Thanks everyone for being here this morning with us. 2019 has been a tough year for Vale, one of the most challenging years for us. The Brumadinho tragedy cost the lives of our colleagues, our friends, and community members. I would like to begin this Vale Day asking a moment of silence in the memory and in respect for the victims. We will never forget Brumadinho, for that, we are committed to build a safer and more reliable company. Since I took Vale's leadership in March, we've been vocal in saying three words, people, safety, and reparation. Those three words have inspired us to create the roadmap that we believe is fundamental to de-risk Vale. First of one, is the reparation of Brumadinho. For that, we have already 400 people engaged in that sense. This department reports directly to me.
The second is to assure that our dams are safe, that our assets are integral, and that we are moving towards to be a safer company. Third, we need to bring back volumes on a sustainable way. We're going to discuss this later. Finally, we have to have discipline on the capital that we are going to be generating. For that, I would like to tell you that this morning, what is our strategy here is to run you through these elements because we believe that's what the investor community are asking from us. I would like to ask your attention for two words that should come frequently during the presentation, is listening and execution. Vale is well known for its execution capacity, and we'll show you during the presentation that we are doing that.
Not very much for listening, so we need to improve our listening, and that's what we are doing. With that said, I would like to ask Marcelo Klein, the person that we designated to do the reparation of Brumadinho, to drive us through what he's been doing so far. Thank you.
Thank you, Eduardo. Good morning, everyone. Our mission at Vale is the full reparation of Brumadinho, the reparation of the damage caused to the people and territories. We have structured our reparation efforts inspired by the United Nations Guiding Principles on Business and Human Rights, in which principle number 31 says that business enterprise should guarantee that you have at operational level, mechanisms that guarantee that grievance will be addressed and resolved based on engagement and dialogue. I'm bringing you here. Sorry.
I'm bringing you here as well, a simplified version of what is a typical week scheduling. My week starts on Monday with attending a meeting with Eduardo, our CEO, and other executive directors, where I report how reparation is evolving, what are the critical issues for the week, what are the medium and long-term risks, and I also take the chance to talk to each of the executives to ask for their helps in terms of legal, IT, social responsibility, and so on. We have all corporate functions at Vale. They are available to help reparation, and that dynamic works very well. We also like to say that besides this strong dialogue, we also have a strong presence on the ground. For our 400 people, around 200 stays every day in Brumadinho, talking to people, to the communities, and paying attention and capturing demands where they really happen.
Along the week, I also talk to public prosecutors and other authorities. I have meetings with the fire officers. Just remind you that from the 270 victims, we are still looking for 13. It's a big rescue operation that has been lasting for more than 10 months. I also have meetings with the representatives from the family victims. They bring weekly their demands, and we are building up a nice agenda together. It's important to say that having them, allowing us to be there with them, sitting down, listen to their demands, to their fears, is a big opportunity and a great chance for us to really construct effective reparation. We have structured our reparation in four main pillars. The first one is restoring the livelihood and the dignity of those affected. The second encompass economic and non-economic compensation.
The third one deals about restoring the productive capacity of affected areas, and the fourth one, restoring the environment. We're going to give you some details on each of those pillars, what are the main actions we are developing to guarantee that together we compose an effective reparation. Talking about restoring the livelihood and dignity of affected people, it's important to say that the most important thing is to welcome the affected people, providing them with information, care, attention, and diverse kinds of services and resources so that they can go through probably the worst moment of their lives with dignity. When we are talking about restoring the livelihood, we have physical items that need to be provided, and we have emotional issues as well. The physical items are easier to provide.
We're talking about water, access to foods, to toilet, to personal items, to housing, and to transportation, for example. At the level of the individual, restoring livelihood demands a lot of attention on mental health and psychosocial support because it's hard to measure if our measures on the things we are doing, our action on those fields are being effective and takes time for us really to guarantee the effectiveness of those actions. We are paying a lot of attention to those two disciplines, mental health and psychosocial support. We are getting guidance from United Nations expert teams as well. We recognize there are still improvement opportunities yet to be captured on those fields. Since we have a framework of sorrow, of fear, of uncertainty, it's really important to pay attention to details. Just give you an example.
In one of those meetings with the families, they have asked us to change the color of the buses that provides the service of commuting, of picking up and dropping off employees from work to house and back to work, because they complained that seeing the buses going through the city every day reminded them of the people they lost and was something that hurt their hearts. We are doing that. We are changing the colors. We are also changing the routes to avoid the buses going through streets where several families of the victims live. This is just an example of how these details become so important. They are not details at all, and they become very important for the families. We can only capture this kind of level of interaction if we are very close to them.
That's an example of how real effective listening is working. Our second pillar talks about economic and non-economic compensation. I don't want to discuss what's more important. Both are important. We need to have the compensation payments. They are important trigger for the restoring of the livelihood of people, and we also need to take care of non-economic compensation. Talk about the economic compensation, I'd like to stress that we have made framework agreements, very important framework agreements in a very short period of time. On February 12th, less than one month after the tragedy, we have the chance to establish an agreement for the payment of a monthly economic support for all the citizens of Brumadinho and the residents along the Paraopeba riverbank from west side and west side.
That is a help that's already beneficiated 108,000 people and had paid more than BRL 1 billion so far. Last week, we have renewed this agreement for 10 months more under new eligibility criteria, but something that guaranteeing the city to running its basic services and avoiding the citizens to go through harder situation while we are carrying on all the reparation efforts. Another very important settlement agreement was established with the Public Defenses of Minas Gerais state, where we have made an agreement for the moral and material indemnifications for individual and groups. It's a friendly agreement. We have made more than 2,300 people already covered by that, and this is a more definitive solution where people can really recover the means for living they have lost. The third important agreement is the labor one.
Remind you that from the 207 victims, 250 of them were laborers or workers. We are talking mainly about a labor tragedy. We have established with the labor prosecutor in Brazil a very wide agreement where we pay fair and competitive indemnifications for all the workers. We have already beneficiated more than 1,500 people. From the 250 families of the victims, 244 have already made agreements. Besides the economic compensation frameworks, we have also non-economic issues. We had signed 22 other agreements that covers, for example, quality water monitoring, Animal rescue and care. Some improvements you need to make to increase the amount of water you can capture since you do not have the water of the river available. We are revamping pumps and water treatment systems. We are drilling new wells so that we can provide water to critical areas like hospitals and schools.
A lot of actions that are important. They are not directly economical, but are important for restoring the overall conditions in the area. Our third pillar talks about how we're going to restore and develop the socioeconomic capacity of Brumadinho and the other cities nearby. Here we have actions that covers the individuals, the communities, and the entities and governments. For individuals, for example, we have a program that calls Full Support for the Affected People, where we provide economic, financial planning and education so that they can make best use of the money they got. We also give technical advisor support for them in choosing their house, and also how they're going to rescue their familiar agricultural small business activities. It's a volunteer program where we have technicians explaining to them and planning with them through weekly meetings how can they reorganize their lives.
For the communities, we are sponsoring several programs with the purpose of reinforcing and re-strengthening the bonds between the people. We have community activities. We have productive gardens where they plant stuff for eating together. They have handcraft workshop and so on. The main purpose of those activities is that the people rediscover their power as a community. For entities, we are providing, for example, financial support to several secretaries of the municipalities of Brumadinho and other cities around so that they can provide better service to the community. For example, things related to health, to education, to tourism, and so on. We are also trying to encourage activities that go beyond mining activities so that Brumadinho can think about a new future less dependent on the mining activities. The fourth pillar is about environmental recovery.
Since the breach of the dam in January, we were very concerned about how to avoid the environmental damage to keep going, since the sediments could be conveyed to the main river. We have installed several engineering structures to prevent the material from being carried during the wet seasons, during the heavy rains that last from October, November to February. So far, these structures are working very well, so we're really managing to keep the big problem limited to a specific area before the main river is achieved. We also have actions related to revegetation, related to the protection of river springs, and so on. Instead of telling you, I'm going to show you a video that gives you much more information about our main efforts on environmental recovery.
To reduce the impacts caused to the environment by the breach of dam 1 in Brumadinho, Vale has been working to contain tailings, recover the environment, and ensure the water catchment and supply in the region. To clean and restore the Ferro-Carvão stream and the impacted section of the Paraopeba River, two water treatment stations were built and are now operating. The first station has already treated and returned over 1 billion liters of clean water to the Paraopeba River. We are working on the removal of accumulated tailings, starting with the dredging of the silted area of the river and withdrawing branches and materials. Vale has also developed different emergency works for environmental recovery and the containment and removal of tailings to minimize the impact. The construction of structures which will guarantee the water supply to the Belo Horizonte Metropolitan region is underway.
We also have initiatives planned to develop sanitation in 22 municipalities in that region.
With this video, I'd like to finish my talk to you, saying that the reparation of Brumadinho become a purpose for life for us and reinforcing two main messages. First, that we are really basing our action on social dialogue and participation and small presence on the ground, and that we are providing fast and fair compensation so that people can restore as much as possible the normality of their lives. We work hard so the affected people can feel respected and dignified amid so much sorrow. Thank you. Now I hand over back to Eduardo.
Thanks, Klein. Well, I think it's pretty clear that we are doing the reparation on an effective way, but more importantly with quality, doing exactly what people are expecting to be done. We need to go beyond that. We need to build, of course, a better Vale. I think we have all the elements together now to push us in that direction. First time I mentioned these two pillars, I'm going to go back to them, about the other three ones later. These two new ones, the safety and operational excellence, a new pact with society was in Barcelona, was a concept, was something that came to us as kind of obvious because we needed to ensure, as I mentioned in the beginning, safety in our operations. We want to go beyond.
We want to be, and we are ambitious on that sense, to build a safer company, one of the safest in the mining industry. We're going to show how. Second, we need to be a true development enabler in the communities where we operate and beyond. Of course, those two, they cross across our business. We won't change our strategy. The valuable volume is still kept. We're going to talk about how we're going to bring back flexibility to do that. Base Metals is still key for us. We need to transform. We are undergoing that. As I mentioned before, we need to have discipline. We have discipline. We will show you actions in that direction as well. To begin, I think nothing will be done in this company if we don't really prove to ourselves, to community, to investors, that we are safer and safe.
For that, when I arrived, we started with the nucleus. When I took effectively in April, we approved with our board a new C-level position. Structure is important. It's not enough. Culture is much more important than that. Of course, we needed to reinforce a second line of defense. For that, we invited Carlos Medeiros, a well-rounded executive from manufacturing that believes in the same things I believe. I believe that operational excellence is what is going to drive safety, is the stabilization of our routines, is the discipline in executing what we have to be executed. We have around BRL 60 billion of assets in Vale. They should be well-run. For that, we have an ambition and dream, as I mentioned, to be one of the safest mines in the world. Medeiros, please guide us through what we are doing in that direction.
[Foreign language] Good morning. Following Vale's decision to strengthen its governance on safety and risk management, this office was created. I lead Vale's second line of defense. I report directly to Eduardo Bartolomeo, Vale's CEO. It's important to make two clarifications. First, my compensation is not tied to any operational targets. The second one, my team and I have the authority to stop any given operation whenever necessary. In order to avoid the occurrence of any major unwanted event, this office has been organized in four different areas. First one, tailings. We have to ensure that our dams are safe and they comply with the international standards. Asset integrity, we have to maintain our assets and ensure that they can be operated with safety. Operational excellence use VPS, that's Vale management system, to be the vehicle for all the changes that will happen going forward.
Health and safety and operational risks enhance the safety culture and establish a methodology for mapping all the risks. We also believe that every accident is preventable, and therefore, every action that we'll be taking will be aiming to build a safer and more reliable company. There are some milestones that will be accomplished in the next couple of years that I would like to share with you. First one, global risk assessment. We have already adopted a very thorough methodology for hazard identification and risk analysis to map all the risks across Vale. Review our tailing management system. It's about building a new tailing management system in line with the best international practices. VPS revised and relaunched.
That's our management system that has been revised, and so far, more than 60,000 people have been trained, so they are now ready to use VPS as a supporting tool for the ongoing transformation. Strengthen our global maintenance structure is about implementing one single global maintenance strategy to guarantee asset integrity. Governance, as you know, plays a fundamental role in accident prevention. This slide shows our previous and our current governance model for risk. Our board approved a new risk policy a few months ago, and following this decision, four executive risk committees have been created. With the current governance model, we believe that we can monitor and manage our risks in a much more effective way besides allowing information to flow freely and openly through all organizational levels.
As far as geotechnical structures are concerned, we have chosen to adopt a different model, and this model, by design, has several redundancies in order to maximize safety. Starting on your left-hand side, the first two box, they belong to the first line of defense, which is our operations. The box at your far left, the geotechnical operations team, they are the ones who run our assets. They are the ones who own our risk. They are overseen by the second box, which is the geotechnical support team. Then following that, there is the second line of defense, which is the organization I lead. An independent board committee. This is, as it says, it's a committee that reports directly to the board and its members are well-known geotechnical experts back there in Brazil. We have the third line of defense, our internal auditors.
We have two external layers. The first one are the companies that issue our declaration of stability. They work with Vale on a continuous basis. There are the companies that report to the public prosecutors. They also work with Vale on a continuous basis. All in all, we have seven instances oversee the main decisions on operations and on the general condition of our geotechnical structure. This goes way beyond the traditional three lines of defense model in the industry. On top of that, Vale is also using the service of an international well-known company to assess and help us rebuilding our Tailing Management S ystem or TMS. This slide shows the timetable for de-characterizing nine upstream dams similar to the one at Brumadinho. The yellow stars indicate the completion date for the containment walls for the most critical structures.
De-characterizing an upstream dam is a quite complex process that encompasses several steps. As we speak, companies have been mobilized or have been hired, and people mobilized, so we can meet the proposed timetable here. As a matter of fact, the 8B dam on the top of the slide has been already fully de-characterized, and the area it used to occupy has already been returned to society. You watch now a video that will help you understand how the de-characterization process works.
In January 2019, Vale announced the upstream dams de-characterization plan. The 8B dam is the first of nine structures in this plan to cease function as a dam. Situated at Mina de Águas Claras in the municipality of Nova Lima, the 8B was a waste containment upstream dam. In other words, the heightened structure was supported on the waste. Before the construction started, the water from the reservoir had been removed by a pumping system. Later, the removal of the upstream structure and the construction of a canal with blocks of stone took place. Such canal allows the natural runoff of surface water. The construction lasted for six months. The planting of native species has already started. 1,100 tree seedlings will be used to revegetate the area and reintegrate it into the natural environment. We will continue working in order to eliminate risks from the upstream dams.
Before I conclude, I would like to leave three key message with you. First one is, in order to de-risk its business, Vale is building a strong and independent second line of defense. The second one is I would like to assure to you that risk and safety is at the very center of every decision we're making at Vale. The third one is that a very strong and robust daily management system is being put together now. I will hand over now to Marcello Spinelli, who's going to explain how Vale will treat its remaining dams going forward. Marcello, please.
Thanks, Carlos. Morning. Well, in addition to the risk management that Carlos just said, and also, the de-characterization of the dams. Sorry. We've been investing in alternative for tailing dams. I really want to say that I'm the operator of iron ore. I'm the first line of defense, and I'm really committed to avoid the use of dams. That's my first goal. What we've been doing. Well, in 2014, our capacity of dry processing method, that we don't use the dams, was 40%, reached 60% this year. In 2023, we will be with 70% of capacity of dry processing method. That's the best for us. The northern system will reach 100% in two years. You know very well that in northern system we have the Carajás fines, the high quality ore.
As you have the blending process, the blending strategy in China, that we use the better ore to blend with the southern system, we can reduce the wet processing method in the south. But we still have a remaining 30%. What we are doing beyond. This is a new information, brand-new information. We are anticipating $1.8 billion of investment to install filters to separate the tailing from the water. We can reuse the water, and we can have the dry stacking after all. It's been under construction for the main sites in the southern system. We still have a 15%-14% of the wet processing method. This is another important information. You know very well that we bought a new technology that is called New Steel this year, and New Steel is based on the dry magnetic method.
We can separate the tailings and the ore without the water. It will be the first company in the world that is going to use industrial scale this methodology in 2022. It's under construction. If we succeed, and we are really concerned, and we really believe that we're going to succeed, we can be out of this kind of method that can use dams and water. Just to summarize this part, as an operator, I'm really committed that in the future of the iron ore mining business, we're not going to use dam anymore. Eduardo, please go back to the stage.
Thank you, Spinelli . Yeah, I think you could see clearly that we are effectively working. That's not a speech, it's actions. I think governance is being structured, is being reinforced. We are eliminating the backlogs on the upstream dams, and are working hard to eliminate and creating safer ways to operate, not only in dams, but in all assets that we do operate. It's a, we say maybe a dream now, but it's an ambition that we will pursue day after day as long as we are together here as a team. That's okay. That's not enough. Society demands much more. I think Brumadinho accelerated several initiatives that were around the company, even society abroad. Abroad, Vale, the mining industry is changing its way that is perceiving how it should interact with society. Society wants to share the value that we create.
That's a fundamental thing. Last year, we announced here those commitments. They range from climate change, from water use, energy, to specific economic development. We understood, again, listening to stakeholders, shareholders, communities, our board, extremely active on that we need to push much further. We need to push much, much further on how we interact locally, on how we truly deliver value locally, how we truly help society move forwards. We revised our goals. We aligned our climate change goals to the Paris Agreement. It does represent, and Luciano will drive us through with more details, a huge ambition that were before. We want to be carbon neutral by 2050. In energy, we have, again, a more ambitious goal to go global. We were only focused in Brazil.
In forest as well, Luciano again is going to mention that, it's going to be like 50% above. Why is that? I think one of the things that is behind this, we need to go further, we can go further. It is not grounded in something that we think is possible, but we have a portfolio that allow us to really induce our value chain to change. Our value chain on steel industry is around 10% of the world's emission. We're not, as a mining company, our emissions are relatively low. When we look beyond, it's really high. We have the right products to do that, even outside the iron ore with the nickel. With energy, we have a very clean matrix in the three more important countries that we operate, on Indonesia, in Canada, in Brazil.
In forest, we are a player in Amazon. That leaves us with a very strong basis to really have the ambition to lead this transition. Again, I would like to ask Luciano to detail that. I think, oh, sorry, I forgot one very important point. I think, as I mentioned before, we had these five points that are being revised. One very important point is our gaps around ESG. We're listening. We've made a big revision. We talked to several institutions like consulting companies, shareholders, NGOs, and we map our gaps. 50% of those we eliminated just by giving disclosure. We create a roadmap about that. For that one, I will come back later. Specifically now, I want Luciano to prove to us and to you that we will lead this carbon transition. Please, Luciano.
There has been a lot of excitement within Vale about this. I'd say today, maybe half the time of our board discussions go around this legacy that we intend to create. It is true that many in the industry have announced similar objectives, so there's a call for action amongst all corporates, especially towards climate change. You might be thinking, "Well, why is this different from what others are doing?" We believe in, on those three ones that we have new targets, that we can lead the way because of the endowments that we have in terms of assets and footprints.
Starting by climate change. Where we are today, we are aligned with the Paris Agreement. That implies increasing to 30% the target for reduction of emissions until 2030. We have a roadmap that addresses today about 70% of that. The other 30%, we yet don't know how to get there, but we're working on it. We have established carbon pricing $50 per ton. So far, others have done that. We're also targeting carbon neutrality in Scope 1 and 2 by 2050. Again, others have done that as well. Where can we lead? We believe we can lead, and that's why the excitement builds within our organization. First, we do have the high-grade iron ore, the pellets and the products that our customers need in order to reach their goals in terms of climate reduction of emissions.
We have the Class 1 nickel that will electrify the world. Based in on that, we are now working on Scope 3 targets that we will introduce shortly for shipping and for steel making. We are building a whole plan for 10 years from now, Vale to be the go-to supplier of products to help customers deal with climate change. Metallics is something that we made an investor tour just focusing on that, and we'll return to that under Spinelli's presentation, that we believe is a business opportunity to get there. That's why we intend to be leaders on this front. Another front that we intend to be leaders is in our energy self-generation. Today, we have 60% of self-generation renewable sources. We intend to go to 100% in Brazil by 2025 and globally by 2030. Our footprint helps on that.
We have a lot of hydropower in Brazil, in Canada, and also in Indonesia. To our knowledge, being 100% supplied with renewable energy is something also that puts us on the leadership. The other topic that we believe we will lead as well is in forest protection. We have, today already, about 100 million hectares of forest, mostly in the Amazon, being protected by Vale. 100 million hectares is about 100 times the size of cities like Manchester or Liverpool. It's about seven times the size of the Greater London area. It's about a third the size of Belgium. We intend to increase that amount protected and reforested by 50%. When we do that, this is going to be an area greater than Northern Ireland. If I may just show you a concrete example of that.
As you know, our largest iron ore mines are in the Amazon. Because of that protection, the animation you'll see shows how, unfortunately, all the surrounding area, besides the borders of the protected areas of Vale, has been deforested over the past 30 years, leaving just the area protected by Vale and its operations as untouched. As you see from 1973 towards 2018, that's how it advanced in leaving just the areas. The red portions is the mining areas of Vale. That's unfortunately how it evolved, but we're being very effective on protecting those areas. When it comes to sustainable development, we talked about the E, now about the S. We want to go beyond the collection of taxes, the corporate social responsibility, traditional one. To be a truly development enabler means thinking very hard and investing a lot of money in our legacy.
The very first example is in the city of Itabira, where Vale was born in the 1940s. The mines will exhaust in about 15 years. We just signed agreements by listening to society's demands and concerns and ambitions to provide for a legacy that goes beyond our operations. Let me show you a short video.
Vale's goal is to positively impact society by contributing to the development of the regions where we operate. In Itabira, Vale is helping to transform the city into an educational and technological innovation hub. One of the initiatives is the empowerment of the city's teaching staff from primary to higher education, the modernization of engineering programs, and the incubation of technology-based businesses. In October 2019, Vale signed an agreement to invest BRL 100 million on the expansion of the campus of the Federal University of Itajubá in the city of Itabira. The partnership involving the municipal government, the university, and Vale aims to support Itabira so the city can become an educational and open innovation hub in the state of Minas Gerais, and further contributes to reduce the city's economic dependency on the mining activity.
The city is very excited about this project. Well, we talked about where we believe we can lead. Now let's talk about bridging our gaps and our shortcomings about what we heard from you, especially on governance, where we can improve.
Thanks, Luciano. Well, as we said in the beginning, first of all, I think we need to listen. We need to talk as well. I think a lot of the stuff that Luciano mentioned, very few of our stakeholders knew how much we involved in the forestation of Amazon, the clean energy that we have. Anyhow, our commitments are done, and we're going to go forward. As I said in the beginning, we mapped around several gaps, 50 we closed. Just one example of something that we already are undergoing as well in direction to close the roadmap. First of all is in gender balance. I think, as a mining company, we're unbalanced. We only have 13% of our workforce female. We want to double that by 2030. We need to certify, was another demand, our operations. We only have 22% of our operations certified in ISO 14,000 a month.
We're going to drive through that. It's a longer period, of course, we'll try to achieve and we will achieve. One very important one in governance is the audit committee, was something that was asked. We are going to establish that on 2020. A very interesting one is the human rights policy. We used to have one. We engaged in conversation. We made a public consultation. We revised it. As well as important, it was a demand as well, is to tie our compensation. Our short-term compensation, normally, I think every company has its safety and environmental goals, we used to have as well. We tied now, we approved with the board, our long-term compensation. It's more or less put your money where your mouth is. It's very famous. Vale C-level, myself, our employees are all committed with those goals.
They are ambitious, but we will try to achieve them. As I mentioned, we need to talk as well, and we created this portal, an ESG portal. That all the information that I'm giving to you here is now, I think, went online on Monday, right? I invite you to take a quick view on how it looks. Oh, sorry.
The ESG portal is the new Vale transparency channel. Here you will find important company information such as repair actions, reuse of water resources, and electricity management, as well as info on sustainability, payment policy, safety measures, and performance. Everything is organized into areas of interest. A way to promote easy and democratic access to important company information in a transparent manner. Visit vale.com/esg and get to know our new portal.
Okay, now we're going to shift gears. We went through the reparation. I think the safety part, as we said, and the impact to society. As I said, those are across the business. Now we want to talk a little bit about iron ore. Marcello is going to come here, talk about how we're going to regain our flexibility and of course, what's next for iron ore. Mark will come and discuss a little bit about how we are evolving with the transformation-based metals, some changes that we're doing in the strategy as well. Lastly, Luciano is going to come and wrap up everything with how opportunity we have, what actions we are doing with some non-core assets. In the end, I will come back and close and do a wrap-up. Please, Marcello.
Thank you. Well, let's talk about iron ore and the name of the game is derisking iron ore business. Derisk iron ore business means back to efficiency to that 2018 and restore the capacity. That the name of the game. Nevertheless, I want to reinforce that that's a mantra today. Okay. We are really committed to safety of people and asset integrity, and safety first is something that is really going on, and we see some examples. Well, talking about resumption of operations, you know very well that we lost 93% after Brumadinho tragedy, 93 million tons after the Brumadinho tragedy. We still have a remaining capacity to restore. We're planning to go back in 15 million tons next year and 25 million tons in 2021. I want to explain how we're going to do this. It's a gradual process.
I can simplify in two phases. The first phase is related to mechanical dismantling. Capacity means quantity, volumes, and quality. This first phase, we can regain the quantity, but not the quality. We don't use the wet processing, so we don't have the best quality ores. The second phase is related to evolving of the dams, so we can increase a better assessment of the dams, and we can use the wet processing and volumes and quality goes back. The blasting process, in the end of the process, in the end of the game, we can have more efficiency. This is a gradual process. Another information here that is really important, that we are every day assessing and investigating all the dams and all the risk management, as Carlos just said. We have three examples that just happened. That's a new normal.
I want to reemphasize that gradually we're going to have some ups and downs and some stops of the operations to reaffirm that we are ready to go to the operations. Two months ago, we had a problem with Ferrous operation. It was a permit problem, already solved. Last Friday we went back. We had a problem in a dam in a very important operation. Almost one month ago, we decided to go further, go deeper in the analysis of Itabiruçu dam, that is Itabiruçu operation. Now we have good news. We are anticipating part of the operation in one month, that will be in January. In the last Monday, during the Vale Day N.Y., my team called me and said, "Well, we have to improve the investigation in Laranjeiras dam," that is a Brucutu operation.
My team and Carlos' team, we decided to stop the operation. We need another one month to go deeper in a crack. We had a lot of information with satellites, very top of the technology used by us for the dams, and we decided to stop the operation, reduce 60% of that operation in Brucutu to guarantee that the dam is okay. We expect in one month, more than that, return the operation a safer way. Safety is the name of the game. The new normal is, if you need to access some operation, some dam, you're going to do it, but safe will be the first thing to do. Well, I'm going to talk about the future here, volumes, and after that, efficiency. What will be the capacity for the next years?
For next year, we expect the number is 350, but the range is from 340- 355. What we have here, again, it's very important to emphasize the value of our volume is our strategy. This is about capacity. If you can deliver the quality and the volume that the market needs, we're going to do it. If you don't have the necessity, we can adjust the capacity to the right production. In two years, we can recover the formal capacity from 2018. This is the news about the volumes. Another very important information here, as we said, that gradually we are returning. The first half of next year, we have two impacts on the volumes. First one, we are recovering the BRBF stocks in China that we used this year. The supply for the beginning of the year, part of that will be used for this recovery.
Secondly, just as I said, quality is a ramp-up that in the second half will be better than the first half. We need to guide our volumes and adjust our volumes by the available volume, considering quality and also the stocks that we need to gain. Another information for pellets. Production for next year expected is 49 million tons. Well, I'll divide the efficiency in three parts. First one, the C1. C1 cost from the mine to the Brazilian port. Good news here, mid-term, we are back to the level of 2018, BRL 13 per ton to BRL 13.50 per ton. What are the main levers to get there? First one is really directly related to the volumes. We can dilute the fixed cost and reduce the variable cost with 1.0 to 0.2. The second lever is about efficiency.
We are working hard to make this company more and more efficient. We have digital transformation undergoing autonomous tracking, automation, expect to have a better operation and reliable operation. There's another very important information. As we are using the futuring process to avoid the dams, we are increasing part of our cost. We just said about the investment that we are anticipating, the OpEx related to this kind of operation increases in part of that. We can offset this with our initiatives of efficiency. Second layer of the cost is after the Brazilian port going to China or going to the other parts of the world, is the freight. Very good news here. We are undergoing our strategy of big vessels, you know very well, with the Valemaxes.
Just to remind you, we can save 40% of emissions with the Valemax, if you compare to Capesize. The results are there. Valemax are coming. We are on track. We also have the Guaibamaxes. We are reducing the freight, mid-term freight, long-term freight to BRL 16 per ton. Next year, we have the IMO regulation, you know very well. We have to use the low sulfur bunker. We have a gap between the low sulfur and the high sulfur, it's about BRL 200 today. We're not counting on the supply-demand that the market can adjust. The low sulfur can go down. To avoid this, we are installing scrubbers. The scrubbers are some mechanisms that we can use the high sulfur bunker. Offset this increase of cost of low sulfur bunker. The roadmap is going really well.
We expect to reach 76% of our fleet this year and also, in two years, 100% of the fleet. That's the way we see the freight. The third part of our competitiveness is the premium, and this is a part that all of you asked me a lot about this year. What about the premiums? You're not confident about the premiums. Let's see. This is just a little complex slide I want to pass through that. The left side you have, this table is about the components, the function that we have the premium. Premium is a function of steel margins and the price of energy that we use in the steel process. Steel margins, the higher the margins is, our clients are stimulated to use a better ore to produce more. That's the trend we have.
If you have a higher cost of the energy, you can save this energy using less coking coal, and you can pay more for that. This is the pattern that happened last year. The right up, the premiums, these numbers are the difference between, the spread between 65 index and 62 index, the premium of iron ore, the Carajás ore. We are going in that up right side. Left down side was what happened the middle of this year. You remember what happened this year. We have an unbalanced in supply-demand. Brumadinho caused that, and also the problems in Australia, the Veronica, and all the weather conditions. With the high index that happened after that, we invited new competitors for this game. We still have part of that, the concentrates from China, product produced inside China.
Other parts of the world are sending concentrates, like Canada sending to China. The price of this steel went down, and this is regarding the problem of trade war, that China was really boosting the production. They relaxed the problems related to the environment, so the winter cuts were really more relaxed. The price went down, and the margins reduced. That's what happened during the year. What we see now, the stable steel is a good reference what our business is. We are around 12 in the spread of the two indexes. That is really close to the margin of the steel today and the price of coking coal.
We really believe that in the long term, the price we believe there is something between $60 and $80, and the margin go back, and the premiums will be higher as we have more margins in this field. To summarize this, what we see in our business is still a strong business. If you consider the EBITDA breakeven, that is the sum of the cost, you see long term, go back what happened to 2018, that we were the first one in the world. We're going to have the 20 way to 30. If you consider that the lower price that you see long term, $60 per ton, we still have a 50% margin of EBITDA in this business, which is very strong and cash generator of business. What is the future? Luciano just mentioned about the necessity. Our clients are claiming, we are in Europe.
You know very well about all the efforts, all the pressures about the emissions here. We are ready now to face this problem. We have the best portfolio in the world. We have the best iron ore in the world. If you simulate the impact of our product in our clients, we can save today 30 million tons of CO2. It's about 90% of the Scope 3, what we call the Scope 3, the CO2 that is emitted in our clients, is the impact of quality of our products. More than 85% of our products are premium products. You know very well the list of our product, the BRBF, the IOCJ. I want to reinforce one product here, this GF88. It was an initiative that we started understanding. The problem with China is there's a delay from Europe.
They're more worried now about the dust, and they are investing about in pelletizing to avoid the sintering process. As you need to make the pellets, they need pellet feed. They don't have pellet feed for that. What we are doing, we are grounding Carajás fines to feed this market. It's about 30 million tons in this market, and we can use what we call the free Carajás to apply in a new possibility. What we expect this year is about 7 million tons of this product. But we are looking beyond that. Luciano said that we have some initiatives about metallics. Why metallics?
We know that there's a trend in some part of the world to move from blast furnace to electric arc furnace. We want to help them, not only to use more scraps, that they can use metallics to clean the scraps or to use directly in their part of the process. We're studying part of that solutions with them. HBI. Why HBI can be a possibility. Brazil is exploring the pre-salt, and there's a lot of gas, can be a location for natural gas, and also we can have plants of HBI with our clients to feed this kind of necessity. Another possibility, what we call the green pig iron. Pig iron inside Vale more than 15 years, we have Tecnored. There's a technology for pig iron that is going really well.
We have an industrial trial going on, and we can use as a source of energy, biomass. We already tested 50% of biomass in this kind of technology, and we can reduce 50% of the emissions in our clients. If you use 100% of biomass, we can close the gap of the challenge of 2050. The main message here is to summarize our strategy. First one, go back to the volumes. Be careful with the safety first. This is a mantra. Volumes and quality and value over volume is a key strategy for us. You know very well that. Secondly, cost. We go back, we're working hard, and as we go with the volumes, we can go and work with the initiative to reduce cost. We go back. We are in a good shape to be the best in the world again in some years.
We are ready for the future, for a greener world. Today, we have the best portfolio and are working hard with our clients to give them, in short to long term, the best portfolio for the new challenges. Now, Mark will continue with the base metals strategy.
Thank you. Good afternoon, everyone. Marcello spoke to you about the potential we have in our iron ore portfolio for a greener future. I want to speak to you today about the turnaround of the Base Metals Business that's underway, but also the opportunity we have as nickel plays a key role in an electric vehicle and renewable energy-driven world. With the adoption of electric vehicles, nickel is poised for dramatic change. Nickel is a key component in the electric vehicle battery that drives increased performance and lowers its cost. With nickel, we will enable the mass adoption of the electric vehicle globally. Of course, this will increase the demand for nickel dramatically. I want to talk to you about how we see the market dynamics playing out for the nickel industry.
Currently, as the demand increases to supply the electric vehicles' batteries, in small numbers right now, and as it grows, we have excess Class 1 nickel available through inventories. Class 1 being our high purity nickel, particularly in the form of briquettes, which is currently feeding the electric vehicle battery industry. However, this will not last. It will not be sufficient to meet the demand in the coming years. What we're going to need to see is the increased use of laterite ores, primarily through the adoption of high pressure acid leach technology, HPAL plants. This is a technology that the nickel industry has tried with some success, clearly some shortfalls in our industry, we will need to dramatically improve to meet the demand in the future.
Overall, we see a tightening supply-demand dynamic in the nickel industry, and we see the emergence of three very distinct markets, each with its own supply-demand dynamic. Our Class 1 high purity products, the stainless steel products, and then products that feed the batteries through nickel sulfate. With the emergence of these supply-demand dynamics, I'm going to talk to you now about the new commercial strategy that we've developed for Vale Base Metals. We have a very strong high purity nickel Class 1 product base, which comes in many different forms, can feed many different applications. As we see the supply-demand dynamic becoming tighter, we see the great opportunity to preserve and restore our market share in the upper Class 1 nickel.
We see the opportunity to play the LME price as we see it responding in the next few years to the demand for electric vehicles, and to get greater value out of the premiums we get from these high-quality nickel products. We also have opportunities in the Class 2 ferronickel market, the market to feed the stainless steel, as well as the battery industry. We will selectively participate in those opportunities as we see the opportunities in front of us and ensure that we have robust returns available to us. I will talk to you about the opportunity we have to increase our ferronickel production in Onça Puma. We also have opportunities in the battery market, be it a greenfield project in Indonesia that I'll speak to in a few minutes in Pomalaa, partnering with Sumitomo.
We also have the ability to move our Class 1 products to the battery markets as it makes sense, particularly with our nickel powders. What are we going to do to take advantage of this opportunity? Our challenge is to turn around the Base Metals business, it's a challenge that we are undertaking right now. It will take us through the next couple of years, I'll explain why. First and foremost, we need to be a safe and reliable producer. Our assets have failed us in the past couple of years, in this year in particular as well. We need to invest in our asset integrity and focus in on the pillars that Carlos explained to us earlier, adopting the preventive maintenance strategy that he discussed. We see that reaping benefits for us in the next couple of years.
We also have a program of very significant investments in replacement mines in Canada. We've announced and are undertaking the development of the Voisey's Bay underground mine, which will replace the open-pit mine which will deplete in the next couple of years. We're also extending the Copper Cliff mine in Sudbury. Through this period, we will have very significant demands on our capital, but it is very important that we've developed a strategy where we will be cash flow positive throughout this tough period, with this period of investment. We've secured this through our nickel hedging strategy that we've announced recently, a nickel hedging strategy that carries about 30% of our production through 2020 and has already generated value for us. Finally, as we move through this period of reinvestment, we have the optionality for growth, particularly in our Indonesian portfolio.
To secure the investments in Indonesia, we need to ensure the pathway to the extension of our contract of work, which expires in 2025. Recently, we announced the signing of a heads of agreement to meet the divestment requirement, which is a key pillar for the extension of the contract of work. It was announced that Inalum, a state-owned entity in Indonesia, will be purchasing 20% of PT Vale, 15% coming from Vale and 5% coming from Sumitomo Metals. We believe this will be a very critical pillar in ensuring the successful extension of the contract of work, which will allow for the investments in Indonesia. We have the brownfield expansion opportunity in Sorowako, our long history of operating in Sorowako, long profitable history. We have the opportunity to expand by 10 kilotons through ferronickel production in the short term.
We are also under discussions through partnerships through the development of two projects. Bahodopi, which would be a 70-kiloton ferronickel project, primarily with Chinese partners using Chinese engineering and EPCM methodology. It's important to say with both of these projects, we retain 100% interest in the mines. In Pomalaa, we will be partnering with Sumitomo, a company that has mastered the HPAL technology. We have a 40-kiloton project available to us supplying HPAL to the electric vehicle market. Where does this get this? Where are we now and where does it bring us to? I'm going to review our production profile through next year and the coming years. These numbers do not include production from Vale New Caledonia, and Luciano will speak to you about that in a few minutes.
Currently, we're at a production rate of about 210,000 tons per annum as we focus in on becoming that safe, reliable producer. In the short term, we have the ability to grow to about 240,000 tons, primarily as we see production increasing in our North Atlantic Canadian operations. We also have the opportunity to expand with a second furnace in Onça Puma, a fantastic project with promising, robust returns. Finally, we have the opportunity to grow to 360,000 tons with the addition of the Indonesian projects that I announced. Similar to nickel, we have great opportunities in the copper business as well. Similar to nickel, copper has the ability to respond and grow with the electric vehicle as well as the renewable energy industries. We'll start to see the application in these industries to add on to the traditional industrial applications that we currently see.
This is just as the mines and the copper industries are depleting and the mine ore grades are depleting as well. I'll just finally conclude with the overview of our copper portfolio and the growth opportunities that we have. We're currently producing or will produce at a rate of 400,000 tons next year, with a very short-term ability to increase to 430,000 tons in 2021, as we see increased production coming from Canada as well as from Sossego in Brazil. In 2022 and 2023, we're going to see significant increases as our Salobo 3 growth project comes online. Finally, not included in the production are three projects that I mentioned here. The Victor project, one that we discussed last year in this event, is a copper-nickel project, primarily copper, sitting alongside the Glencore Nickel Rim project.
We are currently studying with Glencore the joint development and operation of that mine, which would see 30 kilotons attributable to Vale. We hope to be announcing a project sanction in the second half of next year. Alemão is another project we have in the Carajás region of Brazil with a potential of 60,000 tons, again, project sanction scheduled for second half of next year. Finally, in the longer term, we have a project in Indonesia, a very significant copper-gold project with the potential of 250,000 tons per annum. Very promising project that we will be looking at. In summary, we're turning around the base metals business, becoming a safe, reliable producer and taking full opportunity of the potential we see in the nickel and copper markets going forward. At this point, I'll return this to Luciano to conclude.
Where do all of these lead us? What's the investment opportunity for Vale at this point in time? The key word, if there's one word that you should leave today in the back of your minds, is the word de-risking. We're very mindful that the equity story of Vale relies on de-risking. De-risking to improve the cash flows of the core business, de-risking to improve the cash flow outside of the core business, we'll talk about, and de-risking to improve the way those cash flows translate into valuations. Starting with the business. If you put all together what was told to you today, every one of our core businesses will increase production from 10%-30% over the next three years. Bear in mind this timeline, three years. 2022 is the year in which we want to deliver to you a completely different Vale.
Together with the increase in production that we talked, the resumption of volumes in iron ore, the increase in production in nickel and in copper, we will have also competitiveness improvements across all the businesses. This will not come at a high cost. We always present the capital expenditure numbers, and here they are. Two messages here. We continue to foresee a $4.5 billion U.S. level of capital expenditures from 2022 onwards, which is exactly where we were before. However, over the next two years, there will be an uptick to $5 billion. Reason being, for the front-loading of those investments in filtration and in dry stacking that Spinelli just mentioned. Our commitment to avoid and eliminate the consequences of tailings dams. We're front-loading those investments two years, then back to $4.5 billion, even with the growth opportunities that were just mentioned, for example, in Base Metals.
De-risking in the core business means cash flows will improve. Now I'll talk about de-risking outside of the core business, and we understand there are lots of inefficiencies and problems that we need to address within the Vale umbrella. Starting by non-performing assets, Moatize, VNC, and other JVs. I'll focus on the two of them, on Moatize and VNC. In Moatize, see what's written on the left-hand side. A short-term shock will lead to strong gains in cash flows. That's our goal. What is the shock about? The reason why we're underperforming in Moatize this year is because we started to mine sections of the mine where the ore body is very poor. Because of the lack of drilling, we did not anticipate that. The plant is not capable of treating that ore. We're going to do twofold.
First, on the left-hand side, there's a complete new mining plan. We will abandon the poor parts of the ore body. We will shorten the mine life. We will go after the good stuff, and we will improve, for example, the yield of coking coal in the mix. The second thing we will do is on the right-hand side, we will stop the plant in Mozambique and ore production for three months in order to do a complete overhaul of the plant to adapt it to the ore body that we have and to do some changes in the flow sheet. After doing this, the goal is on the second half of 2020 to have it up and running at 50 million tons production rate, and therefore, EBITDA positive. When it comes to Vale New Caledonia, we made a decision to exit VNC.
We've communicated this to the French authorities, both in France and in the South Province. We're going to exit responsibly. There's a few reasons why we believe we will succeed and why we're doing this. The first one is we realized that we don't have the competence to raise the production levels with this technology to where we want it to be. We realized that others may have this competence as HPAL is a technology now that it is much talked about in many parts of the world because it's going to be a key technology to supply the nickel battery market. Others are doing their homework and maybe better than us. Finally, New Caledonia produces not only final products, but also intermediates that are very sought after today.
NHC is very important for the battery market, and there may be an opportunity to work with those intermediates and to completely also change the flow sheet, and others are looking into this as well. A final decision on the final configuration of VNC will be announced in the first half of 2020. Not only Moatize and VNC, but there are other cash flow drains within the Vale system. Regardless of what happens outside of Vale, just by shutting the taps, we can improve cash flow significantly. Here's a list of them. We just mentioned Moatize and VNC. They're consuming over $1 billion in 2019. Our commitment to you is to vanish those outflows by 2022. We have the stoppage expenses, all of the expenses that are going out because of the halted mines, $900 million this year. Commitment to 2022, they will be zero.
Samarco, remember Samarco is still a cash flow drain. Samarco and Renova, the foundation. It will still be there by 2022, expenses with Renova. It will diminish considerably. Next year is an important one because of the restart and some more indemnifications at the Renova Foundation. We're repurchasing the MBR preferred shares within the iron ore business. The outflows of BRL 200 million per year will cease next year. There are other outflows that we're vigorously tackling. If you add the 2019 column, that's almost $3 billion outside of Brumadinho expenses that went out for no good economic purpose. We intend to eliminate most of those by 2022. De-risking in the outside of the core business. Talking about Brumadinho expenditures, yes, they were heavy in 2019, they will be heavy in 2020, they will be heavy in 2021.
They will start to decrease by 2022. The reason why 2020 and 2021 are very strong is because of the de-characterization expenses, which are mostly concentrated on those two years. They're not going to vanish in 2022, but they will be hopefully substantially smaller. The risking outside of the core business will lead to important improvements in cash flows. Therefore, by 2022, you see the tables, EBITDA on the left-hand side, free cash flow on the right-hand side. We intend to deliver to you a very healthy company. There are some hypotheses here of prices of iron ore and nickel, and you can see by yourselves the cash flows intended and how they convert very healthily into free cash flow because of the low level of capital expenditures.
The key question is how those numbers translate into valuation, and we are very mindful that you have many doubts about Vale. You doubt about the liabilities of the reparation efforts. You doubt about the safety issues. You doubt about the resumption of volumes. You doubt about how we're going to deal with Moatize in VNC. That's why we've spent 70% of this presentation talking about all of those issues to convey you the message that management is fully committed towards de-risking the company. If we successfully de-risk the company, on the right-hand side, you have on top of it, the EBITDA numbers similar to the ones you saw on the table on the left side. Three different scenarios. A more pessimistic scenario, BRL 15.5. A base case scenario, BRL 19.5. A more optimistic scenario, BRL 23.5.
How do those cash flows will translate into valuation? If we de-risk the company, if we eliminate all those uncertainties, we believe we may deserve from you an assessment, an EV multiple, which may come back to the 5.5-6 range that we traded about 10 years ago from four times today, maybe even less than four times. That's a key component of the story. If we do that and still aiming at BRL 10 billion of net debt, you can see how the market cap can improve substantially. When you add the free cash flow that will be generated over the next three years, by 2022, there can be a potential shareholder return if you take just the middle scenario of over 25% a year.
All that we're talking about, we're going to do it because it is the right thing to do, but also there will be, hopefully, rewards from it. That's what we intend to deliver to you by 2022.
Thank you, Luciano. I think with that. Sorry. We conclude. As you saw, we are undergoing the de-risking. The doubts are getting smaller or lower. Fundamentally, I want to remind you, and we say that inside Vale, we don't see this as a sprint, it's a marathon. It will take time, it will take efforts. Two words you can expect from us, discipline and persistence. Preparation, as Klein showed, is happening. It's happening with quality. Safety is something that is embedded in us. We will be the safest company in the world. We need to stabilize our production. We are getting back our volumes swiftly, but with safety. More importantly, we are primed to this valuation because, as I said in the beginning, we will be disciplined. I think more importantly, we want to build a better Vale.
A better Vale that is safer, more human, and more sustainable. Okay, thank you. Let's go to the Q&A. Thank you again.
Well, thank you very much, gentlemen. It's Doug Upton from the Capital Group. I have a question. It's a continuation of the de-risking question, I think.
Luciano, thanks for what you ran through. From a shareholder's point of view, in a short term, de-risking is also about the final closure of the Brumadinho issues.
Yes.
Could you just talk through, like, the key issues still facing the company from Brumadinho, the key counterparties?
Okay.
Maybe mostly from a legal point of view.
Yeah.
I think, and what the time frames might look like. Thank you.
Okay. Thanks, Doug. Let's put this way. I think there is an obvious investigation that has to conclude internally and externally that will assess responsibilities. Sorry. Timeframe for that. Internally, we believe that our technical assessments are going to be delivered this month. We are finally attacking that. That's the internal assessment of the break. From the prosecutors, we believe will happen either before the recess of the judiciary or later in the beginning of the year. There's a recess in Brazil now for that. That's a very important point because it creates a possibility to the other agreements that need to be done. We have three civil actions against us that froze BRL 11 billion, around $2 billion. It doesn't matter. One is around environment. We have reparation and compensation.
The studies about reparation are very well advanced, but the problem is the compensation, and that we are discussing with them. Again, I think we could expect something around the first quarter. The second one is the social and economic damage that we advanced a lot on how can I say that, the agreements that Klein mentioned here, but we need to get that collective. That gets more complex, but anyhow, again, we are dealing, and I will get to the third one to clear that up. There is a fundamental compensation for the government. The government took the lead and tried to arrange these agreements around what stakeholders we are talking here, the public prosecutors of the state of Minas Gerais, the government itself, and the judiciary system, and ourselves, of course. The complexity of managing those four elements is being led by the government.
We believe that we should expect at least that for the first half, not this year. We don't have any time. We were hopefully that thinking that we could have the agreement, but it's too many people around and too many complexities. We believe that in the first half of next year is reasonable. If you remember Samarco, it took much more than that. I think there is a key difference here is the speed that we are dealing with. That's as we said, I think in other events, how can I say that? It's taking the burden of the ACPs. ACP is a civil action that requires that. We're not waiting for that. On water, we are taking action. Those things, I think, will allow us to conclude this on the first half. It's, again, very ambitious.
From an accounting perspective, when we did, for example, the provision on the second quarter for the social environmental side, we did reparation because we basically know what needs to be done. Some of the agreements that were mentioned already deal with that. We also already provisioned for compensation. Why is that? We've engaged with the authorities, and we pretty much know where they're coming from. For example, David talked about sanitation efforts. There's a desire to, for example, increase water supply security for the metropolitan area of Belo Horizonte. There are long-term plans and things that we're discussing with the water utility company. This will fall under the compensation umbrella, the agreements that Eduardo mentioned, but hasn't been settled yet, but has been provisioned for according to our estimates. Same thing with the socioeconomic. The provisions were big.
If you just think about indemnifications for individuals, we will never get to the values which were provisioned. The difference to the provisions are our own estimates of the grounds and the order of magnitude of where those compensation agreements should come from. Once they are settled, then we will have naturally an adjustment upwards or downwards.
The legal and the public authorities are telling you that it's better to take a bit longer on all the arrangements to legitimate all the compensation package, rather than going too fast and having problems in the future.
Thanks. Serafino Capoferri from Macquarie Group. Just a question for Marcello . Do you anticipate more difficulties or disruptions in the first quarter during the rainy season from operating the dry processing facilities? Could you sort of comment on the risk around that?
Okay. Well, I think this year we faced a unique problem in the Northern System. In March, we had a lot of problems, the merge, and we have many problems. Since that, we've been working hard to have a better position in the rainy season. The rainy season just already started before we are expecting, but we think we are more prepared for that. It's raining more, but we are much more prepared. It's a lot of initiatives to make it happen. I see in terms of disruption, that we'll be in much better shape than this year.
Thank you. Sergey Donskoy, SocGen. Two questions. One actually is a follow-up to Doug's question. Do I say this correctly that the provisions that you have made so far, they are made against, well, to the best of your knowledge, and there is nothing of substantial sort that we should bear in mind that is left outside of those provisions on a balance sheet. Speaking of these lawsuits and your interactions with the prosecutors and the government. That's first question. Second question, you provided outlook for iron ore growth production over the next four years. What should we think about the evolution in quality, for instance, grades, how they are going to evolve from where we are now to next year and to 2022, or any other parameters there are that are of relevance? Thank you.
Okay. Thank you for the question. I think, just clarifying, I think Klein just mentioned we are interacting with the prosecutors, not only the prosecutors, but there is a person organizing the demands. Again, we are pretty sure that we are comfortable in that range. We have to bear in mind that we are frozen in BRL 11 billion, and we provisioned BRL 16 billion. As Luciano mentioned, it's pretty larger than we thought before. On the environmental part, you cannot even compare to Fundão because the range is much smaller, the impact is much smaller, so there is no relevance. We have as well the reference for Samarco for that. The collective damage is the one that has the biggest uncertainty. I think Luciano can comment as well.
We're pretty sure that from what we know so far, and even from the action that we have against us, we are well in a conservative side.
Just to give an idea, one of the civil actions that were put forward in the very beginning was the civil action of the labor public prosecutors because this was basically a labor accident. 250 of the 270 victims were workers, employees of Vale or contractors. The labor public prosecutors, they took forward, they put this civil action. This was settled. As Marcello mentioned, 244 of the 250 families have already settled with Vale, so fair indemnification. They have established already in the civil action the amount of the compensation, the collective compensation, at 400 million BRL. That was already paid, about $100 million. When you go to the 108,000 people of the city of Brumadinho and the surroundings, you obviously have way more people. However, these are not the families of the victims.
These are people who had, some of them were much less affected. That gives you an order of magnitude of the types of compensation that could come. For example, the sanitation over 22 municipalities is expected to cost around 1.2 billion BRL. It's about $300 million. Likely, that agreement will be a patchwork of many of those, so we should do sanitation for 22 municipalities, you should do something for the water utility company, you should do something here, you should do something there. When you add all of this up, to our best knowledge, we believe we have enough funds already to cover those estimates.
One point I think to remind about the uncertainty that in this case we don't have is the limit of the impacted people. If you've seen 180,000 people, we even believe that impacted people are much lesser because they're in the range of the river. Anyhow, we don't have this uncertainty now.
Yeah, that's interesting. Last week, the emergency payments were renewed, but they were renewed with a different criteria. Of the 108,000 people, 9,000 will continue to receive the full emergency payments. The other 99,000, which are deemed to be less affected, so to speak, they're now going to receive just half the handouts. There is some sort of convergence towards a number of affected people, around 10, maybe 15,000. That's what we are talking about in terms of the bigger impacts.
Agreed judicially with prosecutors, everybody involved.
Yes.
Understanding and agreeing that is a fair adjustment in the compensation.
I think you could come to your second question.
Regarding the quality, we can divide this in two phases. The short term, as I mentioned, we have very good news. The S11D is going really well. We expect a full year next year for 90 million tons, with Carajás is the base of the quality. As I mentioned, during the first half, we have the return of the wet processing method so we can sometimes be short of high-quality products in the beginning. We are going to adapt the value of the volume to not oversupply high silica products. That's the main thing. After that, the Carajás, as I mentioned, we have the best portfolio, we have the blending and the Carajás will grow, and we have other products to improve if you need to improve Carajás. High quality is the key strategy for Vale.
Hi. Tyler Broda from RBC. Thanks very much for coming to London for this presentation. Two questions from my side. One, the 340 million-355 million ton forecast you have for this year? Is that including the potential for more Laranjeiras type situations, i.e., if you're going to be focusing more on safety, is that built into the base case? Just curious in terms of the guidance. Secondly, does the de-characterization schedule, does that have an impact still on the production profile? If you could explain how, if at all. Then finally, I guess in terms of metallics and the interesting shift there with the cheaper gas in Brazil that potentially grow out of EAF capacity in Brazil. Is there any thought from Vale to move further downstream as that process develops?
Let me begin with the last one. There's no chance that we go downstream. The idea here is to solve a problem from the client. If he wants to solve the problem, he comes together with us. That we have the opportunity to solve a big problem, we're talking to the Europeans mainly now, and of course, what we want to do? We want to captivate our iron ore with the client. That's the main driver behind that. We want to solve a problem, and we want to captivate him. It's more or less like the Brascos of the pelletizing plants of the 50 years ago. They want, they come together with us. Otherwise, we don't go. We have the very bad experience on that. That builds up on our capital discipline that I mentioned before, our learning from the past.
We are extremely optimistic around that, but extremely conservative on this downstream optionality. We don't see as an optionality, we see as an opportunity if the client comes together either on take or pay, either on investing. Of course, we didn't design that yet, but philosophically is that. I think Mr. Spinelli can go over the.
Yep. In terms of capacity, I can say capacity because yeah, we can have some disruption. Again, we have seven layers of defense. If someone puts a red flag, say, "Well, there's a problem here," we're going to look after that. We are counting on that, in that range. Can happen. We really believe that this is a good number to pursue. In terms of the characterization, we don't count on that dams for our production. In the nine dams, I think there are two or three that we need to understand the impact of a production in that dam. Actually we don't use them. We don't need to finalize the de-characterization process, we have to check the interaction between the operation there.
That's the first phase that I mentioned, the mechanical dismantling is the first phase because you cannot blast because of the impact of that. The interaction is regarding impact, not directly involved in the process of de-characterization.
Jason Fairclough, Bank of America Merrill Lynch. Just listening to Brumadinho notwithstanding, it appears that the real quality core of the business is still the iron ore business, and the further we get away from Brazil, the more problems you guys are having operationally and from a quality point of view. You've got disposal in New Caledonia, recapitalizing in Mozambique, recapitalizing in Canada. How do we think about these businesses longer term? Do they really have a place in Vale? Is there a focus? We see some of the other large mining companies disposing of some of their tail of assets. Could you reasonably call some of these assets a tail?
Not necessarily. I think as we mentioned before, base metal is a core for us. I think, of course, as Luciano mentioned, New Caledonia, as we talked here last year, is something that we're struggling, and we believe it's time with the risk profile, much more on the risk profile and the return profile. If you do it very well, it shouldn't be on the core of the base metals business. If we were a standalone company, we would do the same thing. We are taking this approach to a standalone company with the base metals to sustain its investments. I think that's very key to understand. I think we made a lot of inroads. Last year, we promised here that we would tackle the underground mines. We delivered the budget on the underground mines. Of course, the bottlenecks move.
Now we had some problems in the refineries that I think it's much more easier to solve it. We are learning how to operate in Canada. I think it's very important that that has to do with our management model that we mentioned that last year as well, the famous VPS. I think we have no doubts about either our Canadian assets. Everybody is looking for our Canadian assets, but we are more than everybody. We feel the optionality in the industry. Indonesia, we might ask why be Indonesia? Because we have the best resources in the world. What happened in the price this year was exactly the reaction to Indonesia. We are there, we are 50 years there, we know how to operate there, so it's key to us. There's no doubt about that. Selectively, we have to do.
Specifically about coal, I think the obvious answer is we need to fix the business. If we talk about exiting, leaving, or sharing, or partnering, now we're destroying value for Vale. First of all, we need to fix. I think in that case, it's much more reliable to fix it than in an HPAL capacity. We have beneficiation plants in Brazil. I think we were unfortunate not to transfer the mining knowledge and the plant knowledge to there. We did very well in the railway. We operate the railway and the ports in Mozambique very, very well. In there are distinct business, by the way. I think more objectively in your answer, no. They are not tails. They are core for us. Base metal is core for us. We believe we will deliver 30%. I think numbers, they are in our strategic plan.
Of course, we need the price to come. We saw the movement this year. I think we're very fortunate to lock in. We're making money in the locking that we did. We know there are price takers there. If the market organizes itself, fundamentally, the nickel market is going to be organized in the future because of what Mark mentioned. We are very optimistic about the upper class market, because that's where we know how to play, that's where we know how to price. I think that's the answer to your question.
One thing I forgot to mention with respect to Indonesian investments is that that will be self-funded at the Indonesian subsidiary level. There will be no cash requirements coming at the shareholder level.
Good afternoon, Sylvain Brunet with Exane BNP Paribas. My first question was on iron ore. We've seen the impact at Laranjeiras. Could you give us more concrete examples of what the intervention team has done 10 months after the accident? Second question is on the inventory you mentioned you need to rebuild in Malaysia. Could you help us with a range there? What sort of tonnage we should assume? Would you be happy with a 20 million-30 million ton estimate? How do you think about that inventory with your new operating style? Should it be a bit bigger than before? Lastly, on copper, could you give us some color behind the lower production number in 2020 versus last year, the origin of that? Thanks.
Okay. Well, Laranjeiras, it's quite the example that we want to deliver to you that we are doing this time. We're using the best technology available to assess the dams. We have satellites that we are checking every day, movements and any signs of what kind of problem. What happened that we saw that something moved during a period of time. I'm talking about eight centimeters, something like that. We went to the field and we found a crack. It's a small crack. It's an eight-meter crack. As you found, we need to investigate. We worked with all the teams there, my team and Carlos' team, and we couldn't answer the question, the full question of what happened. As we don't know what happened, we need to investigate. We decide to stop, investigate, and see.
We don't see a problem of safety in this case. The pattern is that if you don't have the answer in the right time, you need to investigate. Stop. We're going through this investigation during one month. Our expectation is there's nothing, so a big problem there, but we need to go through that. We have. We are to return to you what happened after one month. That's exactly what happened. That's exactly what happened in the dam before, and it can happen with the others. What we are confident that is the right path to do this time with all the team involved. You ask about Malaysia, right? The Malaysia port is very important. It's part of one of the 17 ports that we operate in Asia, actually serving China and all the countries there.
It's very important. Part of our pricing model is based there. We can define the price based on that port. We are planning to expand this port. We didn't approve yet. We have a plan to expand another 13% of capacity. Actually, we are really well-served in China with the 17 port now. We are using four port for volume access and also Malaysia port. We see that's a very good strategy to keep the blend in all the distribution after that. We want to actually improve the distribution in China with other kind of services in Malaysia. That's the strategy we have there. He asked about the guidance for copper.
Yeah. In copper, we gave guidance of 400,000 tons. It is on the conservative side. There is the potential to be a few more thousand tons in there if we execute very well next year. I think there's a few different factors. One is there's some refinement, I think, of our guidance, primarily trying to be conservative given some of the journey we're on in our preventative maintenance scheduling, getting better availability out of our equipment. There is some substantial work that's delaying, I think, the ramp up a little bit in Long Harbour, so some cutting there. There's also the impact of some reduction of third-party feed in Sudbury, as one of our providers there has shut down a mine, so it reduces the tonnage in Sudbury due to that impact as well.
Hi, Roberto Lampl from Alquity Investment Management. Thank you very much for your presentation. It's really encouraging to see how you're incorporating ESG factors, which are very dear to us and to our stakeholders. Why only 20% of your long-term compensation tied to that factor? That's one question. The other one is regarding the other tailing dams in the portfolio at Vale. How many of them would you classify as high risk, potential either some kind of rupture or toxin materials seeping into drinking water and so forth? Lastly, the audit committee that you're going to be establishing, how will that differ in terms of responsibilities compared to the Fiscal Council, which is in place in Brazil?
First of all, thank you for recognizing that. I think we are the first big three miners that will have long-term compensation with ESG-related factors. That was a decision discussed with the board. We think it's a journey, it's a beginning, we can reassess that when time is due. Specifically about the dams, we have 18 dams that don't have the certificate of stability. They are well known. We're taking care. They are not upstream dams. That's very important to mention. Of course, the upstream dams that we mentioned here, they don't have certificate of stability. As Carlos mentioned, we are building backup dams on them. If you ask me what concern us is the upstream dams, when I mentioned about safety, governance, removal of backlogs, and reducing the use of tailings. We have already one that is completed.
It's in the Gongo Soco region, is a huge structure. Is a backup dam that will hold, if in the event that something happen, will hold, and this impact that you mentioned will not happen. We will get the ones that really are concerning us on the factor of safety there on the other three. They will get ready by February because Forquilha is getting more time because of geological issues there. The B3/B4, if you remember, if you see the presentation there, you'll see will be ready by December. That's a very effective demonstration that we are not underestimating any risk. Maybe you see why we're building these structures, because it can happen. We, of course, are working in reducing the arrival of water. We are draining it. As Spinelli mentioned, we're increasing the factor of safety, but we're not counting on that.
We are counting when we are doing effective actions to mitigate that. That's specifically how we are dealing with the tailings dams. I think the audit committee, Luciano can explore that. It's a long-term demand to be independent. I think Luciano has more details.
Just adding on the tailings dams. Sometimes there's a little bit of confusion. The material which is stored on tailings dam is not toxic at all. It's basically iron ore with a lot of silica. It's like 20% iron ore.
Sand and water.
Silica, which is sand, basically.
Water.
Yeah, water. What sometimes we get reports is following the dam breach, sometimes the riverbed already contains some of these heavier metals. The bottom of the riverbed was shaken because of the flow of the tailings. Some of these, which perhaps come from artisanal mining, have raised up to the surface. One very evident proof of this is some of our tailings dams are used actually to source water for Vale. For example, in Salobo, the water for the operation of Salobo comes from the tailings dam. It catches water from the rain, we pump it for our consumption of our employees and our activities. It's not toxic at all. In terms of the audit committee and Fiscal Council, Fiscal Council is something that the Brazilian corporate law prescribes to have.
It's a body in which minorities can be represented in order to basically, it's another level of audit on the company's accounts, but it does not support and provides advisory to the board of directors. The board of directors, and something that usually there is in Brazil, it's the finance committee. Some board of directors have established the finance committee as a subcommittee in order to provide that kind of advisory, which in the U.S., for example, is mostly done by the audit committee. The audit committee requires independent experts, basically. This in the boards of directors, like in Vale, for example, the finance committee does not have those certified experts, advisors, and which will need to go outside of the board of directors in order to bring those guys to the audit committee.
The audit committee chair needs to be independent, but it will work together with the board of directors in order to provide accurate advisory on those more complex audit and financial matters. The Fiscal Council interaction with the board of directors is not that frequent, and they have kind of different constituencies. They answer to different constituencies, so therefore, the Fiscal Council has not been providing the type of support that boards of directors, they need. Although the SEC, for example. They understand that a Fiscal Council with certain characteristics make up for the lack of an audit committee, and that's why Vale continues to be traded in New York Stock Exchange in compliance with U.S. securities laws. We recognize that by having a true independent audit committee as a support to the board is the best practice, and we will implement that.
Doug Upton again. I have three questions, I think all technical. The first one is on the filtering and dry stacking in the iron ore wet process. It looks like you plan to do half of the wet processing as a filter and dry stack. Some of the rest will be the dry magnetic separation. My question is, why not filter and dry stack all of the iron ore, all of the wet processing? Second question, could you just update us on the idea of doing an extra 50 million tons of capacity in Carajás? The third one was, after the sell-down in Indonesia, do you still consolidate the Indonesian one, or will that go out into equity? Just sort of a fourth one as well. When you do the internal report on Brumadinho, will you be publishing that one? Thank you very much.
Okay, good. Thank you again. Yes, for the fourth, as soon as we have. Thanks for your question because this is something very key on it. We are extremely diligent on delivering every information towards the solving of the problem. That's absolutely. The day that sits in my table, we will be in the market. That's the fundamental thing that we are driving our actions. We are as obviously, we want to know exactly to answer the former question. Because we are more or less like throwing the net in everything. We don't care about what is inferred, perceived. We are doing the right thing. If we get more technical insights, we are gonna use again for the upstreams to prevent, but although we are prevented by the backups. Now I'm gonna circulate the questions.
Yeah
Mark can give more color. I think we won't consolidate because they're going to be 34, but that's going to be in 2025.
Yeah. The agreement that will close likely early in the new year, based on how we're structuring the governance and the shareholders agreement and through some relationships with Sumitomo, we believe we'll be able to consolidate on closing of that transaction. There is a further divestment requirement as we go to a new regime when we switch in 2025 to a license regime, and there's an additional sale of 11%. That's a different story.
For the dry processing and.
The wet process and dry processing. It's a Lego solution. You need a space for dry stacking. In some part of the mines, we don't have space for dry stacking. We have the dams that are working, so we can use it. There's a limitation for that. What kind of things we are working? We are trying to put some different products to make the piles more stronger, so we can do it, and be out of that, like a co-product. We're developing other solutions to expand the use of the dry stacking. Again, the dry magnetic is much simpler because you can do this in small packages, like one million to two million, is more flexible to do that. We're working hard to combine all the technologies to find a solution, but that's a restriction.
Yeah.
We have that.
There is a shared value proposition that we are looking at that I think will be disruptive. Tailings is a problem, wet and dry. We cannot underestimate, even sometimes worse on piles. We will try to extract the sand out of it. That's something to watch for. That will allow us. People ask me already about that. We don't have tails in our master plan. There's no more tailings being designed in Vale. We are constructing three tailings, if I'm not mistaken. It's Maravilhas, Torto, and Grupo, but there's none more. We will find a solution. Innovation. Need is the mother of innovation. We will need to stack, dispose-
Sell.
We can sell, that's too much now. We're not downstream on that. We can even make money on that. Anyhow, our position now is let's reduce something that is obviously not the best appropriate way to do it. That's why. For our knowledge so far, I think it's reasonable. New Steel is something that we see some opportunities as well because it has to dry, so it consumes energy. If we can reduce the consumption of energy, there's a lot of things going on there. I think this push, as I mentioned in the beginning, will move a lot of pieces inside Vale to make us much better and much safer.
50 million.
The BRL 50 million.
Carajás.
I know it's mine.
Yeah.
Okay. BRL 50 million, it's a flexibility.
For the S11D?
Yeah. We are engineering. That's all. Anyhow, go into the details.
Yeah. We are 90. We are ready for another 10. We're studying and probably approving soon another 20. We are still studying. We have engineering for 150. Depends on the market, depends on the necessity. Quality is a key trend for that. Just to reinforce what Eduardo is saying, my car today is iron ore. I don't know, soon can be iron ore and sand. I don't know. Depends on the technology and our competence.
For the BRL 50 million, it's much more on the engineering and creating the flexibility. Finally, of course, that we have the best resources in the world. That's where the money should flow to invest. That's where, if needed, by the way, if needed. Again, I've been very insistent on those things because it's the de-risking issue. We are not going to create any downstream or excess capacity. I think we're trying to look to the past, see what we did right, because we did a lot of things right, but of course, learn from what we didn't do right. We need to sign on the system that we have the best ore, and we have the best logistics. We just invested. We doubled the track in railway in Carajás. We expand Ponte da Madeira. It's there.
If you look at Vitória a Minas, what happened in the past, that's what allowed us to be where we are, to be what we are. We are preparing the company for the next 10- 20 years.
Hi, good afternoon, gentlemen. Paulo Vitor Carvalho from CRU. You mentioned metallics, and the gentleman asked a question about metallics early on. I think Mr. Spinelli referred to the investor tour presentation focused almost exclusively in the metallics opportunity evaluating. You mentioned you would be evaluating that opportunity to increase your portfolio of premium products to your clients. My question would be the timing of that initiative, the upside in margin that Vale envisages in that opportunity, and also if there's appetite even outside Europe, for instance, in China, for those sorts of products that will help your clients reduce emissions and be more profitable.
Success plans.
Yeah. We have different markets. Europe is suffering more pressure now for emissions. China, we see this in more long term. In five years, they will be more concerned about emissions. Now they have problem with dust, with other kind of problems. Metallics can be a solution for Europe or even U.S. The way we see metallics is to lock in the way we sell iron ore or pellets. It's not something that we want to be an investor, a hard investor in this business that is close to our client's business. We want to be a solution for them, suggest our logistics, location, source of energy, because the business is this. The kind of energy, biomass can be a possibility even for pig iron, or if you think about HBI. HBI is natural gas. Brazil can become a source of that.
We are trying to arrange the solution and be part of that, but not be the main investor for that. If the client needs, we'll be there to have the solution and lock in capacity to sell iron ore or pellets. That's the way we are going to evolve this kind of business. Timeline for that is five years, Europe, U.S., and more time, take more time for China. The kind of product for China is different in this five years, next five years, more for kind of pellets, to pelletize in low ground, Carajás, other kind of products that we're still developing. We can, in few months, show you other solutions for China. There's a key theme here, which is in five years, the seaborne market will start to contract, and in 10 years it will be very contested.
One key component of Vale's strategy for iron ore is to lock in its clients, to be the differentiated company, to make sure that when it comes to be contested, it's the others who are going to lose market share. We're beefing up our technical marketing resources, our products to be ready for what's going to happen in 10 years' time.
Okay. We have time for one last question. I think there's a question here.
Thanks. Yeah. Tom Morgan-Davies from Optiva. Two quick questions from me, more on the regulatory side. How concerned are you about the potential for a special participation tax? Secondly, I appreciate it's not a priority at the moment, but given Brazil corporate law, which we were just discussing, the provisions we've seen, and also more recently the impairments, how likely is it that Vale may be required to pay out a minimum dividend, perhaps this month or in March?
Okay. Thank you. Your first question, sorry?
Participation.
Yeah, participation. Special participation.
I was thinking about the dividends. Sorry. We have a very objective view on that, legal view. You cannot double tax anything. There's a chosen royalty that is CFEM. You cannot do a special participation. That's in the constitution. That's our view. Again, we always say the same thing. It's the view of a miner in a mining country. We use, of course, our entities to defend our position in Congress through IBRAM and through CNI. We are very confident that that cannot happen. That's our view. We are, of course, not just saying that. That's one thing. There's another one that is about levying it, the import tax or the export tax, the VAT. That's mining. We say taxing exportage is going to bring the, how can I say that, fragility to the Brazilian industry.
Again, the way that they're trying to do is just for the miners. That again, doesn't make any sense because you need. Those kind of things, it's natural. I think this is a thing that happens. We have to remember that we just undergone this within, I think 2017, right, Luciano? I think in our sense, the time hasn't come. By the way, because he was talking about reform the whole system to make it our country more competitive. In that discussion as well, doesn't make sense of that. In our sense, we are confident that either the legality is not sound or on the opposite way. I think from the competitive way side for the country, for the company, doesn't make sense. About dividends, we are obliged to pay the 25%.
We don't know the impacts exactly of the impairment yet, but Luciano can explore it because we don't want to make projections in this way. I think Luciano can explain the technicality about the 25%.
If you do the math with impairments and the results accumulated, I think you can have a pretty good idea of at least if it were going to be on the plus or negative territory. I think with not too much work, you can have the answer to your question.
I'm really being pushed out. I hope we answer your questions and, of course, I think the main line that we're trying to convey to you is that we are doing our utmost with discipline, with persistence to de-risk the business. It's not a sprint, is a long run. It's going to be taken. We do it with our team. I think we try to show you that we are committed to that, okay. By the way, thank you. Otherwise, I would miss my flight. Okay, thanks a lot.