Vale S.A. Q1 FY2025 earnings call

Strategic Direction

• Emphasized Vale 2030 vision, building a leading mining platform with a flexible portfolio supported by innovation.

Q1 Performance

• Iron ore sales up 4% YOY to 66 million tons; production 4% lower due to rainfall. S11D achieved highest Q1 production. Prioritized medium-grade products like BRBF and PF C1. Vargem Grande and Capanema projects progressing, combined to produce 40 million tons in 2025. Plus 20 project at S11D 73% complete. Autonomous equipment used in mines and ports, increasing recovery rates.

Financial Performance

• Pro forma EBITDA $3.2 billion, 8% lower YOY. Iron ore C1 cash costs $21 per ton, all-in-cost $54.4 per ton, lowest Q1 since 2022. Free cash flow $500 million in Q1. CapEx slightly lower YOY, trending to $5.9 billion. Dividends of $2 billion paid in March. Expanded net debt $18.2 billion, target range $10-20 billion.

Sustainability

• 2024 integrated report published, $250 million invested in decarbonization, 30 million tons of iron ore recovered from tailings.

Iron ore sales increased 4% year-on-year to 66 million tons, with production 4% lower due to higher rainfall. Iron ore C1 cash costs (excluding third-party purchases) were $21 per ton, 11% lower YOY. Vale Base Metals saw EBITDA double year-on-year, with copper all-in costs decreasing 63% to $1,200 per ton and nickel all-in costs decreasing 4% YOY due to solid operating performance and higher volumes.

EBITDA

• Pro forma EBITDA $3.2 billion in Q1, 8% lower YOY.

Costs

• Confident in achieving C1 cost guidance of $20.5-$22 per ton for 2025. Copper all-in costs expected to meet guidance. Nickel costs to decrease in upcoming quarters.

CapEx

• Total CapEx slightly lower YOY, trending to $5.9 billion for 2025.

Net Debt

• Expanded net debt target range $10-20 billion, aim to bring back to mid-level.

Dividends

• $2 billion in dividends paid in March, with focus on shareholder returns.

• Market volatility and trade war impacts.
• Rainfall affecting production in the northern system.
• Macroeconomic uncertainties impacting commodity prices.

Q: About iron ore market feedback from China and capital allocation strategy A: Gustavo mentioned monitoring macro environment closely, focusing on cost efficiency. Rogerio discussed China's GDP, steel production, and market indicators showing improvement.

Q: Update on value over volume strategy and CapEx efficiency A: Marcelo talked about portfolio redesign, focusing on mid-grade products, optimizing concentration value chain, and CapEx efficiency initiatives. Gustavo stated CapEx guidance remains $5.9 billion for 2025.

Q: On dividends and cash cost guidance A: Marcelo said not right time to discuss extraordinary dividends yet, but cash inflow from Aliança deal considered. Confident in C1 cost guidance for 2025.

Q: Strategy to buy ore from third parties A: Rogerio stated will buy only if value accretive, volumes around 25 million tons/year if prices at $100, will cut non-profitable ores if prices drop.

Q: Nickel business and Simandou impact A: Shaun discussed nickel cost reduction initiatives, overhead reductions, and Voisey's Bay ramp-up. Rogerio talked about Simandou's impact on iron ore market and Vale's flexible portfolio to maximize value.

Q: Production performance in Q2 and Aliança debt impact A: Rogerio said Q2 production improved, with 1-1.1 million tons more produced in first 20-21 days of April. Gustavo mentioned Aliança deal has $100 million deconsolidated debt impact and $1 billion cash inflow.

Q: Capital allocation and operational changes in price upside scenario A: Marcelo said will consider buybacks if net debt reaches target and share price attractive. Gustavo and Rogerio discussed Vale's flexible portfolio and ability to adjust operations quickly in price upside scenarios.

Q: Gold sensitivity on copper costs and Mariana Agreement A: Shaun said $100/ounce move in gold price impacts copper volume cost by $135/ton. Gustavo said majority of municipalities joined Mariana Agreement, non-joiners won't enjoy payments.