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

 

September, 2016

 

Vale S.A.

 

Avenida das Américas, No. 700
22640-100 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

 

 

Interim Financial Statements

September 30, 2016

 

 

BRGAAP in R$ (English)

 

1



Table of Contents

 

 

Vale S.A. Interim Financial Statements

Contents

 

 

 

Page

Report on the review of quarterly information – ITR

 

3

Condensed Consolidated and Parent Company Income Statement

 

4

Condensed Consolidated and Parent Company Statement of Comprehensive Income

 

5

Condensed Consolidated and Parent Company Cash Flow Statement

 

6

Condensed Consolidated and Parent Company Balance Sheet

 

8

Condensed Statement of Changes in Equity

 

9

Condensed Consolidated and Parent Company Value Added Statement

 

10

Selected Notes to the Interim Financial Statements

 

11

1.

Corporate information

 

11

2.

Basis for preparation of the interim financial statements

 

11

3.

Information by business segment

 

13

4.

Liabilities related to associates and joint ventures

 

18

5.

Non-current assets and liabilities held for sale

 

21

6.

Acquisitions and divestitures

 

21

7.

Cash and cash equivalents

 

22

8.

Accounts receivable

 

22

9.

Inventories

 

22

10.

Investments in associates and joint ventures

 

23

11.

Intangibles

 

25

12.

Property, plant and equipment

 

26

13.

Loans and borrowings

 

27

14.

Litigation

 

29

15.

Income taxes

 

31

16.

Employee postretirement obligations

 

32

17.

Financial instruments classification

 

32

18.

Fair value estimate

 

33

19.

Derivative financial instruments

 

33

20.

Stockholders’ equity

 

44

21.

Costs and expenses by nature

 

45

22.

Financial results

 

46

23.

Deferred revenue — Gold stream

 

46

24.

Commitments

 

47

25.

Related parties

 

48

26.

Parent Company information (individual interim information)

 

51

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

 

56

 

2



 

GRAPHIC

 

GRAPHIC

KPMG Auditores Independentes

Central Tel

55 (21) 3515-9400

Av. Almirante Barroso, 52 - 4º

Fax

55 (21) 3515-9000

20031-000 - Rio de Janeiro, RJ - Brasil

Internet

www.kpmg.com.br

Caixa Postal 2888

 

20001-970 - Rio de Janeiro, RJ - Brasil

 

 

Report on the review of quarterly information - ITR

 

(A free translation of the original report in Portuguese, as filed with the Brazilian Securities and Exchange Commission (CVM), prepared in accordance with the accounting practices adopted in Brazil, rules of the CVM and of the International Financial Reporting Standards - IFRS)

 

To

The Board of Directors and Stockholders of

Vale S.A.

Rio de Janeiro - RJ

 

Introduction

 

1.              We have reviewed the interim accounting information of Vale S.A. (“the Company”), included in the quarterly information form - ITR for the quarter ended September 30, 2016, which comprises the individual and consolidated balance sheets as of September 30, 2016 and the respective individual and consolidated statements of income and comprehensive income for the three and nine months periods ended on September 30, 2016, the individual and consolidated statements of changes in stockholders’ equity for the nine-month period then ended and the individual statement of cash flows for the nine-month period and the consolidated statement of cash flows for the three and nine months periods then ended, including the explanatory notes.

 

2.              The Company`s Management is responsible for the preparation of these interim accounting information in accordance with the Accounting Pronouncement CPC 21(R1) — “Demonstração Intermediária” and the international accounting rule IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board — IASB, as well as the presentation of these information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of quarterly information - ITR. Our responsibility is to express our conclusion on this interim accounting information based on our review.

 

Scope of the review

 

3.              We conducted our review in accordance with Brazilian and International Interim Information Review Standards (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity). A review of interim information consists of making inquiries primarily of the management responsible for financial and accounting matters and applying analytical procedures and other review procedures. The scope of a review is significantly less than an audit conducted in accordance with auditing standards and, accordingly, it did not enable us to obtain assurance that we were aware of all the material matters that would have been identified in an audit. Therefore, we do not express an audit opinion.

 

 

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.

 

1



 

Conclusion on the interim accounting information

 

4.              Based on our review, we are not aware of any fact that might lead us to believe that the individual and consolidated interim accounting information included in the aforementioned quarterly information was not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, applicable to the preparation of the quarterly review - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission.

 

Other matters

 

Statements of added value

 

5.              We have also reviewed the individual and consolidated statements of added value for the nine-month period ended September 30, 2016, prepared under the responsibility of the Company`s Management, for which presentation is required in the interim information in accordance with the standards issued by the CVM applicable to the preparation of quarterly information - ITR, and considered as supplementary information by IFRS, which does not require the presentation of the statements of added value. These statements were submitted to the same review procedures described previously and, based on our review, we are not aware of any fact that might lead us to believe that they were not prepared, in all material respects, in accordance with the individual and consolidated interim accounting information, taken as a whole.

 

Rio de Janeiro, October 26, 2016

 

KPMG Auditores Independentes

CRC SP-014428/O-6 F-RJ

 

(Original report in Portuguese signed by)

 

Manuel Fernandes Rodrigues de Sousa

Accountant CRC RJ-052428/O-2

 

2



Table of Contents

 

 

Condensed Income Statement

In millions of Brazilian Reais, except as otherwise stated

 

 

 

Consolidated

 

 

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

Notes

 

2016

 

2015

 

2016

 

2015

 

Net operating revenue

 

3(c)

 

23,772

 

23,350

 

69,042

 

62,818

 

Cost of goods sold and services rendered

 

21(a)

 

(16,082

)

(18,025

)

(49,340

)

(48,981

)

Gross profit

 

 

 

7,690

 

5,325

 

19,702

 

13,837

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (expenses) income

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

21(b)

 

(495

)

(458

)

(1,453

)

(1,501

)

Research and evaluation expenses

 

 

 

(275

)

(434

)

(783

)

(1,143

)

Pre operating and operational stoppage

 

 

 

(395

)

(936

)

(1,197

)

(2,491

)

Other operating income (expenses), net

 

21(c)

 

176

 

(422

)

(524

)

(866

)

 

 

 

 

(989

)

(2,250

)

(3,957

)

(6,001

)

Results on measurement or sale of non-current assets

 

5 and 6

 

(110

)

(189

)

(338

)

185

 

Operating income

 

 

 

6,591

 

2,886

 

15,407

 

8,021

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

22

 

1,222

 

9,048

 

26,392

 

20,474

 

Financial expenses

 

22

 

(4,635

)

(34,895

)

(17,959

)

(58,375

)

Equity results in associates and joint ventures

 

10

 

149

 

(1,204

)

1,396

 

(1,361

)

Others results in associates and joint ventures

 

4 and 6

 

(106

)

 

(4,105

)

296

 

Net income (loss) before income taxes

 

 

 

3,221

 

(24,165

)

21,131

 

(30,945

)

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

15

 

 

 

 

 

 

 

 

 

Current tax

 

 

 

(181

)

(353

)

(2,887

)

(761

)

Deferred tax

 

 

 

(1,174

)

17,430

 

(6,411

)

19,927

 

 

 

 

 

(1,355

)

17,077

 

(9,298

)

19,166

 

Net income (loss)

 

 

 

1,866

 

(7,088

)

11,833

 

(11,779

)

Income (loss) attributable to noncontrolling interests

 

 

 

24

 

(425

)

95

 

(721

)

Net income (loss) attributable to Vale’s stockholders

 

 

 

1,842

 

(6,663

)

11,738

 

(11,058

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Vale’s stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

20(b)

 

 

 

 

 

 

 

 

 

Preferred share (R$)

 

 

 

0.36

 

(1.29

)

2.28

 

(2.15

)

Common share (R$)

 

 

 

0.36

 

(1.29

)

2.28

 

(2.15

)

 

 

 

Parent company

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net operating revenue

 

11,941

 

11,346

 

32,315

 

30,948

 

Cost of goods sold and services rendered

 

(7,552

)

(6,846

)

(21,599

)

(20,037

)

Gross profit

 

4,389

 

4,500

 

10,716

 

10,911

 

 

 

 

 

 

 

 

 

 

 

Operating (expenses) income

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

(265

)

(266

)

(754

)

(845

)

Research and evaluation expenses

 

(162

)

(195

)

(417

)

(547

)

Pre operating and operational stoppage

 

(167

)

(129

)

(506

)

(353

)

Equity results from subsidiaries

 

1,169

 

(1,759

)

4,574

 

(3,359

)

Other operating income (expenses), net

 

(312

)

(155

)

(830

)

(504

)

 

 

263

 

(2,504

)

2,067

 

(5,608

)

Results on measurement or sale of non-current assets

 

 

 

 

546

 

Operating income

 

4,652

 

1,996

 

12,783

 

5,849

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

1,296

 

9,190

 

25,006

 

19,652

 

Financial expenses

 

(4,464

)

(31,518

)

(17,122

)

(52,858

)

Equity results in associates and joint ventures

 

149

 

(1,204

)

1,396

 

(1,361

)

Others results in associates and joint ventures

 

(106

)

 

(4,105

)

55

 

Net income (loss) before income taxes

 

1,527

 

(21,536

)

17,958

 

(28,663

)

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

Current tax

 

137

 

18

 

(2,161

)

18

 

Deferred tax

 

178

 

14,855

 

(4,059

)

17,587

 

 

 

315

 

14,873

 

(6,220

)

17,605

 

Net income (loss)

 

1,842

 

(6,663

)

11,738

 

(11,058

)

 

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

See Report on the review of quarterly information – ITR.

 

4



Table of Contents

 

 

Condensed Statement of Comprehensive Income

In millions of Brazilian Reais

 

 

 

Consolidated

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss)

 

1,866

 

(7,088

)

11,833

 

(11,779

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

(128

)

(25

)

(1,100

)

(48

)

Effect of taxes

 

43

 

6

 

340

 

80

 

 

 

(85

)

(19

)

(760

)

32

 

Total items that will not be reclassified subsequently to the income statement

 

(85

)

(19

)

(760

)

32

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

787

 

24,733

 

(13,435

)

36,846

 

Effect of taxes

 

55

 

 

(467

)

 

Transfer of realized results to net income, net of taxes

 

 

 

(266

)

 

 

 

842

 

24,733

 

(14,168

)

36,846

 

Cash flow hedge

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

 

254

 

23

 

1,812

 

Effect of taxes

 

 

(6

)

(3

)

(16

)

Equity results in associates and joint ventures

 

 

(8

)

16

 

(16

)

Transfer of realized results to net income, net of taxes

 

 

(135

)

(10

)

(823

)

 

 

 

105

 

26

 

957

 

Total of items that may be reclassified subsequently to the income statement

 

842

 

24,838

 

(14,142

)

37,803

 

Total comprehensive income (loss)

 

2,623

 

17,731

 

(3,069

)

26,056

 

Comprehensive income (loss) attributable to noncontrolling interests

 

66

 

692

 

(835

)

910

 

Comprehensive income (loss) attributable to Vale’s stockholders

 

2,557

 

17,039

 

(2,234

)

25,146

 

 

 

 

Parent company

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss)

 

1,842

 

(6,663

)

11,738

 

(11,058

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

(26

)

(31

)

(66

)

(81

)

Effect of taxes

 

10

 

11

 

23

 

27

 

Equity results in associates and joint ventures

 

(69

)

1

 

(717

)

86

 

 

 

(85

)

(19

)

(760

)

32

 

Total items that will not be reclassified subsequently to the income statement

 

(85

)

(19

)

(760

)

32

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

800

 

23,616

 

(12,972

)

35,215

 

Effect of taxes

 

 

 

(266

)

 

 

 

800

 

23,616

 

(13,238

)

35,215

 

Cash flow hedge

 

 

 

 

 

 

 

 

 

Equity results in associates and joint ventures

 

 

105

 

26

 

957

 

 

 

 

105

 

26

 

957

 

Total of items that may be reclassified subsequently to the income statement

 

800

 

23,721

 

(13,212

)

36,172

 

Total comprehensive income (loss)

 

2,557

 

17,039

 

(2,234

)

25,146

 

 

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

See Report on the review of quarterly information – ITR.

 

5



Table of Contents

 

 

Condensed Cash Flow Statement

In millions of Brazilian Reais

 

 

 

Consolidated

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

3,221

 

(24,165

)

21,131

 

(30,945

)

Adjustments for:

 

 

 

 

 

 

 

 

 

Equity results from associates and joint ventures

 

(149

)

1,204

 

(1,396

)

1,361

 

Results on measurement or sale of non-current assets

 

(371

)

189

 

(143

)

(916

)

Others results in associates and joint ventures

 

 

 

3,999

 

(296

)

Depreciation, amortization and depletion

 

3,127

 

3,670

 

9,694

 

9,709

 

Financial results, net

 

3,413

 

25,847

 

(8,433

)

37,901

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(40

)

1,210

 

(1,112

)

1,898

 

Inventories

 

40

 

(1,171

)

(91

)

(690

)

Suppliers and contractors

 

874

 

1,493

 

693

 

1,115

 

Payroll and related charges

 

(54

)

188

 

88

 

(1,439

)

Other taxes assets and liabilities, net

 

397

 

(318

)

200

 

(1,429

)

Deferred revenue - Gold stream (note 23) (ii)

 

1,683

 

 

1,683

 

1,670

 

Other assets and liabilities, net

 

(1,586

)

386

 

(2,394

)

1,169

 

Cash provided from operations

 

10,555

 

8,533

 

23,919

 

19,108

 

Interest on loans and borrowings paid

 

(1,381

)

(1,445

)

(4,520

)

(3,760

)

Derivatives received (paid), net (note 19)

 

(619

)

(622

)

(3,831

)

(2,709

)

Interest on participative stockholders’ debentures paid

 

 

 

(117

)

 

Income taxes

 

(384

)

(166

)

(1,259

)

(1,069

)

Income taxes - Settlement program

 

(362

)

(325

)

(1,056

)

(950

)

Net cash provided by operating activities

 

7,809

 

5,975

 

13,136

 

10,620

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

Financial investments redeemed (invested)

 

227

 

180

 

221

 

917

 

Loans and advances granted

 

(231

)

83

 

(430

)

(87

)

Additions to investments

 

(29

)

(22

)

(850

)

(377

)

Additions to property, plant and equipment and intangible (note 3(b))

 

(4,057

)

(6,616

)

(13,735

)

(19,366

)

Dividends and interest on capital received from associates and joint ventures

 

1

 

71

 

416

 

722

 

Proceeds from disposal of assets and investments

 

1,053

 

1,793

 

1,140

 

3,542

 

Proceeds from gold stream transaction

 

885

 

 

885

 

1,156

 

Net cash used in investing activities

 

(2,151

)

(4,511

)

(12,353

)

(13,493

)

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

Loans and borrowings (i)

 

 

 

 

 

 

 

 

 

Additions

 

5,091

 

3,772

 

23,046

 

12,196

 

Repayments

 

(6,458

)

(3,287

)

(17,409

)

(5,930

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

Dividends and interest on capital paid to Vale’s stockholders

 

 

 

 

(3,101

)

Dividends and interest on capital paid to noncontrolling interest

 

(433

)

 

(702

)

(35

)

Transactions with noncontrolling stockholders

 

 

4,000

 

(69

)

3,875

 

Net cash provided by (used in) financing activities

 

(1,800

)

4,485

 

4,866

 

7,005

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

3,858

 

5,949

 

5,649

 

4,132

 

Cash and cash equivalents in the beginning of the period

 

13,377

 

9,799

 

14,022

 

10,555

 

Effect of exchange rate changes on cash and cash equivalents

 

193

 

1,722

 

(2,243

)

2,783

 

Cash and cash equivalents at end of the period

 

17,428

 

17,470

 

17,428

 

17,470

 

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - capitalized loans and borrowing costs

 

556

 

689

 

1,995

 

1,789

 

 


(i)

Includes transactions with related parties: Bradesco, Banco do Brasil and Banco Nacional do Desenvolvimento Econômico e Social - BNDES.

(ii)

Net of warrants

 

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

See Report on the review of quarterly information – ITR.

 

6



Table of Contents

 

 

Condensed Cash Flow Statement

In millions of Brazilian Reais

 

 

 

Parent company

 

 

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

Cash flow from operating activities:

 

 

 

 

 

Net income (loss) before income taxes

 

17,958

 

(28,663

)

Adjustments for:

 

 

 

 

 

Equity results in associates and joint ventures

 

(1,396

)

1,361

 

Equity results from subsidiaries

 

(4,574

)

3,359

 

Others results in associates and joint ventures

 

3,999

 

(601

)

Results on disposal of property, plant and equipment and intangibles

 

51

 

160

 

Depreciation, amortization and depletion

 

3,717

 

3,330

 

Financial results, net

 

(7,884

)

33,206

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

4,634

 

(5,068

)

Inventories

 

87

 

(173

)

Suppliers and contractors

 

333

 

452

 

Payroll and related charges

 

153

 

(1,075

)

Other taxes assets and liabilities, net

 

(85

)

(540

)

Other assets and liabilities, net

 

460

 

14,373

 

Cash provided from operations

 

17,453

 

20,121

 

Dividends and interest on capital received from subsidiaries

 

186

 

717

 

Interest on loans with related parties received (paid), net

 

(1,824

)

(1,256

)

Interest on loans and borrowings paid

 

(2,361

)

(1,839

)

Derivatives received (paid), net (note 19)

 

(790

)

(649

)

Interest on participative stockholders’ debentures paid

 

(117

)

 

Income taxes

 

(60

)

 

Income taxes - Settlement program

 

(1,035

)

(930

)

Net cash provided by operating activities

 

11,452

 

16,164

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Financial investments redeemed

 

(34

)

374

 

Loans and advances received

 

(341

)

65

 

Additions to investments

 

(1,334

)

(5,109

)

Additions to property, plant and equipment and intangible

 

(9,070

)

(11,847

)

Dividends and interest on capital received from associates and joint ventures

 

403

 

718

 

Proceeds from disposal of assets and investments

 

115

 

4,316

 

Net cash used in investing activities

 

(10,261

)

(11,483

)

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

Loans and borrowings (i)

 

 

 

 

 

Additions

 

8,221

 

14,503

 

Repayments

 

(9,011

)

(9,839

)

Transactions with related parties

 

(423

)

 

Transactions with stockholders:

 

 

 

 

 

Dividends and interest on capital paid to noncontrolling interest

 

 

(3,101

)

Net cash provided by (used in) financing activities

 

(1,213

)

1,563

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(22

)

6,244

 

Cash and cash equivalents in the beginning of the period

 

518

 

685

 

Cash and cash equivalents at end of the period

 

496

 

6,929

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

Additions to property, plant and equipment - capitalized loans and borrowing costs

 

827

 

892

 

 


(i)

Includes transactions with related parties: Bradesco, Banco do Brasil and Banco Nacional do Desenvolvimento economico e Social - BNDES.

 

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

See Report on the review of quarterly information – ITR.

 

7



Table of Contents

 

 

Condensed Balance Sheet

In millions of Brazilian Reais

 

 

 

Consolidated

 

Parent company

 

 

 

Notes

 

September 30,
2016

 

December 31, 2015

 

September 30,
2016

 

December 31, 2015

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

7

 

17,428

 

14,022

 

496

 

518

 

Financial investments

 

 

 

372

 

109

 

53

 

18

 

Derivative financial instruments

 

19

 

458

 

474

 

343

 

196

 

Accounts receivable

 

8

 

8,299

 

5,763

 

24,541

 

36,026

 

Inventories

 

9

 

12,659

 

13,775

 

3,924

 

3,830

 

Recoverable income taxes

 

 

 

1,029

 

3,513

 

645

 

3,176

 

Recoverable taxes

 

 

 

5,205

 

5,482

 

3,668

 

3,352

 

Related parties

 

25

 

215

 

273

 

739

 

834

 

Others

 

 

 

2,114

 

1,215

 

672

 

581

 

 

 

 

 

47,779

 

44,626

 

35,081

 

48,531

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

5

 

15,545

 

15,792

 

 

 

 

 

 

 

63,324

 

60,418

 

35,081

 

48,531

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

19

 

1,635

 

363

 

1,361

 

293

 

Loans

 

 

 

592

 

732

 

110

 

106

 

Recoverable income taxes

 

 

 

1,760

 

1,840

 

 

 

Recoverable taxes

 

 

 

2,234

 

1,956

 

1,753

 

1,457

 

Deferred income taxes

 

15(a)

 

22,234

 

30,867

 

13,256

 

17,292

 

Judicial deposits

 

14(c)

 

3,485

 

3,445

 

2,803

 

2,707

 

Related parties

 

25

 

62

 

5

 

828

 

1,468

 

Others

 

 

 

2,144

 

2,392

 

554

 

765

 

 

 

 

 

34,146

 

41,600

 

20,665

 

24,088

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

10

 

12,908

 

11,481

 

120,422

 

127,517

 

Intangibles

 

11

 

22,589

 

20,789

 

11,435

 

8,557

 

Property, plant and equipment

 

12

 

198,430

 

211,259

 

100,095

 

96,887

 

 

 

 

 

268,073

 

285,129

 

252,617

 

257,049

 

Total assets

 

 

 

331,397

 

345,547

 

287,698

 

305,580

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

 

 

12,177

 

13,140

 

6,897

 

7,084

 

Payroll and related charges

 

 

 

1,924

 

1,464

 

1,221

 

806

 

Derivative financial instruments

 

19

 

2,816

 

8,107

 

2,265

 

3,559

 

Loans and borrowings

 

13

 

7,080

 

9,788

 

5,291

 

4,736

 

Related parties

 

25

 

1,811

 

1,856

 

9,934

 

6,774

 

Income taxes - Settlement program

 

15(c)

 

1,458

 

1,348

 

1,428

 

1,320

 

Taxes payable

 

 

 

601

 

977

 

365

 

460

 

Provision for income taxes

 

 

 

500

 

943

 

 

 

Employee postretirement obligations

 

16

 

235

 

266

 

65

 

72

 

Asset retirement obligations

 

 

 

227

 

346

 

73

 

83

 

Liabilities related to associates and joint ventures

 

4

 

1,069

 

 

1,069

 

 

Others

 

 

 

4,824

 

2,531

 

830

 

825

 

 

 

 

 

34,722

 

40,766

 

29,438

 

25,719

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities associated with non-current assets held for sale

 

5

 

484

 

416

 

 

 

 

 

 

 

35,206

 

41,182

 

29,438

 

25,719

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

19

 

3,789

 

5,581

 

3,258

 

4,745

 

Loans and borrowings

 

13

 

95,010

 

102,878

 

47,579

 

55,986

 

Related parties

 

25

 

445

 

830

 

50,107

 

63,837

 

Employee postretirement obligations

 

16

 

6,861

 

6,831

 

493

 

483

 

Provisions for litigation

 

14(a)

 

2,984

 

3,210

 

1,967

 

2,190

 

Income taxes - Settlement program

 

15(c)

 

16,156

 

15,953

 

15,825

 

15,626

 

Deferred income taxes

 

15(a)

 

5,440

 

6,520

 

 

 

Asset retirement obligations

 

 

 

10,289

 

9,313

 

1,627

 

1,291

 

Participative stockholders’ debentures

 

 

 

2,137

 

1,336

 

2,137

 

1,336

 

Deferred revenue - Gold stream

 

23

 

7,004

 

6,830

 

 

 

Liabilities related to associates and joint ventures

 

4

 

2,580

 

 

2,580

 

 

Others

 

 

 

7,706

 

5,664

 

3,753

 

3,207

 

 

 

 

 

160,401

 

164,946

 

129,326

 

148,701

 

Total liabilities

 

 

 

195,607

 

206,128

 

158,764

 

174,420

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Equity attributable to Vale’s stockholders

 

20

 

128,934

 

131,160

 

128,934

 

131,160

 

Equity attributable to noncontrolling interests

 

 

 

6,856

 

8,259

 

 

 

Total stockholders’ equity

 

 

 

135,790

 

139,419

 

128,934

 

131,160

 

Total liabilities and stockholders’ equity

 

 

 

331,397

 

345,547

 

287,698

 

305,580

 

 

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

See Report on the review of quarterly information – ITR.

 

8



Table of Contents

 

 

Condensed Statement of Changes in Equity

In millions of Brazilian Reais

 

 

 

Share
capital

 

Results on
conversion
of shares

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value gain
(losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity
attributable
to Vale’s
stockholders

 

Equity attributable
to noncontrolling
interests

 

Total
stockholder’s
equity

 

Balance at December 31, 2015

 

77,300

 

50

 

(1,881

)

3,846

 

(2,746

)

(3,873

)

58,464

 

 

131,160

 

8,259

 

139,419

 

Net income

 

 

 

 

 

 

 

 

11,738

 

11,738

 

95

 

11,833

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

(760

)

 

 

(760

)

 

(760

)

Cash flow hedge

 

 

 

 

 

 

26

 

 

 

26

 

 

26

 

Translation adjustments

 

 

 

 

 

 

420

 

(13,658

)

 

(13,238

)

(930

)

(14,168

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

(645

)

(645

)

Acquisitions and disposal of participation of noncontrolling interest

 

 

 

8

 

 

 

 

 

 

8

 

(1

)

7

 

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

78

 

78

 

Balance at September 30, 2016

 

77,300

 

50

 

(1,873

)

3,846

 

(2,746

)

(4,187

)

44,806

 

11,738

 

128,934

 

6,856

 

135,790

 

 

 

 

Share
capital

 

Results on
conversion
of shares

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value gain
(losses)

 

Cumulative
translation
adjustments

 

Retained
earnings
(loss)

 

Equity
attributable
to Vale’s
stockholders

 

Equity attributable
to noncontrolling
interests

 

Total
stockholder’s
equity

 

Balance at December 31, 2014

 

77,300

 

50

 

(970

)

53,085

 

(2,746

)

(4,553

)

24,248

 

 

146,414

 

3,187

 

149,601

 

Loss

 

 

 

 

 

 

 

 

(11,058

)

(11,058

)

(721

)

(11,779

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

32

 

 

 

32

 

 

32

 

Cash flow hedge

 

 

 

 

 

 

957

 

 

 

957

 

 

957

 

Translation adjustments

 

 

 

 

 

 

(1,089

)

36,304

 

 

35,215

 

1,631

 

36,846

 

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

(21

)

(21

)

Acquisitions and disposal of participation of noncontrolling interest

 

 

 

663

 

 

 

 

(1,233

)

 

(570

)

4,746

 

4,176

 

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

86

 

86

 

Dividends and interest on capital of Vale’s stockholders

 

 

 

 

(3,101

)

 

 

 

 

(3,101

)

 

(3,101

)

Balance at September 30, 2015

 

77,300

 

50

 

(307

)

49,984

 

(2,746

)

(4,653

)

59,319

 

(11,058

)

167,889

 

8,908

 

176,797

 

 

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

See Report on the review of quarterly information – ITR.

 

9



Table of Contents

 

 

Condensed Value Added Statement

In millions of Brazilian Reais

 

 

 

Consolidated

 

Parent company

 

 

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Generation of value added from continuing operations

 

 

 

 

 

 

 

 

 

Gross revenue

 

 

 

 

 

 

 

 

 

Revenue from products and services

 

70,031

 

63,889

 

32,841

 

31,621

 

Results on measurement or sale of non-current assets

 

(604

)

481

 

(266

)

601

 

Revenue from the construction of own assets

 

10,114

 

21,156

 

7,921

 

12,739

 

Allowance for doubtful accounts

 

(15

)

44

 

(2

)

(4

)

Other revenues

 

1,269

 

1,781

 

315

 

399

 

Less:

 

 

 

 

 

 

 

 

 

Acquisition of products

 

(1,267

)

(1,931

)

(572

)

(515

)

Material, service and maintenance

 

(24,898

)

(32,770

)

(14,576

)

(18,588

)

Oil and gas

 

(3,399

)

(3,133

)

(2,029

)

(1,926

)

Energy

 

(2,010

)

(1,463

)

(757

)

(710

)

Freight

 

(6,052

)

(8,181

)

(49

)

 

Other results in investments

 

(3,839

)

 

(3,839

)

 

Other costs and expenses

 

(4,282

)

(7,036

)

(1,315

)

(1,502

)

Gross value added

 

35,048

 

32,837

 

17,672

 

22,115

 

Depreciation, amortization and depletion

 

(9,694

)

(9,709

)

(3,717

)

(3,330

)

Net value added

 

25,354

 

23,128

 

13,955

 

18,785

 

 

 

 

 

 

 

 

 

 

 

Received from third parties

 

 

 

 

 

 

 

 

 

Equity results from entities

 

1,396

 

(1,361

)

5,970

 

(4,720

)

Financial income

 

469

 

541

 

241

 

259

 

Monetary and exchange variation of assets

 

(6,299

)

13,172

 

(6,461

)

14,255

 

Total value added to be distributed

 

20,920

 

35,480

 

13,705

 

28,579

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

6,068

 

6,761

 

2,141

 

3,258

 

Taxes and contributions

 

6,192

 

6,136

 

4,911

 

4,756

 

Current income tax

 

2,887

 

761

 

2,161

 

(18

)

Deferred income tax

 

6,411

 

(19,927

)

4,059

 

(17,587

)

Financial expense (excludes capitalized interest)

 

3,707

 

13,062

 

4,415

 

9,206

 

Monetary and exchange variation of liabilities

 

(17,343

)

39,332

 

(18,020

)

38,409

 

Other remunerations of third party funds

 

1,165

 

1,134

 

2,300

 

1,613

 

Reinvested net income (absorbed loss)

 

11,738

 

(11,058

)

11,738

 

(11,058

)

Net income (loss) attributable to noncontrolling interest

 

95

 

(721

)

 

 

Distributed value added

 

20,920

 

35,480

 

13,705

 

28,579

 

 

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

See Report on the review of quarterly information – ITR.

 

10



Table of Contents

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of Brazilian Reais, unless otherwise stated

 

1.         Corporate information

 

Vale S.A. (the “Parent Company”) is a public company headquartered at 700, Avenida das Américas, Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo - BM&F BOVESPA (Vale3 and Vale5), New York - NYSE (VALE and VALE.P) and Paris - NYSE Euronext (Vale3 and Vale5).

 

Vale and its direct and indirect subsidiaries (“Vale”, “Group” or “Company”) are producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. The Group also produces copper, metallurgical and thermal coal, potash, phosphates and other fertilizer nutrients, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 3.

 

2.         Basis for preparation of the interim financial statements

 

a)   Statement of compliance

 

The condensed consolidated and individual interim financial statements of the Company (“interim financial statements”) have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as implemented in Brazil by the Brazilian Accountant Pronouncements Committee (“CPC”), approved by the Brazilian Securities Exchange Commission (“CVM”) and by the Brazilian Federal Accounting Council (“CFC”). All relevant information from its own financial statements, and only this information, are being presented and correspond to those used by the Company’s Management.

 

The consolidated financial statements present the accounts of the Group.

 

The individual financial statements present the accounts of the Parent Company and are presented in a summarized form in note 26.

 

b)   Basis of presentation

 

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

 

The accounting practices, accounting estimates and judgments, risk management and measurement methods are the same as those adopted when preparing the financial statements for the year ended December 31, 2015. These interim financial statements were prepared 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, 2015.

 

The interim financial statements of the Group and its associates and joint ventures are measured using the currency of the primary economic environment in which each entity operates (“functional currency”). In the case of the Parent Company the functional currency is the Brazilian real (“BRL” or “R$”). For presentation purposes, these interim financial statements are presented in R$.

 

11



Table of Contents

 

 

The exchange rates used by the Group for major currencies to translate its operations into R$ are as follows:

 

 

 

 

 

 

 

Average rate for the

 

 

 

Closing rate

 

Three months period ended

 

Nine months period ended

 

 

 

September 30,
2016

 

December 31,
2015

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

US dollar (“US$”)

 

3.2462

 

3.9048

 

3.2460

 

3.5379

 

3.5450

 

3.1684

 

Canadian dollar (“CAD”)

 

2.4757

 

2.8171

 

2.4881

 

2.7024

 

2.6802

 

2.5090

 

Australian dollar (“AUD”)

 

2.4895

 

2.8532

 

2.4616

 

2.5642

 

2.6273

 

2.4067

 

Euro (“EUR” or “€”)

 

3.6484

 

4.2504

 

3.6232

 

3.9365

 

3.9549

 

3.5285

 

 

Subsequent events were evaluated through October 26, 2016, which is the date the interim financial statements were approved by the Board of Directors.

 

c)         Accounting standards issued but not yet effective

 

The standards and interpretations issued by IASB relevant to the Company but not yet effective are disclosed below:

 

·                  IFRS 9 Financial instruments.

·                  IFRS 15 Revenue from contracts with customers.

·                  IFRS 16 Leases.

·                  Amendments to IAS 12 – Recognition of deferred tax assets.

·                  Amendments to IAS 7 – Disclosure Initiative.

·                  Amendments to IFRS 2 – Classification and measurement of share-based payment transactions.

·                  Amendments to IFRS 4 – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.

 

The Company is currently analyzing potential impacts regarding these pronouncements on its financial statements.

 

12



Table of Contents

 

 

3.         Information by business segment

 

The information presented to the Executive Board on the performance of each segment is derived from the accounting records.

 

a)   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 less (i) the depreciation, depletion and amortization, (ii) results on measurement or sales of non-current assets, (iii) impairment, (iv) onerous contracts and plus (v) dividends received from associates and joint ventures.

 

 

 

Consolidated

 

 

 

Three months period ended September 30, 2016

 

 

 

Net operating
revenue

 

Cost of goods sold and
services rendered

 

Sales, administrative
and other operating
expenses

 

Research and
evaluation expenses

 

Pre operating and
operational stoppage

 

Dividends received
from associates and
joint ventures

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

12,275

 

(5,347

)

(254

)

(81

)

(131

)

1

 

6,463

 

Pellets

 

3,217

 

(1,662

)

(27

)

(13

)

(16

)

 

1,499

 

Ferroalloys and manganese

 

245

 

(205

)

(18

)

 

(10

)

 

12

 

Other ferrous products and services

 

358

 

(226

)

(1

)

(1

)

(3

)

 

127

 

 

 

16,095

 

(7,440

)

(300

)

(95

)

(160

)

1

 

8,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

530

 

(509

)

20

 

(11

)

(42

)

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,763

 

(2,573

)

(89

)

(67

)

(86

)

 

948

 

Copper

 

1,365

 

(825

)

(8

)

(6

)

 

 

526

 

Other base metals products

 

 

 

481

 

 

 

 

481

 

 

 

5,128

 

(3,398

)

384

 

(73

)

(86

)

 

1,955

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

110

 

(112

)

(5

)

(2

)

(14

)

 

(23

)

Phosphates

 

1,526

 

(1,344

)

(76

)

(13

)

(1

)

 

92

 

Nitrogen

 

225

 

(171

)

(9

)

(2

)

 

 

43

 

Other fertilizers products

 

80

 

 

 

 

 

 

80

 

 

 

1,941

 

(1,627

)

(90

)

(17

)

(15

)

 

192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

78

 

(190

)

(215

)

(79

)

(1

)

 

(407

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

23,772

 

(13,164

)

(201

)

(275

)

(304

)

1

 

9,829

 

 

13



Table of Contents

 

 

 

 

Consolidated

 

 

 

Three months period ended September 30, 2015

 

 

 

Net operating
revenue

 

Cost of goods sold
and services
rendered

 

Sales, administrative
and other operating
expenses

 

Research and
evaluation expenses

 

Pre operating and
operational stoppage

 

Dividends received
from associates and
joint ventures

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

11,792

 

(6,574

)

(591

)

(92

)

(77

)

1

 

4,459

 

Pellets

 

3,150

 

(1,811

)

49

 

(4

)

(17

)

 

1,367

 

Ferroalloys and manganese

 

99

 

(107

)

(9

)

 

(15

)

 

(32

)

Other ferrous products and services

 

446

 

(247

)

13

 

(2

)

 

 

210

 

 

 

15,487

 

(8,739

)

(538

)

(98

)

(109

)

1

 

6,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

453

 

(735

)

(65

)

(25

)

(90

)

 

(462

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,618

 

(2,953

)

35

 

(83

)

(340

)

 

277

 

Copper

 

1,245

 

(796

)

(4

)

(11

)

 

 

434

 

 

 

4,863

 

(3,749

)

31

 

(94

)

(340

)

 

711

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

146

 

(102

)

(4

)

(53

)

(28

)

 

(41

)

Phosphates

 

1,990

 

(1,291

)

(15

)

(26

)

(69

)

 

589

 

Nitrogen

 

282

 

(180

)

(2

)

(2

)

(5

)

 

93

 

Other fertilizers products

 

61

 

 

 

 

 

 

61

 

 

 

2,479

 

(1,573

)

(21

)

(81

)

(102

)

 

702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

68

 

(152

)

10

 

(135

)

 

70

 

(139

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

23,350

 

(14,948

)

(583

)

(433

)

(641

)

71

 

6,816

 

 

14



Table of Contents

 

 

 

 

Consolidated

 

 

 

Nine months period ended September 30, 2016

 

 

 

Net operating revenue

 

Cost of goods sold
and services
rendered

 

Sales, administrative
and other operating
expenses

 

Research and
evaluation expenses

 

Pre operating and
operational stoppage

 

Dividends received
from associates and
joint ventures

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

35,726

 

(16,151

)

(1,379

)

(180

)

(376

)

1

 

17,641

 

Pellets

 

9,184

 

(4,971

)

(153

)

(27

)

(61

)

213

 

4,185

 

Ferroalloys and manganese

 

641

 

(566

)

(9

)

 

(31

)

 

35

 

Other ferrous products and services

 

1,061

 

(680

)

9

 

(4

)

(9

)

 

377

 

 

 

46,612

 

(22,368

)

(1,532

)

(211

)

(477

)

214

 

22,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

1,640

 

(2,476

)

184

 

(29

)

(80

)

 

(761

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

11,328

 

(8,267

)

(194

)

(200

)

(299

)

1

 

2,369

 

Copper

 

4,129

 

(2,404

)

(33

)

(12

)

 

 

1,680

 

Other base metals products

 

 

 

481

 

 

 

 

481

 

 

 

15,457

 

(10,671

)

254

 

(212

)

(299

)

1

 

4,530

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

276

 

(261

)

9

 

(13

)

(42

)

 

(31

)

Phosphates

 

3,926

 

(3,406

)

(214

)

(36

)

(4

)

 

266

 

Nitrogen

 

661

 

(489

)

(29

)

(6

)

 

 

137

 

Other fertilizers products

 

198

 

 

 

 

 

10

 

208

 

 

 

5,061

 

(4,156

)

(234

)

(55

)

(46

)

10

 

580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

272

 

(555

)

(362

)

(276

)

(2

)

191

 

(732

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

69,042

 

(40,226

)

(1,690

)

(783

)

(904

)

416

 

25,855

 

 

15



Table of Contents

 

 

 

 

Consolidated

 

 

 

Nine months period ended September 30, 2015

 

 

 

Net operating
revenue

 

Cost of goods sold
and services
rendered

 

Sales, administrative
and other operating
expenses

 

Research and
evaluation expenses

 

Pre operating and
operational stoppage

 

Dividends received
from associates and
joint ventures

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

30,102

 

(18,111

)

(1,665

)

(295

)

(225

)

1

 

9,807

 

Pellets

 

8,916

 

(5,265

)

60

 

(11

)

(60

)

624

 

4,264

 

Ferroalloys and manganese

 

471

 

(409

)

(9

)

(1

)

(43

)

 

9

 

Other ferrous products and services

 

1,199

 

(825

)

37

 

(8

)

(3

)

25

 

425

 

 

 

40,688

 

(24,610

)

(1,577

)

(315

)

(331

)

650

 

14,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

1,322

 

(1,855

)

(397

)

(59

)

(161

)

 

(1,150

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

11,285

 

(7,953

)

(233

)

(233

)

(1,015

)

 

1,851

 

Copper

 

3,602

 

(2,127

)

(35

)

(20

)

(3

)

 

1,417

 

Other base metals products

 

 

 

722

 

 

 

 

722

 

 

 

14,887

 

(10,080

)

454

 

(253

)

(1,018

)

 

3,990

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

326

 

(221

)

14

 

(123

)

(52

)

 

(56

)

Phosphates

 

4,380

 

(2,949

)

(75

)

(65

)

(134

)

 

1,157

 

Nitrogen

 

747

 

(496

)

(9

)

(6

)

(12

)

 

224

 

Other fertilizers products

 

137

 

 

 

 

 

 

137

 

 

 

5,590

 

(3,666

)

(70

)

(194

)

(198

)

 

1,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

331

 

(326

)

(294

)

(322

)

(1

)

72

 

(540

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

62,818

 

(40,537

)

(1,884

)

(1,143

)

(1,709

)

722

 

18,267

 

 

16



Table of Contents

 

 

Adjusted Ebitda is reconciled to net income (loss) as follows:

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Adjusted EBITDA

 

9,829

 

6,816

 

25,855

 

18,267

 

Depreciation, depletion and amortization

 

(3,127

)

(3,670

)

(9,694

)

(9,709

)

Dividends received from associates and joint ventures

 

(1

)

(71

)

(416

)

(722

)

Results on measurement or sale of non-current assets

 

(110

)

(189

)

(338

)

185

 

Operating income

 

6,591

 

2,886

 

15,407

 

8,021

 

 

 

 

 

 

 

 

 

 

 

Financial results, net

 

(3,413

)

(25,847

)

8,433

 

(37,901

)

Equity results in associates and joint ventures

 

149

 

(1,204

)

1,396

 

(1,361

)

Others results in associates and joint ventures

 

(106

)

 

(4,105

)

296

 

Income taxes

 

(1,355

)

17,077

 

(9,298

)

19,166

 

Income (loss) attributable to noncontrolling interests

 

(24

)

425

 

(95

)

721

 

Income (loss) attributable to Vale’s stockholders

 

1,842

 

(6,663

)

11,738

 

(11,058

)

 

b)   Assets by segment

 

 

 

Consolidated

 

 

 

September 30, 2016

 

Three months
period ended
September 30,
2016

 

Nine months
period ended
September 30,
2016

 

 

 

Product inventory

 

Investments in
associates and
joint ventures

 

Property, plant
and equipment
and intangible
assets

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous minerals

 

4,176

 

5,944

 

111,487

 

2,586

 

8,855

 

Coal

 

307

 

944

 

6,340

 

494

 

1,574

 

Base metals

 

3,706

 

52

 

81,101

 

595

 

2,465

 

Fertilizers

 

805

 

293

 

14,785

 

338

 

737

 

Others

 

8

 

5,675

 

7,306

 

44

 

104

 

Total

 

9,002

 

12,908

 

221,019

 

4,057

 

13,735

 

 


(i) Includes only cash effect .

 

 

 

Consolidated

 

 

 

December 31, 2015

 

Three months
period ended
September 30,
2015

 

Nine months
period ended
September 30,
2015

 

 

 

Product inventory

 

Investments in
associates and
joint ventures

 

Property, plant
and equipment
and intangible
assets

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous minerals

 

4,044

 

5,775

 

110,123

 

3,888

 

12,087

 

Coal

 

206

 

1,195

 

7,075

 

1,168

 

3,371

 

Base metals

 

4,552

 

66

 

91,849

 

1,302

 

3,199

 

Fertilizers

 

1,156

 

292

 

15,096

 

195

 

504

 

Others

 

10

 

4,153

 

7,905

 

63

 

205

 

Total

 

9,968

 

11,481

 

232,048

 

6,616

 

19,366

 

 


(i) Includes only cash effect.

 

17



Table of Contents

 

 

 

c)   Revenues by geographic area

 

 

 

Consolidated

 

 

 

Three months period ended September 30, 2016

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas, except United States and Brazil

 

260

 

 

986

 

37

 

 

1,283

 

United States of America

 

177

 

 

597

 

 

 

774

 

Europe

 

2,028

 

180

 

1,448

 

69

 

 

3,725

 

Middle East/Africa/Oceania

 

1,083

 

43

 

14

 

 

 

1,140

 

Japan

 

1,207

 

56

 

302

 

 

 

1,565

 

China

 

8,827

 

53

 

557

 

 

 

9,437

 

Asia, except Japan and China

 

930

 

198

 

1,083

 

31

 

 

 

2,242

 

Brazil

 

1,583

 

 

141

 

1,804

 

78

 

3,606

 

Net operating revenue

 

16,095

 

530

 

5,128

 

1,941

 

78

 

23,772

 

 

 

 

Consolidated

 

 

 

Three months period ended September 30, 2015

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

Americas, except United States and Brazil

 

293

 

44

 

741

 

68

 

 

1,146

 

United States of America

 

33

 

 

635

 

 

11

 

679

 

Europe

 

2,196

 

88

 

1,566

 

135

 

 

3,985

 

Middle East/Africa/Oceania

 

819

 

56

 

28

 

10

 

 

913

 

Japan

 

1,396

 

73

 

308

 

 

 

1,777

 

China

 

8,545

 

80

 

627

 

 

 

9,252

 

Asia, except Japan and China

 

808

 

107

 

799

 

43

 

 

1,757

 

Brazil

 

1,397

 

5

 

159

 

2,223

 

57

 

3,841

 

Net operating revenue

 

15,487

 

453

 

4,863

 

2,479

 

68

 

23,350

 

 

 

 

Consolidated

 

 

 

Nine months period ended September 30, 2016

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas, except United States and Brazil

 

875

 

50

 

3,054

 

99

 

 

4,078

 

United States of America

 

493

 

 

1,887

 

 

14

 

2,394

 

Europe

 

5,996

 

283

 

4,818

 

246

 

 

11,343

 

Middle East/Africa/Oceania

 

2,720

 

195

 

62

 

10

 

 

2,987

 

Japan

 

3,260

 

303

 

762

 

 

 

4,325

 

China

 

26,514

 

172

 

1,566

 

 

 

28,252

 

Asia, except Japan and China

 

2,334

 

637

 

2,947

 

178

 

 

6,096

 

Brazil

 

4,420

 

 

361

 

4,528

 

258

 

9,567

 

Net operating revenue

 

46,612

 

1,640

 

15,457

 

5,061

 

272

 

69,042

 

 

 

 

Consolidated

 

 

 

Nine months period ended September 30, 2015

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

Americas, except United States and Brazil

 

872

 

57

 

2,628

 

166

 

 

3,723

 

United States of America

 

76

 

 

2,027

 

 

57

 

2,160

 

Europe

 

5,992

 

239

 

4,582

 

322

 

 

11,135

 

Middle East/Africa/Oceania

 

2,552

 

255

 

195

 

19

 

 

3,021

 

Japan

 

3,668

 

188

 

872

 

 

 

4,728

 

China

 

20,719

 

118

 

1,599

 

 

 

22,436

 

Asia, except Japan and China

 

2,700

 

409

 

2,288

 

151

 

 

5,548

 

Brazil

 

4,109

 

56

 

696

 

4,932

 

274

 

10,067

 

Net operating revenue

 

40,688

 

1,322

 

14,887

 

5,590

 

331

 

62,818

 

 

4.             Liabilities related to associates and joint ventures

 

Refers to the provision to comply with the obligations under the agreement related to the dam failure of Samarco Mineração S.A. (“Samarco”), which is a Brazilian joint venture between Vale S.A. and BHP Billiton Brasil Ltda. (“BHPB”), as follows:

 

a) Reparation agreement

 

Samarco and its shareholders, Vale S.A. and BHPB, entered into an Agreement in connection with the R$20.2 billion lawsuit (“Agreement”) on March 2, 2016 with the Brazilian federal government, the two Brazilian states affected by the failure (Espírito Santo and Minas Gerais) and other governmental authorities in order to implement the programs for remediation and compensation of the areas and communities affected by Samarco’s dam failure.

 

The Agreement does not contemplate admission of civil, criminal or administrative liability for the Fundão dam failure.

 

The Agreement has a 15-year term, renewable for successive one-year periods until all the obligations under the Agreement have

 

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been performed.

 

Under the Agreement, Samarco, Vale S.A. and BHPB have agreed to establish a foundation to develop and implement social and economic remediation and compensation, to be funded by Samarco as follows: R$2.0 billion in 2016, R$1.2 billion in 2017 and R$1.2 billion in 2018. From 2019 to 2021, Samarco agreed to provide funding based on the amounts needed to implement the projects approved for the relevant year, subject to an annual minimum of R$800 and an annual maximum of R$1.6 billion. From 2022 onwards, Samarco will provide the necessary funding in order to complete remaining programs approved for each relevant year. The foundation will allocate an annual amount of R$240 over 15 years to the implementation of compensation programs, and these annual amounts are included in the annual contributions described above for the first six years. Through the end of 2018, R$500 will be provided for sewage collection and treatment and solid waste disposal under the terms of the Agreement.

 

To the extent that Samarco does not meet its funding obligations to the foundation, each of Vale S.A. and BHPB will provide, under the terms of the Agreement, funds to the Foundation in proportion to its 50% equity interest in Samarco.

 

On June 24, 2016, the Renova Foundation (“Foundation”) was constituted, under the Agreement, to develop and implement the socioeconomic and environmental´s restoration and compensation programs. The Foundation began its operations in August of 2016.

 

As the consequence of the dam failure, the governmental authorities ordered the suspension of Samarco’s operations.

 

b) Estimates used for the provision

 

The Samarco initially expected to resume its operations in the last quarter of 2016. Based on this assumption, Samarco´s cash flow projections indicated that Samarco would be able to generate all or a substantial part of the funding required under the Agreement. This assumption was supported by studies of technical solutions available, combined with the progress of the repair works on the remaining dam structures after the dam failure and the definition of the contractual scope of the remediation measures and compensation to the communities impacted by the dam failure. Consequently, no provision was recognized in the Company´s financial statements as of March 31, 2016.

 

However, in view of the current stage of the necessary procedures to resume operations and the uncertainties related to the licensing approval by the governmental authorities during the current year, Samarco reviewed its assumption and concluded that was unable to make a reliable estimate of how and when its operations will resume.

 

Therefore, the Company recognized a provision on its interim financial statements as of June 30, 2016, in the amount of R$5,560 which was discounted at a free-risk rate, resulting in R$3,733 liability, which represents its best estimate of the obligation to comply with the reparation and compensation programs under the Agreement, equivalent to the percentage of 50% entered into under the Agreement by Vale.

 

On August, 2016, Samarco issued non-convertible private debentures which were subscribed equally by the Company and BHPB, and the resources contributed by Vale S.A. were allocated as follows: (i) R$146 was used by Samarco in the reparation programs in accordance with the agreement, and therefore, discounted from the provision of R$3,733 mentioned above; and (ii) R$106 applied by Samarco´s to fund its working capital, and recognized in the income statement as “Others results in associates and joint ventures” in the third quarter of 2016. Funds to working capital requirements will be released on an as-needed basis by the shareholders and will be subject to achieving certain milestones, without undertaking an obligation to Samarco.

 

For the period ended in September 2016, the movements of the provision are as follows:

 

Balance at June 30, 2016

 

3,733

 

 

 

 

 

Payments

 

(146

)

Interests

 

62

 

Balances at September 30, 2016

 

3,649 

 

 

 

 

 

Current liabilities

 

1,069

 

Non-current liabilities

 

2,580

 

 

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At each reporting period, the Company will reassess the key assumptions used by Samarco in the preparation of the projected future cash flows and will adjust the provision, if required.

 

c) Relevant information of Samarco

 

Samarco disbursed R$285 and R$1,016 in the accident reparation during the three and nine months period ended September 30, 2016, respectively. Since the initial date of the accident, R$1,141 has been disbursed to comply with the obligations under the agreement.

 

d) Contingencies related to Samarco accident

 

(i) Public civil claim filed by the Federal Government and others

 

The federal government, the two Brazilian states affected by the failure (Espirito Santo and Minas Gerais) and other governmental authorities have initiated a public civil lawsuit against Samarco and its shareholders, Vale S.A. and BHPB, which the estimated value indicated by the plaintiffs in R$20.2 billion.

 

On May 5, 2016, the Agreement was ratified by the Federal Regional Court (TRF), 1st Region signed in March 2, 2016. In July, 2016 the Superior Court of Justice (STJ) in Brazil issued an interim order, suspending the decision of TRF, which ratified the Agreement until the final judgments of the claim.

 

On August 17, 2016, the TRF of the 1st Region has rejected the appeal presented by Samarco, Vale S.A. e BHPB against the interim order and overruled the judicial decision that ratified the Agreement. The decision granted by the TRF of the 1st Region, among other measures, confirmed a prior injunction that prohibited the defendants from transferring or conveying any of their interest in its Brazilian iron ore concessions, without, however, limiting their production and commercial activities.

 

Only the judicial decision that ratified the Agreement was suspended and, therefore, the Agreement between the parties remains valid, and the parties will continue fulfilling their obligations under the Agreement.

 

(ii) U.S. Securities class action suits

 

Vale S.A. and certain of its officers have been named as defendants in securities class action suits in Federal Court in New York brought by holders of Vale’s American Depositary Receipts under U.S. federal securities laws. The lawsuits allege that Vale S.A. made false and misleading statements or omitted to make disclosures concerning the risks and dangers of the operations of Samarco’s Fundão dam and the adequacy of related programs and procedures. The plaintiffs have not specified an amount of alleged damages in these actions. Vale S.A. intends to vigorously mount a full defense against the allegations. The litigation is at a very early stage. On March 7, 2016, the judge overseeing the securities class actions issued an order consolidating these actions and designating lead plaintiffs and counsel. On April 29, 2016, lead plaintiffs filed a Consolidated Amended Complaint that will serve as the operative complaint in the litigation. In July 2016, Vale S.A. and the individual defendants filed a motion to dismiss the Amended Complaint. In August 2016, the plaintiffs submitted their opposition to the motion to dismiss, which was replied by the defendants in September 2016. The decision on the motion to dismiss remains pending.

 

(iii) Public civil action filed by Federal Prosecution Office

 

On May 3, 2016, the Federal Prosecution Office (MPF) filed a public civil action against Samarco and its shareholders and presented several demands, including: (i) the adoption of measures for mitigating the social, economic and environmental impacts resulting from the Fundão dam failure and other emergency measures; (ii) the payment of compensation to the community; and (iii) payments for the collective moral damage. The initial action value claimed by the Federal Prosecution Office (MPF) is R$155 billion. The first conciliatory hearing was held on September 13th and a second hearing might be scheduled by the judge.

 

(iv) Criminal lawsuit

 

On October 20, 2016, the Federal Prosecutors Office (MPF) offered a criminal lawsuit to the Brazilian Federal Justice Court against Vale, BHPB, Samarco, VogBr Recursos Hídricos e Geotecnia Ltda. and 22 individuals for alleged crimes against the environment, urban planning and cultural heritage, flooding, landslide, as well as for alleged crimes against the victims of the Fundão dam failure. The MPF also requested that, if found guilty at the end of the criminal procedure, and the accused, the Judge imposes the minimum amount needed to repair the damage caused by the dam failure. So far, Vale was not serviced to present its defense.

 

(v) Other lawsuits

 

In addition, Samarco and its shareholders were named as a defendant in several other lawsuits brought by individuals, corporations and governmental entities seeking damages for material or personnel damages.

 

These lawsuits and petitions are at very early stages, thus it is not possible to determine a range of outcomes and/or reliable estimates of the potential exposure at this time. No contingent liability has been quantified and no provision was recognized for these other lawsuits.

 

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5.         Non-current assets and liabilities held for sale

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Shipping assets

 

Nacala

 

Total

 

Nacala

 

 

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

37

 

37

 

13

 

Other current assets

 

 

312

 

312

 

522

 

Property, plant and equipment and Intangible, net

 

1,613

 

13,583

 

15,196

 

15,257

 

Total assets

 

1,613

 

13,932

 

15,545

 

15,792

 

 

 

 

 

 

 

 

 

 

 

Liabilities associated with non-current assets held for sale

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

 

449

 

449

 

365

 

Other current liabilities

 

 

35

 

35

 

51

 

Total liabilities

 

 

484

 

484

 

416

 

Net non-current assets held for sale

 

1,613

 

13,448

 

15,061

 

15,376

 

 

a) Shipping assets

 

In June 2016, Vale approved a plan to dispose its fleet of ships. As a consequence, the referenced assets were reclassified to non-current assets held for sale and a loss of R$202 was recorded in the income statement as “Results on measurement or sale of non-current assets”.

 

b)        Coal - Nacala logistic corridor (“Nacala”)

 

See note 6.

 

6.         Acquisitions and divestitures

 

2016

 

Coal assets - In December 2014, the Company signed an agreement with Mitsui & Co., Ltd. (“Mitsui”) to sell 50% of its stake in the Nacala corridor and 15% of Vale´s stake in Vale Moçambique. After completion of the transaction, Vale will indirectly own 81% of the Moatize mine and approximately 50% of Nacala Assets, sharing control with Mitsui and therefore will not consolidate the assets, liabilities and results of Nacala Corridor. On that date, the assets and liabilities related to Nacala were classified as non-current assets held for sale with no impact in the income statement.

 

In September 2016, the Company reviewed the terms related to this transaction, in which Mitsui agreed to contribute up to US$450 (R$1,450), being: (i) US$255 (R$822) for a 15% of Vale’s stake in the Moatize coal mine; and (ii) an additional contribution of up to US$195 (R$629) based on meeting certain conditions, including mine performance. Mitsui will also contribute US$348 (R$1,122) for a 50% stake in the equity and quasi-equity instruments of the Nacala and extend a long-term facility of US$165 (R$532).

 

As at September 2016, completion of the transaction remains subject to successful completion of the Project Finance and certain government approvals.

 

Shipping assets — In June 2016, the Company concluded the sale of three vessels VLOC’s of 400,000 tons for the consortium led by ICBC International (ICBC) and recognized a loss of R$26 in the income statement as “Results on measurement or sales of non-current assets”. For this transaction, Vale received cash proceeds of R$863 in the third quarter of 2016.

 

Thyssenkrupp Companhia Siderúrgica do Atlântico Ltd (“CSA”)In April 2016, the Company sold 100% of its interest at CSA (26.87%) for a  non-significant amount. The transaction resulted in R$266 loss on recycling the “Cumulative translation adjustments” recognized in the income statement as “Others results in associates and joint ventures”.

 

Minas da Serra Geral S.A. (“MSG”) — In March 2016, the Company completed the purchase option on additional 50% participation at MSG which was owned by JFE Steel Corporation (“JFE”) in the amount of R$65. Vale now holds 100% of MSG’s total stockholder’s equity.

 

2015

 

Energy generation assets — In December 2013, the Company signed agreements with CEMIG Geração e Transmissão S.A. (“CEMIG GT”) to incorporate two joint ventures, Aliança Norte Participações S.A. and Aliança Geração de Energia S.A and exchange of assets and shares. The transaction was completed in the first quarter of 2015, in which Vale received cash proceeds of R$306 and recognized a gain of R$55 as “Others results in associates and joint ventures” and a gain of R$546 as “Results on measurement or sales of non-current assets”.

 

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7.         Cash and cash equivalents

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Cash and bank deposits

 

9,482

 

7,881

 

Short-term investments

 

7,946

 

6,141

 

 

 

17,428

 

14,022

 

 

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

 

8.         Accounts receivable

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Trade receivables

 

8,509

 

5,988

 

Provision for doubtful debts

 

(210

)

(225

)

 

 

8,299

 

5,763

 

 

 

 

 

 

 

Trade receivables related to the steel sector - %

 

74.66

%

75.32

%

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Provision for doubtful debts recorded in the income statement

 

(1

)

(39

)

1

 

(44

)

Trade receivables write-offs recorded in the income statement

 

(7

)

4

 

(16

)

(16

)

 

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

 

9.         Inventories

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Product inventory

 

9,978

 

11,991

 

Impairment of product inventory

 

(976

)

(2,023

)

 

 

9,002

 

9,968

 

 

 

 

 

 

 

Consumable inventory

 

3,657

 

3,807

 

Total

 

12,659

 

13,775

 

 

Product inventories by segments are presented in note 3(b).

 

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10.          Investments in associates and joint ventures

 

Changes in investments in associates and joint ventures are as follows:

 

 

 

Consolidated

 

 

 

2016

 

2015

 

Balance at June 30,

 

12,721

 

13,057

 

Additions

 

31

 

22

 

Disposals

 

(14

)

 

Translation adjustment

 

7

 

482

 

Equity results in income statement

 

149

 

(1,204

)

Dividends declared

 

0

 

(30

)

Others

 

14

 

(7

)

Balance at September 30,

 

12,908

 

12,320

 

 

 

 

Consolidated

 

 

 

2016

 

2015

 

Balance at January 1st

 

11,481

 

10,978

 

Acquisitions

 

 

1,819

 

Additions

 

856

 

76

 

Disposals

 

(14

)

241

 

Translation adjustment

 

(360

)

732

 

Equity results in income statement

 

1,396

 

(1,361

)

Dividends declared

 

(419

)

(253

)

Transfer to held for sale

 

 

(15

)

Others

 

(32

)

103

 

Balance at September 30,

 

12,908

 

12,320

 

 

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Table of Contents

 

Investments in associates and joint ventures (continued)

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

 

 

Equity results in Income statement

 

Dividends received

 

 

 

%

 

% voting

 

Investments in associates and joint
ventures

 

Three months period
ended

 

Nine months period
ended

 

Three months period
ended

 

Nine months period
ended

 

 

 

ownership

 

capital

 

September 30, 2016

 

December 31, 2015

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

 

Joint ventures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aliança Geração de Energia S.A. (i)

 

55.00

 

55.00

 

1,910

 

1,876

 

34

 

24

 

112

 

83

 

 

56

 

79

 

56

 

Aliança Norte Energia Participações S.A. (i)

 

51.00

 

51.00

 

463

 

316

 

7

 

(2

)

(5

)

3

 

 

 

 

 

California Steel Industries, Inc.

 

50.00

 

50.00

 

576

 

613

 

54

 

(27

)

67

 

(68

)

 

 

 

 

Companhia Coreano-Brasileira de Pelotização

 

50.00

 

50.00

 

216

 

242

 

8

 

28

 

41

 

59

 

 

 

45

 

33

 

Companhia Hispano-Brasileira de Pelotização (i)

 

50.89

 

51.00

 

206

 

222

 

13

 

19

 

35

 

37

 

 

 

65

 

44

 

Companhia Ítalo-Brasileira de Pelotização (i)

 

50.90

 

51.00

 

232

 

194

 

16

 

24

 

38

 

51

 

 

 

33

 

36

 

Companhia Nipo-Brasileira de Pelotização (i)

 

51.00

 

51.11

 

362

 

406

 

30

 

40

 

62

 

112

 

 

 

71

 

51

 

Companhia Siderúrgica do Pecém

 

50.00

 

50.00

 

2,227

 

879

 

(171

)

(865

)

646

 

(1,060

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MRS Logística S.A.

 

48.16

 

46.75

 

1,612

 

1,436

 

55

 

28

 

174

 

98

 

 

 

 

 

Samarco Mineração S.A. (ii)

 

50.00

 

50.00

 

 

 

 

(395

)

 

(532

)

 

 

 

 

459

 

Others

 

 

 

 

 

99

 

142

 

29

 

18

 

26

 

16

 

1

 

1

 

1

 

2

 

 

 

 

 

 

 

7,903

 

6,326

 

75

 

(1,108

)

1,196

 

(1,201

)

1

 

57

 

294

 

681

 

Associates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henan Longyu Energy Resources Co., Ltd.

 

25.00

 

25.00

 

944

 

1,194

 

3

 

(36

)

(32

)

(28

)

 

 

 

 

Mineração Rio Grande do Norte S.A.

 

40.00

 

40.00

 

427

 

364

 

27

 

38

 

152

 

66

 

 

12

 

111

 

12

 

Teal Minerals Inc.

 

50.00

 

50.00

 

 

 

(11

)

(32

)

(11

)

(96

)

 

 

 

 

 

Thyssenkrupp Companhia Siderúrgica do Atlântico Ltd. (iii)

 

 

 

 

 

 

(104

)

 

(199

)

 

 

 

 

 

VLI S.A.

 

37.60

 

37.60

 

3,145

 

3,038

 

51

 

45

 

106

 

104

 

 

 

 

 

25

 

Zhuhai YPM Pellet Co.

 

25.00

 

25.00

 

73

 

92

 

 

 

 

1

 

 

 

 

 

 

 

Others

 

 

 

 

 

416

 

467

 

4

 

(7

)

(15

)

(8

)

 

2

 

11

 

4

 

 

 

 

 

 

 

5,005

 

5,155

 

74

 

(96

)

200

 

(160

)

 

14

 

122

 

41

 

Total of joint ventures and associates

 

 

 

 

 

12,908

 

11,481

 

149

 

(1,204

)

1,396

 

(1,361

)

1

 

71

 

416

 

722

 

 


(i)             Although the Company held majority of the voting capital, the entities are accounted under equity method due to shareholders agreements.

(ii)          Note 4.

(iii)       Note 6

 

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11.       Intangibles

 

Changes in intangibles are as follows:

 

 

 

Consolidated

 

 

 

Goodwill

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance at June 30, 2016

 

10,333

 

10,026

 

448

 

1,383

 

22,190

 

Additions

 

 

670

 

 

18

 

688

 

Disposals

 

 

(11

)

 

 

(11

)

Amortization

 

 

(335

)

(2

)

(127

)

(464

)

Translation adjustment

 

26

 

155

 

2

 

3

 

186

 

Balance at September 30, 2016

 

10,359

 

10,505

 

448

 

1,277

 

22,589

 

Cost

 

10,359

 

14,205

 

708

 

5,100

 

30,372

 

Accumulated amortization

 

 

(3,700

)

(260

)

(3,823

)

(7,783

)

 

 

10,359

 

10,505

 

448

 

1,277

 

22,589

 

 

 

 

Consolidated

 

 

 

Goodwill

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance at June 30, 2015

 

10,746

 

6,659

 

789

 

1,475

 

19,669

 

Additions

 

 

499

 

 

99

 

598

 

Amortization

 

 

(120

)

(37

)

(127

)

(284

)

Translation adjustment

 

1,785

 

 

133

 

 

1,918

 

Balance at September 30, 2015

 

12,531

 

7,038

 

885

 

1,447

 

21,901

 

Cost

 

12,531

 

10,581

 

1,890

 

3,967

 

28,969

 

Accumulated amortization

 

 

(3,543

)

(1,005

)

(2,520

)

(7,068

)

 

 

12,531

 

7,038

 

885

 

1,447

 

21,901

 

 

 

 

Consolidated

 

 

 

Goodwill

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance at December 31, 2015

 

11,544

 

7,084

 

811

 

1,350

 

20,789

 

Additions

 

 

3,646

 

3

 

38

 

3,687

 

Disposals

 

 

(29

)

 

(1

)

(30

)

Amortization

 

 

(606

)

(7

)

(413

)

(1,026

)

Translation adjustment

 

(1,185

)

140

 

(96

)

15

 

(1,126

)

Transfers

 

 

270

 

(263

)

288

 

295

 

Balance at September 30, 2016

 

10,359

 

10,505

 

448

 

1,277

 

22,589

 

Cost

 

10,359

 

14,205

 

708

 

5,100

 

30,372

 

Accumulated amortization

 

 

(3,700

)

(260

)

(3,823

)

(7,783

)

 

 

10,359

 

10,505

 

448

 

1,277

 

22,589

 

 

 

 

Consolidated

 

 

 

Goodwill

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance at December 31, 2014

 

9,987

 

5,876

 

789

 

1,462

 

18,114

 

Additions

 

 

1,572

 

 

365

 

1,937

 

Disposals

 

 

(49

)

 

 

(49

)

Amortization

 

 

(361

)

(100

)

(380

)

(841

)

Translation adjustment

 

2,442

 

 

196

 

 

2,638

 

Acquisition of subsidiary

 

102

 

 

 

 

102

 

Balance at September 30, 2015

 

12,531

 

7,038

 

885

 

1,447

 

21,901

 

Cost

 

12,531

 

10,581

 

1,890

 

3,967

 

28,969

 

Accumulated amortization

 

 

(3,543

)

(1,005

)

(2,520

)

(7,068

)

 

 

12,531

 

7,038

 

885

 

1,447

 

21,901

 

 

25



Table of Contents

 

 

12.       Property, plant and equipment

 

Changes in property, plant and equipment are as follows:

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at June 30, 2016

 

2,860

 

33,126

 

29,630

 

25,623

 

35,843

 

21,978

 

46,605

 

195,665

 

Additions (i)

 

 

 

 

 

 

 

4,079

 

4,079

 

Disposals

 

(1

)

(3

)

(8

)

(49

)

(397

)

(6

)

(1

)

(465

)

Depreciation and amortization

 

 

(463

)

(591

)

(692

)

(603

)

(467

)

 

(2,816

)

Translation adjustment

 

7

 

82

 

85

 

100

 

100

 

43

 

63

 

480

 

Assets retirement obligations

 

 

 

 

 

1,487

 

 

 

1,487

 

Transfers

 

75

 

2,288

 

1,140

 

893

 

90

 

531

 

(5,017

)

 

Balance at September 30, 2016

 

2,941

 

35,030

 

30,256

 

25,875

 

36,520

 

22,079

 

45,729

 

198,430

 

Cost

 

2,941

 

53,845

 

49,370

 

46,013

 

62,030

 

34,227

 

45,729

 

294,155

 

Accumulated depreciation

 

 

(18,815

)

(19,114

)

(20,138

)

(25,510

)

(12,148

)

 

(95,725

)

 

 

2,941

 

35,030

 

30,256

 

25,875

 

36,520

 

22,079

 

45,729

 

198,430

 

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at June 30, 2015

 

3,098

 

37,430

 

31,296

 

29,100

 

40,777

 

32,046

 

47,397

 

221,144

 

Additions (i)

 

 

 

 

 

 

 

9,170

 

9,170

 

Disposals

 

 

 

(104

)

(45

)

 

(2,061

)

(21

)

(2,231

)

Depreciation and amortization

 

 

(444

)

(546

)

(849

)

(621

)

(622

)

 

(3,082

)

Translation adjustment

 

179

 

3,528

 

1,881

 

3,589

 

4,611

 

4,413

 

3,039

 

21,240

 

Transfers

 

(194

)

1,608

 

3,302

 

453

 

702

 

1,992

 

(7,863

)

 

Transfers to non-current assets held for sale

 

 

 

 

 

(505

)

 

 

(505

)

Balance at September 30, 2015

 

3,083

 

42,122

 

35,829

 

32,248

 

44,964

 

35,768

 

51,722

 

245,736

 

Cost

 

3,083

 

53,171

 

52,494

 

50,360

 

67,213

 

49,831

 

51,722

 

327,874

 

Accumulated depreciation

 

 

(11,049

)

(16,665

)

(18,112

)

(22,249

)

(14,063

)

 

(82,138

)

 

 

3,083

 

42,122

 

35,829

 

32,248

 

44,964

 

35,768

 

51,722

 

245,736

 

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2015

 

2,989

 

35,538

 

32,378

 

28,532

 

40,234

 

28,135

 

43,453

 

211,259

 

Additions (i)

 

 

 

 

 

 

 

11,043

 

11,043

 

Disposals

 

(1

)

(5

)

(11

)

(97

)

(409

)

(1,214

)

(74

)

(1,811

)

Depreciation and amortization

 

 

(1,311

)

(1,660

)

(2,355

)

(2,091

)

(1,609

)

 

(9,026

)

Translation adjustment

 

(130

)

(3,558

)

(2,125

)

(2,682

)

(3,778

)

(1,376

)

809

 

(12,840

)

Assets retirement obligations

 

 

 

 

 

1,694

 

 

 

1,694

 

Transfers

 

83

 

4,365

 

1,674

 

2,477

 

870

 

(262

)

(9,502

)

(295

)

Transfers to non-current assets held for sale

 

 

 

 

 

 

(1,595

)

 

(1,595

)

Acquisition of subsidiary

 

 

1

 

 

 

 

 

 

1

 

Balance at September 30, 2016

 

2,941

 

35,030

 

30,256

 

25,875

 

36,520

 

22,079

 

45,729

 

198,430

 

Cost

 

2,941

 

53,845

 

49,370

 

46,013

 

62,030

 

34,227

 

45,729

 

294,155

 

Accumulated depreciation

 

 

(18,815

)

(19,114

)

(20,138

)

(25,510

)

(12,148

)

 

(95,725

)

 

 

2,941

 

35,030

 

30,256

 

25,875

 

36,520

 

22,079

 

45,729

 

198,430

 

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2014

 

2,839

 

30,955

 

28,721

 

24,669

 

39,654

 

29,095

 

51,574

 

207,507

 

Additions (i)

 

 

 

 

 

 

 

20,445

 

20,445

 

Disposals

 

 

(14

)

(126

)

(105

)

(434

)

(3,653

)

(26

)

(4,358

)

Depreciation and amortization

 

 

(1,267

)

(1,713

)

(2,556

)

(1,992

)

(1,747

)

 

(9,275

)

Translation adjustment

 

252

 

4,307

 

2,620

 

5,191

 

7,489

 

5,930

 

5,816

 

31,605

 

Transfers

 

(8

)

8,141

 

6,327

 

5,048

 

752

 

5,827

 

(26,087

)

 

Transfers to non-current assets held for sale

 

 

 

 

 

(505

)

 

 

(505

)

Acquisition of subsidiary

 

 

 

 

1

 

 

316

 

 

317

 

Balance at September 30, 2015

 

3,083

 

42,122

 

35,829

 

32,248

 

44,964

 

35,768

 

51,722

 

245,736

 

Cost

 

3,083

 

53,171

 

52,494

 

50,360

 

67,213

 

49,831

 

51,722

 

327,874

 

Accumulated depreciation

 

 

(11,049

)

(16,665

)

(18,112

)

(22,249

)

(14,063

)

 

(82,138

)

 

 

3,083

 

42,122

 

35,829

 

32,248

 

44,964

 

35,768

 

51,722

 

245,736

 

 


(i) Includes capitalized borrowing costs, see cash flow.

 

There are no material changes to the net book value of consolidated property, plant and equipment pledged to secure judicial claims and loans and borrowings (note 13(d)) compared to those disclosed in the financial statements as at December 31, 2015.

 

26



Table of Contents

 

13.       Loans and borrowings

 

a)   Total debt

 

 

 

Consolidated

 

 

 

Current liabilities

 

Non-current liabilities

 

 

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

December 31, 2015

 

Debt contracts in the international markets

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

US$

 

1,247

 

943

 

22,965

 

20,203

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

US$

 

1,331

 

4,651

 

42,494

 

50,463

 

EUR

 

 

 

5,473

 

6,376

 

Other currencies

 

50

 

56

 

698

 

659

 

Accrued charges

 

907

 

1,274

 

 

 

 

 

3,535

 

6,924

 

71,630

 

77,701

 

Debt contracts in Brazil

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

R$, indexed to TJLP, TR, IPCA, IGP-M and CDI

 

1,198

 

827

 

18,375

 

18,388

 

Basket of currencies and US$ indexed to LIBOR

 

1,079

 

1,133

 

4,056

 

5,239

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

R$

 

246

 

246

 

858

 

1,047

 

Accrued charges

 

1,022

 

658

 

91

 

503

 

 

 

3,545

 

2,864

 

23,380

 

25,177

 

 

 

7,080

 

9,788

 

95,010

 

102,878

 

 

The future flows of debt payments (principal and interest) per nature of funding are as follows:

 

 

 

Consolidated

 

 

 

Bank loans (i)

 

Capital markets (i)

 

Development
agencies (i)

 

Debt principal (i)

 

Estimated future
payments of
interest(ii)

 

2016 

 

16

 

 

682

 

698

 

5,366

 

2017

 

2,039

 

 

3,275

 

5,314

 

5,545

 

2018

 

6,661

 

2,737

 

3,795

 

13,193

 

5,191

 

2019

 

3,220

 

3,246

 

4,353

 

10,819

 

4,483

 

2020

 

11,018

 

4,347

 

2,944

 

18,309

 

3,944

 

2021

 

1,188

 

4,356

 

2,863

 

8,407

 

3,253

 

Between 2022 and 2025

 

3,977

 

10,859

 

3,405

 

18,241

 

8,469

 

2026 onwards

 

286

 

24,310

 

493

 

25,089

 

19,058

 

 

 

28,405

 

49,855

 

21,810

 

100,070

 

55,309

 

 


(i)   Does not include accrued charges.

(ii)  Consists of estimated future payments of interest, calculated based on interest rate curves and foreign exchange rates applicable as at September 30, 2016 and considering that all amortization payments and payments at maturity on loans and borrowings 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 September 30, 2016, the average annual interest rates by currency are as follows:

 

 

 

Consolidated

 

Loans and borrowings in

 

Average interest rate (i)

 

Total debt

 

US$

 

4.55

%

73,952

 

R$ (ii)

 

11.15

%

21,759

 

EUR (iii)

 

4.06

%

5,629

 

Other currencies

 

3.50

%

750

 

 

 

 

 

102,090

 

 


(i)   In order to determine the average interest rate for debt contracts with floating rates, the Company used the last renegotiated rate at September 30, 2016.

(ii)  R$ denominated debt that bears interest at IPCA, CDI, TR or TJLP, plus spread. For a total of R$14,877, the Company entered into derivative transactions to mitigate the exposure to the cash flow variations of the floating rate debt denominated in R$, resulting in an average cost of 2.19% per year in US$.

(iii) Eurobonds, for which the Company entered into derivatives to mitigate the exposure to the cash flow variations of the debt denominated in EUR, resulting in an average cost of 4.29% per year in US$.

 

27



Table of Contents

 

 

b)   Credit and financing lines

 

 

 

Contractual

 

 

 

Period of the

 

Available amount

 

Type

 

currency

 

Date of agreement

 

agreement

 

Total amount

 

September 30, 2016

 

Credit lines

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facilities

 

US$

 

May 2015

 

5 years

 

9,739

 

3,895

 

Revolving credit facilities

 

US$

 

July 2013

 

5 years

 

6,492

 

5,843

 

Financing lines

 

 

 

 

 

 

 

 

 

 

 

BNDES (i)

 

R$

 

April 2008

 

10 years

 

7,300

 

897

 

BNDES - CLN 150

 

R$

 

September 2012

 

10 years

 

3,883

 

20

 

BNDES - S11D e S11D Logística

 

R$

 

May 2014

 

10 years

 

6,163

 

2,247

 

 


(i)   Memorandum of understanding signature date, however term is considered from the signature date of each contract amendment. This credit line supported or supports the Usina VIII, Onça Puma, Salobo I and II and capital expenditure of Itabira projects.

 

c)   Funding

 

During 2016, the Company drew down part of its revolving credit facilities of which R$6,493 is outstanding at September 30, 2016.

 

In June and August 2016, the Company issued through its wholly owned subsidiary Vale Overseas Limited the guaranteed notes due 2021 and 2026 totaling US$2,250 (R$7,304). These notes bear a coupon of 5.875% and 6.250% per year, respectively, payable semi-annually, and were sold at a price of 100.000% of the principal amount.

 

d)   Guarantees

 

As at September 30, 2016 and December 31, 2015, loans and borrowings are secured by property, plant and equipment and receivables in the amount of R$1,522 and R$1,937, respectively.

 

The securities issued through Vale’s 100%-owned finance subsidiary Vale Overseas Limited are fully and unconditionally guaranteed by Vale.

 

e)   Covenants

 

Some of the Company’s debt agreements with lenders contain financial covenants. The main covenants in those agreements require maintaining certain ratios, such as debt to EBITDA (Earnings before Interest Taxes, Depreciation and Amortization) and interest coverage. The Company has not identified any instances of noncompliance as at September 30, 2016 and December 31, 2015.

 

28



Table of Contents

 

 

14.       Litigation

 

a)   Provision for litigation

 

Vale is party to labor, civil, tax and other ongoing lawsuits, at administrative and court levels. Provisions for losses resulting from lawsuits are estimated and updated by the Company, based on analysis from the Company’s legal consultants. Changes in provision for litigation are as follows:

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at June 30, 2016

 

740

 

359

 

1,784

 

84

 

2,967

 

Additions

 

24

 

95

 

238

 

 

357

 

Reversals

 

(5

)

(106

)

(129

)

(15

)

(255

)

Payments

 

(7

)

(9

)

(76

)

 

(92

)

Indexation and interest

 

(5

)

(21

)

48

 

(3

)

19

 

Translation adjustment

 

(12

)

 

 

 

(12

)

Balance at September 30, 2016

 

735

 

318

 

1,865

 

66

 

2,984

 

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at June 30, 2015

 

1,003

 

405

 

1,939

 

212

 

3,559

 

Additions

 

46

 

30

 

204

 

1

 

281

 

Reversals

 

(4

)

(36

)

(246

)

(1

)

(287

)

Payments

 

(28

)

(126

)

(16

)

(30

)

(200

)

Indexation and interest

 

27

 

17

 

(85

)

24

 

(17

)

Translation adjustment

 

39

 

1

 

 

34

 

74

 

Balance at September 30, 2015

 

1,083

 

291

 

1,796

 

240

 

3,410

 

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2015

 

1,052

 

309

 

1,771

 

78

 

3,210

 

Additions

 

75

 

299

 

638

 

18

 

1,030

 

Reversals

 

(67

)

(187

)

(300

)

(29

)

(583

)

Payments

 

(363

)

(171

)

(320

)

 

(854

)

Indexation and interest

 

28

 

68

 

76

 

(2

)

168

 

Translation adjustment

 

10

 

 

 

1

 

13

 

Balance at September 30, 2016

 

735

 

318

 

1,865

 

66

 

2,984

 

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2014

 

972

 

311

 

1,876

 

246

 

3,405

 

Additions

 

490

 

172

 

419

 

1

 

1,082

 

Reversals

 

(520

)

(126

)

(367

)

(2

)

(1,015

)

Payments

 

(22

)

(123

)

(64

)

(66

)

(275

)

Indexation and interest

 

79

 

56

 

(68

)

8

 

75

 

Translation adjustment

 

84

 

1

 

 

53

 

138

 

Balance at September 30, 2015

 

1,083

 

291

 

1,796

 

240

 

3,410

 

 

29



Table of Contents

 

 

b)   Contingent liabilities

 

Contingent liabilities of administrative and judicial claims, with expectation of loss classified as possible, and for which the recognition of a provision is not considered necessary by the Company, based on legal advice are as follows:

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Tax litigation

 

25,648

 

20,796

 

Civil litigation

 

5,196

 

5,214

 

Labor litigation

 

8,749

 

7,288

 

Environmental litigation

 

5,992

 

5,393

 

Total

 

45,585

 

38,691

 

 

i - Tax litigation - Our most significant tax-related contingent liabilities result from disputes related to (i) the deductibility of our payments of social security contributions on the net income (CSLL) from our taxable income, (ii) challenges of certain tax credits we deducted from our PIS and COFINS payments, (iii) assessments of CFEM (royalties), and (iv) charges of value-added tax on services and circulation of goods (ICMS), especially relating to certain tax credits we claimed from the sale and transmission of energy, ICMS charges in connection with the transfer of iron ore between different Brazilian states, ICMS charges on our own transportation costs and challenges to other tax credits we claimed.  The changes reported in the period resulted from interest and inflation adjustments in the amounts in dispute.

 

ii - Civil litigation - Most of those claims have been filed by suppliers for indemnification under construction contracts, primarily relating to certain alleged damages, payments and contractual penalties. A number of other claims related to contractual disputes regarding inflation index.

 

iii - Labor litigation - Represents individual claims by employees and service providers, primarily involving demands for additional compensation for overtime work, time spent commuting or health and safety conditions; and the Brazilian federal social security administration (“INSS”) regarding contributions on compensation programs based on profits.

 

iv - Environmental litigation - The most significant claims concern alleged procedural deficiencies in licensing processes, non-compliance with existing environmental licenses or damage to the environment.

 

c)   Judicial deposits

 

In addition to the provisions and contingent liabilities, the Company is required by law to make judicial deposits to secure a potential adverse outcome of certain lawsuits. These court-ordered deposits are monetarily adjusted and reported as non-current assets until a judicial decision to draw the deposit occurs.

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Tax litigation

 

869

 

822

 

Civil litigation

 

225

 

399

 

Labor litigation

 

2,322

 

2,163

 

Environmental litigation

 

69

 

61

 

Total

 

3,485

 

3,445

 

 

d)   Others

 

In the third quarter of 2015, the Company filed an enforceable action in the amount of R$524 referring to the final court decision in favor of the Company of the accrued interest of compulsory deposits from 1987 to 1993. Currently it is not possible to estimate the economic benefit inflow as the counterparty can appeal on the calculation. Consequently, the asset was not recognized in the financial statements.

 

For contingencies related to Samarco Mineração S.A., see note 4.

 

30



Table of Contents

 

 

15.       Income taxes

 

a)   Deferred income tax

 

Changes in deferred tax are as follows:

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at June 30, 2016

 

23,396

 

5,581

 

17,815

 

Effect in income statement

 

(861

)

313

 

(1,174

)

Translation adjustment

 

215

 

160

 

55

 

Transfers between asset and liabilities

 

(589

)

(589

)

 

Other comprehensive income

 

73

 

(25

)

98

 

Balance at September 30, 2016

 

22,234

 

5,440

 

16,794

 

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at June 30, 2015

 

13,341

 

9,585

 

3,756

 

Effect in income statement

 

17,461

 

31

 

17,430

 

Translation adjustment

 

868

 

1,849

 

(981

)

Other comprehensive income

 

40

 

40

 

 

Balance at September 30, 2015

 

31,710

 

11,505

 

20,205

 

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at December 31, 2015

 

30,867

 

6,520

 

24,347

 

Effect in income statement

 

(6,312

)

99

 

(6,411

)

Translation adjustment

 

(1,898

)

(886

)

(1,012

)

Transfers between asset and liabilities

 

(14

)

(14

)

 

Other comprehensive income

 

(409

)

(279

)

(130

)

Balance at September 30, 2016

 

22,234

 

5,440

 

16,794

 

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at December 31, 2014

 

10,560

 

8,874

 

1,686

 

Effect in income statement

 

19,796

 

(131

)

19,927

 

Translation adjustment

 

1,292

 

2,733

 

(1,441

)

Acquisition of subsidiary

 

(31

)

 

(31

)

Other comprehensive income

 

93

 

29

 

64

 

Balance at September 30, 2015

 

31,710

 

11,505

 

20,205

 

 

b)   Income tax reconciliation

 

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

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss) before income taxes

 

3,221

 

(24,165

)

21,131

 

(30,945

)

Income taxes at statutory rates - 34%

 

(1,095

)

8,216

 

(7,185

)

10,521

 

Adjustments that affect the basis of taxes:

 

 

 

 

 

 

 

 

 

Income tax benefit from interest on stockholders’ equity

 

 

 

 

1,054

 

Tax incentives

 

269

 

42

 

616

 

117

 

Equity results

 

24

 

(410

)

455

 

(463

)

Additions(reversals) of tax loss carry forward

 

221

 

11,174

 

(346

)

11,174

 

Unrecognized tax losses of the period

 

(551

)

(1,302

)

(1,842

)

(1,807

)

Others results in associates and joint ventures

 

(36

)

 

(1,305

)

 

Others

 

(187

)

(643

)

309

 

(1,430

)

Income taxes

 

(1,355

)

17,077

 

(9,298

)

19,166

 

 

c)         Income taxes - Settlement program (“REFIS”)

 

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

 

At September 30, 2016, the balance of R$17,614 (R$1,458 as current and R$16,156 as non-current) is due in 145 remaining monthly installments, bearing interest at the SELIC rate.

 

31



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16.          Employee postretirement obligations

 

Reconciliation of assets and liabilities recognized in the balance sheet

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
benefits

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
benefits

 

Balance at beginning of the period

 

3,754

 

 

 

3,455

 

 

 

Interest income

 

404

 

 

 

427

 

 

 

Changes in asset ceiling and onerous liability

 

1,906

 

 

 

(128

)

 

 

Balance at end of the period

 

6,064

 

 

 

3,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount recognized in the balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

Present value of actuarial liabilities

 

(9,962

)

(13,958

)

(4,491

)

(9,659

)

(14,407

)

(4,773

)

Fair value of assets

 

16,026

 

11,353

 

 

13,413

 

12,083

 

 

Effect of the asset ceiling

 

(6,064

)

 

 

(3,754

)

 

 

Liabilities

 

 

(2,605

)

(4,491

)

 

(2,324

)

(4,773

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

(64

)

(171

)

 

(67

)

(199

)

Non-current liabilities

 

 

(2,541

)

(4,320

)

 

(2,257

)

(4,574

)

Liabilities

 

 

(2,605

)

(4,491

)

 

(2,324

)

(4,773

)

 

17.       Financial instruments classification

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

Financial assets

 

Loans and
receivables
or amortized
cost

 

At fair value
through net
income

 

Total

 

Loans and
receivables
or amortized
cost

 

At fair value
through net
income

 

Derivatives
designated as
hedge
accounting

 

Total

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

17,428

 

 

17,428

 

14,022

 

 

 

14,022

 

Financial investments

 

372

 

 

372

 

109

 

 

 

109

 

Derivative financial instruments

 

 

458

 

458

 

 

474

 

 

474

 

Accounts receivable

 

8,299

 

 

8,299

 

5,763

 

 

 

5,763

 

Related parties

 

215

 

 

215

 

273

 

 

 

273

 

 

 

26,314

 

458

 

26,772

 

20,167

 

474

 

 

20,641

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

1,635

 

1,635

 

 

363

 

 

363

 

Loans

 

592

 

 

592

 

732

 

 

 

732

 

Related parties

 

62

 

 

62

 

5

 

 

 

5

 

 

 

654

 

1,635

 

2,289

 

737

 

363

 

 

1,100

 

Total of financial assets

 

26,968

 

2,093

 

29,061

 

20,904

 

837

 

 

21,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

12,177

 

 

12,177

 

13,140

 

 

 

13,140

 

Derivative financial instruments

 

 

2,816

 

2,816

 

 

7,909

 

198

 

8,107

 

Loans and borrowings

 

7,080

 

 

7,080

 

9,788

 

 

 

9,788

 

Related parties

 

1,811

 

 

1,811

 

1,856

 

 

 

1,856

 

 

 

21,068

 

2,816

 

23,884

 

24,784

 

7,909

 

198

 

32,891

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

3,789

 

3,789

 

 

5,581

 

 

5,581

 

Loans and borrowings

 

95,010

 

 

95,010

 

102,878

 

 

 

102,878

 

Related parties

 

445

 

 

445

 

830

 

 

 

830

 

Participative stockholders’ debentures

 

 

2,137

 

2,137

 

 

1,336

 

 

1,336

 

Others (i)

 

 

817

 

817

 

 

551

 

 

551

 

 

 

95,455

 

6,743

 

102,198

 

103,708

 

7,468

 

 

111,176

 

Total of financial liabilities

 

116,523

 

9,559

 

126,082

 

128,492

 

15,377

 

198

 

144,067

 

 


(i) See note 18(a).

 

32



Table of Contents

 

 

18.          Fair value estimate

 

a)   Assets and liabilities measured and recognized at fair value:

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Level 2

 

Level 3

 

Total

 

Level 2

 

Level 3

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

1,025

 

1,068

 

2,093

 

837

 

 

837

 

Total

 

1,025

 

1,068

 

2,093

 

837

 

 

837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

5,803

 

802

 

6,605

 

13,688

 

 

13,688

 

Participative stockholders’ debentures

 

2,137

 

 

2,137

 

1,336

 

 

1,336

 

Others (minimum return instrument)

 

 

817

 

817

 

 

551

 

551

 

Total

 

7,940

 

1,619

 

9,559

 

15,024

 

551

 

15,575

 

 

There are no changes in the methods and techniques of evaluation of instruments above compared to disclosed in the financial statements as at December 31, 2015.

 

b)   Fair value of financial instruments not measured at fair value

 

The fair values and carrying amounts of loans (net of interest) are as follows:

 

 

 

Consolidated

 

Financial liabilities

 

Balance

 

Fair value

 

Level 1

 

Level 2

 

September 30, 2016

 

 

 

 

 

 

 

 

 

Debt principal

 

100,070

 

96,702

 

46,384

 

50,318

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

Debt principal

 

110,231

 

102,434

 

48,017

 

54,417

 

 

19.          Derivative financial instruments

 

a)   Derivatives effects on balance sheet

 

 

 

Consolidated

 

 

 

Assets

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Current

 

Non-current

 

Current

 

Non-current

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

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

 

426

 

 

269

 

 

IPCA swap

 

23

 

241

 

7

 

64

 

Pré-dolar swap

 

6

 

52

 

 

 

 

 

455

 

293

 

276

 

64

 

Commodities price risk

 

 

 

 

 

 

 

 

 

Nickel

 

3

 

17

 

198

 

41

 

 

 

3

 

17

 

198

 

41

 

 

 

 

 

 

 

 

 

 

 

Others

 

 

1,325

 

 

258

 

 

 

 

1,325

 

 

258

 

Total

 

458

 

1,635

 

474

 

363

 

 

33



Table of Contents

 

 

 

 

Consolidated

 

 

 

Liabilities

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Current

 

Non-current

 

Current

 

Non-current

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

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

 

2,138

 

2,532

 

3,119

 

4,419

 

IPCA swap

 

62

 

245

 

82

 

393

 

Eurobonds swap

 

19

 

79

 

572

 

111

 

Euro forward

 

24

 

 

 

 

Pre dollar swap

 

65

 

115

 

364

 

280

 

 

 

2,308

 

2,971

 

4,137

 

5,203

 

Commodities price risk

 

 

 

 

 

 

 

 

 

Nickel

 

7

 

11

 

153

 

42

 

Bunker oil

 

501

 

 

3,609

 

 

 

 

508

 

11

 

3,762

 

42

 

 

 

 

 

 

 

 

 

 

 

Others

 

 

807

 

 

336

 

 

 

 

807

 

 

336

 

Derivatives designated as cash flow hedge accounting

 

 

 

 

 

 

 

 

 

Bunker oil

 

 

 

198

 

 

Foreign exchange

 

 

 

10

 

 

 

 

 

 

208

 

 

Total

 

2,816

 

3,789

 

8,107

 

5,581

 

 

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

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

 

 

Gain (loss) recognized in the
income statement

 

Financial settlement
inflows(outflows)

 

Gain(loss) recognized in other
comprehensive income

 

 

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(182

)

(3,174

)

16

 

(5

)

 

 

IPCA swap

 

3

 

(396

)

(83

)

 

 

 

Eurobonds swap

 

28

 

(46

)

 

 

 

 

Euro forward

 

15

 

 

 

 

 

 

Pre dollar swap

 

(26

)

(690

)

(3

)

(11

)

 

 

 

 

(162

)

(4,306

)

(70

)

(16

)

 

 

Commodities price risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel

 

(8

)

(69

)

(9

)

(77

)

 

 

Bunker oil

 

(25

)

(1,821

)

(540

)

(117

)

 

 

 

 

(33

)

(1,890

)

(549

)

(194

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

62

 

(169

)

 

 

 

 

 

 

62

 

(169

)

 

 

 

 

Derivatives designated as cash flow hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker oil

 

 

(459

)

 

(375

)

 

96

 

Foreign exchange

 

 

(37

)

 

(37

)

 

17

 

 

 

 

(496

)

 

(412

)

 

113

 

Total

 

(133

)

(6,861

)

(619

)

(622

)

 

113

 

 

34



Table of Contents

 

 

 

 

Consolidated

 

 

 

Nine months period ended September 30

 

 

 

Gain (loss) recognized in the
income statement

 

Financial settlement
inflows(outflows)

 

Gain(loss) recognized in other
comprehensive income

 

 

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

2,621

 

(5,533

)

(322

)

(883

)

 

 

IPCA swap

 

244

 

(546

)

(78

)

19

 

 

 

Eurobonds swap

 

(2

)

(386

)

(524

)

(38

)

 

 

Euro forward

 

(27

)

 

 

 

 

 

Pre dollar swap

 

218

 

(925

)

(304

)

(21

)

 

 

 

 

3,054

 

(7,390

)

(1,228

)

(923

)

 

 

Commodities price risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel

 

(151

)

(125

)

(113

)

(157

)

 

 

Bunker oil

 

441

 

(1,737

)

(2,277

)

(499

)

 

 

 

 

290

 

(1,862

)

(2,390

)

(656

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

532

 

(390

)

 

 

 

 

 

 

532

 

(390

)

 

 

 

 

Derivatives designated as cash flow hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker oil

 

 

(950

)

(203

)

(1,021

)

 

928

 

Foreign exchange

 

(10

)

(109

)

(10

)

(109

)

10

 

45

 

 

 

(10

)

(1,059

)

(213

)

(1,130

)

10

 

973

 

Total

 

3,866

 

(10,701

)

(3,831

)

(2,709

)

10

 

973

 

 

During 2015, the Company implemented bunker oil purchase cash flows protection program and recognized as cost of goods sold and services rendered and financial expense the amounts of R$459 and R$6,402 for the three months period ended on September 30, 2015, respectively, and the amounts of R$950 and R$9,751 for the nine months period ended on September 30, 2015, respectively. In 2016, all derivatives impacts were charged to financial results.

 

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

 

 

 

Last maturity dates

 

Currencies and interest rates

 

July 2023

 

Bunker oil

 

December 2016

 

Nickel

 

September 2018

 

Others

 

December 2027

 

 

Additional information about derivatives financial instruments

 

The risk of the derivatives portfolio is measured using the delta-Normal parametric approach, and 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 estimate considers a 95% confidence level for a one-business day time horizon.

 

There was no cash amount deposited as margin call regarding derivative positions on September 30, 2016. The derivative positions described in this document did not have initial costs associated.

 

The following tables detail the derivatives positions for Vale and its controlled companies as of September 30, 2016, with the following information: notional amount, fair value including credit risk, gains or losses in the period, value at risk and the fair value breakdown by year of maturity.

 

35



Table of Contents

 

 

a)                           Foreign exchange and interest rates derivative positions

 

(i)       Protection programs for the R$ denominated debt instruments

 

In order to reduce cash flow volatility, swap transactions were implemented to convert into US$ the cash flows from certain debt instruments denominated in R$ with interest rates linked mainly to CDI, TJLP and IPCA. In those swaps, Vale pays fixed or floating rates in US$ and receives payments in R$ linked to the interest rates of the protected debt instruments.

 

The swap transactions were negotiated over-the-counter and the protected items are the cash flows from debt instruments linked to R$. These programs transform into US$ the obligations linked to R$ to achieve a currency offset in the Company’s cash flows, by matching its receivables - mainly linked to US$ - with its payables.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

 

 

 

 

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Index

 

Average rate

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

2017

 

2018

 

2019+

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CDI vs. US$ fixed rate swap

 

 

 

 

 

 

 

(1,884

)

(3,059

)

368

 

167

 

(1,362

)

81

 

(603

)

 

Receivable

 

R$

6,289

 

R$

5,239

 

CDI

 

106.78

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

2,563

 

US$

2,288

 

Fix

 

3.46

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ fixed rate swap

 

 

 

 

 

 

 

 

(2,178

)

(3,965

)

(664

)

225

 

(44

)

(714

)

(354

)

(1,067

)

Receivable

 

R$

4,559

 

R$

5,484

 

TJLP +

 

1.33

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

2,126

 

US$

2,611

 

Fix

 

1.72

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ floating rate swap

 

 

 

 

 

 

 

 

(182

)

(245

)

(5

)

16

 

(2

)

(11

)

(14

)

(155

)

Receivable

 

R$

253

 

R$

267

 

TJLP +

 

0.92

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

147

 

US$

156

 

Libor +

 

-1.21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R$ fixed rate vs. US$ fixed rate swap

 

 

 

 

 

(122

)

(644

)

(266

)

74

 

(50

)

(14

)

38

 

(96

)

Receivable

 

R$

1,107

 

R$

1,356

 

Fix

 

7.43

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

383

 

US$

528

 

Fix

 

-0.79

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. US$ fixed rate swap

 

 

 

 

 

 

 

 

(191

)

(411

)

4

 

37

 

 

21

 

17

 

(229

)

Receivable

 

R$

1,000

 

R$

1,000

 

IPCA +

 

6.55

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

434

 

US$

434

 

Fix

 

3.98

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. CDI swap

 

 

 

 

 

 

 

 

148

 

6

 

(93

)

1

 

 

(60

)

(30

)

238

 

Receivable

 

R$

1,350

 

R$

1,350

 

IPCA +

 

6.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

1,350

 

US$

1,350

 

CDI

 

98.58

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(ii)   Protection program for EUR denominated debt instruments

 

In order to reduce the cash flow volatility, swap and forward transactions were implemented to convert into US$ the cash flows from certain debt instruments issued in Euros by Vale. In those swaps, Vale receives fixed rates in EUR and pays fixed rates in US$. And in those forwards only the principal amount of the debt is converted from EUR to US$.

 

The swap and forward transactions were negotiated over-the-counter and the protected items are the cash flows from debt instruments linked to EUR. The financial settlement inflows/outflows are offset by the protected items’ losses/gains due to EUR/US$ exchange rate.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

 

 

 

 

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Index

 

Average rate

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

2017

 

2018

 

2019+

 

EUR fixed rate vs. US$ fixed rate swap

 

 

 

 

 

(98

)

(683

)

(494

)

38

 

 

(18

)

(16

)

(63

)

Receivable

 

500

 

1,000

 

Fix

 

3.75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

613

 

US$

1,302

 

Fix

 

4.29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial settlement

 

 

 

 

 

 

 

 

 

Notional

 

Bought /

 

Average rate

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(USD/EUR)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

2017

 

Forward

 

500

 

 

B

 

1.143

 

(24

)

 

 

19.9

 

 

(24

)

 

(iii)                            Foreign exchange hedging program for disbursements in CAD

 

In order to reduce the cash flow volatility, forward transactions were implemented to mitigate the foreign exchange exposure that arises from the currency mismatch between revenues denominated in US$ and disbursements denominated in CAD.

 

The forward transactions were negotiated over-the-counter and the protected item is part of the CAD denominated disbursements. The financial settlement inflows/outflows are offset by the protected items’ losses/gains due to CAD/US$ exchange rate. This program is classified under the hedge accounting requirements, and it was settled in the first quarter.

 

36



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial settlement

 

 

 

Fair value

 

 

 

Notional

 

Bought /

 

Average rate

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(CAD / USD)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

Forward

 

 

CAD

10

 

B

 

1.028

 

 

(10

)

 

 

 

 

b)                           Commodities derivative positions

 

(i)       Bunker Oil purchase cash flows protection program

 

In order to partially reduce the impact of bunker oil price fluctuation on 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.

 

The derivative transactions were negotiated over-the-counter and the protected item is part of the Vale’s costs linked to bunker oil prices. The financial settlement inflows/outflows are offset by the protected items’ losses/gains due to bunker oil prices changes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

Fair value

 

 

 

Notional (ton)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

Bunker Oil protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forwards

 

352,500

 

1,867,500

 

B

 

511

 

(286

)

(2,252

)

(1,604

)

15

 

(286

)

Call options

 

540,000

 

2,041,500

 

B

 

380

 

0.6

 

0.1

 

 

0.4

 

0.6

 

Put options

 

540,000

 

2,041,500

 

S

 

300

 

(87

)

(1,158

)

(607

)

17

 

(87

)

Total

 

 

 

 

 

 

 

 

 

(373

)

(3,410

)

 

 

 

 

(373

)

 

As at September 30, 2016 and December 31, 2015, excludes R$128 and R$397, respectively, of transactions in which the financial settlement occurs subsequently of the closing month.

 

(ii)   Protection programs for base metals raw materials and products

 

In the operational protection program for nickel sales at fixed prices, derivatives transactions were implemented to convert into floating prices the contracts with clients that required a fixed price, in order to keep nickel revenues exposed to nickel price fluctuations. Those operations are usually implemented through the purchase of nickel forwards.

 

In the operational protection program for the purchase of raw materials and products, derivatives transactions were implemented, usually through the sale of nickel and copper forward or futures, in order to reduce the mismatch between the pricing period of purchases (concentrate, cathode, sinter, scrap and others) and the pricing period of the final product sales to the clients.

 

The derivative transactions are negotiated at London Metal Exchange or over-the-counter and the protected item is part of Vale’s revenues and costs linked to nickel and copper prices. The financial settlement inflows/outflows are offset by the protected items’ losses/gains due to nickel and copper prices changes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

 

 

 

 

 

 

 

 

Notional (ton)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

2017

 

2018

 

Fixed prices sales protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel forwards

 

12,923

 

16,917

 

B

 

10,272

 

13

 

(180

)

(105

)

14

 

(3

)

7

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials purchase protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel forwards

 

153

 

118

 

S

 

9,890

 

(0.3

)

0.4

 

(0.4

)

0.2

 

(0.3

)

 

 

Copper forwards

 

1,262

 

385

 

S

 

4,873

 

(0.0

)

0.4

 

0.3

 

0.2

 

(0.0

)

 

 

Total

 

 

 

 

 

 

 

 

 

(0.4

)

0.7

 

 

 

 

 

(0.4

)

 

 

 

37



Table of Contents

 

 

c)                            Silver Wheaton Corp. warrants

 

The company owns 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 part of gold payable flows produced as a sub product from Salobo copper mine and some nickel mines in Sudbury.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

Fair value

 

 

 

Notional (quantity)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(US$/share)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2023

 

Call options

 

10,000,000

 

10,000,000

 

B

 

44

 

258

 

28

 

 

25

 

258

 

 

d)                           Call options from debentures

 

The company has debentures in which lenders have call options of a specified quantity of Ferrovia Norte Sul S.A. ordinary shares, later changed to VLI S.A. shares. The call option’s strike price is given by the debentures’ remaining notional in each exercise date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

Fair value

 

 

 

Notional (quantity)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(R$/share)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2027

 

Call options

 

140,239

 

140,239

 

S

 

8,570

 

(121

)

(152

)

 

7

 

(121

)

 

e)                            Options related to Minerações Brasileiras Reunidas S.A. (“MBR”) shares

 

The Company entered into a contract that has options related to MBR shares. Under certain restrict and contingent conditions, which are beyond the buyer’s control, such as illegality due to changes in the law, the contract has a clause that gives the buyer the right to sell back its stake to the Company. It this case, the Company could settle through cash or shares. On the other hand, the Company has the right to buy back this non-controlling interest in the subsidiary.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

Fair value

 

 

 

Notional (quantity, in millions)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(R$/ação)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016+

 

Options

 

2,139

 

2,139

 

B/S

 

1.9

 

388

 

57

 

 

39

 

388

 

 

f)                             Embedded derivatives in commercial contracts

 

The Company has some 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.

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

Fair value

 

 

 

Notional (ton)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

Nickel Forward

 

5,538

 

3,877

 

S

 

10,236

 

0.9

 

11.7

 

 

 

 

 

0.9

 

Copper Forward

 

4,527

 

5,939

 

S

 

4,768

 

0.9

 

7.7

 

 

 

 

 

0.9

 

Total

 

 

 

 

 

 

 

 

 

1.8

 

19.4

 

 

7.3

 

1.8

 

 

The Company has also a natural gas purchase agreement in which there´s a clause that defines that a premium can be charged if the Company’s pellet sales prices trade above a pre-defined level. This clause is considered an embedded derivative.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

 

 

 

 

 

 

 

 

Notional (volume/month)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

September 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

September 30, 2016

 

2016

 

2017

 

2018+

 

Call options

 

746,667

 

746,667

 

S

 

179

 

(5.6

)

 

 

3.6

 

(0.0

)

(0.1

)

(5.6

)

 

38



Table of Contents

 

 

g)                           Sensitivity analysis of derivative financial instruments

 

The following tables present the potential value of the instruments given hypothetical stress scenarios for the main market risk factors that impact the derivatives positions. The scenarios were defined as follows:

 

-     Scenario I: fair value calculation considering market prices as of September 30, 2016

-     Scenario II: fair value estimated considering a 25% deterioration in the associated risk variables

-     Scenario III: fair value estimated considering a 50% deterioration in the associated risk variables

 

Instrument

 

Instrument’s main risk events

 

Scenario I

 

Scenario II

 

Scenario III

 

 

 

 

 

 

 

 

 

 

 

CDI vs. US$ fixed rate swap

 

R$ depreciation

 

(1,885

)

(4,009

)

(6,134

)

 

 

US$ interest rate inside Brazil decrease

 

(1,885

)

(1,910

)

(1,935

)

 

 

Brazilian interest rate increase

 

(1,885

)

(1,890

)

(1,895

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ fixed rate swap

 

R$ depreciation

 

(2,178

)

(3,873

)

(5,567

)

 

 

US$ interest rate inside Brazil decrease

 

(2,178

)

(2,258

)

(2,341

)

 

 

Brazilian interest rate increase

 

(2,178

)

(2,377

)

(2,559

)

 

 

TJLP interest rate decrease

 

(2,178

)

(2,318

)

(2,461

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ floating rate swap

 

R$ depreciation

 

(182

)

(293

)

(403

)

 

 

US$ interest rate inside Brazil decrease

 

(182

)

(190

)

(198

)

 

 

Brazilian interest rate increase

 

(182

)

(196

)

(209

)

 

 

TJLP interest rate decrease

 

(182

)

(192

)

(202

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

R$ fixed rate vs. US$ fixed rate swap

 

R$ depreciation

 

(122

)

(448

)

(774

)

 

 

US$ interest rate inside Brazil decrease

 

(122

)

(159

)

(199

)

 

 

Brazilian interest rate increase

 

(122

)

(219

)

(303

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. US$ fixed rate swap

 

R$ depreciation

 

(190

)

(573

)

(956

)

 

 

US$ interest rate inside Brazil decrease

 

(190

)

(213

)

(236

)

 

 

Brazilian interest rate increase

 

(190

)

(286

)

(371

)

 

 

IPCA index decrease

 

(190

)

(238

)

(285

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. CDI swap

 

Brazilian interest rate increase

 

148

 

(4

)

(136

)

 

 

IPCA index decrease

 

148

 

70

 

(4

)

Protected item: R$ denominated debt linked to IPCA

 

IPCA index decrease

 

n.a.

 

(70

)

4

 

 

 

 

 

 

 

 

 

 

 

EUR fixed rate vs. US$ fixed rate swap

 

EUR depreciation

 

(97

)

(673

)

(1,250

)

 

 

Euribor increase

 

(97

)

(107

)

(116

)

 

 

US$ Libor decrease

 

(97

)

(139

)

(182

)

Protected item: EUR denominated debt

 

EUR depreciation

 

n.a.

 

673

 

1,250

 

 

 

 

 

 

 

 

 

 

 

EUR Forward

 

EUR depreciation

 

(24

)

(480

)

(936

)

 

 

Euribor increase

 

(24

)

(25

)

(26

)

 

 

US$ Libor decrease

 

(24

)

(26

)

(28

)

Protected item: EUR denominated debt

 

EUR depreciation

 

n.a.

 

480

 

936

 

 

39



Table of Contents

 

 

Instrument

 

Instrument’s main risk events

 

Scenario I

 

Scenario II

 

Scenario III

 

 

 

 

 

 

 

 

 

 

 

Bunker Oil protection

 

 

 

 

 

 

 

 

 

Forwards and options

 

Bunker Oil price decrease

 

(373

)

(550

)

(735

)

Protected item: Part of costs linked to bunker oil prices

 

Bunker Oil price decrease

 

n.a.

 

550

 

735

 

 

 

 

 

 

 

 

 

 

 

Nickel sales fixed price protection

 

 

 

 

 

 

 

 

 

Forwards

 

Nickel price decrease

 

13

 

(98

)

(208

)

Protected item: Part of nickel revenues with fixed prices

 

Nickel price fluctuation

 

n.a.

 

98

 

208

 

 

 

 

 

 

 

 

 

 

 

Purchase protection program

 

 

 

 

 

 

 

 

 

Nickel forwards

 

Nickel price increase

 

(0.3

)

(1.7

)

(3.0

)

Protected item: Part of costs linked to nickel prices

 

Nickel price increase

 

n.a.

 

1.7

 

3.0

 

 

 

 

 

 

 

 

 

 

 

Copper forwards

 

Copper price increase

 

(0.0

)

(2.0

)

(4.0

)

Protected item: Part of costs linked to copper prices

 

Copper price increase

 

n.a.

 

2.0

 

4.0

 

 

 

 

 

 

 

 

 

 

 

SLW warrants

 

SLW stock price decrease

 

258

 

142

 

49

 

 

 

 

 

 

 

 

 

 

 

VLI call options

 

VLI stock value increase

 

(121

)

(183

)

(257

)

 

 

 

 

 

 

 

 

 

 

Options regarding non-controlling interest in subsidiary

 

Subsidiary stock value decrease

 

388

 

66

 

(161

)

 

Instrument

 

Main risks

 

Scenario I

 

Scenario II

 

Scenario III

 

 

 

 

 

 

 

 

 

 

 

Embedded derivatives - Raw material purchase (nickel)

 

Nickel price increase

 

1

 

(45

)

(91

)

Embedded derivatives - Raw material purchase (copper)

 

Copper price increase

 

1

 

(16

)

(34

)

Embedded derivatives - Gas purchase

 

Pellet price increase

 

(2

)

(7

)

(16

)

 

h)                           Financial counterparties’ ratings

 

The transactions of derivative instruments, cash and cash equivalents as well as investments are held with financial institutions whose exposure limits are periodically reviewed and approved by the delegated authority. The financial institutions credit risk is performed through a methodology that considers, among other information, ratings provided by international rating agencies.

 

The table below presents the ratings in foreign currency published by agencies Moody’s and S&P regarding the main financial institutions that we had outstanding positions as of September 30, 2016.

 

Long term ratings by counterparty

 

Moody’s

 

S&P

 

ANZ Australia and New Zealand Banking

 

Aa2

 

AA-

 

Banco Bradesco

 

Ba3

 

BB

 

Banco de Credito del Peru

 

Baa1

 

BBB

 

Banco do Brasil

 

Ba3

 

BB

 

Banco do Nordeste

 

Ba3

 

BB

 

Banco Safra

 

Ba3

 

BB

 

Banco Santander

 

Ba3

 

BB

 

Banco Votorantim

 

Ba3

 

BB

 

Bank of America

 

Baa1

 

BBB+

 

Bank of Nova Scotia

 

Aa3

 

A+

 

Bank of Tokyo Mitsubishi UFJ

 

A1

 

A

 

Banpara

 

Ba3

 

BB-

 

Barclays

 

Baa3

 

BBB

 

BBVA

 

A3

 

BBB+

 

BNP Paribas

 

A1

 

A

 

BTG Pactual

 

Ba3

 

BB-

 

Caixa Economica Federal

 

Ba3

 

BB

 

Citigroup

 

Baa1

 

BBB+

 

Credit Agricole

 

A1

 

A

 

Deutsche Bank

 

A3

 

BBB+

 

Goldman Sachs

 

A3

 

BBB+

 

HSBC

 

A1

 

A

 

Intesa Sanpaolo Spa

 

A3

 

BBB-

 

Itau Unibanco

 

Ba3

 

BB

 

JP Morgan Chase & Co

 

A3

 

A-

 

Macquarie Group Ltd

 

A3

 

BBB

 

Morgan Stanley

 

A3

 

BBB+

 

National Australia Bank NAB

 

Aa2

 

AA-

 

Royal Bank of Canada

 

Aa3

 

AA-

 

Societe Generale

 

A2

 

A

 

Standard Bank Group

 

Baa3

 

 

Standard Chartered

 

A1

 

BBB+

 

 

40



Table of Contents

 

 

i)                              Market curves

 

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

 

(i)       Products

 

Nickel

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

 

 

SPOT

 

10,460

 

MAR17

 

10,617

 

SEP17

 

10,683

 

 

 

OCT16

 

10,544

 

APR17

 

10,627

 

SEP18

 

10,798

 

 

 

NOV16

 

10,560

 

MAY17

 

10,640

 

SEP19

 

10,882

 

 

 

DEC16

 

10,578

 

JUN17

 

10,650

 

SEP20

 

10,964

 

 

 

JAN17

 

10,593

 

JUL17

 

10,662

 

 

 

 

 

 

 

FEB17

 

10,605

 

AUG17

 

10,673

 

 

 

 

 

 

 

 

Copper

 

Maturity

 

Price (US$/lb)

 

Maturity

 

Price (US$/lb)

 

Maturity

 

Price (US$/lb)

 

 

 

SPOT

 

2.21

 

MAR17

 

2.21

 

SEP17

 

2.22

 

 

 

OCT16

 

2.20

 

APR17

 

2.22

 

SEP18

 

2.23

 

 

 

NOV16

 

2.21

 

MAY17

 

2.22

 

SEP19

 

2.25

 

 

 

DEC16

 

2.21

 

JUN17

 

2.22

 

SEP20

 

2.26

 

 

 

JAN17

 

2.21

 

JUL17

 

2.22

 

 

 

 

 

 

 

FEB17

 

2.21

 

AUG17

 

2.22

 

 

 

 

 

 

 

 

Bunker Oil

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

 

 

SPOT

 

256

 

MAR17

 

262

 

SEP17

 

267

 

 

 

OCT16

 

259

 

APR17

 

263

 

SEP18

 

280

 

 

 

NOV16

 

262

 

MAY17

 

264

 

SEP19

 

293

 

 

 

DEC16

 

262

 

JUN17

 

264

 

SEP20

 

308

 

 

 

JAN17

 

262

 

JUL17

 

265

 

 

 

 

 

 

 

FEB17

 

261

 

AUG17

 

266

 

 

 

 

 

 

 

 

41



Table of Contents

 

 

(ii)   Foreign exchange and interest rates

 

US$-Brazil Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

11/01/16

 

1.61

 

09/01/17

 

2.00

 

01/02/20

 

2.86

 

 

 

12/01/16

 

1.74

 

10/02/17

 

2.05

 

04/01/20

 

2.98

 

 

 

01/02/17

 

1.78

 

01/02/18

 

2.17

 

07/01/20

 

3.07

 

 

 

02/01/17

 

1.81

 

04/02/18

 

2.25

 

10/01/20

 

3.18

 

 

 

03/01/17

 

1.82

 

07/02/18

 

2.36

 

01/04/21

 

3.28

 

 

 

04/03/17

 

1.83

 

10/01/18

 

2.42

 

04/01/21

 

3.34

 

 

 

05/02/17

 

1.86

 

01/02/19

 

2.54

 

07/01/21

 

3.43

 

 

 

06/01/17

 

1.92

 

04/01/19

 

2.62

 

10/01/21

 

3.52

 

 

 

07/03/17

 

1.93

 

07/01/19

 

2.68

 

01/03/22

 

3.57

 

 

 

08/01/17

 

1.99

 

10/01/19

 

2.72

 

01/02/23

 

3.87

 

 

 

 

US$ Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

1M

 

0.53

 

6M

 

0.91

 

11M

 

0.94

 

 

 

2M

 

0.65

 

7M

 

0.92

 

12M

 

0.94

 

 

 

3M

 

0.85

 

8M

 

0.93

 

2Y

 

1.02

 

 

 

4M

 

0.88

 

9M

 

0.93

 

3Y

 

1.08

 

 

 

5M

 

0.90

 

10M

 

0.94

 

4Y

 

1.15

 

 

 

 

TJLP

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

11/01/16

 

7.50

 

09/01/17

 

7.50

 

01/02/20

 

7.50

 

 

 

12/01/16

 

7.50

 

10/02/17

 

7.50

 

04/01/20

 

7.50

 

 

 

01/02/17

 

7.50

 

01/02/18

 

7.50

 

07/01/20

 

7.50

 

 

 

02/01/17

 

7.50

 

04/02/18

 

7.50

 

10/01/20

 

7.50

 

 

 

03/01/17

 

7.50

 

07/02/18

 

7.50

 

01/04/21

 

7.50

 

 

 

04/03/17

 

7.50

 

10/01/18

 

7.50

 

04/01/21

 

7.50

 

 

 

05/02/17

 

7.50

 

01/02/19

 

7.50

 

07/01/21

 

7.50

 

 

 

06/01/17

 

7.50

 

04/01/19

 

7.50

 

10/01/21

 

7.50

 

 

 

07/03/17

 

7.50

 

07/01/19

 

7.50

 

01/03/22

 

7.50

 

 

 

08/01/17

 

7.50

 

10/01/19

 

7.50

 

01/02/23

 

7.50

 

 

 

 

42



Table of Contents

 

 

BRL Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

11/01/16

 

14.03

 

09/01/17

 

12.58

 

01/02/20

 

11.58

 

 

 

12/01/16

 

13.93

 

10/02/17

 

12.48

 

04/01/20

 

11.60

 

 

 

01/02/17

 

13.77

 

01/02/18

 

12.19

 

07/01/20

 

11.61

 

 

 

02/01/17

 

13.60

 

04/02/18

 

12.01

 

10/01/20

 

11.59

 

 

 

03/01/17

 

13.48

 

07/02/18

 

11.85

 

01/04/21

 

11.58

 

 

 

04/03/17

 

13.32

 

10/01/18

 

11.73

 

04/01/21

 

11.59

 

 

 

05/02/17

 

13.16

 

01/02/19

 

11.63

 

07/01/21

 

11.59

 

 

 

06/01/17

 

13.00

 

04/01/19

 

11.59

 

10/01/21

 

11.60

 

 

 

07/03/17

 

12.88

 

07/01/19

 

11.57

 

01/03/22

 

11.60

 

 

 

08/01/17

 

12.72

 

10/01/19

 

11.58

 

01/02/23

 

11.68

 

 

 

 

Implicit Inflation (IPCA)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

11/01/16

 

7.40

 

09/01/17

 

6.04

 

01/02/20

 

5.27

 

 

 

12/01/16

 

7.32

 

10/02/17

 

5.95

 

04/01/20

 

5.29

 

 

 

01/02/17

 

7.16

 

01/02/18

 

5.75

 

07/01/20

 

5.30

 

 

 

02/01/17

 

7.00

 

04/02/18

 

5.63

 

10/01/20

 

5.29

 

 

 

03/01/17

 

6.89

 

07/02/18

 

5.50

 

01/04/21

 

5.28

 

 

 

04/03/17

 

6.74

 

10/01/18

 

5.41

 

04/01/21

 

5.29

 

 

 

05/02/17

 

6.59

 

01/02/19

 

5.32

 

07/01/21

 

5.30

 

 

 

06/01/17

 

6.43

 

04/01/19

 

5.28

 

10/01/21

 

5.31

 

 

 

07/03/17

 

6.32

 

07/01/19

 

5.26

 

01/03/22

 

5.32

 

 

 

08/01/17

 

6.17

 

10/01/19

 

5.27

 

01/02/23

 

5.43

 

 

 

 

EUR Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

1M

 

-0.38

 

6M

 

-0.11

 

11M

 

-0.01

 

 

 

2M

 

-0.35

 

7M

 

-0.08

 

12M

 

0.00

 

 

 

3M

 

-0.32

 

8M

 

-0.05

 

2Y

 

-0.22

 

 

 

4M

 

-0.21

 

9M

 

-0.04

 

3Y

 

-0.21

 

 

 

5M

 

-0.15

 

10M

 

-0.02

 

4Y

 

-0.19

 

 

 

 

CAD Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

 

 

1M

 

0.88

 

6M

 

1.01

 

11M

 

0.10

 

 

 

2M

 

0.89

 

7M

 

0.74

 

12M

 

0.01

 

 

 

3M

 

0.90

 

8M

 

0.51

 

2Y

 

0.88

 

 

 

4M

 

0.96

 

9M

 

0.34

 

3Y

 

0.91

 

 

 

5M

 

1.00

 

10M

 

0.21

 

4Y

 

0.95

 

 

 

 

Currencies - Ending rates

 

CAD/US$

 

0.7623

 

US$/BRL

 

3.2462

 

EUR/US$

 

1.1222

 

 

 

 

43



Table of Contents

 

 

20.          Stockholders’ equity

 

a)   Share capital

 

At September 30, 2016 and December 31, 2015, the share capital was R$77,300 corresponding to 5,244,316,120 shares issued and fully paid without par value.

 

 

 

September 30, 2016

 

 

 

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

 

792,920,634

 

640,657,142

 

1,433,577,776

 

FMP - FGTS

 

75,083,246

 

 

75,083,246

 

PIBB - BNDES

 

742,578

 

993,751

 

1,736,329

 

BNDESPar

 

206,378,882

 

66,185,272

 

272,564,154

 

Foreign institutional investors in local market

 

273,953,175

 

746,942,370

 

1,020,895,545

 

Institutional investors

 

76,600,716

 

128,382,435

 

204,983,151

 

Retail investors in Brazil

 

43,538,724

 

364,220,944

 

407,759,668

 

Shares outstanding

 

3,185,653,000

 

1,967,721,926

 

5,153,374,926

 

Shares in treasury

 

31,535,402

 

59,405,792

 

90,941,194

 

Total issued shares

 

3,217,188,402

 

2,027,127,718

 

5,244,316,120

 

 

 

 

 

 

 

 

 

Amounts per class of shares (in millions)

 

47,421

 

29,879

 

77,300

 

 

 

 

 

 

 

 

 

Total authorized shares

 

3,600,000,000

 

7,200,000,000

 

10,800,000,000

 

 

b)   Basic and diluted earnings per share

 

Basic and diluted earnings per share are as follows:

 

 

 

Three months period ended
September 30

 

Nine months period ended
September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss) attributable to Vale’s stockholders

 

1,842

 

(6,663

)

11,738

 

(11,058

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

Income (loss) available to preferred stockholders

 

703

 

(2,544

)

4,482

 

(4,222

)

Income (loss) available to common stockholders

 

1,139

 

(4,119

)

7,256

 

(6,836

)

Total

 

1,842

 

(6,663

)

11,738

 

(11,058

)

Thousands of shares

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - preferred shares

 

1,967,722

 

1,967,722

 

1,967,722

 

1,967,722

 

Weighted average number of shares outstanding - common shares

 

3,185,653

 

3,185,653

 

3,185,653

 

3,185,653

 

Total

 

5,153,375

 

5,153,375

 

5,153,375

 

5,153,375

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per share

 

 

 

 

 

 

 

 

 

Preferred share

 

0.36

 

(1.29

)

2.28

 

(2.15

)

Common share

 

0.36

 

(1.29

)

2.28

 

(2.15

)

 

44



Table of Contents

 

 

21.          Costs and expenses by nature

 

a)   Cost of goods sold and services rendered

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Personnel

 

1,887

 

2,043

 

5,924

 

5,505

 

Materials and services

 

3,301

 

3,426

 

10,424

 

9,248

 

Fuel oil and gas

 

1,097

 

1,113

 

3,396

 

3,085

 

Maintenance

 

2,394

 

2,213

 

7,079

 

6,252

 

Energy

 

699

 

500

 

2,004

 

1,443

 

Acquisition of products

 

430

 

464

 

1,267

 

1,931

 

Depreciation and depletion

 

2,918

 

3,077

 

9,114

 

8,444

 

Freight

 

2,000

 

3,275

 

6,052

 

8,181

 

Others

 

1,356

 

1,914

 

4,080

 

4,892

 

Total

 

16,082

 

18,025

 

49,340

 

48,981

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

15,643

 

17,617

 

48,074

 

47,727

 

Cost of services rendered

 

439

 

408

 

1,266

 

1,254

 

Total

 

16,082

 

18,025

 

49,340

 

48,981

 

 

b)   Selling and administrative expenses

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Personnel

 

199

 

196

 

601

 

658

 

Services (consulting, infrastructure and others)

 

62

 

94

 

186

 

252

 

Advertising and publicity

 

7

 

14

 

17

 

30

 

Depreciation and amortization

 

118

 

112

 

323

 

297

 

Travel expenses

 

7

 

9

 

21

 

26

 

Taxes and rents

 

12

 

11

 

37

 

40

 

Others

 

90

 

22

 

268

 

198

 

Total

 

495

 

458

 

1,453

 

1,501

 

 

c)   Others operational expenses (incomes), net

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Provision for litigation

 

102

 

(6

)

447

 

67

 

Provision for loss with VAT credits (ICMS)

 

89

 

188

 

135

 

458

 

Provision for profit sharing program

 

64

 

5

 

92

 

59

 

Provision (reversals) for disposal of materials and inventories

 

13

 

61

 

(339

)

343

 

Gold stream transaction

 

(481

)

 

(481

)

(722

)

Others

 

37

 

174

 

670

 

661

 

Total

 

(176

)

422

 

524

 

866

 

 

45



Table of Contents

 

 

22.          Financial result

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Financial expenses

 

 

 

 

 

 

 

 

 

Loans and borrowings gross interest

 

(1,514

)

(1,526

)

(4,711

)

(3,891

)

Capitalized loans and borrowing costs

 

556

 

688

 

1,995

 

1,789

 

Labor, tax and civil lawsuits

 

(13

)

26

 

(95

)

(122

)

Derivative financial instruments

 

(329

)

(6,402

)

(1,132

)

(10,718

)

Indexation and exchange rate variation (a)

 

(1,977

)

(27,233

)

(9,881

)

(45,067

)

Participative stockholders’ debentures

 

(155

)

245

 

(918

)

2,073

 

Expenses of REFIS

 

(466

)

(486

)

(1,368

)

(1,333

)

Others

 

(737

)

(207

)

(1,849

)

(1,106

)

 

 

(4,635

)

(34,895

)

(17,959

)

(58,375

)

Financial income

 

 

 

 

 

 

 

 

 

Short-term investments

 

20

 

188

 

279

 

326

 

Derivative financial instruments

 

196

 

 

4,998

 

967

 

Indexation and exchange rate variation (b)

 

911

 

8,710

 

20,925

 

18,907

 

Others

 

95

 

150

 

190

 

274

 

 

 

1,222

 

9,048

 

26,392

 

20,474

 

Financial results, net

 

(3,413

)

(25,847

)

8,433

 

(37,901

)

 

 

 

 

 

 

 

 

 

 

Summary of indexation and exchange rate variation

 

 

 

 

 

 

 

 

 

Loans and borrowings

 

(1,034

)

(24,473

)

18,067

 

(36,828

)

Others

 

(32

)

5,950

 

(7,023

)

10,668

 

Net (a) + (b)

 

(1,066

)

(18,523

)

11,044

 

(26,160

)

 

23.          Deferred revenue - Gold stream

 

In August 2016, the Company entered into an amendment to the original agreement with Silver Wheaton Corp. (“SLW”) to sell an additional 25% premium of the payable gold stream in copper concentrate from the Salobo copper mine for the life of the mine. In this transaction, the Company received: (i) an initial cash payment of R$2.568 (US$800); (ii) an option value with a reduction of the exercise price, from R$211.00 (US$65.00) to R$142.00 (US$43.75), of the 10 million warrants of SLW held by Vale since 2013 and maturing in 2023; and (iii) future cash payments for each ounce of gold delivered to SLW under the agreement, equal to the lesser of US$400 per oz (plus a 1% annual adjustment from 2019 onwards) and the prevailing market price.

 

Vale may also receive an additional cash payment contingent on its decision to expand its capacity to process Salobo copper ores to more than 28 Mtpy before 2036. Salobo I and Salobo II, which are ramping up, will have a total capacity to process 24 Mtpy of run-of-mine (ROM). The contingent additional cash payment could range from US$113 to US$953 depending on ore grade, timing and size of the expansion.

 

This transaction was bifurcated into two identifiable components (i) the sale of the mineral rights which resulted in R$481 (US$150) gain in the income statement under “Other operating income (expenses), net” and, (ii) R$1.762 (US$549) recorded as deferred revenue (liability) related to the services for gold extraction on the portion in which Vale operates as an agent for SLW gold extraction.

 

After the completion of this transaction SLW holds 75% of the payable gold stream in copper concentrated from the Salobo mine and 70% of the gold extracted during the next 20 years as a by-product of the Sudbury nickel mines. During the three months period ended September 30, 2016 and 2015, the Company recognized R$187 and R$79, respectively, and during the nine months period ended September 30, 2016 and 2015, R$493 and R$225, respectively, in income statement related to rendered services of the original and amended transactions.

 

Defining the gain on sale of mineral interest and the deferred revenue portion of the transaction required 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.

 

46



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24.          Commitments

 

a)   Base metals operations

 

In December 2015, the put option related to the dilution of Sumic Nickel Netherland B.V. (“Sumic”) interest in Vale Nouvelle-Calédonie S.A.S. (“VNC”) was automatically triggered.

 

In March 2016, Vale Canada Limited purchased the equity interest held by Sumic in VNC for R$ 480 (US$135).

 

b)   Participative stockholders’ debentures

 

At October 3rd, 2016 (subsequently event), the company has paid the semiannual remuneration to stockholders debentures the amount of R$164.

 

c)   Operating lease and purchase obligations

 

The future payment commitments for operating lease and purchase obligations are as follows:

 

2016

 

130

 

2017

 

197

 

2018

 

206

 

2019

 

177

 

2020 and thereafter

 

186

 

Total minimum payments required

 

896

 

 

d)   Guarantees provided

 

As of September 30, 2016, 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 R$1,149 and R$4,385 respectively.

 

47



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25.          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 enters into contracts with related parties (associates, joint ventures and stockholders), related to the sale and purchase of products and services, loans, derivatives, 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 are as follows:

 

 

 

Assets

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Cash and
cash
equivalents

 

Derivative
financial
instruments

 

Accounts
receivable

 

Related
parties

 

Cash and
cash
equivalents

 

Derivative
financial
instruments

 

Accounts
receivable

 

Related
parties

 

Banco Bradesco S.A.

 

1,740

 

711

 

 

 

144

 

258

 

 

 

Banco do Brasil S.A.

 

503

 

101

 

 

 

1,544

 

62

 

 

 

Baovale Mineração S.A.

 

 

 

 

 

 

 

 

4

 

Companhia Coreano-Brasileira de Pelotização

 

 

 

 

45

 

 

 

 

22

 

Companhia Hispano-Brasileira de Pelotização

 

 

 

7

 

 

 

 

3

 

14

 

Companhia Ítalo-Brasileira de Pelotização

 

 

 

 

 

 

 

 

33

 

Companhia Nipo-Brasileira de Pelotização

 

 

 

 

71

 

 

 

 

35

 

Companhia Siderúrgica do Atlântico

 

 

 

 

52

 

 

 

 

 

Companhia Siderúrgica do Pecem

 

 

 

187

 

 

 

 

 

 

Consórcio de Rebocadores da Baia de São Marcos

 

 

 

32

 

 

 

 

60

 

 

Ferrovia Norte Sul S.A.

 

 

 

5

 

 

 

 

12

 

 

Mitsui & Co., Ltd.

 

 

 

10

 

 

 

 

5

 

 

MRS Logística S.A.

 

 

 

 

61

 

 

 

 

65

 

VLI Multimodal S.A.

 

 

 

15

 

 

 

 

36

 

 

VLI Operações Portuárias S.A.

 

 

 

6

 

 

 

 

99

 

 

VLI S.A.

 

 

 

6

 

38

 

 

 

 

39

 

Others

 

 

 

77

 

10

 

 

 

91

 

66

 

Total

 

2,243

 

812

 

345

 

277

 

1,688

 

320

 

306

 

278

 

 

48



Table of Contents

 

 

 

 

Liabilities

 

 

 

Consolidated

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Others
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Others
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Aliança Geração de Energia S.A.

 

38

 

 

155

 

 

43

 

 

 

 

Banco Bradesco S.A.

 

 

1,526

 

 

19

 

212

 

800

 

 

1,445

 

Banco do Brasil S.A.

 

 

678

 

 

9,365

 

 

976

 

 

10,250

 

Baovale Mineração S.A.

 

70

 

 

 

 

29

 

 

 

 

BNDES

 

 

123

 

 

14,520

 

 

152

 

 

15,877

 

BNDES Participações S.A.

 

 

 

 

1,428

 

 

 

 

1,449

 

Companhia Coreano-Brasileira de Pelotização

 

149

 

 

97

 

 

15

 

 

273

 

 

Companhia Hispano-Brasileira de Pelotização

 

82

 

 

100

 

 

143

 

 

26

 

 

Companhia Ítalo-Brasileira de Pelotização

 

106

 

 

162

 

 

12

 

 

252

 

 

Companhia Nipo-Brasileira de Pelotização

 

300

 

 

197

 

 

34

 

 

436

 

 

Consórcio de Rebocadores Baia da São Marcos

 

 

 

 

 

30

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

 

 

268

 

 

 

 

266

 

 

Mitsui & Co., Ltd.

 

42

 

 

 

 

41

 

 

 

 

 

MRS Logística S.A.

 

43

 

 

 

 

91

 

 

 

 

Sumic Nickel Netherland B.V.

 

 

 

1,144

 

 

 

 

1,374

 

 

VLI S.A.

 

2

 

 

109

 

 

 

 

 

 

Others

 

95

 

 

24

 

 

93

 

 

59

 

 

Total

 

927

 

2,327

 

2,256

 

25,332

 

743

 

1,928

 

2,686

 

29,021

 

 

 

 

Consolidated

 

 

 

Three months period ended September 30

 

 

 

2016

 

2015

 

 

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Aliança Geração de Energia S.A.

 

 

(105

)

 

22

 

 

 

Banco Bradesco S.A. (i)

 

 

 

(807

)

 

 

(294

)

Banco do Brasil S.A. (i)

 

 

 

(793

)

 

 

(460

)

Baovale Mineração S.A.

 

 

(13

)

 

 

(2

)

 

BNDES (i)

 

 

 

(529

)

 

 

(381

)

BNDES Participações S.A. (i)

 

 

 

(73

)

 

 

(30

)

Companhia Coreano-Brasileira de Pelotização

 

 

(21

)

(17

)

 

(84

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(37

)

(11

)

 

(58

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(42

)

(19

)

 

(73

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(88

)

(29

)

 

(86

)

 

Companhia Siderúrgica do Pecem

 

192

 

 

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

35

 

(31

)

(4

)

47

 

(32

)

(2

)

Ferrovia Norte Sul S.A.

 

11

 

 

 

 

 

 

Mitsui & Co., Ltd.

 

133

 

 

 

146

 

 

 

MRS Logística S.A.

 

 

(433

)

 

 

(386

)

 

Samarco Mineração S.A.

 

 

 

 

70

 

 

 

VLI Multimodal S.A.

 

30

 

 

 

 

 

 

VLI Operações Portuárias S.A.

 

100

 

(24

)

 

112

 

 

 

VLI S.A.

 

109

 

 

 

141

 

 

 

Others

 

7

 

(27

)

7

 

39

 

(22

)

13

 

Total

 

617

 

(821

)

(2,275

)

577

 

(743

)

(1,154

)

 


(i) Does not include exchange rate variation

 

49



Table of Contents

 

 

 

 

Consolidated

 

 

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

 

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Aliança Geração de Energia S.A.

 

 

(334

)

 

22

 

 

 

Banco Bradesco S.A. (i)

 

 

 

(380

)

 

 

(462

)

Banco do Brasil S.A. (i)

 

 

 

(1,091

)

 

 

(828

)

Baovale Mineração S.A.

 

 

(43

)

 

 

(62

)

 

BNDES (i)

 

 

 

(1,057

)

 

 

(489

)

BNDES Participações S.A. (i)

 

 

 

(146

)

 

 

(62

)

Companhia Coreano-Brasileira de Pelotização

 

 

(152

)

(17

)

 

(187

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(108

)

(11

)

 

(121

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(123

)

(19

)

 

(156

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(285

)

(29

)

 

(236

)

 

Companhia Siderúrgica do Atlântico

 

 

(21

)

 

 

 

 

Companhia Siderúrgica do Pecem

 

308

 

 

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

104

 

(75

)

(5

)

120

 

(94

)

(4

)

Ferrovia Norte Sul S.A.

 

50

 

 

 

 

 

 

Mitsui & Co., Ltd.

 

359

 

 

 

471

 

 

 

MRS Logística S.A.

 

 

(1,161

)

 

 

(1,161

)

 

Samarco Mineração S.A.

 

 

 

 

336

 

 

 

VLI Multimodal S.A.

 

30

 

 

 

 

 

 

VLI Operações Portuárias S.A.

 

348

 

(35

)

 

112

 

 

 

VLI S.A.

 

327

 

 

 

528

 

 

 

Others

 

48

 

(94

)

1

 

139

 

(92

)

19

 

Total

 

1,574

 

(2,431

)

(2,754

)

1,728

 

(2,109

)

(1,826

)

 


(i) Does not include exchange rate variation

 

50



Table of Contents

 

 

26.          Select notes to Parent Company information (individual interim information)

 

(a) Investments

 

 

 

Parent company

 

 

 

2016

 

2015

 

Balance at January 1st

 

127,517

 

128,615

 

Acquisitions

 

 

1,818

 

Additions

 

1,638

 

5,109

 

Disposals

 

 

(4,000

)

Translation adjustment

 

(13,504

)

35,215

 

Equity results in income statement

 

5,970

 

(4,720

)

Equity results in statement of comprehensive income

 

(683

)

177

 

Dividends declared

 

(524

)

(355

)

Transfer to held for sale

 

 

(30

)

Others

 

8

 

132

 

Balance at September 30,

 

120,422

 

161,961

 

 

(b) Intangible

 

 

 

Parent company

 

 

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance at December 31, 2015

 

7,084

 

123

 

1,350

 

8,557

 

Additions (i)

 

3,643

 

 

36

 

3,679

 

Disposals

 

(29

)

 

 

(29

)

Amortization

 

(405

)

(5

)

(362

)

(772

)

Balance at September 30, 2016

 

10,293

 

118

 

1,024

 

11,435

 

Cost

 

13,773

 

223

 

4,033

 

18,029

 

Accumulated amortization

 

(3,480

)

(105

)

(3,009

)

(6,594

)

 

 

10,293

 

118

 

1,024

 

11,435

 

 

 

 

Parent company

 

 

 

Concessions

 

Right of use

 

Software

 

Total

 

Balance at December 31, 2014

 

5,876

 

129

 

1,462

 

7,467

 

Additions

 

1,572

 

 

365

 

1,937

 

Disposals

 

(49

)

 

 

(49

)

Amortization

 

(361

)

(6

)

(380

)

(747

)

Balance at September 30, 2015

 

7,038

 

123

 

1,447

 

8,608

 

Cost

 

10,581

 

223

 

3,967

 

14,771

 

Accumulated amortization

 

(3,543

)

(100

)

(2,520

)

(6,163

)

 

 

7,038

 

123

 

1,447

 

8,608

 

 


(i) Refers mainly duplication the Carajás Railroad.

 

51



Table of Contents

 

 

(c) Property, plant and equipment

 

 

 

Parent company

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2015

 

1,672

 

19,546

 

19,379

 

8,371

 

4,215

 

14,203

 

29,501

 

96,887

 

Additions (i)

 

 

 

 

 

 

 

6,288

 

6,288

 

Disposals

 

 

(1

)

(9

)

(64

)

 

(37

)

(30

)

(141

)

Depreciation and amortization

 

 

(467

)

(723

)

(817

)

(152

)

(934

)

 

(3,093

)

Assets retirement obligations

 

 

 

 

 

159

 

 

 

159

 

Transfers

 

9

 

1,808

 

759

 

960

 

(46

)

226

 

(3,721

)

(5

)

Balance at September 30, 2016

 

1,681

 

20,886

 

19,406

 

8,450

 

4,176

 

13,458

 

32,038

 

100,095

 

Cost

 

1,681

 

24,044

 

25,796

 

14,103

 

5,575

 

21,049

 

32,038

 

124,286

 

Accumulated depreciation

 

 

(3,158

)

(6,390

)

(5,653

)

(1,399

)

(7,591

)

 

(24,191

)

 

 

1,681

 

20,886

 

19,406

 

8,450

 

4,176

 

13,458

 

32,038

 

100,095

 

 

 

 

Parent company

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2014

 

1,452

 

13,364

 

17,337

 

7,097

 

4,396

 

9,820

 

33,855

 

87,321

 

Additions (i)

 

 

 

 

 

 

 

9,614

 

9,614

 

Disposals

 

 

(10

)

(8

)

(92

)

 

(36

)

 

(146

)

Depreciation and amortization

 

 

(371

)

(656

)

(722

)

(259

)

(856

)

 

(2,864

)

Transfers

 

236

 

4,530

 

2,452

 

1,682

 

543

 

4,053

 

(13,496

)

 

Balance at September 30, 2015

 

1,688

 

17,513

 

19,125

 

7,965

 

4,680

 

12,981

 

29,973

 

93,925

 

Cost

 

1,688

 

20,085

 

24,712

 

12,690

 

5,794

 

19,852

 

29,973

 

114,794

 

Accumulated depreciation

 

 

(2,572

)

(5,587

)

(4,725

)

(1,114

)

(6,871

)

 

(20,869

)

 

 

1,688

 

17,513

 

19,125

 

7,965

 

4,680

 

12,981

 

29,973

 

93,925

 

 


(i) Includes capitalized borrowing costs, see cash flow.

 

(d) Loans and borrowings

 

 

 

Parent company

 

 

 

Current liabilities

 

Non-current liabilities

 

 

 

September 30, 2016

 

December 31, 2015

 

September 30, 2016

 

December 31, 2015

 

Debt contracts in the international markets

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

US$

 

447

 

567

 

15,060

 

16,829

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

US$

 

1,331

 

937

 

4,869

 

9,020

 

EUR

 

 

 

5,473

 

6,376

 

Accrued charges

 

329

 

479

 

 

 

 

 

2,107

 

1,983

 

25,402

 

32,225

 

Debt contracts in Brazil

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

R$, indexed to TJLP, TR, IPCA, IGP-M and CDI

 

921

 

780

 

17,395

 

17,658

 

Basket of currencies and US$ indexed to LIBOR

 

1,074

 

1,125

 

4,049

 

5,227

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

R$

 

190

 

190

 

733

 

876

 

Accrued charges

 

999

 

658

 

 

 

 

 

3,184

 

2,753

 

22,177

 

23,761

 

 

 

5,291

 

4,736

 

47,579

 

55,986

 

 

52



Table of Contents

 

 

The future flows of debt payments (principal) are as follows:

 

 

 

Parent company

 

 

 

Debt principal

 

2016 

 

604

 

2017

 

4,099

 

2018

 

12,546

 

2019

 

6,872

 

2020

 

7,690

 

2021

 

3,553

 

Between 2022 and 2025

 

10,683

 

2026 onwards

 

5,495

 

 

 

51,542

 

 

(e)  Provisions for litigation

 

 

 

Parent company

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2015

 

332

 

241

 

1,562

 

55

 

2,190

 

Additions

 

38

 

296

 

575

 

7

 

916

 

Reversals

 

(44

)

(171

)

(278

)

(16

)

(509

)

Payments

 

(277

)

(167

)

(306

)

 

(750

)

Indexation and interest

 

2

 

66

 

56

 

(4

)

120

 

Balance at September 30, 2016

 

51

 

265

 

1,609

 

42

 

1,967

 

 

 

 

Parent company

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2014

 

436

 

186

 

1,732

 

94

 

2,448

 

Additions

 

369

 

89

 

379

 

1

 

838

 

Reversals

 

(500

)

(82

)

(330

)

(1

)

(913

)

Payments

 

(44

)

(4

)

(56

)

(34

)

(138

)

Indexation and interest

 

97

 

50

 

(127

)

6

 

26

 

Balance at September 30, 2015

 

358

 

239

 

1,598

 

66

 

2,261

 

 

(f)  Income taxes

 

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

 

 

 

Parent company

 

 

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

Net income (loss) before income taxes

 

17,958

 

(28,663

)

Income taxes at statutory rates - 34%

 

(6,106

)

9,745

 

Adjustments that affect the basis of taxes:

 

 

 

 

 

Income tax benefit from interest on stockholders’ equity

 

 

1,054

 

Tax incentives

 

559

 

 

Equity results

 

2,030

 

(1,605

)

Addiction (Reversals) of tax loss carry forward

 

(1,250

)

8,818

 

Others results in associates and joint ventures

 

(1,305

)

 

Others

 

(148

)

(407

)

Income taxes

 

(6,220

)

17,605

 

 

53



Table of Contents

 

 

(g) Related parties

 

 

 

Parent company

 

 

 

Assets

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Cash and
cash
equivalents

 

Accounts
receivable

 

Derivative
financial
instruments

 

Related
parties

 

Cash and
cash
equivalents

 

Accounts
receivable

 

Derivative
financial
instruments

 

Related
parties

 

Banco Bradesco S.A.

 

88

 

 

711

 

 

44

 

 

258

 

 

Banco do Brasil S.A.

 

39

 

 

101

 

 

217

 

 

62

 

 

Biopalma da Amazônia S.A.

 

 

 

 

973

 

 

 

 

1,360

 

Companhia Coreano-Brasileira de Pelotização

 

 

 

 

45

 

 

 

 

22

 

Companhia Hispano-Brasileira de Pelotização

 

 

7

 

 

 

 

 

 

14

 

Companhia Ítalo-Brasileira de Pelotização

 

 

 

 

 

 

 

 

33

 

Companhia Nipo-Brasileira de Pelotização

 

 

 

 

71

 

 

 

 

35

 

Companhia Portuária Baía de Sepetiba

 

 

 

 

119

 

 

 

 

119

 

Companhia Siderúrgica do Atlântico

 

 

 

 

52

 

 

 

 

 

Companhia Siderúrgica do Pecem

 

 

173

 

 

 

 

 

 

 

Empreendimentos Brasileiros de Mineração S.A.

 

 

 

 

121

 

 

 

 

 

Mineração Brasileiras Reunidas S.A.

 

 

 

 

 

 

 

 

161

 

Mineração Corumbaense Reunidas S.A.

 

 

46

 

 

 

 

51

 

 

 

MRS Logística S.A.

 

 

 

 

26

 

 

 

 

27

 

Salobo Metais S.A.

 

 

14

 

 

119

 

 

22

 

 

155

 

Vale International S.A.

 

 

26,092

 

 

 

 

36,518

 

 

331

 

VLI Multimodal S.A.

 

 

15

 

 

 

 

36

 

 

 

VLI Operações Portuárias S.A.

 

 

6

 

 

 

 

99

 

 

 

VLI S.A.

 

 

6

 

 

38

 

 

 

 

39

 

Others

 

 

126

 

 

3

 

 

230

 

 

6

 

Total

 

127

 

26,485

 

812

 

1,567

 

261

 

36,956

 

320

 

2,302

 

 

 

 

Parent company

 

 

 

Liabilities

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Othes
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Othes
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Aliança Geração de Energia S.A.

 

38

 

 

155

 

 

43

 

 

 

 

Banco Bradesco S.A.

 

 

1,526

 

 

19

 

 

800

 

 

1,445

 

Banco do Brasil S.A.

 

 

678

 

 

9,365

 

 

976

 

 

10,250

 

Baovale Mineração S.A.

 

70

 

 

 

 

29

 

 

 

 

BNDES

 

 

123

 

 

13,004

 

 

152

 

 

14,405

 

BNDES Participações S.A.

 

 

 

 

1,428

 

 

 

 

1,449

 

Companhia Coreano-Brasileira de Pelotização

 

149

 

 

 

 

15

 

 

 

 

Companhia Hispano-Brasileira de Pelotização

 

82

 

 

 

 

143

 

 

 

 

Companhia Ítalo-Brasileira de Pelotização

 

105

 

 

 

 

12

 

 

 

 

Companhia Nipo-Brasileira de Pelotização

 

300

 

 

 

 

34

 

 

 

 

Companhia Portuária Baía de Sepetiba

 

677

 

 

 

 

484

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

 

 

268

 

 

 

 

266

 

 

Mineração Brasileiras Reunidas S.A.

 

521

 

 

3,032

 

 

510

 

 

3,172

 

 

MRS Logística S.A.

 

43

 

 

 

 

91

 

 

 

 

Vale International S.A.

 

4

 

 

56,126

 

 

5

 

 

66,814

 

 

VLI S.A.

 

2

 

 

109

 

 

2

 

 

 

 

Others

 

146

 

 

351

 

 

255

 

 

359

 

 

Total

 

2,137

 

2,327

 

60,041

 

23,816

 

1,623

 

1,928

 

70,611

 

27,549

 

 

54



Table of Contents

 

 

 

 

Parent company

 

 

 

Nine months period ended September 30

 

 

 

2016

 

2015

 

 

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Aliança Geração de Energia S.A.

 

 

(334

)

 

 

 

 

Banco Bradesco S.A. (i)

 

 

 

(389

)

 

 

(461

)

Banco do Brasil S.A. (i)

 

 

 

(1,094

)

 

 

(828

)

Baovale Mineração S.A.

 

 

(43

)

 

 

 

 

Biopalma da Amazônia S.A.

 

 

 

(178

)

1

 

 

526

 

BNDES (i)

 

 

 

(1,033

)

 

 

(480

)

BNDES Participações S.A. (i)

 

 

 

(146

)

 

 

(62

)

Companhia Coreano-Brasileira de Pelotização

 

 

(151

)

 

 

(62

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(108

)

 

 

(187

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(123

)

 

 

(121

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(285

)

 

 

(156

)

 

Companhia Portuária Baía de Sepetiba

 

 

(536

)

 

 

(602

)

 

Companhia Siderúrgica do Atlântico

 

 

(21

)

 

 

 

 

Companhia Siderúrgica do Pecem

 

294

 

 

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

104

 

(75

)

(5

)

120

 

(94

)

(4

)

Mineração Brasileiras Reunidas S.A.

 

 

(1,172

)

(305

)

 

(675

)

(53

)

MRS Logística S.A.

 

 

(1,161

)

 

 

(1,161

)

 

Salobo Metais S.A.

 

30

 

 

 

24

 

(7

)

 

Samarco Mineração S.A.

 

 

 

 

336

 

 

 

Vale Energia S.A.

 

 

(8

)

 

 

(185

)

7

 

Vale International S.A.

 

28,206

 

 

3,344

 

26,945

 

 

(13,425

)

VLI Multimodal S.A.

 

30

 

 

 

 

 

 

VLI Operações Portuárias S.A.

 

348

 

(35

)

 

112

 

 

 

VLI S.A.

 

327

 

 

 

528

 

 

 

Others

 

89

 

(3

)

(276

)

95

 

(247

)

55

 

Total

 

29,428

 

(4,055

)

(82

)

28,161

 

(3,497

)

(14,725

)

 


(i) Does not include exchange rate variation

 

55



Table of Contents

 

 

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

 

Board of Directors

 

 

 

 

Governance and Sustainability Committee

Gueitiro Matsuo Genso

 

Fernando Jorge Buso Gomes

Chairman

 

Fernando Santos do Nascimento

 

 

Eduardo de Oliveira Rodrigues Filho

Sérgio Alexandre Figueiredo Clemente

 

Priscila Valle Costa de Oliveira

Vice-President

 

Ricardo Simonsen

 

 

 

Dan Antonio Marinho Conrado

 

Fiscal Council

Marcel Juviniano Barros

 

 

Eduardo Refinetti Guardia

 

Marcelo Amaral Moraes

Fernando Jorge Buso Gomes

 

 

Motomu Takahashi

 

Chairman

Oscar Augusto de Camargo Filho

 

 

Eduardo de Salles Bartolomeo

 

Paulo José dos Reis Souza

Lucio Azevedo

 

Sandro Kohler Marcondes

Alberto Guth

 

Aníbal Moreira dos Santos

 

 

Raphael Manhães Martins

Alternate

 

 

Gilberto Antonio Vieira

 

Alternate

Moacir Nachbar Junior

 

Paula Bicudo de Castro Magalhães

Arthur Prado Silva

 

Sergio Mamede Rosa do Nascimento

Francisco Ferreira Alexandre

 

Oswaldo Mário Pego de Amorim Azevedo

Robson Rocha

 

Julio Sergio de Souza Cardozo

Luiz Mauricio Leuzinger

 

 

Yoshitomo Nishimitsu

 

Executive Officers

Eduardo de Oliveira Rodrigues Filho

 

 

Marcelo Marcolino

 

Murilo Pinto de Oliveira Ferreira

Carlos Roberto de Assis Ferreira

 

Chief Executive Officer

Marcelo Gasparino

 

 

 

 

Clovis Torres Junior

 

 

Executive Officer (Human Resources, Health & Safety, Sustainability, Energy, Mergers and Acquisitions, Governance, Corporate Integrity, Legal and Tax)

Advisory Committees of the Board of Directors

 

 

 

 

Luciano Siani Pires

Controlling Committee

 

Executive Officer (Finance and Investors Relations)

Eduardo Cesar Pasa

 

 

Moacir Nachbar Junior

 

Roger Allan Downey

Oswaldo Mário Pego de Amorim Azevedo

 

Executive Officer (Fertilizers, Coal and Strategy)

 

 

 

 

 

Gerd Peter Poppinga

Executive Development Committee

 

Executive Officer (Ferrous)

Oscar Augusto de Camargo Filho

 

 

Marcel Juviniano Barros

 

Humberto Ramos de Freitas

Fernando Jorge Buso Gomes

 

Executive Officer (Logistics and Mineral Research)

Tatiana Boavista Barros Heil

 

 

 

 

Jennifer Anne Maki

Strategic Committee

 

Executive Officer (Base Metals)

Murilo Pinto de Oliveira Ferreira

 

 

Gueitiro Matsuo Genso

 

 

Luiz Carlos Trabuco Cappi

 

 

Oscar Augusto de Camargo Filho

 

Rogerio Nogueira

Eduardo de Salles Bartolomeo

 

Global Controller Director

 

 

 

Finance Committee

 

Murilo Muller

Gilmar Dalilo Cezar Wanderley

 

Controllership Director

Fernando Jorge Buso Gomes

 

 

Eduardo de Oliveira Rodrigues Filho

 

Dioni Brasil

Marcelo Marcolino

 

Accounting Manager

 

 

TC-CRC-RJ 083305/O-8

 

56



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/ Andre Figueiredo

Date: October 27, 2016

 

Andre Figueiredo

 

 

Director of Investor Relations