

 

Level 2

 

Financial liabilities

 

 

 

 

 

 

 

 

 

March 31, 2015 (unaudited)

 

 

 

 

 

 

 

 

 

Loans (long term) (i)

 

28,183

 

28,539

 

14,931

 

13,608

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

Loans (long term) (i)

 

28,370

 

29,479

 

15,841

 

13,638

 

 


(i) Net interest of US$304 on March 31, 2015 and US$437 on December 31, 2014.

 

23.                     Derivative financial instruments

 

a)        Derivatives effects on balance sheet

 

 

 

Assets

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Current

 

Non-current

 

Current

 

Non-current

 

Derivatives not designated as hedge

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

CDI & TJLP vs. US$ fixed and floating rate swap

 

138

 

 

137

 

11

 

IPCA swap

 

4

 

 

7

 

 

Eurobonds swap

 

 

 

 

41

 

Pre dollar swap

 

6

 

 

2

 

 

 

 

148

 

 

146

 

52

 

Commodities price risk

 

 

 

 

 

 

 

 

 

Nickel

 

41

 

7

 

20

 

3

 

 

 

41

 

7

 

20

 

3

 

Warrants

 

 

 

 

 

 

 

 

 

SLW options (note 28)

 

 

27

 

 

32

 

 

 

 

27

 

 

32

 

Derivatives designated as cash flow hedge

 

 

 

 

 

 

 

 

 

Total

 

189

 

34

 

166

 

87

 

 

 

 

Liabilities

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Current

 

Non-current

 

Current

 

Non-current

 

Derivatives not designated as hedge

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

CDI & TJLP vs. US$ fixed and floating rate swap

 

154

 

1,976

 

442

 

1,355

 

IPCA swap

 

 

131

 

 

63

 

Eurobonds swap

 

164

 

45

 

9

 

90

 

Pre dollar swap

 

105

 

89

 

30

 

98

 

 

 

423

 

2,241

 

481

 

1,606

 

Commodities price risk

 

 

 

 

 

 

 

 

 

Nickel

 

36

 

7

 

23

 

3

 

Bunker oil

 

98

 

248

 

452

 

 

 

 

134

 

255

 

475

 

3

 

Derivatives designated as cash flow hedge

 

 

 

 

 

 

 

 

 

Bunker oil

 

318

 

 

434

 

 

Foreign exchange

 

29

 

 

26

 

1

 

 

 

347

 

 

460

 

1

 

Total

 

904

 

2,496

 

1,416

 

1,610

 

 

25



Table of Contents

 

GRAPHIC

 

b)             Effects of derivatives in the statement of income, cash flow and other comprehensive income

 

 

 

Three-months period ended (unaudited)

 

 

 

Amount of gain (loss) recognized
in the statement of income

 

Financial settlement
inflows(outflows)

 

Amount of gain(loss) recognized
in OCI

 

 

 

March 31, 2015

 

March 31, 2014

 

March 31, 2015

 

March 31, 2014

 

March 31, 2015

 

March 31, 2014

 

Derivatives not designated as hedge

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

 

 

 

 

CDI & TJLP vs. US$ fixed and floating rate swap

 

(950

)

194

 

(344

)

28

 

 

 

IPCA swap

 

(73

)

7

 

4

 

 

 

 

Eurobonds swap

 

(151

)

6

 

 

10

 

 

 

Pre dollar swap

 

(89

)

11

 

(2

)

2

 

 

 

 

 

(1,263

)

218

 

(342

)

40

 

 

 

Commodities price risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel

 

(8

)

(1

)

(15

)

1

 

 

 

Bunker oil

 

(49

)

3

 

(155

)

(8

)

 

 

 

 

(57

)

2

 

(170

)

(7

)

 

 

Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

SLW options (note 28)

 

(5

)

8

 

 

 

 

 

 

 

(5

)

8

 

 

 

 

 

Derivatives designated as cash flow hedge

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker oil

 

(120

)

(3

)

(130

)

(3

)

116

 

(8

)

Foreign exchange

 

(15

)

(13

)

(15

)

(13

)

(1

)

(9

)

 

 

(135

)

(16

)

(145

)

(16

)

115

 

(17

)

Total

 

(1,460

)

212

 

(657

)

17

 

115

 

(17

)

 

Related to the effects of derivatives in the statement of income, the Company recognized US$120 as cost of goods sold and services rendered and US$1,340 as financial expense.

 

The maturities dates of the derivative financial instruments are as follows:

 

 

 

Maturity dates

 

Currencies and interest rates

 

July 2023

 

Gas - Oman

 

April 2016

 

Nickel

 

March 2017

 

Copper

 

June 2015

 

Warrants

 

February 2023

 

Bunker oil

 

December 2016

 

 

Additional information about derivatives financial instruments

 

Value at risk computation methodology

 

The value at risk of the positions was measured using a delta-Normal parametric approach, which considers that the future distribution of the risk factors - and its correlations - tends to present the same statistic properties verified in the historical data. The value at risk of Vale’s derivatives current positions was estimated considering one business day time horizon and a 95% confidence level.

 

Contracts subjected to margin calls

 

Vale has contracts subject to margin calls only for part of nickel trades executed by its wholly-owned subsidiary Vale Canada Ltd. There was not cash amount deposited for margin call on March 31, 2015.

 

Initial cost of contracts

 

The financial derivatives negotiated by Vale and its controlled companies described in this document didn’t have initial costs (initial cash flow) associated.

 

The following tables show as of March 31, 2015, the derivatives positions for Vale and controlled companies with the following information: notional amount, fair value including credit risk (1), gains or losses in the period, value at risk and the fair value for the remaining years of the operations per each group of instruments.

 


(1)  The “Adjusted net/total for credit risk” considers the adjustments for credit (counterparty) risk calculated for the instruments, in accordance with International Financial Reporting Standard 13.

 

26



Table of Contents

 

GRAPHIC

 

Foreign exchange and interest rates derivative positions

 

Protection program for the Real denominated debt indexed to CDI

 

In order to reduce the cash flow volatility, Vale entered into swap transactions to convert into US$ the cash flows from debt instruments denominated in BRL linked to CDI. In those swaps, Vale pays fixed rates in US$ and receives payments linked to CDI.

 

US$ Million

 

 

 

Notional ($ million)

 

 

 

 

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Index

 

Average rate

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

2017

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CDI vs. fixed rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

R$

4,939

 

R$

4,511

 

CDI

 

109.03

%

1,633

 

1,783

 

548

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

2,199

 

US$

2,284

 

US$ +

 

3.35

%

(2,256

)

(2,327

)

(781

)

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

(623

)

(544

)

(233

)

27

 

101

 

(431

)

(51

)

(242

)

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

(632

)

(547

)

 

 

 

 

101

 

(434

)

(53

)

(245

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CDI vs. floating rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

R$

0

 

R$

428

 

CDI

 

0.00

%

 

169

 

175

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

0

 

US$

250

 

Libor +

 

0.00

%

 

(251

)

(252

)

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

(82

)

(77

)

 

 

 

 

 

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

 

(82

)

 

 

 

 

 

 

 

 

 

Type of contracts: OTC Contracts

 

Protected item: Debt instruments linked to BRL

 

The protected items are the debt instruments linked to BRL once the objective of this program is to transform into US$ the obligations linked to BRL so as to achieve a currency offset by matching Vale’s receivables - mainly linked to US$ - with Vale’s payables.

 

Protection program for the real denominated debt indexed to TJLP

 

In order to reduce the cash flow volatility, Vale entered into swap transactions to convert into US$ the cash flows linked to TJLP of the loans with Banco Nacional de Desenvolvimento Econômico e Social (BNDES). In those swaps, Vale pays fixed or floating rates in US$ and receives payments linked to TJLP.

 

 

 

Notional ($ million)

 

 

 

Average

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Index

 

rate

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

2017

 

2018 - 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swap TJLP vs. fixed rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

R$

6,083

 

R$

6,247

 

TJLP +

 

1.33

%

1,668

 

2,050

 

128

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

2,948

 

US$

3,051

 

USD +

 

1.71

%

(2,845

)

(2,937

)

(152

)

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

(1,177

)

(887

)

(24

)

76

 

(102

)

(205

)

(281

)

(589

)

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

(1,281

)

(953

)

 

 

 

 

(102

)

(209

)

(298

)

(672

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swap TJLP vs. floating rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

R$

293

 

R$

295

 

TJLP +

 

0.94

%

77

 

91

 

1

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

172

 

US$

173

 

Libor +

 

-1.21

%

(154

)

(155

)

(1

)

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

(77

)

(64

)

(0

)

5

 

(1

)

(4

)

(6

)

(66

)

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

(78

)

(66

)

 

 

 

 

(2

)

(4

)

(6

)

(67

)

 

Type of contracts: OTC Contracts

 

Protected item: Debt instruments linked to BRL

 

The protected items are the debt instruments linked to BRL once the objective of this program is to transform into US$ the obligations linked to BRL so as to achieve a currency offset by matching Vale’s receivables - mainly linked to US$ - with Vale’s payables.

 

27



Table of Contents

 

GRAPHIC

 

Protection program for the Real denominated fixed rate debt

 

In order to reduce the cash flow volatility, Vale entered into a swap transactions to convert into US$ the cash flows from loans in BRL linked to fixed rates with BNDES. In those swaps, Vale pays fixed rates in US$ and receives fixed rates in BRL.

 

US$ Million

 

 

 

Notional ($ million)

 

 

 

 

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Index

 

Average rate

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

2017

 

2018 - 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R$ fixed rate vs. US$ fixed rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

R$

728

 

R$

735

 

Fix

 

3.92

%

257

 

244

 

13

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

387

 

US$

395

 

US$ -

 

-1.67

%

(433

)

(366

)

(15

)

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

(176

)

(122

)

(2

)

10

 

(35

)

(85

)

(7

)

(48

)

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

(188

)

(127

)

 

 

 

 

(35

)

(87

)

(7

)

(58

)

 

Type of contracts: OTC Contracts

 

Protected item: Debt instruments linked to BRL

 

The protected items are the debt instruments linked to BRL once the objective of this program is to transform into US$ the obligations linked to BRL so as to achieve a currency offset by matching Vale’s receivables - mainly linked to US$ - with Vale’s payables.

 

Protection program for the Real denominated debt indexed to IPCA

 

In order to reduce the cash flow volatility, Vale entered into swap transactions to convert into US$ the cash flows from debt instruments denominated in BRL linked to IPCA on debenture contracts issued by Vale in 2014 with a notional amount of BRL 1 billion. In those swaps, Vale pays fixed rates in US$ and receives payments linked to IPCA.

 

US$ Million

 

 

 

Notional ($ million)

 

 

 

Average

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Index

 

rate

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

2017

 

2018-2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. US$ fixed rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

R$

1,000

 

R$

1,000

 

IPCA +

 

6.55

%

342

 

419

 

21

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

434

 

US$

434

 

US$ +

 

3.98

%

(467

)

(474

)

(14

)

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

(125

)

(55

)

7

 

9

 

 

3

 

3

 

(131

)

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

(127

)

(56

)

 

 

 

 

 

3

 

3

 

(134

)

 

 

Type of contracts: OTC Contracts

 

Protected item: Debt instruments linked to BRL

 

The protected items are the debt instruments linked to BRL once the objective of this program is to transform into US$ the obligations linked to BRL so as to achieve a currency offset by matching Vale’s receivables - mainly linked to US$ - with Vale’s payables.

 

Protection program for Euro denominated debt

 

In order to reduce the cash flow volatility, Vale entered into swap transactions to convert into US$ the cash flow from debt instruments issued in Euros by Vale in 2010 and 2012 with a notional amount of € 750 million each. In those swaps, Vale receives fixed rates in Euros and pays fixed rates in US$.

 

US$ million

 

 

 

Notional ($ million)

 

 

 

 

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Index

 

Average rate

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

2017- 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivable

 

1,000

 

1,000

 

EUR

 

4.063

%

1,236

 

1,431

 

46

 

 

 

 

 

 

 

 

 

Payable

 

US$

1,302

 

US$

1,302

 

US$

 

4.511

%

(1,445

)

(1,484

)

(59

)

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

(209

)

(53

)

(13

)

22

 

 

(164

)

(44

)

Net adjusted for credit risk

 

 

 

 

 

 

 

 

 

(209

)

(58

)

 

 

 

 

 

(165

)

(45

)

 

 

Type of contracts: OTC Contracts

 

Protected item: Vale’s debt instruments linked to EUR

 

The P&L shown in the table above is offset by the hedged statement of income due to EUR/US$ exchange rate.

 

28



Table of Contents

 

Foreign exchange hedging program for disbursements in Canadian dollars

 

In order to reduce the cash flow volatility, Vale entered into forward transactions to mitigate the foreign exchange exposure that arises from the currency mismatch between revenues denominated in US$ and disbursements denominated in Canadian Dollars.

 

US$ million

 

 

 

Notional ($ million)

 

 

 

Average rate

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(CAD/USD)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward

 

CAD

150

 

CAD

230

 

B

 

1.023

 

(29

)

(27

)

 

1

 

(27

)

(2

)

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

(29

)

(27

)

 

 

 

 

(27

)

(2

)

 

Type of contracts: OTC Contracts

 

Hedged item: part of disbursements in Canadian Dollars

 

The P&L shown in the table above is offset by the hedged statement of income due to CAD/US$ exchange rate.

 

Commodity derivative positions

 

The Company’s cash flow is also exposed to several market risks associated to global commodities price volatilities. To offset these volatilities, Vale entered into the following derivatives transactions:

 

Nickel purchase protection program

 

In order to reduce the cash flow volatility and eliminate the mismatch between the pricing of the purchased nickel (concentrate, cathode, sinter and others) and the pricing of the product sold to our clients, protection transactions were implemented. The trades are usually implemented through the sale and/or buy of nickel forward or future contracts at LME or over-the-counter.

 

US$ million

 

 

 

Notional (ton)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value
by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/ton)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel Futures

 

90

 

140

 

S

 

14,331

 

0.18

 

0.15

 

0.26

 

0.03

 

0.18

 

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

0.18

 

0.15

 

 

 

 

 

0.18

 

 

 

Type of contracts: LME contracts and OTC contracts

 

Protected item: part of Vale’s revenues linked to nickel price.

 

The P&L shown in the table above is offset by the protected statement of income due to nickel price.

 

Nickel fixed price program

 

In order to maintain the revenues exposure to nickel price fluctuations, The Company entered into derivatives to convert to floating prices all contracts with clients that required a fixed price. These trades aim to guarantee that the prices of these operations would be the same of the average prices negotiated in LME in the date the product is delivered to the client. It normally involves buying nickel forwards (over-the-counter) or futures (exchange negotiated). Those operations are usually reverted before the maturity in order to match the settlement dates of the commercial contracts in which the prices are fixed.

 

US$ million

 

 

 

Notional (ton)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy / Sell

 

(US$/ton)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel Futures

 

11,384

 

11,264

 

B

 

16,085

 

(42

)

(24

)

(16

)

4

 

(31

)

(10

)

(1

)

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

(42

)

(24

)

 

 

 

 

(31

)

(10

)

(1

)

 

 

Type of contracts: LME contracts and OTC contracts

 

Protected item: part of Vale’s revenues linked to fixed price sales of nickel.

 

The P&L shown in the table above is offset by the protected statement of income due to nickel price.

 

29



Table of Contents

 

GRAPHIC

 

Copper scrap purchase protection program

 

In order to reduce the cash flow volatility and eliminate the quotation period mismatch between the pricing period of copper scrap purchase and the pricing period of final products sale to the clients, protection transactions were implemented. This program is usually implemented through the sale of forwards or futures at LME or over-the-counter operations.

 

US$ million

 

 

 

Notional (lbs)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value
by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/lbs)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward

 

357,149

 

793,665

 

S

 

2.61

 

(0.05

)

0.11

 

0.23

 

0.02

 

(0.05

)

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

(0.05

)

0.11

 

 

 

 

 

(0.05

)

 

 

Type of contracts: OTC contracts

 

Protected item: part of Vale’s revenues linked to copper price.

 

The P&L shown in the table above is offset by the protected statement of income due to copper price.

 

Bunker Oil purchase protection program

 

In order to reduce the impact of bunker oil price fluctuation on Vale’s maritime freight hiring/supply and consequently reducing the company’s cash flow volatility, bunker oil derivatives were implemented. These transactions are usually executed through forward purchases and zero cost-collars.

 

US$ million

 

 

 

Notional (ton)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value
by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/mt)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward

 

3,204,000

 

2,205,000

 

B

 

434

 

(344

)

(363

)

(67

)

18

 

(18

)

(326

)

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

(345

)

(363

)

 

 

 

 

(18

)

(327

)

 

Type of contracts: OTC Contracts

 

Protected item: part of Vale’s costs linked to bunker oil price

 

The P&L shown in the table above is offset by the protected statement of income due to bunker oil price.

 

Bunker Oil purchase hedging program

 

In order to reduce the impact of bunker oil price fluctuation on Vale’s maritime freight hiring/supply and consequently reducing the company’s cash flow volatility, bunker oil derivatives were implemented. These transactions are usually executed through forward purchases and zero cost-collars.

 

US$ million

 

 

 

Notional (ton)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value
by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/mt)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward

 

1,485,000

 

1,950,000

 

B

 

505

 

(286

)

(371

)

(100

)

8

 

(286

)

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

(286

)

(371

)

 

 

 

 

(286

)

 

 

Type of contracts: OTC contracts

 

Protected item: part of Vale’s costs linked to bunker oil price

 

The P&L shown in the table above is offset by the protected statement of income due to bunker oil price.

 

30



Table of Contents

 

GRAPHIC

 

Silver Wheaton Corp. warrants

 

The company owns 10 million warrants of Silver Wheaton Corp. (SLW), a Canadian company with stocks negotiated in Toronto Stock Exchange and New York Stock Exchange. Such warrants configure American call options and were received as part of the payment regarding the sale of 25% of gold payable flows produced as a sub product from Salobo copper mine during its life and 70% of gold payable flows produced as a sub product from some nickel mines in Sudbury during 20 years.

 

US$ million

 

 

 

Notional (quantity)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value
by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/share)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call Option

 

10,000,000

 

10,000,000

 

B

 

65

 

27

 

33

 

 

2

 

27

 

Total adjusted for credit risk

 

 

 

 

 

 

 

 

 

27

 

33

 

 

 

 

 

27

 

 

Embedded derivative positions

 

The Company’s cash flow is also exposed to several market risks associated to contracts that contain embedded derivatives or derivative-like features. From Vale’s perspective, it may include, but is not limited to, commercial contracts, procurement contracts, rental contracts, bonds, insurance policies and loans. The following embedded derivatives were observed as of March 31, 2015.

 

Raw material and intermediate products purchase

 

Nickel concentrate and raw materials purchase agreements in which there are provisions based on nickel and copper future prices behavior. These provisions are considered as embedded derivatives.

 

US$ million

 

 

 

Notional (ton)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/ton)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel Forwards

 

5,507

 

4,491

 

S

 

14,248

 

2.8

 

(0.6

)

 

 

 

2.8

 

Copper Forwards

 

4,599

 

6,310

 

 

 

5,761

 

(0.7

)

1.1

 

 

 

 

(0.7

)

Total

 

 

 

 

 

 

 

 

 

2.1

 

0.5

 

 

2

 

2.1

 

 

Gas purchase for pelletizing company in Oman

 

Our subsidiary Vale Oman Pelletizing Company LLC has a natural gas purchase agreement in which there´s a clause that defines that a premium can be charged if pellet prices trades above a pre-defined level. This clause is considered as an embedded derivative.

 

US$ million

 

 

 

Notional (volume/month)

 

 

 

Average Strike

 

Fair value

 

Realized Gain/Loss

 

Value at Risk

 

Fair value by year

 

Flow

 

March 31, 2015

 

December 31, 2014

 

Buy/ Sell

 

(US$/ton)

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2015

 

2015

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call Options

 

746,667

 

746,667

 

S

 

179.36

 

(0.01

)

(0.20

)

 

0.01

 

(0.01

)

(0.00

)

 

Sensitivity analysis(2)

 

The Company present below the sensitivity analysis for all derivatives outstanding positions as of March 31, 2015 given predefined scenarios for market risk factors behavior. The scenarios were defined as follows:

 

·                  Fair Value: the fair value of the financial instruments position as of March 31, 2015;

·                  Scenario I: Potential change in fair value considering a 25% deterioration of market curves for main underlying market risk factors;

·                  Scenario II: Potential change in fair value considering a 25% evolution of market curves for main underlying market risk factors;

·                  Scenario III: Potential change in fair value considering a 50% deterioration of market curves for main underlying market risk factors;

·                  Scenario IV: Potential change in fair value considering a 50% evolution of market curves for main underlying market risk factors;

 


(2)  The deterioration scenario of “BRL fluctuation” on the tables of this section means the depreciation of BRL against the USD. The same is applicable for the other currencies fluctuations as risk factors. Specifically on “Sensitivity analysis - cash investments in other currencies” table, the Compnay have the depreciation of each currency as a risk factor against another currencies in general, not only USD.

 

31



Table of Contents

 

Sensitivity analysis — Summary of the US$/BRL fluctuation: Debt, cash investments and derivatives

 

US$ million

 

Program

 

Instrument

 

Risk

 

Scenario I

 

Scenario II

 

Scenario III

 

Scenario IV

 

Funding

 

Debt denominated in BRL

 

BRL fluctuation

 

-

 

-

 

-

 

-

 

Funding

 

Non hedged debt denominated in US$

 

BRL fluctuation

 

6,084

 

(6,084

)

12,167

 

(12,167

)

Cash Investments

 

Cash denominated in BRL

 

BRL fluctuation

 

-

 

-

 

-

 

-

 

Cash Investments

 

Cash denominated in US$

 

BRL fluctuation

 

-

 

-

 

-

 

-

 

Derivatives

 

Consolidated derivatives portfolio

 

BRL fluctuation

 

(1,539

)

1,539

 

(3,077

)

3,077

 

Net result

 

 

 

 

 

4,545

 

(4,545

)

9,090

 

(9,090

)

 

Sensitivity analysis — Consolidated derivatives portfolio

 

US$ million

 

Program

 

Instrument

 

Main Risks

 

Fair Value

 

Scenario I

 

Scenario II

 

Scenario III

 

Scenario IV

 

Protection program for the Real denominated debt indexed to CDI

 

CDI vs. US$ fixed rate swap

 

BRL fluctuation

 

(632

)

(564

)

564

 

(1,128

)

1,128

 

 

 

USD interest rate inside Brazil variation

 

(26

)

26

 

(54

)

51

 

 

 

Brazilian interest rate fluctuation

 

(7

)

6

 

(14

)

12

 

 

 

USD Libor variation

 

(2.4

)

2.4

 

(4.9

)

4.7

 

 

 

Protected Items - Real denominated debt

 

BRL fluctuation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Protection program for the Real denominated debt indexed to TJLP

 

TJLP vs. US$ fixed rate swap

 

BRL fluctuation

 

(1,281

)

(711

)

711

 

(1,422

)

1,422

 

 

 

USD interest rate inside Brazil variation

 

(54

)

51

 

(110

)

99

 

 

 

Brazilian interest rate fluctuation

 

120

 

(106

)

257

 

(199

)

 

 

TJLP interest rate fluctuation

 

(56

)

53

 

(112

)

107

 

 

 

TJLP vs. US$ floating rate swap

 

BRL fluctuation

 

(78

)

(38

)

38

 

(77

)

77

 

 

 

 

USD interest rate inside Brazil variation

 

(4

)

4

 

(9

)

8

 

 

 

 

Brazilian interest rate fluctuation

 

7

 

(6

)

16

 

(12

)

 

 

 

TJLP interest rate fluctuation

 

(3

)

3

 

(7

)

7

 

 

 

 

USD Libor variation

 

2

 

(2

)

4

 

(4

)

 

 

Protected Items - Real denominated debt

 

BRL fluctuation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Protection program for the Real denominated fixed rate debt

 

BRL fixed rate vs. US$fixed rate swap

 

BRL fluctuation

 

(188

)

(108

)

108

 

(216

)

216

 

 

 

USD interest rate inside Brazil variation

 

(6

)

6

 

(13

)

12

 

 

 

Brazilian interest rate fluctuation

 

15

 

(13

)

32

 

(25

)

 

 

Protected Items - Real denominated debt

 

BRL fluctuation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Protection program for the Real denominated debt indexed to IPCA

 

IPCA vs. US$ fixed rate swap

 

BRL fluctuation

 

(127

)

(117

)

117

 

(233

)

233

 

 

 

USD interest rate inside Brazil variation

 

(10

)

9

 

(21

)

18

 

 

 

Brazilian interest rate fluctuation

 

44

 

(37

)

95

 

(69

)

 

 

IPCA index fluctuation

 

(20

)

21

 

(39

)

43

 

 

 

USD Libor variation

 

(3

)

3

 

(6

)

5

 

 

 

Protected Items - Real denominated debt

 

BRL fluctuation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Protection Program for the Euro denominated debt

 

EUR fixed rate vs. US$ fixed rate swap

 

EUR fluctuation

 

(209

)

(309

)

309

 

(618

)

618

 

 

 

EUR Libor variation

 

5

 

(5

)

10

 

(10

)

 

 

USD Libor variation

 

(23

)

22

 

(48

)

42

 

 

 

Protected Items - Euro denominated debt

 

EUR fluctuation

 

n.a.

 

309

 

(309

)

618

 

(618

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Exchange hedging program  for disbursements in Canadian dollars (CAD)

 

CAD Forward

 

CAD fluctuation

 

(29

)

 

 

 

 

 

 

 

 

 

 

CAD Libor variation

 

(37

)

37

 

(73

)

73

 

 

 

USD Libor variation

 

0

 

(0

)

0

 

(0

)

 

 

Protected Items - Disbursement in Canadian dollars

 

CAD fluctuation

 

 

n.a.

 

(0.1

37

)

(0.1

(37

 

)

(0.1

73

)

0.1

(73

 

)

 

US$ million

 

Program

 

Instrument

 

Main Risks

 

Fair Value

 

Scenario I

 

Scenario II

 

Scenario III

 

Scenario IV

 

Nickel purchase protection program

 

Pruchase / sale of nickel future/forward contracts

 

Nickel price fluctuation

 

0.2

 

0.3

 

(0.3

)

0.6

 

(0.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAD fluctuation

 

 

0.04

 

(0.04

)

0.09

 

(0.09

)

 

 

Protected Item: Part of Vale’s revenues linked to Nickel price

 

Nickel price fluctuation

 

n.a.

 

(0.3

)

0.3

 

(0.6

)

0.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel fixed price program

 

Purchase of nickel future/forward contracts

 

Nickel price fluctuation

 

(42

)

(36

)

36

 

(72

)

72

 

 

 

 

 

 

 

 

 

 

CAD fluctuation

(10

)

10

 

(21

)

21

 

 

 

Protected Item: Part of Vale’s nickel revenues from sales with fixed prices

 

Nickel price fluctuation

 

n.a.

 

36

 

(36

)

72

 

(72

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Copper Scrap Purchase Protection Program

 

Sale of copper future/forward contracts

 

Copper price fluctuation

 

 

 

0.2

 

(0.2

)

0.5

 

(0.5

)

 

(0.1

)

 

 

 

 

 

 

 

 

CAD fluctuation

 

 

(0.01

)

0.01

 

(0.03

)

0.03

 

 

 

Protected Item: Part of Vale’s revenues linked to Copper price

 

Copper price fluctuation

 

n.a.

 

(0.2

)

0.2

 

(0.5

)

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker Oil Protection Program

 

Bunker Oil forward

 

Bunker Oil price fluctuation

 

(345

)

(260

)

260

 

(519

)

519

 

 

 

Protected Item: part of Vale’s costs linked to Bunker Oil price

 

Bunker Oil price fluctuation

 

n.a.

 

260

 

(260

)

519

 

(519

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker Oil Hedge Program

 

Bunker Oil forward

 

Bunker Oil price fluctuation

 

(286

)

(116

)

116

 

(232

)

232

 

 

Protected Item: part of Vale’s costs linked to Bunker Oil price

Bunker Oil price fluctuation

n.a.

 

116

 

(116

)

232

 

(232

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sell of part of future gold production (subproduct) from Vale

 

10 million of SLW warrants

 

SLW stock price fluctuation

 

 

 

(13

)

16

 

(22

)

34

 

 

27

 

 

 

 

 

 

 

 

 

Libor USD fluctuation

 

 

(1

)

1

 

(2

)

2

 

 

US$ million

 

Program

 

Instrument

 

Main Risks

 

Fair Value

 

Scenario I

 

Scenario II

 

Scenario III

 

Scenario IV

 

Embedded derivatives - Raw material purchase (Nickel)

 

Embedded derivatives - Raw material purchase

 

Nickel price fluctuation

 

 

 

19

 

(19

)

38

 

(38

)

 

 

 

 

2.8

 

 

 

 

 

 

 

 

 

 

 

CAD fluctuation

 

 

 

(0.7

)

0.7

 

(1.4

)

1.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivatives - Raw material purchase (Copper)

 

Embedded derivatives - Raw material purchase

 

Copper price fluctuation CAD fluctuation

 

 

 

7

 

(7

)

14

 

(14

)

 

(0.7

)

 

 

 

 

 

 

 

 

 

 

 

0.2

 

(0.2

)

0.3

 

(0.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivatives - Gas purchase for Pelletizing Company

 

Embedded derivatives - Gas purchase

 

Pellet price fluctuation

 

(0.0

)

0.01

 

(0.04

)

0.01

 

(0.19

)

 

32



Table of Contents

 

GRAPHIC

 

Sensitivity analysis - Cash investments

 

The cash investments are subjected to foreign exchange risk when the investment currency is other than the functional currency of the investor company.

 

US$ million

 

Program

 

Instrument

 

Risk

 

Scenario I

 

Scenario II

 

Scenario III

 

Scenario IV

 

Cash Investments

 

Cash denominated in EUR

 

EUR

 

(4

)

4

 

(8

)

8

 

Cash Investments

 

Cash denominated in CAD

 

CAD

 

(0.17

)

0.17

 

(0.34

)

0.34

 

Cash Investments

 

Cash denominated in GBP

 

GBP

 

(0

)

0

 

(0

)

0

 

Cash Investments

 

Cash denominated in AUD

 

AUD

 

(2

)

2

 

(3

)

3

 

Cash Investments

 

Cash denominated in Other Currencies*

 

Others

 

(6

)

6

 

(13

)

13

 

 


(*) Includes investments in other currencies and investments in USD as the functional currency of the investor is not USD or BRL.

 

Financial counterparties ratings

 

Derivative transactions and cash investments are held with financial institutions whose exposure limits are periodically reviewed and approved by the delegated authority. The financial institutions credit risk tracking 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 published by agencies Moody’s and S&P regarding the main financial institutions that the Company had outstanding trades as of March 31, 2015.

 

Long term rating by counterparty

 

Moody’s

 

S&P

 

ANZ Australia and New Zealand Banking

 

Aa2

 

AA-

 

Banco Bradesco

 

Baa2

 

BBB-

 

Banco de Credito del Peru

 

Baa1

 

BBB+

 

Banco do Brasil

 

Baa2

 

BBB-

 

Banco do Nordeste

 

Baa3

 

BBB-

 

Banco Safra

 

Baa2

 

BBB-

 

Banco Santander

 

Baa2

 

BBB-

 

Banco Votorantim

 

Baa2

 

BB+

 

Bank of America

 

Baa2

 

A-

 

Bank of Nova Scotia

 

Aa2

 

A+

 

Banpara

 

Ba3

 

BB

 

Barclays

 

A3

 

A-

 

BBVA

 

Baa2

 

BBB

 

BNP Paribas

 

A1

 

A+

 

BTG Pactual

 

Baa3

 

BB+*

 

Caixa Economica Federal

 

Baa2

 

BBB-

 

Citigroup

 

Baa2

 

A-

 

Credit Agricole

 

A2

 

A

 

Deutsche Bank

 

A3

 

A

 

Goldman Sachs

 

Baa1

 

A-

 

HSBC

 

Aa3

 

A+

 

Intesa Sanpaolo Spa

 

Baa2

 

BBB-

 

Itau Unibanco

 

Baa2

 

BBB-

 

JP Morgan Chase & Co

 

A3

 

A

 

Morgan Stanley

 

Baa2

 

A-

 

National Australia Bank NAB

 

Aa2

 

AA-

 

Royal Bank of Canada

 

Aa3

 

AA-

 

Societe Generale

 

A2

 

A

 

Standard Bank Group

 

Baa3

 

 

Standard Chartered

 

A2

 

A

 

 

33



Table of Contents

 

GRAPHIC

 

Market curves

 

The curves used on the pricing of the derivatives were developed based on data from BM&F, Central Bank of Brazil, London Metals Exchange (LME) and Bloomberg.

 

1. Commodities

 

Nickel

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

SPOT

 

12,460.00

 

SEP15

 

12,441.59

 

MAR16

 

12,522.40

 

APR15

 

12,356.96

 

OCT15

 

12,460.07

 

MAR17

 

12,625.99

 

MAY15

 

12,374.64

 

NOV15

 

12,478.50

 

MAR18

 

12,627.47

 

JUN15

 

12,392.18

 

DEC15

 

12,491.34

 

MAR19

 

12,610.51

 

JUL15

 

12,407.31

 

JAN16

 

12,501.32

 

 

 

 

 

AUG15

 

12,424.00

 

FEB16

 

12,513.50

 

 

 

 

 

 

Copper

 

Maturity

 

Price (US$/lb)

 

Maturity

 

Price (US$/lb)

 

Maturity

 

Price (US$/lb)

 

SPOT

 

2.75

 

SEP15

 

2.73

 

MAR16

 

2.73

 

APR15

 

2.75

 

OCT15

 

2.73

 

MAR17

 

2.72

 

MAY15

 

2.75

 

NOV15

 

2.73

 

MAR18

 

2.71

 

JUN15

 

2.74

 

DEC15

 

2.73

 

MAR19

 

2.70

 

JUL15

 

2.74

 

JAN16

 

2.73

 

 

 

 

 

AUG15

 

2.74

 

FEB16

 

2.73

 

 

 

 

 

 

Bunker Oil

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

SPOT

 

305.80

 

SEP15

 

314.04

 

MAR16

 

331.56

 

APR15

 

307.60

 

OCT15

 

316.50

 

MAR17

 

362.57

 

MAY15

 

309.47

 

NOV15

 

318.97

 

MAR18

 

394.38

 

JUN15

 

310.90

 

DEC15

 

322.21

 

MAR19

 

433.39

 

JUL15

 

310.67

 

JAN16

 

325.46

 

 

 

 

 

AUG15

 

311.78

 

FEB16

 

328.71

 

 

 

 

 

 

34



Table of Contents

 

GRAPHIC

2. Rates

 

US$-Brazil Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

05/04/15

 

1.98

 

03/01/16

 

2.55

 

04/02/18

 

3.24

 

06/01/15

 

1.72

 

04/01/16

 

2.66

 

07/02/18

 

3.32

 

07/01/15

 

1.70

 

06/01/16

 

2.80

 

10/01/18

 

3.34

 

08/03/15

 

1.78

 

07/01/16

 

2.84

 

01/02/19

 

3.34

 

09/01/15

 

1.89

 

10/03/16

 

2.99

 

04/01/19

 

3.35

 

10/01/15

 

2.02

 

01/02/17

 

3.03

 

07/01/19

 

3.42

 

11/03/15

 

2.16

 

04/03/17

 

3.07

 

10/01/19

 

3.44

 

12/01/15

 

2.28

 

07/03/17

 

3.09

 

01/02/20

 

3.46

 

01/04/16

 

2.44

 

10/02/17

 

3.14

 

04/01/20

 

3.47

 

02/01/16

 

2.48

 

01/02/18

 

3.18

 

07/01/20

 

3.48

 

 

US$ Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

1M

 

0.18

 

6M

 

0.40

 

11M

 

0.46

 

2M

 

0.22

 

7M

 

0.42

 

12M

 

0.47

 

3M

 

0.27

 

8M

 

0.44

 

2Y

 

0.83

 

4M

 

0.34

 

9M

 

0.45

 

3Y

 

1.15

 

5M

 

0.38

 

10M

 

0.46

 

4Y

 

1.41

 

 

TJLP

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

05/04/15

 

5,50

 

03/01/16

 

5,50

 

04/02/18

 

5,50

 

06/01/15

 

5,50

 

04/01/16

 

5,50

 

07/02/18

 

5,50

 

07/01/15

 

5,50

 

06/01/16

 

5,50

 

10/01/18

 

5,50

 

08/03/15

 

5,50

 

07/01/16

 

5,50

 

01/02/19

 

5,50

 

09/01/15

 

5,50

 

10/03/16

 

5,50

 

04/01/19

 

5,50

 

10/01/15

 

5,50

 

01/02/17

 

5,50

 

07/01/19

 

5,50

 

11/03/15

 

5,50

 

04/03/17

 

5,50

 

10/01/19

 

5,50

 

12/01/15

 

5,50

 

07/03/17

 

5,50

 

01/02/20

 

5,50

 

01/04/16

 

5,50

 

10/02/17

 

5,50

 

04/01/20

 

5,50

 

02/01/16

 

5,50

 

01/02/18

 

5,50

 

07/01/20

 

5,50

 

 

BRL Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

05/04/15

 

12.64

 

03/01/16

 

13.51

 

04/02/18

 

13.16

 

06/01/15

 

12.84

 

04/01/16

 

13.52

 

07/02/18

 

13.17

 

07/01/15

 

13.02

 

06/01/16

 

13.53

 

10/01/18

 

13.14

 

08/03/15

 

13.16

 

07/01/16

 

13.53

 

01/02/19

 

13.12

 

09/01/15

 

13.30

 

10/03/16

 

13.47

 

04/01/19

 

13.09

 

10/01/15

 

13.38

 

01/02/17

 

13.38

 

07/01/19

 

13.07

 

11/03/15

 

13.46

 

04/03/17

 

13.33

 

10/01/19

 

13.05

 

12/01/15

 

13.48

 

07/03/17

 

13.31

 

01/02/20

 

13.03

 

01/04/16

 

13.50

 

10/02/17

 

13.26

 

04/01/20

 

13.00

 

02/01/16

 

13.51

 

01/02/18

 

13.19

 

07/01/20

 

12.98

 

 

Implicit Inflation (IPCA)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

05/04/15

 

6.31

 

03/01/16

 

7.14

 

04/02/18

 

6.39

 

06/01/15

 

6.50

 

04/01/16

 

7.14

 

07/02/18

 

6.40

 

07/01/15

 

6.67

 

06/01/16

 

7.00

 

10/01/18

 

6.37

 

08/03/15

 

6.80

 

07/01/16

 

6.93

 

01/02/19

 

6.36

 

09/01/15

 

6.93

 

10/03/16

 

6.72

 

04/01/19

 

6.33

 

10/01/15

 

7.01

 

01/02/17

 

6.60

 

07/01/19

 

6.31

 

11/03/15

 

7.09

 

04/03/17

 

6.53

 

10/01/19

 

6.29

 

12/01/15

 

7.11

 

07/03/17

 

6.51

 

01/02/20

 

6.27

 

01/04/16

 

7.12

 

10/02/17

 

6.47

 

04/01/20

 

6.24

 

02/01/16

 

7.13

 

01/02/18

 

6.41

 

07/01/20

 

6.22

 

 

EUR Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

1M

 

0.00

 

6M

 

0.06

 

11M

 

0.08

 

2M

 

0.00

 

7M

 

0.07

 

12M

 

0.08

 

3M

 

0.02

 

8M

 

0.07

 

2Y

 

0.09

 

4M

 

0.04

 

9M

 

0.07

 

3Y

 

0.12

 

5M

 

0.05

 

10M

 

0.08

 

4Y

 

0.18

 

 

CAD Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

1M

 

1.00

 

6M

 

1.01

 

11M

 

0.90

 

2M

 

1.00

 

7M

 

0.98

 

12M

 

0.88

 

3M

 

1.00

 

8M

 

0.95

 

2Y

 

0.88

 

4M

 

1.01

 

9M

 

0.93

 

3Y

 

0.96

 

5M

 

1.01

 

10M

 

0.91

 

4Y

 

1.08

 

 

Currencies - Ending rates

 

CAD/US$

 

0.7882

 

US$/BRL

 

3.2080

 

EUR/US$

 

1.0728

 

 

35



Table of Contents

 

GRAPHIC

 

24.                     Stockholders’ equity

 

a)        Capital

 

Stockholders’ equity is represented by common shares (“ON”) and preferred non-redeemable shares (“PNA”) without par value. Preferred shares have the same rights as common shares, with the exception of voting for election of members of the Board of Directors. The Board of Directors may, regardless of changes to bylaws, issue new shares (authorized capital), including the capitalization of profits and reserves to the extent authorized.

 

At March 31, 2015, the capital was US$61,614 corresponding to 5,244,316,120 shares without par value.

 

 

 

March 31, 2015 (unaudited)

 

 

 

ON

 

PNA

 

Total

 

Stockholders

 

 

 

 

 

 

 

Valepar S.A.

 

1,716,435,045

 

20,340,000

 

1,736,775,045

 

Brazilian Government (Golden Share)

 

 

12

 

12

 

Foreign investors - ADRs

 

800,208,384

 

638,736,050

 

1,438,944,434

 

FMP - FGTS

 

81,160,587

 

 

81,160,587

 

PIBB - BNDES

 

1,661,382

 

2,483,236

 

4,144,618

 

BNDESPar

 

206,378,882

 

66,185,272

 

272,564,154

 

Foreign institutional investors in local market

 

265,476,598

 

619,231,763

 

884,708,361

 

Institutional investors

 

78,475,932

 

213,176,592

 

291,652,524

 

Retail investors in Brazil

 

35,856,190

 

407,569,001

 

443,425,191

 

Treasury stock

 

31,535,402

 

59,405,792

 

90,941,194

 

Total

 

3,217,188,402

 

2,027,127,718

 

5,244,316,120

 

 

b)        Basic and diluted earnings per share

 

Basic and diluted earnings per share were calculated as follows:

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Net income (loss) attributable to the Company’s stockholders

 

(3,118

)

2,515

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

 

 

 

 

Income (loss) available to preferred stockholders

 

(1,191

)

960

 

Income (loss) available to common stockholders

 

(1,927

)

1,555

 

Total

 

(3,118

)

2,515

 

 

 

 

 

 

 

Weighted average number of shares outstanding (thousands of shares) - preferred shares

 

1,967,722

 

1,967,722

 

Weighted average number of shares outstanding (thousands of shares) - common shares

 

3,185,653

 

3,185,653

 

Total

 

5,153,375

 

5,153,375

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

 

 

 

 

Preferred share

 

(0.61

)

0.49

 

Common share

 

(0.61

)

0.49

 

 

36



Table of Contents

 

GRAPHIC

 

25.                     Information by business segment and by geographic area

 

The information presented to the Executive Board on the performance of each segment is derived from the accounting records, adjusted for reallocations between segments.

 

a)             Operating income (loss) and adjusted EBITDA

 

Adjusted EBITDA is used by management to support the decision making process for segments. The definition of adjusted EBITDA for the Company is the operating income or loss added by dividends received from joint ventures and associates and adjusted by depreciation, depletion and amortization, impairment and results on measurement or sales of non-current assets.

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

 

 

Statement of income

 

Dividends

 

 

 

Gain on

 

 

 

 

 

Net operating
revenue

 

Costs

 

Expenses, net

 

Research and
evaluation
expenses

 

Pre operating
and stoppage
operation

 

Depreciation
and others
results

 

Operating
income (loss)

 

received from
joint ventures
and associates

 

Depreciation,
depletion and
amortization

 

measurement
or sale of non-
current assets

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

2,716

 

(1,898

)

(169

)

(33

)

(27

)

(359

)

230

 

 

359

 

 

589

 

Pellets

 

965

 

(591

)

3

 

(1

)

(5

)

(85

)

286

 

26

 

85

 

 

397

 

Ferroalloys and manganese

 

70

 

(47

)

 

 

(6

)

(6

)

11

 

 

6

 

 

17

 

Others ferrous products and services

 

117

 

(100

)

8

 

(1

)

 

(20

)

4

 

 

20

 

 

24

 

 

 

3,868

 

(2,636

)

(158

)

(35

)

(38

)

(470

)

531

 

26

 

470

 

 

1,027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

145

 

(186

)

(70

)

(5

)

(12

)

(23

)

(151

)

 

23

 

 

(128

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products (i)

 

1,335

 

(847

)

(61

)

(27

)

(105

)

(422

)

(127

)

 

422

 

 

295

 

Copper (ii)

 

375

 

(224

)

4

 

(1

)

(1

)

(48

)

105

 

 

48

 

 

153

 

Others base metals products

 

 

 

230

 

 

 

 

230

 

 

 

 

230

 

 

 

1,710

 

(1,071

)

173

 

(28

)

(106

)

(470

)

208

 

 

470

 

 

678

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

30

 

(21

)

(1

)

(10

)

(4

)

(6

)

(12

)

 

6

 

 

(6

)

Phosphates

 

357

 

(261

)

(16

)

(6

)

(9

)

(55

)

10

 

 

55

 

 

65

 

Nitrogen

 

79

 

(55

)

(3

)

(1

)

(1

)

(6

)

13

 

 

6

 

 

19

 

Others fertilizers products

 

12

 

 

 

 

 

 

12

 

 

 

 

12

 

 

 

478

 

(337

)

(20

)

(17

)

(14

)

(67

)

23

 

 

67

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

39

 

(27

)

(44

)

(34

)

 

188

 

122

 

1

 

5

 

(193

)

(65

)

Total

 

6,240

 

(4,257

)

(119

)

(119

)

(170

)

(842

)

733

 

27

 

1,035

 

(193

)

1,602

 

 


(i) Includes nickel by-products and by-products (copper, precious metal, cobalt and others).

(ii) Includes copper concentrate and does not include the cooper by-product of nickel.

 

37



Table of Contents

 

GRAPHIC

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2014

 

 

 

Statement of income

 

Dividends

 

 

 

 

 

 

 

Net operating
revenue

 

Costs

 

Expenses, net

 

Research and
evaluation
expenses

 

Pre operating
and stoppage
operation

 

Depreciation and
others results

 

Operating
income (loss)

 

received from
joint ventures
and associates

 

Depreciation,
depletion and
amortization

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

5,122

 

(1,939

)

(324

)

(61

)

(24

)

(366

)

2,408

 

 

366

 

2,774

 

Pellets

 

1,431

 

(612

)

(3

)

 

(22

)

(51

)

743

 

11

 

51

 

805

 

Ferroalloys and manganese

 

69

 

(55

)

(2

)

 

(5

)

(6

)

1

 

 

6

 

7

 

Others ferrous products and services

 

196

 

(179

)

1

 

 

 

(30

)

(12

)

 

30

 

18

 

 

 

6,818

 

(2,785

)

(328

)

(61

)

(51

)

(453

)

3,140

 

11

 

453

 

3,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

137

 

(237

)

(53

)

(1

)

(8

)

(39

)

(201

)

 

39

 

(162

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products (i)

 

1,400

 

(809

)

(25

)

(31

)

(115

)

(391

)

29

 

 

391

 

420

 

Copper (ii)

 

328

 

(202

)

7

 

 

(4

)

(38

)

91

 

 

38

 

129

 

 

 

1,728

 

(1,011

)

(18

)

(31

)

(119

)

(429

)

120

 

 

429

 

549

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

36

 

(30

)

 

(4

)

(7

)

(5

)

(10

)

 

5

 

(5

)

Phosphates

 

403

 

(343

)

(20

)

(11

)

(22

)

(83

)

(76

)

 

83

 

7

 

Nitrogen

 

78

 

(56

)

(2

)

(2

)

(1

)

(12

)

5

 

 

12

 

17

 

Others fertilizers products

 

16

 

 

 

 

 

 

16

 

 

 

16

 

 

 

533

 

(429

)

(22

)

(17

)

(30

)

(100

)

(65

)

 

100

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

287

 

(187

)

(33

)

(35

)

 

(5

)

27

 

 

5

 

32

 

Total

 

9,503

 

(4,649

)

(454

)

(145

)

(208

)

(1,026

)

3,021

 

11

 

1,026

 

4,058

 

 


(i) Includes nickel by-products and by-products (copper, precious metal, cobalt and others).

(ii) Includes copper concentrate and does not include the cooper by-product of nickel.

 

38



Table of Contents

 

GRAPHIC

 

b)             Adjusted EBITDA and information of assets by segment

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

 

 

Adjusted EBITDA

 

Investments

 

Property, plant and
equipment and
intangible assets

 

Additions to
property, plant and
equipment and
intangible (iii)

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

Iron ore

 

589

 

463

 

31,065

 

1,460

 

Pellets

 

397

 

332

 

1,375

 

11

 

Ferroalloys and manganese

 

17

 

 

214

 

2

 

Others ferrous products and services

 

24

 

908

 

252

 

3

 

 

 

1,027

 

1,703

 

32,906

 

1,476

 

 

 

 

 

 

 

 

 

 

 

Coal

 

(128

)

356

 

4,519

 

354

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

Nickel and other products (i)

 

295

 

19

 

27,536

 

217

 

Copper (ii)

 

153

 

189

 

2,868

 

71

 

Others base metals products

 

230

 

 

 

 

 

 

678

 

208

 

30,404

 

288

 

Fertilizers

 

 

 

 

 

 

 

 

 

Potash

 

(6

)

 

140

 

 

Phosphates

 

65

 

 

4,736

 

56

 

Nitrogen

 

19

 

 

 

 

Others fertilizers products

 

12

 

 

 

 

 

 

90

 

 

4,876

 

56

 

 

 

 

 

 

 

 

 

 

 

Others

 

(65

)

1,545

 

3,029

 

26

 

Total

 

1,602

 

3,812

 

75,734

 

2,200

 

 


(i) Includes nickel by-products and by-products (copper, precious metal, cobalt and others).

(ii) Includes copper concentrate and does not include the cooper by-product of nickel.

(iii) Includes only acquisitions realized with cash and cash equivalents.

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2014

 

 

 

Adjusted EBITDA

 

Investments

 

Property, plant and
equipment and
intangible assets

 

Additions to
property, plant and
equipment and
intangible (iii)

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

Iron ore

 

2,774

 

626

 

39,337

 

1,316

 

Pellets

 

805

 

1,085

 

1,813

 

75

 

Ferroalloys and manganese

 

7

 

 

290

 

28

 

Others ferrous products and services

 

18

 

1,255

 

385

 

13

 

 

 

3,604

 

2,966

 

41,825

 

1,432

 

 

 

 

 

 

 

 

 

 

 

Coal

 

(162

)

368

 

4,548

 

396

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

Nickel and other products (i)

 

420

 

20

 

28,898

 

268

 

Copper (ii)

 

129

 

223

 

3,927

 

110

 

 

 

549

 

243

 

32,825

 

378

 

Fertilizers

 

 

 

 

 

 

 

 

 

Potash

 

(5

)

 

183

 

 

Phosphates

 

7

 

 

7,551

 

80

 

Nitrogen

 

17

 

 

 

 

Others fertilizers products

 

16

 

 

 

 

 

 

35

 

 

7,734

 

80

 

 

 

 

 

 

 

 

 

 

 

Others

 

32

 

1,738

 

3,924

 

97

 

Total

 

4,058

 

5,315

 

90,856

 

2,383

 

 


(i) Includes nickel by-products and by-products (copper, precious metal, cobalt and others).

(ii) Includes copper concentrate and does not include the cooper by-product of nickel.

(iii) Includes only acquisitions realized with cash and cash equivalents.

 

39



Table of Contents

 

GRAPHIC

 

c)              Results by segment and revenues by geographic area

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

Results

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

3,868

 

145

 

1,710

 

478

 

39

 

6,240

 

Cost and expenses

 

(2,867

)

(273

)

(1,032

)

(388

)

(105

)

(4,665

)

Gain on measurement or sale of non-current assets

 

 

 

 

 

193

 

193

 

Depreciation, depletion and amortization

 

(470

)

(23

)

(470

)

(67

)

(5

)

(1,035

)

Operating income (loss)

 

531

 

(151

)

208

 

23

 

122

 

733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial result

 

(4,430

)

83

 

(101

)

(68

)

6

 

(4,510

)

Results on sale or disposal of investments from joint ventures and associates

 

 

 

 

 

18

 

18

 

Equity results from joint ventures and associates

 

(142

)

 

(5

)

 

(124

)

(271

)

Income taxes

 

1,048

 

(23

)

(33

)

(126

)

(6

)

860

 

Net income (loss)

 

(2,993

)

(91

)

69

 

(171

)

16

 

(3,170

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) attributable to noncontrolling interests

 

(6

)

(11

)

(32

)

6

 

(9

)

(52

)

Income (loss) attributable to the Company’s stockholders

 

(2,987

)

(80

)

101

 

(177

)

25

 

(3,118

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales classified by geographic area:

 

 

 

 

 

 

 

 

 

 

 

 

 

America, except United States and Brazil

 

95

 

 

305

 

15

 

 

415

 

United States of America

 

10

 

 

239

 

 

8

 

257

 

Europe

 

649

 

13

 

437

 

28

 

 

1,127

 

Middle East/Africa/Oceania

 

295

 

34

 

39

 

3

 

 

371

 

Japan

 

408

 

29

 

145

 

 

 

582

 

China

 

1,634

 

 

142

 

 

 

1,776

 

Asia, except Japan and China

 

309

 

59

 

276

 

11

 

 

655

 

Brazil

 

468

 

10

 

127

 

421

 

31

 

1,057

 

Net operating revenue

 

3,868

 

145

 

1,710

 

478

 

39

 

6,240

 

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2014

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

Results

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

6,818

 

137

 

1,728

 

533

 

287

 

9,503

 

Cost and expenses

 

(3,225

)

(299

)

(1,179

)

(498

)

(255

)

(5,456

)

Depreciation, depletion and amortization

 

(453

)

(39

)

(429

)

(100

)

(5

)

(1,026

)

Operating income (loss)

 

3,140

 

(201

)

120

 

(65

)

27

 

3,021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial result

 

245

 

42

 

(131

)

2

 

(9

)

149

 

Equity results from joint ventures and associates

 

217

 

12

 

(6

)

 

(28

)

195

 

Income taxes

 

(997

)

26

 

(34

)

19

 

(3

)

(989

)

Net income (loss)

 

2,605

 

(121

)

(51

)

(44

)

(13

)

2,376

 

Income (loss) attributable to noncontrolling interests

 

(11

)

(9

)

(113

)

(5

)

(1

)

(139

)

Income (loss) attributable to the Company’s stockholders

 

2,616

 

(112

)

62

 

(39

)

(12

)

2,515

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales classified by geographic area:

 

 

 

 

 

 

 

 

 

 

 

 

 

America, except United States and Brazil

 

200

 

3

 

348

 

10

 

 

561

 

United States of America

 

2

 

 

262

 

 

124

 

388

 

Europe

 

1,177

 

11

 

593

 

27

 

 

1,808

 

Middle East/Africa/Oceania

 

435

 

14

 

35

 

 

 

484

 

Japan

 

666

 

49

 

165

 

 

 

880

 

China

 

3,053

 

5

 

155

 

 

 

3,213

 

Asia, except Japan and China

 

533

 

55

 

169

 

3

 

 

760

 

Brazil

 

752

 

 

1

 

493

 

163

 

1,409

 

Net operating revenue

 

6,818

 

137

 

1,728

 

533

 

287

 

9,503

 

 

d)             Investment, intangible and property, plant and equipment by geographic area

 

There was no significant change in relation to the information of assets by geographic area disclosed in the financial statements for the year ended December 31, 2014.

 

40



Table of Contents

 

GRAPHIC

 

26.                     Cost of goods sold and services rendered, and selling and administrative expenses and other operating expenses (income), net, by nature

 

a)        Cost of goods sold and services rendered

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

 

 

 

 

Personnel

 

526

 

678

 

Material and service

 

958

 

1,286

 

Fuel oil and gas

 

307

 

415

 

Maintenance

 

655

 

426

 

Energy

 

141

 

145

 

Acquisition of products

 

253

 

420

 

Depreciation and depletion

 

912

 

941

 

Freight

 

770

 

692

 

Others

 

646

 

587

 

Total

 

5,168

 

5,590

 

 

 

 

 

 

 

Cost of goods sold

 

5,022

 

5,326

 

Cost of services rendered

 

146

 

264

 

Total

 

5,168

 

5,590

 

 

b)                 Selling and administrative expenses

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Personnel

 

84

 

111

 

Services (consulting, infrastructure and others)

 

29

 

46

 

Advertising and publicity

 

3

 

5

 

Depreciation and amortization

 

30

 

44

 

Travel expenses

 

3

 

2

 

Taxes and rents

 

6

 

6

 

Others

 

40

 

68

 

Total

 

195

 

282

 

 

c)                                      Others operational expenses (incomes), net

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Provision for litigation

 

(17

)

56

 

Provision for loss with VAT credits (ICMS)

 

41

 

45

 

Provision for profit sharing program

 

21

 

40

 

Provision for disposal of materials and inventories

 

63

 

20

 

Gold stream transaction

 

(230

)

 

Others

 

76

 

56

 

Total

 

(46

)

217

 

 

41



Table of Contents

 

GRAPHIC

 

27.                     Financial result

 

The financial results, by nature, are as follows:

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Financial expenses

 

 

 

 

 

Interest

 

(195

)

(384

)

Labor, tax and civil lawsuits

 

(34

)

(7

)

Derivative financial instruments

 

(1,340

)

(19

)

Indexation and exchange rate variation (a)

 

(5,301

)

(489

)

Participative stockholders’ debentures

 

275

 

(22

)

Expenses of REFIS

 

(144

)

(163

)

Others

 

(121

)

(106

)

 

 

(6,860

)

(1,190

)

Financial income

 

 

 

 

 

Short-term investments

 

26

 

55

 

Derivative financial instruments

 

 

231

 

Indexation and exchange rate variation (b)

 

2,282

 

1,005

 

Others

 

42

 

48

 

 

 

2,350

 

1,339

 

Financial results, net

 

(4,510

)

149

 

 

 

 

 

 

 

Summary of indexation and exchange rate variation

 

 

 

 

 

Loans and financing

 

(5,014

)

856

 

Related parties

 

(1

)

4

 

Others

 

1,996

 

(344

)

Net (a) + (b)

 

(3,019

)

516

 

 

28.                     Deferred revenue - Gold stream

 

In February 2013, the Company entered into a gold stream transaction (“original transaction”) with Silver Wheaton Corp. (“SLW”) to sell 25% of the gold extracted during the life of the mine as a by-product of Salobo copper mine (“Salobo transaction”) and 70% of the gold extracted during the next 20 years as a by-product of the Sudbury nickel mines (“Sudbury transaction”).

 

The original transaction was amended in March, 2015 to include an additional 25% of gold extracted during the life of the mine as a by-product of Salobo copper mine (“amended transaction”). The Company received up-front cash proceeds of US$900. The Company may also receive an additional cash payment contingent on its decision to expand the capacity to process Salobo copper ores until 2036. The additional amount could range from US$ 88 million to US$ 720 million depending on timing and size of the expansion.

 

As the gold is delivered to SLW, Vale will receive a payment equal to the lesser of: (i) US$400 per ounce of refined gold delivered, subject to an annual increase of 1% per year commencing on January 1, 2017 for the original and amended transactions and each January 1 thereafter; and (ii) the reference market price on the date of delivery.

 

This transaction was bifurcated into two identifiable components: (i) the sale of the mineral rights and, (ii) the services for gold extraction on the portion in which Vale operates as an agent for SLW gold extraction.

 

The result of the sale of the mineral rights of US$230 was recognized in the statement of income under other operating expenses, net. The portion related to the provision of future services for gold extraction was recorded as deferred revenue (liability) in the amount of US$532 and will be recognized in the statement of income as the service is rendered and the gold extracted. During the three-months period ended March 31, 2015 and 2014, the Company recognized US$15 and US$22, respectively, in statement of income related to rendered services related to the original and amended transactions.

 

The deferred revenue will be recognized in the future based on the units of gold extracted compared to the total of proven and probable gold reserves negotiated with SLW. Defining the gain on sale of mineral interest and the deferred revenue portion of the transaction requires the use of critical accounting estimates as follow:

 

· Discount rates used to measure the present value of future inflows and outflows;

· Allocation of costs between copper and gold based on relative prices;

· Expected margin for the independent elements (sale of mineral rights and service for gold extraction) based on Company’s best estimate.

 

42



Table of Contents

 

GRAPHIC

 

29.                     Commitments

 

a)        Base metals operations

 

There have been no material changes to commitments of base metals operations disclosed in the financial statements as at December 31, 2014, except for letters of credit and guarantees in the amount of US$957 (US$1,007 at December, 2014) associated with items such as environment reclamation, asset retirement obligation commitments, insurance, electricity commitments, post-retirement benefits, community service commitments and import and export duties.

 

b)        VBG - Guinea

 

On April 30, 2014, Rio Tinto plc (“Rio Tinto”) filed a lawsuit against Vale, BSGR, and other defendants in the United States District Court for the Southern District of New York, alleging violations of the U.S. Racketeer Influenced and Corrupt Organizations Act (RICO) in relation to Rio Tinto’s loss of certain Simandou mining rights, the Government of Guinea’s assignment of those rights to BSGR, and Vale’s subsequent investment in VBG.  Discovery, a pre-trial evidentiary procedure in which the parties are required to disclose information and produce documents to each other and can depose potential witnesses or take other steps to obtain relevant information, has begun and under the current schedule will be completed in March 2016.  Vale intends to vigorously defend the action, which it believes to be without factual or legal merit.

 

c)         Participative stockholders’ debentures

 

During the period, there was no issuance of new debentures, or any change in the par value or the indicators affecting debentures issued. At March 2015, the Company made available for withdrawal the amount of US$39 as semiannual compensation.

 

d)                                     Operating lease - pelletizing operations

 

Vale has operating lease agreements with its joint ventures Companhia Coreano-Brasileira de Pelotização, Companhia Hispano-Brasileira de Pelotização, Companhia Ítalo-Brasileira de Pelotização and Companhia Nipo-Brasileira de Pelotização (together “pelletizing companies”), in which Vale leases their pelletizing plants. These renewable operating lease agreements have last between 3 and 10 years.

 

The total amount of operational leasing expenses related to pelletizing operations for the three-month period ended on March 31, 2015 and 2014 were US$68 and US$91, respectively.

 

e)                                      Concession agreements

 

The contractual basis and deadlines for completion of concessions railways and port terminals are unchanged in the period.

 

f)               Guarantees provided

 

At March 31, 2015, corporate guarantees provided by Vale (within the limit of its direct or indirect interest) for the companies Norte Energia S.A. and Companhia Siderúrgica do Pecém S.A. totaled US$220 and US$600, respectively. Due to the conclusion of the energy generation assets transaction (note 6), the guarantee of Norte Energia S.A. is shared with Cemig GT.

 

43



Table of Contents

 

GRAPHIC

 

30.                     Related parties

 

Transactions with related parties are made by the Company at arm´s-length, observing the price and usual market conditions and therefore do not generate any undue benefit to their counterparties or loss to the Company.

 

In the normal course of operations, Vale contracts rights and obligations with related parties (associates, joint ventures and stockholders), derived from operations of sale and purchase of products and services, leasing of assets, sale of raw material and railway transportation services.

 

The balances of these related party transactions and their effects on the financial statements may be identified as follows:

 

 

 

Assets

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Accounts receivable

 

Related parties

 

Accounts receivable

 

Related parties

 

Baovale Mineração S.A.

 

3

 

6

 

4

 

9

 

Ferrovia Norte Sul

 

9

 

 

9

 

 

Mitsui & Co., Ltd.

 

14

 

 

9

 

 

MRS Logística S.A.

 

3

 

20

 

3

 

24

 

Samarco Mineração S.A.

 

28

 

256

 

24

 

310

 

Teal Minerals Inc.

 

 

220

 

 

216

 

VLI Multimodal S.A.

 

6

 

 

25

 

 

VLI S.A.

 

170

 

8

 

9

 

 

VLI Operações Portuárias S.A.

 

17

 

 

26

 

 

Others

 

40

 

35

 

56

 

55

 

Total

 

290

 

545

 

165

 

614

 

 

 

 

 

 

 

 

 

 

 

Current

 

290

 

522

 

165

 

579

 

Non-current

 

 

23

 

 

35

 

Total

 

290

 

545

 

165

 

614

 

 

 

 

Liabilities

 

 

 

March 31, 2015 (unaudited)

 

December 31, 2014

 

 

 

Suppliers

 

Related parties

 

Suppliers

 

Related parties

 

Baovale Mineração S.A.

 

7

 

 

4

 

 

Companhia Coreano-Brasileira de Pelotização

 

15

 

54

 

1

 

86

 

Companhia Hispano-Brasileira de Pelotização

 

11

 

7

 

32

 

 

Companhia Ítalo-Brasileira de Pelotização

 

10

 

11

 

1

 

47

 

Companhia Nipo-Brasileira de Pelotização

 

26

 

98

 

2

 

147

 

Ferrovia Centro-Atlântica S.A.

 

 

82

 

 

98

 

Mitsui & Co., Ltd.

 

9

 

 

11

 

 

MRS Logística S.A.

 

10

 

 

25

 

 

VLI Multimodal S.A.

 

 

96

 

 

 

Others

 

28

 

9

 

32

 

37

 

Total

 

116

 

357

 

108

 

415

 

 

 

 

 

 

 

 

 

 

 

Current

 

116

 

267

 

108

 

306

 

Non-current

 

 

90

 

 

109

 

Total

 

116

 

357

 

108

 

415

 

 

44



Table of Contents

 

GRAPHIC

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

Net operating
revenue

 

Cost/Expenses

 

Financial
results

 

Net operating
revenue

 

Cost/Expenses

 

Financial
results

 

Baovale Mineração S.A.

 

 

(5

)

 

 

(5

)

 

California Steel Industries, Inc.

 

 

 

 

94

 

 

 

Thyssenkrupp Companhia Siderúrgica do Atlântico Ltd.

 

 

 

 

 

(116

)

 

Companhia Coreano-Brasileira de Pelotização

 

 

(16

)

 

 

(26

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(12

)

 

 

(16

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(14

)

 

 

(10

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(25

)

 

 

(39

)

 

Ferrovia Centro Atlântica S.A.

 

12

 

(12

)

 

15

 

(16

)

 

Mitsui & Co., Ltd.

 

58

 

 

 

44

 

 

 

MRS Logística S.A.

 

 

(119

)

 

 

(138

)

 

Samarco Mineração S.A.

 

31

 

 

 

62

 

 

 

VLI S.A.

 

62

 

 

2

 

86

 

 

6

 

VLI Multimodal S.A.

 

 

 

 

 

 

 

 

Others

 

22

 

(11

)

2

 

16

 

(15

)

7

 

Total

 

185

 

(214

)

4

 

317

 

(381

)

13

 

 

 

 

 

 

Statement of income

 

 

 

Balance sheet

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

December 31, 2014

 

March 31, 2015

 

March 31, 2014

 

 

 

(unaudited)

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Bradesco

 

19

 

34

 

 

1

 

 

 

19

 

25

 

 

1

 

Loans and financing payable

 

 

 

 

 

 

 

 

 

BNDES

 

4,068

 

4,511

 

(17

)

(57

)

BNDESPar

 

487

 

589

 

(10

)

(12

)

 

 

4,555

 

5,100

 

(27

)

(69

)

 

Remuneration of key management personnel

 

 

 

Three-months period ended (unaudited)

 

 

 

March 31, 2015

 

March 31, 2014

 

Short-term benefits:

 

14

 

18

 

Wages or pro-labor

 

2

 

3

 

Direct and indirect benefits

 

4

 

4

 

Bonus

 

8

 

11

 

 

 

 

 

 

 

Long-term benefits:

 

1

 

1

 

Based on stock

 

1

 

1

 

 

 

 

 

 

 

Termination of position

 

4

 

 

 

 

19

 

19

 

 

45



Table of Contents

 

GRAPHIC

 

Board of Directors, Fiscal Council, Advisory Committees and Executive Officers

 

Board of Directors

 

Governance and Sustainability Committee

 

 

Fernando Jorge Buso Gomes

Dan Antonio Marinho Conrado

 

Arthur Prado

Chairman

 

Eduardo de Oliveira Rodrigues Filho

 

 

Ricardo Rodrigues Morgado

Sérgio Alexandre Figueiredo Clemente

 

Ricardo Simonsen

Vice-President

 

 

 

 

Fiscal Council

Marcel Juviniano Barros

 

 

Gueitiro Matsuo Genso

 

Vacant

Tarcísio José Massote de Godoy

 

Chairman

Fernando Jorge Buso Gomes

 

 

Hiroyuki Kato

 

Marcelo Barbosa Saintive

Oscar Augusto de Camargo Filho

 

Marcelo Amaral Moraes

Luciano Galvão Coutinho

 

Cláudio José Zucco

Lucio Azevedo

 

Aníbal Moreira dos Santos

 

 

Raphael Manhães Martins

Alternate

 

 

Marco Geovanne Tobias da Silva

 

Alternate

Moacir Nachbar Junior

 

Marcos Tadeu Siqueira

Francisco Ferreira Alexandre

 

Oswaldo Mário Pego de Amorim Azevedo

Gilberto Antonio Vieira

 

Paulo Fontoura Valle

Robson Rocha

 

Pedro Paulo de Souza

Luiz Mauricio Leuzinger

 

Executive Officers

Yoshitomo Nishimitsu

 

 

Eduardo de Oliveira Rodrigues Filho

 

Murilo Pinto de Oliveira Ferreira

Victor Guilherme Tito

 

Chief Executive Officer

Carlos Roberto de Assis Ferreira

 

 

 

 

Vânia Lucia Chaves Somavilla

Advisory Committees of the Board of Directors

 

Executive Officer (Human Resources, Health & Safety, Sustainability and Energy)

 

 

 

Controlling Committee

 

Luciano Siani Pires

Eduardo Cesar Pasa

 

Chief Financial Officer and Investors Relations

Moacir Nachbar Junior

 

 

Oswaldo Mário Pego de Amorim Azevedo

 

Roger Allan Downey

Marcos Paulo Pereira da Silva

 

Executive Officer (Fertilizers and Coal)

 

 

 

Executive Development Committee

 

Gerd Peter Poppinga

Oscar Augusto de Camargo Filho

 

Executive Officer (Ferrous)

Marcel Juviniano Barros

 

 

Fernando Jorge Buso Gomes

 

Galib Abrahão Chaim

Tatiana Boavista Barros Heil

 

Executive Officer (Capital Projects Implementation)

 

 

 

Strategic Committee

 

Humberto Ramos de Freitas

Murilo Pinto de Oliveira Ferreira

 

Executive Officer (Logistics and Mineral Research)

Gueitiro Matsuo Genso

 

 

Luiz Carlos Trabuco Cappi

 

Vacant

Oscar Augusto de Camargo Filho

 

Executive Officer (Base Metals)

Luciano Galvão Coutinho

 

 

 

 

Marcelo Botelho Rodrigues

Finance Committee

 

Global Controller Director

Gilmar Dalilo Cezar Wanderley

 

 

Fernando Jorge Buso Gomes

 

Murilo Muller

Eduardo de Oliveira Rodrigues Filho

 

Chief Accountant and Controllership Director

Tatiana Boavista Barros Heil

 

CRC-PR - 046788/O-5 “S” RJ

 

46



Table of Contents

 

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)

 

 

 

 

By:

/s/ Rogerio T. Nogueira

Date:  April 30, 2015

 

Rogerio T. Nogueira

 

 

Director of Investor Relations

 

47