6-K 1 tm2111946d2_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

 

April 2021

 

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-      .)

 

 

 

 

 

 

Interim Financial Statements

March 31, 2021

 

 

IFRS in US$

 

 

 

 

 

Vale S.A. Interim Financial Statements

 

Contents

 

  Page
Report of Independent Registered Public Accounting Firm 2
Consolidated Income Statement 3
Consolidated Statement of Comprehensive Income 4
Consolidated Statement of Cash Flows   5
Consolidated Statement of Financial Position 6
Consolidated Statement of Changes in Equity 7
Notes to the Interim Financial Statements 8
1.     Corporate information 8
2.     Basis of preparation of the interim financial statements 8
3.     Significant events in the current period 9
4.     Information by business segment and by geographic area 10
5.     Costs and expenses by nature 13
6.     Financial results 14
7.     Income taxes 14
8.     Basic and diluted earnings per share 15
9.     Accounts receivable 15
10.    Inventories 15
11.    Other financial assets and liabilities 15
12.    Investments in subsidiaries, associates and joint ventures 16
13.    Intangibles 18
14.    Property, plant and equipment 18
15.    Financial and capital risk management 19
16.    Financial assets and liabilities 25
17.    Participative stockholders’ debentures 26
18.    Loans, borrowings, leases, cash and cash equivalents and short-term investments 27
19.    Brumadinho’s dam failure 29
20.    Liabilities related to associates and joint ventures 34
21.    Provisions 36
22.    Litigations 36
23.    Employee post-retirement obligations 38
24.    Stockholders’ equity 38
25.    Related parties 39

 

1

 

 

 

Report of Independent registered Public Accounting Firm

 

To the stockholders and Board of Directors of

Vale S.A.

 

Results of Review of Interim Financial Statements

 

We have reviewed the accompanying consolidated statement of financial position of Vale S.A. and its subsidiaries (the “Company”) as of March 31, 2021, and the related consolidated income statement and statements of comprehensive income, changes in equity and of cash flows for the three-month periods ended March 31, 2021 and March 31, 2020, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of the Company as of December 31, 2020, and the related consolidated income statement and statements of comprehensive income, changes in equity and of cash flows (not presented herein), and in our report dated February 25, 2021, which included a paragraph describing a change in the manner of accounting for leases on January 1, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial position as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

 

Basis for Review Results

 

These interim financial statements are the responsibility of the Company’s management. 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. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

/s/ PricewaterhouseCoopers

Auditores Independentes

Rio de Janeiro, RJ, Brazil

April 26, 2021

 

2

 

 

 

Consolidated Income Statement

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

 

 

       Three-month period ended March 31, 
   Notes   2021   2020 
Net operating revenue   4(c)   12,645    6,969 
Cost of goods sold and services rendered   5(a)   (4,627)   (4,278)
Gross profit        8,018    2,691 
                
Operating expenses               
Selling and administrative expenses   5(b)   (105)   (115)
Research and evaluation expenses        (100)   (95)
Pre-operating and operational stoppage   19    (145)   (268)
Brumadinho event   19    (115)   (159)
Other operating expenses, net   5(c)   (12)   (62)
         (477)   (699)
Impairment and disposals of non-current assets   12 and 14    (161)   (29)
Operating income        7,380    1,963 
                
Financial income   6    74    107 
Financial expenses   6    (1,386)   (525)
Other financial items, net   6    1,235    (1,867)
Equity results and other results in associates and joint ventures   12 and 20    (16)   (166)
Income (loss) before income taxes        7,287    (488)
                
Income taxes   7           
Current tax        (1,515)   (347)
Deferred tax        (295)   996 
         (1,810)   649 
                
Net income        5,477    161 
Loss attributable to non-controlling interests        (69)   (78)
Net income attributable to Vale's stockholders        5,546    239 
                
Earnings per share attributable to Vale's stockholders:               
Basic and diluted earnings per share:   8           
Common share (US$)        1.08    0.05 

 

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

 

3

 

 

 

Consolidated Statement of Comprehensive Income

In millions of United States dollars

 

 

   Three-month period ended March 31, 
   2021   2020 
Net income   5,477    161 
Other comprehensive income (loss):          
Items that will not be subsequently reclassified to income statement          
Translation adjustments   (3,348)   (9,463)
Retirement benefit obligations (note 23)   291    9 
Fair value adjustment to investment in equity securities   275    (248)
Total items that will not be subsequently reclassified to income statement, net of tax   (2,782)   (9,702)
           
Items that may be subsequently reclassified to income statement          
Translation adjustments   2,006    4,243 
Net investments hedge (note 15)   (160)   (520)
Net Cash flow hedge (note 15)   9    64 
Reclassification of cumulative translation adjustment to net income (note 12)   (1,118)   - 
Total of items that may be subsequently reclassified to income statement, net of tax   737    3,787 
Total comprehensive income (loss)   3,432    (5,754)
           
Comprehensive income (loss) attributable to non-controlling interests   (69)   (76)
Comprehensive income (loss) attributable to Vale's stockholders   3,501    (5,678)

 

Items above are stated net of tax and the related taxes are disclosed in note 7.

 

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

 

4

 

 

 

Consolidated Statement of Cash Flows

In millions of United States dollars

 

  

   Three-month period ended March 31, 
   2021   2020 
Cash flow from operations (a)   8,673    2,005 
Interest on loans and borrowings paid (note 18)   (288)   (244)
Cash received (paid) on settlement of Derivatives, net (note 15)   (199)   273 
Income taxes (including settlement program)   (1,164)   (349)
Net cash provided by operating activities   7,022    1,685 
           
Cash flow from investing activities:          
Capital expenditures (notes 13 and 14)   (1,009)   (1,124)
Additions to investments (note 12)   (42)   (75)
Cash paid on the disposal of VNC (note12)   (555)   - 
Short-term investment   (716)   181 
Other investments activities, net   (24)   (53)
Net cash used in investing activities   (2,346)   (1,071)
           
Cash flow from financing activities:          
Loans and borrowings from third-parties (note 18)   290    5,000 
Payments of loans and borrowings from third-parties (note 18)   (1,233)   (375)
Lease payments (note 18)   (55)   (50)
Dividends and interest on capital paid to stockholders (note 24)   (3,884)   - 
Dividends and interest on capital paid to non-controlling interest   (3)   (3)
Net cash provided by (used in) financing activities   (4,885)   4,572 
           
Increase (decrease) in cash and cash equivalents   (209)   5,186 
Cash and cash equivalents in the beginning of the period   13,487    7,350 
Effect of exchange rate changes on cash and cash equivalents   (395)   (748)
Cash and cash equivalents at end of the period   12,883    11,788 
           
Non-cash transactions:          
Additions to property, plant and equipment - capitalized loans and borrowing costs   16    32 
           
Cash flow from operating activities:          
Income (loss) before income taxes   7,287    (488)
Adjusted for:          
Equity results and other results in associates and joint ventures (note 12)   16    166 
Impairment and disposal of non-current assets   161    29 
Depreciation, depletion and amortization   731    815 
Financial results, net (note 6)   77    2,285 
Changes in assets and liabilities:          
Accounts receivable   1,401    621 
Inventories   (174)   (227)
Suppliers and contractors (i)   (256)   (674)
Provision - Payroll, related charges and other remunerations   (289)   (208)
Payments related to Brumadinho event (note 19) (ii)   (149)   (217)
Other assets and liabilities, net   (132)   (97)
Cash flow from operations (a)   8,673    2,005 
           

(i) Includes variable lease payments.

(ii) In addition, the Company has incurred in expenses, which were recognized straight in the income statement, of US$115 and US$159 for the three-month period ended March 31, 2021 and 2020, respectively. Therefore, the Company has disbursed a total amount of US$264 as at March 31, 2021 in relation to the Brumadinho event (2020: US$376).

 

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

 

5

 

 

 

Consolidated Statement of Financial Position

In millions of United States dollars

 

 

   Notes   March 31,
2021
   December 31,
2020
 
Assets               
Current assets               
Cash and cash equivalents   18    12,883    13,487 
Short-term investments   18    1,429    771 
Accounts receivable   9    3,515    4,993 
Other financial assets   11    289    329 
Inventories   10    4,274    4,061 
Recoverable taxes        466    509 
Others        317    253 
         23,173    24,403 
                
Non-current assets               
Judicial deposits   22(c)   1,146    1,268 
Other financial assets   11    2,111    1,784 
Recoverable taxes        1,107    1,091 
Deferred income taxes   7(a)   9,207    10,335 
Others        646    651 
         14,217    15,129 
                
Investments in associates and joint ventures   12    1,871    2,031 
Intangibles   13    8,661    9,296 
Property, plant and equipment   14    39,062    41,148 
         63,811    67,604 
Total assets        86,984    92,007 
Liabilities               
Current liabilities               
Suppliers and contractors        3,113    3,367 
Loans, borrowings and leases   18    989    1,136 
Other financial liabilities   11    2,082    1,906 
Taxes payable        830    952 
Settlement program ("REFIS")   7(c)   311    340 
Liabilities related to associates and joint ventures   20    846    876 
Provisions   21    903    1,826 
Liabilities related to Brumadinho   19    1,847    1,910 
De-characterization of dams   19    367    381 
Dividends payable        21    1,220 
Others        518    680 
         11,827    14,594 
Non-current liabilities               
Loans, borrowings and leases   18    12,818    13,891 
Participative stockholders' debentures   17    4,045    3,413 
Other financial liabilities   11    4,418    4,612 
Settlement program ("REFIS")   7(c)   2,121    2,404 
Deferred income taxes   7(a)   1,944    1,770 
Provisions   21    7,445    8,434 
Liabilities related to Brumadinho   19    2,167    2,665 
De-characterization of dams   19    1,595    1,908 
Liabilities related to associates and joint ventures   20    886    1,198 
Streaming transactions        1,986    2,005 
Others        303    292 
         39,728    42,592 
Total liabilities        51,555    57,186 
                
Stockholders' equity   24           
Equity attributable to Vale's stockholders        36,409    35,744 
Equity attributable to non-controlling interests        (980)   (923)
Total stockholders' equity        35,429    34,821 
Total liabilities and stockholders' equity        86,984    92,007 

 

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

 

6

 

 

 

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
non-controlling
interests
   Total
stockholders'
equity
 
Balance at December 31, 2020   61,614    1,139    7,042    (2,441)   (2,056)   (29,554)   -    35,744    (923)   34,821 
Net income (loss)   -    -    -    -    -    -    5,546    5,546    (69)   5,477 
Other comprehensive income   -    -    (501)   -    591    (2,135)   -    (2,045)   -    (2,045)
Dividends and interest on capital of Vale's stockholders   -    -    (2,843)   -    -    -    -    (2,843)   -    (2,843)
Dividends of non-controlling interest   -    -    -    -    -    -    -    -    (2)   (2)
Acquisitions and disposal of non-controlling interest   -    -    -    -    -    -    -    -    14    14 
Treasury shares utilized in the period (note 24)                  7                   7    -    7 
Balance at March 31, 2021   61,614    1,139    3,698    (2,434)   (1,465)   (31,689)   5,546    36,409    (980)   35,429 

 

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

Retained

earnings

   Equity
attributable
to Vale’s
stockholders
   Equity
attributable to
non-controlling
interests
   Total
stockholders'
equity
 
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)   -    -    -    -    -    -    239    239    (78)   161 
Other comprehensive income   -    -    (1,593)   -    (239)   (4,085)   -    (5,917)   2    (5,915)
Dividends of non-controlling interest   -    -    -    -    -    -    -    -    (2)   (2)
Capitalization of non-controlling interest advances   -    -    -    -    -    -    -    -    6    6 
Treasury shares utilized in the period (note 24)   -    -    -    14    -    -    -    14    -    14 
Balance at March 31, 2020   61,614    1,139    5,497    (2,441)   (2,349)   (29,296)   239    34,403    (1,146)   33,257 

 

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

 

7

 

 

Selected Notes to the Interim 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 interim financial statements

 

a)    Statement of compliance

 

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

 

b)    Basis of presentation

 

The interim financial statements have been prepared to update users about relevant events and transactions that occurred in the period and should be read in conjunction with the financial statements for the year ended December 31, 2020. The accounting policies, accounting estimates and judgements, risk management and measurement methods are the same as those applied when preparing the last annual financial statements.

 

These interim financial statements were authorized for issue by the Executive Board on April 26, 2021.

 

The interim financial statements of the Company 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$”). For presentation purposes, these interim financial statements are presented in United States dollar (“US$”) as the Company believes that this is how international investors analyze the interim financial statements.

 

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

 

           Average rate 
   Closing rate   Three-month period ended March 31, 
   March 31, 2021   December 31, 2020   2021   2020 
United States dollar   5.6973    5.1967    5.4833    4.4656 
Canadian dollar ("CAD")   4.5325    4.0771    4.3323    3.3148 
Euro ("EUR")   6.6915    6.3779    6.6033    4.9224 

 

8

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

3.        Significant events in the current period

 

The financial position, cash flows and performance of the Company were particularly affected by the following events and transactions during the three-month period ended March 31, 2021:

 

·February 2021, 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. In April 2021 (subsequent event), the res judicata of the Global Settlement was drawn up (note 12).

 

·In March 2021, the Company completed the sale of its equity interest in Vale Nouvelle-Calédonie SAS (“VNC”) to the Prony Resources New Caledonia consortium. Upon closing of the transaction, the Company recognized further losses in the amount of US$98 as “Impairment and disposals of non-current assets”. Thus, the Company has paid a total cash of US$611, of which US$56 were used support the continuity of VNC’s operation until March 31, 2021 and US$555 was paid to the buyers on March 31, 2021. Additionally, the Company reclassified the gain of US$1,132 related to the cumulative translation adjustments from the stockholders’ equity to the income statement under “Other financial items, net” (note 12).

 

·In March 2021, the Company paid stockholders’ remuneration in the amount of US$3,884 (note 24).

 

·In March 2021, the Company redeemed all of its 3.750% bonds due January 2023, in the total amount of US$884 (EUR750 million) and for it paid a premium of US$63, which was recorded as “Financial expenses” under “Expenses with cash tender offer redemption” for three-month period ended March 31,2021 (notes 6 and 18).

 

·In April 2021 (subsequent event), the Company approved a share buyback program for its common shares, limited to a maximum of 270,000,000 common shares and their respective ADRs. The program will be carried out over a period of up to 12 months (note 24).

 

·In April 2021 (subsequent event), the Company signed an Investment Agreement with Mitsui & Co., Ltd (“Mitsui”), for the acquisition by Vale of the totality of Mitsui´s interest of Vale Moçambique and in the Nacala Logistics Corridor (“NLC”). The completion of Mitsui´s exit is expected throughout 2021 (note 12).

 

9

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

4.        Information by business segment and by geographic area

 

The Company operates the following reportable segments: 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 ("chief operating decision maker" under IFRS 8 - Operating Segments) are the Executive Boards and the Board of Directors. Accordingly, the performance of the operating segments is assessed based on a measure of adjusted EBITDA.

 

The Company allocates to “Others” the revenues and cost of other products, services, research and development, investments in joint ventures and associates of other business and unallocated corporate expenses. Additionally, the costs related to the Brumadinho event are not directly linked to the Company's operating activities and, therefore, are allocated to "Other" as well.

 

In the current period, the Company has allocated the financial information of Vale New Caledonia operation to “Others” as this operation is no longer analyzed by the chief operating decision maker as part of to the performance of the Base Metals business segment due to the sale of this operation. The comparative periods were restated to reflect this change in the allocation criteria.

 

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.

 

   Three-month period ended March 31, 2021 
   Net operating
revenue
   Cost of goods
sold and
services
rendered
   Sales,
administrative
and other
operating
expenses
   Research and
evaluation
   Pre operating
and operational
stoppage
   Dividends
received and
interest from
associates and
joint ventures
   Adjusted
EBITDA
 
Ferrous minerals                                   
Iron ore   9,154    (2,087)   (22)   (33)   (92)   -    6,920 
Iron ore pellets   1,208    (383)   29    (1)   (13)   -    840 
Ferroalloys and manganese   46    (23)   (1)   -    (4)   -    18 
Other ferrous products and services   97    (66)   2    -    -    -    33 
    10,505    (2,559)   8    (34)   (109)   -    7,811 
                                    
Base metals                                   
Nickel and other products   1,434    (771)   (10)   (11)   -    -    642 
Copper   554    (166)   -    (18)   (1)   -    369 
    1,988    (937)   (10)   (29)   (1)   -    1,011 
                                    
Coal   92    (329)   2    (2)   -    78    (159)
                                    
Others (i)   60    (114)   (106)   (35)   (1)   -    (196)
    12,645    (3,939)   (106)   (100)   (111)   78    8,467 
                                    
Brumadinho event   -    -    (115)   -    -    -    (115)
COVID-19   -    -    (2)   -    -    -    (2)
Total   12,645    (3,939)   (223)   (100)   (111)   78    8,350 

 

(i) Includes the EBITDA of VNC in the amount of US$65.

 

10

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

   Three-month period ended March 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   4,311    (1,683)   (25)   (23)   (169)   -    2,411 
Iron ore pellets   852    (412)   10    (1)   (25)   -    424 
Ferroalloys and manganese   46    (49)   -    -    (1)   -    (4)
Other ferrous products and services   87    (71)   1    (1)   -    -    16 
    5,296    (2,215)   (14)   (25)   (195)   -    2,847 
                                    
Base metals                                   
Nickel and other products   956    (528)   (19)   (13)   -    -    396 
Copper   383    (207)   1    (17)   -    -    160 
    1,339    (735)   (18)   (30)   -    -    556 
                                    
Coal   148    (374)   2    (9)   -    75    (158)
                                    
Others (i)   186    (225)   (130)   (31)   (4)   -    (204)
    6,969    (3,549)   (160)   (95)   (199)   75    3,041 
                                    
Brumadinho event   -    -    (159)   -    -    -    (159)
Total   6,969    (3,549)   (319)   (95)   (199)   75    2,882 

 

(i) Includes the reclassification of the EBITDA of VNC in the amount of US$46 for the three-month period ended March 31, 2020.

 

Adjusted EBITDA is reconciled to net income as follows:

 

   Three-month period ended March 31, 
   2021   2020 
Net income attributable to Vale's stockholders   5,546    239 
Loss attributable to non-controlling interests   (69)   (78)
Net income   5,477    161 
Depreciation, depletion and amortization   731    815 
Income taxes   1,810    (649)
Financial results   77    2,285 
Equity results and other results in associates and joint ventures   16    166 
Dividends received and interest from associates and joint ventures (i)   78    75 
Impairment and disposal of non-current assets   161    29 
Adjusted EBITDA   8,350    2,882 

 

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

 

b)        Assets by segment

 

   March 31, 2021   December 31, 2020 
    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   2,177    1,059    27,214    2,017    1,154    29,436 
Base metals   1,295    17    19,213    1,231    18    19,549 
Coal   47    -    -    25    -    - 
Others   3    795    1,296    -    859    1,459 
Total   3,522    1,871    47,723    3,273    2,031    50,444 

 

11

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

   Three-month period ended March 31, 
   2021   2020 
    Capital
expenditures (ii)
         Capital
expenditures (ii)
      
    Sustaining
capital
    Project
execution
    Depreciation, depletion
and amortization
    Sustaining
capital
    Project
execution
    Depreciation, depletion
and amortization
 
Ferrous minerals   526    82    397    536    91    422 
Base metals   291    68    317    300    52    342 
Coal   29    -    -    80    -    19 
Others (iii)   11    2    17    63    2    32 
Total   857    152    731    979    145    815 

 

(i) Goodwill is allocated to ferrous minerals and base metals segments in the amount of US$1,252 and US1,951 in March 31, 2021 and US$1,373 and US$1,926 in December 31, 2020, respectively. The variation of "property, plant and equipment and intangibles" of base metals occurred due to the foreign exchange variation in the period.

(ii) Cash outflows.

(iii) Includes the reclassification of VNC under the captions “Sustaining capital” and “depreciation, depletion and amortization”, in the amount of US$61 and US$18, respectively, for the three-month period ended on March 31, 2020.

 

c) Net operating revenue by geographic area

 

   Three-month period ended March 31, 2021 
   Ferrous
minerals
   Base metals   Coal   Others   Total 
Americas, except United States and Brazil   219    94    -    4    317 
United States of America   98    285    -    -    383 
Germany   169    466    -    -    635 
Europe, except Germany   591    706    18    -    1,315 
Middle East, Africa and Oceania   271    -    18    -    289 
Japan   527    96    -    -    623 
China   6,793    160    13    -    6,966 
Asia, except Japan and China   782    158    43    -    983 
Brazil   1,055    23    -    56    1,134 
Net operating revenue   10,505    1,988    92    60    12,645 

 

   Three-month period ended March 31, 2020 
   Ferrous
minerals
   Base metals   Coal   Others (i)   Total 
Americas, except United States and Brazil   100    111    -    88    299 
United States of America   44    245    -    -    289 
Germany   182    194    -    -    376 
Europe, except Germany   286    378    47    -    711 
Middle East, Africa and Oceania   242    8    28    -    278 
Japan   377    94    13    -    484 
China   3,064    116    16    -    3,196 
Asia, except Japan and China   411    156    44    -    611 
Brazil   590    37    -    98    725 
Net operating revenue   5,296    1,339    148    186    6,969 
                          

(i) Includes the reclassification of VNC in the amount of US$88 for the three-month period ended March 31, 2020.

 

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 15). 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 is presented below:

 

   March 31, 2021 
   Thousand
metric tons
   Provisional
price
(US$/tonne)
   Change   Effect on
Revenue
 
Iron ore   12,114    160.5    +/-10%    194 
Iron ore pellets   108    200.0    +/-10%    2 
Copper   78    10,864.6    +/-10%    84 

 

12

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

5.        Costs and expenses by nature

 

a)    Cost of goods sold and services rendered

 

   Three-month period ended March 31, 
   2021   2020 
Personnel   390    413 
Materials and services   702    805 
Fuel oil and gas   208    279 
Maintenance   649    670 
Royalties   251    164 
Energy   149    189 
Ores acquired from third parties (i)   343    62 
Depreciation, depletion and amortization   688    729 
Freight   782    696 
Others   465    271 
Total   4,627    4,278 
           
Cost of goods sold   4,493    4,117 
Cost of services rendered   134    161 
Total   4,627    4,278 

 

(i) The increase in “Ores acquired from third parties” is mainly due to the significant increase in the reference price for iron ore and higher volumes of other ores compared to 2020.

 

Tax on mineral production (Taxa de Fiscalização de Recursos Minerais - “TFRM”) – Several Brazilian states, including Minas Gerais, Pará and Mato Grosso do Sul, impose a TFRM, which is currently assessed at rates ranging from R$0.50 to R$3.72 per metric ton of minerals produced in or transferred from the state. The expenses related to the TFRM are presented in these interim financial statements under “Royalties”. In March 2021, a state decree increased the TFRM rate in the state of Para to R$11.19 per metric ton, with effectiveness as of April 2021. According to the prior rule, which would expire in 2031, the TFRM rate was R$3.72 per ton until the production of 10 million metric tons and R$0.74 for volumes over than 10 million metric tons. The Company is evaluating in the legal aspects of this change and, based on the Constitutional Principle of mandatory notice period, which sets out the tax increase would become in force only in the subsequent year of its enactment, therefore the Company does not expect any impact in 2021. The Company is also evaluating other legal aspects to defend the overcharge for the future.

 

b)        Selling and administrative expenses

 

   Three-month period ended March 31, 
   2021   2020 
Selling   18    17 
Personnel   47    47 
Services   17    18 
Depreciation and amortization   9    17 
Others   14    16 
Total   105    115 

 

c)        Other operating expenses (income), net

 

   Three-month period ended March 31, 
   2021   2020 
Provision for litigations   16    19 
Profit sharing program   23    32 
Others   (27)   11 
Total   12    62 

 

13

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

6.        Financial result

 

   Three-month period ended March 31, 
   2021   2020 
Financial income          
Short-term investments   27    52 
Others   47    55 
    74    107 
Financial expenses          
Loans and borrowings gross interest (note 18)   (207)   (214)
Capitalized loans and borrowing costs   16    32 
Participative stockholders' debentures (note 17)   (983)   (49)
Interest on REFIS   (7)   (25)
Interest on lease liabilities (note 18)   (19)   (18)
Financial guarantees   (37)   (141)
Expenses with cash tender offer redemption (note 18)   (63)   - 
Others   (86)   (110)
    (1,386)   (525)
Other financial items, net          
Net foreign exchange gains (losses)   320    (464)
Derivative financial instruments (note 15)   (439)   (1,384)
Reclassification of cumulative translation adjustment on VNC sale (note 12)   1,132    - 
Indexation gains (losses), net   222    (19)
    1,235    (1,867)
Total   (77)   (2,285)
           

 

7.        Income taxes

 

a) Deferred income tax assets and liabilities

 

   Assets   Liabilities   Deferred taxes, net 
Balance at December 31, 2020   10,335    1,770    8,565 
Effect in income statement   (245)   50    (295)
Translation adjustment   (619)   2    (621)
Other comprehensive income   (264)   122    (386)
Balance at March 31, 2021   9,207    1,944    7,263 
                
    Assets    Liabilities    Deferred taxes, net 
Balance at December 31, 2019   9,217    1,882    7,335 
Effect in income statement   953    (43)   996 
Transfers between asset and liabilities   40    40    - 
Translation adjustment   (1,945)   (148)   (1,797)
Other comprehensive income   1,795    10    1,785 
Balance at March 31, 2020   10,060    1,741    8,319 
                

b)    Income tax reconciliation – Income statement

 

Income tax expense is recognized based on the estimate of the weighted average effective tax rate expected for the full year. The total amount presented as income taxes in the income statement is reconciled to the statutory rate, as follows:

 

   Three-month period ended March 31, 
   2021   2020 
Income (loss) before income taxes   7,287    (488)
Income taxes at statutory rate - 34%   (2,478)   166 
Adjustments that affect the basis of taxes:          
Tax incentives   455    310 
Equity results   (10)   (37)
Addition (reversal) of tax loss carryforward   (46)   237 
Others   269    (27)
Income taxes   (1,810)   649 

 

14

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

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

 

The balance mainly relates to the settlement program 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. As at March 31, 2021, the balance of US$2,432 (US$311 classified as current liabilities and US$2,121 classified as non-current liabilities) is due in 91 remaining monthly installments, bearing the SELIC interest rate (Special System for Settlement and Custody), which is the Brazilian federal funds rate. As at March 31, 2021, the SELIC rate was 2.75% per annum.

 

d) Uncertain tax positions

 

There have been no developments on matters related to the uncertain tax positions since the December 31, 2020 financial statements.

 

 

8.Basic and diluted earnings per share

 

The basic and diluted earnings per share are presented below:

 

   Three-month period ended March 31, 
   2021   2020 
Net income attributable to Vale's stockholders:          
Net income   5,546    239 
           
Thousands of shares          
Weighted average number of shares outstanding - common shares   5,130,188    5,128,598 
           
Basic and diluted earnings per share:          
Common share (US$)   1.08    0.05 

 

The Company does not have potential outstanding shares or other instruments with dilutive effect on the earnings per share computation.

 

9.Accounts receivable

 

   March 31,
2021
   December 31,
2020
 
Accounts receivable   3,564    5,043 
Expected credit loss   (49)   (50)
    3,515    4,993 
           
Revenue related to the steel sector - %   88.98%   87.25%

 

   Three-month period ended March 31, 
   2021   2020 
Impairment of accounts receivable recorded in the income statement       -       11 

 

As at March 31, 2021, there is no customer that individually represents more than 10% of the Company’s accounts receivable or revenues. In 2020, the Company had a customer of the Ferrous Minerals Segment whose revenue individually represented 10.1% of the Company’s total revenue.

 

10.Inventories

 

   March 31,
2021
   December 31,
2020
 
Finished products   3,244    2,626 
Work in progress   278    647 
Consumable inventory   752    788 
Total   4,274    4,061 

 

   Three-month period ended March 31, 
   2021   2020 
Reversal for net realizable value       12         53 

 

Finished and work in progress products inventories by segments are presented in note 4(b) and the cost of goods sold is presented in note 5(a).

 

11.       Other financial assets and liabilities

 

   Current   Non-Current 
   March 31,
2021
   December 31,
2020
   March 31,
2021
   December 31,
2020
 
Other financial assets                    
Restricted cash   -    -    58    38 
Derivative financial instruments (note 15)   140    134    57    66 
Investments in equity securities   -    -    1,086    757 
Related parties - Loans (note 25)   149    195    910    923 
    289    329    2,111    1,784 
Other financial liabilities                    
Derivative financial instruments (note 15)   308    328    856    689 
Related parties - Loans (note 25)   728    725    940    943 
Financial guarantees provided   -    -    836    877 
Liabilities related to the concession grant (note 13)   257    209    1,786    2,103 
Advance received   789    644    -    - 
    2,082    1,906    4,418    4,612 
                     

Investment in equity securities – Mainly refers to 34.2 million common shares of The Mosaic Company (“Mosaic”), which is accounted for as a financial instrument measured at fair value through other comprehensive income. The recorded amount was calculated based on Mosaic’s share price at the end of each financial reporting period.

 

15

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

12.      Investments in subsidiaries, associates and joint ventures

 

a) Investment information

 

          

  

Equity results

in the income statement

   Dividends received 
           Investments in associates
and joint ventures
   Three-month period ended
March 31,
   Three-month period ended
March 31,
 
Associates and joint ventures  % ownership   % voting
capital
   March 31,
2021
   December 31,
2020
   2021   2020   2021   2020 
Ferrous minerals                                        
Baovale Mineração S.A.   50.00    50.00    19    20    1    1    -    - 
Companhia Coreano-Brasileira de Pelotização   50.00    50.00    49    48    5    3    -    - 
Companhia Hispano-Brasileira de Pelotização (i)   50.89    50.89    39    43    -    3    -    - 
Companhia Ítalo-Brasileira de Pelotização (i)   50.90    51.00    44    44    4    5    -    - 
Companhia Nipo-Brasileira de Pelotização (i)   51.00    51.11    113    121    3    2    -    - 
MRS Logística S.A.   48.16    46.75    371    398    17    (2)   -    - 
Samarco Mineração S.A. (note 20)   50.00    50.00    -    -    -         -    - 
VLI S.A.   29.60    29.60    424    480    (15)   (30)   -    - 
              1,059    1,154    15    (18)   -    - 
Base metals                                        
Korea Nickel Corp.   25.00    25.00    17    18    -    -    -    - 
              17    18    -    -    -    - 
Others                                        
Aliança Geração de Energia S.A. (i)   55.00    55.00    320    367    10    10    -    - 
Aliança Norte Energia Participações S.A. (i)   51.00    51.00    105    117    (1)   (1)   -    - 
California Steel Industries, Inc.   50.00    50.00    247    234    12    (7)   -    - 
Companhia Siderúrgica do Pecém (“CSP”) (ii)   50.00    50.00    -    -    (42)   (75)   -    - 
Mineração Rio do Norte S.A.   40.00    40.00    55    71    (9)   (10)   -    - 
Nacala Corridor Holding Netherlands B.V.   50.00    50.00    -    -    -    -    -    - 
Others             68    70    (13)   (9)   -    - 
              795    859    (43)   (92)   -    - 
Total             1,871    2,031    (28)   (110)   -    - 
                                         

(i) Although the Company held a majority of the voting capital, the entities are accounted under the equity method due to the stockholders' agreement where relevant decisions are shared with other parties.

(ii) CSP is a joint venture and its results are accounted for under the equity method, in which the accumulated losses are capped to the Company ́s interest in the investee’s capital based on the applicable law and requirements. That is, after the investment is reduced to zero, the Company does not recognize further losses nor liabilities associated with the investee.

 

16

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

b) Movements during the period

 

   2021   2020 
Balance at January 1,   2,031    2,798 
Capital contribution to CSP   42    75 
Translation adjustment   (154)   (557)
Equity results in income statement   (28)   (110)
Dividends declared   (36)   (42)
Others   16    10 
Balance at March 31,   1,871    2,174 

 

The amount of investments by segments are presented in note 4(b).

 

c) Acquisitions and divestitures

 

Investment Agreement with Mitsui & Co. Ltd. (“Mitsui”) - In January 2021, the Company signed a Heads of Agreement with Mitsui, both parties to structure Mitsui’s exit from Vale Moçambique and Nacala Logistics Corridor (“NLC”). Currently, Mitsui holds a non-controlling interest of 15% in Vale Moçambique and a 50% interest in NLC.

 

In April 2021 (subsequent event), the Company signed an Investment Agreement with Mitsui for the acquisition by Vale of the totality of Mitsui´s interest of Vale Moçambique and NLC. The Investment Agreement determines that Vale will acquire Mitsui's stake in the mine and logistics assets for an immaterial consideration and will undertake of the Nacala Corridor Project Finance in full, which is approximately US$2,489 outstanding balance at March 31, 2021. 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 during 2021.

 

In addition, the Company informed the market its divestiture intention in the coal segment following the acquisition of Mitsui’s stake. Therefore, after completion of this acquisition transaction, the Company will assess whether the coal segment would meet the criteria to be classified as a discontinued operation in its future financial statements.

 

Boston Electrometallurgical Company (“Boston Metal”) – In February 2021, the Company made an investment of US$6 in Boston Metal to acquire a non-controlling interest of 3.24%, aiming promote the development of a technology focused on the reduction of carbon dioxide on the steel production. Boston Metal has a diverse shareholding structure which includes venture capital funds, mining companies and private investors. Since the Company does not have significant influence over Boston Metal, this investment has been classified as a financial instrument and recorded as “Investments in equity securities”.

 

Vale Nouvelle-Calédonie S.A.S. (“VNC”) – In December 2020, the Company signed a binding put option agreement to sell its interest in VNC for an immaterial consideration to a consortium constituted in a new company called “Prony Resources”, led by the current management and employees of VNC and supported by the Caledonian and French authorities with Trafigura Pte. Ltd. as a non-controlling shareholder. Under the terms of agreement, the Company has assumed an obligation to pay to the buyers an amount of US$500 upon closing of the transaction and this amount has been provided for as at December 31, 2020.

 

In March 2021, the Company signed the share purchase agreement with Prony Resources, concluding the transaction to sell its interest in VNC. With the final agreement, Vale's obligation to pay to buyers increased by US$55, which combined with other working capital adjustments, resulted in an additional loss of US$98, recorded as “Impairment and disposals of non-current assets”. On March 31, 2021, the Company disbursed US$555 to VNC on the closing of the transaction, thus the liabilities recorded as at December 31, 2021 were settled and there is no outstanding balance in these interim financial statements.

 

The agreement also established that Vale may purchase a certain amount of VNC’s annual nickel production, with a cap price over a long-term period. Such cap included in contract is an embedded derivative, however, it is deemed closely related to the host contract (nickel supply agreement) because the cap was out of the money on inception of the contract. Therefore, this derivative will not be separated from the host contract, which will be accounted for as an executory contract.

 

Upon closing of the transaction, the Company also recognized a gain of US$1,132 arising from the accumulated exchange differences reclassified from the stockholders’ equity to the income statement under “Other financial items, net”.

 

d) Financial guarantees provided

 

As at March 31, 2021 and December 31, 2020, the notional value of corporate financial guarantees provided by the Company (within the limit of its direct or indirect interest) for certain associates and joint ventures were US$1,502 and US$1,557, respectively. The fair value of these financial guarantees is shown in note 16.

 

17

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

13.       Intangibles

 

Movements during the period

 

   Goodwill   Concessions   Contract
right
   Software   Research and
development project
and patents
   Total 
Balance at December 31, 2020   3,298    5,391    -    76    531    9,296 
Additions   -    33    -    14    -    47 
Disposals   -    (2)   -    -    -    (2)
Amortization   -    (55)   -    (8)   -    (63)
Translation adjustment   (95)   (472)   -    (3)   (47)   (617)
Balance at March 31, 2021   3,203    4,895    -    79    484    8,661 
Cost   3,203    5,850    -    715    484    10,252 
Accumulated amortization   -    (955)   -    (636)   -    (1,591)
Balance at March 31, 2021   3,203    4,895    -    79    484    8,661 
                               
    Goodwill    Concessions    Contract
right
    Software    Research and
development project
and patents
    Total 
Balance at December 31, 2019   3,629    3,970    140    76    684    8,499 
Additions   -    19    -    7    -    26 
Disposals   -    (1)   -    -    -    (1)
Amortization   -    (48)   -    (7)   -    (55)
Translation adjustment   (504)   (888)   (16)   (12)   (153)   (1,573)
Balance at March 31, 2020   3,125    3,052    124    64    531    6,896 
Cost   3,125    3,958    218    734    531    8,566 
Accumulated amortization   -    (906)   (94)   (670)   -    (1,670)
Balance at March 31, 2020   3,125    3,052    124    64    531    6,896 
                               

 

14.       Property, plant and equipment

 

a) Movements during the period

 

   Building
and land
   Facilities   Equipment   Mineral
properties
   Railway
equipment
   Right of use
assets
   Others   Constructions
in progress
   Total 
Balance at December 31, 2020   8,591    7,591    4,933    8,054    2,523    1,563    2,495    5,398    41,148 
Additions (i)   -    -    -    -    -    39         937    976 
Disposals   -    -    -    -    -    -    -    (18)   (18)
Assets retirement obligation (ii)   -    -    -    (372)   -    -    -    -    (372)
Depreciation, depletion and amortization   (103)   (113)   (160)   (138)   (39)   (39)   (63)   -    (655)
Impairment (iii)   -    -    -    -    -    -    -    (44)   (44)
Translation adjustment   (507)   (530)   (189)   (150)   (215)   (32)   (119)   (231)   (1,973)
Transfers   34    75    142    19    19    -    65    (354)   - 
Balance at March 31, 2021   8,015    7,023    4,726    7,413    2,288    1,531    2,378    5,688    39,062 
Cost   14,507    11,028    10,390    16,577    3,543    1,964    5,695    5,688    69,392 
Accumulated depreciation   (6,492)   (4,005)   (5,664)   (9,164)   (1,255)   (433)   (3,317)   -    (30,330)
Balance at March 31, 2021   8,015    7,023    4,726    7,413    2,288    1,531    2,378    5,688    39,062 
                                              
    Building
and land
    Facilities    Equipment    Mineral
properties
    Railway
equipment
    Right of use
assets
    Others    Constructions
in progress
    Total 
Balance at December 31, 2019   10,702    9,604    5,686    8,261    3,241    1,692    3,012    4,378    46,576 
Additions (i)   -    -    -    -    -    27    -    883    910 
Disposals   -    (3)   (5)   (4)   -    -    (1)   (38)   (51)
Assets retirement obligation   -    -    -    45    -    -    -    -    45 
Depreciation, depletion and amortization   (122)   (140)   (208)   (143)   (66)   (42)   (76)   -    (797)
Translation adjustment   (1,875)   (1,891)   (692)   (1,022)   (713)   (99)   (484)   (735)   (7,511)
Transfers   22    105    155    284    53    -    75    (694)   - 
Balance at March 31, 2020   8,727    7,675    4,936    7,421    2,515    1,578    2,526    3,794    39,172 
Cost   16,247    14,632    10,457    16,274    3,710    1,803    5,929    3,794    72,846 
Accumulated depreciation   (7,520)   (6,957)   (5,521)   (8,853)   (1,195)   (225)   (3,403)   -    (33,674)
Balance at March 31, 2020   8,727    7,675    4,936    7,421    2,515    1,578    2,526    3,794    39,172 
                                              

(i) Includes capitalized borrowing costs.

(ii) Refers to changes in discount rates.

(iii) Due to the Company's assessment of the recoverability of its coal assets, the carrying amount of this cash-generating unit was reduced to zero. Therefore, assets acquired during the year are also provided for impairment. In the current year, the Company recognized an impairment loss related to coal assets acquired in the amount of US$44.

 

18

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

b) Right-of-use assets (Leases)

 

   December 31,
2020
   Additions and
contract
modifications
   Depreciation   Translation
adjustment
   March 31,
2021
 
Ports   718    -    (11)   (10)   697 
Vessels   534    -    (10)   -    524 
Pellets plants   131    36    (9)   (13)   145 
Properties   112    3    (6)   (9)   100 
Energy plants   56    -    (2)   -    54 
Mining equipment and locomotives   12    -    (1)   -    11 
Total   1,563    39    (39)   (32)   1,531 

 

Lease liabilities are presented in note 18.

 

 

15.      Financial and capital risk management

 

a) Effects of derivatives on the balance sheet

 

   Assets 
   March 31, 2021   December 31, 2020 
   Current   Non-current   Current   Non-current 
Foreign exchange and interest rate risk                    
IPCA swap   6    36    7    38 
Eurobonds swap   -    -    -    3 
Pre-dollar swap   -    1    -    9 
Libor swap   1    5    -    - 
    7    42    7    50 
Commodities price risk                    
Base metals products   24    -    30    - 
Gasoil, Brent and freight   109    -    97    - 
    133    -    127    - 
                     
Others   -    15    -    16 
    -    15    -    16 
Total   140    57    134    66 

 

   Liabilities 
   March 31, 2021   December 31, 2020 
   Current   Non-current   Current   Non-current 
Foreign exchange and interest rate risk                    
CDI & TJLP vs. US$ fixed and floating rate swap   147    619    111    525 
IPCA swap   5    124    72    100 
Eurobonds swap   -    -    4    - 
Pre-dollar swap   90    85    62    58 
Libor swap   2    -    1    6 
Forward transactions   26    28    1    - 
    270    856    251    689 
Commodities price risk                    
Base metals products   23    -    46    - 
Gasoil, Brent and freight   1    -    13    - 
    24    -    59    - 
                     
Others   14    -    18    - 
Total   308    856    328    689 

 

19

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

 

a.i) Net exposure

 

   March 31,
2021
   December 31,
2020
 
Foreign exchange and interest rate risk          
CDI & TJLP vs. US$ fixed and floating rate swap   (766)   (636)
IPCA swap   (87)   (127)
Eurobonds swap   -    (1)
Pre-dollar swap   (174)   (111)
Libor swap (i)   4    (7)
Forward transactions   (54)   (1)
    (1,077)   (883)
Commodities price risk          
Base metals products   1    (16)
Gasoil, Brent and freight   108    84 
    109    68 
           
Others   1    (2)
    1    (2)
Total   (967)   (817)

 

(i) In July 2017, the U.K. Financial Conduct Authority (FCA), which regulates the London Interbank Offered Rate (‘‘LIBOR’’), announced the effective discontinuation of LIBOR. After June 30, 2023, the FCA will no longer require panel banks to submit quotes for any U.S. dollar LIBOR settings. The Company is currently evaluating the potential impact of the eventual replacement of the LIBOR interest rate.

 

a.ii)     Effects of derivatives on the income statement and cash flows

 

  

Gain (loss) recognized

in the income statement

  

Financial settlement

inflows (outflows)

 
   Three-month period ended March 31, 
   2021   2020   2021   2020 
Foreign exchange and interest rate risk                    
CDI & TJLP vs. US$ fixed and floating rate swap   (274)   (680)   (90)   (18)
IPCA swap   15    (232)   (18)   - 
Eurobonds swap   (28)   (34)   (29)   (6)
Pre-dollar swap   (205)   (145)   (75)   (21)
Libor swap   10         (1)   - 
    (482)   (1,091)   (213)   (45)
Commodities price risk                    
Base metals products   (2)   (1)   (6)