Table of Contents

 

 

 

United States
Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934

 

For the month of

 

June, 2016

 

Vale S.A.

 

Avenida das Américas, No. 700
22640-100 Rio de Janeiro, RJ, Brazil

(Address of principal executive office)

 

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

 

(Check One) Form 20-F x Form 40-F o

 

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

 

(Check One) Yes o No x

 

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

 

(Check One) Yes o No x

 

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

 

(Check One) Yes o No x

 

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

 

 

 



Table of Contents

 

 

Interim Financial Statements

 

June 30, 2016

 

 

BRGAAP in R$ (English)

 

1



Table of Contents

 

Vale S.A. Interim Financial Statements

Contents

 

 

Page

Independent auditor’s report on the financial statements

3

Condensed Consolidated and Parent Company Income Statement

5

Condensed Consolidated and Parent Company Statement of Comprehensive Income

6

Condensed Consolidated and Parent Company Cash Flow Statement

7

Condensed Consolidated and Parent Company Balance Sheet

9

Condensed Statement of Changes in Equity

10

Condensed Consolidated and Parent Company Value Added Statement

11

Selected Notes to the Interim Financial Statements

12

1.

Corporate information

12

2.

Basis for preparation of the interim financial statements

12

3.

Information by business segment

13

4.

Relevant Event

18

5.

Assets held for sale

20

6.

Acquisitions and divestitures

20

7.

Cash and cash equivalents

21

8.

Accounts receivable

21

9.

Inventories

21

10.

Investments in associates and joint ventures

22

11.

Intangibles

23

12.

Property, plant and equipment

24

13.

Loans and borrowings

25

14.

Litigation

27

15.

Income taxes

29

16.

Employee postretirement obligations

30

17.

Financial instruments classification

30

18.

Fair value estimate

31

19.

Derivative financial instruments

31

20.

Stockholders’ equity

41

21.

Costs and expenses by nature

42

22.

Financial results

43

23.

Commitments

43

24.

Related parties

44

25.

Parent Company information (individual interim information)

46

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

50

 

2



Table of Contents

 

 

 

 

KPMG Auditores Independentes

Av. Almirante Barroso, 52 - 4º

20031-000 - Rio de Janeiro, RJ - Brasil

Caixa Postal 2888

20001-970 - Rio de Janeiro, RJ - Brasil

Central Tel
Fax
Internet

55 (21) 3515-9400
55 (21) 3515-9000

www.kpmg.com.br

 

Report on the review of quarterly information - ITR

 

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

 

To

The Board of Directors and Stockholders of

Vale S.A.

Rio de Janeiro - RJ

 

Introduction

 

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

 

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

 

Scope of the review

 

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

 

 

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

 

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

 

3



Table of Contents

 

 

Conclusion on the interim accounting information

 

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

 

Other matters

 

Statements of added value

 

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

 

Rio de Janeiro, July 26, 2016

 

KPMG Auditores Independentes

CRC SP-014428/O-6 F-RJ

 

(Original report in Portuguese signed by)

Manuel Fernandes Rodrigues de Sousa

Accountant CRC RJ-052428/O-2

 

4



Table of Contents

 

 

Condensed Income Statement

In millions of Brazilian Reais, except as otherwise stated

 

 

 

 

 

Consolidated

 

 

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

Notes

 

2016

 

2015

 

2016

 

2015

 

Net operating revenue

 

3(c)

 

23,203

 

21,441

 

45,270

 

39,468

 

Cost of goods sold and services rendered

 

21(a)

 

(16,791

)

(15,968

)

(33,258

)

(30,956

)

Gross profit

 

 

 

6,412

 

5,473

 

12,012

 

8,512

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (expenses) income

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

21(b)

 

(493

)

(488

)

(958

)

(1,043

)

Research and evaluation expenses

 

 

 

(276

)

(365

)

(508

)

(710

)

Pre operating and operational stoppage

 

 

 

(402

)

(797

)

(802

)

(1,555

)

Other operating income (expenses), net

 

21(c)

 

(566

)

(622

)

(700

)

(442

)

 

 

 

 

(1,737

)

(2,272

)

(2,968

)

(3,750

)

Results on measurement or sale of non-current assets

 

5 and 6

 

(228

)

(172

)

(228

)

374

 

Operating income

 

 

 

4,447

 

3,029

 

8,816

 

5,136

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

22

 

13,417

 

4,486

 

25,170

 

11,437

 

Financial expenses

 

22

 

(6,344

)

(2,862

)

(13,324

)

(23,491

)

Equity results in associates and joint ventures

 

10

 

658

 

668

 

1,247

 

(157

)

Others results in associates and joint ventures

 

4 and 6

 

(3,999

)

241

 

(3,999

)

296

 

Net income (loss) before income taxes

 

 

 

8,179

 

5,562

 

17,910

 

(6,779

)

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

15

 

 

 

 

 

 

 

 

 

Current tax

 

 

 

(1,415

)

(208

)

(2,707

)

(409

)

Deferred tax

 

 

 

(3,125

)

(353

)

(5,236

)

2,497

 

 

 

 

 

(4,540

)

(561

)

(7,943

)

2,088

 

Net income (loss)

 

 

 

3,639

 

5,001

 

9,967

 

(4,691

)

Income (loss) attributable to noncontrolling interests

 

 

 

54

 

(143

)

71

 

(296

)

Net income (loss) attributable to Vale’s stockholders

 

 

 

3,585

 

5,144

 

9,896

 

(4,395

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Vale’s stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

20(b)

 

 

 

 

 

 

 

 

 

Preferred share (R$)

 

 

 

0.70

 

1.00

 

1.92

 

(0.85

)

Common share (R$)

 

 

 

0.70

 

1.00

 

1.92

 

(0.85

)

 

 

 

Parent company

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net operating revenue

 

12,210

 

9,367

 

20,374

 

19,602

 

Cost of goods sold and services rendered

 

(7,085

)

(6,767

)

(14,047

)

(13,191

)

Gross profit

 

5,125

 

2,600

 

6,327

 

6,411

 

 

 

 

 

 

 

 

 

 

 

Operating (expenses) income

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

(249

)

(286

)

(489

)

(579

)

Research and evaluation expenses

 

(136

)

(185

)

(255

)

(352

)

Pre operating and operational stoppage

 

(175

)

(111

)

(339

)

(224

)

Equity results from subsidiaries

 

506

 

2,174

 

3,405

 

(1,600

)

Other operating income (expenses), net

 

(91

)

(389

)

(518

)

(349

)

 

 

(145

)

1,203

 

1,804

 

(3,104

)

Results on measurement or sale of non-current assets

 

 

 

 

546

 

Operating income

 

4,980

 

3,803

 

8,131

 

3,853

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

12,348

 

3,539

 

23,710

 

10,462

 

Financial expenses

 

(5,938

)

(2,310

)

(12,658

)

(21,340

)

Equity results in associates and joint ventures

 

658

 

668

 

1,247

 

(157

)

Others results in associates and joint ventures

 

(3,999

)

 

(3,999

)

55

 

Net income (loss) before income taxes

 

8,049

 

5,700

 

16,431

 

(7,127

)

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

Current tax

 

(1,281

)

 

(2,298

)

 

Deferred tax

 

(3,183

)

(556

)

(4,237

)

2,732

 

 

 

(4,464

)

(556

)

(6,535

)

2,732

 

Net income (loss)

 

3,585

 

5,144

 

9,896

 

(4,395

)

 

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

See independent auditor’s report on the financial statements.

 

5



Table of Contents

 

 

Condensed Statement of Comprehensive Income

In millions of Brazilian Reais

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss)

 

3,639

 

5,001

 

9,967

 

(4,691

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

(641

)

295

 

(972

)

(23

)

Effect of taxes

 

193

 

(83

)

297

 

74

 

 

 

(448

)

212

 

(675

)

51

 

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

 

(448

)

212

 

(675

)

51

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

(7,793

)

(2,825

)

(14,222

)

12,113

 

Effect of taxes

 

27

 

 

(522

)

 

Transfer of realized results to net income, net of taxes

 

(266

)

 

(266

)

 

 

 

(8,032

)

(2,825

)

(15,010

)

12,113

 

Cash flow hedge

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

2

 

834

 

23

 

1,558

 

Effect of taxes

 

 

(10

)

(3

)

(10

)

Equity results in associates and joint ventures

 

16

 

(1

)

16

 

(8

)

Transfer of realized results to net income, net of taxes

 

 

(271

)

(10

)

(688

)

 

 

18

 

552

 

26

 

852

 

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

 

(8,014

)

(2,273

)

(14,984

)

12,965

 

Total comprehensive income (loss)

 

(4,823

)

2,940

 

(5,692

)

8,325

 

Comprehensive income (loss) attributable to noncontrolling interests

 

(434

)

(258

)

(901

)

218

 

Comprehensive income (loss) attributable to Vale’s stockholders

 

(4,389

)

3,198

 

(4,791

)

8,107

 

 

 

 

Parent company

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss)

 

3,585

 

5,144

 

9,896

 

(4,395

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

(19

)

(40

)

(40

)

(50

)

Effect of taxes

 

6

 

14

 

13

 

17

 

Equity results in associates and joint ventures

 

(435

)

238

 

(648

)

84

 

 

 

(448

)

212

 

(675

)

51

 

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

 

(448

)

212

 

(675

)

51

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments

 

 

 

 

 

 

 

 

 

Gross balance for the period

 

(7,278

)

(2,710

)

(13,772

)

11,599

 

Transfer of realized results to net income, net of taxes

 

(266

)

 

(266

)

 

 

 

(7,544

)

(2,710

)

(14,038

)

11,599

 

Cash flow hedge

 

 

 

 

 

 

 

 

 

Equity results in associates and joint ventures

 

18

 

552

 

26

 

852

 

 

 

18

 

552

 

26

 

852

 

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

 

(7,526

)

(2,158

)

(14,012

)

12,451

 

Total comprehensive income (loss)

 

(4,389

)

3,198

 

(4,791

)

8,107

 

 

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

See independent auditor’s report on the financial statements.

 

6



Table of Contents

 

 

Condensed Cash Flow Statement

In millions of Brazilian Reais

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

8,179

 

5,562

 

17,910

 

(6,779

)

Adjustments for:

 

 

 

 

 

 

 

 

 

Equity results from associates and joint ventures

 

(658

)

(668

)

(1,247

)

157

 

Results on measurement or sale of non-current assets

 

228

 

172

 

228

 

(374

)

Others results in associates and joint ventures

 

3,999

 

(241

)

3,999

 

(296

)

Results on disposal of property, plant and equipment and intangibles

 

105

 

(48

)

144

 

(731

)

Depreciation, amortization and depletion

 

3,253

 

3,039

 

6,567

 

6,039

 

Financial results, net

 

(7,073

)

(1,624

)

(11,846

)

12,054

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

372

 

(1,553

)

(3,524

)

688

 

Inventories

 

269

 

(272

)

(131

)

481

 

Suppliers and contractors

 

1,249

 

772

 

(181

)

(378

)

Payroll and related charges

 

153

 

(46

)

142

 

(1,627

)

Other taxes assets and liabilities, net

 

(14

)

(677

)

(197

)

(602

)

Deferred revenue - Gold stream

 

 

 

 

1,670

 

Other assets and liabilities, net

 

557

 

360

 

1,496

 

421

 

Cash provided from operations

 

10,619

 

4,776

 

13,360

 

10,723

 

Interest on loans and borrowings paid

 

(1,276

)

(994

)

(3,137

)

(2,315

)

Derivatives received (paid), net (note 19)

 

(1,236

)

(303

)

(3,212

)

(2,088

)

Interest on participative stockholders’ debentures paid

 

(117

)

 

(117

)

(124

)

Income taxes

 

(244

)

(144

)

(875

)

(903

)

Income taxes - Settlement program

 

(351

)

(317

)

(694

)

(625

)

Net cash provided by operating activities

 

7,395

 

3,018

 

5,325

 

4,668

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

Financial investments redeemed (invested)

 

(384

)

335

 

(6

)

737

 

Loans and advances granted

 

(2

)

(27

)

(15

)

(33

)

Guarantees and deposits granted

 

(46

)

(67

)

(184

)

(137

)

Additions to investments

 

(476

)

(88

)

(838

)

(118

)

Acquisition of subsidiary, net of cash acquired

 

 

 

17

 

(237

)

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

 

(4,324

)

(6,514

)

(9,678

)

(12,773

)

Dividends and interest on capital received from associates and joint ventures

 

413

 

577

 

415

 

651

 

Proceeds from disposal of assets and investments

 

40

 

1,410

 

87

 

1,749

 

Proceeds from gold stream transaction

 

 

 

 

1,156

 

Net cash used in investing activities

 

(4,779

)

(4,374

)

(10,202

)

(9,005

)

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

Loans and borrowings (i)

 

 

 

 

 

 

 

 

 

Additions

 

5,005

 

4,748

 

17,955

 

8,424

 

Repayments

 

(6,215

)

(1,824

)

(10,950

)

(2,643

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

Dividends and interest on capital paid to Vale’s stockholders

 

 

(3,101

)

 

(3,101

)

Dividends and interest on capital paid to noncontrolling interest

 

(252

)

(28

)

(269

)

(35

)

Transactions with noncontrolling stockholders

 

 

(125

)

(69

)

(125

)

Net cash provided by (used in) financing activities

 

(1,462

)

(330

)

6,667

 

2,520

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

1,154

 

(1,686

)

1,790

 

(1,817

)

Cash and cash equivalents in the beginning of the period

 

13,461

 

11,818

 

14,022

 

10,555

 

Effect of exchange rate changes on cash and cash equivalents

 

(1,238

)

(333

)

(2,435

)

1,061

 

Cash and cash equivalents at end of the period

 

13,377

 

9,799

 

13,377

 

9,799

 

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

 

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

 

769

 

544

 

1,439

 

1,100

 

 


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

 

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

See independent auditor’s report on the financial statements.

 

7



Table of Contents

 

 

Condensed Cash Flow Statement

In millions of Brazilian Reais

 

 

 

Parent company

 

 

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

Cash flow from operating activities:

 

 

 

 

 

Net income (loss) before income taxes

 

16,431

 

(7,127

)

Adjustments for:

 

 

 

 

 

Equity results from entities

 

(4,652

)

1,757

 

Results on measurement or sale of non-current assets

 

 

(546

)

Others results in associates and joint ventures

 

3,999

 

(55

)

Results on disposal of property, plant and equipment and intangibles

 

96

 

135

 

Depreciation, amortization and depletion

 

2,398

 

2,122

 

Financial results, net

 

(11,052

)

10,878

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

2,896

 

5,365

 

Inventories

 

19

 

43

 

Suppliers and contractors

 

925

 

606

 

Payroll and related charges

 

106

 

(1,131

)

Other taxes assets and liabilities, net

 

8

 

(414

)

Other assets and liabilities, net

 

338

 

159

 

Cash provided from operations

 

11,512

 

11,792

 

Dividends and interest on capital received from subsidiaries

 

59

 

670

 

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

 

(1,176

)

(1,253

)

Interest on loans and borrowings paid

 

(1,671

)

(1,034

)

Derivatives received (paid), net (note 19)

 

(672

)

(601

)

Interest on participative stockholders’ debentures paid

 

(117

)

(124

)

Income taxes

 

(81

)

 

Income taxes - Settlement program

 

(681

)

(612

)

Net cash provided by operating activities

 

7,173

 

8,838

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Financial investments redeemed

 

6

 

374

 

Loans and advances received

 

85

 

127

 

Guarantees and deposits granted

 

(188

)

(122

)

Additions to investments

 

(1,282

)

(994

)

Additions to property, plant and equipment and intangible

 

(6,276

)

(8,045

)

Dividends and interest on capital received from associates and joint ventures

 

403

 

649

 

Proceeds from disposal of assets and investments

 

13

 

316

 

Net cash used in investing activities

 

(7,239

)

(7,695

)

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

Loans and borrowings (i)

 

 

 

 

 

Additions

 

6,315

 

7,496

 

Repayments

 

(6,750

)

(2,331

)

Transactions with related parties

 

447

 

(2,318

)

Transactions with stockholders:

 

 

 

 

 

Dividends and interest on capital paid to noncontrolling interest

 

 

(3,101

)

Net cash provided by (used in) financing activities

 

12

 

(254

)

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(54

)

889

 

Cash and cash equivalents in the beginning of the period

 

518

 

685

 

Cash and cash equivalents at end of the period

 

464

 

1,574

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

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

 

827

 

551

 

 


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

 

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

See independent auditor’s report on the financial statements.

 

8



Table of Contents

 

 

Condensed Balance Sheet

In millions of Brazilian Reais

 

 

 

Consolidated

 

Parent company

 

 

 

Notes

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

December 31, 2015

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

13,377

 

14,022

 

464

 

518

 

Financial investments

 

 

 

443

 

109

 

12

 

18

 

Derivative financial instruments

 

19 

 

437

 

474

 

293

 

196

 

Accounts receivable

 

 

7,871

 

5,763

 

26,256

 

36,026

 

Inventories

 

 

12,409

 

13,775

 

3,991

 

3,830

 

Recoverable income taxes

 

 

 

958

 

3,513

 

609

 

3,176

 

Recoverable taxes

 

 

 

5,718

 

5,482

 

3,680

 

3,352

 

Related parties

 

24 

 

218

 

273

 

1,508

 

834

 

Others

 

 

 

2,271

 

1,215

 

524

 

581

 

 

 

 

 

43,702

 

44,626

 

37,337

 

48,531

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale

 

 

14,952

 

15,792

 

 

 

 

 

 

 

58,654

 

60,418

 

37,337

 

48,531

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

19 

 

1,596

 

363

 

1,477

 

293

 

Loans

 

 

 

576

 

732

 

107

 

106

 

Recoverable income taxes

 

 

 

1,648

 

1,840

 

 

 

Recoverable taxes

 

 

 

1,987

 

1,956

 

1,519

 

1,457

 

Deferred income taxes

 

15(a)

 

23,396

 

30,867

 

13,068

 

17,292

 

Judicial deposits

 

14(c)

 

3,499

 

3,445

 

2,743

 

2,707

 

Related parties

 

24 

 

10

 

5

 

841

 

1,468

 

Others

 

 

 

2,154

 

2,392

 

574

 

765

 

 

 

 

 

34,866

 

41,600

 

20,329

 

24,088

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

10 

 

12,721

 

11,481

 

117,351

 

127,517

 

Intangibles

 

11 

 

22,190

 

20,789

 

11,016

 

8,557

 

Property, plant and equipment

 

12 

 

195,665

 

211,259

 

98,650

 

96,887

 

 

 

 

 

265,442

 

285,129

 

247,346

 

257,049

 

Total assets

 

 

 

324,096

 

345,547

 

284,683

 

305,580

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

 

 

12,489

 

13,140

 

7,478

 

7,084

 

Payroll and related charges

 

 

 

1,583

 

1,464

 

970

 

806

 

Derivative financial instruments

 

19

 

3,242

 

8,107

 

2,121

 

3,559

 

Loans and borrowings

 

13

 

10,120

 

9,788

 

4,930

 

4,736

 

Related parties

 

24

 

1,927

 

1,856

 

9,955

 

6,774

 

Income taxes - Settlement program

 

15(c)

 

1,419

 

1,348

 

1,390

 

1,320

 

Taxes payable

 

 

 

842

 

977

 

372

 

460

 

Provision for income taxes

 

 

 

385

 

943

 

 

 

Employee postretirement obligations

 

16

 

248

 

266

 

79

 

72

 

Asset retirement obligations

 

 

 

261

 

346

 

75

 

83

 

Liabilities related to associates and joint ventures

 

 

 

928

 

 

928

 

 

Others

 

 

 

3,363

 

2,531

 

540

 

825

 

 

 

 

 

36,807

 

40,766

 

28,838

 

25,719

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities associated with assets held for sale

 

5

 

258

 

416

 

 

 

 

 

 

 

37,065

 

41,182

 

28,838

 

25,719

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

19

 

3,857

 

5,581

 

3,334

 

4,745

 

Loans and borrowings

 

13

 

91,996

 

102,878

 

47,702

 

55,986

 

Related parties

 

24

 

462

 

830

 

50,328

 

63,837

 

Employee postretirement obligations

 

16

 

6,900

 

6,831

 

476

 

483

 

Provisions for litigation

 

14(a)

 

2,967

 

3,210

 

1,933

 

2,190

 

Income taxes - Settlement program

 

15(c)

 

16,089

 

15,953

 

15,759

 

15,626

 

Deferred income taxes

 

15(a)

 

5,581

 

6,520

 

 

 

Asset retirement obligations

 

 

 

8,855

 

9,313

 

1,578

 

1,291

 

Participative stockholders’ debentures

 

 

 

1,982

 

1,336

 

1,982

 

1,336

 

Deferred revenue - Gold stream

 

 

 

5,348

 

6,830

 

 

 

Liabilities related to associates and joint ventures

 

 

 

2,805

 

 

2,805

 

 

Others

 

 

 

7,038

 

5,664

 

3,575

 

3,207

 

 

 

 

 

153,880

 

164,946

 

129,472

 

148,701

 

Total liabilities

 

 

 

190,945

 

206,128

 

158,310

 

174,420

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Equity attributable to Vale’s stockholders

 

20

 

126,373

 

131,160

 

126,373

 

131,160

 

Equity attributable to noncontrolling interests

 

 

 

6,778

 

8,259

 

 

 

Total stockholders’ equity

 

 

 

133,151

 

139,419

 

126,373

 

131,160

 

Total liabilities and stockholders’ equity

 

 

 

324,096

 

345,547

 

284,683

 

305,580

 

 

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

See independent auditor’s report on the financial statements.

 

9



Table of Contents

 

 

Condensed Statement of Changes in Equity

In millions of Brazilian Reais

 

 

 

Share
capital

 

Results on
conversion
of shares

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized fair
value gain
(losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity
attributable
to Vale’s
stockholders

 

Equity attributable
to noncontrolling
interests

 

Total
stockholder’s
equity

 

Balance at December 31, 2015

 

77,300

 

50

 

(1,881

)

3,846

 

(2,746

)

(3,873

)

58,464

 

 

131,160

 

8,259

 

139,419

 

Net income

 

 

 

 

 

 

 

 

9,896

 

9,896

 

71

 

9,967

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

(675

)

 

 

(675

)

 

(675

)

Cash flow hedge

 

 

 

 

 

 

26

 

 

 

26

 

 

26

 

Translation adjustments

 

 

 

 

 

 

453

 

(14,491

)

 

(14,038

)

(972

)

(15,010

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

(641

)

(641

)

Acquisitions and disposal of participation of noncontrolling interest

 

 

 

4

 

 

 

 

 

 

4

 

 

4

 

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

61

 

61

 

Balance at June 30, 2016

 

77,300

 

50

 

(1,877

)

3,846

 

(2,746

)

(4,069

)

43,973

 

9,896

 

126,373

 

6,778

 

133,151

 

 

 

 

Share
capital

 

Results on
conversion
of shares

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized fair
value gain
(losses)

 

Cumulative
translation
adjustments

 

Retained
earnings
(loss)

 

Equity
attributable
to Vale’s
stockholders

 

Equity attributable
to noncontrolling
interests

 

Total
stockholder’s
equity

 

Balance at December 31, 2014

 

77,300

 

50

 

(970

)

53,085

 

(2,746

)

(4,553

)

24,248

 

 

146,414

 

3,187

 

149,601

 

Loss

 

 

 

 

 

 

 

 

(4,395

)

(4,395

)

(296

)

(4,691

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

51

 

 

 

51

 

 

51

 

Cash flow hedge

 

 

 

 

 

 

852

 

 

 

852

 

 

852

 

Translation adjustments

 

 

 

 

 

 

(434

)

12,033

 

 

11,599

 

514

 

12,113

 

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

(15

)

(15

)

Acquisitions and disposal of participation of noncontrolling interest

 

 

 

(13

)

 

 

 

 

 

(13

)

(114

)

(127

)

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

46

 

46

 

Dividends and interest on capital of Vale’s stockholders

 

 

 

 

(3,101

)

 

 

 

 

(3,101

)

 

(3,101

)

Balance at June 30, 2015

 

77,300

 

50

 

(983

)

49,984

 

(2,746

)

(4,084

)

36,281

 

(4,395

)

151,407

 

3,322

 

154,729

 

 

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

See independent auditor’s report on the financial statements.

 

10



Table of Contents

 

 

Condensed Value Added Statement

In millions of Brazilian Reais

 

 

 

Consolidated

 

Parent company

 

 

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Generation of value added from continuing operations

 

 

 

 

 

 

 

 

 

Gross revenue

 

 

 

 

 

 

 

 

 

Revenue from products and services

 

45,907

 

40,172

 

20,715

 

20,096

 

Results on measurement or sale of non-current assets

 

(494

)

670

 

(266

)

601

 

Revenue from the construction of own assets

 

6,835

 

9,802

 

5,275

 

6,721

 

Allowance for doubtful accounts

 

(8

)

4

 

 

(4

)

Other revenues

 

289

 

1,817

 

125

 

302

 

Less:

 

 

 

 

 

 

 

 

 

Acquisition of products

 

(837

)

(1,467

)

(347

)

(375

)

Material, service and maintenance

 

(16,725

)

(17,661

)

(9,650

)

(10,889

)

Oil and gas

 

(2,301

)

(1,994

)

(1,337

)

(1,256

)

Energy

 

(1,309

)

(952

)

(489

)

(483

)

Freight

 

(4,052

)

(4,906

)

(24

)

 

Other results in investments

 

(3,733

)

 

(3,733

)

 

Other costs and expenses

 

(2,830

)

(4,480

)

(478

)

(1,032

)

Gross value added

 

20,742

 

21,005

 

9,791

 

13,681

 

Depreciation, amortization and depletion

 

(6,567

)

(6,039

)

(2,398

)

(2,122

)

Net value added

 

14,175

 

14,966

 

7,393

 

11,559

 

 

 

 

 

 

 

 

 

 

 

Received from third parties

 

 

 

 

 

 

 

 

 

Equity results from entities

 

1,247

 

(157

)

4,652

 

(1,757

)

Financial income

 

354

 

1,199

 

169

 

642

 

Monetary and exchange variation of assets

 

(6,826

)

5,550

 

(7,181

)

5,525

 

Total value added to be distributed

 

8,950

 

21,558

 

5,033

 

15,969

 

 

 

 

 

 

 

 

 

 

 

Personnel

 

4,098

 

4,499

 

1,377

 

2,081

 

Taxes and contributions

 

3,936

 

4,149

 

3,232

 

3,375

 

Current income tax

 

2,707

 

409

 

2,298

 

 

Deferred income tax

 

5,236

 

(2,497

)

4,237

 

(2,732

)

Financial expense (excludes capitalized interest)

 

1,155

 

5,868

 

2,004

 

4,162

 

Monetary and exchange variation of liabilities

 

(18,936

)

13,186

 

(19,547

)

12,577

 

Other remunerations of third party funds

 

787

 

635

 

1,536

 

901

 

Reinvested net income (absorbed loss)

 

9,896

 

(4,395

)

9,896

 

(4,395

)

Net income (loss) attributable to noncontrolling interest

 

71

 

(296

)

 

 

Distributed value added

 

8,950

 

21,558

 

5,033

 

15,969

 

 

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

See independent auditor’s report on the financial statements.

 

11



Table of Contents

 

 

Selected Notes to the Interim Financial Statements

Expressed in millions of Brazilian Reais, unless otherwise stated

 

1.                            Corporate information

 

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

 

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

 

2.                            Basis for preparation of the interim financial statements

 

a)        Statement of compliance

 

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

 

The consolidated financial statements present the accounts of the Group.

 

The individual financial statements present the accounts of the Parent Company and are presented in a summarized form in note 25.

 

b)        Basis of presentation

 

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

 

The accounting practices, accounting estimates and judgments, risk management and measurement methods are the same as those adopted when preparing the financial statements for the year ended December 31, 2015. These interim financial statements were prepared to update users about relevant information presented in the period and should be read in conjunction with the financial statements for the year ended December 31, 2015.

 

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

 

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

 

 

 

 

 

 

 

Average rate for the

 

 

 

Closing rate

 

Three-months period ended

 

Six-months period ended

 

 

 

June 30, 2016

 

December 31,
2015

 

June 30, 2016

 

June 30, 2015

 

June 30, 2016

 

June 30, 2015

 

US dollar (“US$”)

 

3.2098

 

3.9048

 

3.5076

 

3.0729

 

3.7017

 

2.9715

 

Canadian dollar (“CAD”)

 

2.4670

 

2.8171

 

2.7217

 

2.4999

 

2.7809

 

2.4060

 

Australian dollar (“AUD”)

 

2.3855

 

2.8532

 

2.6153

 

2.3913

 

2.7142

 

2.3228

 

Euro (“EUR” or “€”)

 

3.5414

 

4.2504

 

3.9624

 

3.4011

 

4.1288

 

3.3111

 

 

Subsequent events were evaluated through July 27, 2016, which is the date the interim financial statements were approved by the Board of Directors.

 

c)         Accounting standards issued but not yet effective

 

The standards and interpretations issued by IASB relevant to the Company but not yet effective are the same as those disclosed in the notes to the financial statements for the year ended December 31, 2015.

 

12



Table of Contents

 

 

3.         Information by business segment

 

a)   Operating income and adjusted EBITDA

 

Adjusted EBITDA is used by management to support the decision making process for segments. The definition of adjusted EBITDA for the Company is the operating income or loss adjusted by: excluding (i) the depreciation, depletion and amortization, (ii) results on measurement or sales of non-current assets, (iii) impairment, (iv) onerous contracts and (v) adding of dividends received from associates and joint ventures.

 

 

 

Consolidated

 

 

 

Three-months period ended June 30, 2016

 

 

 

Income statement

 

Adjusted by

 

 

 

 

 

Net operating
revenue

 

Cost of goods
sold and services
rendered

 

Selling,
administrative
and other
operating
expenses, net

 

Research and
evaluation
expenses

 

Pre operating
and operational
stoppage

 

Operating
income (loss)

 

Depreciation,
depletion and
amortization

 

Results on
measurement or
sale of non-current assets

 

Dividends
received from
associates and
joint ventures

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

12,263

 

(6,640

)

(818

)

(58

)

(138

)

4,609

 

956

 

228

 

 

5,793

 

Pellets

 

3,049

 

(1,896

)

(78

)

(13

)

(39

)

1,023

 

304

 

 

213

 

1,540

 

Ferroalloys and manganese

 

214

 

(202

)

3

 

 

(14

)

1

 

20

 

 

 

21

 

Other ferrous products and services

 

364

 

(277

)

(12

)

(1

)

(4

)

70

 

57

 

 

 

127

 

 

 

15,890

 

(9,015

)

(905

)

(72

)

(195

)

5,703

 

1,337

 

228

 

213

 

7,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

511

 

(882

)

(29

)

(10

)

(33

)

(443

)

54

 

 

 

(389

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,682

 

(3,959

)

(39

)

(76

)

(157

)

(549

)

1,329

 

 

 

780

 

Copper

 

1,393

 

(1,037

)

(35

)

(3

)

 

318

 

208

 

 

 

526

 

 

 

5,075

 

(4,996

)

(74

)

(79

)

(157

)

(231

)

1,537

 

 

 

1,306

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

75

 

(104

)

(3

)

(5

)

(13

)

(50

)

25

 

 

 

(25

)

Phosphates

 

1,276

 

(1,412

)

(90

)

(12

)

(4

)

(242

)

264

 

 

 

22

 

Nitrogen

 

208

 

(173

)

(14

)

(2

)

 

19

 

19

 

 

 

38

 

Other fertilizers products

 

68

 

 

 

 

 

68

 

 

 

10

 

78

 

 

 

1,627

 

(1,689

)

(107

)

(19

)

(17

)

(205

)

308

 

 

10

 

113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

100

 

(209

)

(172

)

(96

)

 

(377

)

17

 

 

190

 

(170

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

23,203

 

(16,791

)

(1,287

)

(276

)

(402

)

4,447

 

3,253

 

228

 

413

 

8,341

 

 

13



Table of Contents

 

 

 

 

Consolidated

 

 

 

Three-months period ended June 30, 2015

 

 

 

Statement of income

 

Adjusted by

 

 

 

 

 

Net operating
revenue

 

Cost of goods
sold and
services
rendered

 

Selling,
administrative
and other
operating
expenses, net

 

Research and
evaluation
expenses

 

Pre operating
and operational
stoppage

 

Operating
income (loss)

 

Depreciation,
depletion and
amortization

 

Results on
measurement
or sale of non-
current assets

 

Dividends
received from
associates and
joint ventures

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

10,451

 

(6,803

)

(843

)

(109

)

(79

)

2,617

 

905

 

172

 

 

3,694

 

Pellets

 

2,989

 

(2,013

)

 

(4

)

(32

)

940

 

268

 

 

552

 

1,760

 

Ferroalloys and manganese

 

165

 

(173

)

(1

)

 

(18

)

(27

)

16

 

 

 

(11

)

Other ferrous products and services

 

418

 

(360

)

(10

)

(3

)

(1

)

44

 

71

 

 

25

 

140

 

 

 

14,023

 

(9,349

)

(854

)

(116

)

(130

)

3,574

 

1,260

 

172

 

577

 

5,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

450

 

(719

)

(139

)

(20

)

(35

)

(463

)

145

 

 

 

(318

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,813

 

(3,590

)

(83

)

(71

)

(563

)

(494

)

1,219

 

 

 

725

 

Copper

 

1,254

 

(845

)

(44

)

(6

)

 

359

 

162

 

 

 

521

 

 

 

5,067

 

(4,435

)

(127

)

(77

)

(563

)

(135

)

1,381

 

 

 

1,246

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

95

 

(84

)

19

 

(40

)

(12

)

(22

)

23

 

 

 

1

 

Phosphates

 

1,370

 

(1,102

)

(15

)

(19

)

(51

)

183

 

199

 

 

 

382

 

Nitrogen

 

242

 

(171

)

 

(2

)

(6

)

63

 

16

 

 

 

79

 

Other fertilizers products

 

42

 

 

 

 

 

42

 

 

 

 

42

 

 

 

1,749

 

(1,357

)

4

 

(61

)

(69

)

266

 

238

 

 

 

504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

152

 

(108

)

(166

)

(91

)

 

(213

)

15

 

 

 

(198

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

21,441

 

(15,968

)

(1,282

)

(365

)

(797

)

3,029

 

3,039

 

172

 

577

 

6,817

 

 

14



Table of Contents

 

 

 

 

Consolidated

 

 

 

Six-months period ended June 30, 2016

 

 

 

Income statement

 

Adjusted by

 

 

 

 

 

Net operating
revenue

 

Cost of goods
sold and
services
rendered

 

Selling,
administrative
and other
operating
expenses, net

 

Research and
evaluation
expenses

 

Pre operating
and operational
stoppage

 

Operating
income (loss)

 

Depreciation,
depletion and
amortization

 

Results on
measurement or
sale of non-
current assets

 

Dividends
received from
associates and
joint ventures

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

23,451

 

(12,529

)

(1,480

)

(100

)

(283

)

9,059

 

1,889

 

228

 

 

11,176

 

Pellets

 

5,967

 

(3,883

)

(151

)

(15

)

(60

)

1,858

 

614

 

 

213

 

2,685

 

Ferroalloys and manganese

 

396

 

(402

)

9

 

 

(28

)

(25

)

49

 

 

 

24

 

Other ferrous products and services

 

703

 

(573

)

3

 

(2

)

(7

)

124

 

126

 

 

 

250

 

 

 

30,517

 

(17,387

)

(1,619

)

(117

)

(378

)

11,016

 

2,678

 

228

 

213

 

14,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

1,110

 

(2,141

)

188

 

(18

)

(37

)

(898

)

150

 

 

 

(748

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

7,565

 

(8,292

)

(123

)

(132

)

(351

)

(1,333

)

2,754

 

 

1

 

1,422

 

Copper

 

2,764

 

(1,950

)

(31

)

(5

)

 

778

 

377

 

 

 

1,155

 

 

 

10,329

 

(10,242

)

(154

)

(137

)

(351

)

(555

)

3,131

 

 

1

 

2,577

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

166

 

(196

)

13

 

(12

)

(27

)

(56

)

47

 

 

 

(9

)

Phosphates

 

2,400

 

(2,537

)

(143

)

(24

)

(8

)

(312

)

484

 

 

 

172

 

Nitrogen

 

436

 

(354

)

(21

)

(4

)

 

57

 

38

 

 

 

95

 

Other fertilizers products

 

118

 

 

 

 

 

118

 

 

 

10

 

128

 

 

 

3,120

 

(3,087

)

(151

)

(40

)

(35

)

(193

)

569

 

 

10

 

386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

194

 

(401

)

(150

)

(196

)

(1

)

(554

)

39

 

 

191

 

(324

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

45,270

 

(33,258

)

(1,886

)

(508

)

(802

)

8,816

 

6,567

 

228

 

415

 

16,026

 

 

15



Table of Contents

 

 

 

 

Consolidated

 

 

 

Six-months period ended June 30, 2015

 

 

 

Statement of income

 

Adjusted by

 

 

 

 

 

Net operating
revenue

 

Cost of goods
sold and
services
rendered

 

Selling,
administrative
and other
operating
expenses, net

 

Research and
evaluation
expenses

 

Pre operating
and operational
stoppage

 

Operating
income (loss)

 

Depreciation,
depletion and
amortization

 

Results on
measurement
or sale of non-
current assets

 

Dividends
received from
associates and
joint ventures

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

18,310

 

(13,315

)

(1,420

)

(203

)

(160

)

3,212

 

1,964

 

172

 

 

5,348

 

Pellets

 

5,767

 

(3,950

)

10

 

(8

)

(59

)

1,760

 

514

 

 

624

 

2,898

 

Ferroalloys and manganese

 

372

 

(324

)

(2

)

(1

)

(38

)

7

 

34

 

 

 

41

 

Other ferrous products and services

 

753

 

(698

)

15

 

(6

)

(2

)

62

 

128

 

 

25

 

215

 

 

 

25,202

 

(18,287

)

(1,397

)

(218

)

(259

)

5,041

 

2,640

 

172

 

649

 

8,502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

869

 

(1,330

)

(334

)

(34

)

(71

)

(900

)

212

 

 

 

(688

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

7,667

 

(7,022

)

(253

)

(150

)

(1,101

)

(859

)

2,433

 

 

 

1,574

 

Copper

 

2,356

 

(1,630

)

(31

)

(10

)

(2

)

683

 

299

 

 

 

982

 

Other base metals products

 

 

 

722

 

 

 

722

 

 

 

 

722

 

 

 

10,023

 

(8,652

)

438

 

(160

)

(1,103

)

546

 

2,732

 

 

 

3,278

 

Fertilizers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potash

 

180

 

(160

)

17

 

(69

)

(25

)

(57

)

41

 

 

 

(16

)

Phosphates

 

2,390

 

(1,987

)

(64

)

(38

)

(87

)

214

 

355

 

 

 

569

 

Nitrogen

 

465

 

(345

)

(8

)

(4

)

(9

)

99

 

33

 

 

 

132

 

Other fertilizers products

 

76

 

 

 

 

 

76

 

 

 

 

76

 

 

 

3,111

 

(2,492

)

(55

)

(111

)

(121

)

332

 

429

 

 

 

761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

263

 

(195

)

237

 

(187

)

(1

)

117

 

26

 

(546

)

2

 

(401

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

39,468

 

(30,956

)

(1,111

)

(710

)

(1,555

)

5,136

 

6,039

 

(374

)

651

 

11,452

 

 

16



Table of Contents

 

 

b)        Assets by segment

 

 

 

Consolidated

 

 

 

As at June 30, 2016

 

Three-months
period ended
June 30, 2016

 

Six-months
period ended
June 30, 2016

 

 

 

Trade
receivables

 

Product
inventory

 

Investments in
associates and
joint ventures

 

Property, plant
and equipment
and intangible
assets

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous minerals

 

5,081

 

3,639

 

5,746

 

109,385

 

2,676

 

6,269

 

Coal

 

193

 

100

 

933

 

6,317

 

559

 

1,080

 

Base metals

 

2,118

 

3,848

 

51

 

80,072

 

815

 

1,870

 

Fertilizers

 

321

 

1,218

 

290

 

14,580

 

246

 

399

 

Others

 

158

 

9

 

5,701

 

7,501

 

28

 

60

 

Total

 

7,871

 

8,814

 

12,721

 

217,855

 

4,324

 

9,678

 

 


(i) Includes only cash effect .

 

 

 

Consolidated

 

 

 

Year ended December 31, 2015

 

Three-months
period ended
June 30, 2015

 

Six-months
period ended
June 30, 2015

 

 

 

Trade
receivables

 

Product
inventory

 

Investments in
associates and
joint ventures

 

Property, plant
and equipment
and intangible
assets

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous minerals

 

3,409

 

4,044

 

5,775

 

110,123

 

3,959

 

8,175

 

Coal

 

176

 

206

 

1,195

 

7,075

 

1,210

 

2,210

 

Base metals

 

1,671

 

4,552

 

66

 

91,849

 

1,126

 

1,935

 

Fertilizers

 

367

 

1,156

 

292

 

15,096

 

154

 

314

 

Others

 

140

 

10

 

4,153

 

7,905

 

65

 

139

 

Total

 

5,763

 

9,968

 

11,481

 

232,048

 

6,514

 

12,773

 

 


(i) Includes only cash effect.

 

c)         Revenues by geographic area

 

 

 

Consolidated

 

 

 

Three-months period ended June 30, 2016

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas, except United States and Brazil

 

260

 

35

 

988

 

24

 

 

1,307

 

United States of America

 

185

 

 

619

 

 

 

804

 

Europe

 

2,086

 

77

 

1,733

 

94

 

 

3,990

 

Middle East/Africa/Oceania

 

1,003

 

81

 

13

 

10

 

 

1,107

 

Japan

 

1,059

 

110

 

258

 

 

 

1,427

 

China

 

9,009

 

24

 

396

 

 

 

9,429

 

Asia, except Japan and China

 

798

 

184

 

918

 

69

 

 

1,969

 

Brazil

 

1,490

 

 

150

 

1,430

 

100

 

3,170

 

Net operating revenue

 

15,890

 

511

 

5,075

 

1,627

 

100

 

23,203

 

 

 

 

Consolidated

 

 

 

Three-months period ended June 30, 2015

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas, except United States and Brazil

 

310

 

13

 

1,020

 

57

 

 

1,400

 

United States of America

 

15

 

 

708

 

 

24

 

747

 

Europe

 

1,940

 

116

 

1,762

 

105

 

 

3,923

 

Middle East/Africa/Oceania

 

874

 

100

 

52

 

 

 

1,026

 

Japan

 

1,101

 

32

 

147

 

 

 

1,280

 

China

 

7,382

 

38

 

553

 

 

 

7,973

 

Asia, except Japan and China

 

1,015

 

130

 

673

 

79

 

 

1,897

 

Brazil

 

1,386

 

21

 

152

 

1,508

 

128

 

3,195

 

Net operating revenue

 

14,023

 

450

 

5,067

 

1,749

 

152

 

21,441

 

 

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Table of Contents

 

 

 

 

Consolidated

 

 

 

Six-months period ended June 30, 2016

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas, except United States and Brazil

 

615

 

50

 

2,068

 

62

 

 

 

2,795

 

United States of America

 

316

 

 

1,290

 

 

14

 

1,620

 

Europe

 

3,968

 

103

 

3,370

 

177

 

 

7,618

 

Middle East/Africa/Oceania

 

1,637

 

152

 

48

 

10

 

 

1,847

 

Japan

 

2,053

 

247

 

460

 

 

 

2,760

 

China

 

17,687

 

119

 

1,009

 

 

 

18,815

 

Asia, except Japan and China

 

1,404

 

439

 

1,865

 

147

 

 

3,855

 

Brazil

 

2,837

 

 

 

219

 

2,724

 

180

 

5,960

 

Net operating revenue

 

30,517

 

1,110

 

10,329

 

3,120

 

194

 

45,270

 

 

 

 

Consolidated

 

 

 

Six-months period ended June 30, 2015

 

 

 

Ferrous
minerals

 

Coal

 

Base metals

 

Fertilizers

 

Others

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas, except United States and Brazil

 

579

 

13

 

1,887

 

98

 

 

2,577

 

United States of America

 

43

 

 

1,392

 

 

46

 

1,481

 

Europe

 

3,796

 

151

 

3,016

 

187

 

 

7,150

 

Middle East/Africa/Oceania

 

1,733

 

199

 

167

 

9

 

 

2,108

 

Japan

 

2,272

 

115

 

564

 

 

 

2,951

 

China

 

12,174

 

38

 

972

 

 

 

13,184

 

Asia, except Japan and China

 

1,892

 

302

 

1,489

 

108

 

 

3,791

 

Brazil

 

2,713

 

51

 

536

 

2,709

 

217

 

6,226

 

Net operating revenue

 

25,202

 

869

 

10,023

 

3,111

 

263

 

39,468

 

 

 

4.             Relevant event — Dam failure at Samarco

 

a) Historical events

 

On November 5, 2015, Samarco experienced the failure of an iron ore tailings dam (Fundão) in the state of Minas Gerais - Brazil which caused impacts on communities and environment, including the Rio Doce river.

 

Following the dam failure, the Brazilian mining authority (DNPM) and the Minas Gerais State Environmental Secretary (SEMAD), ordered the suspension of Samarco’s operations.

 

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

 

The term of the Agreement is 15 years, renewable for successive one-year periods until all the obligations under the Agreement have been fulfilled.

 

Under the Agreement, Samarco, Vale S.A. and BHPB agreed to establish a foundation to develop and implement social and economic remediation and compensation, to be funded by Samarco as follows: R$2.0 billion in 2016, R$1.2 billion in 2017 and R$1.2 billion in 2018. Amounts that Samarco already spent on remediation and compensation will be considered within its funding obligations. From 2019 to 2021, Samarco agreed to provide funding based on the amounts needed to implement the projects approved for the relevant year, subject to an annual minimum of R$800 and an annual maximum of R$1.6 billion. From 2022 onwards, Samarco will provide the necessary funding in order to complete remaining remediation and compensation programs approved for each relevant year. The foundation will allocate an annual amount of R$240 over 15 years to the implementation of compensation programs, and these annual amounts are included in the annual contributions described above for the first six years. Through the end of 2018, the foundation will also set aside R$500 for basic sanitation programs in the affected areas.

 

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

 

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b) New facts occurred in the second quarter of 2016

 

According the analyses prepared by independent experts engaged by Samarco, the amount to comply with the obligations under the Agreement to remediate and compensate the impacts of the dam failure, was estimated at R$11,121, of which R$656 has already been disbursed by Samarco until June 30, 2016. The Company’s proportional estimated share of the remaining balance discounted at a free-risk rate, amounts R$3,733 at June 30, 2016.

 

Samarco is currently unable to resume its mining and processing operations. Samarco´s original estimate was to resume its operations in the last quarter of 2016. That estimate was based on studies of technical solutions available, combined with the progress of the repair works on the remaining dam structures after the incident and the formal scope defined under the Agreement to remediate and compensate the communities impacted by the incident.

 

However, in view of the current stage of the necessary procedures to resume operations and the uncertainties related to the licensing approval by the governmental authorities, Samarco cannot make a reliable estimate of how and when its operations will resume.

 

Accordingly, the Company recognized a provision of R$3,733 as a liability on the interim financial statements as of June 30, 2016, which represents its best estimate of the obligation under the Agreement reflected in the income statement as “Other results in associates and joint ventures”

 

At each reporting period, the Company will reassess the key assumptions used by Samarco in the preparation of the projected future estimated cash flows, as well as the assumptions for defining the scope and assessing the respective provision, in order to timely reflect in the financial statements any changes in judgment used by management and/or any occurrence of new facts and circumstances.

 

c) Contingencies related to Samarco dam failure

 

On May 5, 2016, the Agreement was ratified by the Federal Regional Court (TRF), 1st Region signed in March 2, 2016. In July, 2016 the Superior Court of Justice (STJ) in Brazil issued an interim order, suspending the decision of the Federal Regional Court (TRF), 1st Region, which ratified the Agreement. With this interim order, the public civil claim with the amount of R$20.2 billion indicated by plaintiffs, filed by the Brazilian Authorities, was reinstated.

 

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

 

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

 

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

 

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

 

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

 

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d) Other subjects

 

On June 28, 2016, the Foundation was established by Samarco and its shareholders, with a commencement date estimated to occur on August 1, 2016.

 

Vale S.A. intends to make short-term facilities of up to R$ 321 (US$100) to Samarco to support its operations, without undertaking an obligation to Samarco. Funds will be released on an as-needed basis and will be subject to achieving certain milestones. Likewise, BHPB will make available a similar short-term facility.

 

5.                            Assets held for sale

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Shipping assets

 

Nacala

 

Total

 

Nacala

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6

 

6

 

13

 

Other current assets

 

 

183

 

183

 

522

 

Property, plant and equipment and Intangible, net

 

1,595

 

13,168

 

14,763

 

15,257

 

Total assets

 

1,595

 

13,357

 

14,952

 

15,792

 

 

 

 

 

 

 

 

 

 

 

Liabilities associated with assets held for sale

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

 

207

 

207

 

365

 

Other current liabilities

 

 

51

 

51

 

51

 

Total liabilities

 

 

258

 

258

 

416

 

Net assets held for sale

 

1,595

 

13,099

 

14,694

 

15,376

 

 

a) Shipping assets

 

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

 

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

 

In December 2014, the Company signed an agreement with Mitsui & Co., Ltd. (“Mitsui”) to sell 50% of its stake of 70% in the Nacala corridor. Nacala is a combination of railroad and port concessions under construction located in Mozambique and Malawi. After completion of the transaction, Vale will share control of Nacala with Mitsui and therefore will not consolidate the assets, liabilities and results of those entities. The assets and liabilities were classified as assets held for sale with no impact in the income statement. As at June 2016, completion of the transaction remains dependent upon certain conditions. The Company remains committed to its plan to sell its 50% interest.

 

6.                            Acquisitions and divestitures

 

2016

 

Shipping assets — In June 2016, the Company concluded the sale of three vessels VLOC’s of 400,000 tons for the consortium led by ICBC International (ICBC). The Company will receive R$863 upon delivery of the vessels, which is expected to happen by August, 2016. A loss of R$26 was recognized in the income statement as “Results on measurement or sales of non-current assets”.

 

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

 

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

 

2015

 

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

 

Shandong Yankuang International Coking Co., Ltd. (“Yankuang”) - In the second quarter of 2015, the Company concluded the sale of its participation in Yankuang, a producer of coke, methanol and other products. In this transaction, Vale recognized a gain of R$241 as “others results in associates and joint ventures”.

 

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Shipping assets — In the second quarter of 2015, the Company and China Ocean Shipping Company (“Cosco”), completed the sale of four very large ore carriers. The Company recognized a loss of R$172 as “Results on measurement or sale of non-current assets”.

 

7.                            Cash and cash equivalents

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Cash and bank deposits

 

8,286

 

7,881

 

Short-term investments

 

5,091

 

6,141

 

 

 

13,377

 

14,022

 

 

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

 

8.                            Accounts receivable

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Trade receivables

 

8,073

 

5,988

 

Provision for doubtful debts

 

(202

)

(225

)

 

 

7,871

 

5,763

 

 

 

 

 

 

 

Trade receivables related to the steel sector - %

 

76.52

%

75.32

%

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Provision for doubtful debts recorded in the income statement

 

(8

)

(4

)

(9

)

(4

)

Trade receivables write-offs recorded in the income statement

 

8

 

 

1

 

(19

)

 

Trade receivables by segments are presented in note 3(b). No individual customer represents over 10% of receivables or revenues.

 

9.                            Inventories

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Product inventory

 

9,899

 

11,991

 

Impairment of product inventory

 

(1,085

)

(2,023

)

 

 

8,814

 

9,968

 

 

 

 

 

 

 

Consumable inventory

 

3,595

 

3,807

 

Total

 

12,409

 

13,775

 

 

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

 

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10.                               Investments in associates and joint ventures

 

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

 

 

 

Consolidated

 

 

 

2016

 

2015

 

Balance at March 31,

 

12,091

 

12,230

 

Additions (i)

 

491

 

24

 

Disposals (ii)

 

 

241

 

Translation adjustment

 

(208

)

(76

)

Equity results in income statement

 

658

 

668

 

Dividends declared

 

(311

)

(147

)

Others

 

 

117

 

Balance at June 30,

 

12,721

 

13,057

 

 


(i) Refers to capital contribution of R$448 to CSP - Companhia Siderúrgica do Pecém and R$43 to Aliança Geração de Energia, with no change in the company’s interest in associates equity.

(ii) Refers to Shandong Yankuang International Coking Co., Ltd.

 

 

 

Consolidated

 

 

 

2016

 

2015

 

Balance at January 1st

 

11,481

 

10,978

 

Acquisitions (i)

 

 

1,819

 

Additions (ii)

 

825

 

54

 

Disposals (iii)

 

 

241

 

Translation adjustment

 

(367

)

250

 

Equity results in income statement

 

1,247

 

(157

)

Dividends declared

 

(419

)

(223

)

Others

 

(46

)

95

 

Balance at June 30,

 

12,721

 

13,057

 

 


(i) Refers to Aliança Geração transaction, see note 6.

(ii) Refers to capital contribution of R$703 to CSP - Companhia Siderúrgica do Pecém and R$122 to Aliança Geração de Energia, with no change in the company’s interest in associates equity.

(iii) Refers to Shandong Yankuang International Coking Co., Ltd.

 

The Company indirectly holds a 4.6 % interest in Norte Energia S.A. (through Aliança Norte Energia Participações S.A.), and the Company’s investment and equity results as of June 30, 2016, are respectively R$427 and R$(12). The independent auditor’s opinion on the Norte Energia financial statements for the year ended December 31, 2015, was qualified due to an investigation related to possible breaches of law and regulation that had not been completed when the mentioned the opinion was issued. Vale believes that the auditor’s qualification has no quantitative or qualitative impact on its interim financial information as of June 30, 2016.

 

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11.                     Intangibles

 

Changes in intangibles are as follows:

 

 

 

Consolidated

 

 

 

Goodwill (i)

 

Concessions (ii)

 

Right of use (ii)

 

Software (ii)

 

Total

 

Balance at March 31, 2016

 

11,014

 

8,378

 

532

 

1,492

 

21,416

 

Additions

 

 

1,556

 

 

14

 

1,570

 

Disposals

 

 

(16

)

 

 

(16

)

Amortization

 

 

(146

)

(1

)

(141

)

(288

)

Translation adjustment

 

(681

)

(16

)

(83

)

18

 

(762

)

Transfers

 

 

270

 

 

 

270

 

Balance at June 30, 2016

 

10,333

 

10,026

 

448

 

1,383

 

22,190

 

Cost

 

10,333

 

13,578

 

711

 

5,071

 

29,693

 

Accumulated amortization

 

 

(3,552

)

(263

)

(3,688

)

(7,503

)

 

 

10,333

 

10,026

 

448

 

1,383

 

22,190

 

 

 

 

Consolidated

 

 

 

Goodwill (i)

 

Concessions (ii)

 

Right of use (ii)

 

Software (ii)

 

Total

 

Balance at March 31, 2015

 

10,889

 

6,069

 

824

 

1,550

 

19,332

 

Additions

 

 

724

 

 

53

 

777

 

Disposals

 

 

(12

)

 

 

(12

)

Amortization

 

 

(122

)

(33

)

(128

)

(283

)

Translation adjustment

 

(144

)

 

(2

)

 

(146

)

Acquisition of subsidiary

 

1

 

 

 

 

1

 

Balance at June 30, 2015

 

10,746

 

6,659

 

789

 

1,475

 

19,669

 

Cost

 

10,746

 

10,078

 

1,604

 

3,868

 

26,296

 

Accumulated amortization

 

 

(3,419

)

(815

)

(2,393

)

(6,627

)

 

 

10,746

 

6,659

 

789

 

1,475

 

19,669

 

 

 

 

Consolidated

 

 

 

Goodwill (i)

 

Concessions (ii)

 

Right of use (ii)

 

Software (ii)

 

Total

 

Balance at December 31, 2015

 

11,544

 

7,084

 

811

 

1,350

 

20,789

 

Additions

 

 

2,976

 

3

 

20

 

2,999

 

Disposals

 

 

(18

)

 

(1

)

(19

)

Amortization

 

 

(270

)

(5

)

(286

)

(561

)

Translation adjustment

 

(1,211

)

(16

)

(98

)

12

 

(1,313

)

Transfers

 

 

270

 

(263

)

288

 

295

 

Balance at June 30, 2016

 

10,333

 

10,026

 

448

 

1,383

 

22,190

 

Cost

 

10,333

 

13,578

 

711

 

5,071

 

29,693

 

Accumulated amortization

 

 

(3,552

)

(263

)

(3,688

)

(7,503

)

 

 

10,333

 

10,026

 

448

 

1,383

 

22,190

 

 

 

 

Consolidated

 

 

 

Goodwill (i)

 

Concessions (ii)

 

Right of use (ii)

 

Software (ii)

 

Total

 

Balance at December 31, 2014

 

9,987

 

5,876

 

789

 

1,462

 

18,114

 

Additions

 

 

1,073

 

 

266

 

1,339

 

Disposals

 

 

(49

)

 

 

(49

)

Amortization

 

 

(241

)

(63

)

(253

)

(557

)

Translation adjustment

 

657

 

 

63

 

 

720

 

Acquisition of subsidiary

 

102

 

 

 

 

102

 

Balance at June 30, 2015

 

10,746

 

6,659

 

789

 

1,475

 

19,669

 

Cost

 

10,746

 

10,078

 

1,604

 

3,868

 

26,296

 

Accumulated amortization

 

 

(3,419

)

(815

)

(2,393

)

(6,627

)

 

 

10,746

 

6,659

 

789

 

1,475

 

19,669

 

 


(i) Indefinite useful life.

(ii) Finite useful life.

 

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12.          Property, plant and equipment

 

Changes in property, plant and equipment are as follows:

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at March 31, 2016

 

2,922

 

35,026

 

31,007

 

27,348

 

38,926

 

27,206

 

43,713

 

206,148

 

Additions (i)

 

 

 

 

 

 

 

3,845

 

3,845

 

Disposals

 

 

 

(1

)

(8

)

 

(1,175

)

(69

)

(1,253

)

Depreciation and amortization

 

 

(405

)

(522

)

(829

)

(799

)

(594

)

 

(3,149

)

Translation adjustment

 

(84

)

(2,685

)

(1,202

)

(1,577

)

(2,757

)

(944

)

1,128

 

(8,121

)

Assets retirement obligations

 

 

 

 

 

60

 

 

 

60

 

Transfers

 

22

 

1,190

 

348

 

689

 

413

 

(920

)

(2,012

)

(270

)

Transfers to non-current assets held for sale

 

 

 

 

 

 

(1,595

)

 

(1,595

)

Balance at June 30, 2016

 

2,860

 

33,126

 

29,630

 

25,623

 

35,843

 

21,978

 

46,605

 

195,665

 

Cost

 

2,860

 

51,619

 

48,187

 

45,097

 

60,590

 

33,541

 

46,605

 

288,499

 

Accumulated depreciation

 

 

(18,493

)

(18,557

)

(19,474

)

(24,747

)

(11,563

)

 

(92,834

)

 

 

2,860

 

33,126

 

29,630

 

25,623

 

35,843

 

21,978

 

46,605

 

195,665

 

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at March 31, 2015

 

2,960

 

36,387

 

31,505

 

28,762

 

40,662

 

32,019

 

51,328

 

223,623

 

Additions (i)

 

 

 

 

 

 

 

5,256

 

5,256

 

Disposals

 

 

 

(19

)

(46

)

 

(1,574

)

 

(1,639

)

Depreciation and amortization

 

 

(437

)

(571

)

(824

)

(748

)

(558

)

 

(3,138

)

Translation adjustment

 

(20

)

(887

)

(423

)

(729

)

(499

)

(510

)

110

 

(2,958

)

Transfers

 

158

 

2,367

 

804

 

1,937

 

1,362

 

2,669

 

(9,297

)

 

Balance at June 30, 2015

 

3,098

 

37,430

 

31,296

 

29,100

 

40,777

 

32,046

 

47,397

 

221,144

 

Cost

 

3,098

 

45,493

 

46,959

 

44,867

 

59,232

 

45,137

 

47,397

 

292,183

 

Accumulated depreciation

 

 

(8,063

)

(15,663

)

(15,767

)

(18,455

)

(13,091

)

 

(71,039

)

 

 

3,098

 

37,430

 

31,296

 

29,100

 

40,777

 

32,046

 

47,397

 

221,144

 

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2015

 

2,989

 

35,538

 

32,378

 

28,532

 

40,234

 

28,135

 

43,453

 

211,259

 

Additions (i)

 

 

 

 

 

 

 

6,964

 

6,964

 

Disposals

 

 

(2

)

(2

)

(48

)

(11

)

(1,208

)

(74

)

(1,345

)

Depreciation and amortization

 

 

(848

)

(1,068

)

(1,663

)

(1,489

)

(1,141

)

 

(6,209

)

Translation adjustment

 

(137

)

(3,640

)

(2,213

)

(2,782

)

(3,878

)

(1,419

)

747

 

(13,322

)

Assets retirement obligations

 

 

 

 

 

207

 

 

 

207

 

Transfers

 

8

 

2,077

 

535

 

1,584

 

780

 

(794

)

(4,485

)

(295

)

Transfers to non-current asstes held for sale

 

 

 

 

 

 

(1,595

)

 

(1,595

)

Acquisition of subsidiary

 

 

1

 

 

 

 

 

 

1

 

Balance at June 30, 2016

 

2,860

 

33,126

 

29,630

 

25,623

 

35,843

 

21,978

 

46,605

 

195,665

 

Cost

 

2,860

 

51,619

 

48,187

 

45,097

 

60,590

 

33,541

 

46,605

 

288,499

 

Accumulated depreciation

 

 

(18,493

)

(18,557

)

(19,474

)

(24,747

)

(11,563

)

 

(92,834

)

 

 

2,860

 

33,126

 

29,630

 

25,623

 

35,843

 

21,978

 

46,605

 

195,665

 

 

 

 

Consolidated

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2014

 

2,839

 

30,955

 

28,721

 

24,669

 

39,654

 

29,095

 

51,574

 

207,507

 

Additions (i)

 

 

 

 

 

 

 

11,275

 

11,275

 

Disposals

 

 

(14

)

(22

)

(60

)

(434

)

(1,592

)

(5

)

(2,127

)

Depreciation and amortization

 

 

(824

)

(1,167

)

(1,707

)

(1,372

)

(1,126

)

 

(6,196

)

Translation adjustment

 

73

 

780

 

739

 

1,602

 

2,879

 

1,518

 

2,777

 

10,368

 

Transfers

 

186

 

6,533

 

3,025

 

4,595

 

50

 

3,835

 

(18,224

)

 

Acquisition of subsidiary

 

 

 

 

1

 

 

316

 

 

317

 

Balance at June 30, 2015

 

3,098

 

37,430

 

31,296

 

29,100

 

40,777

 

32,046

 

47,397

 

221,144

 

Cost

 

3,098

 

45,493

 

46,959

 

44,867

 

59,232

 

45,137

 

47,397

 

292,183

 

Accumulated depreciation

 

 

(8,063

)

(15,663

)

(15,767

)

(18,455

)

(13,091

)

 

(71,039

)

 

 

3,098

 

37,430

 

31,296

 

29,100

 

40,777

 

32,046

 

47,397

 

221,144

 

 


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

 

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

 

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Table of Contents

 

 

13.                     Loans and borrowings

 

a)        Total debt

 

 

 

Consolidated

 

 

 

Current liabilities

 

Non-current liabilities

 

 

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

December 31, 2015

 

Debt contracts in the international markets

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

US$

 

751

 

943

 

22,327

 

20,203

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

US$

 

5,174

 

4,651

 

40,109

 

50,463

 

EUR

 

 

 

5,312

 

6,376

 

Other currencies

 

45

 

56

 

552

 

659

 

Accrued charges

 

915

 

1,274

 

 

 

 

 

6,885

 

6,924

 

68,300

 

77,701

 

Debt contracts in Brazil

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

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

 

980

 

827

 

18,228

 

18,388

 

Basket of currencies and US$ indexed to LIBOR

 

1,022

 

1,133

 

4,112

 

5,239

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

R$

 

248

 

246

 

923

 

1,047

 

Accrued charges

 

985

 

658

 

433

 

503

 

 

 

3,235

 

2,864

 

23,696

 

25,177

 

 

 

10,120

 

9,788

 

91,996

 

102,878

 

 

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

 

 

 

Consolidated

 

 

 

Bank loans (i)

 

Capital markets (i)

 

Development
agencies (i)

 

Debt principal (i)

 

Estimated future
payments of
interest(ii)

 

2016

 

112

 

 

1,361

 

1,473

 

5,226

 

2017

 

3,120

 

3,890

 

3,136

 

10,146

 

5,425

 

2018

 

6,911

 

2,655

 

3,383

 

12,949

 

4,892

 

2019

 

2,298

 

3,210

 

3,951

 

9,459

 

4,198

 

2020

 

11,027

 

4,311

 

2,664

 

18,002

 

3,717

 

2021

 

973

 

4,311

 

2,866

 

8,150

 

3,043

 

Between 2022 and 2025

 

4,044

 

10,695

 

3,265

 

18,004

 

7,639

 

2026 onwards

 

273

 

20,836

 

491

 

21,600

 

18,646

 

 

 

28,758

 

49,908

 

21,117

 

99,783

 

52,786

 

 


(i)        Does not include accrued charges.

(ii)     Consists of estimated future payments of interest, calculated based on interest rate curves and foreign exchange rates applicable as at June 30, 2016 and considering that all amortization payments and payments at maturity on loans and borrowings will be made on their contracted payments dates. The amount includes the estimated values of future interest payments (not yet accrued), in addition to interest already recognized in the financial statements.

 

At June 30, 2016, the average annual interest rates by currency are as follows:

 

 

 

Consolidated

 

Loans and borrowings in

 

Average interest rate (i)

 

Total debt

 

US$

 

4.46

%

74,349

 

R$ (ii)

 

11.13

%

21,769

 

EUR (iii)

 

4.06

%

5,401

 

Other currencies

 

4.35

%

597

 

 

 

 

 

102,116

 

 


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

(ii)     R$ denominated debt that bears interest at IPCA, CDI, TR or TJLP, plus spread. For a total of R$14,495, the Company entered into derivative transactions to mitigate the exposure to the cash flow variations of the floating rate debt denominated in R$, resulting in an average cost of 2.21% per year in US$.

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

 

25



Table of Contents

 

 

b)        Credit and financing lines

 

 

 

Contractual

 

 

 

Period of the

 

Available amount

 

Type

 

currency

 

Date of agreement

 

agreement

 

Total amount

 

June 30, 2016

 

Credit lines

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facilities

 

US$

 

May 2015

 

5 years

 

9,629

 

3,852

 

Revolving credit facilities

 

US$

 

July 2013

 

5 years

 

6,420

 

5,777

 

Financing lines

 

 

 

 

 

 

 

 

 

 

 

BNDES (i)

 

R$

 

April 2008

 

10 years

 

7,300

 

1,112

 

BNDES - CLN 150

 

R$

 

September 2012

 

10 years

 

3,883

 

20

 

BNDES - S11D e S11D Logística

 

R$

 

May 2014

 

10 years

 

6,163

 

2,447

 

 


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

 

c)         Funding

 

During 2016, the Company drew down part of its revolving credit facilities of which R$6,420 (US$2billions) is outstanding at June 30, 2016.

 

In June 2016, the Company issued through its wholly owned subsidiary Vale Overseas Limited the guaranteed notes due 2021 in the amount of R$4,012 (US$1,250).  The notes bear 5.875% coupon per year, payable semi-annually, and were sold at a price of 100% of the principal amount. These notes will mature in June 2021.

 

d)        Guarantees

 

As at June 30, 2016 and December 31, 2015, loans and borrowings are secured by property, plant and equipment and receivables in the amount of R$1,531 and R$1,937, respectively.

 

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

 

e)         Covenants

 

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

 

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Table of Contents

 

 

14.                     Litigation

 

a)        Provision for litigation

 

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

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at March 31, 2016

 

776

 

365

 

1,806

 

82

 

3,029

 

Additions

 

39

 

157

 

225

 

11

 

432

 

Reversals

 

(31

)

(66

)

(105

)

(6

)

(208

)

Payments

 

(88

)

(92

)

(155

)

 

(335

)

Indexation and interest

 

10

 

(5

)

13

 

(3

)

15

 

Translation adjustment

 

34

 

 

 

 

34

 

Balance at June 30, 2016

 

740

 

359

 

1,784

 

84

 

2,967

 

 

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at March 31, 2015

 

980

 

367

 

1,910

 

229

 

3,486

 

Additions

 

41

 

95

 

114

 

 

250

 

Reversals

 

(20

)

(57

)

(46

)

(1

)

(124

)

Payments

 

(15

)

(4

)

(67

)

(13

)

(99

)

Indexation and interest

 

27

 

4

 

28

 

2

 

61

 

Translation adjustment

 

(10

)

 

 

(5

)

(15

)

Balance at june 30, 2015

 

1,003

 

405

 

1,939

 

212

 

3,559

 

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2015

 

1,052

 

309

 

1,771

 

78

 

3,210

 

Additions

 

51

 

204

 

400

 

18

 

673

 

Reversals

 

(61

)

(81

)

(171

)

(14

)

(327

)

Payments

 

(356

)

(162

)

(244

)

 

(762

)

Indexation and interest

 

33

 

89

 

26

 

1

 

149

 

Translation adjustment

 

21

 

 

2

 

1

 

24

 

Balance at June 30, 2016

 

740

 

359

 

1,784

 

84

 

2,967

 

 

 

 

Consolidated

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2014

 

972

 

311

 

1,876

 

246

 

3,405

 

Additions

 

443

 

142

 

215

 

 

800

 

Reversals

 

(516

)

(90

)

(120

)

(1

)

(727

)

Payments

 

(24

)

(4

)

(80

)

(59

)

(167

)

Indexation and interest

 

83

 

45

 

48

 

6

 

182

 

Translation adjustment

 

45

 

1

 

 

20

 

66

 

Balance at June 30, 2015

 

1,003

 

405

 

1,939

 

212

 

3,559

 

 

27



Table of Contents

 

 

b)        Contingent liabilities

 

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

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Tax litigation

 

23,195

 

20,796

 

Civil litigation

 

5,213

 

5,214

 

Labor litigation

 

7,391

 

7,288

 

Environmental litigation

 

5,839

 

5,393

 

Total

 

41,638

 

38,691

 

 

i - Tax litigation - The most significant claims relate to pending challenges by the Brazilian federal tax authority concerning the deductibility of Brazilian social contribution payments for income tax purposes and demands by Brazilian state tax authorities for additional payments of the value-added tax on services and circulation of goods (“ICMS”) in relation to the use of ICMS credits from sales and energy transmission. The change in the period refers basically to income tax on tax incentive , and new tax enforcement on brazilian federal contributions (“PIS/ COFINS”), circulation of goods (“ICMS”) and CFEM (Compensação Financeira pela Exploração de Recursos Minerais).

 

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

 

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

 

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

 

c)         Judicial deposits

 

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

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Tax litigation

 

841

 

822

 

Civil litigation

 

327

 

399

 

Labor litigation

 

2,264

 

2,163

 

Environmental litigation

 

67

 

61

 

Total

 

3,499

 

3,445

 

 

d)        Others

 

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

 

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

 

28



Table of Contents

 

 

15.                     Income taxes

 

a)        Deferred income tax

 

Changes in deferred tax are as follows:

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at March 31, 2016

 

27,317

 

6,467

 

20,850

 

Effect in income statement

 

(3,161

)

(36

)

(3,125

)

Translation adjustment

 

(1,022

)

(892

)

(130

)

Transfers between asset and liabilities

 

225

 

225

 

 

Other comprehensive income

 

37

 

(183

)

220

 

Balance at June 30, 2016

 

23,396

 

5,581

 

17,815

 

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at March 31, 2015

 

14,036

 

9,942

 

4,094

 

Effect in income statement

 

(492

)

(139

)

(353

)

Translation adjustment

 

(254

)

(362

)

108

 

Other comprehensive income

 

51

 

144

 

(93

)

Balance at June 30, 2015

 

13,341

 

9,585

 

3,756

 

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at December 31, 2015

 

30,867

 

6,520

 

24,347

 

Effect in income statement

 

(5,449

)

(213

)

(5,236

)

Translation adjustment

 

(2,114

)

(1,046

)

(1,068

)

Transfers between asset and liabilities

 

575

 

575

 

 

Other comprehensive income

 

(483

)

(255

)

(228

)

Balance at June 30, 2016

 

23,396

 

5,581

 

17,815

 

 

 

 

Consolidated

 

 

 

Assets

 

Liabilities

 

Total

 

Balance at December 31, 2014

 

10,560

 

8,874

 

1,686

 

Effect in income statement

 

2,336

 

(161

)

2,497

 

Translation adjustment

 

423

 

883

 

(460

)

Acquisition of subsidiary

 

(31

)

 

(31

)

Other comprehensive income

 

53

 

(11

)

64

 

Balance at June 30, 2015

 

13,341

 

9,585

 

3,756

 

 

b)        Income tax reconciliation

 

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

 

 

 

Consolidated

 

 

 

Three-months period ended
June 30

 

Six-months period ended
June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss) before income taxes

 

8,179

 

5,562

 

17,910

 

(6,779

)

Income taxes at statutory rates - 34%

 

(2,781

)

(1,891

)

(6,089

)

2,305

 

Adjustments that affect the basis of taxes:

 

 

 

 

 

 

 

 

 

Income tax benefit from interest on stockholders’ equity

 

 

509

 

 

1,054

 

Tax incentives

 

336

 

75

 

347

 

75

 

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

 

 

867

 

 

(118

)

Equity results

 

217

 

228

 

431

 

(53

)

Additions(reversals) of tax loss carry forward

 

(776

)

 

(567

)

 

Unrecognized tax losses of the period

 

(568

)

 

(1,291

)

 

Others results in associates and joint ventures

 

(1,269

)

 

(1,269

)

 

Others

 

301

 

(349

)

495

 

(1,175

)

Income taxes

 

(4,540

)

(561

)

(7,943

)

2,088

 

 

29



Table of Contents

 

 

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

 

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

 

At June 30, 2016, the balance of R$17,508 (R$1,419 as current and R$16,089 as non-current) is due in 148 remaining monthly installments, bearing interest at the SELIC rate.

 

16.                               Employee postretirement obligations

 

Reconciliation of assets and liabilities recognized in the balance sheet

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
benefits

 

Overfunded
pension plans

 

Underfunded
pension plans

 

Others
benefits

 

Balance at beginning of the period

 

3,754

 

 

 

3,455

 

 

 

Interest income

 

266

 

 

 

427

 

 

 

Changes in asset ceiling and onerous liability

 

1,423

 

 

 

(128

)

 

 

Balance at end of the period

 

5,443

 

 

 

3,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount recognized in the balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

Present value of actuarial liabilities

 

(9,873

)

(13,045

)

(4,487

)

(9,659

)

(14,407

)

(4,773

)

Fair value of assets

 

15,316

 

10,384

 

 

13,413

 

12,083

 

 

Effect of the asset ceiling

 

(5,443

)

 

 

(3,754

)

 

 

Liabilities

 

 

(2,661

)

(4,487

)

 

(2,324

)

(4,773

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

(65

)

(183

)

 

(67

)

(199

)

Non-current liabilities

 

 

(2,596

)

(4,304

)

 

(2,257

)

(4,574

)

Liabilities

 

 

(2,661

)

(4,487

)

 

(2,324

)

(4,773

)

 

17.                     Financial instruments classification

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Loans and
receivables
or amortized
cost

 

At fair value
through net
income

 

Total

 

Loans and
receivables
or amortized
cost

 

At fair value
through net
income

 

Derivatives
designated as
hedge
accounting

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

13,377

 

 

13,377

 

14,022

 

 

 

14,022

 

Financial investments

 

443

 

 

443

 

109

 

 

 

109

 

Derivative financial instruments

 

 

437

 

437

 

 

474

 

 

474

 

Accounts receivable

 

7,871

 

 

7,871

 

5,763

 

 

 

5,763

 

Related parties

 

218

 

 

218

 

273

 

 

 

273

 

 

 

21,909

 

437

 

22,346

 

20,167

 

474

 

 

20,641

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

1,596

 

1,596

 

 

363

 

 

363

 

Loans

 

576

 

 

576

 

732

 

 

 

732

 

Related parties

 

10

 

 

10

 

5

 

 

 

5

 

 

 

586

 

1,596

 

2,182

 

737

 

363

 

 

1,100

 

Total of financial assets

 

22,495

 

2,033

 

24,528

 

20,904

 

837

 

 

21,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Suppliers and contractors

 

12,489

 

 

12,489

 

13,140

 

 

 

13,140

 

Derivative financial instruments

 

 

3,242

 

3,242

 

 

7,909

 

198

 

8,107

 

Loans and borrowings

 

10,120

 

 

10,120

 

9,788

 

 

 

9,788

 

Related parties

 

1,927

 

 

1,927

 

1,856

 

 

 

1,856

 

 

 

24,536

 

3,242

 

27,778

 

24,784

 

7,909

 

198

 

32,891

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

3,857

 

3,857

 

 

5,581

 

 

5,581

 

Loans and borrowings

 

91,996

 

 

91,996

 

102,878

 

 

 

102,878

 

Related parties

 

462

 

 

462

 

830

 

 

 

830

 

Participative stockholders’ debentures

 

 

1,982

 

1,982

 

 

1,336

 

 

1,336

 

Others (i)

 

 

706

 

706

 

 

551

 

 

551

 

 

 

92,458

 

6,545

 

99,003

 

103,708

 

7,468

 

 

111,176

 

Total of financial liabilities

 

116,994

 

9,787

 

126,781

 

128,492

 

15,377

 

198

 

144,067

 

 


(i) See note 18(a).

 

30



Table of Contents

 

 

18.                               Fair value estimate

 

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

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Level 2

 

Level 3

 

Total

 

Level 2

 

Level 3

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

991

 

1,042

 

2,033

 

837

 

 

837

 

Total

 

991

 

1,042

 

2,033

 

837

 

 

837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

6,320

 

779

 

7,099

 

13,688

 

 

13,688

 

Participative stockholders’ debentures

 

1,982

 

 

1,982

 

1,336

 

 

1,336

 

Others (minimum return instrument)

 

 

706

 

706

 

 

551

 

551

 

Total

 

8,302

 

1,485

 

9,787

 

15,024

 

551

 

15,575

 

 

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

 

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

 

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

 

 

 

Consolidated

 

Financial liabilities

 

Balance

 

Fair value

 

Level 1

 

Level 2

 

June 30, 2016

 

 

 

 

 

 

 

 

 

Debt principal

 

99,783

 

97,739

 

47,774

 

49,965

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

Debt principal

 

110,231

 

102,434

 

48,017

 

54,417

 

 

19.                               Derivative financial instruments

 

a)        Derivatives effects on balance sheet

 

 

 

Consolidated

 

 

 

Assets

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Current

 

Non-current

 

Current

 

Non-current

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

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

 

353

 

174

 

269

 

 

IPCA swap

 

23

 

161

 

7

 

64

 

Pré-dolar swap

 

6

 

100

 

 

 

 

 

382

 

435

 

276

 

64

 

Commodities price risk

 

 

 

 

 

 

 

 

 

Nickel

 

49

 

3

 

198

 

41

 

Bunker oil

 

6

 

 

 

 

 

 

55

 

3

 

198

 

41

 

 

 

 

 

 

 

 

 

 

 

Others

 

 

1,158

 

 

258

 

 

 

 

1,158

 

 

258

 

Total

 

437

 

1,596

 

474

 

363

 

 

31



Table of Contents

 

 

 

 

Consolidated

 

 

 

Liabilities

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Current

 

Non-current

 

Current

 

Non-current

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

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

 

1,974

 

2,598

 

3,119

 

4,419

 

IPCA swap

 

83

 

229

 

82

 

393

 

Eurobonds swap

 

21

 

104

 

572

 

111

 

Euro forward

 

39

 

 

 

 

Pre dollar swap

 

64

 

141

 

364

 

280

 

 

 

2,181

 

3,072

 

4,137

 

5,203

 

Commodities price risk

 

 

 

 

 

 

 

 

 

Nickel

 

48

 

2

 

153

 

42

 

Bunker oil

 

1,013

 

 

3,609

 

 

 

 

1,061

 

2

 

3,762

 

42

 

 

 

 

 

 

 

 

 

 

 

Others

 

 

783

 

 

336

 

 

 

 

783

 

 

336

 

Derivatives designated as cash flow hedge accounting

 

 

 

 

 

 

 

 

 

Bunker oil

 

 

 

198

 

 

Foreign exchange

 

 

 

10

 

 

 

 

 

 

208

 

 

Total

 

3,242

 

3,857

 

8,107

 

5,581

 

 

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

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

 

 

Gain (loss) recognized in the
income statement

 

Financial settlement
inflows(outflows)

 

Gain(loss) recognized in other
comprehensive income

 

 

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

1,491

 

534

 

(163

)

37

 

 

 

IPCA swap

 

101

 

73

 

 

9

 

 

 

Eurobonds swap

 

(70

)

86

 

 

(39

)

 

 

Euro forward

 

(51

)

 

 

 

 

 

Pre dollar swap

 

137

 

37

 

(6

)

(5

)

 

 

 

 

1,608

 

730

 

(169

)

2

 

 

 

Commodities price risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel

 

(49

)

(34

)

(35

)

(34

)

 

 

Bunker oil

 

526

 

236

 

(1,032

)

30

 

 

 

 

 

477

 

202

 

(1,067

)

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

488

 

(203

)

 

 

 

 

 

 

488

 

(203

)

 

 

 

 

Derivatives designated as cash flow hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker oil

 

 

(291

)

 

(271

)

 

524

 

Foreign exchange

 

 

(30

)

 

(30

)

2

 

29

 

 

 

 

(321

)

 

(301

)

2

 

553

 

Total

 

2,573

 

408

 

(1,236

)

(303

)

2

 

553

 

 

32



Table of Contents

 

 

 

 

Consolidated

 

 

 

Six-months period ended June 30

 

 

 

Gain (loss) recognized in the
income statement

 

Financial settlement
inflows(outflows)

 

Gain(loss) recognized in other
comprehensive income

 

 

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

 

Derivatives not designated as hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange and interest rate risk

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

2,803

 

(2,359

)

(338

)

(879

)

 

 

IPCA swap

 

241

 

(150

)

5

 

20

 

 

 

Eurobonds swap

 

(30

)

(338

)

(524

)

(39

)

 

 

Euro forward

 

(42

)

 

 

 

 

 

Pre dollar swap

 

244

 

(235

)

(301

)

(11

)

 

 

 

 

3,216

 

(3,082

)

(1,158

)

(909

)

 

 

Commodities price risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel

 

(143

)

(57

)

(104

)

(79

)

 

 

Bunker oil

 

466

 

84

 

(1,737

)

(382

)

 

 

 

 

323

 

27

 

(1,841

)

(461

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

470

 

(222

)

 

 

 

 

 

 

470

 

(222

)

 

 

 

 

Derivatives designated as cash flow hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker oil

 

 

(634

)

(203

)

(646

)

 

832

 

Foreign exchange

 

(10

)

(72

)

(10

)

(72

)

10

 

28

 

 

 

(10

)

(706

)

(213

)

(718

)

10

 

860

 

Total

 

3,999

 

(3,983

)

(3,212

)

(2,088

)

10

 

860

 

 

The Company recognized as operating income and financial results the loss of R$291 and gain of R$699 for the three-months period ended June 30, 2015, and R$634 and R$3,349 of losses for the six-month ended June 30, 2015. In 2016, all derivatives impacts were charged to financial results.

 

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

 

 

 

Last maturity dates

 

Currencies and interest rates

 

July 2023

 

Bunker oil

 

December 2016

 

Nickel

 

August 2018

 

Others

 

December 2027

 

 

Additional information about derivatives financial instruments

 

The risk of the derivatives portfolio is measured using the delta-Normal parametric approach, and considers that the future distribution of the risk factors and its correlations tends to present the same statistic properties verified in the historical data. The value at risk estimate considers a 95% confidence level for a one-business day time horizon.

 

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

 

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

 

33



Table of Contents

 

 

a)                           Foreign exchange and interest rates derivative positions

 

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

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial settlement

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

 

 

 

 

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Index

 

Average rate

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

2017

 

2018

 

2019+

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CDI vs. US$ fixed rate swap

 

 

 

 

 

(1,734

)

(3,059

)

227

 

156

 

(1,228

)

48

 

(554

)

 

Receivable

 

R$

5,739

 

R$

5,239

 

CDI

 

107.41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

2,427

 

US$

2,288

 

Fix

 

3.47

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ fixed rate swap

 

 

 

 

 

(2,147

)

(3,965

)

(561

)

217

 

(164

)

(692

)

(335

)

(957

)

Receivable

 

R$

5,096

 

R$

5,484

 

TJLP+

 

1.33

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

2,251

 

US$

2,611

 

Fix

 

1.72

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ floating rate swap

 

 

 

 

 

 

(164

)

(245

)

(4

)

15

 

(3

)

(9

)

(13

)

(139

)

Receivable

 

R$

256

 

R$

267

 

TJLP+

 

0.92

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

148

 

US$

156

 

Libor+

 

-1.21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R$ fixed rate vs. US$ fixed rate swap

 

 

 

 

 

 

(99

)

(644

)

(300

)

77

 

(52

)

(14

)

36

 

(69

)

Receivable

 

R$

1,128

 

R$

1,356

 

Fix

 

7.32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

391

 

US$

528

 

Fix

 

-0.83

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. US$ fixed rate swap

 

 

 

 

 

 

(178

)

(411

)

5

 

36

 

 

20

 

16

 

(214

)

Receivable

 

R$

1,000

 

R$

1,000

 

IPCA+

 

6.55

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

434

 

US$

434

 

Fix

 

3.98

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. CDI swap

 

 

 

 

 

 

51

 

6

 

 

1

 

(80

)

(59

)

(34

)

224

 

Receivable

 

R$

1,350

 

R$

1,350

 

IPCA+

 

6.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

1,350

 

US$

1,350

 

CDI

 

98.58

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(ii)   Protection program for EUR denominated debt instruments

 

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

 

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

 

 

 

Notional

 

 

 

 

 

Fair value

 

Financial settlement
Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Index

 

Average rate

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

2017

 

2018

 

2019+

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR fixed rate vs. US$ fixed rate swap

 

 

 

 

 

(125

)

(683

)

(524

)

33

 

 

(18

)

(16

)

(91

)

Receivable

 

500

 

1,000

 

Fix

 

3.75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable

 

US$

613

 

US$

1,302

 

Fix

 

4.29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

 

Bought /

 

Average rate

 

Fair value

 

Financial settlement
Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(USD/EUR)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

2017

 

Forward

 

500

 

 

B

 

1.143

 

(39

)

 

 

20.1

 

 

(39

)

 

(iii)    Foreign exchange hedging program for disbursements in CAD

 

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

 

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

 

34



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial settlement

 

 

 

Fair value

 

 

 

Notional

 

Bought /

 

Average rate

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(CAD / USD)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward

 

 

CAD 10

 

B

 

1.028

 

 

(10

)

 

 

 

 

b)                           Commodities derivative positions

 

(i)       Bunker Oil purchase cash flows protection program

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

Financial Settlement

 

 

 

Fair value

 

 

 

Notional (ton)

 

Bought /

 

Average strike

 

Fair value

 

Inflows (Outflows)

 

Value at Risk

 

by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bunker Oil protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forwards

 

705,000

 

1,867,500

 

B

 

511

 

(577

)

(2,252

)

(1,195

)

27

 

(577

)

Call options

 

1,080,000

 

2,041,500

 

B

 

380

 

6.0

 

0.1

 

 

2.5

 

6.0

 

Put options

 

1,080,000

 

2,041,500

 

S

 

300

 

(184

)

(1,158

)

(542

)

30

 

(184

)

Total

 

 

 

 

 

 

 

 

 

(755

)

(3,410

)

 

 

 

 

(755

)

 

As at June 30, 2016 and December 31, 2015, excludes R$252 and R$397, respectively, of transactions in which the financial settlement occurs subsequently of the closing month.

 

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

 

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

 

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

 

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

 

 

 

Notional (ton)

 

Bought /

 

Average strike

 

Fair value

 

Financial Settlement
Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

2017

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed prices sales protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel forwards

 

14,545

 

16,917

 

B

 

10,429

 

(42

)

(180

)

(102

)

14

 

(29

)

(17

)

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials purchase protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel forwards

 

178

 

118

 

S

 

8,813

 

(0.3

)

0.4

 

0.4

 

0.2

 

(0.3

)

 

 

Copper forwards

 

581

 

385

 

S

 

4,774

 

(0.1

)

0.4

 

0.3

 

0.2

 

(0.1

)

 

 

Total

 

 

 

 

 

 

 

 

 

(0.5

)

0.7

 

 

 

 

 

(0.5

)

 

 

 

35



Table of Contents

 

 

c)                            Silver Wheaton Corp. warrants

 

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

 

 

 

Notional (quantity)

 

Bought /

 

Average strike

 

Fair value

 

Financial Settlement

Inflows (Outflows)

 

Value at Risk

 

Fair value
by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(US$/share)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2023

 

Call options

 

10,000,000

 

10,000,000

 

B

 

65

 

116

 

28

 

 

21

 

116

 

 

d)                           Call options from debentures

 

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

 

 

 

Notional (quantity)

 

Bought /

 

Average strike

 

Fair value

 

Financial Settlement

Inflows (Outflows)

 

Value at Risk

 

Fair value
by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(R$/share)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2027

 

Call options

 

140,239

 

140,239

 

S

 

8,570

 

(139

)

(152

)

 

9

 

(139

)

 

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

 

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

 

 

 

Notional (quantity, in millions)

 

Bought /

 

Average strike

 

Fair value

 

Financial Settlement

Inflows (Outflows)

 

Value at Risk

 

Fair value
by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(R$/ação)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016+

 

Options

 

2,139

 

2,139

 

B/S

 

1.9

 

402

 

57

 

 

33

 

402

 

 

f)                             Embedded derivatives in commercial contracts

 

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

 

 

 

Notional (ton)

 

Bought /

 

Average strike

 

Fair value

 

Financial Settlement

Inflows (Outflows)

 

Value at Risk

 

Fair value
by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

Nickel Forward

 

4,983

 

3,877

 

S

 

8,543

 

(0.9

)

11.7

 

 

 

 

 

(2.1

)

Copper Forward

 

3,937

 

5,939

 

S

 

4,653

 

(1.3

)

7.7

 

 

 

 

 

1.0

 

Total

 

 

 

 

 

 

 

 

 

(2.2

)

19.4

 

 

5.7

 

(1.1

)

 

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

 

 

 

Notional (volume/month)

 

Bought /

 

Average strike

 

Fair value

 

Financial Settlement
Inflows (Outflows)

 

Value at Risk

 

Fair value by year

 

Flow

 

June 30, 2016

 

December 31, 2015

 

Sold

 

(US$/ton)

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

June 30, 2016

 

2016

 

2017

 

2018+

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call options

 

746,667

 

746,667

 

S

 

179

 

(4.2

)

 

 

2.7

 

(0.0

)

(0.1

)

(4.1

)

 

36



Table of Contents

 

 

g)                           Sensitivity analysis of derivative financial instruments

 

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

 

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

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

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

 

Instrument

 

Instrument’s main risk events

 

Scenario I

 

Scenario II

 

Scenario III

 

 

 

 

 

 

 

 

 

 

 

CDI vs. US$ fixed rate swap

 

R$ depreciation

 

(1.734

)

(3.718

)

(5.702

)

 

 

US$ interest rate inside Brazil decrease

 

(1.734

)

(1.770

)

(1.806

)

 

 

Brazilian interest rate increase

 

(1.734

)

(1.741

)

(1.749

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ fixed rate swap

 

R$ depreciation

 

(2.147

)

(3.895

)

(5.643

)

 

 

US$ interest rate inside Brazil decrease

 

(2.147

)

(2.258

)

(2.374

)

 

 

Brazilian interest rate increase

 

(2.147

)

(2.377

)

(2.585

)

 

 

TJLP interest rate decrease

 

(2.147

)

(2.300

)

(2.459

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

TJLP vs. US$ floating rate swap

 

R$ depreciation

 

(164

)

(271

)

(377

)

 

 

US$ interest rate inside Brazil decrease

 

(164

)

(174

)

(184

)

 

 

Brazilian interest rate increase

 

(164

)

(179

)

(193

)

 

 

TJLP interest rate decrease

 

(164

)

(174

)

(185

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

R$ fixed rate vs. US$ fixed rate swap

 

R$ depreciation

 

(99

)

(417

)

(735

)

 

 

US$ interest rate inside Brazil decrease

 

(99

)

(145

)

(195

)

 

 

Brazilian interest rate increase

 

(99

)

(202

)

(290

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. US$ fixed rate swap

 

R$ depreciation

 

(178

)

(550

)

(922

)

 

 

US$ interest rate inside Brazil decrease

 

(178

)

(207

)

(237

)

 

 

Brazilian interest rate increase

 

(178

)

(282

)

(374

)

 

 

IPCA index decrease

 

(178

)

(230

)

(280

)

Protected item: R$ denominated debt

 

R$ depreciation

 

n.a.

 

 

 

 

 

 

 

 

 

 

 

 

 

IPCA vs. CDI swap

 

Brazilian interest rate increase

 

51

 

(110

)

(247

)

 

 

IPCA index decrease

 

51

 

(30

)

(107

)

Protected item: R$ denominated debt linked to IPCA

 

IPCA index decrease

 

n.a.

 

30

 

107

 

 

 

 

 

 

 

 

 

 

 

EUR fixed rate vs. US$ fixed rate swap

 

EUR depreciation

 

(125

)

(685

)

(1.246

)

 

 

Euribor increase

 

(125

)

(139

)

(153

)

 

 

US$ Libor decrease

 

(125

)

(162

)

(201

)

Protected item: EUR denominated debt

 

EUR depreciation

 

n.a.

 

685

 

1.246

 

 

 

 

 

 

 

 

 

 

 

EUR Forward

 

EUR depreciation

 

(39

)

(485

)

(931

)

 

 

Euribor increase

 

(39

)

(40

)

(42

)

 

 

US$ Libor decrease

 

(39

)

(41

)

(43

)

Protected item: EUR denominated debt

 

EUR depreciation

 

n.a.

 

485

 

931

 

 

37



Table of Contents

 

 

Instrument

 

Instrument’s main risk events

 

Scenario I

 

Scenario II

 

Scenario III

 

 

 

 

 

 

 

 

 

 

 

Bunker Oil protection

 

 

 

 

 

 

 

 

 

Forwards and options

 

Bunker Oil price decrease

 

(755

)

(1.093

)

(1.453

)

Protected item: Part of costs linked to bunker oil prices

 

Bunker Oil price decrease

 

n.a.

 

1.093

 

1.453

 

 

 

 

 

 

 

 

 

 

 

Nickel sales fixed price protection

 

 

 

 

 

 

 

 

 

Forwards

 

Nickel price decrease

 

(42

)

(153

)

(263

)

Protected item: Part of nickel revenues with fixed prices

 

Nickel price fluctuation

 

n.a.

 

153

 

263

 

 

 

 

 

 

 

 

 

 

 

Purchase protection program

 

 

 

 

 

 

 

 

 

Nickel forwards

 

Nickel price increase

 

(0,3

)

(1,7

)

(3,0

)

Protected item: Part of costs linked to nickel prices

 

Nickel price increase

 

n.a.

 

1,7

 

3,0

 

 

 

 

 

 

 

 

 

 

 

Copper forwards

 

Copper price increase

 

(0,1

)

(2,4

)

(4,7

)

Protected item: Part of costs linked to copper prices

 

Copper price increase

 

n.a.

 

2,4

 

4,7

 

 

 

 

 

 

 

 

 

 

 

SLW warrants

 

SLW stock price decrease

 

116

 

15

 

(67

)

 

 

 

 

 

 

 

 

 

 

VLI call options

 

VLI stock value increase

 

(139

)

(220

)

(304

)

 

 

 

 

 

 

 

 

 

 

Options regarding non-controlling interest in subsidiary

 

Subsidiary stock value decrease

 

402

 

153

 

(33

)

 

 

 

 

 

 

 

 

 

 

Instrument

 

Main risks

 

Scenario I

 

Scenario II

 

Scenario III

 

 

 

 

 

 

 

 

 

 

 

Embedded derivatives - Raw material purchase (nickel)

 

Nickel price increase

 

(1

)

(37

)

(72

)

Embedded derivatives - Raw material purchase (copper)

 

Copper price increase

 

(1

)

(16

)

(31

)

Embedded derivatives - Gas purchase

 

Pellet price increase

 

(4

)

(8

)

(15

)

 

h)                           Financial counterparties’ ratings

 

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

 

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

 

Long term ratings by counterparty

 

Moody’s

 

S&P

ANZ Australia and New Zealand Banking

 

Aa2

 

AA-

Banco Bradesco

 

Ba3

 

BB

Banco de Credito del Peru

 

Baa1

 

BBB

Banco do Brasil

 

Ba3

 

BB

Banco do Nordeste

 

Ba3

 

BB

Banco Safra

 

Ba3

 

BB

Banco Santander

 

Ba3

 

BB

Banco Votorantim

 

Ba3

 

BB

Bank of America

 

Baa1

 

BBB+

Bank of Nova Scotia

 

Aa3

 

A+

Bank of Tokyo Mitsubishi UFJ

 

A1

 

A

Banpara

 

Ba3

 

BB-

Barclays

 

Baa3

 

BBB

BBVA

 

A3

 

BBB+

BNP Paribas

 

A1

 

A

BTG Pactual

 

Ba3

 

B+

Caixa Economica Federal

 

Ba3

 

BB

Citigroup

 

Baa1

 

BBB+

Credit Agricole

 

A2

 

A

Deutsche Bank

 

A3

 

BBB+

Goldman Sachs

 

A3

 

BBB+

HSBC

 

A1

 

A

Intesa Sanpaolo Spa

 

A3

 

BBB-

Itau Unibanco

 

Ba3

 

BB

JP Morgan Chase & Co

 

A3

 

A-

Macquarie Group Ltd

 

A3

 

BBB

Morgan Stanley

 

A3

 

BBB+

National Australia Bank NAB

 

Aa2

 

AA-

Royal Bank of Canada

 

Aa3

 

AA-

Societe Generale

 

A2

 

A

Standard Bank Group

 

Baa3

 

Standard Chartered

 

A1

 

BBB+

 

38



Table of Contents

 

 

i)                              Market curves

 

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

 

(i)       Products

 

Nickel

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

SPOT

 

9,415

 

DEC16

 

9,488

 

JUN17

 

9,556

 

JUL16

 

9,416

 

JAN17

 

9,502

 

JUN18

 

9,671

 

AUG16

 

9,433

 

FEB17

 

9,515

 

JUN19

 

9,773

 

SEP16

 

9,447

 

MAR17

 

9,527

 

JUN20

 

9,860

 

OCT16

 

9,462

 

APR17

 

9,536

 

 

 

 

 

NOV16

 

9,476

 

MAY17

 

9,547

 

 

 

 

 

 

Copper

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Price (US$/lb)

 

Maturity

 

Price (US$/lb)

 

Maturity

 

Price (US$/lb)

 

SPOT

 

2.20

 

DEC16

 

2.20

 

JUN17

 

2.20

 

JUL16

 

2.20

 

JAN17

 

2.20

 

JUN18

 

2.22

 

AUG16

 

2.20

 

FEB17

 

2.20

 

JUN19

 

2.22

 

SEP16

 

2.20

 

MAR17

 

2.20

 

JUN20

 

2.24

 

OCT16

 

2.20

 

APR17

 

2.20

 

 

 

 

 

NOV16

 

2.20

 

MAY17

 

2.20

 

 

 

 

 

 

Bunker Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

Maturity

 

Price (US$/ton)

 

SPOT

 

257

 

DEC16

 

253

 

JUN17

 

263

 

JUL16

 

254

 

JAN17

 

255

 

JUN18

 

281

 

AUG16

 

250

 

FEB17

 

257

 

JUN19

 

295

 

SEP16

 

250

 

MAR17

 

259

 

JUN20

 

310

 

OCT16

 

250

 

APR17

 

260

 

 

 

 

 

NOV16

 

252

 

MAY17

 

262

 

 

 

 

 

 

(ii)   Foreign exchange and interest rates

 

US$-Brazil Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

08/01/16

 

3.54

 

06/01/17

 

2.80

 

10/01/19

 

3.52

 

09/01/16

 

3.12

 

07/03/17

 

2.80

 

01/02/20

 

3.67

 

10/03/16

 

2.90

 

10/02/17

 

2.89

 

04/01/20

 

3.72

 

11/01/16

 

2.80

 

01/02/18

 

2.96

 

07/01/20

 

3.86

 

12/01/16

 

2.72

 

04/02/18

 

3.03

 

10/01/20

 

4.03

 

01/02/17

 

2.69

 

07/02/18

 

3.10

 

01/04/21

 

4.14

 

02/01/17

 

2.69

 

10/01/18

 

3.21

 

04/01/21

 

4.25

 

03/01/17

 

2.71

 

01/02/19

 

3.28

 

07/01/21

 

4.35

 

04/03/17

 

2.73

 

04/01/19

 

3.39

 

01/03/22

 

4.63

 

05/02/17

 

2.77

 

07/01/19

 

3.46

 

01/02/23

 

5.09

 

 

US$ Interest Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

1M

 

0.47

 

6M

 

0.67

 

11M

 

0.68

 

2M

 

0.55

 

7M

 

0.67

 

12M

 

0.68

 

3M

 

0.65

 

8M

 

0.67

 

2Y

 

0.74

 

4M

 

0.66

 

9M

 

0.68

 

3Y

 

0.81

 

5M

 

0.67

 

10M

 

0.68

 

4Y

 

0.90

 

 

TJLP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

08/01/16

 

7.50

 

06/01/17

 

7.50

 

10/01/19

 

7.50

 

09/01/16

 

7.50

 

07/03/17

 

7.50

 

01/02/20

 

7.50

 

10/03/16

 

7.50

 

10/02/17

 

7.50

 

04/01/20

 

7.50

 

11/01/16

 

7.50

 

01/02/18

 

7.50

 

07/01/20

 

7.50

 

12/01/16

 

7.50

 

04/02/18

 

7.50

 

10/01/20

 

7.50

 

01/02/17

 

7.50

 

07/02/18

 

7.50

 

01/04/21

 

7.50

 

02/01/17

 

7.50

 

10/01/18

 

7.50

 

04/01/21

 

7.50

 

03/01/17

 

7.50

 

01/02/19

 

7.50

 

07/01/21

 

7.50

 

04/03/17

 

7.50

 

04/01/19

 

7.50

 

01/03/22

 

7.50

 

05/02/17

 

7.50

 

07/01/19

 

7.50

 

01/02/23

 

7.50

 

 

39



Table of Contents

 

 

BRL Interest Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

08/01/16

 

14.11

 

06/01/17

 

13.43

 

10/01/19

 

12.30

 

09/01/16

 

14.11

 

07/03/17

 

13.34

 

01/02/20

 

12.24

 

10/03/16

 

14.10

 

10/02/17

 

13.11

 

04/01/20

 

12.22

 

11/01/16

 

14.06

 

01/02/18

 

12.88

 

07/01/20

 

12.21

 

12/01/16

 

14.03

 

04/02/18

 

12.74

 

10/01/20

 

12.20

 

01/02/17

 

13.92

 

07/02/18

 

12.61

 

01/04/21

 

12.15

 

02/01/17

 

13.80

 

10/01/18

 

12.53

 

04/01/21

 

12.16

 

03/01/17

 

13.72

 

01/02/19

 

12.41

 

07/01/21

 

12.16

 

04/03/17

 

13.64

 

04/01/19

 

12.35

 

01/03/22

 

12.17

 

05/02/17

 

13.55

 

07/01/19

 

12.33

 

01/02/23

 

12.24

 

 

Implicit Inflation (IPCA)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

08/01/16

 

6.93

 

06/01/17

 

6.29

 

10/01/19

 

5.48

 

09/01/16

 

6.93

 

07/03/17

 

6.21

 

01/02/20

 

5.43

 

10/03/16

 

6.93

 

10/02/17

 

6.12

 

04/01/20

 

5.42

 

11/01/16

 

6.88

 

01/02/18

 

5.98

 

07/01/20

 

5.42

 

12/01/16

 

6.86

 

04/02/18

 

5.87

 

10/01/20

 

5.43

 

01/02/17

 

6.76

 

07/02/18

 

5.76

 

01/04/21

 

5.39

 

02/01/17

 

6.64

 

10/01/18

 

5.68

 

04/01/21

 

5.41

 

03/01/17

 

6.56

 

01/02/19

 

5.57

 

07/01/21

 

5.43

 

04/03/17

 

6.49

 

04/01/19

 

5.51

 

01/03/22

 

5.47

 

05/02/17

 

6.41

 

07/01/19

 

5.50

 

01/02/23

 

5.60

 

 

EUR Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

1M

 

-0.36

 

6M

 

-0.23

 

11M

 

-0.20

 

2M

 

-0.32

 

7M

 

-0.22

 

12M

 

-0.20

 

3M

 

-0.29

 

8M

 

-0.21

 

2Y

 

-0.07

 

4M

 

-0.26

 

9M

 

-0.21

 

3Y

 

-0.03

 

5M

 

-0.24

 

10M

 

-0.20

 

4Y

 

-0.01

 

 

CAD Interest Rate

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

Maturity

 

Rate (% p.a.)

 

1M

 

0.88

 

6M

 

1.01

 

11M

 

0.88

 

2M

 

0.88

 

7M

 

0.97

 

12M

 

0.87

 

3M

 

0.88

 

8M

 

0.94

 

2Y

 

0.86

 

4M

 

0.94

 

9M

 

0.92

 

3Y

 

0.88

 

5M

 

0.98

 

10M

 

0.90

 

4Y

 

0.90

 

 

Currencies - Ending rates

 

CAD/US$

 

0.7682

 

US$/BRL

 

3.2098

 

EUR/US$

 

1.1103

 

 

40



Table of Contents

 

 

20.                               Stockholders’ equity

 

a)        Share capital

 

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

 

 

 

June 30, 2016

 

 

 

ON

 

PNA

 

Total

 

Stockholders

 

 

 

 

 

 

 

Valepar S.A.

 

1,716,435,045

 

20,340,000

 

1,736,775,045

 

Brazilian Government (Golden Share)

 

 

12

 

12

 

Foreign investors - ADRs

 

789,507,484

 

657,055,684

 

1,446,563,168

 

FMP - FGTS

 

76,647,018

 

 

76,647,018

 

PIBB - BNDES

 

1,185,752

 

1,028,029

 

2,213,781

 

BNDESPar

 

206,378,882

 

66,185,272

 

272,564,154

 

Foreign institutional investors in local market

 

268,445,614

 

730,516,782

 

998,962,396

 

Institutional investors

 

85,718,256

 

120,989,909

 

206,708,165

 

Retail investors in Brazil

 

41,334,949

 

371,606,238

 

412,941,187

 

Shares outstanding

 

3,185,653,000

 

1,967,721,926

 

5,153,374,926

 

Shares in treasury

 

31,535,402

 

59,405,792

 

90,941,194

 

Total issued shares

 

3,217,188,402

 

2,027,127,718

 

5,244,316,120

 

 

 

 

 

 

 

 

 

Amounts per class of shares (in millions)

 

47,421

 

29,879

 

77,300

 

 

 

 

 

 

 

 

 

Total authorized shares

 

3,600,000,000

 

7,200,000,000

 

10,800,000,000

 

 

b)        Basic and diluted earnings per share

 

Basic and diluted earnings per share are as follows:

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Net income (loss) attributable to Vale’s stockholders

 

3,585

 

5,144

 

9,896

 

(4,395

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

Income (loss) available to preferred stockholders

 

1,369

 

1,964

 

3,779

 

(1,678

)

Income (loss) available to common stockholders

 

2,216

 

3,180

 

6,117

 

(2,717

)

Total

 

3,585

 

5,144

 

9,896

 

(4,395

)

Thousands of shares

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - preferred shares

 

1,967,722

 

1,967,722

 

1,967,722

 

1,967,722

 

Weighted average number of shares outstanding - common shares

 

3,185,653

 

3,185,653

 

3,185,653

 

3,185,653

 

Total

 

5,153,375

 

5,153,375

 

5,153,375

 

5,153,375

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

 

 

 

 

 

 

 

 

Preferred share

 

0.70

 

1.00

 

1.92

 

(0.85

)

Common share

 

0.70

 

1.00

 

1.92

 

(0.85

)

 

41



Table of Contents

 

 

21.                               Costs and expenses by nature

 

a)        Cost of goods sold and services rendered

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Personnel

 

2,092

 

1,941

 

4,037

 

3,509

 

Materials and services

 

4,049

 

3,045

 

7,123

 

5,904

 

Fuel oil and gas

 

1,106

 

1,086

 

2,299

 

1,973

 

Maintenance

 

2,265

 

2,130

 

4,685

 

4,039

 

Energy

 

670

 

529

 

1,305

 

943

 

Acquisition of products

 

511

 

763

 

837

 

1,467

 

Depreciation and depletion

 

3,037

 

2,714

 

6,196

 

5,367

 

Freight

 

2,132

 

2,638

 

4,052

 

4,906

 

Others

 

929

 

1,122

 

2,724

 

2,848

 

Total

 

16,791

 

15,968

 

33,258

 

30,956

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

16,380

 

15,542

 

32,431

 

30,110

 

Cost of services rendered

 

411

 

426

 

827

 

846

 

Total

 

16,791

 

15,968

 

33,258

 

30,956

 

 

b)        Selling and administrative expenses

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Personnel

 

204

 

223

 

403

 

462

 

Services (consulting, infrastructure and others)

 

63

 

77

 

124

 

158

 

Advertising and publicity

 

6

 

8

 

10

 

16

 

Depreciation and amortization

 

116

 

103

 

205

 

185

 

Travel expenses

 

9

 

9

 

14

 

17

 

Taxes and rents

 

10

 

11

 

25

 

28

 

Others

 

85

 

57

 

177

 

177

 

Total

 

493

 

488

 

958

 

1,043

 

 

c)         Others operational expenses (incomes), net

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Provision for litigation

 

224

 

126

 

346

 

73

 

Provision for loss with VAT credits (ICMS)

 

19

 

194

 

136

 

313

 

Provision (reversals) for disposal of materials and inventories

 

(22

)

97

 

(351

)

282

 

Gold stream transaction

 

 

 

 

(722

)

Insurance and externalities

 

116

 

22

 

194

 

59

 

Result on sale or disposal of property, plant and equipment and intangible

 

104

 

(47

)

144

 

 

Others

 

125

 

230

 

231

 

437

 

Total

 

566

 

622

 

700

 

442

 

 

42



Table of Contents

 

 

22.                               Financial result

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

2016

 

2015

 

Financial expenses

 

 

 

 

 

 

 

 

 

Loans and borrowings gross interest

 

(1,586

)

(1,246

)

(3,197

)

(2,365

)

Capitalized loans and borrowing costs

 

749

 

545

 

1,439

 

1,101

 

Labor, tax and civil lawsuits

 

(1

)

(53

)

(82

)

(147

)

Derivative financial instruments

 

(575

)

(267

)

(803

)

(4,316

)

Indexation and exchange rate variation (a)

 

(3,625

)

(1,934

)

(7,904

)

(17,846

)

Participative stockholders’ debentures

 

(312

)

1,107

 

(763

)

1,828

 

Expenses of REFIS

 

(454

)

(439

)

(902

)

(848

)

Others

 

(540

)

(575

)

(1,112

)

(898

)

 

 

(6,344

)

(2,862

)

(13,324

)

(23,491

)

Financial income

 

 

 

 

 

 

 

 

 

Short-term investments

 

95

 

65

 

259

 

139

 

Derivative financial instruments

 

3,148

 

966

 

4,802

 

967

 

Indexation and exchange rate variation (b)

 

10,149

 

3,431

 

20,014

 

10,210

 

Others

 

25

 

24

 

95

 

121

 

 

 

13,417

 

4,486

 

25,170

 

11,437

 

Financial results, net

 

7,073

 

1,624

 

11,846

 

(12,054

)

 

 

 

 

 

 

 

 

 

 

Summary of indexation and exchange rate variation

 

 

 

 

 

 

 

 

 

Loans and borrowings

 

9,509

 

2,735

 

19,101

 

(12,355

)

Others

 

(2,985

)

(1,238

)

(6,991

)

4,719

 

Net (a) + (b)

 

6,524

 

1,497

 

12,110

 

(7,636

)

 

23.                               Commitments

 

a)        Base metals operations

 

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

 

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

 

b)        Operating lease and purchase obligations

 

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

 

2016

 

170

 

2017

 

196

 

2018

 

206

 

2019

 

177

 

2020 and thereafter

 

186

 

Total minimum payments required

 

935

 

 

c)         Guarantees provided

 

As of June 30, 2016, corporate guarantees provided by Vale (within the limit of its direct or indirect interest) for the companies Norte Energia S.A. and Companhia Siderúrgica do Pecém S.A. totaled R$1.125 and R$4.228 respectively.

 

43



Table of Contents

 

 

24.                               Related parties

 

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

 

In the normal course of operations, Vale enters into contracts with related parties (associates, joint ventures and stockholders), related to the sale and purchase of products and services, loans, derivatives, leasing of assets, sale of raw material and railway transportation services.

 

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

 

 

 

Assets

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Cash and
cash
equivalents

 

Derivative
financial
instruments

 

Accounts
receivable

 

Related
parties

 

Cash and
cash
equivalents

 

Derivative
financial
instruments

 

Accounts
receivable

 

Related
parties

 

Banco Bradesco S.A.

 

157

 

1,072

 

 

 

144

 

258

 

 

 

Banco do Brasil S.A.

 

520

 

125

 

 

 

1,544

 

62

 

 

 

Baovale Mineração S.A.

 

 

 

 

 

 

 

 

4

 

Companhia Coreano-Brasileira de Pelotização

 

 

 

 

45

 

 

 

 

22

 

Companhia Hispano-Brasileira de Pelotização

 

 

 

7

 

 

 

 

3

 

14

 

Companhia Ítalo-Brasileira de Pelotização

 

 

 

 

 

 

 

 

33

 

Companhia Nipo-Brasileira de Pelotização

 

 

 

 

71

 

 

 

 

35

 

Companhia Siderúrgica do Pecem

 

 

 

80

 

 

 

 

 

 

Consórcio de Rebocadores da Baia de São Marcos

 

 

 

39

 

 

 

 

60

 

 

Ferrovia Norte Sul S.A.

 

 

 

26

 

 

 

 

12

 

 

Mitsui & Co., Ltd.

 

 

 

9

 

 

 

 

5

 

 

MRS Logística S.A.

 

 

 

 

61

 

 

 

 

65

 

VLI Multimodal S.A.

 

 

 

18

 

 

 

 

36

 

 

VLI Operações Portuárias S.A.

 

 

 

43

 

 

 

 

99

 

 

VLI S.A.

 

 

 

 

38

 

 

 

 

39

 

Others

 

 

 

55

 

13

 

 

 

91

 

66

 

Total

 

677

 

1,197

 

277

 

228

 

1,688

 

320

 

306

 

278

 

 

 

 

Liabilities

 

 

 

Consolidated

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Others
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Others
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Aliança Geração de Energia S.A.

 

38

 

 

174

 

 

43

 

 

 

 

Banco Bradesco S.A.

 

424

 

1.098

 

 

562

 

212

 

800

 

 

1.445

 

Banco do Brasil S.A.

 

 

664

 

 

9.475

 

 

976

 

 

10.250

 

Baovale Mineração S.A.

 

57

 

 

 

 

29

 

 

 

 

BNDES

 

 

138

 

 

14.951

 

 

152

 

 

15.877

 

BNDES Participações S.A.

 

 

 

 

1.399

 

 

 

 

1.449

 

Companhia Coreano-Brasileira de Pelotização

 

216

 

 

110

 

 

15

 

 

273

 

 

Companhia Hispano-Brasileira de Pelotização

 

74

 

 

68

 

 

143

 

 

26

 

 

Companhia Ítalo-Brasileira de Pelotização

 

70

 

 

161

 

 

12

 

 

252

 

 

Companhia Nipo-Brasileira de Pelotização

 

209

 

 

207

 

 

34

 

 

436

 

 

Consórcio de Rebocadores Baia da São Marcos

 

 

 

 

 

30

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

 

 

266

 

 

 

 

266

 

 

Mitsui & Co., Ltd.

 

42

 

 

 

 

41

 

 

 

 

 

MRS Logística S.A.

 

37

 

 

 

 

91

 

 

 

 

Sumic Nickel Netherland B.V.

 

 

 

1.162

 

 

 

 

1.374

 

 

VLI S.A.

 

2

 

 

218

 

 

 

 

 

 

Others

 

7

 

 

23

 

 

93

 

 

59

 

 

Total

 

1.176

 

1.900

 

2.389

 

26.387

 

743

 

1.928

 

2.686

 

29.021

 

 

44



Table of Contents

 

 

 

 

Consolidated

 

 

 

Three-months period ended June 30

 

 

 

2016

 

2015

 

 

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Banco Bradesco S.A. (i)

 

 

 

486

 

 

 

31

 

Banco do Brasil S.A. (i)

 

 

 

(166

)

 

 

38

 

Baovale Mineração S.A.

 

 

(18

)

 

 

(47

)

 

BNDES (i)

 

 

 

(358

)

 

 

(58

)

BNDES Participações S.A. (i)

 

 

 

(49

)

 

 

(4

)

Companhia Coreano-Brasileira de Pelotização

 

 

(62

)

 

 

(57

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(30

)

 

 

(27

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(44

)

 

 

(44

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(70

)

 

 

(78

)

 

Companhia Siderúrgica do Atlântico

 

 

(21

)

 

 

 

 

Companhia Siderúrgica do Pecem

 

53

 

 

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

40

 

(25

)

 

38

 

(29

)

 

Ferrovia Norte Sul S.A.

 

22

 

 

 

 

 

 

Mitsui & Co., Ltd.

 

147

 

 

 

155

 

 

 

MRS Logística S.A.

 

 

(489

)

 

 

(433

)

 

Samarco Mineração S.A.

 

 

 

 

176

 

 

 

VLI Operações Portuárias S.A.

 

135

 

(11

)

 

 

 

 

VLI S.A.

 

111

 

 

 

209

 

 

 

Others

 

3

 

(30

)

 

37

 

(36

)

(7

)

Total

 

511

 

(800

)

(87

)

615

 

(751

)

 

 


(i) Does not include exchange rate variation

 

 

 

Consolidated

 

 

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

 

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Net operating
revenue

 

Costs and
expenses

 

Financial result

 

Banco Bradesco S.A. (i)

 

 

 

428

 

 

 

(168

)

Banco do Brasil S.A. (i)

 

 

 

(298

)

 

 

(368

)

Baovale Mineração S.A.

 

 

(30

)

 

 

(60

)

 

BNDES (i)

 

 

 

(528

)

 

 

(108

)

BNDES Participações S.A. (i)

 

 

 

(73

)

 

 

(32

)

Companhia Coreano-Brasileira de Pelotização

 

 

(131

)

 

 

(103

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(71

)

 

 

(63

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(81

)

 

 

(83

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(197

)

 

 

(150

)

 

Companhia Siderúrgica do Atlântico

 

 

(21

)

 

 

 

 

Companhia Siderúrgica do Pecem

 

116

 

 

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

69

 

(44

)

(2

)

73

 

(62

)

 

Ferrovia Norte Sul S.A.

 

39

 

 

 

 

 

 

Mitsui & Co., Ltd.

 

226

 

 

 

325

 

 

 

MRS Logística S.A.

 

 

(729

)

 

 

(775

)

 

Samarco Mineração S.A.

 

1

 

 

 

266

 

 

 

VLI Operações Portuárias S.A.

 

249

 

(11

)

 

 

 

 

VLI S.A.

 

218

 

 

 

387

 

 

 

Others

 

40

 

(65

)

 

100

 

(70

)

4

 

Total

 

958

 

(1,380

)

(473

)

1,151

 

(1,366

)

(672

)

 


(i) Does not include exchange rate variation

 

45



Table of Contents

 

 

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

 

(a)    Investments

 

 

 

Parent company

 

 

 

2016

 

2015

 

Balance at January 1st

 

127,517

 

118,628

 

Acquisitions (i)

 

 

1,819

 

Additions

 

1,282

 

940

 

Capitalizations

 

5

 

 

Translation adjustment

 

(14,304

)

10,964

 

Equity results in income statement

 

4,652

 

(1,757

)

Equity results in statement of comprehensive income

 

(618

)

920

 

Dividends declared

 

(1,157

)

(341

)

Transfer to held for sale

 

 

52

 

Others

 

(26

)

(30

)

Balance at June 30,

 

117,351

 

131,195

 

 


(i) Refers to Aliança Geração transaction, see note 6.

 

(b)    Intangible

 

 

 

Parent company

 

 

 

Concessions (i)

 

Right of use (i)

 

Software (i)

 

Total

 

Balance at December 31, 2015

 

7,084

 

123

 

1,350

 

8,557

 

Additions (ii)

 

2,973

 

 

18

 

2,991

 

Disposals

 

(18

)

 

 

(18

)

Amortization

 

(258

)

(3

)

(253

)

(514

)

Balance at June 30, 2016

 

9,781

 

120

 

1,115

 

11,016

 

Cost

 

13,151

 

223

 

4,015

 

17,389

 

Accumulated amortization

 

(3,370

)

(103

)

(2,900

)

(6,373

)

 

 

9,781

 

120

 

1,115

 

11,016

 

 

 

 

Parent company

 

 

 

Concessions (i)

 

Right of use (i)

 

Software (i)

 

Total

 

Balance at December 31, 2014

 

5,876

 

129

 

1,462

 

7,467

 

Additions

 

1,073

 

 

266

 

1,339

 

Disposals

 

(48

)

 

 

(48

)

Amortization

 

(242

)

(4

)

(253

)

(499

)

Balance at June 30, 2015

 

6,659

 

125

 

1,475

 

8,259

 

Cost

 

10,078

 

223

 

3,868

 

14,169

 

Accumulated amortization

 

(3,419

)

(98

)

(2,393

)

(5,910

)

 

 

6,659

 

125

 

1,475

 

8,259

 

 


(i) Finite useful life.

(ii) Refers mainly duplication the Carajás Railroad.

 

46



Table of Contents

 

 

(c) Property, plant and equipment

 

 

 

Parent company

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2015

 

1,672

 

19,546

 

19,379

 

8,371

 

4,215

 

14,203

 

29,501

 

96,887

 

Additions (i)

 

 

 

 

 

 

 

3,776

 

3,776

 

Disposals

 

 

 

(1

)

(8

)

 

(22

)

(60

)

(91

)

Depreciation and amortization

 

 

(307

)

(468

)

(535

)

(102

)

(654

)

 

(2,066

)

Assets retirement obligations

 

 

 

 

 

144

 

 

 

144

 

Transfers

 

8

 

1,281

 

(60

)

503

 

(68

)

(171

)

(1,493

)

 

Balance at June 30, 2016

 

1,680

 

20,520

 

18,850

 

8,331

 

4,189

 

13,356

 

31,724

 

98,650

 

Cost

 

1,680

 

23,719

 

25,090

 

13,780

 

5,538

 

20,671

 

31,724

 

122,202

 

Accumulated depreciation

 

 

(3,199

)

(6,240

)

(5,449

)

(1,349

)

(7,315

)

 

(23,552

)

 

 

1,680

 

20,520

 

18,850

 

8,331

 

4,189

 

13,356

 

31,724

 

98,650

 

 

 

 

Parent company

 

 

 

Land

 

Building

 

Facilities

 

Equipment

 

Mineral
properties

 

Others

 

Constructions
in progress

 

Total

 

Balance at December 31, 2014

 

1,452

 

13,364

 

17,337

 

7,097

 

4,396

 

9,820

 

33,855

 

87,321

 

Additions (i)

 

 

 

 

 

 

 

5,733

 

5,733

 

Disposals

 

 

(10

)

(8

)

(52

)

 

(25

)

 

(95

)

Depreciation and amortization

 

 

(238

)

(431

)

(473

)

(172

)

(550

)

 

(1,864

)

Transfers

 

143

 

3,430

 

1,377

 

1,390

 

7

 

2,179

 

(8,526

)

 

Balance at June 30, 2015

 

1,595

 

16,546

 

18,275

 

7,962

 

4,231

 

11,424

 

31,062

 

91,095

 

Cost

 

1,595

 

18,983

 

23,649

 

12,526

 

5,258

 

18,009

 

31,062

 

111,082

 

Accumulated depreciation

 

 

(2,437

)

(5,374

)

(4,564

)

(1,027

)

(6,585

)

 

(19,987

)

 

 

1,595

 

16,546

 

18,275

 

7,962

 

4,231

 

11,424

 

31,062

 

91,095

 

 


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

 

(d) Loans and borrowings

 

 

 

Parent company

 

 

 

Current liabilities

 

Non-current liabilities

 

 

 

June 30, 2016

 

December 31, 2015

 

June 30, 2016

 

December 31, 2015

 

Debt contracts in the international markets

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

US$

 

442

 

567

 

13,931

 

16,829

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

US$

 

1,284

 

937

 

5,970

 

9,020

 

EUR

 

 

 

5,312

 

6,376

 

Accrued charges

 

326

 

479

 

 

 

 

 

2,052

 

1,983

 

25,213

 

32,225

 

Debt contracts in Brazil

 

 

 

 

 

 

 

 

 

Floating rates in:

 

 

 

 

 

 

 

 

 

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

 

795

 

780

 

17,604

 

17,658

 

Basket of currencies and US$ indexed to LIBOR

 

1,017

 

1,125

 

4,104

 

5,227

 

Fixed rates in:

 

 

 

 

 

 

 

 

 

R$

 

190

 

190

 

781

 

876

 

Accrued charges

 

876

 

658

 

 

 

 

 

2,878

 

2,753

 

22,489

 

23,761

 

 

 

4,930

 

4,736

 

47,702

 

55,986

 

 

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

 

 

 

Parent company

 

 

 

Debt principal

 

2016

 

1,223

 

2017

 

5,148

 

2018

 

12,354

 

2019

 

5,646

 

2020

 

7,590

 

2021

 

3,495

 

Between 2022 and 2025

 

10,537

 

2026 onwards

 

5,437

 

 

 

51,430

 

 

47



Table of Contents

 

 

(e)     Provisions for litigation

 

 

 

Parent company

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2015

 

332

 

241

 

1,562

 

55

 

2,190

 

Additions

 

17

 

201

 

353

 

7

 

578

 

Reversals

 

(41

)

(67

)

(160

)

(11

)

(279

)

Payments

 

(275

)

(161

)

(233

)

 

(669

)

Indexation and interest

 

12

 

92

 

9

 

 

113

 

Balance at June 30, 2016

 

45

 

306

 

1,531

 

51

 

1,933

 

 

 

 

Parent company

 

 

 

Tax litigation

 

Civil litigation

 

Labor litigation

 

Environmental
litigation

 

Total of litigation
provision

 

Balance at December 31, 2014

 

436

 

186

 

1,732

 

94

 

2,448

 

Additions

 

330

 

59

 

193

 

 

582

 

Reversals

 

(500

)

(45

)

(94

)

 

(639

)

Payments

 

(24

)

(11

)

(73

)

(37

)

(145

)

Indexation and interest

 

130

 

47

 

(7

)

6

 

176

 

Balance at June 30, 2015

 

372

 

236

 

1,751

 

63

 

2,422

 

 

(f)      Income taxes

 

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

 

 

 

Parent company

 

 

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

Net income (loss) before income taxes

 

16,431

 

(7,127

)

Income taxes at statutory rates - 34%

 

(5,587

)

2,423

 

Adjustments that affect the basis of taxes:

 

 

 

 

 

Income tax benefit from interest on stockholders’ equity

 

 

1,054

 

Tax incentives

 

319

 

 

 

Equity results

 

1,582

 

(598

)

Reversals of tax loss carry forward

 

(1,295

)

 

Others results in associates and joint ventures

 

(1,269

)

 

Others

 

(285

)

(147

)

Income taxes

 

(6,535

)

2,732

 

 

(g) Related parties

 

 

 

Parent company

 

 

 

Assets

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Cash and
cash
equivalents

 

Accounts
receivable

 

Derivative
financial
instruments

 

Related
parties

 

Cash and
cash
equivalents

 

Accounts
receivable

 

Derivative
financial
instruments

 

Related
parties

 

Banco Bradesco S.A.

 

55

 

 

1,072

 

 

44

 

 

258

 

 

Banco do Brasil S.A.

 

52

 

 

125

 

 

217

 

 

62

 

 

Biopalma da Amazônia S.A.

 

 

 

 

1,044

 

 

 

 

1,360

 

Companhia Coreano-Brasileira de Pelotização

 

 

 

 

45

 

 

 

 

22

 

Companhia Hispano-Brasileira de Pelotização

 

 

7

 

 

 

 

 

 

14

 

Companhia Ítalo-Brasileira de Pelotização

 

 

 

 

 

 

 

 

33

 

Companhia Nipo-Brasileira de Pelotização

 

 

 

 

71

 

 

 

 

35

 

Companhia Portuária Baía de Sepetiba

 

 

1

 

 

120

 

 

 

 

119

 

Mineração Brasileiras Reunidas S.A.

 

 

 

 

879

 

 

 

 

161

 

Mineração Corumbaense Reunidas S.A.

 

 

45

 

 

 

 

51

 

 

 

MRS Logística S.A.

 

 

 

 

26

 

 

 

 

27

 

Salobo Metais S.A.

 

 

15

 

 

119

 

 

22

 

 

155

 

Samarco Mineração S.A.

 

 

1

 

 

 

 

 

 

 

Vale International S.A.

 

 

27,056

 

 

2

 

 

36,518

 

 

331

 

VLI Multimodal S.A.

 

 

18

 

 

 

 

36

 

 

 

VLI Operações Portuárias S.A.

 

 

43

 

 

 

 

99

 

 

 

VLI S.A.

 

 

 

 

38

 

 

 

 

39

 

Others

 

 

214

 

 

5

 

 

230

 

 

6

 

Total

 

107

 

27,400

 

1,197

 

2,349

 

261

 

36,956

 

320

 

2,302

 

 

48



Table of Contents

 

 

 

 

Parent company

 

 

 

Liabilities

 

 

 

June 30, 2016

 

December 31, 2015

 

 

 

Other
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Other
liabilities

 

Derivative
financial
instruments

 

Related
parties

 

Loans and
borrowings

 

Aliança Geração de Energia S.A.

 

47

 

 

174

 

 

43

 

 

 

 

Banco Bradesco S.A.

 

 

1,098

 

 

560

 

 

800

 

 

1,445

 

Banco do Brasil S.A.

 

 

664

 

 

9,475

 

 

976

 

 

10,250

 

Baovale Mineração S.A.

 

57

 

 

 

 

29

 

 

 

 

BNDES

 

 

138

 

 

13,448

 

 

152

 

 

14,405

 

BNDES Participações S.A.

 

 

 

 

1,399

 

 

 

 

1,449

 

Companhia Coreano-Brasileira de Pelotização

 

127

 

 

 

 

15

 

 

 

 

Companhia Hispano-Brasileira de Pelotização

 

74

 

 

 

 

143

 

 

 

 

Companhia Ítalo-Brasileira de Pelotização

 

70

 

 

 

 

12

 

 

 

 

Companhia Nipo-Brasileira de Pelotização

 

209

 

 

 

 

34

 

 

 

 

Companhia Portuária Baía de Sepetiba

 

609

 

 

 

 

484

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

 

 

266

 

 

 

 

266

 

 

Mineração Brasileiras Reunidas S.A.

 

498

 

 

3,426

 

 

510

 

 

3,172

 

 

MRS Logística S.A.

 

37

 

 

 

 

91

 

 

 

 

Vale International S.A.

 

4

 

 

55,857

 

 

5

 

 

66,814

 

 

Others

 

141

 

 

560

 

 

257

 

 

359

 

 

Total

 

1,873

 

1,900

 

60,283

 

24,882

 

1,623

 

1,928

 

70,611

 

27,549

 

 

 

 

Parent company

 

 

 

Six-months period ended June 30

 

 

 

2016

 

2015

 

 

 

Net operating
revenue

 

Costs and
expenses

 

Financial
result

 

Net operating
revenue

 

Costs and
expenses

 

Financial
result

 

Banco Bradesco S.A. (i)

 

 

 

424

 

 

 

(167

)

Banco do Brasil S.A. (i)

 

 

 

(299

)

 

 

(368

)

Baovale Mineração S.A.

 

 

(31

)

 

 

(60

)

 

Biopalma da Amazônia S.A.

 

 

 

(203

)

 

 

 

BNDES (i)

 

 

 

(516

)

 

 

(99

)

BNDES Participações S.A. (i)

 

 

 

(73

)

 

 

(32

)

Companhia Coreano-Brasileira de Pelotização

 

 

(131

)

 

 

(103

)

 

Companhia Hispano-Brasileira de Pelotização

 

 

(71

)

 

 

(63

)

 

Companhia Ítalo-Brasileira de Pelotização

 

 

(82

)

 

 

(83

)

 

Companhia Nipo-Brasileira de Pelotização

 

 

(197

)

 

 

(150

)

 

Companhia Portuária Baía de Sepetiba

 

 

(395

)

 

 

(395

)

 

Companhia Siderúrgica do Atlântico

 

 

(21

)

 

 

 

 

Companhia Siderúrgica do Pecem

 

116

 

 

 

 

 

 

 

 

 

 

 

Ferrovia Centro Atlântica S.A.

 

69

 

(44

)

(2

)

73

 

(62

)

 

Mineração Brasileiras Reunidas S.A.

 

 

(761

)

(246

)

 

(359

)

 

MRS Logística S.A.

 

 

(729

)

 

 

(775

)

 

Samarco Mineração S.A.

 

1

 

 

 

266

 

 

 

Vale International S.A.

 

17,811

 

 

3,464

 

17,004

 

 

(996

)

VLI Operações Portuárias S.A.

 

249

 

(11

)

 

 

(13

)

 

VLI S.A.

 

218

 

 

 

387

 

 

 

Others

 

76

 

(5

)

2

 

102

 

(153

)

201

 

Total

 

18,540

 

(2,478

)

2,551

 

17,832

 

(2,216

)

(1,461

)

 


(i) Does not include exchange rate variation

 

49



Table of Contents

 

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

 

Board of Directors

 

 

 

 

Governance and Sustainability Committee

Gueitiro Matsuo Genso

 

Fernando Jorge Buso Gomes

Chairman

 

Eduardo de Oliveira Rodrigues Filho

 

 

Ricardo Rodrigues Morgado

Sérgio Alexandre Figueiredo Clemente

 

Ricardo Simonsen

Vice-President

 

 

 

 

Fiscal Council

Dan Antonio Marinho Conrado

 

 

Marcel Juviniano Barros

 

Marcelo Amaral Moraes

Fernando Jorge Buso Gomes

 

Chairman

Motomu Takahashi

 

 

Oscar Augusto de Camargo Filho

 

Paulo José dos Reis Souza

Lucio Azevedo

 

Sandro Kohler Marcondes

Alberto Guth

 

Aníbal Moreira dos Santos

 

 

Raphael Manhães Martins

 

 

Marcelo Amaral Moraes

Alternate

 

 

Gilberto Antonio Vieira

 

Alternate

Moacir Nachbar Junior

 

Paula Bicudo de Castro Magalhães

Arthur Prado Silva

 

Sergio Mamede Rosa do Nascimento

Francisco Ferreira Alexandre

 

Oswaldo Mário Pego de Amorim Azevedo

Robson Rocha

 

Julio Sergio de Souza Cardozo

Luiz Mauricio Leuzinger

 

 

Yoshitomo Nishimitsu

 

Executive Officers

Eduardo de Oliveira Rodrigues Filho

 

 

Victor Guilherme Tito

 

Murilo Pinto de Oliveira Ferreira

Carlos Roberto de Assis Ferreira

 

Chief Executive Officer

Marcelo Gasparino

 

 

 

 

Vania Lucia Chaves Somavilla

Advisory Committees of the Board of Directors

 

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

 

 

 

Controlling Committee

 

Luciano Siani Pires

Eduardo Cesar Pasa

 

Executive Officer (Finance and Investors Relations)

Moacir Nachbar Junior

 

 

Oswaldo Mário Pego de Amorim Azevedo

 

Roger Allan Downey

Marcos Paulo Pereira da Silva

 

Executive Officer (Fertilizers, Coal and Strategy)

 

 

 

Executive Development Committee

 

Gerd Peter Poppinga

Oscar Augusto de Camargo Filho

 

Executive Officer (Ferrous)

Marcel Juviniano Barros

 

 

Fernando Jorge Buso Gomes

 

Galib Abrahão Chaim

Tatiana Boavista Barros Heil

 

Executive Officer (Capital Projects Implementation)

 

 

 

Strategic Committee

 

Humberto Ramos de Freitas

Murilo Pinto de Oliveira Ferreira

 

Executive Officer (Logistics and Mineral Research)

Gueitiro Matsuo Genso

 

 

Luiz Carlos Trabuco Cappi

 

Jennifer Anne Maki

Oscar Augusto de Camargo Filho

 

Executive Officer (Base Metals)

 

 

 

 

 

 

 

 

 

Finance Committee

 

 

Gilmar Dalilo Cezar Wanderley

 

Rogerio Nogueira

Fernando Jorge Buso Gomes

 

Global Controller Director

Eduardo de Oliveira Rodrigues Filho

 

 

Tatiana Boavista Barros Heil

 

Murilo Muller

 

 

Controllership Director

 

 

 

 

 

Dioni Brasil

 

 

Accounting Manager

 

 

TC-CRC-RJ 083305/O-8

 

50



Table of Contents

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Vale S.A.

 

(Registrant)

 

 

 

 

By:

/s/ Andre Figueiredo

Date: July 28, 2016

 

Andre Figueiredo

 

 

Director of Investor Relations