"One year has passed since the Dam I rupture, and I would like to restate our respect for the families of the victims. Vale remains firm in its purposes: to integrally repair Brumadinho and to ensure the safety of our people and our assets. We have made significant progress, with an effective reparation program, relevant governance and operational improvements, and a decharacterization plan for our upstream tailings dams under accelerated implementation. We are de-risking Vale. We are paving the way to make our business better, safer and more stable", commented Eduardo Bartolomeo, Chief Executive Officer.

Reparation progress

Since the first hours of the dam rupture, Vale has taken care of victims and families impacted, providing assistance to restore their dignity and livelihoods. Vale has also provided support to local governments and public entities, given the extent of the impacts and of the halting of Vale's operations in the region. To support the rescue of fauna and mitigate environmental impacts, over 700 professionals, a hospital and an animal shelter were mobilized.

Repairing the damage caused in a fair and agile way is fundamental to the families, and Vale has prioritized initiatives and resources for that end. Based on open dialogue with authorities and people affected, Vale has drawn up the Integral Reparation Program, structured in social, environmental and infrastructure pillars, to ensure that actions and resources will effectively
compensate individuals and communities, recover the environment and enable sustainable development of Brumadinho and surroundings.

Economic compensation has evolved with agility, as per three relevant framework agreements entered into with authorities1:

. Labour indemnification to 244 of the 250 employees that lost their lives in the disaster, comprehending 611 agreements, 1,570 beneficiaries and R$1.4 billion paid out2;
. Individual or collective indemnification reaching 4,451 beneficiaries and more than R$ 679 million paid;
. Emergency aid payment to approximately 106,000 people residing in Brumadinho and along the Paraopeba river has been extended until October 2020. Over R$ 1.2 billion has already been paid;
. Other 27 agreements signed to cover specific fronts, such as: (i) support for municipalities in providing public services and infrastructure; (ii) environmental recovery; (iii) water supply, including new water withdrawal and treatment systems with COPASA; (iv) emergency payments to families relocated in Barão de Cocais and for the Pataxós indigenous community; and (v) external audits and asset integrity studies, providing technical support for the authorities, with measures to review and reinforce structures and halting of operations.
On the environmental front, a plan has been developed to remove and treat tailings, recover fauna and flora and ensure the water catchment and supply to the Belo Horizonte metropolitan region. Two Water Treatment Stations (ETAF) are already operating to clean and return treated water to the Ferro-Carvão stream and the Paraopeba river. The Zero Ground project will fully recover the original conditions of the Ferro-Carvão stream by 2023.

On the socio-economic front, non-economic compensation measures aim to ensure respect for human rights and are negotiated and defined following the perspectives and demands of the people affected and authorities. Vale's initiatives are being designed to provide structured assistance for long-term results in education, healthcare and well-being, employment and income generation, ultimately enabling sustainable development in the region.

Vale knows there is still a lot to be done to fully repair Brumadinho and reinforces its commitment to doing it. For further information on the updated balance of actions Vale has taken so far, refer to the following website: www.vale.com/repairoverview.

Safety

Vale has implemented significant improvements in governance, processes and people towards achieving its goal to become one of the safest mining companies in the world:

. The Board of Directors has approved a new Risk Management Policy, establishing, among other measures, four Business Risk Executive Committees to deal with Operational Risks, Strategic, Financial and Cyber Risks, Compliance Risks and Geotechnical Risks, allowing for the information to flow freely and openly at all organizational levels.
. The new Safety and Operational Excellence Office, which reports directly to the CEO and has the authority to halt operations on safety grounds, has outlined its work plan for the next two years, with actions covering the four areas around which it is organized: (i) Tailings Management, to ensure Vale's dams are safe and comply with international standards, (ii) Asset Integrity, to assure that assets are well maintained and safe to operate, (iii) Operational Excellence, to implement the Vale Production System (VPS) across the company, guaranteeing the continuity of the improvements that are being implemented, and (iv) Health & Safety and Operational Risk, to enhance the safety culture and also map all risks throughout the company.

One of the key milestones on the road to reducing the risk level of the company is the decharacterization of the upstream structures, a process that will continue over the next years.

. The first decharacterized dam, 8B, was completed in December 2019; the second one, Fernandinho dam, will be concluded in 2020.
. Vale has also completed the construction of the containment structure for Sul Superior Dam in the city of Barão de Cocais, while the containment structures for B3/B4 and Forquilhas dams will be concluded in 1H20, increasing the safety conditions in the areas downstream from the dams and allowing the decharacterization works at these sites to start thereafter.
. As of September 2019, due to the technical revaluation of the construction methods of the Doutor and Campo Grande dam by the Brazilian National Mining Agency (ANM), Vale included them in the decharacterization plan. Additionally, smaller dikes that were raised through the upstream method and drained stack structures will also be decharacterized.
. In December 2019, the independent Expert Panel retained to provide an assessment of the technical causes of the Dam I rupture reported on its conclusions, which were promptly taken to the authorities and made public knowledge. Results of this sort are also an important input to improve the tailings management practices at Vale.

For the future, Vale plans to reduce significantly its use of dams and will invest in alternatives that will enable the transitioning from wet processing operations to safer and more sustainable processes.

. Dry processing will reach 70% of iron ore production volume in the next three years.
. Vale will invest US$ 1.8 billion in the next years to increase the use of filtering and dry stacking in more than 50% of the remaining wet processing volume.
. Vale will invest in the development of new technologies, such as New Steel's dry concentration that is being currently tested.

Reducing uncertainties

Following the Brumadinho dam rupture, Vale's iron ore production capacity was significantly impacted by the stoppage of operations with interdictions on Brucutu, Vargem Grande, Alegria, Timbopeba and Fábrica operations. Over the year, Vale has made progress as regards the resumption of the stopped production capacity:

. Brucutu mine: In June 2019, following the decision of the legal authorities, Brucutu mine restarted adding back 30 Mtpy of production capacity. However, in December 2019, Vale took the decision to suspend temporarily the disposal of tailings at the Laranjeiras dam. Until at least the end of March 2020, the Brucutu plant will operate at around 40% of its capacity, with an estimated impact due of approximately 1.5Mt per month.
. Vargem Grande Complex: In July 2019, the ANM authorized the partial resumption of the dry processing operations at the site, enabling 5 Mt of production in 2019, which represents 12 Mtpy of production capacity.
. Alegria mine: In November 2019, Vale received the necessary authorization from the ANM to resume the operations of the Alegria Mine, enabling 3 Mt of production in 2019, which represents 8 Mtpy of production capacity.

As for the plan to resume approximately 40 Mtpy of halted capacity, enabling additional 15 Mt and 25 Mt production in 2020 and 2021, respectively, Vale is making progress in the discussions with the ANM, the Minas Gerais State Public Prosecutor's Office (MPMG) and the external audit firms to start site tests and gradually resume production. Further details on the plan to resume the halted production can be found in the Ferrous Minerals section of this report.

Vale's performance in 2019 and 4Q19

. In 2019, proforma EBITDA, excluding the provisions and incurred expenses related to Brumadinho, totaled US$ 17.987 billion, US$ 1.394 billion higher than in 2018, mainly due to higher prices (US$ 5.991 billion) and favorable foreign exchange variations (US$ 571 million), which were partially offset by lower volumes (US$ 2.796 billion), higher costs, expenses and others[3] (US$ 1.404 billion) and the stoppage expenses and others due to Brumadinho (US$ 968 million).
. Vale generated US$ 8.105 billion in Free Cash Flow from Operations in 2019, enabling:
o the repurchase of US$ 2.270 billion of bonds, with gross debt totaling US$ 13.056 billion in 4Q19, a decrease of US$ 2.410 billion in relation to 4Q18;
o the increase in cash and cash equivalents to US$ 8.176 billion, US$ 2.452 billion higher than 4Q18, and the decrease in net debt to US$ 4.880 billion, US$ 4.770 billion lower than 4Q18 and the lowest level since 2008;
o the redemption and cancelation of MBR preferred shares, which paid dividends to non-controlling interest of US$ 162 million and US$ 168 million in 2019 and 2018, reducing future cash-flow commitments.
. Interest paid on loans totalled US$ 921 million in 2019, the lowest level since 2010 and 45% lower than the peak level of US$ 1.663 billion in 2016, reflecting the deleveraging and strengthening process of Vale's balance sheet in the last three years.
. In December 2019, Vale completed the sindication of a US$ 3.0 billion revolving credit facility, which will be available for five years. The new line, together with the existing US$ 2.0 billion facility that expires in 2022, preserves the total available amount in revolving credit facilities at US$ 5.0 billion, providing a liquidity buffer for Vale and allowing for an efficient cash management.
. Vale posted a loss of US$ 1.683 billion in 2019, compared to a net income of US$ 6.860 billion in 2018. The US$ 8.543 billion decrease was mostly driven by: (i) provisions and expenses related to the Brumadinho dam rupture, including the decharacterization of dams and reparation agreements (US$ 7.402 billion), (ii) recognition of non-cash impairment charges and onerous contracts, mainly in the Base Metals and Coal businesses (US$ 4.202 billion), (iii) provisions related to the Renova Foundation and to the decommissioning of Germano dam (US$ 758 million), which were partially offset by lower foreign exchange losses (US$ 2.555 billion) in the year.
. Impairment charges were mainly due to revisions on the Base Metals and Coal business plans. In the Base Metals business, the New Caledonian operation has experienced challenging issues throughout 2019, mainly in relation to production and processing. Thus, Vale reduced the expected production levels for the remaining life of the operation and recognized an impairment charge of US$ 2.511 billion. In the Coal business, the revaluation of the expectations related to the yield of metallurgical and thermal coal, the review of the mining plan, which led to a reduction in the proven and probable reserves, and the lowering of the long-term price assumptions led to an impairment charge of US$ 1.691 billion.
. In December 2019, the Board of Directors approved the interest on capital (JCP[4]) of R$ 7.253 billion, equivalent to R$ 1.414364369 per share. The decision did not modify the Board of Directors' previous decision of suspending the Shareholder Remuneration Policy, with the allocation of the JCP to be decided only after the Policy suspension is withdraw.
. In 4Q19, Vale's proforma EBITDA totaled US$ 4.677 billion in 4Q19, US$ 151 million lower than 3Q19. The impact of lower iron ore reference prices was largely offset by: (i) higher iron ore fines sales volumes, (ii) lower unit cost of the iron ore delivered at Chinese ports that reached a break-even EBITDA of US$ 37.6/t in 4Q19, US$ 2.5/t lower than 3Q19, mainly due to the decrease in C1 and freight costs and the higher pellets contribution, and (iii) higher base metals realized prices.

Ferrous Minerals

. In 2019, adjusted EBITDA of the Ferrous Minerals business segment was US$ 16.997 billion, 16% higher than in 2018, mainly due to higher prices (US$ 6.099 billion), which were offset by lower volumes (US$ 2.463 billion) and higher costs (US$ 885 million), following Dam I rupture impacts.
. On a quarterly basis, adjusted EBITDA of the Ferrous Minerals business segment was US$ 4.538 billion in 4Q19, in line with 3Q19 despite decrease in prices (US$ 663 million), which was offset by higher sales volumes (US$ 196 million), lower costs (US$ 168 million) and higher received dividends (US$ 152 million).
. Despite the lower 62% Fe reference price, 13% lower than in 3Q19, Vale's realized price CFR/FOB decreased only 6% vs. 3Q19, due to the positive effect of the pricing system mechanisms impacted by the strong price volatility in the quarter together with a higher forward price curve.
. C1 cash cost for iron ore fines decreased to US$ 14.5/t in 4Q19 from US$ 15.3/t in 3Q19, mainly due to lower volumes and prices of third-party purchases and BRL depreciation.
. Freight costs decreased US$ 0.9/t, totaling US$ 18.2/t in 4Q19, mainly due to lower exposure to spot market and mix of routes/fleet. Vale expects freight costs in 1Q20 to reduce in relation to 4Q19, mainly as a result of spot market volatility caused, among other factors, by uncertainties related to coronavirus.
Base Metals
. Base Metals adjusted EBITDA totaled US$ 2.174 billion in 2019, vs. US$ 2.542 billion in 2018. The decrease was mainly due to higher costs (US$ 387 million), mostly related to VNC, Onça Puma and Sossego operations, lower cobalt realized prices (US$ 157 million), lower copper realized prices  (U$ 45 million) and higher expenses (US$ 73 million), mostly for research expenses related to Hu'u project, which were partially offset by favourable exchange rate variations (US$ 132 million), higher nickel realized prices (US$ 81 million) and higher gold realized prices (US$ 76 million).
. Nickel operations are progressing towards higher reliability with production at the refineries going back to regular operating rates after the scheduled and unscheduled maintenance activities at the Copper Cliff Nickel Refinery, in Sudbury, and at the Clydach, Matsusaka and Long Harbour refineries. Likewise, production at Onça Puma mine and plant was resumed after a judicial authorization granted in September.
. The performance of copper operations was supported by Salobo's solid performance during the year, reaching close to zero unit cash costs after by-products in 2H19, notwithstanding the impact of unscheduled maintenance in Sossego.
. On a quarterly basis, Base Metals adjusted EBITDA was US$ 649 million in 4Q19 vs. US$ 555 million in 3Q19, mainly due to higher nickel and copper realized prices (US$ 139 million), higher by-products volumes (US$ 100 million) and favourable exchange rate variations (US$ 8 million), partially offset by higher costs (US$ 78 million), lower nickel and copper volumes (US$ 42 million) and higher expenses (US$ 33 million), mainly as a result of stoppage expenses related to unscheduled maintenance at Sossego.
. The average nickel realized price was US$ 16,251/t, US$ 801/t higher than the average LME nickel price of US$ 15,450/t in 4Q19, mainly due to the effect of sales with lagged prices (US$ 439/t), as the nickel average price fell throughout the fourth quarter, and the positive hedge program settlements (US$ 279/t), reflecting the lower LME prices vis a vis the floor price of the collar hedge structure (US$ 15,714/t).
1 Figures as of February 20th, 2020.
2 Including R$ 400 million paid in collective indemnification.

Click here for full report