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'll conduct a question and answer session, and instructions will be given at that time. If you should require assistance during the call, please press star followed by zero. As a reminder, this conference is being recorded, and the recording will be available on the company's website at vale.com at the investor's link. This conference call is accompanied by a slide presentation, also available at the investor's link at the company's website, and is transmitted via internet as well. The broadcast via internet, both the audio and the slide changes, has a few seconds delay in relation to the audio transmitted via phone.
Before we begin, let me mention that forward-looking statements are being made under the safe harbor of the Private Securities Litigation Reform Act of 1995. Actual performance may differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks, and other factors. With us today are Mr. Eduardo de Salles Bartolomeo, CEO, Mr. Luciano Siani Pires, CFO, and Mr. Alexandre Silva D'Ambrosio, General Counsel. First, Mr. Eduardo Bartolomeo will proceed to the presentation on Vale's first quarter 2019 performance, and after that, he'll 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 first quarter 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 apologies for the tragedy that happened in Brumadinho. I have taken the helm at Vale during the most challenging period in its 77-year history. A critical moment, however, that also brings important opportunities to transform the company.
In my first conference call speaking as Vale CEO, I would like to thank all employees, the authorities, the firefighters and the civil defense of Minas Gerais State, as well all volunteers who have spared no efforts in the ongoing rescue and shelter operations since January 25th. Vale is totally focused on the reparation efforts. We are so 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 damage caused in Brumadinho, and also of the inconvenience caused to the people that were forced to leave their homes in other regions of the Minas Gerais state. 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 caused to those families 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 located in Brumadinho and counts on the support of our 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 the scope of this structure. Please allow me to mention some achievements so far. If we can go to slide five and six. We'll see that in the donations, I would like to pinpoint two points here. One is the immediate response that we gave on the BRL 100,000 for the immediate support for the people that got affected, and more important as well, or as important, was the support that we gave to the municipalities that were affected economically to keep providing the service that are needed in this situation. The second, the institutions that are helping us on there, the firefighters, the public defenders, police, we were able as well to help them. Finally, in our preliminary agreement, we already engaged 33,000 people to the indemnification process there.
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 or in the 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 rejects to get to the river. We are also doing a very extreme sampling of the river, 65 stations, over 1,100,000 samples. We are glad that the rejects didn't achieve the São Francisco River. Okay? As I was going to say, another relevant topic to us is the support with complete transparency of the investigation of the causes of the tragedy. We have established two internal and independent investigations, one of them requested by the board of directors.
Go please to the next slide. 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 trend in iron ore. Adding, as you can see in the slide, two new priorities, the focus on safety and operational excellence, and the creation of a new pact with society. We will move forward the trajectory of base metals transformation, applying the best practice that all of our operations, and converting it into a significant cash generator. We will keep the focus on disciplined capital allocation 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 lever as well our strengths in iron ore through our iron ore low-cost reserves, its assets and logistics to maximize the value generation of our premium portfolio. Nevertheless, we are also committed to increase even further the safety of all operations through the improvements of our asset integrity. Our mission is to transform the way we operate by working on three interconnected fronts, safety and risk management, asset management, and in the organization, process, and culture, which are represented in our management system called VPS, or Vale Production System. If we can go to slide four, 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 procedure, the minimum requirement, and do the audits.
To the right is the first line of defense that executes the contract. It's the people that are complying with the standards, that are executing the Vale Production System, as I mentioned. The mission of this office will integrate these three work fronts. This structure will keep open and direct report channel concerning operational risk management to me and to the board of directors. It will be composed of highly qualified professionals who will act independently, thus strengthening and unifying the second line of defense for operational risks. This second line already exists in the company, but was carried out by different areas with distinct lines of report, such as health and safety area, geotech and corporate area, and the business risk management area. The pillar of safety and operational excellence is strategic, as it is the basis for everything.
Effective processes being executed by capable people generates 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 leading 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 you can see in the slide, the way we believe and we envision the system is that we move from a reactive position to a position that will help society, that will work together with the regulatory authorities, the industry peers, the society or the IBRAM in Brazil or MAC in Canada to achieve this vision. Our idea is to improve our regulatory frame to be working together with each one of the players there within the industry. The journey has just begun, and I thought that we have many challenges to overcome. Nevertheless, I'm confident that we know we can count on thousands of employees eager to create a Vale even better from this moment on. All the steps need to be improved.
If someone asked me today how our success will measure in the medium term, I would say that, first of all, I would like to see Brumadinho reborn with new economic locations. 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. Finally, that society recognizes in this medium term our genuine efforts to become a better company. To conclude, I would like to reaffirm that we will never forget Brumadinho, 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, 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&A. My goal will be to give you a sense of what has been provisioned, what it might still be provisioned, and how the cash flows should behave going forward. I'll start by the decommission of upstream dams. For those who had the results released, I'm going to follow the numbers on the blocks with provisions that add up to $4.5 billion. I'll start with the $1.8 billion for the decommission of upstream dams. First, why provision for decommissioning? Because this is not an investment, because it will not generate an asset capable of generating revenue in the future. From an accounting perspective, it needs to be provisioned.
We now have the basic engineering, and we're going into the detailed engineering for the decommissioning of nine 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 like conventional methods. Here I'm talking about the dams. The dikes themselves are now being subject to further analysis and are not included here. All of the nine dams will be decommissioned through removal of the tailings inside, and the tailings will be deposited elsewhere, more commonly on the exhausted pits. The timeline for decommission will depend especially on the volume of tailings in each of the reservoirs and on the engineering methods to be used. We now know everything which is behind the engineering for all of these works. 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. We are estimating in 2019 to spend between $150 million-$200 million on the decommissioning and about $500 million in 2020, and then it should come down to a level between $150 million and $200 million over the next many years. If we move now to the direct impact on the affected people, we have $2.4 billion of provisions, of which the largest amount is $1.77 billion for the framework agreement with the public defenders. These amounts were based on an extensive collection of references from previous legal cases. That entails moral compensation for How do I call them? Compensation for moral effects, compensation for lost revenues, compensation for losses, for example, of plantations, losses of houses. Everything is in here.
The estimate is that we going to spend around 60% of it over the next 12 months and 30% on the 12 months afterwards, and then another 10% further down the road. The CAP agreement, BRL 264 million, 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 last for 12 months. The next one is the framework agreement for the Public Ministry of Labor. Basically, is 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. Those amounts, the uncertainty on all those that I mentioned are more related to the number of people affected. When we talk about the framework agreement with public defenders, we don't know exactly how many people. We estimate 100,000. We talk about the preliminary agreements for stipends. We don't know exactly how many people, but we have a good estimate. The framework agreement with the Public Ministry of Labor relates to the families of the victims, so therefore, we know how many they are. We go into the administrative sanctions of IBAMA and others, and donations. 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. There's talks about water treatment stations and pipelines to reinforce the safety of the reliability of the system. 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. Finally, what's also not in here is provisions for the decommissioning of the Germano dam at Samarco, because Samarco is not generating cash, so therefore, Vale and BHP will have to split the costs for the decommission of that dam, that one single dam. Those three factors are not in here.
The other socioeconomics, this is very encompassing, 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%-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 over the next 18 months, BRL 200, BRL 500 million, but then slower amounts down the road. Ladies and gentlemen, initial remarks about the provisions, and now we open for Q&A.
Thank you. Ladies and gentlemen, we'll now begin the Q&A session. If you have a question, please press the star key followed by the one key on your touch-tone phone now. If at any time you would like to remove yourself from the questioning queue, press star two. Please restrict to two questions at a time. The first question comes from Carlos De Alba, Morgan Stanley.
Thank you very much. Good afternoon. My question, Luciano, is on the impact of the Brumadinho accident on the cash cost of iron ore. I read in the release that you broke it in two pieces, an impact of 1.5 per ton in C1 straight effect, then another 2.7 per ton in the stoppages or the impact of the stoppages following the dam rupture. That was classified as an expense and not as cost. Could you please walk us over your rationale to separate these two? If you could, as a follow-up, just how do you see these two impacts moving forward in the following quarters? Thank you.
Carlos, thank you for your question. The goal would be to make the C1 cash cost independent from the Brumadinho effect. The increase you saw from $12.80 per ton on the fourth quarter to $14 relates more to the lower dilution of fixed costs. It's a seasonal effect, and it happens every year. Actually, if you compare first quarter 2019 to first quarter 2018, 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. In the second quarter, it should stay approximately at the same level. In the third or fourth quarter, because of the increased volumes of production and sales, it should come down again to around between $12 and $13 per ton.
In a way that on average, we're forecasting the average C1 for 2019 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. It has been classified differently on the stoppage expenses. It's basically the wages and fixed costs for the operations which are not producing. The 2.7, it is in fact the effect of the lower dilution, 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 line, the evolution of these will depend on the stoppages. If operations come back, these numbers should come down. If operations continue to be stopped, the numbers should be similar to that.
Because of the fact that in the first quarter, we only had two months of stoppages. The normalized stoppage expenses would be closer to BRL 4 per ton for a full quarter. Again, if you see, for example, two operations returning, then the numbers should vary accordingly.
All right. Great. Thank you very much, sir.
The next question comes from Timna Tanners, Bank of America Merrill Lynch.
Yes, hello. Thank you. I wanted to ask a little bit more about the color we saw on some headlines earlier today of the 400 million ton target over the next several years for resuming iron ore production. I know you gave some color about the timing of that. Can you help us understand the parameters, like what the 30 million tons from Brumadinho, and then the next 30 million tons, what has to happen for those to restart and what's your level of confidence? Thank you.
Okay. A common question is, when are we going to come back to 400 million tons? The short answer is between 2 to 3 years. The long answer is, you should think about the 90 million tons which are subject to some sort of restriction as divided equally in 3 parts of 3 million. The first part is Brumadinho. Today we are producing close to 10 million tons within Brumadinho on dry processing. For Brumadinho to come back to 30 million tons, it requires a release by the justice. A favorable decision towards Vale. We've been seeing back and forth decisions for stoppage, then release, stoppage, 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.
We see no reasons 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 deciding without complete information. As long as we submit to them the complete information, we are confident that it will restart. This is very short term. The other operations, the 60 million tons, they are subject to several restrictions. Why am I dividing this into 30 and 30? 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 million 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.
What needs to be provided for the National Agency for them to make this decision are engineering reports stating that the explosives, the mining operations, the dry processing operations at 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. These engineering reports are being provided. The first ones that we received are somehow in the direction that we anticipated. They state that there's no connection between the mining and blasting operations and the dams.
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 million back on because we are talking about different sites. Lastly, the remaining 30 million, 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 each dam. We're working together with the prosecutors. We have the same goal here. We're not in a hurry to bring that 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. In some cases, some buttressing of the dams are being conducted.
These last 30 million are the ones which should require another, as I said, 2 to 3 years to come back. When we put the picture all together, the 400 million should be coming back in 2 to 3 years.
The next question comes from Jon Brandt, 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 come up recently, as you return to the market with some higher quality Carajás ore after the impact on the ports, do you anticipate any increasing of your quality portfolio, which could potentially have negative ramifications on the quality price for Carajás? Secondly, I just wanted to ask you about the inventory management systems that you've 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? Thank you.
Okay, on the first part of the question on quality, the overall direction is for an increase in quality given the ramp-up of S11D. In the short term, you have operations stopped, which both produce very high-quality products such as pellet feed, and lower quality products such as dry processing. As you move forward, for example, if we bring Brucutu back, most of the Brucutu production is wet processing. Most of the products are pellet feed, high grade. Therefore, you should have an upward bump in quality. As you bring the additional 30 million tons, mostly through dry processing, 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 Carajás.
We plan to bring some Carajás in order to produce pellets in the south. As dry processing comes back, you start mixing more wet-dry processing material with Carajás to produce the blend fines. 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 implication of costs. Because you would have many small stockpiles, almost a stockpile for each of the clients. Once the revenue was recognized with the material still at the ports. You had to segregate separately and have one stockpile for each client. Now we're doing it more simply. We establish the contract. Only when the client comes there and remove the ore from, let's say, a generic pile, we recognize the revenue.
Therefore, now we don't have more this restriction of having to segregate a specific pile for each customer, and therefore you operate at a lower cost and better flexibility for customers.
Thank you.
The next question comes from Gabriela Cortez, Banco do Brasil.
Thank you very much, guys. My question is just a follow-up from Jon's questions regarding quality. We saw that iron ore fine pellet premium fell quarter-over-quarter. Although we saw pellet contribution increasing. I just wanted to know to understand a little better what to expect from now on in terms of pellets, the rationale behind it. Just to try to figure out how the total pellet premium is going to be from now on. Thank you very much.
Quality premiums declined in the first quarter, mostly for two factors. First one, steel margins were smaller. We know there's a direct relationship between the Carajás quality premium and the steel margins. Higher steel margins, you have higher opportunity costs, higher incentives for productivity. You can pay more for high-quality material. The second reason was the environmental closures mandated by the government were lighter in this winter than in past years. Therefore, some of the steel mills could operate at lower utilization rates. Therefore, again, you need less of the high-quality material because you need less productivity. Those two factors took the Carajás premium towards BRL 10 per ton. Since April, it has rebounded back, BRL 15 on average last month, and now yesterday, a trade of BRL 16 per ton. Because now you had steel margins increasing again, improving again.
Demand is very healthy within China now. Also, you have a more normalized production, so utilization levels came up again. We believe those two factors are going to support Carajás premiums going forward. On the pellet side, the increase you saw relate to the negotiations of contracts that happened late last year. 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 Bokkenheuser, UBS.
Thank you very much. Just one question from me on your provisioning. Again, $2.4 billion, $2.5 billion. Can you briefly just talk us through
how you came up with that number. What effectively goes into that number? Is that mostly the environment into cleanup or 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. These amounts are easier to estimate. It does include also the preliminary agreements for payment of monthly stipends to about 100,000 people on a monthly basis for 12 months. We made a lot of well-educated estimates. These are mostly under the $1.7 billion out of the $2.4 in the release, which we name it as framework agreements 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 experience 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. There was a very educated guess into the number of people affected on the geography, the socioeconomic profile of the population, and the amounts referenced in cases such as Samarco to get to this $1.7 billion. When you add this all up together, you get to the $2.4, mostly socioeconomical, nothing related to environment yet so far.
The next question comes from Tyler Broda, RBC.
Great. Thanks very much for the call this channel. Just two questions from my side. Just one, I guess on VNC. Could you just go through sort of what the changes are there operationally? How that ramp sort of you expect to see happening over the next six months? Then I guess, sort of in part with VNC, but then also in terms of coal, I guess, is there any change in the thinking around or not these assets staying within the Vale portfolio at this point? Thanks very much.
Okay, Tyler. It's Eduardo here. VNC is undergoing a profound transformation since the arrival of a new leadership in November, December. Coupled with this, we had a sulfuric acid plant, and of course nickel side, the downturn in price that we saw since the first quarter, and now even worse now. The expectations around VNC is that the work that has been undergoing will start to show progress on the fourth quarter. It's really turnaround of the very basic principles. As I even said in my presentation around the management system, that was very weak there, so we need to strengthen that. There's a lot of effort being put with support of Port Colborne, of the people on the island. We have PIP there as well. To be very objective with you, we believe have to see results into the fourth quarter, but not before yet.
We will try to do our best, but it will take time. We don't correct something like in a short term. About coal, I think it's too early to talk about revision of portfolio, but for sure, as we said, we have to undergo a very strict analysis of everything. We do that consistently. I think Luciano Siani can help me on that, but it's 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 strictly 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 Luciano Siani 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. This is an additional consideration beyond risk that we will apply in reviewing our portfolio as a whole.
Next question, Thiago Lofiego, Bradesco BBI.
Thank you, gentlemen. Just a quick follow-up question. How much iron ore from third parties do you expect to purchase this year?
Also if you could give an update on the acquisition of Ferrous. Would you consider canceling the deal at all, or that's still your 100% in place? Thank you.
We will continue to purchase around 10 million tons of iron ore from third parties. We are, as I mentioned in the Portuguese call, also looking perhaps to purchase a little more pellet feed in order to supply the pellet plants. Other than that, it shouldn't be large numbers. The Ferrous 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 hand over to Alexandre 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 open decision that has to be made.
Thank you.
The next question comes from Gustavo Allevato, Santander.
Hi, I have two questions. First one, I'd like to understand what are the key variables that could eventually change the agreement with the public defenders that eventually change the value of $1.7 billion. The second question is regarding how is the company seeing the actual demand for iron ore and the inventories throughout the chain three and a half months after the accident? Thank you.
The $1.7 billion, it depends a lot on the number of people which are going to be indemnified and their socioeconomic profile. 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. What we are seeing is steel production in China to stay stable and steel production ex-China to grow by 2.4%, about 1.2% overall growth for the market. This is very good because it starts from a very high base. The growth last year was very important. Given the supply disruption on all 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 S11D and increased supply of Brazilian Blend Fines. In order to cope with the reduced production this year, our inventories should remain somehow flat. You saw some consumption over the first quarter of around three million tons.
The next question comes from Petr Grishchenko, Barclays.
Hi, good morning, thanks for taking the questions. Just two quick ones. On the liquidity front, you mentioned quite a big cushion, BRL 5 billion cash position. I'm just curious, I think you have still BRL 5 billion of drawing 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 BRL 1.6 billion of new credit lines at a higher cost rather than drawing your revolver lines. That's number one. Number two, if you can update us on the situation. Where does the licensing process stand, and how do you get the water started?
The revolvers are available. The reason why we opted for going for regular commercial lines is because we consider the revolver to be a last resort resource. The market understands basically when you draw a revolver that you're signaling that you have run out of additional options. Obviously we still have a lot of credit. As you can see, we raised funds. This makes a lot of difference when you are to renew the revolvers. People look at the past and see how have you managed your access to the facility. Therefore, this was a decision more based on signaling for the market rather than anything else. You're right, the commercial lines are usually higher cost than the revolver. In terms of Samarco, we still have to fulfill one or two requirements from the authorities in order to get the resumption license, the restart license.
Also the works on the preparation of the exhausted pits to receive the tailings 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 2020. 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 million tons. In the month of April, statistics were released, the amount of ore that arrived in China was 63.5 million tons, a drop of 30 million tons from what arrived in March. It's very significant.
It coincides with the time it takes to take the Vale production from Brazil elsewhere. The physical impact of Brumadinho is started 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. 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, that there are no provisions for the environment. I don't want to mean that, okay, you should expect another very large number for the environmental provisions.
Just wanted to remind you that compared to the Fundão dam breach at Samarco, the amount of tailings that was leaked to the river is estimated at close to 3 million cubic meters of tailings, as compared to around 35 million cubic meters for Samarco. It's a 10th of the volume, therefore the environmental impact is way much smaller. To give you now another reference, there have been reports in the press that Copasa, the water supply concession company at the state of Minas Gerais would potentially ask for BRL 2 billion, therefore $500 million of works to upgrade the water supply system around the metropolitan area of Belo Horizonte. This is a very long list of wishes in terms of whatever they could ask for, and we understand that a final negotiation will be just a fraction of this.
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 Very 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 stamina. Concerning legal penalties and civil lawsuits, forgive me, I'm a stranger and.
Ladies and gentlemen, please hold. Mr. John Tumazos? I think we lost the connection with Mr. John Tumazos. This concludes today's question and answer session. Mr. Eduardo Bartolomeo, at this time you may proceed with your closing statements.
Before closing, I'd like to thank John. Sorry we lost him. We didn't contact him with the details of the lawsuits, truly a very hard period for us. There's a lot of stamina from everybody here to face this hard moment that the company is facing, for sure. As we said during the presentation, we want to get very clear to everyone that our priorities are safety, people, and restoration. The update of it shows that Vale will not spare any resources and efforts to repair everything that was done. Finally, we're going to build our strategic agenda and what we have as our strengths. The three ones that are coming from the past. We need to really strengthen the Base Metals Division with its high-quality asset base. We need to continue and focus on our price policy with the premium process.
Capital discipline will be strengthened, as we mentioned before. Fundamentally, need to add these two new pillars in our strategy, the new pact with 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, a safer one, and a more predictable. Thank you. I hope to 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.