Earnings Call: Q4 2019

Feb 21, 2020

Good morning, ladies and gentlemen. Welcome to Vale's Conference Call to discuss 4Q 'nineteen 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 valet.com@theinvestorslink. This conference call is accompanied by a slide presentation also available at the Investors link at the company's website and is transmitted via Internet as well. The broadcasting via Internet, both the audio and the slides changes, has 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 macroeconomic conditions, market risks and other factors. With us today are Mr. Eduardo Gisales Bartolomeo, Chief Executive Officer Mr. Luciano Cianipiris, CFO Mr. Marcelo Spinelli, Executive Officer for Ferros Minerals Mr. Mark Travers, Executive Officer for Base Metals Mr. Mark Carlos Medeiros, Safety and Operational Excellence Executive Officer Mr. Luiz Eduardo Osorio, Executive Officer for Sustainability and Institutional Relations Mr. Alexandre Pereira, Executive Officer for Business Support and Mr. Alejandro D'Ambrosio, General Counsel. First, Mr. Eduardo Bartolomeo will proceed to the presentation on Vale's 4Q '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, everyone. 1 year has passed since the dam B1 rupture. I want to express my respect for the families of the victims and thank all who have dedicated efforts to bring support and comfort to them. We closed the year firmed in our purposes, fully repairing Brumadinho, ensuring the safety of our people and stabilizing our production. Safety, people and reparation, these words remain our priorities. Please? I would like to start our call today by talking about the reparation of Lumagim. Vale is well recognized for its agility and execution capacity, and this is how we have been working on the reparation. To date, in indemnifications to the families and communities, we have already allocated BRL3.2 billion. In civil and labor indemnification specifically, we have entered into agreements which include about 6,000 people and over BRL1.9 billion paid. Important to notice, the families of 96% of the deceased workers have signed agreements, which have benefited 1570 people so far. On the environmental recovery, we launched the Ground 0 project in January this year, a pilot for the recovery of the Paroqueba River and the Fel Calvo stream, which shows how those areas will look like in the future. And another highlight is that the containment structures that we built last year have withstood the heavy rains of January in Minas Gerais, which is a good sign of the effectiveness of our actions. Finally, we have opened a dialogue with authorities, and we are looking for a definitive agreement to repair and compensate the environmental damage and collected ones. I believe that we will reach a broad understanding soon. In summary, our work of caring for the people and environmental recovery has evolved as expected. Please, next one. Talking about safety. Vale is becoming more safe and reliable each day. Our Board of Directors is intensively overseeing the company with the support of specialized technical committees. The Executive Directors have also been supported by executive committees of different areas of dedicated to risk management. What means is that our decisions have relied on more robust and conservative risk assessments from now on. Regarding our dam management systems, we opened the 2nd Jotechnical Monetary Center, which now allows us to cover about 100 structures 24 hours a day, 7 days a week, with an important redundancy to ensure the safety of our dams. And most importantly, we are revising and improving our tailing management systems with the support of renowned international specialists. A good example of improvement is the implementation of the engineer record of our dams in January this year. Beyond that, we de characterized the 1st upstream dam, 8B, in December, and the second will be eliminated this year. We also completed the construction of the first redundant containment structure at the Sul Superior Dam. 2 more will be delivered in the first half of twenty twenty. Another point to notice is that our Safety and Operational Excellence Executive Office created in 2019 is moving forward with the relaunching of VPS, which is our management model and the rigorous assessment of other operational risks. But most importantly, we are accelerating the culture transformation at Vale with the new safety and operational excellence governance and mainly with behavioral models that must be followed by the entire company. With actions like this, we will transform Vale into 1 of the safest and most reliable mining companies in the world. Please? But our new Pact with Society goes beyond safety. Starting this year, our performance will be measured against ambitious societal and environmental goals. For example, achieving carbon neutrality by 2,050 and recovering or protecting 500,000 hectares of forests. As we announced at Valide, in our long term compensation, our Board of Directors approved a 20% stake linked to ESG metrics. Another key point is the treatment of our main ESG gaps. This is a very bold work to leverage our practice in those areas. One of those gaps has also become a goal to double the female participation in Vale's workforce by 2,030. Finally, with the recent change announced, the structure of our Board of Directors already reflects Vale's progress in governance, with a greater number of independent directors, an increase in gender diversity and an extensive experience in corporate governance and mining. Well, I'm confident that our capacity of execution will bring good results in those dimensions very soon as well. Please, next one. Well, we are working, as I said, on all these fronts, And at the same time, we remain focused on safely resuming and stabilizing our production. We closed 2019 sales in line with our guidance, thanks to our operational flexibility. In 2020, we will keep seeking the resumption of our operations under safer conditions. However, we are monitoring and assessing the uncertainties related to this resumption, like the approvals by the Brazilian authorities and also the impacts of the coronavirus in the Chinese and the world economy. Marcelo Espinel will comment later in detail our plan to resume the halted iron ore production in 2020. Talking about base metals, we had a very good performance in the Canadian mines in 2019, especially in Sudbury and also better results in our refineries in this Q4. In the case of VNC, we have set a short term solution with the halting of the refinery activities by April, thus starting to reduce the cash consumption of that operation. In parallel, we are in negotiations with interested parties, and I'm confident that we will be in significant, a strong evidence of Vale's recovery capacity. And we have had discipline in allocating our resources. We have prioritized the disbursements for reparation and actions towards safety, and we have fairly reduced our debt levels and we have not searched new acquisitions. One good example is the redemption and cancellation of the MBR shares, were a relevant move to the efficient capital allocation and to decline cash outflows since we will no longer pay annual dividends of around $160,000,000 Finally, we are working to have the necessary conditions to resume our dividend policy. We will inform you as soon as we have any developments in these matters. To conclude, I complete my 1st year leading Vale with the certainty that the company has proved its resilience and its power execution. I believe that we are building a safer path with operational excellence and that sustainable results will soon start to be noticed. 2020 will be a year of continuity and stabilization as we execute the actions we planned and started last year. We have a present and vigilant senior leadership committed to the implementation of these plans. And more important, each day, our more than 70,000 employees have shown great strength to overcome this strategy and build a better value for everyone. Thanks for your time today. I'll now pass Luciano for further comments. Thank you. Welcome, everyone. We have a number of hot topics to address even before the Q and A. And I'm going to start by talking about this potential agreement with the authorities and the provision. Marcelo Spinelli will lead with corona virus and the resumption of production. And finally, our General Counsel will give his thoughts about the independent investigation report that was issued yesterday. So you saw that we've included a footnote to the financial statements regarding a possible additional provision of US1 $1,000,000,000 to US2 $1,000,000,000 connected to a possible agreement with the authorities. For some clarification on this, this provision will only be recognized in our balance sheet if the agreement yields the suspension of the civil lawsuits and assure and if the agreement assures that there is a framework from a legal standpoint and to give speed in reparation. So that's our goal, suspension of the civil lawsuits and a stable legal framework for the reparation. If the lawsuits are not suspended, the company would naturally keep on the current path, which is to sign specific agreements for specific demands of the lawsuits, which so far has been producing good results. Our estimates of environmental reparation and compensation numbers are being confirmed in the talk with the authorities. However, the socioeconomic question has a more subjective matter. And the list of projects that were presented to us by the authorities, so mainly the socioeconomic projects as a condition for the suspension of the lawsuits, is more extended than we initially thought. Important that an agreement has to be good for both parties. If we, on the one hand, will get the suspension of the lawsuits, it's natural that the authorities, they want something beyond what would be normally expected in order to grant us the suspension. So we have a longer list of projects. You remember that in Vale Day in December, we presented the new Pact with Society as a new strategic pillar for Vale. So our assessment is that to establish this new pact with society in Brazil and especially in the state of Minas Gerais, to leave a legacy to those people affected, to suspend the lawsuits and to have a stable legal framework for the reparation, then it's worth closing this agreement, which may then result in additional provisions. Why do we have this uncertainty between US1 $1,000,000,000 to US2 $1,000,000,000 for additional provisions? We explained in the earnings release that the list of compensation and reparation products, mainly the socioeconomic ones, is still being assessed, the estimates for each of the projects. It's still being analyzed what is the overlap with the provisions and initiatives that we have provisioned for. And also, the timing of those projects is uncertain. So therefore, the net present value of the disbursements is also uncertain. So there's a lot of uncertainty in the numbers. Why are we not provisioning now? We're not provisioning because although an agreement is possible, the necessary conditions for us to approve this agreement are not here yet. So therefore, from an accounting perspective, we're treating this potential agreement as we treat other contingencies. So we for example, tax contingencies or labor contingencies or civil contingencies, so we are describing it in a footnote. So the bottom line is that we the administration evaluation is that it is worthwhile to make this additional effort in relation to our initial estimates in order to get the suspension of the civil lawsuits, in order to have legal stability around the reparation, in order to reestablish the pact with the Brazilian society, which is fundamental for our long term plans in the country. Now moving to Marcelo Spinelli with the corona virus impact on the Vale business. Okay. Let's start with the resumption of operations. We have a chart to let's follow the numbers, walk through the numbers, and it's easy to understand the guidance that we have of 340,000,000 tons and 355,000,000 tons. We came from last year 302,000,000 tons. That's the number we closed. This year, in Offern System, we have the ramp up of S11D. Our number is 210,000,000, so we add 21,000,000 tons. The run rate of Alegria and also Pico Mine that came back in the last year, the end of last year, the run rate is another 12,000,000 tons. So for those 2, we see that the risk is really low. From now, in the right, we have operations that we need to have authorizations from the agency, the mining agency, also the prosecutors. In other, we need just for maintenance, and we are waiting for the operation authorization in the end of March. So for second half second quarter, we are counting on Jimbo Pemba. Fabrica is just for the second half. We're still in the beginning of the process testing the impact of the operation, the mine operation, the dams. So remember that we have a step by step test to check the impact of our operations processes in the debt. So we are waiting for the second half. Varze and Granje, the wet processes, we don't add volumes, but we add quality. We're waiting to resume the operation along the second half as the pellet is planned, and we will only have end of the test to get the approval. Brucutlou mine, the end of last year, remember that we stopped the La Ringeras dam to have a better view about the safety of the dam. It's a downstream dam, just to remind you. But the base case is to count on La Nagera Zone in the second half. So Boucoutou is operating now with 40% of the capacity. And considering in this planning, Fucotou coming back in the second half. If we during the assessment of the of Guarindiras, if you have in the end of March good news, we can return in the Q2 and add another 3,000,000 tons in this projection. And the other 2,000,000 tons is regarding the possibility to have some gains in the operation in other mines. So that's the way we are from the left to the right, more uncertainty or less uncertainty with our numbers for the guidance. Now let's talk about the coronavirus. Well, I'll start with some numbers of all the cases. It's important that we are tracking this every day. Probably, you're doing the same. Last day, we had about 900 new cases. We are splitting this analysis in Hubei area. That's the center of the problem ex Hubei. Hubei represents only 4% of this very important information. Yesterday, there were spike based on new information from AJU in Shandon. But the main information here now that the cure case now more than 2,000 cases a day better higher than the case that we have the infection. So that's a possibility to have a better position for the source of the problem in a few weeks. Well, the consequence of the economy is huge. So I want to share some information, some timely indicator or lead indicator like the consumption of coal should be at this moment after the Chinese New Year at the level of 90%, 95%. We only have 60% of the consumption of coal. Another interesting information is about the transit of people based on the daily railway passenger. We have already have 100,000,000,000 people to go back to their houses. The impact is in the workforce is really clear now. At the same time, the government tone is really is to achieve the economic target based on double the GDP per capita, and they need to grow this year 5.7%. And the way they're going to do this help us a lot because it's based on infrastructure and also manufacturing and helps the consumption of iron ore in the end of the chain. Moving the chain, the steel demand now is really under pressure. Construction didn't go back. The automotive is they are we have news that they are coming, but if you check the consumption of tires, they are only 20%. And according to Maestro, there's another information here. Maestro is an agency for information for our business, for Steel and I don't know why. They are in a daily survey checking when the industry the downstream industry will go back. And the expectation for all of March is in average, 75% of the industry will come back, some more optimistic like the white goods, some less like the construction. White goods is 100% will go back, will come back and construction only 53%. So this is the scenario that we have. This is a very slow but gradual return of the economy. And the impact of the steel the high record steel inventory now based on the lack of sales, logistics constraint, a lot of logistics constraint and a lack of workforce also. Well, the impact on iron ore. Our clients, at the end of the day, is the blast furnace. So the decision to quit to stop the blast furnace is the last one to take. So firstly, they can just shut down the EAF, so it's more than 40% more expensive than the blast furnace. They can reduce the scraps, the building ventures or cut some rolling output, but we don't see that today, if you compare the blast furnace cuts compared with what happened in the environmental cuts last year in October last year, is still less than that period. So that's a good news from our main client that is the blast furnace. Well, the at the port side, the stocks now inventories is about 120 3,000,000 tons. This is a very low level of inventory and it's a good news. We have our operations in all the ports in China are running very, very good. Some very important information. We have the domestic concentrate. They are struggling with the logistics constraint. They're part of the out of the market. This is another buffer for our iron ore. And this explains another phenomenon that is going on that our premiums for BRBF, even Carajas, are really high from the average comparing for with the last quarter. Because we have a lack of low alumina product based on the restrictions of the mass concentrate. So what we have, our operations are running now. We already have booked for the next 30 days. We have some noise coming from some credit, some letter of credit from our clients. There is a it's not a big noise, but we are we have some concern about the healthy of our clients. But so far, so good. We are running, but very period of time that we must take care on a daily basis to check what will be the consequence and the return of the coronavirus. Now Alex D'Ambrosio. Thank you, Marcel. Thanks, Luciano. This is Alex Dambrosa, I'm the General Counsel at Vale to address specifically the report that the independent committee released yesterday. We received this report and immediately published at the CBM site, the summary executive summary, and we've been since reviewing the full report. I think it's very important to stress that the report was based upon the same inventory of information that we made available to the public prosecutors, identical information source and the same facts. For that reason, the report does not really bring anything new to the investigation, but it does have its own interpretation of the facts and of the information. It's their the committee reviewed information and reached its own conclusions and interpretation. We do not see any reason or any reason to believe that this report would change or influence prosecutors' conclusions because the prosecutors themselves reached their own findings based on their informed views of the evidence that they reviewed. So in that sense, the report brings some conclusions and some recommendations. The recommendations come actually, in our view, as an endorsement of the many practices and actions that the company has been taking over the past years as recommendations that relate to culture changes and improvements in governance, things that have been already in the works for the past year. So we see those as an endorsement. And as far as the conclusions go, they are conclusions reached by the independent committee and they are in parallel, but not in conflict with any of the conclusions reached by the prosecutors. Thank you. Thank you. Ladies and gentlemen, we'll now begin the question and answer Our first question comes from Andrea Bokkenhauser, UBS. Yes, just two questions from me. What specifically is that referring to? Are we talking about any lawsuits that could be brought forward by the central government or the state government of Minas Gerais? So if you could give a little bit of color on that, that would be great. Thank you. And the second question relates to shipments. So you obviously gave us your iron ore production guidance for the year, 340,000,000 to 355,000,000 tons, which is unchanged. How should we think about sales or shipments? Or maybe ask in a different way, what are you targeting in terms of building inventories for blending in China and elsewhere? Those are my two questions. Thank you very much. Andreas, thank you. I will defer to Alex, our General Counsel on the first question. Thank you, Luciano. Thank you, Andreas, for the question. The agreement that we are trying to put together is with the state authorities indeed, and the federal prosecutors will also participate in the agreement, if not as direct beneficiaries of the agreement, they will be involved in the governance of this agreement. What I mean by that is that the lawsuits that we are looking to settle are lawsuits that were brought by the state authorities. The state prosecutors have and the state attorneys have filed one loss of the state attorneys and 2 by state prosecutors. There are no civil actions by the federal prosecutors at this point. And Andreas, just as a compliment, there are yet no provisions recognized because we do not have yet the conditions for such an agreement, but we are indicating as a possibility that we'll do so. And the existing provisions will be complemented by the additional, if any, provisions, in that case, of USD 1,000,000,000 to USD 2,000,000,000. Therese, as Marciano Spinelli, About the shipments and sales, we expect to have in parallel the sales and the volumes of production. But you're right, we have some inventories to build in China. We have we had last year to consume part of our stocks in China for BRBF. So we are we have to build up again part of the stock that we lost last year. Our next question comes from Alex Hakim, Citi. Good morning, good afternoon and thank you for the questions. I have two questions. The first one is maybe you could discuss a little bit the production outlook for the northern range in Karashas. Obviously, that declined last year, which was something that we were not expecting. And I guess is 230,000,000 tons still the long term target for production out of the whole Carajas system? And would you anticipate getting there in 2021? And then second question just on VNC. I think if I heard correctly, you mentioned you're still kind of exploring sale options there. My question is what happens if none of those sale options work out? Thank you very much. Alex, this is Spinelli. About the Northland System, as I mentioned, we our forecast for this year is 210. Yes, we have capacity for 230. We rely on not only in the ramp up of S11D, but we have we had a delay this year, 6 months of delay to start a new front and the mine that is called Murun. We already started, but the volume will come the full volume will come only at the beginning of next year. In the mid- to long term, we have other fronts in the North branch. But for next year, we're waiting for the return of Sejalastgy and also the geladinho project that they are coming. So again, EUR230,000,000 is a bit long term goal based on new pits and 23 for the North Range. And Cerroeste and Real Agino project, we can reach again the 230. Alex Eduardo, Bob BNC. I think, as I mentioned in the beginning, we are already redesigning the operation for a full sheet that we believe is more suitable to the reality of that plant after we learned. But for sure, we are extremely focused on finding sales solution, a solution that gets a new partner or sorry, not partner, a new operator that can execute it better. But I would like to Marc to elaborate a little bit more. Thank you, Alex. What I would say is that as Eduardo indicated, we do have interest in the project, which is encouraging. And we're hoping that we'll know in relatively short order how that is proceeding. Of course, we announced in Valet Day that we would have to make a decision by the end of 2020 as to our course of action, and we had indicated a desire to leave New Caledonia. So of course, by the end of 2020, if we do not have a solution, we'd have to find another way to deal with this potentially exit. The next question comes from Carlos De Alba, Morgan Stanley. So the first question is, maybe Spinelli, if you can give us a little bit more color on the actual situation on the blending that the company is facing given not only the constraints after the Brumadinho accident, but also with the rains that you are experiencing and potential what we've heard that there is some high impurities in some of the mines that the company is operating right now that may be affecting the blending. So if you could give us a little more color as to what the situation is right now and when do you expect any challenges that the company is facing to normalize? And then maybe Alex, if I could, just to pick your brain on the challenges or on the new investigation or the report from the investigation of the Board Committee. Is this can the can federal prosecutors still present charges against the company even after you guys reach an agreement with the state prosecutors or it will be independent to the process that you elaborated the company is trying to conclude with the state prosecutors? And then if I may add to that last point, the potential agreement with the state prosecutors, is that mostly focused on civil actions and environmental charges? Or it would also include criminal and or potential corruption charges? Thank you. Carlos, it's Pineli. Thank you for your question. Regarding the blend, we expect a new record in China this year. Actually, we don't have any problem with quality directly in the blend. We have our levels of inventory are low, so we are recovering that. But regarding the shipments and the north, it's important to say, as I mentioned in the last question, we had a delay in the license of Morun. So we decided to have a smoother production in the Q1, anticipating some maintenance to have the total volume for the production. The South, as I mentioned, we are recovering the production with the dry processing. So for the part of the blend with the high silica product, we don't have problem. Actually, there's a lack of high quality products in the South. But that gradually, we're going to recover, as I mentioned, to the end of the year, the dry processing step by step. So for blending, again, we don't have any problem. And this is a gradual production in this beginning of the year regarding the norm. Our next question comes from Christian I haven't answered Carlos de Alba, sorry. This is Alex D'Ambrosio. Okay, so I'd like to answer Carlos D'Alba's question. So Carlos, let me start, I think, in reverse order, okay? The agreements that we are trying to close with the prosecutors, the state prosecutors, they will address civil and environmental and social obligations. So it's based the idea is to suspend the civil actions and the environmental actions that are brought by the state. And there are now, as I mentioned before, there are 3. Now it does not address criminal. Criminal is completely independent. In fact, in Brazil, you cannot make this type of agreement like as you would in the United States to end the criminal prosecution by agreement. So what we're focusing here is in the civil and the compensation and the indemnifications and reparations. And the answer is no. No new actions would be able to be brought by the state that versed about these topics. So once we close these, the idea is that we will have a section in the agreement that precludes the state from bringing new actions related to those items that we have addressed in the agreement. Hope I answered your question. No, that's completely answered to Carlos De Alba's question. I was reminded that there's a question about anti corruption. Well, first, make clear that Vale has never endorsed any actions that are illegal and unethical and that violate our code of ethics. So we are very confident that if any actions were to be brought on these fronts, we would defend them in the proper channels. So we do not anticipate at this point that we could be charged with any action on that front. And again, reminding that the report by the special committee, the independent committee, did not bring any new facts and does not point out any new liabilities, none that were not yet already known by the prosecutors. So that's why we don't anticipate that it would change any of the charges already brought. The next question comes from Christian Georges, Societe Generale. Thank you and good afternoon. I'll go for possibly a simpler question. One on Mozambique. If you could give us perhaps some indication of what you're targeting in terms of productions there on thermal and cooking coal this year? And what kind of running rates in future we are looking at for both type of coal ideally? And the second question on copper. So there's some pushback we understand in China for taking some of the copper shipments. Is it something you have experienced already or that's something which is impacting you? Thank you. Okay. For Mozambique, there is a clear distinction about the production rates we expect after the shock that we described in December, which is a 3 to 4 month stoppage in the operations to change the flow sheet and to correct all the maintenance issues. So we expect a run rate we continue to expect a run rate of 15,000,000 tonnes per year after that. But until then, honestly, there is no expectation that we will have any step change or substantial improvement in the current conditions because the many problems that we have identified, they really require the stoppage for correction. So I'd say we are completely focused on established the 15,000,000 tonne run rate after the large stoppage. Whatever happens until then, I don't think it's relevant for the overall case for Mozambique because the operation is not in a good condition. The calendar year production will depend then on the effectiveness and the speed in which we can fix the situation with that stoppage. So far, we're maintaining the stoppage for the beginning of the Q2. However, we're monitoring very closely the impacts of coronavirus on the arrival of parts for the changes that need to be made. So there are initial indications of some delays, but we still expect that by the Q2, we'll be able to initiate the stoppage, and we're still targeting the second half we're going to get to the 50,000,000 tonne run rate. On copper, Christian, I would say that two things. First of all, copper, most of our copper concentrate is contracted for 2020. And secondly, relatively little of it goes to China. So there is certainly an impact in the sense of shipments that are coming up, but we are monitoring. They may be delayed, and we need to look at logistical concerns. But overall, it should be relatively minor in the base metals division. The next question comes from Tyler Brodhead, RBC. Great. Thanks very much for the call. My first question just to the operations report. You mentioned about the 3 to 355,000,000 tonne guidance for the year. You also mentioned in a statement there that with the achievement of the higher end of the production range continues to be possible on several upside being explored. I wonder if you could provide some color on that. And then secondly, just in terms of some of the other costs coming through, the established expenses, some of the research developments, some of the other costs within the P and L, just some of them were up this quarter. How should we look at those going forward into next year? Thank you. Thank you, Thiago, for the questions. This is Marcelo Espinelli. Well, some as I mentioned, we are recovering the production, and we actually, we rely on some authorization. So I can say that in that figure that you saw, the recovery operations, the more is in the left, there's more risky in the right, sorry, in the left is less. Upsides, I think we have some initiatives in Boucou 2 to anticipate some idea from using other dam that is the Bahaging Choo, this Choo dam, using some addition of products that we can use the dam that is almost full. We have other initiatives in Itabira, but I can say that the small initiatives that you can sum and have some number, like I mentioned, some 2,000,000 or 2,500,000 tons. But mainly, we are focused on the return of the operations and the assessment of the safety. As regards the expenses, you noticed probably that R and D expenditures were higher in 'nineteen than in 'eighteen. That relates to some of the projects we are developing, engineering studies and the catch up in drilling, but it should remain at the same level of 2019 throughout 2020. So no surprises on that. The operating and stoppage expenses were very large in 2019, a total of BRL882,000,000 for the entire company, of which not surprisingly BRL 823,000,000 were related to Brumadinho in the iron ore business. The iron ore pre operating and stoppage expenses should be directly proportional to the amount of production which is stopped. So you can do a linear extrapolation. If we resume the volumes throughout the year, the stoppage expenses should reduce proportionally. There were some stoppage expenses recorded in base metals, but we believe they will pretty much vanish this year as the operations like Sosego, Anza Puma and others that were stopped, they're coming back online successfully. The next question comes from Edward Sterck, BMO. Sorry, I was on mute. Good afternoon. Just a couple of questions for me. The first one on the topic of provisions. If we cast our minds back to the half year results when the first provisions were announced, I think at the time, they were described as being full provisions to the best management's ability knowledge at the time. We've seen further increases since then. Now there's obviously potentially $1,000,000,000 to $2,000,000,000 more. Are there any other actions outstanding against Vale that could result in further provisions? That's my first question. And the second one is, I'm afraid this is a rather naive one. I'm not familiar with Brazilian law. But on the topic of criminal charges, can they be brought against Vale itself as an institution or just against individuals? And I'm sorry for the rather crude nature of that question as well. So Edward, on the provisions, we made it clear throughout the year in the Q1, we mostly provisioned for our estimates of individual indemnification, social economic liabilities. Then on the 2nd quarter and the decommissioning of dams. On the 2nd quarter, we came out with the environmental provisions. We have complemented some of the indemnification provisions given the extension, for example, of the emergency monthly stipends for a very large population. And in the Q4, we did the provisions for 2 new dams to be de characterized following a reclassification in September by the National Mining Agency. Those were obviously all to the best extent of our knowledge as management. The I can tell you that for decommissioning, for example, the our knowledge has evolved substantially throughout the year to decharacterize very large dams and to make an estimate, as we did in the Q1, was quite a challenge. Actually, that portion was reduced, but across the year, we had because of laws that were enacted, we had to decommission also smaller dikes, and we added provisions for that. And these 2 large dams that we are adding, about USD 600,000,000, they basically came from a as I said, there's a reclassification from the agency that happened in September. There is no more such reclassification going forward because the agencies already did what needs to be done, which means that the upstream dams that need to be decommissioned, now they're all accounted for. When it comes to the environmental liabilities, the conversations that we're having with the authorities, they are confirming our initial estimates. So again, in this regard, there is nothing to expect in addition to that. The conversation is ongoing. They relate to sanitation measures, to water supply security for the city of Belo Horizonte, some works in water new water pipelines with the state utility company. So no surprises on that. When it comes to the socioeconomic provisions, that's where the what I call an additional effort is being requested from us by the state authorities in order to grant us this very large benefit, which will be the suspension of the actions and the no and the shielding against potential new lawsuits regarding socioeconomic and environmental. And right now, what we're doing is we are assessing these requests. We are crossing them with the existing programs that we when we made our provisions, we thought they would be the ones necessary to address the socioeconomic issues. But from a conceptual standpoint, we agree that we believe that there's value in doing this additional effort in order to suspend the lawsuits. That's kind of a tit for tat, right? We're going to receive a very large benefit. And we, on the other hand, will give an additional a legacy for the state with all these projects that are being asked for, very beneficial for the company. We believe we need to re connect with the Brazilian society and the society in the state of Minas Gerais. So putting all in context, we're willing to enter into such an agreement. But we haven't provisioned yet because the conditions are not yet here, very important. So we're treating this from an accounting perspective as a contingency rather than as a done deal or something that we will do. So as a listed company, we need to bring those things forward, so we're bringing it to you. This is Alex. Well, typically, under Brazilian law, criminal charges are against natural persons or individuals. There are some few statutes that will present possibilities of bringing criminal charges against the institution, against the company, but then the prosecutors would have to prove there's an institutional intent to practice certain crime. And that applies specifically to environmental. There's strict liability environmental prosecutions, yes. There could be antitrust and in some instances, anticorruption. As I said, for these last 2, in particular, you have to prove that there is an institutional intent that ranges from the entire organization. So typically, even in these issues of anti corruption and antitrust, the individual natural persons have to be the center of some type of indictment or accusation. The next question comes from Tina Tanners, Bank of America Merrill Lynch. Yes. Hey, thanks for all the great detail. I just wanted to ask 2 specific One on the iron ore market, if you could add some perspective. Clearly, the weaker demand outlook for steel in China has been matched by less supply, whether it be cyclone or rainy related. I just want your perspective on how much of that shortfall in supply was weather related in your view or external related and how much is intentional to match the lower demand? And if it's just because of the weather is there, do you think willingness to match lower demand if that does manifest? And then the second question is on the dividend. I just want to be really clear on, is there a checklist here of steps that need to be met before you consider resumption? Or is it really more qualitative? And if you could provide a little more color on that? Thanks very much. Hi, Timna. I think we have a market before coronavirus and after coronavirus. So that's the main point now. As many times now difficult to understand the consequence of the coronavirus, but I think I have some callers for NAND in China that will be around 1,000,000,000 tons of production of steel will be addressed in last month during the year, so we can have a boost in the consumer of iron ore after the coronavirus. So that's a common sense for the market in China. I think ex China, we already have some good news. We expect to grow more than 3%. Part of that, some recover from situations like in Japan that we had a problem last year in with the typhoons or like Europe that have a technical growth better than last year. But again, all of these numbers now can be adjusted with the impact of coronavirus in all the world with the center coming from China. From the supply side, I think we are really close to the demand. And Vale is returning the operation mainly in second half. We had some lack of production in Australia this beginning of the year, but we see that the supply demand will be tight for the whole year. Hina, it's Eduardo. I think answering very objectively, there's no checklist point. It's a qualitative assessment for sure, but bias it on the advancement of the work that we've been doing here on the reparation front that we believe we are advancing very well, as I mentioned before. So it's a system that we will find the right timing, but we need to, as I've always been saying, focus on the reparation and improving the performance of the company. But I'll ask you didn't ask, but I will ask Luciano to elaborate as well on the return of the policy because this has to be, of course, done when this management thinks it's time, of course, the board thinks it's time. And there are some doubts about that, I think, that need to be clarified as well. Tim, there was a question on the Portuguese call, and I'm repeating it here about what how do we think about the framework in terms of the indebtedness and its relation to the dividend. First of all, the intent when the dividend policy is reestablished is to do exactly as we did before, same formula, EBITDA less 30%. And so the discussion here is how are you going to think to pay dividends beyond above and beyond whatever the formula yields? Because there's no doubt that once the dividend is reestablished that the minimum dividend according to policy will be met. But what about above and beyond? So some people only it's a little strange and what was the intent when Vale put in the release a demonstration of expanded that and then expanded that in commitments that went up to that in commitments that went up to USD17 1,000,000,000. The intent was simply to show that some people start to speculate Vale is going to go towards a net cash position. And this is a narrow view because we do have, yes, lots of commitments beyond headline debt that need to be considered when looking at the liability side of the balance sheet. Well, but does that mean that your $10,000,000,000 leverage target is not there anymore? Look, the $10,000,000,000 was established when it was established. Most of these expanded and other liabilities were already there. So we already had the Samaku and Brum and Renova liabilities. We already had hit fees. We already had the leases. So in that respect, nothing changed. On the other hand, Brumagio came, and this is a big change. So although we're now below the headline USD10 1,000,000,000 by USD5 1,000,000,000, it is also true that we have an additional USD5 1,000,000,000 provision recognized on the balance sheet for Brumadinho expenses. So net net, we're about where we wanted to be, if you think about the framework as before. We're not at 10%, we are at 5% on headline debt. However, we do have 5 additional more commitments to match. So the consequence of this is, if the dividend policy was reenacted today, every cash flow that the company generated from now on would potentially be available for discussion with the Board of Directors for distribution for shareholders. So that's the consequence. But there's as of now, there will not be sort of a catch up dividend, extraordinary $5,000,000,000 dividend to come back to the $10,000,000,000 Having said that, those additional commitments, they tend to decrease over time. So as we spend the money in order to do the reparation in Brumadin, the $5,000,000,000 will decrease. And then over time, we will be able to relever the company, the headline debt back towards USD10 1,000,000,000. And in that process also, we will consider this to pay additional dividends above and beyond the minimum dividend policy. So that's the thinking right now. The next question comes from John Tumazos. John Tumazos, very independent. Thank you very much. Could you explain the large drop in the pellet price realization, almost $18 was that due to the German recession and softness in the Atlantic market? And then secondly, concerning the dry processing of the lower grade southern, southeastern ores, The shipment of the lower grade material to Malaysia or China for blending is a big freight bigger freight expense. The blending takes effort. The high grade ore that is blended loses its price premium. Then when it gets to China, there's going to be more slag after they make the iron from the material that never went in tailings dam to begin with. Why not just simply shut the lower grade mines where you can't use the tailings dams anymore? So dry processing seems to have a lot of disadvantages. John, this is Pinelli here. Regarding the pellet premium, I think the number is higher than that. It's about 30, not 18. And I think the drop, okay. And I think the market is we reduced the production of pellet feed with all the problems in Boucouture, and we see the market today very tight, and we expect some better premiums for next quarter. But this is still a very good premium. The good news in the premium side is in China for pellets. We've seen some premiums now coming in the spot market around 40, just to figure out, we're not in this market. But as now we are considering to see what will be in this market during this year. And regarding the dry processing, the blending and the high silica or Carajas fines pure Carajas finds. We've been assessing this decision for some time, and we are still convinced that we have the best solution blended in China. We are struggling now to recover the production, but in mid- to long term, the premiums from BRBF is much better than the discount of the Hy Silica even shutting down their production. We still have margins selling BRBF rather than selling Carajas plants or being out of the purchase of high silica. So again, it's a good business. But Jon, on the other hand, it is also true that we had a plan, an initial plan for this year of going up to EUR370,000,000 to EUR 375,000,000 by accelerating the dry processing of the operations where now we can do it. However, the silica discounts were so large and the costs were also prohibited because we're not blasting, we're using mechanical dismantling of the rocks that we said, okay, we're not going to produce it. So we're very mindful of those trade offs. We consciously removed about 20,000,000 tonnes from the production plan in order to get to this 340,000,000 to 355,000,000 precisely on the grounds of optimization. So we have all the information, we have dynamic optimization, we're very mindful, we're on top of things and we do what's best for the overall profitability of the company. This concludes today's question and answer session. Mr. Eduardo Bartolomeo, at this time, you may proceed with your closing statements. Okay. Thank you. First of all, thanks everyone for your time and attention and the questions. Definitely, 2019 was one of the it is the hardest year that we ever faced. But I believe that the path that we choose through operational excellence to a safer company will bring sustainable results and will start to be noticed soon. So as I mentioned in the beginning, 2020 will be a year of continuity and stabilization. But for sure, Vale will be out of the strategy in a much better shape and a much better company, okay? Thank you, and see you in the next call. That does conclude Vale's conference call for today. Thank you very much for your participation. You may now disconnect.