6-K 1 tm212148d1_6k.htm FORM 6-K

 

 

 

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

 

February 2020

 

Vale S.A.

 

Praia de Botafogo nº 186, 18º andar, Botafogo
22250-145 Rio de Janeiro, RJ, Brazil

(Address of principal executive office)

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

(Check One) Form 20-F x Form 40-F ¨

 

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

 

(Check One) Yes ¨ No x

 

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

 

(Check One) Yes ¨ No x

 

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

 

(Check One) Yes ¨ No x   

 

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

 

 

 

 

 

 

 

Financial Statements

December 31, 2020

 

 

 

IFRS in US$

 

 

 

 

 

 

Vale S.A. Financial Statements

 

Contents

 

  Page
Report of Independent Registered Public Accounting Firm 2
Management’s Report on Internal Control over Financial Reporting 7
Consolidated Income Statement 8
Consolidated Statement of Comprehensive Income 9
Consolidated Statement of Cash Flows   10
Consolidated Statement of Financial Position 11
Consolidated Statement of Changes in Equity 12
Notes to the Financial Statements 13
1.     Corporate information 13
2.     Basis of preparation of the financial statements 13
3.     Significant events in the current year 14
4.     Information by business segment and by geographic area 17
5.     Costs and expenses by nature 21
6.     Financial results 22
7.     Streaming transactions 23
8.     Income taxes 24
9.     Basic and diluted earnings (loss) per share 27
10.   Accounts receivable 28
11.   Inventories 28
12.   Recoverable taxes 29
13.   Other financial assets and liabilities 29
14.   Investments in subsidiaries, associates and joint ventures 30
15.   Acquisitions and divestitures 34
16.   Intangibles 38
17.   Property, plant and equipment 39
18.   Impairment and onerous contracts 42
19.   Financial and capital risk management 45
20.   Financial assets and liabilities 56
21.   Participative stockholders’ debentures 59
22.   Loans, borrowings, leases, cash and cash equivalents and short-term investments 59
23.   Brumadinho’s dam failure 62
24.   Liabilities related to associates and joint ventures 67
25.   Provisions 70
26.   Litigations 71
27.   Employee benefits 75
28.   Stockholders’ equity 82
29.   Related parties 85
30.   Commitments 86

 

1

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders of

Vale S.A.

 

Opinions on the Financial Statements and Internal Control over Financial Reporting

 

We have audited the accompanying consolidated statement of financial position of Vale S.A. and its subsidiaries (the "Company") as of December 31, 2020 and 2019, and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for each of the two years in the period ended December 31, 2020, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in "Internal Control - Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020 in conformity with International Financial Reporting Standards  as issued by the International Accounting Standards Board. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

 

The consolidated financial statements of the Company as of December 31, 2018 and for the year then ended were audited by other auditors whose report dated April 18, 2019 expressed an unqualified opinion on those financial statements.

 

Change in accounting principle

 

As discussed in Note 2(d) to the consolidated financial statements, the Company changed the manner in which it accounts for leases on January 1st, 2019.

 

Basis for Opinions

 

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br

 

2

 

 

 

 

Vale S.A.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

 

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

Definition and Limitations of Internal Control over Financial Reporting

 

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (i) relate to accounts or disclosures that are material to the consolidated financial statements; and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

3

 

 

 

 

Vale S.A.

 

Brumadinho's dam failure

 

As described in Note 23 to the consolidated financial statements, the Company has incurred costs and recorded provisions, as a consequence of the Brumadinho's dam failure, which occurred in January 25, 2019. The provision amounted to US$ 6,864 million as of December 31, 2020. Management applied significant judgment in determining the value of these provisions, including subsequent reviews, which involved the use of significant estimates and assumptions with respect to: (i) the engineering projects and the total expected costs to carry out all de-characterization projects related to the dams built under the upstream method; and (ii) the valuation of the costs to carry out the remediation of the environmental and social impacts of the event in accordance with the agreements reached with the relevant authorities and others. The assumptions used in developing these estimates, with the support of management's specialists, included among others: (i) volume of the waste to be removed based on historical data available and interpretation of the enacted laws and regulations; (ii) location availability for the tailings disposal; (iii) acceptance by the authorities of the proposed engineering methods and solution; and (iv) number of individuals entitled to the indemnification payments. In addition, as management has further disclosed, given the nature and uncertainties inherent in this type of event, the amounts recognized and disclosed will be reassessed by the Company and may be adjusted significantly in future periods, as new facts and circumstances become known.

 

The principal considerations for our determination that performing procedures relating to the Brumadinho's dam failure provisions is a critical audit matter are that there were significant judgments by management, including the use of specialists, when developing the estimates of: (i) the engineering projects and the total expected costs to carry out all de-characterization projects related to the dams, and (ii) valuation of the costs related to the agreements reached by the Company. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the audit evidence related to the data, methods and assumptions used by management and its specialists in developing these estimates to evaluate management's valuation and significant assumptions used. Also, the audit effort involved the use of professionals with specialized skill and knowledge.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's estimates of cost and provision recorded in relation to the Brumadinho's dam failure. These procedures also included, among others, evaluating the methods and significant assumptions used by management in developing these estimates and cost provisions, and the assessment of costs in accordance with the agreements reached, and whether these were consistent with internal and external evidence available or obtained in other areas of the audit. The work of Company’s specialists was used in performing the procedures to evaluate the reasonableness of these estimates. As a basis for using this work, the specialists' qualifications and objectivity were understood, as well as the methods and assumptions used by them. The procedures also included tests of the data used by the management´s specialist and an understanding of the specialists' findings. In addition, professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the assumptions used in the engineering projects set out by management.

 

4

 

 

 

 

Vale S.A.

 

Assessment of goodwill and other long lived non-financial assets for impairment

 

As described in Notes 4 and 18 to the consolidated financial statements, the Company's goodwill balance was US$ 3,299 million as of December 31, 2020, comprised by the goodwill allocated to the Ferrous Minerals segment, in the amount of US$ 1,373 million and the goodwill allocated to the Base Metals segment, in the amount of US$ 1,926 million. As described in Note 18, management conducts an impairment test of goodwill on an annual basis, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired. Management also evaluates impairment indicators for the other long lived non-financial assets, such as intangible, property plant and equipment and investments in associate companies and joint ventures. Potential impairment is identified by comparing the fair value less costs to disposal (FVLCD) of a cash generating unit (CGU) to its carrying value, including goodwill. Fair value is generally estimated by management using a discounted cash flow model. Management’s cash flow projections for the CGUs included significant judgments and assumptions relating to (i) long-term future metal prices; and (ii) discount rates. During 2020, due to the decision to exit New Caledonian operation, included in Base Metals segment, the Company recorded an impairment charge of US$ 882 million and then classified New Caledonian operation as held for sale.

 

The principal considerations for our determination that performing procedures relating to impairment tests for goodwill and other long lived non-financial assets is a critical audit matter are that there were significant judgments by management when developing the fair value measurement of each CGU. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's cash flow projections and significant assumptions, related to long-term future metal prices and discount rates. In addition, the audit effort involved the use of professionals with specialized skills and knowledge.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of the controls related to management's goodwill and other long lived non-financial assets impairment assessment, including controls over the valuation of each CGU. These procedures also included, among others (i) testing management’s process for developing the fair value estimate; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of the underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management related to the long-term future metal prices and discount rates. Evaluating these management´s significant assumptions involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of each CGU; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model, and the long-term future metal prices and the discount rate assumptions.

 

5

 

 

 

 

Vale S.A.

 

Tax litigation

 

As described in Note 26 to the consolidated financial statements, the Company recognized provisions for tax litigations in the amount of US$ 485 million and disclosed contingent liabilities related to tax litigation in the amount of US$ 6,911 million. The Company recognizes a provision for tax litigation in the consolidated financial statements for the resolution of pending litigation when the Company has a present obligation as a result of a past event and management determines that a loss is probable, and the amount of the loss can be reasonably estimated, with the support of Company’s specialists. No provision for tax litigation is recognized in the consolidated financial statements for unfavorable outcomes when, after assessing the information available, (i) management concludes that it is not probable that a loss has been incurred in any of the pending litigation; or (ii) management is unable to estimate the loss or range of loss for any of the pending matters. In case of income tax pending litigations, management determines whether it is probable or not that taxation authorities will accept the uncertain tax treatment. If the Company concludes it is not probable that taxation authorities will accept the uncertain tax treatment, a provision for income tax is recognized. The Company also discloses the contingency in circumstances where management concludes: (i) no loss is probable or reasonably estimable, but it is reasonably possible that a loss may be incurred; or (ii) in case of income tax pending litigations, it is probable that the taxation authority will accept the uncertain tax treatment.

 

The principal considerations for our determination that performing procedures relating to tax litigation are a critical audit matter are that there were significant judgments by management when assessing the likelihood of a loss being incurred and when determining whether a reasonable estimate of the loss or range of loss and possible outcomes for each tax litigation claim can be made, which in turn led to a high degree of auditor judgment, subjectivity and effort in evaluating management’s assessment of the loss contingencies associated with litigation claims. In addition, the audit effort involved the use of professionals with specialized skills and knowledge.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of tax litigation claims, including controls over determining whether a loss is probable and whether the amount of loss can be reasonably estimated, or whether it is probable the taxation authority will not accept the income tax pending litigation, as well as financial statement disclosures. These procedures also included, among others, obtaining and evaluating the letters of audit inquiry with internal and external legal counsel, evaluating the reasonableness of management's assessment regarding whether unfavorable outcomes is reasonably possible or probable and reasonably estimable and evaluating the sufficiency of the Company's tax litigation contingencies disclosures. The work of Company’s specialists was used in performing the procedures to evaluate the reasonableness of the estimates related to the tax litigation claims. As a basis for using this work, the specialists' qualifications and objectivity were understood, as well as the methods and assumptions used by them. The procedures also included an evaluation of the specialists' findings. In addition, professionals with specialized skills and knowledge were used to assist in the evaluation of the reasonableness of the estimate or range of loss and possible outcomes of the main tax litigation claims.

 

/s/ PricewaterhouseCoopers Auditores Independentes

Rio de Janeiro, RJ, Brazil

February 25, 2021

 

We have served as the Company's auditor since 2019.

 

PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br

 

6

 

 

 

 

Management’s Report on Internal Control over Financial Reporting 

 

The management of Vale S.A (Vale) is responsible for establishing and maintaining adequate internal control over financial reporting.

 

The Vale’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.

 

Vale’s management has assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2020 based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such assessment and criteria, Vale’s management has concluded that the company’s internal control over financial reporting are effective as of December 31, 2020.

 

The effectiveness of the company’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report which appears herein. 

 

February 25th, 2021. 

 

Eduardo de Salles Bartolomeo

Chief Executive Officer 

 

Luciano Siani

Chief Financial Officer and Investors Relations

 

7

 

 

 

 

Consolidated Income Statement

In millions of United States dollars, except earnings per share data

 

 

       Year ended December 31, 
   Notes   2020   2019   2018 
Net operating revenue   4(d)   40,018    37,570    36,575 
Cost of goods sold and services rendered   5(a)   (19,039)   (21,187)   (22,109)
Gross profit        20,979    16,383    14,466 
                     
Operating expenses                    
Selling and administrative expenses   5(b)   (554)   (487)   (523)
Research and evaluation expenses        (443)   (443)   (373)
Pre-operating and operational stoppage   23    (887)   (1,153)   (271)
Brumadinho event   23    (5,257)   (7,402)   - 
Other operating expenses, net   5(c)   (752)   (505)   (445)
         (7,893)   (9,990)   (1,612)
Impairment and disposals of non-current assets   18    (2,243)   (5,074)   (899)
Operating income        10,843    1,319    11,955 
                     
Financial income   6    375    527    423 
Financial expenses   6    (3,283)   (3,746)   (2,314)
Other financial items, net   6    (1,903)   (194)   (3,066)
Equity results and other results in associates and joint ventures   14 and 24    (1,063)   (681)   (182)
Income (loss) before income taxes        4,969    (2,775)   6,816 
                     
Income taxes   8                
Current tax        (3,398)   (1,522)   (752)
Deferred tax        2,960    2,117    924 
         (438)   595    172 
                     
Net income (loss) from continuing operations        4,531    (2,180)   6,988 
Net income (loss) attributable to noncontrolling interests        (350)   (497)   36 
Net income (loss) from continuing operations attributable to Vale’s stockholders        4,881    (1,683)   6,952 
                     
Discontinued operations                    
Loss from discontinued operations        -    -    (92)
Loss from discontinued operations attributable to Vale’s stockholders        -    -    (92)
                     
Net income (loss)        4,531    (2,180)   6,896 
Net income (loss) attributable to noncontrolling interests        (350)   (497)   36 
Net income (loss) attributable to Vale’s stockholders        4,881    (1,683)   6,860 
                     
Earnings (loss) per share attributable to Vale’s stockholders:                    
Basic and diluted earnings (loss) per share:   9                
Common share (US$)        0.95    (0.33)   1.32 

 

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

 

8

 

 

 

 

Consolidated Statement of Comprehensive Income

In millions of United States dollars

 

 

   Year ended December 31, 
   2020   2019   2018 
Net income (loss)   4,531    (2,180)   6,896 
Other comprehensive income (loss):               
Items that will not be subsequently reclassified to income statement               
Translation adjustments   (9,160)   (1,677)   (6,762)
Retirement benefit obligations (note 27)   (88)   (126)   41 
Fair value adjustment to investment in equity securities (note 19)   101    (184)   60 
Transfer to reserve   -    -    (16)
Total items that will not be subsequently reclassified to income statement, net of tax   (9,147)   (1,987)   (6,677)
                
Items that may be subsequently reclassified to income statement               
Translation adjustments   4,203    1,111    3,899 
Net investments hedge (note 19)   (578)   (74)   (543)
Cash flow hedge (note 19)   (105)   102    - 
Transfer of realized results to net income   135    -    (78)
Total of items that may be subsequently reclassified to income statement, net of tax   3,655    1,139    3,278 
Total comprehensive income (loss)   (961)   (3,028)   3,497 
                
Comprehensive income (loss) attributable to noncontrolling interests   (318)   (512)   (84)
Comprehensive income (loss) attributable to Vale’s stockholders   (643)   (2,516)   3,581 
From continuing operations   (643)   (2,516)   3,589 
From discontinued operations   -    -    (8)
    (643)   (2,516)   3,581 

 

Items above are stated net of tax and the related taxes are disclosed in note 8.

 

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

 

9

 

 

 

 

Consolidated Statement of Cash Flows

In millions of United States dollars

 

 

   Year ended December 31, 
   2020   2019   2018 
Cash flow from operations (a)   17,030    15,623    15,365 
Interest on loans and borrowings paid (note 22)   (755)   (1,186)   (1,121)
Derivatives received (paid), net (note 19)   (34)   (324)   (67)
Interest on participative stockholders’ debentures paid (note 21)   (183)   (194)   (148)
Income taxes (including settlement program)   (1,736)   (1,809)   (1,128)
Net cash provided by operating activities   14,322    12,110    12,901 
                
Cash flow from investing activities:               
Capital expenditures   (4,430)   (3,704)   (3,784)
Additions to investments (note 14)   (131)   (76)   (23)
Acquisition of subsidiary, net of cash (note 15)   -    (926)   - 
Proceeds from disposal of assets and investments   426    142    1,481 
Dividends received from associates and joint ventures (note 14)   173    353    245 
Judicial deposits and restricted cash related to Brumadinho event (note 23)   (9)   (1,638)   - 
Short-term investment   630    (828)   (50)
Investment fund applications   (824)   -    - 
Other investments activities, net (i)   (504)   (312)   2,290 
Net cash provided by (used in) investing activities   (4,669)   (6,989)   159 
                
Cash flow from financing activities:               
Loans and borrowings from third-parties (note 22)   6,800    3,142    1,225 
Payments of loans and borrowings from third-parties (note 22)   (6,064)   (5,417)   (7,841)
Payments of leasing (note 22)   (219)   (224)   - 
Dividends and interest on capital paid to stockholders (note 28)   (3,350)   -    (3,313)
Dividends and interest on capital paid to noncontrolling interest   (14)   (184)   (182)
Share buyback program   -    -    (1,000)
Transactions with noncontrolling stockholders (note 15)   171    (812)   (17)
Net cash used in financing activities   (2,676)   (3,495)   (11,128)
                
Net cash used in discontinued operations   -    -    (46)
                
Increase in cash and cash equivalents   6,977    1,626    1,886 
Cash and cash equivalents in the beginning of the year   7,350    5,784    4,328 
Effect of exchange rate changes on cash and cash equivalents   (825)   (60)   (313)
Effects of disposals of subsidiaries, net of cash and cash equivalents   (15)   -    (117)
Cash and cash equivalents at end of the year   13,487    7,350    5,784 
                
Non-cash transactions:               
Additions to property, plant and equipment - capitalized loans and borrowing costs   70    140    194 
                
Cash flow from operating activities:               
Income (loss) before income taxes   4,969    (2,775)   6,816 
Adjusted for:               
Provisions related to Brumadinho event (note 23)   4,748    6,550    - 
Equity results and other results in associates and joint ventures (note 14)   1,063    681    182 
Impairment and disposal of non-current assets (note 18)   2,243    5,074    899 
Depreciation, depletion and amortization   3,234    3,726    3,351 
Financial results, net (note 6)   4,811    3,413    4,957 
Changes in assets and liabilities:               
Accounts receivable   (2,540)   (25)   (156)
Inventories   (180)   110    (817)
Suppliers and contractors (ii)   (267)   655    (376)
Provision - Payroll, related charges and other remunerations   222    (94)   (11)
Proceeds from streaming transactions (note 7)   -    -    690 
Payments related to Brumadinho event (note 23) (iii)   (809)   (989)   - 
Other assets and liabilities, net   (464)   (703)   (170)
Cash flow from operations (a)   17,030    15,623    15,365 

 

(i) Includes loans and advances from/to related parties. For the year ended December 31, 2018, includes proceeds received from Nacala project finance (note 29) in the amount of US$2,572.

(ii) Includes variable lease payments.

(iii) In addition, the Company has incurred in expenses in the amount of US$510 and US$730 for the year ended December 31, 2020 and 2019, respectively. Therefore, in 2020, the Company has disbursed a total amount of US$1,319 in relation to the Brumadinho event (2019: US$1,719).

 

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

 

10

 

 

 

 

Consolidated Statement of Financial Position

In millions of United States dollars

 

 

   Notes   December 31, 2020   December 31, 2019 
Assets               
Current assets               
Cash and cash equivalents   22    13,487    7,350 
Short-term investments   22    771    826 
Accounts receivable   10    4,993    2,529 
Other financial assets   13    329    607 
Inventories   11    4,061    4,274 
Recoverable taxes   12    509    922 
Others        253    534 
         24,403    17,042 
                
Non-current assets               
Judicial deposits   26(c)   1,268    3,133 
Other financial assets   13    1,784    2,661 
Recoverable taxes   12    1,091    1,204 
Deferred income taxes   8(a)   10,335    9,217 
Others        651    583 
         15,129    16,798 
                
Investments in associates and joint ventures   14    2,031    2,798 
Intangibles   16    9,296    8,499 
Property, plant and equipment   17    41,148    46,576 
         67,604    74,671 
Total assets        92,007    91,713 
             
Liabilities            
Current liabilities               
Suppliers and contractors        3,367    4,107 
Loans, borrowings and leases   22    1,136    1,439 
Other financial liabilities   13    1,906    1,404 
Taxes payable        952    512 
Settlement program (“REFIS”)   8(d)   340    431 
Liabilities related to associates and joint ventures   24    876    516 
Provisions   25    1,826    1,230 
Liabilities related to Brumadinho   23    1,910    1,568 
De-characterization of dams   23    381    309 
Dividends payable   28    1,220    1,560 
Others        680    769 
         14,594    13,845 
Non-current liabilities               
Loans, borrowings and leases   22    13,891    13,408 
Participative stockholders’ debentures   21    3,413    2,584 
Other financial liabilities   13    4,612    1,788 
Settlement program (“REFIS”)   8(d)   2,404    3,476 
Deferred income taxes   8(a)   1,770    1,882 
Provisions   25    8,434    8,493 
Liabilities related to Brumadinho   23    2,665    1,415 
De-characterization of dams   23    1,908    2,180 
Liabilities related to associates and joint ventures   24    1,198    1,184 
Streaming transactions   7    2,005    2,063 
Others        292    402 
         42,592    38,875 
Total liabilities        57,186    52,720 
                
Stockholders’ equity   28           
Equity attributable to Vale’s stockholders        35,744    40,067 
Equity attributable to noncontrolling interests        (923)   (1,074)
Total stockholders’ equity        34,821    38,993 
Total liabilities and stockholders’ equity        92,007    91,713 

 

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

 

11

 

 

 

 

Consolidated Statement of Changes in Equity

In millions of United States dollars

 

 

   Share capital   Capital reserve   Profit reserves   Treasury stocks   Other reserves   Cumulative translation adjustments  

Retained

earnings

   Equity attributable to Vale’s stockholders   Equity attributable to noncontrolling interests   Total stockholders’ equity 
Balance at December 31, 2017   61,614    1,139    7,419    (1,477)   (2,289)   (22,948)   -    43,458    1,314    44,772 
Net income   -    -    -    -    -    -    6,860    6,860    36    6,896 
Other comprehensive income   -    -    (1,257)   -    134    (2,156)   -    (3,279)   (120)   (3,399)
Dividends and interest on capital of Vale’s stockholders   -    -    -    -    -    -    (2,054)   (2,054)   -    (2,054)
Dividends of noncontrolling interest   -    -    -    -    -    -    -    -    (166)   (166)
Acquisitions and disposal of noncontrolling interest   -    -    -    -    -    -    -    -    (229)   (229)
Capitalization of noncontrolling interest advances   -    -    -    -    -    -    -    -    12    12 
Appropriation to undistributed retained earnings   -    -    4,806    -    -    -    (4,806)   -    -    - 
Share buyback program   -    -    -    (1,000)   -    -    -    (1,000)   -    (1,000)
Balance at December 31, 2018   61,614    1,139    10,968    (2,477)   (2,155)   (25,104)   -    43,985    847    44,832 
Loss   -    -    -    -    -    -    (1,683)   (1,683)   (497)   (2,180)
Other comprehensive income   -    -    (428)   -    (298)   (107)   -    (833)   (15)   (848)
Interest on capital of Vale’s stockholders   -    -    (1,767)   -    -    -    -    (1,767)   -    (1,767)
Dividends of noncontrolling interest   -    -    -    -    -    -    -    -    (87)   (87)
Acquisitions and disposal of noncontrolling interest   -    -    -    -    343    -    -    343    (1,350)   (1,007)
Capitalization of noncontrolling interest advances   -    -    -    -    -    -    -    -    28    28 
Allocation of loss   -    -    (1,683)   -    -    -    1,683    -    -    - 
Treasury shares utilized in the year (note 28)   -    -    -    22    -    -    -    22    -    22 
Balance at December 31, 2019   61,614    1,139    7,090    (2,455)   (2,110)   (25,211)   -    40,067    (1,074)   38,993 
Net income (loss)                                 4,881    4,881    (350)   4,531 
Other comprehensive income   -    -    (1,448)   -    267    (4,343)   -    (5,524)   32    (5,492)
Dividends and interest on capital of Vale’s stockholders   -    -    (2,329)   -    -    -    (1,152)   (3,481)   -    (3,481)
Dividends of noncontrolling interest   -    -    -    -    -    -    -    -    (8)   (8)
Acquisitions and disposal of noncontrolling interest   -    -    -    -    (213)   -    -    (213)   455    242 
Capitalization of noncontrolling interest advances   -    -    -    -    -    -    -    -    22    22 
Appropriation to undistributed retained earnings   -    -    3,729    -    -    -    (3,729)   -         - 
Treasury shares utilized in the year (note 28)   -    -    -    14    -    -    -    14    -    14 
Balance at December 31, 2020   61,614    1,139    7,042    (2,441)   (2,056)   (29,554)   -    35,744    (923)   34,821 

 

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

 

12

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

1.Corporate information

 

Vale S.A. and its subsidiaries (“Vale” or the “Company”) are iron ore and iron ore pellets producers, which are key raw materials for steelmaking, and nickel producers, which is used to produce stainless steel and metal alloys employed in the production process of several products. The Company also produces copper, metallurgical and thermal coal, manganese ore and, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 4.

 

Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo – B3 S.A. (VALE3), New York - NYSE (VALE) and Madrid – LATIBEX (XVALO).

 

2.Basis of preparation of the financial statements

 

a)Statement of compliance

 

The consolidated financial statements of the Company (“financial statements”) have been prepared and are being presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

b)Basis of presentation

 

The financial statements have been prepared on a historical cost basis as adjusted to reflect: (i) the fair value of financial instruments measured at fair value through income statement or at fair value through the statement of comprehensive income; and (ii) impairment of assets.

 

These financial statements were authorized for issue by the Board of Directors on February 25, 2021.

 

c)Functional currency and presentation currency

 

The financial statements of the Company and its associates and joint ventures are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian real (“R$”). For presentation purposes, these financial statements are presented in United States dollar (“US$”) as the Company believes that this is how international investors analyze the financial statements.

 

The exchange rates used by the Company to translate its foreign operations are as follows:

 

   Closing rate   Average rate for the year ended 
   2020   2019   2018   2020   2019   2018 
US Dollar (“US$”)   5.1967    4.0307    3.8748    5.1578    3.9461    3.6558 
Canadian dollar (“CAD”)   4.0771    3.1034    2.8451    3.8480    2.9746    2.8190 
Euro (“EUR” or “€”)   6.3779    4.5305    4.4390    5.8989    4.4159    4.3094 

 

d)Significant accounting policies

 

Significant accounting policies used in the preparation of these financial statements are disclosed in the respective notes and have been consistently applied to all years presented, except for the adoption of the IFRS 16 - Leases from January 1, 2019 using the retrospective approach with the cumulative effect recognized as at the date of initial application. Accordingly, the comparative information has not been restated and 2018 financial information continues to be presented under IAS 17 and related interpretations. As disclosed in note 8(e), the Company also adopted IFRIC 23 – Uncertainty over Income Tax Treatments from January 1, 2019.

 

In addition, certain new accounting standards and interpretations have been published that are not mandatory for December 31, 2020 reporting periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in future reporting periods.

 

13

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

e)Critical accounting estimates and judgments

 

The preparation of financial statements requires the use of critical accounting estimates and the application of judgment by management in applying the Company’s accounting policies. These estimates are based on the experience, best knowledge, information available at the statement of financial position date and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in facts and circumstances may lead to the revision of these estimates. Actual future results may differ from estimates.

 

The significant estimates and judgments applied by the Company in the preparation of these financial statements are as follows:

 

Note Significant estimates and judgments
7 Deferred revenue
8 Deferred income taxes
14 Consolidation
17 Mineral reserves and mine useful life
18 Impairment of non-current assets
19 Fair values estimate
23 Brumadinho dam failure
24 Liabilities related to associates and joint ventures
25 Asset retirement obligation
26 Litigation
27 Employee post-retirement obligations

 

3.       Significant events in the current year

 

a) Main events

 

The financial position, cash flows and performance of the Company were particularly affected by the following events and transactions during the year ended December 31, 2020:

 

In February 2021 (subsequent event), the Company entered into a Judicial Settlement for Integral Reparation (“Global Settlement”) with the State of Minas Gerais, the Public Defender of the State of Minas Gerais and the Federal and the State of Minas Gerais Public Prosecutors Offices, to repair the environmental and social damage resulting from the Dam I rupture. Thus, the Company recognized a loss of US$3,872 (R$19,924 million) in the income statement for the year ended December 31, 2020 (note 23).

 

In 2020, as a consequence of the periodic review of the estimates for the de-characterization of the dam structures, the Company recognized US$369 in addition to the provision already recorded. In addition, the Company also identified other structures that met the de-characterization criteria, resulting in an addition of US$248 to the provision (note 23).

 

In December 2020, the Company signed the early extension terms for its railways concessions related to Estrada de Ferro Carajás (“EFC”) and Estrada de Ferro Vitória a Minas (“EFVM”), for an additional thirty years period, from 2027 to 2057. As a result of the agreement, the Company recognized an intangible asset, which represents its right to use of both EFVM and EFC, and their related concession grants liabilities, in the aggregate amount of US$2,312 (R$12,016 million) (note 16).

 

In 2020, the Company started looking for a potential buyer for Vale Nouvelle-Calédonie S.A.S. (“VNC”) and started studying the other options available to exit the operation. Following the negotiations that took place during the year, VNC’s assets and liabilities were classified as “held for sale” and measured at fair value, resulting in the recognition of an impairment loss in the amount of US$382. In December 2020, the Company signed a binding put option agreement for the sale of its ownership interest in VNC for an immaterial consideration. The proposed transaction is expected to be concluded in the first quarter of 2021. Under this agreement, the Company has reserved the amount of the commitment to fund VNC in approximately US$500 to continue VNC operations, including the commitment to invest in the conversion of the tailings deposition from wet to dry-stacking. Therefore, the Company recognized a loss related to VNC in the amount of US$882, recognized in the in the income statement as “Impairment and disposals of non-current assets” for the year ended December 31, 2020 (note 18).

 

In 2020, the Company tested the recoverability of its loan receivable from Nacala BV. The testing was triggered by the revisions undertaken on the coal volumes that are projected to be transported on the railway, resulting in a loss of US$798, recognized in the income statement as “Impairment and disposals of non-current assets” for the year ended December 31, 2020 (note 18).

 

14

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

During 2020, Fundação Renova reviewed the assumptions used on the preparation of the estimates incorporated into the mitigation and compensation programs. The periodic review resulted in an addition of US$1,069 to the provision. In addition, Vale made available US$166 for Samarco’s working capital needs (2019: US$102). This amount was recognized in the income statement as “Equity results and other results in associates and joint ventures” for the year ended December 31, 2020 (note 24).

 

In July 2020, the Board of Directors approved the resumption of the stockholders´ remuneration policy and paid the amount of US$3,350 (R$18,637 million) (note 28).

 

In December 2020, the Company was notified by BNDESPar of the full exercise of the option to purchase 8% of VLI shares held by Vale. With the exercise of this option, Vale received US$241 (R$1,223 million) and holds 29.6% of VLI’s total shares. This transaction resulted in a gain of US$172, recognized in the income statement as “Equity results and other results in associates and joint ventures” for the year ended December 31, 2020 (note 15).

 

In November 2020, the Company concluded the sale of Biopalma da Amazônia S.A. Reflorestamento Indústria e Comércio (“Biopalma”) to Brasil Bio Fuels S.A. As a result of this transaction, a loss of US$125 was recognized in the income statement as “Impairment and disposals of non-current assets” for the year ended December 31, 2020 (note 18).

 

In August 2020, the conditions precedent of the agreement to sell the Company’s stake in Henan Longyu were concluded and the Company received US$156 as part of the consideration for the transaction. This transaction resulted in a gain of US$116 due to the recycling of the cumulative translation adjustments at closing, which was recognized as “Equity results and other results in associates and joint ventures” in the income statement for the year ended December 31, 2020 (note 15).

 

In October 2020, the Company concluded the agreement for the divestiture of PT Vale Indonesia Tbk (“PTVI”) and received US$278. The transaction with non-controlling interest resulted in a loss of US$179, which was recognized in the Stockholders’ Equity for the year ended December 31, 2020 (note 15).

 

In September 2020, the Company decided to shut down its operations at the Simões Filho plant in Bahia, resulting in an impairment loss of US$76, recognized in the income statement as “Impairment and disposals of non-current assets” for the year ended December 31, 2020 (note 18).

 

In July 2020, Vale Overseas Limited issued guaranteed notes due July 2030, in the amount of US$1,500 (note 22).

 

In October 2020, the Company approved the incorporation of a joint venture to build and operate an expansion project for the Shulanghu Port facilities, located in China. Vale’s capital contribution to the project is estimated to range from US$110 to US$160.The construction of the project, which is expected to take up to three years, will start after both parties obtain the anti-trust and other regulatory approvals in China (note 15).

 

On January 20, 2021 (subsequent event), the Company signed a Heads of Agreement (“HoA”) with Mitsui & Co., Ltd. (“Mitsui”), allowing both parties to structure Mitsui’s exit from the Moatize coal mine (“Vale Moçambique”) and the Nacala Logistics Corridor (“NLC”). The HoA determines that Vale will acquire Mitsui’s stake in the mine and logistics assets for an immaterial consideration and will undertake the obligation of the Nacala Corridor’s Project Finance in full, which has approximately US$2,500 outstanding balance at December 31,2020. In case of closing the transaction, Vale will also control NLC and, therefore, consolidate its assets and liabilities. The parties expect to conclude the transaction in 2021, which is subject to the execution of the definitive agreement and usual precedent conditions. In addition, the Company informed the market its divestiture decision in the coal segment, which may lead to the presentation of this segment as a discontinued operation in future financial statements depending on the Company’s assessment (note 15).

 

15

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

b) Coronavirus impact

 

A significant portion of the Company’s revenue derived from sales to customers in Asia and Europe, regions that have had their economic activities affected as a result of the pandemic. The Company also has an extensive logistics and supply chain, including several ports, distribution centers and suppliers that have operations in those affected regions.

 

The Company has taken several measures to monitor and prevent the effects of COVID-19, including health and safety measures for its employees (such as social distancing and remote working) and actions to secure the supply of materials essential to the Company’s production process.

 

The Company has pledged US$109 to support humanitarian aid programs in the communities where the Company operates, with special focus on Brazil communities that have been more adversely affected by the pandemic. This amount was used to purchase medical supplies and equipment and were recognized as “Other operating expenses” in the income statement for the year ended December 31, 2020.

 

At this time, the effects of the pandemic have not caused significant impacts on its operations nor on the fair value of the Company’s assets and liabilities. However, unusual significant changes have occurred in the value of financial assets in many markets since the pandemic outbreak. However, if the pandemic continues for an extended period of time or increases in intensity in the regions where the Company operates, the Company’s financial conditions or results of operations may be adversely impacted.

 

Liquidity - As a precautionary measure to increase its cash position and preserve financial flexibility considering the uncertainties resulting from the COVID-19 pandemic, the Company temporary discontinued the nickel hedge program, through the sale of option contracts for the total amount of US$230.

 

Deferred income tax - On March 31, 2020, the government of Indonesia issued a regulation (“PERPPU-1”) to manage the economic impact of the global COVID-19 pandemic, which affects Indonesia’s tax policies. The 25% income tax rate was reduced to 22% in fiscal years 2020 and 2021 and will later be reduced to 20% as of fiscal year 2022. Therefore, the Company has measured the deferred income tax of PT Vale Indonesia Tbk (“PTVI”), considering the effective promulgation of the new income tax rate recognizing an income tax gain of US$80 in the year ended December 31, 2020.

 

16

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

4.        Information by business segment and by geographic area

 

The Company operated the following reportable segments during this year: Ferrous Minerals, Base Metals and Coal. The segments are aligned with products and reflect the structure used by Management to evaluate Company’s performance. The responsible bodies for making operational decisions, allocating resources and evaluating performance are the Executive Boards and the Board of Directors. The performance of the operating segments is assessed based on a measure of adjusted EBITDA.

 

The Company has created the Special Recovery and Development Board, which is in-charge of those measures related to the Brumadinho dam rupture (note 23) that reports to the CEO. The costs related to the Brumadinho event are not directly linked to the Company’s operating activities and, therefore, are under “Other”, as well as, revenues and costs of other products, services, research and development, investments in joint ventures and associates of other businesses and unallocated corporate expenses.

 

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

 

The main activities of the operating segments are as follows:

 

Ferrous minerals – Comprise of the production and extraction of iron ore, iron ore pellets, manganese, other ferrous products and its logistic services.

 

Base metals - Include the production and extraction of nickel and its by-products (copper, gold, silver, cobalt, precious metals and others) and copper, as well as its by-products (gold and silver).

 

Coal – Comprise of the production and extraction of metallurgical and thermal coal and its logistic services.

 

Fertilizers (Discontinued operations) - Included the production of potash, phosphate, nitrogen and other fertilizer products, which was discontinued in 2018 (note 15).

 

a)     Adjusted EBITDA

 

The definition of Adjusted EBITDA for the Company is the operating income or loss plus dividends received and interest from associates and joint ventures, and excluding the amounts charged as (i) depreciation, depletion and amortization and (ii) impairment and disposal of non-current assets.

 

   Year ended December 31, 2020 
   Net operating revenue   Cost of goods sold and services rendered   Sales, administrative and other operating expenses   Research and evaluation   Pre operating and operational stoppage   Dividends received and interest from associates and joint ventures   Adjusted EBITDA 
Ferrous minerals                                   
Iron ore   27,285    (8,171)   (187)   (127)   (534)   23    18,289 
Iron ore pellets   4,242    (1,661)   11    (5)   (77)   116    2,626 
Ferroalloys and manganese   225    (179)   -    (2)   (29)   -    15 
Other ferrous products and services   326    (254)   3    (2)   -    2    75 
    32,078    (10,265)   (173)   (136)   (640)   141    21,005 
                                    
Base metals                                   
Nickel and other products   4,995    (3,216)   (25)   (49)   (29)   -    1,676 
Copper   2,175    (794)   (7)   (68)   (1)   -    1,305 
    7,170    (4,010)   (32)   (117)   (30)   -    2,981 
                                    
Coal   473    (1,456)   (15)   (28)   -    95    (931)
                                    
Brumadinho event   -    -    (5,257)   -    -    -    (5,257)
COVID-19   -    -    (109)   -    -    -    (109)
Others   297    (328)   (928)   (162)   (12)   32    (1,101)
Total   40,018    (16,059)   (6,514)   (443)   (682)   268    16,588 

  

17

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

  

 Year ended December 31, 2019

 
   Net operating revenue   Cost of goods sold and services rendered   Sales, administrative and other operating expenses   Research and evaluation   Pre operating and operational stoppage   Dividends received and interest from associates and joint ventures   Adjusted EBITDA 
Ferrous minerals                                   
Iron ore   23,343    (8,778)   (323)   (123)   (750)   29    13,398 
Iron ore pellets   5,948    (2,666)   (20)   (16)   (72)   258    3,432 
Ferroalloys and manganese   282    (220)   (8)   (2)   (1)   -    51 
Other ferrous products and services   432    (324)   -    (1)   -    9    116 
    30,005    (11,988)   (351)   (142)   (823)   296    16,997 
                                    
Base metals                                   
Nickel and other products   4,257    (2,867)   (75)   (44)   (28)   -    1,243 
Copper   1,904    (905)   (5)   (43)   (20)   -    931 
    6,161    (3,772)   (80)   (87)   (48)   -    2,174 
                                    
Coal   1,021    (1,638)   1    (30)   -    113    (533)
                                    
Brumadinho event   -    -    (7,402)   -    -    -    (7,402)
                                    
Others   383    (390)   (506)   (184)   (11)   57    (651)
Total   37,570    (17,788)   (8,338)   (443)   (882)   466    10,585 

  

   Year ended December 31, 2018 
   Net operating revenue   Cost of goods sold and services rendered   Sales, administrative and other operating expenses   Research and evaluation   Pre operating and operational stoppage   Dividends received and interest from associates and joint ventures   Adjusted EBITDA 
Ferrous minerals                                   
Iron ore   20,354    (9,048)   (76)   (110)   (115)   28    11,033 
Iron ore pellets   6,651    (3,393)   (11)   (26)   (19)   154    3,356 
Ferroalloys and manganese   454    (290)   (3)   (1)   -    -    160 
Other ferrous products and services   474    (313)   (4)   (1)   (1)   7    162 
    27,933    (13,044)   (94)   (138)   (135)   189    14,711 
                                    
Base metals                                   
Nickel and other products   4,610    (3,060)   (47)   (39)   (33)   -    1,431 
Copper   2,093    (960)   (4)   (18)   -    -    1,111 
    6,703    (4,020)   (51)   (57)   (33)   -    2,542 
                                    
Coal   1,643    (1,575)   (9)   (21)   -    143    181 
                                    
Others   296    (263)   (752)   (157)   (21)   56    (841)
Total   36,575    (18,902)   (906)   (373)   (189)   388    16,593 
                                    
Discontinued operations (Fertilizers)   121    (120)   (4)   -    -    -    (3)
Total   36,696    (19,022)   (910)   (373)   (189)   388    16,590 

 

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

 

From continuing operations

 

   Year ended December 31, 
   2020   2019   2018 
Net income (loss) attributable to Vale’s stockholders   4,881    (1,683)   6,952 
Net income (loss) attributable to noncontrolling interests   (350)   (497)   36 
Net income (loss)   4,531    (2,180)   6,988 
Depreciation, depletion and amortization   3,234    3,726    3,351 
Income taxes   438    (595)   (172)
Financial results   4,811    3,413    4,957 
Equity results and other results in associates and joint ventures   1,063    681    182 
Dividends received and interest from associates and joint ventures (i)   268    466    388 
Impairment and disposal of non-current assets   2,243    5,074    899 
Adjusted EBITDA   16,588    10,585    16,593 

 

(i) Includes the remuneration of the financial instrument of the Coal segment.

 

18

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

From discontinued operations

 

   Year ended December 31, 2018 
Loss   (92)
Income taxes   (40)
Financial results   5 
Impairment of non-current assets   124 
Adjusted EBITDA   (3)

 

b)     Assets by segment

 

   December 31, 2020   December 31, 2019 
   Product inventory   Investments in associates and joint ventures   Property, plant and equipment and intangibles (i)   Product inventory   Investments in associates and joint ventures   Property, plant and equipment and intangibles (i) 
Ferrous minerals   2,017    1,154    29,436    1,955    1,729    33,528 
Base metals   1,231    18    19,549    1,354    14    19,893 
Coal   25    -    -    60    -    - 
Others   -    859    1,459    2    1,055    1,654 
Total   3,273    2,031    50,444    3,371    2,798    55,075 

 

   Year ended December 31, 
   2020   2019   2018 
   Capital expenditures (ii)        Capital expenditures (ii)        Capital expenditures (ii)      
   Sustaining capital   Project execution   Depreciation, depletion and amortization   Sustaining capital   Project execution   Depreciation, depletion and amortization   Sustaining capital   Project execution   Depreciation, depletion and amortization 
Ferrous minerals   2,134    258    1,768    1,685    385    2,063    1,569    823    1,672 
Base metals   1,566    239    1,397    1,225    151    1,351    1,189    34    1,351 
Coal   203    -    19    240    -    237    132    24    252 
Others   5    25    50    10    8    75    6    7    76 
Total   3,908    522    3,234    3,160    544    3,726    2,896    888    3,351 

 

(i) Goodwill is allocated to ferrous minerals and base metals segments in the amount of US$1,373 and US1,926 in December 31, 2020 and US$1,770 and US$1,859 in December 31, 2019, respectively. 

(ii) Cash outflows.

 

c) Assets by geographic area

 

   December 31, 2020   December 31, 2019 
   Investments in associates and joint ventures   Intangible   Property, plant and equipment   Total   Investments in associates and joint ventures   Intangible   Property, plant and equipment   Total 
Brazil   1,760    7,341    23,364    32,465    2,498    6,496    29,134    38,128 
Canada   -    1,951    11,798    13,749    -    2,000    10,733    12,733 
Americas, except Brazil and Canada   234    -    5    239    242    -    -    242 
Europe   -    -    894    894    -    2    900    902 
Indonesia   -    2    2,729    2,731    -    1    2,761    2,762 
Asia, except Indonesia and China   20    -    951    971    39    -    985    1,024 
China   17    2    19    38    19    -    10    29 
New Caledonia   -    -    -    -    -    -    604    604 
Oman   -    -    1,388    1,388    -    -    1,449    1,449 
Total   2,031    9,296    41,148    52,475    2,798    8,499    46,576    57,873 

 

19

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

d) Net operating revenue by geographic area

 

   Year ended December 31, 2020 
   Ferrous minerals   Base metals   Coal   Others   Total 
Americas, except United States and Brazil   334    286    -    -    620 
United States of America   244    797    -    -    1,041 
Germany   357    1,309    -    -    1,666 
Europe, except Germany   1,214    2,356    101    -    3,671 
Middle East, Africa and Oceania   1,418    17    68    -    1,503 
Japan   1,793    400    20    -    2,213 
China   22,202    922    16    -    23,140 
Asia, except Japan and China   2,068    931    257    -    3,256 
Brazil   2,448    152    11    297    2,908 
Net operating revenue   32,078    7,170    473    297    40,018 

 

   Year ended December 31, 2019 
   Ferrous minerals   Base metals   Coal   Others   Total 
Americas, except United States and Brazil   523    835    -    -    1,358 
United States of America   404    931    -    -    1,335 
Germany   1,161    522    -    -    1,683 
Europe, except Germany   1,514    1,715    282    -    3,511 
Middle East, Africa and Oceania   2,083    20    75    -    2,178 
Japan   2,057    426    120    -    2,603 
China   17,572    670    -    -    18,242 
Asia, except Japan and China   2,032    816    464    -    3,312 
Brazil   2,659    226    80    383    3,348 
Net operating revenue   30,005    6,161    1,021    383    37,570 

 

   Year ended December 31, 2018 
   Ferrous minerals   Base metals   Coal   Others   Total 
Americas, except United States and Brazil   820    658    -    -    1,478 
United States of America   388    952    -    13    1,353 
Germany   1,130    523    -    -    1,653 
Europe, except Germany   2,218    1,800    436    -    4,454 
Middle East, Africa and Oceania   2,562    25    151    -    2,738 
Japan   2,072    508    163    -    2,743 
China   14,381    861    -    -    15,242 
Asia, except Japan and China   1,798    1,101    767    -    3,666 
Brazil   2,564    275    126    283    3,248 
Net operating revenue   27,933    6,703    1,643    296    36,575 

 

Provisionally priced commodities sales – The commodity price risk arises from volatility of iron ore, nickel, copper and coal prices. The Company is mostly exposed to the fluctuations in the iron ore and copper price (note 19). The selling price of these products can be measured reliably at each period, since the price is quoted in an active market.

 

The sensitivity of the Company’s risk on final settlement of provisionally priced accounts receivables are presented below:

 

   December 31, 2020 
   Thousand metric tons   Provisional price (US$/tonne)   Change   Effect on Revenue 
Iron ore   27,169    150.6    +/-10%    +/-409
Iron ore pellets   418    181.9    +/-10%    +/-8
Copper   89    9,723.4    +/-10%    +/-86

 

20

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

Accounting policy

 

 

Revenue is recognized when the control of a good or service transferred to a customer. Since Vale’s sales are under different shipping terms, revenue could be recognized when the product is available at the loading port, loaded on the ship, at the port of discharge or at the customer’s warehouse.

 

A relevant proportion of Vale’s sales are under Cost and Freight (“CFR”) and Cost, Insurance and Freight (“CIF”) Incoterms, in which the Company is responsible for providing shipping services after the date that Vale transfers control of the goods to the customers. Shipping services for CFR and CIF contracts are considered as a separate performance obligation in which a proportion of the transaction price is allocated and recognized over time as the shipping services are provided.

 

Generally, the contract payment terms consider the upfront payments or the use of credit letters. The payment terms do not have a significant financing component. In some cases, the sale price is determined on a provisional basis at the date of sale and adjustments to the sale price subsequently occur based on movements in the quoted market or contractual prices up to the date of final pricing.

 

Revenue is recognized based on the estimated fair value of the total consideration receivable, and the provisionally priced sale mechanism embedded within these sale arrangements has the character of a derivative. Accordingly, the fair value of the final sale price adjustment is re-estimated continuously and changes in fair value are recognized as operational revenue in the income statement.

 

5.       Costs and expenses by nature

 

a)     Cost of goods sold and services rendered

 

   Year ended December 31, 
   2020   2019   2018 
Personnel   1,676    2,009    2,278 
Materials and services   3,345    3,873    3,957 
Fuel oil and gas   949    1,392    1,538 
Maintenance   2,725    2,797    2,807 
Royalties   846    802    746 
Energy   703    858    906 
Ores acquired from third parties   946    608    513 
Depreciation, depletion and amortization   2,980    3,399    3,207 
Freight   3,439    4,023    4,306 
Others   1,430    1,426    1,851 
Total   19,039    21,187    22,109 
                
Cost of goods sold   18,457    20,498    21,526 
Cost of services rendered   582    689    583 
Total   19,039    21,187    22,109 

 

b)     Selling and administrative expenses

 

   Year ended December 31, 
   2020   2019   2018 
Selling   88    92    95 
Personnel   224    181    212 
Services   114    85    92 
Depreciation and amortization   49    56    62 
Advertisement   17    7    20 
Others   62    66    42 
Total   554    487    523 

 

21

 

 

Notes to the Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

 

c)     Other operating expenses (income), net

 

   Year ended December 31, 
   2020   2019   2018 
Asset retirement obligations   312    92    5 
Provision for litigations (i)   73    291    185 
Profit sharing program   115    89