Earnings Call: Q1 2019

May 9, 2019

Good morning, ladies and gentlemen. Welcome to Vale's Conference Call to discuss First Quarter 2019 Results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference is being recorded, and the recording will be available on the company's website at valley.com@theinvestmentlink. This conference call is accompanied by a slide presentation also available at the Investorslink at the company's website and is transmitted via Internet as well. The broadcast via Internet, both the audio and the slide changes, have a few seconds delay in relation to the audio transmitted via phone. Before proceeding, let me mention that forward looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward looking comments as a result of certain economic conditions, market risks and other factors. With us today are Mr. Eduardo de Sales Bartolomeo, CEO Mr. Lucia Nusseini Piris, CFO and Mr. Alexandre Stifelambordio, General Counsel. First, Mr. Eduardo Bercolomeo will proceed with the presentation on Vale's Q1 'nineteen performance. And after that, he will be available for questions and answers. It is now my pleasure to turn the call over to Mr. Eduardo Bartolomeo. Sir, you may now begin. Okay. Thank you. Good morning to all. Before handing over to Luciano to comment on the Q1 results, I would like to tell you that in my remarks, I'm going to go over the priorities that the company are facing now, an update of the reparation efforts and share with you some small changes that we have made in our strategic agenda, okay? Well, first of all, I would like to offer, on behalf of all Vale employees, our sincere ecologists for the tragedy that happened in Brumadinho. I have taken the helm at Vale, doing the most challenging period in its 77 year history. A critical moment, however, that also brings important commitments to transform the company. In my first conference call, speaking as Pali's CEO, I would like to thank our employees, the authorities, the firefighters and the civil defense of the Jeray state, as well all volunteers who have spared no efforts in the ongoing rescue and shelter operations since January 25. Vale is properly confused on the reparation efforts and is also completely committed to the affected communities. As such, from now on, three words will drive Vale's priorities: safety, people and reparation. The safety of people comes first as our company is made out of people. More precisely, not only the 110,000 of our own and third party employees in Brazil and in the rest of the world, but also the people from the nearby communities who must feel safe in the knowledge that they are our neighbors. We also give priority to the safety of our assets. The safety of our assets means the safety of the people in the process of our operations. Another priority, which is just as important as this, is the reparation of damages caused in Brumadinho and also of the inconvenience caused to the people that were forced to leave their homes in other regions of the United States. As the company has demonstrated over recent months, we have not spared and will not spare resources or efforts to make good quickly and fairly the damage cost to those tenants involved, to the infrastructure of these communities and to the environment. We have recently announced the creation of the position of Special Director for Recovery and Development. This is Jose de Brumadinho and counts on the support of 100 employees. This new structure reports directly to me, enabling it to work with the proper speed and flexibility. The objective is to guarantee that everything is done within the agreed targets. Several relevant actions are under this scope of this structure. Please allow me to mention some achievements so far. If we can go to Slide 56, we will see that the donations, I would like to pinpoint 2 points here. 1 is the immediate response that we gave on the BRL 100,000 that we for the needed software that people that got affected. And more important as well, as important, was the support that we gave to the municipalities that were affected economically to keep providing the service that are needed in the situation. The second, the institutions that are helping us on there, the firefighters, the civil defendants, police, Europe as well to help them. And finally, in our preliminary agreement, we already engaged 33,000 people to the implementation process there. So another relevant topic to us sorry, I have to adjust the next slide. I forgot to mention a very relevant thing because this is in the human aspect, currently infrastructure aspect and environmental aspect. We were able to build in a very quick very short time notice the treatment of water that will allow us to stop the project direct to catch the river. We are undergoing a very extreme sampling of the river, 65 stations for over 1,000,000 100,000 samples, and we are glad that the reject didn't achieve the San Francisco River, okay? So as I was going to say, another relevant topic to us is to support with complete transparency of the investigation of the causes of the strategy. We have established 2 internal and independent applications, one of them requested by the Board of Directors. To go please to the next slide. But our agenda for next year goes beyond the full reparation of the damage. We will keep on pursuing the previous established priorities, by which I mean the turnaround of the base metals division, the discipline in capital allocation, and the maximization of the flight to quality trends in iron ore, adding, as you can see in the slide, 2 new priorities: the focus on safety and operational excellence and the creation of a new pact with society. We will move forward in the trajectory of base metals transformation, applying the best practice at all of our operations and converting it into a significant cash generator. We will keep the focus on this green cap rotation with a renewed emphasis on value creation and asset safety. Our current and future portfolio will always be evaluated, taking into account risk and alignment with our strengths. We will continue to lap as well our strengths in iron ore our iron ore class reserves, its assets and logistics to optimize the value generation of our premium portfolio. Nevertheless, we are so committed to increase even further the safety of all operations through the improvement of our asset integrity. Our mission is to transform the way we operate by working on 3 interconnected fronts: safe and risk management, asset management and equal organization, process and culture, which are represented in our management system called VCS or value production System. If we can go to Slide 4, we can see that the role of this office that we're going to create, It's basically on the left, as I would say, an architect that defines the procedures, the minimum requirements and do the audits. And the Sarai is the first line of defense that executes the contract. So the people that are complying with the standards are executing the valid production system as I mentioned. So the mission of this office will integrate these 3 work fronts. This structure will keep open and direct report channel concerning operational risk management to me and to the Board of Directors. This will be composed of highly qualified professionals who will act independently, thus strengthening and unit time the second line of defense coordination risks. The 2nd line already exists in the company, but was carried out by different areas with distinct lines of the court, such as health and safety area, geotech and corporate area and business risk management area. The pillar of safety and operational excellence is strategic as it is the basis for everything. The effective processes being executed by capable people generate predictable results, leading to a positive impact on our costs, on our volumes and, obviously, on the safety of people and assets. Lastly, I am also committed to a new pact with society in which we will deliver a new value proposition by acting as a major force for generating wealth in the communities where we operate, going beyond mere tax payments and the reparation actions. We will establish partnerships and alliances to foster sustainable development at the local territory. I believe this is mandatory for an effective redefinition of mining in Brazil and the rest of the world. As we continue to fight, the way we believe and we envision the system is that we move from a reactive position to a position that we help society, that we work together with the regulatory authorities, the industry peers, the society, the Ibra in Brazil or MEC in Canada to achieve this vision. Our idea is to improve our regulatory frame, to be working together with each one of the players that are within the industry. Well, the journey has just begun. And I know that we have many challenges to overcome. Nevertheless, I'm confident that we know we can count on 1,000 of employees eager to create a value even better from this moment on. I'll just add to this proof. If someone asked me today how our success is measured in the medium term, I would say that, first of all, I would like to see Navinho reborn with new economic implications. Then see our culture transformed with safety becoming an obsession and sustainability being incorporated in our local operations. Our asset portfolio leaner with the risk versus growth relation being optimized through disciplined capital allocation and finally, that society recognizes in this medium term our genuine efforts to become a better company. To conclude, I'd like to reaffirm that we will never forget Du Margin and that our legacy will be to transform Vale into the safest and therefore the most reliable mining company in the world. Thank you very much. And I now pass the word to Luciano. Good morning and good afternoon. I'm just going to restrict myself to a description of the provisions, which is the key one off of this quarter, then we'll move to Q and A. My goal will be to give you a sense of what has been provisioned, what might still be provisioned and how the cash flows should behave going forward. So I'll start by the decommission of upstream dams. For those who have the results released, I'm going to follow the numbers on the blocks, the provisions that add up to 4.5 $1,000,000,000 So our stock would be $1,800,000,000 for the decommission of upstream dams. First, why provision for decommissioning? Because this is not an investment because it will not generate an asset before generating revenue in the future. So from an accounting perspective, it needs to be provisioned. We now have the basic engineering, and we are going into the detailed engineering for the decommissioning of 9 dams. These are the large and all of the upstream dams that we have. In addition to that, we do have small dikes built over tailings within larger structures built by conventional methods. So here, I'm talking about the dams. The dykes themselves are now being subject to further analysis and are not included here. All of the mine dams will be decommissioned through removal of the tailings inside, and the tailings will be deposited elsewhere, more commonly on the exhausted pits. The time line for decommissioning will depend especially on the volume of tailings in each of the reservoirs and on the engineering methods to be used. So we now know everything which is behind the engineering for all of these works. And therefore, we do have this estimate. This is the present value of the amounts to be spent. And the profile should have a more concentrated spending over the next 18 months. So we are estimating in 'nineteen to spend between $150,000,000 $200,000,000 on the decommissioning and about 500,000,000 in 2020. And then it should come down to a level between 150,000,000 200,000,000 over the next many years. If we move now to the direct impact on the affected people, we have 2,400,000,000 of provisions, of which the largest amount is $1,770,000,000 of the framework agreement with the COVID defenders. These amounts were based on an extensive collection of references from previous legal cases That entails moral compensation for compensation for moral effects, compensation for lost revenues, compensation for losses, for example, of plantations, losses of houses. So everything is in here. And the estimate is that we're going to spend around 60% of it over the next 12 months, then 30% on the 12 months upwards and then another 10% further down the road. The TAP agreement, $264,000,000 includes this is has a more precise estimate because that's the payment of a monthly stipend for about 100,000 people, which is ongoing. We already paid over 30,000 of them. And this should be should last for 12 months. The next one is the framework agreement for the Public Ministry of Labor. Basically, it's the agreement that we will pay salaries and health insurance for the families until the date in which the victims would complete 75 years old. So those amounts, they have the uncertainty on those all those that we've mentioned are more related to the number of people affected. So when we talk about the framework agreement with public defenders, we don't know exactly how many people. We estimate 100,000. When we talk about the preliminary agreements for stipends, we don't know exactly how many people, but we have a good estimate. Framework agreement with the Public Ministry of Labor relates to the families of the victims. So therefore, we know how many they are. Then we go into the administrative sections of Ibama and others and donations. So as you can see, most of what is in here relates to social and economic damage and compensation. What's not here is the environmental damages. There are news in the press about, for example, dealings between Vale and the local concession company for water supply, about potential alternatives to ensure the continuous supply of water for the metropolitan area of Belo Horizonte. So there's talks about treatment water treatment stations and pipelines to reinforce the safety of the reliability of the system. But we don't know yet what the final solutions are going to be, so we have not provisioned those. What also is not in here is what may arise from future negotiations with the public prosecutors on collective damages. And finally, what's also not in here is provisions for the commissioning of the Germano dam at Samarco. The San Marco is not generating cash. So therefore, Vale and DHT will have to split the costs for the decommission of that dam, that one single dam. So those three factors are not in here. The other social economics, this is very encompassing and very comprehensive, this list. Most of the amounts should be spent in a short period of time for the social and economic damages. So 60% to 70%, if you sum all of those. On the other hand, on the decommissioning, most of the amounts are going to take a longer period of time. Concentration of the next 18 months, dollars 200,000,000 $500,000,000 but then slower amounts down the road. So ladies and gentlemen, initial remarks about the provisions. And now we open for Q and A. Q and The first question comes from Carlos De Alba, Morgan Stanley. Thank you very much and good afternoon. So my question, Luciano, is on the impact of the Barrino accident on the cash cost of iron ore. I already mentioned the release you're talking 2 pieces, an impact of 1.5 per ton in C1 straight effect and then another 2.7 percent in stoppages or the impact of the stoppages following the dam rupture. But that was classified as an expense and not as cost. Could you please walk us over your rationale to separate these 2? And then you could as a follow-up, how do you see these 2 impacts moving forward in the following quarters? Thank you. Carlos, thank you for your question. The goal would be to make the C1 cash costs independent from the Guimadinho effect. So the increase you saw from 12.8 dollars per ton in the Q4 to $14 relates more to the lower dilution of fixed costs, and it's a seasonal effect, and it happens every year. Actually, if you compare Q1 'nineteen to Q1 'eighteen, there's a decrease from 14.8 to 14.0, mostly driven by the exchange rate. What we expect going forward for C1 is the normal behavior, which you observe every year. So in the Q2, it should stay approximately at the same level. But then in the 3rd or Q4, because of the increased volumes of production in sales, it should come down again to around between $12 $15 per ton in a way that, on average, we're forecasting the average C1 for 'nineteen to be $13.3 per ton, down from $13.6 last year. The $2.7 it is a real hit on the EBITDA for the iron ore business, but it has been classified differently on the stoppage expenses. It's basically the wages and fixed costs for the operations which are not reducing. So the 2.7, it is, in fact, the effect of the lower dilution, but not on lower volumes for seasonal reasons, but because of the sites which are not producing. So these, you will continue to see over that time. And this will depend the evolution of these will depend on the stoppages. So if operations come back, these numbers should come down. If the operations continue to be stopped, numbers should be similar to that. Because of the fact that in the Q1, we only had 2 months of stoppages, so the normalized stoppage expenses would be closer to $4 per ton for a full quarter. Again, if you see, for example, like these 2 operations returning, then the numbers should vary accordingly. Next question comes from Kimna Tanners, Bank of America Merrill Lynch. Hello. Thank you. I wanted to ask a little bit more about the color we saw on headlines earlier today of the 400,000,000 ton target over the next several years for resuming iron ore production. I know you gave some color about the timing of that, but can you help us understand the parameters like what the 30,000,000 tons from Ruku II and then the next 30,000,000 tons, what has to happen for those to restart and what's your level of confidence? Thank you. Okay. So a common question is, so when are we going to come back to 400,000,000 tons? The short answer is between 10 years. The long answer is you should think about the 90,000,000 tons, which are subject to some sort of restriction, as divided equally in 3 parts of 3,000,000. The first part is Bouquetou. Today, we are producing close to £10,000,000 within pituit tool on dry processing. But for pituit to come back to 30,000,000 tons, it requires release by the Justice, so a favorable decision towards Vale. So we've been seeing back and forth decisions for stoppage, then release, surface release. Right now, we continue to be very confident that we will get a final decision based on the fact that it is a conventional dam. It has the stability statement. So we see no reason why it should continue to be stopped. And the interim decisions that kept it stopped relate more to the fact that the judges have been decided without complete information. So as long as we submit to give the complete information, we are confident that it will restart. So this is very short term. The other operations, they are subject to the 60,000,000 tons. They are subject to several restrictions. So why am I dividing this into 3030? Because there is a possibility it's easier to bring back those operations to produce through dry processing than to produce fully using wet processing. In order to release 30,000,000 tons of dry processing production, we need basically to get the National Mining Agency to release production in our mines and our mills with the dry processing method. And whatever what needs to be provided for the national agency for them to make this decision are engineering reports stating that the explosives of the mining operations, the dry processing operations of the mills do not cause triggers and any potential seismic waves at the existing dams, which are being challenged. In other words, I have a mine which is 10 kilometers away from a dam which is being challenged. I need to prove that the mine movement and the blasting will not affect the challenged dam. So these engineering reports have been provided. The first ones that we received are somehow in the direction that we anticipated. So we state that there's no connection between the mining and blasting operations and the dams. So we believe that by the second half and by the next 6 to 12 months, we should be able to bring different parts of this €30,000,000 back on because we are talking about different sites. Lastly, the remaining €30,000,000, dollars which includes wet processing depends on something which is more difficult, which is a release from the courts and the public prosecutors based now on a more comprehensive and thorough assessment of the safety conditions of Isthm. We're working together with the prosecutors. We have the same goal here. We're not in a hurry to bring up a production back. We're providing additional reports, and in some cases, a second and a third opinion to make sure that those dams are safe. And in some cases, some buttressing of the dams are being conducted. So these last EUR 30,000,000 are the ones which should require another, as I said, 2 to 3 years to come back. So when we put it all together, the EUR 400,000,000 should be coming back in 2 to 3 years. The next question comes from John Branch, HSBC. Hi, good afternoon. I first wanted to ask you about any potential impacts on the quality of your products. I know the FE content and the premium pricing has gone up recently. But have you returned to the market with some higher quality carajas or after the impact on the ports, do you anticipate any impact? Do you anticipate an increasing of your quality portfolio, which could potentially have negative ramifications on the quality price for CarShaft. And secondly, I just wanted to ask you about the inventory management system that you changed in the Chinese ports. Just the rationale behind it, was it a capacity issue? Are you running out of capacity there? Is that why there was a change? Or was there something else driving that? Okay. And the first part of the question on quality, the overall direction is for an increase in quality given the ramp up of F-seven D. In the short term, you have operations stopped, which both produce very high quality products such as plant feed and lower quality products, products such as dry processing. So as you move forward, for example, if we bring Brucutu back, most of the Brucutu production is wet processing. So most of the products are petted feed, high grade. So therefore, you should have an upward bump in quality. But as you bring the additional 30,000,000 tons mostly to dry processes, then the quality should decrease again. In other words, there will be fluctuations within an overall trend of increased quality. In terms of the product mix, again, today, we might have an excess of parajas. We're bringing some we plan to bring some parajas in order to produce pellets in the South. As you move towards as dry processing comes back, you start mixing more dry wet dry processing material with Carajas to produce between a blend of mines. So the mix should revert more back to normal levels. On the second question on inventory management, In fact, there was a lot of lack of operational flexibility the way we were operating, sometimes with implications on capacity of particular ports, sometimes with implementation of costs, because you would have many small stockpiles, almost a stockpile for each of the clients once the revenue was recognized with the materials still at the ports. So you had to segregate separately and have 1 stockpile for each client. Now we're doing it more simply. We established the contract Only when the client comes there and remove the ore from a, let's say, a generic pile, we recognize the revenues. And therefore, now we don't have more of this restriction of having to segregate a specific pile for each customer, and therefore, you operate with lower costs and better flexibility. The next question comes from Gabriela Cortes. Thank you very much, guys. My question is just a follow-up from John's questions regarding the question. We saw that I don't want to explain pellet premium sales quarter over quarter, Although we saw pellet contribution increasing, I just wanted to know to understand a little bit what to expect from now on in terms of balance, the rationale behind it? Just trying to figure out how the total credit premium is going to be from now on. So quality premiums declined in the Q1 mostly for two factors. 1st, 1, steel margins were smaller. We know there's a direct relationship between the Carajas quality premium and the steel margins. Higher steel margins, you have high opportunity costs, higher incentives for productivity, then you can pay more for high quality material. The second reason was the environmental closures maintained by the government were lighter in this winter than in past years. And therefore, some of the steel mills could operate at lower utilization rates. And therefore, again, you need less of the high quality material in order to because you need less productivity. So those two factors took the Caragas premium towards $10 per ton. Since April, it has rebounded back $15 on average last month. And now, yesterday, a trade of $16 per ton. Now you had steel margins increasing again, improving again. The net is very healthy within China now. And also, you have a more normalized production, so utilization levels came up again. So we believe those 2 factors are going to support Carazas premiums going forward. On the pellet side, the increase you saw relate to the negotiations of contracts that happened late last year. And now you have a quarter in which those negotiations are flowing into the income statement through higher premiums. Thanks. The next question comes from Andreas Bokkenhuizen, UBS. Thank you very much. Just one question for me on your provisioning. That in $2,400,000 to $2,500,000 Can you briefly just talk us through how you came up with that number? I mean what effectively goes into that number? Is that mostly environmental things from cleaning up? Are there other things in there as well? That would be great. Thank you very much. Andreas, the number does not include any provision for cleanup or for water supply works. Everything which is in here is social and economical indemnifications. It does include, for the families of the victims, moral damages and payments of salaries until 75 years old and health insurance for the families. So these amounts are easier to estimate. It does include also the preliminary agreements for payment of monthly payments to about 100,000 people on a monthly basis for 12 months. And the we made a lot of well educated estimates. These are mostly under the BRL 1,700,000,000 out of the BRL 2,400,000,000 in the release, which we name it as framework agreement with the public defenders. We made several educated estimates about the indemnifications for all types of losses and based on past experiences, unfortunately, including the exchange that we had in Samarco because there are lots of references in Samarco that can be applied here. For example, for people who lost their plantations and small farms, people who lost their houses and people who lost economic activities, people who used to fish. So there was a very educated guess as to the number of people affected on the geography, the socioeconomic of Sao Paulo population and the amounts referenced in the case of Santo Tomas to get to this 1,700,000,000 When you add this all up together, you get to the 2,400,000,000, mostly social economical, nothing related to environment yet so far. The next question comes from Tyler Brodend, RBC. Great. Thanks very much for the call, Luciano. And just two questions from my side. Just one, I guess, on VMC. Could you just go through sort of what the challenges are there operationally and how that ramp sort of you expect to see happening over the next 6 months? And then I guess, sort of in part with EMC, but then also in terms of coal, I guess, is there any change in the thinking around or not? Do you guys have stick within the value portfolio at this point? Okay, Father. It's Eduardo here. The M3 is undergoing a profound transformation since the arrival of a new leadership in November, December. Coupled with this, we had a softening in the assets plant. And of course, it's like the downturn in price that we saw since the Q1 and now even worse now. So expectations around BNC that the work that has been undergoing will start to show progress in the Q4. It's a really turnaround of the very business, I've even said in my presentation around the management system that was very, very weak there. So we need to strengthen that. There's a lot of effort being put with support of course of Toronto, of the people on the island. We have PIP there as well. So to be very objective, what you could do is we don't we have 2 key results into the Q4, but not before that. So we will try to do our best, but it will take time. It doesn't we do not correct it. We don't correct something like in the short term. About coal, I think it's too early to talk about revision of portfolio. But for sure, if we as we said, we have further we have to undergo a very strict analysis of everything. We do that consistently. I think Luciano helped me on that. That is something that we do periodically. We are starting our strategic plan. We have nothing yet, not only for coal, but for all our assets. They're going to be very quickly assessed on their safety, on their risks, on their ability to perform, on their strength, on their alignment with our strengths, meaning logistics, materials, how we move, how we manage, that's basically our thoughts around it. I think you can add, please. No. The only thing I would add is that, as you can see by the pillars that Eduardo established in his initial presentation, management attention will shift somehow towards Brazil in the next few years naturally. So this is an additional consideration beyond risk that we will apply in reviewing our portfolio as a whole. Next question, Thiago Fiego, Bradesco, BTI. Thank you, gentlemen. Just a follow-up question. How much iron ore from 3rd party do you expect to purchase this year? And also if you could give an update on the acquisition of Caros. Would you consider canceling the deal at all or that's totally or 100% in the past? We will continue to purchase around 10,000,000 tons of iron ore from 3rd parties. We are, as I mentioned in the Portuguese call, also looking perhaps to purchase a little more of pellet feed in order to supply the pellet grades. But other than that, it shouldn't be large numbers. The Ferros acquisition will move forward, especially now the pellet feed that it will produce is even more precious for us. On the current status on the antitrust authorities, I'll hand it to Alex and Brozde for the update. Okay. Thank you, Luciano. We are waiting for the CADE to rule on this decision. It's been recently distributed to the commission. And we expect that it will within the ordinary course, within a couple of months. We are very confident that it will be approved, although it's still an issue, it's still an open decision that has to be made. The next question comes from Gustavo Levi, Santander. Hi. I have two questions. First one, I'd like to understand how are what are the key drivers that could eventually change the agreement with the public defender that eventually change the value of EUR 4,700,000,000? And the second question is regarding how is the company seeing the actual demand for iron ore and inventories throughout the chain 3.5 months after the accident? The RMB1.7 billion, it depends a lot on the number of people which are going to be indemnified and their socioeconomic profile. So we made some guesses, but there can be variations. As regards demand for iron ore, we see demand healthy this year. I do have some numbers here to share with you. Okay. So what we are seeing is steel production in China to stay stable and steel production ex China to grow by 2.4%, so about 1.2% overall growth for the market. So this is very good because it starts from a very high base. The growth last year was very, very important. And given the high disruption of our own of the Australians, there shall be a lot of support for demand for our material. In terms of inventories, we would normally continue to build some inventories because of the ramp up of SLF and B and increased supply of Brazilian blend fines. But in order to cope with the reduced production this year, our inventories should remain somehow flat. And you saw some consumption over the Q1 of around 3,000,000 tons. The next question comes from Petr Gruechenko, Barclays. Hi, good morning and thanks for taking my questions. Just two quick ones. On the liquidity front, you mentioned a quarter to question, given $5,000,000,000 cash position. I'm just curious, I think you have still $5,000,000,000 of drawn revolvers in place. I'm curious if all of this amount is available to draw. And if so, why I guess you decided to issue $1,000,000,000 of new credit lines at higher cost rather than drawing your revolver lines? That's number 1. And number 2, if you can update us on where the licensing process stands and how do you get to our restart? So the revolvers are available. The reason why we opted for going for regular commercial lines is because we consider the revolver to be a less resort resource. The market understands basically when you draw a revolver that you're signaling that you have ran out of additional options. And obviously, we still have a lot of credit. As you can see, we raised funds. And this makes a lot of difference when you are to renew the revolvers, to look at the past and see how have you managed your access to the facility. So therefore, this was a decision more based on signaling from the market rather than anything else. And you're right, the commercial lines are usually higher cost than the revolver. In terms of Safranco, we still have to fulfill 1 or 2 requires from the authorities in order to get the resumption license, the restart license, and also the works on the preparation of the exhausted pits to be to receive the savings from a restart are ongoing. We should finish by September, which is our expectation somehow when we're going to have the Restart license. Once you get the restart license, you have to do some investments, mainly on the filtration in order to move forward. Therefore, the forecast restart date as we speak is middle of 2020 to second half of twenty twenty. Just additional information on the questions I answered before. On the market conditions and demand, I just wanted to highlight that the inventories in China have been declining very quickly recently. Today, they stand at 133,000,000 tons. In the month of April, there was statistics were released. The amount of ore that arrived in China was 63,500,000 tons, a drop of 30,000,000 tons from what arrived in March. So it's very significant. It coincides with the time it takes to take the Vale production from Brazil elsewhere. So the physical impact of Brumadinho is starting to be felt within China. Everyone notices that this and therefore, there is somehow a little rush to get access to the very small amounts of material that are arriving. And also, as I mentioned, impacted by the cyclones in Australia as well. The other information I would like to add, when I said to I think it was to Andreas from UBS, there's no there are no provisions for the environment. I don't want to mean that, okay, you should expect another very large number of for the environmental provisions. Just wanted to remind you that compared to the Fundanga beach at Samarco, the amount of tailings that were leaked to the river is estimated at close to 3,000,000 cubic meters of tailings as compared to around 35,000,000 cubic meters for Samarra. So it's a tenth of the volume. So therefore, the environmental impact is way much smaller. To give you now another reference, there have been reports in the press that, Chicago, the water supply concession company at the state of Minas Gerais, would potentially ask for BRL2 1,000,000,000, therefore, dollars 500,000,000 of works to upgrade the supply water supply system around the metropolitan area of Belarus. This is a very long list of wishes in terms of whatever they could ask for, and we understand that the final negotiation will be just a fraction of this. So I hope that with those two pieces of information, I give you a better idea of what the size of the environmental provisions might be in the future. The next question comes from John Tumazos with John Tumazos Independent Research. Thank you very much Luciano, Eduardo, the entire team for your tireless works for Vale, the communities, the shareholders. We all appreciate your seminar. Concerning legal penalties and civil lawsuits. Forgive me, I'm a stranger. Mr. John Tomatoes? This concludes today's question and answer session. Mr. Eduardo Bartolome, Epti Cano may proceed with your closing statements. Okay. So for closing, I'd like to thank John for the sorry we lost him and we can contact him with the details of the lawsuit. But it's truly a very hard period for us. There's a lot of this time in a from everybody here to face this hard moment that the company is facing for sure. But as we said during the presentation, we want to get very clear to everyone that our priorities are safety, people and reparation. The update of it shows that Vale will not spare any resources, methods to repair everything that was done. And finally, we're going to build our strategic agenda and what we have as our strengths. The 3 ones that are coming from the past, we need to really strengthen the base metals division with this high quality asset base. We need to continue and focus on our price quality with the premium process. Capital discipline will be strengthened, as we mentioned before. But fundamentally, we need to add these 2 new dealers in our strategy, a new package society and foremost and as important as all of those is the safety and operational excellence that will help us to transform us in a better company, safer one and a more predictable. Thank you, and I will see you in the next quarter. That does conclude Vale's conference call for today. Thank you very much for your participation. You may now disconnect.