Table of Contents

 

 

 

United States
Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934

 

For the month of

 

October, 2017

 

Vale S.A.

 

Avenida das Américas, No. 700
22640-100 Rio de Janeiro, RJ, Brazil

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

(Check One) Form 20-F x Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

 

(Check One) Yes o No x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

 

(Check One) Yes o No x

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

(Check One) Yes o No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82-      .

 

 

 



Table of Contents

 

 

Interim Financial Statements

September 30, 2017

 

 

IFRS in US$

 



Table of Contents

 

GRAPHIC

 

Vale S.A. Interim Financial Statements

Contents

 

 

 

Page

Report of independent registered public accounting firm

 

3

Consolidated Income Statement

 

4

Consolidated Statement of Comprehensive Income

 

5

Consolidated Statement of Cash Flows

 

6

Consolidated Statement of Financial Position

 

7

Consolidated Statement of Changes in Equity

 

8

Selected Notes to the Interim Financial Statements

 

9

1.

Corporate information

 

9

2.

Basis for preparation of the interim financial statements

 

9

3.

Information by business segment and by geographic area

 

10

4.

Special events occurred during the period

 

14

5.

Costs and expenses by nature

 

16

6.

Financial result

 

16

7.

Income taxes

 

17

8.

Basic and diluted earnings per share

 

18

9.

Accounts receivable

 

18

10.

Inventories

 

19

11.

Other financial assets and liabilities

 

19

12.

Non-current assets and liabilities held for sale and discontinued operations

 

19

13.

Acquisitions and divestitures

 

21

14.

Investments in associates and joint ventures

 

22

15.

Intangibles

 

24

16.

Property, plant and equipment

 

25

17.

Loans, borrowings, cash and cash equivalents and financial investments

 

26

18.

Liabilities related to associates and joint ventures

 

28

19.

Financial instruments classification

 

31

20.

Fair value estimate

 

32

21.

Derivative financial instruments

 

33

22.

Provisions

 

37

23.

Litigation

 

38

24.

Employee postretirement obligations

 

39

25.

Stockholders’ equity

 

40

26.

Related parties

 

40

27.

Commitments

 

42

28.

Additional information about derivatives financial instruments

 

42

 

2



Table of Contents

 

 

 

 

 

KPMG Auditores Independentes

Rua do Passeio, 38 Setor 2 17º andar

20021-290 - Rio de Janeiro, RJ - Brasil

Central Tel

Fax

Internet

55 (21) 2207-9400

55 (21) 2207-9000

www.kpmg.com.br

 

Report of independent registered public accounting firm

 

To the Board of Directors and Stockholders of

Vale S.A.

Rio de Janeiro - RJ

 

We have reviewed the accompanying condensed consolidated balance sheet of Vale S.A. (“the Company”) and subsidiaries as of September 30, 2017, the related condensed consolidated statements of income, comprehensive income and cash flows for the three and nine-month periods ended on September 30, 2017 and 2016, and the related condensed consolidated statement of changes in equity for the nine-month periods ended on September 30, 2017 and 2016. These condensed consolidated financial statements are the responsibility of the Company’s management.

 

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an audit opinion.

 

Based on our review, we are not aware of any material modification that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vale S.A. and subsidiaries as of December 31, 2016 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

KPMG Auditores Independentes

Rio de Janeiro, Brazil

October 25, 2017

 

3



Table of Contents

 

GRAPHIC

 

Consolidated Income Statement

In millions of United States dollars, except earnings per share data

 

 

 

 

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

 

 

 

Notes

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

(i)

 

 

 

(i)

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

3(c)

 

9,050

 

6,726

 

24,800

 

18,223

 

Cost of goods sold and services rendered

 

5(a)

 

(5,412

)

(4,345

)

(15,248

)

(12,547

)

Gross profit

 

 

 

3,638

 

2,381

 

9,552

 

5,676

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

5(b)

 

(129

)

(137

)

(385

)

(371

)

Research and evaluation expenses

 

 

 

(91

)

(80

)

(236

)

(207

)

Pre operating and operational stoppage

 

 

 

(83

)

(116

)

(288

)

(323

)

Other operating revenues (expenses), net

 

5(c)

 

(151

)

63

 

(316

)

(115

)

 

 

 

 

(454

)

(270

)

(1,225

)

(1,016

)

Impairment and other results on non-current assets

 

13 and 16

 

(169

)

(29

)

123

 

(95

)

Operating income

 

 

 

3,015

 

2,082

 

8,450

 

4,565

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

6

 

1,513

 

362

 

2,911

 

7,501

 

Financial expenses

 

6

 

(1,293

)

(1,401

)

(4,643

)

(5,054

)

Equity results in associates and joint ventures

 

14

 

115

 

45

 

164

 

390

 

Impairment and other results in associates and joint ventures

 

18

 

(26

)

(33

)

(121

)

(1,146

)

Income before income taxes

 

 

 

3,324

 

1,055

 

6,761

 

6,256

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

7

 

 

 

 

 

 

 

 

 

Current tax

 

 

 

(522

)

(64

)

(1,092

)

(818

)

Deferred tax

 

 

 

(457

)

(370

)

(561

)

(1,906

)

 

 

 

 

(979

)

(434

)

(1,653

)

(2,724

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

 

 

2,345

 

621

 

5,108

 

3,532

 

Net income attributable to noncontrolling interests

 

 

 

7

 

11

 

53

 

25

 

Net income from continuing operations attributable to Vale’s stockholders

 

 

 

2,338

 

610

 

5,055

 

3,507

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

12

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

(106

)

(39

)

(313

)

(49

)

Net income attributable to noncontrolling interests

 

 

 

2

 

(4

)

6

 

1

 

Loss from discontinued operations attributable to Vale’s stockholders

 

 

 

(108

)

(35

)

(319

)

(50

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

2,239

 

582

 

4,795

 

3,483

 

Net income attributable to noncontrolling interests

 

 

 

9

 

7

 

59

 

26

 

Net income attributable to Vale’s stockholders

 

 

 

2,230

 

575

 

4,736

 

3,457

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Vale’s stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share(restated in note 4):

 

8

 

 

 

 

 

 

 

 

 

Preferred share (US$)

 

 

 

0.43

 

0.11

 

0.92

 

0.67

 

Common share (US$)

 

 

 

0.43

 

0.11

 

0.92

 

0.67

 

 


(i) Period restated according to Note 12.

 

The accompanying notes are an integral part of these interim financial statements.

 

4



Table of Contents

 

GRAPHIC

 

Consolidated Statement of Comprehensive Income

In millions of United States dollars

 

 

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Net income

 

2,239

 

582

 

4,795

 

3,483

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments

 

1,797

 

(447

)

1,158

 

6,660

 

Retirement benefit obligations

 

64

 

(43

)

(249

)

(311

)

Tax recognized within other comprehensive income

 

(19

)

14

 

76

 

96

 

Total items that will not be reclassified subsequently to the income statement

 

1,842

 

(476

)

985

 

6,445

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the income statement

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments

 

(603

)

219

 

88

 

(3,459

)

Cash flow hedge

 

 

 

 

6

 

Net investments hedge

 

290

 

 

162

 

 

Equity results in associates and joint ventures, net of taxes

 

 

 

 

5

 

Transfer of realized results to net income, net of taxes

 

 

 

 

(78

)

Tax recognized within other comprehensive income

 

(180

)

18

 

(209

)

(124

)

Total of items that may be reclassified subsequently to the income statement

 

(493

)

237

 

41

 

(3,650

)

Total comprehensive income

 

3,588

 

343

 

5,821

 

6,278

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to noncontrolling interests

 

37

 

(3

)

78

 

150

 

Comprehensive income attributable to Vale’s stockholders

 

3,551

 

346

 

5,743

 

6,128

 

 

The accompanying notes are an integral part of these interim financial statements.

 

5



Table of Contents

 

GRAPHIC

 

Consolidated Statement of Cash Flows

In millions of United States dollars

 

 

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

(i)

 

 

 

(i)

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

Income before income taxes from continuing operations

 

3,324

 

1,055

 

6,761

 

6,256

 

Continuing operations adjustments for:

 

 

 

 

 

 

 

 

 

Equity results in associates and joint ventures

 

(115

)

(45

)

(164

)

(390

)

Impairment and other results on non-current assets

 

169

 

29

 

(123

)

95

 

Impairment and other results in associates and joint ventures

 

26

 

 

121

 

1,113

 

Depreciation, amortization and depletion

 

920

 

853

 

2,732

 

2,475

 

Financial results, net

 

(220

)

1,039

 

1,732

 

(2,447

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(936

)

127

 

1,104

 

(787

)

Inventories

 

(52

)

(72

)

(496

)

(87

)

Suppliers and contractors

 

37

 

436

 

363

 

462

 

Provision - Payroll, related charges and others remunerations

 

205

 

(15

)

162

 

28

 

Deferred revenue - Gold stream

 

 

524

 

 

524

 

Other assets and liabilities, net

 

(235

)

(739

)

(928

)

(299

)

 

 

3,123

 

3,192

 

11,264

 

6,943

 

Interest on loans and borrowings paid

 

(407

)

(422

)

(1,334

)

(1,243

)

Derivatives paid, net

 

(113

)

(191

)

(223

)

(1,054

)

Interest on participative stockholders’ debentures paid

 

 

 

(70

)

(37

)

Income taxes

 

(84

)

(88

)

(489

)

(342

)

Income taxes - Settlement program

 

(124

)

(116

)

(365

)

(304

)

Net cash provided by operating activities from continuing operations

 

2,395

 

2,375

 

8,783

 

3,963

 

Net cash provided by operating activities from discontinued operations

 

87

 

34

 

78

 

88

 

Net cash provided by operating activities

 

2,482

 

2,409

 

8,861

 

4,051

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

Financial investments redeemed (invested)

 

(34

)

69

 

(53

)

46

 

Loans and advances - Net receipts (payments) (note 18)

 

(101

)

(123

)

(332

)

(126

)

Additions to investments

 

(57

)

(4

)

(74

)

(230

)

Additions to property, plant and equipment and intangible

 

(856

)

(1,150

)

(2,853

)

(3,640

)

Proceeds from disposal of assets and investments (note 13)

 

198

 

326

 

721

 

350

 

Dividends received from associates and joint ventures

 

21

 

 

103

 

115

 

Others investments activities

 

4

 

51

 

(30

)

4

 

Proceeds from gold stream transaction

 

 

276

 

 

276

 

Net cash used in investing activities from continuing operations

 

(825

)

(555

)

(2,518

)

(3,205

)

Net cash used in investing activities from discontinued operations

 

(71

)

(103

)

(215

)

(208

)

Net cash used in investing activities

 

(896

)

(658

)

(2,733

)

(3,413

)

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

Loans and borrowings

 

 

 

 

 

 

 

 

 

Additions

 

351

 

1,573

 

1,801

 

6,206

 

Repayments

 

(2,818

)

(1,979

)

(5,788

)

(4,940

)

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

Dividends and interest on capital attributed to stockholders

 

 

 

(1,454

)

 

Dividends and interest on capital paid to noncontrolling interest

 

(116

)

(129

)

(124

)

(204

)

Transactions with noncontrolling stockholders (note 13)

 

 

 

(98

)

(17

)

Net cash provided by (used in) financing activities from continuing operations

 

(2,583

)

(535

)

(5,663

)

1,045

 

Net cash used in financing activities from discontinued operations

 

(34

)

(8

)

(34

)

(13

)

Net cash provided by (used in) financing activities

 

(2,617

)

(543

)

(5,697

)

1,032

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(1,031

)

1,208

 

431

 

1,670

 

Cash and cash equivalents in the beginning of the period

 

5,720

 

4,168

 

4,262

 

3,591

 

Effect of exchange rate changes on cash and cash equivalents

 

28

 

(7

)

38

 

108

 

Effects of disposals of subsidiaries and merger, net on cash and cash equivalents

 

2

 

 

(12

)

 

Cash and cash equivalents at end of the period

 

4,719

 

5,369

 

4,719

 

5,369

 

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - capitalized loans and borrowing costs

 

111

 

172

 

297

 

562

 

 


(i) Period restated according to Note 12.

 

The accompanying notes are an integral part of these interim financial statements.

 

6



Table of Contents

 

GRAPHIC

 

Consolidated Statement of Financial Position

In millions of United States dollars

 

 

 

Notes

 

September 30,
2017

 

December 31,
2016

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

17

 

4,719

 

4,262

 

Accounts receivable

 

9

 

2,712

 

3,663

 

Other financial assets

 

11

 

2,255

 

363

 

Inventories

 

10

 

4,083

 

3,349

 

Prepaid income taxes

 

 

 

333

 

159

 

Recoverable taxes

 

 

 

1,125

 

1,625

 

Others

 

 

 

337

 

557

 

 

 

 

 

15,564

 

13,978

 

 

 

 

 

 

 

 

 

Non-current assets held for sale

 

12

 

4,325

 

8,589

 

 

 

 

 

19,889

 

22,567

 

Non-current assets

 

 

 

 

 

 

 

Judicial deposits

 

23(c)

 

2,005

 

962

 

Other financial assets

 

11

 

3,262

 

628

 

Prepaid income taxes

 

 

 

539

 

527

 

Recoverable taxes

 

 

 

651

 

727

 

Deferred income taxes

 

7(a)

 

6,651

 

7,343

 

Others

 

 

 

309

 

274

 

 

 

 

 

13,417

 

10,461

 

 

 

 

 

 

 

 

 

Investments in associates and joint ventures

 

14

 

3,855

 

3,696

 

Intangibles

 

15

 

8,651

 

6,871

 

Property, plant and equipment

 

16

 

56,280

 

55,419

 

 

 

 

 

82,203

 

76,447

 

Total assets

 

 

 

102,092

 

99,014

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Suppliers and contractors

 

 

 

4,013

 

3,630

 

Loans and borrowings

 

17

 

1,838

 

1,660

 

Other financial liabilities

 

11

 

634

 

1,086

 

Taxes payable

 

7(c)

 

730

 

657

 

Provision for income taxes

 

 

 

309

 

171

 

Liabilities related to associates and joint ventures

 

18

 

301

 

292

 

Provisions

 

22

 

1,197

 

952

 

Dividends and interest on capital

 

 

 

 

798

 

Others

 

 

 

563

 

896

 

 

 

 

 

9,585

 

10,142

 

Liabilities associated with non-current assets held for sale

 

12

 

1,132

 

1,090

 

 

 

 

 

10,717

 

11,232

 

Non-current liabilities

 

 

 

 

 

 

 

Loans and borrowings

 

17

 

23,952

 

27,662

 

Other financial liabilities

 

11

 

2,963

 

2,127

 

Taxes payable

 

7(c)

 

5,168

 

4,961

 

Deferred income taxes

 

7(a)

 

1,604

 

1,700

 

Provisions

 

22

 

6,877

 

5,748

 

Liabilities related to associates and joint ventures

 

18

 

725

 

785

 

Deferred revenue - Gold stream

 

 

 

1,922

 

2,090

 

Others

 

 

 

1,682

 

1,685

 

 

 

 

 

44,893

 

46,758

 

Total liabilities

 

 

 

55,610

 

57,990

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

25

 

 

 

 

 

Equity attributable to Vale’s stockholders

 

 

 

45,008

 

39,042

 

Equity attributable to noncontrolling interests

 

 

 

1,474

 

1,982

 

Total stockholders’ equity

 

 

 

46,482

 

41,024

 

Total liabilities and stockholders’ equity

 

 

 

102,092

 

99,014

 

 

The accompanying notes are an integral part of these interim financial statements.

 

7



Table of Contents

GRAPHIC

Statement of Changes in Equity

In millions of United States dollars

 

 

 

Share capital

 

Results on
conversion of
shares

 

Capital reserve

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value
gain (losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity
attributable to
Vale’s
stockholders

 

Equity
attributable to
noncontrolling
interests

 

Total
stockholders’
equity

 

Balance at December 31, 2016

 

61,614

 

(152

)

 

(699

)

4,203

 

(1,477

)

(1,147

)

(23,300

)

 

39,042

 

1,982

 

41,024

 

Net income

 

 

 

 

 

 

 

 

 

4,736

 

4,736

 

59

 

4,795

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

(173

)

 

 

(173

)

 

(173

)

Net investments hedge (note 17 (vi))

 

 

 

 

 

 

 

 

107

 

 

107

 

 

107

 

Translation adjustments

 

 

 

 

 

127

 

 

(18

)

936

 

28

 

1,073

 

19

 

1,092

 

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and interest on capital of Vale’s stockholders

 

 

 

 

 

(658

)

 

 

 

 

(658

)

 

(658

)

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(107

)

(107

)

Acquisitions and disposal of noncontrolling interest (note 13)

 

 

 

 

(277

)

 

 

 

 

 

(277

)

(512

)

(789

)

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

 

33

 

33

 

Merger of Valepar - Note 4

 

 

 

1,158

 

 

 

 

 

 

 

1,158

 

 

1,158

 

Balance at September 30, 2017

 

61,614

 

(152

)

1,158

 

(976

)

3,672

 

(1,477

)

(1,338

)

(22,257

)

4,764

 

45,008

 

1,474

 

46,482

 

 

 

 

Share capital

 

Results on
conversion of
shares

 

Capital reserve

 

Results from
operation with
noncontrolling
interest

 

Profit
reserves

 

Treasury
stocks

 

Unrealized
fair value
gain (losses)

 

Cumulative
translation
adjustments

 

Retained
earnings

 

Equity
attributable to
Vale’s
stockholders

 

Equity
attributable to
noncontrolling
interests

 

Total
stockholders’
equity

 

Balance at December 31, 2015

 

61,614

 

(152

)

 

(702

)

985

 

(1,477

)

(992

)

(25,687

)

 

33,589

 

2,115

 

35,704

 

Net income

 

 

 

 

 

 

 

 

 

3,457

 

3,457

 

26

 

3,483

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement benefit obligations

 

 

 

 

 

 

 

(215

)

 

 

(215

)

 

(215

)

Cash flow hedge

 

 

 

 

 

 

 

7

 

 

 

7

 

 

7

 

Translation adjustments

 

 

 

 

 

200

 

 

(90

)

2,608

 

161

 

2,879

 

124

 

3,003

 

Transactions with stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(174

)

(174

)

Acquisitions and disposal of noncontrolling interest (note 13)

 

 

 

 

2

 

 

 

 

 

 

2

 

 

2

 

Capitalization of noncontrolling interest advances

 

 

 

 

 

 

 

 

 

 

 

21

 

21

 

Balance at September 30, 2016

 

61,614

 

(152

)

 

(700

)

1,185

 

(1,477

)

(1,290

)

(23,079

)

3,618

 

39,719

 

2,112

 

41,831

 

 

The accompanying notes are an integral part of these interim financial statements.

 

8



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GRAPHIC

Selected Notes to the Interim Financial Statements

Expressed in millions of United States dollar, unless otherwise stated

 

1.            Corporate information

 

Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo — B3 S.A. (Vale3 and Vale5), New York - NYSE (VALE and VALE.P), Paris - NYSE Euronext (Vale3 and Vale5) and Madrid — LATIBEX (XVALO and XVALP).

 

Vale S.A. and its direct and indirect subsidiaries (“Vale” or “Company”) are global producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. The Company also produces copper, metallurgical and thermal coal, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 3.

 

2.         Basis for preparation of the interim financial statements

 

a)   Statement of compliance

 

The condensed consolidated interim financial statements of the Company (“interim financial statements”) present the accounts of the Company and have been prepared in accordance with IAS 34 Interim Financial Reporting of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

b)   Basis of presentation

 

The interim financial statements have been prepared under the historical cost convention as adjusted to reflect: (i) the fair value of financial instruments measured at fair value through the income statement or available-for-sale financial instruments measured at fair value through the statement of comprehensive income; and (ii) impairment of assets.

 

The accounting practices, accounting estimates and judgments, risk management and measurement methods are the same as those adopted when preparing the financial statements for the year ended December 31, 2016. The accounting policy for recognizing and measuring income taxes in the interim period is described in note 7. These interim financial statements were prepared to update users about relevant information presented in the period and should be read in conjunction with the financial statements for the year ended December 31, 2016.

 

The consolidated comparative information for the periods ended September 30, 2016 was restated for the purposes of applying IFRS 5 “Non-current assets held for sale and discontinued operations” after approval by the Board of Directors of the sale of the fertilizers assets, as presented in Note 12. Also earnings per share were restated as disclosed in note 4.

 

The interim financial statements of the Company and its associates and joint ventures are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian real (“BRL” or “R$”). For presentation purposes, these interim financial statements are presented in United States dollar (“USD” or “US$”) as the Company believes that this is how international investors analyze the interim financial statements.

 

The exchange rates used by the Company for major currencies to translate its operations are as follows:

 

 

 

 

 

 

 

Average rate for the

 

 

 

Closing rate

 

Three-month period ended

 

Nine-month period ended

 

 

 

September 30,
2017

 

December 31,
2016

 

September 30,
2017

 

September 30,
2016

 

September 30,
2017

 

September 30,
2016

 

US Dollar (“US$”)

 

3.1680

 

3.2591

 

3.1639

 

3.2460

 

3.1750

 

3.5450

 

Canadian dollar (“CAD”)

 

2.5334

 

2.4258

 

2.5235

 

2.4881

 

2.4319

 

2.6802

 

Australian dollar (“AUD”)

 

2.4837

 

2.3560

 

2.4969

 

2.4616

 

2.4320

 

2.6273

 

Euro (“EUR” or “€”)

 

3.7430

 

3.4384

 

3.7162

 

3.6232

 

3.5392

 

3.9549

 

 

Subsequent events were evaluated through October 25, 2017, which is the date the interim financial statements were approved by the Board of Directors.

 

9



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GRAPHIC

 

c)   Accounting standards issued but not yet effective

 

The standards and interpretations issued by IASB relevant to the Company but not yet effective are the same as those applicable when preparing the financial statements for the year ended December 31, 2016.

 

3.         Information by business segment and by geographic area

 

The information presented to the Executive Board on the performance of each segment is derived from the accounting records, adjusted for reallocations between segments.

 

a)   Adjusted EBITDA

 

Adjusted EBITDA is used by management to support the decision making process for segments. The definition of adjusted EBITDA for the Company is the operating income or loss excluding (i) the depreciation, depletion and amortization, (ii) results on measurement or sales of non-current assets, (iii) impairment, (iv) onerous contracts and plus (v) dividends received and interest from associates and joint ventures.

 

 

 

Three-month period ended September 30, 2017

 

 

 

Net operating
revenue

 

Cost of goods
sold and
services
rendered

 

Sales,
administrative
and other
operating
expenses

 

Research and
evaluation

 

Pre operating
and operational
stoppage

 

Dividends
received and
interest from
associates and
joint ventures

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

5,131

 

(2,086

)

(89

)

(22

)

(47

)

1

 

2,888

 

Iron ore Pellets

 

1,441

 

(733

)

(21

)

(5

)

(3

)

 

679

 

Ferroalloys and manganese

 

131

 

(71

)

(4

)

 

1

 

 

57

 

Other ferrous products and services

 

117

 

(77

)

(2

)

 

 

12

 

50

 

 

 

6,820

 

(2,967

)

(116

)

(27

)

(49

)

13

 

3,674

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

360

 

(368

)

(9

)

(4

)

 

67

 

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

1,168

 

(883

)

(44

)

(14

)

 

 

227

 

Copper

 

594

 

(246

)

(8

)

(6

)

 

 

334

 

 

 

1,762

 

(1,129

)

(52

)

(20

)

 

 

561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

108

 

(80

)

(86

)

(40

)

1

 

8

 

(89

)

Total of continuing operations

 

9,050

 

(4,544

)

(263

)

(91

)

(48

)

88

 

4,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations (Fertilizers)

 

533

 

(490

)

(23

)

(3

)

(5

)

 

12

 

Total

 

9,583

 

(5,034

)

(286

)

(94

)

(53

)

88

 

4,204

 

 

 

 

Three-month period ended September 30, 2016

 

 

 

Net operating
revenue

 

Cost of goods sold
and services
rendered

 

Sales,
administrative and
other operating
expenses

 

Research and
evaluation

 

Pre operating and
operational
stoppage

 

Adjusted EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

3,782

 

(1,648

)

(80

)

(25

)

(40

)

1,989

 

Iron ore Pellets

 

991

 

(512

)

(8

)

(4

)

(5

)

462

 

Ferroalloys and manganese

 

76

 

(63

)

(6

)

 

(3

)

4

 

Other ferrous products and services

 

110

 

(70

)

(1

)

 

(1

)

38

 

 

 

4,959

 

(2,293

)

(95

)

(29

)

(49

)

2,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

163

 

(157

)

3

 

(3

)

(13

)

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

1,159

 

(792

)

(31

)

(21

)

(26

)

289

 

Copper

 

420

 

(255

)

(2

)

(2

)

 

161

 

Other base metals products

 

 

 

150

 

 

 

150

 

 

 

1,579

 

(1,047

)

117

 

(23

)

(26

)

600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

25

 

(58

)

(64

)

(25

)

 

(122

)

Total of continuing operations

 

6,726

 

(3,555

)

(39

)

(80

)

(88

)

2,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations (Fertilizers)

 

598

 

(501

)

(29

)

(5

)

(4

)

59

 

Total

 

7,324

 

(4,056

)

(68

)

(85

)

(92

)

3,023

 

 

10



Table of Contents

 

GRAPHIC

 

 

 

Nine-month period ended September 30, 2017

 

 

 

Net operating
revenue

 

Cost of goods
sold and services
rendered

 

Sales,
administrative
and other
operating
expenses

 

Research and
evaluation

 

Pre operating
and operational
stoppage

 

Dividends
received and
interest from
associates and
joint ventures

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

13,501

 

(5,648

)

(181

)

(61

)

(128

)

1

 

7,484

 

Iron ore Pellets

 

4,231

 

(2,097

)

(43

)

(13

)

(5

)

37

 

2,110

 

Ferroalloys and manganese

 

334

 

(196

)

(8

)

 

(3

)

 

127

 

Other ferrous products and services

 

365

 

(230

)

6

 

(1

)

 

12

 

152

 

 

 

18,431

 

(8,171

)

(226

)

(75

)

(136

)

50

 

9,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

1,165

 

(921

)

(32

)

(11

)

(4

)

67

 

264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,309

 

(2,563

)

(119

)

(34

)

(50

)

 

543

 

Copper

 

1,562

 

(723

)

(15

)

(10

)

 

 

814

 

 

 

4,871

 

(3,286

)

(134

)

(44

)

(50

)

 

1,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

333

 

(304

)

(239

)

(106

)

(2

)

53

 

(265

)

Total of continuing operations

 

24,800

 

(12,682

)

(631

)

(236

)

(192

)

170

 

11,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations (Fertilizers)

 

1,304

 

(1,201

)

(58

)

(8

)

(26

)

 

11

 

Total

 

26,104

 

(13,883

)

(689

)

(244

)

(218

)

170

 

11,240

 

 

 

 

Nine-month period ended September 30, 2016

 

 

 

Net operating
revenue

 

Cost of goods
sold and services
rendered

 

Sales,
administrative
and other
operating
expenses

 

Research and
evaluation

 

Pre operating
and operational
stoppage

 

Dividends
received and
interest from
associates and
joint ventures

 

Adjusted
EBITDA

 

Ferrous minerals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron ore

 

10,208

 

(4,609

)

(386

)

(52

)

(107

)

 

5,054

 

Iron ore Pellets

 

2,611

 

(1,408

)

(43

)

(8

)

(17

)

60

 

1,195

 

Ferroalloys and manganese

 

185

 

(162

)

(3

)

 

(9

)

 

11

 

Other ferrous products and services

 

300

 

(192

)

2

 

(1

)

(2

)

 

107

 

 

 

13,304

 

(6,371

)

(430

)

(61

)

(135

)

60

 

6,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

463

 

(687

)

46

 

(8

)

(24

)

 

(210

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base metals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nickel and other products

 

3,209

 

(2,332

)

(55

)

(57

)

(84

)

 

681

 

Copper

 

1,170

 

(684

)

(9

)

(3

)

 

 

474

 

Other base metals products

 

 

 

150

 

 

 

 

150

 

 

 

4,379

 

(3,016

)

86

 

(60

)

(84

)

 

1,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others

 

77

 

(158

)

(106

)

(78

)

(2

)

55

 

(212

)

Total of continuing operations

 

18,223

 

(10,232

)

(404

)

(207

)

(245

)

115

 

7,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations (Fertilizers)

 

1,446

 

(1,190

)

(68

)

(16

)

(14

)

3

 

161

 

Total

 

19,669

 

(11,422

)

(472

)