Leonardo Correa

Leonardo Correa asked about the strong cost performance of Vale Base Metals (VBM), particularly the negative copper all-in costs and $9,000/ton nickel costs, questioning the impact of by-product credits versus bottom-up initiatives. He also inquired if the current results, materially below recent guidance, suggest potential upside or downside to cost forecasts. Additionally, he asked CEO Gustavo Pimenta about unlocking the value of Vale's copper assets, which are currently valued lower than peers, and whether an IPO of VBM or consistent project delivery is the preferred strategy.

Answer

Shaun Usmar, CEO of Vale Base Metals, explained that restructuring efforts, including a significant reduction in global overhead, led to over $400 million in savings, double the initial target. He highlighted successful project ramp-ups, which diluted fixed costs, and reaffirmed commitment to cost discipline, noting potential upside to guidance if current by-product price regimes continue. Gustavo Pimenta, CEO of Vale, stated that the market is beginning to appreciate VBM's value, emphasizing strong operational performance and the enormous growth potential to double copper output. He mentioned progress on projects like Bacaba and Alemão, asserting that demonstrating operational excellence and faster growth than peers will drive share price recognition, with capital market transactions like an IPO to be assessed later for funding.

Leonardo Correa asked about Vale Base Metals' (VBM) solid cost performance, specifically the negative copper all-in costs and $9,000/ton nickel costs, inquiring about the influence of by-product credits and potential upside/downside to cost guidance. He also questioned CEO Gustavo Pimenta on the market's valuation of Vale's copper assets, the opportunity to unlock value, and whether an IPO of VBM was being considered.

Answer

Shaun Usmar, CEO of Vale Base Metals, explained that significant restructuring led to overhead reductions exceeding $400 million, double the initial target, and a focus on operating execution, project ramp-ups, and fixed cost dilution. He noted that while by-product prices introduce volatility, VBM is well on track with guidance and sees upside if the current price regime continues. Gustavo Pimenta, CEO of Vale S.A., stated that the market is beginning to appreciate VBM's value, with the business performing well operationally. He highlighted the enormous growth potential to double copper output from 380 kilotons/year, citing progress on projects like Bacaba and Alemão. Pimenta emphasized the focus on operating well and accelerating growth, deferring capital market transactions like an IPO to a later assessment for funding needs.

Leonardo Correa questioned what specific triggers are needed for Vale to resume paying extraordinary dividends, given resilient iron ore prices, and asked why the full-year CapEx guidance wasn't lowered despite a low spending figure in Q2.

Answer

Marcelo Bacci, Executive VP of Finance & IR, responded that sustained iron ore prices around $100/ton and progress toward the $15 billion midpoint of the expanded net debt range would increase the likelihood of additional payouts. He attributed the low Q2 CapEx to a 'seasonal effect' and reaffirmed the company's confidence in the $5.9 billion full-year guidance.

Leonardo Correa asked about shareholder returns, questioning if the $2 billion dividend was a one-off given the expanded net debt is slightly above the target's midpoint. He also inquired about media reports of a potential M&A transaction for the Bamin asset and its strategic rationale for Vale.

Answer

Executive Marcelo Bacci clarified that strong cash flow projections and lower CapEx keep the company within its expanded net debt target range, justifying the dividend. Regarding M&A, Executive Gustavo Duarte Pimenta stated that while Vale evaluates all opportunities, any investment must meet strict strategic and financial return thresholds, and there is no current commitment to any specific project.

Leonardo Correa of BTG Pactual asked for an early outlook on 2025 iron ore production given new projects coming online, and questioned what conditions are necessary for Vale to resume paying extraordinary dividends.

Answer

Executive Gustavo Duarte Pimenta confirmed a positive upward trend for production towards the 340-360 million ton goal by 2026, with specifics to be provided at Vale Day. Regarding extraordinary dividends, he noted the company wants to first see how the second half performs on prices and how the Mariana situation evolves before making further commitments.

Leonardo Correa questioned the extent of supply rationalization seen across the pulp industry given depressed prices and asked if Suzano sees room to lower its full-year cash cost guidance given management's confident tone.

Answer

EVP of Pulp Commercial & Logistics, Leonardo Grimaldi, noted that 15% of global hardwood capacity is operating below cash cost and expects more commercial downtime from competitors now that tariff uncertainties are clearer. EVP of Pulp Operations, Aires Galhardo, stated that while challenging, hitting the annual cost target requires sub-BRL 800/ton performance in H2, aided by the Eldorado deal. CEO João Alberto Fernandez de Abreu reinforced the focus on reducing total operational disbursement.

Leonardo Correa of BTG Pactual questioned the apparent increase in the 2025 cash cost guidance compared to previous statements. He also asked about the company's capital allocation strategy, particularly the pause in share buybacks despite a de-rated stock valuation.

Answer

Executive Aires Galhardo clarified the cash cost guidance change was primarily due to updating the FX assumption from BRL 5.35 to BRL 5.80, not a fundamental cost increase. Executive Marcos Assumpcao explained that buybacks are weighed against other capital allocation options and the primary goal of deleveraging, attributing the stock's de-rating to broader market factors like interest rates.

Leonardo Correa questioned the dynamics of the Brazilian rebar market, highlighting significant price discounts despite stable demand, and asked about the potential for price recovery. He also inquired if the recent change in reporting segments was a preliminary step towards a potential spin-off of the U.S. business.

Answer

CEO Gustavo Werneck explained that the reporting change reflects the increasing regionalization of markets and is not related to any spin-off plans, stating there are no concrete discussions on such a restructuring. Regarding Brazilian rebar, he acknowledged fierce price competition, partly due to a new market entrant, and noted that recovering profitability in the short term is unlikely given the challenging outlook for the second half of the year.