Brazil Mining Giant Vale Q3 Profits R$15 Billion, More Than Double Q3 2019

RIO DE JANEIRO, BRAZIL – Vale has posted a net profit of R$15.6 billion (US$3 billion) in Q3 2020, more than double the R$6.5 billion recorded over the same period last year. The improved result was mainly due to the 26 percent increase in iron ore prices and the 20 percent increase in sales volume in the period.

The company has been growing since the collapse of the Brumadinho dam in January 2019, which left a trail of destruction in the region – with 237 dead and 33 missing – and has led to an increase in restrictions for the operation of ore tailing dams in the country.

The mining company had already posted a profit of R$5.3 billion in Q2 2020, with the positive impact of the resumption of Chinese demand for iron ore. Despite the novel coronavirus pandemic, the company closed the first semester with an accumulated profit of R$6.2 billion.

According to the company, the repair of Brumadinho remains a priority. In August, the search and rescue operations were restarted after a five-month suspension because of the Covid-19 pandemic. Eleven victims are still missing. The mining company also pointed out that the compensation proceeding continues by videoconference.

According to the Q3 report, 600 people have been added to the indemnity agreements since the preceding quarter, now comprising 8,200 people.

Moreover, the North System hit a quarterly production record, while the South and Southeast Systems improved performance in all operating units, particularly at the Itabira Complex and the Timbopeba site, which operated for a full quarter after the return in June, and with the resumption at the Fazendão mine in July.

“While we remain firm in our commitment to the full repair of Brumadinho, this quarter we reached an important milestone in stabilizing our production, with a record production in the North System, a major step towards de-risking our company,” said Eduardo Bartolomeo, Vale’s CEO.

With the Q3 2020 results, Vale’s net debt reached its lowest level since Q4 2008, reaching US$4.47 billion (R$25.6 billion), a reduction of US$223 million (R$1.2 billion).

In the balance, Vale points out that the company’s expanded debt, which includes relevant commitments, was reduced by US$844 million (R$4.8 billion) mainly because of smaller commitments related to Brumadinho and Samarco & Renova Foundation.

According to the company, this reflects the payments made over the quarter and the depreciation of the real, which were partially offset by the impact of exchange swaps in the period. Now, the expanded net debt stands at US$14.46 (R$82.88 billion).

Gross debt has been reduced by US$3.5 billion (R$ 20 billion), now totaling US$13.44 billion (R$77 billion). The drop was the result of the issue of US$1.5 billion (R$ 8.6 billion) in bonds maturing in 2030 with a 3.75 percent coupon per year and the repayment of revolving credit lines of US$5 billion (R$28.6 billion) paid in early 2020.

In September, Vale’s board of directors agreed to distribute R$12.4 billion to its shareholders as earnings in the first quarters of 2020.

This was the second time that the mining company paid shareholders since the Brumadinho (MG) accident, which left 272 dead in January 2019. In August, the company paid R$7.25 billion as earnings for the 2018 result. The operation was approved in December by the company’s board of directors.

According to analysts, the announcement showed that the company is not considering any further large disbursements to repair the damages or compensate victims and will focus on the remuneration of its shareholders. The resumption of shareholder compensation had been approved in December but suspended again after the start of the pandemic.

Before the pandemic, the company had also announced the return of bonus payments to executives. In a meeting held on April 30th, already during the crisis, shareholders approved a remuneration package that included R$19 million in prizes to the board of directors for their performance in 2019.

Source: Folhapress