Good morning, ladies and gentlemen. Welcome to Vale's Conference Call to discuss Second Quarter 2020 Results. [Operator Instructions] As a reminder, this conference is being recorded, and the recording will be available on the company's website at vale.com at Investors link. 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 change 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 Bartolomeo, Chief Executive Officer; Mr. Luciano Pires, CFO; Mr. Marcello Spinelli, Executive Officer for Ferrous Minerals; Mr. Mark Travers, Executive Officer for Base Metals; Mr. Carlos Medeiros, Safety and Operational Excellence, Officer; Mr. Alexandre Pereira, Executive Officer for Business Support; Mr. Paulo Couto, Director of Coal; Mr. Alexandre D'Ambrosio, General Counsel; and Mrs. Marina Quental, Director of People. First, Mr. Eduardo Bartolomeo will proceed to the presentation on Vale's 2Q '20 performance. And after that, he'll be available for questions and answers. It is now my pleasure to turn the call over to Mr. Eduardo Bartolomeo. Sir, you may now begin.

Okay thank you, Doe. Good morning to everyone. First of all, I hope you and your families are doing well overcoming this unprecedented moment. The first think I will like to highlight is Vale continues to face the COVID-19 pandemic with humbleness, discipline, and sense of urgency. Almost five months, we have been managing the company in a remote way. The pandemic demand has us to make important choices. It put us our planning to the test. We are learning a lot during this process. And adjust that planning based on the new situations that we face. As I have said in the last quarter, this work will not be a big one. So, we will keep our defense high. Finally, our priorities continue intact. They are safety, people, and a full reparation of Brumadinho. Next slide please. Well, our derisking plan continues and our response to the pandemic has been incorporated on it. Let me remind you that our risk, the risk focus has four thrones we prioritize. 1) The reparation of Brumadinho, 2) The safety of our employees, our dams, and just work for our committees, communities, 3) The stability of our operations and 4) The discipline in capital allocation. I will tell a little bit each of these four thrones to you in the next slides. Please, next one. Starting with the reparation. Our commitment to Brumadinho remains steady. In this pandemic, we are there happy to issue resources necessary for the healthcare of the effected communities. The indemnifications continue remotely with more than 7600 people covered by agreements which totals about R$3.9 billion with the net emergency aids. Also, we have already entered into a fair number of agreements with the authorities. Focused on reparation projects from protection of farm and flora to water security in…

Thank you, Eduardo. Well, we know that you have some questions about iron ore production. I want to address the answer in three blocks of information. So, firstly, it's important to emphasize that we have a plan to resume capacity to 400 million tons by 2022. We are sticking to the plan and we know what to do that we have to do. Secondly, we have obviously we had an additional challenge after COVID. So, we had to change many things. I want to remind you that four main issues that we faced in after COVID. So, first one was related to absentees. So, now we are 1/3rd of the peak that's happened in April. We are dealing really well in the North even now in the South Eastern and Southern system there. The problem is growing but we so far so good. We had this stoppage of Itabiruçu and we lost 1 million tons with this and we learned a lot and improved our controls after this case. Those in pact as those two ones represents 3.5 million tons. For loss, flexibility in our production, you know very well any buffer now we need to deliver, I just give an example that we moved one maintenance from the wet season to the dry season, so we lost more. We are planning to less more production the second half because of that, as already planned. And just remind you, we already said that we choose to keep our operations running rather than some constructions to improve capacity. So, all those impacts represents a 10 million tons, part of that is already done, part of that is our in our plan. Well, the third information, the third block of information, I'll drive you in this slide line-by-line. It is important to…

Thank you, Marcello. So, a few highlights on the financials, starting by iron ore performance and costs which was the negative highlight of the quarter. Cost increase from 16.2 to 17.1. And the major corporate here is low production. Low production has several consequences. So, it reduces the cost dilution and it because of the production below plan, we had many ships awaiting at the port to being loaded. And the demurrage cost skyrocketed. We had one of the worst quarters ever in terms of the demurrage. We paid US$81 million for the waiting of those ships, an increase of US$28 million from the prior quarter which in itself is an increase of US$0.50 low per ton in terms of costs. So, we expect for the second half that this will all revert. So, cost dilution will take off about $2 per ton from costs and the fall of demurrage towards normalized levels will take another US$0.90 off costs. That's why we're guiding towards 14.5 for the second half which is slightly above the 14 we said a quarter before. And the reason is because of those delays on resumptions for the fourth quarter which would further dilute costs. Now they're in to '21. So, we will not get that full benefit. But the FX the evaluation already had positive effects in some other parts of the iron ore business. For example, stoppage expenses, I don’t know if you noticed, they fell from US$3 per ton to US$2.2 per ton mostly on FX. The pellet margin expanded substantially US$22 per ton in the quarter. Okay, we had US$5 per ton in price, we had US$7 per ton in dividends that only come every other quarter. But half this margin expansion for example about US$8 per ton can be attributed to…

Thank you. [Operator Instructions] Our first question comes from Timna Tanners, Bank of America Merrill Lynch.

Yes hi great, thanks to the opportunity. And good morning, hope everyone's doing well. Good afternoon. I wanted to just ask a little bit more about the production outlook. Clearly the 400 million is the medium term goal and you laid out some challenges in the short term. I was just wondering if how the if you're concerned about the shortfall having added to the mobility of your customers to find alternatives or to produce their own mines or to add to their own mining plans such as encouraging cement deal. Could you just talk about that and your concerns about the high iron ore price there or the shortfall in supply? And then I was just wondering if you could lay out a little bit more in terms of timing for when we could expect to see further updates on your divestiture plans in coal and VNC. Thanks.

Okay Timna, thanks for your questions. I think Spinelli can detail the iron ore perspective. Of course I think prices are in a sense coalition of leads, so attracts of course, investments that wouldn't be. So, I believe that the supply demand balance is key. But we see some medium term losses in the supply as well. But Spinelli is the most fit to answer that and I'd come back with the divestitures. Okay.

Hi Timna, thank you for your question. Firstly, Vale is the only company that can bring back almost a 100 million tons in the next two years. So, as I mentioned, if you have some problems, I'm talking about delays of some month but we'll be back. So, this is a very important information. I don’t have any restriction to high restriction to come back. Secondly we I think we have if we need to supply more, if you have a demand, remember that we have a varied policy that we are really stick with that is the value. If you need more capacity, that’s when we have the best products to put to happen. We are developing another possibility to some another 20 -- its S11D. We are under finalizing the project and we're going to submit this to as soon as possible to our board. Again, you're right that the price is high, we don’t see a support for the price and the short-to-midterm actually, remember that we are now bring in more than 50 million tons to the market than the second half. You are right, that the demand in China is amazing. They have many stimulus for even for second half related to infrastructure. That we see that all those information that there is now support to keep so high the price. Eduardo?

Yes, thank you Spinelli. I think just to add in this Spinelli's point, I think we are the growth option that is the obvious one and the cheapest one, that's why we're going to announce we're going to submit by the way to our board the expansion of S11D. We are to use our logistic capacity. And of course we have to remember our mantra, value over volume, not to mix up the mix. So, we're going to be able to, doesn’t mean we need to. And on the Clover Montes, it's the same, there's no updates, there is only the unfortunately we weren't able to start the revamp because of COVID. I think by the way coal was the most impacted by COVID. Now all that means is probably main production but not for COVID. We had no COVID problem there. But the fact that we were not able to enter the asset to fix it, we will take a while. So, our first strategy as we've been saying is fix the asset. Then we're going to decide what to do with it. By then we see, we have good news, I think we had just added more a little more time to New Century to Clover some due diligence and some papers. And but we're very confident that we are going to be able to close the transaction. That's why we did the relevant fact yesterday. But I think I would like to have Mark to add some color just to give clarity. Because it's very important to understand that we want and we need solution for VNC, but we want to lead that.

Yes. So Timna, I believe your question was around the timing and as Eduardo was saying. We feel that we're in very good position to sign documentation with New Century as well as the French State before the expiry, the exclusivity, in early September. We feel like we're in there in the position to do so. And then we will go through a period of primarily the conditions around financing, concluding the financing. And we expect that the closing would occur before well before year end. So, that's the timing. And in terms of its maybe some additional color. The financing package is I would say is quite well defined. In terms of our current discussions, Luciano was already said that would some of the parameters or the financing package that was said out in our press release, a total of 900 million, €200 million from the French state, 200 million from New Century, 500 from us. Just an important note about our contribution is that it is starting as of July 1st, so there are expenditures that we're already incurring and will incur up till closing which would be deducted from that 500 million. There is also a differed compensation component in the discussions where we could earn money back based on price in the future years. And other than that, I think it's shaping up quite well and New Century is coming to the table with a very robust package to continue to hand off this asset to them with us handing it off other than the contribution to the financing. We would pass off the obligations and liabilities to levy to the owners going forward after closing.

Our next question comes from Carlos De Alba, Morgan Stanley.

Hi, hopefully everyone is doing fine. So, my question is maybe Eduardo you can comment on any update on the potential compensation agreement with the authorities in Brazil regarding the Brumadinho particularly the legal exposure and any other provisions or money that the company may need to pay on that front. And then, for either Eduardo or maybe Luciano, just wanted to confirm the dividend situation. So, the way I understand is the company will pay in August 7, the interest and show this equity announce in December plus then in September subject to board approval, there might be another dividend on the back or the first half performance. And then next March another dividend on the back of the second half 2020 performance. If you could confirm these that'd be great plus any comments that you may have on outside or potential especially dividends and your share buybacks, thank you.

Hi Carlos, thank you. I'll address quickly the first one and then Luciano can give some more color on the dividends but you're almost there. I think we engaged yes with all the stakeholders at Minas. We are actually there's a meeting even today. So, just to be clear but it is a convergence right, there's many stakeholders and we're not the government of Minas is interested, Vale's interested, well everybody's interested in them getting to a more broader agreement as we mentioned. The big one is really just to get the legal certainty, the governors and the scope correct. And I think we are how can I say that, we are advancing on that sense because as I mentioned there is interest on the government there's interest from the prosecutors there. So, it's just a matter of trying to meet those stakeholders needs because of what each one has his own priorities and we need to converge. So, I cannot give you that how can I say timeline for that because it depends on this convergence. But one thing I want to highlight and maybe get to your point in that and in that end that we are doing the reparation because as we speak it's our obligation and we as we are progressing now on that front. We're doing indemnification, we're doing the reparation there the environment of how can I say that reparation that had a solution for the hybrid problem that they had there. So, I think things are advancing well and of course it's desirable that we can converge and close this to give like a cap in. And the fact that U.S. I think is important to mention that we already put in a foot note in our balance that we expect an arrangement of I think it will send to help me here, it's just change the dollar, right. So, around what is in our provision, Luciano?

730 to a 1.5. It's on the footnotes.

Yes, on the foot notes. Yes, we believe those numbers they talk to the projects that we listed with the government. So, we don’t see any other provisions coming from that discussions, okay. So, Luciano can give some more color on that. Specifically about dividend, I think it's important that we resumed the policy because we're confident in our business and I think it's in the press release, so I don’t need to go over that. It is that we are going to pay now in August the interest on the one that we announced on December. There is a second, the first half is the September and then powers on the what you call the creditability that we want to have in the policy. We haven’t discussed yet any extraordinary dividends because Luciano will give you more clarity on how mindset are but of course there we need to know what the how the world our business is in September. How much you're going to pay March and etcetera. I think you can help me on that, Luciano.

Okay. First on the provisions. Why do we separate on the footnotes that amount of money and why don’t we incorporate in the existing provisions. The list of initiatives and programs and projects being discussed with the government is very adherence to the provisions that we already have in the balance sheet. So, no change here. The thing is the icing in the cake like the major gift for example for the people of Minas Gerais with such an agreement would be some major infrastructural works already in the identify that have no relationship to Brumadinho. And then, if and when we get the legal certainty, all the conditions that we want, we would be willing to do those extra up and above infrastructure works in order to have closure on all of this. But if you look strictly on the reparation of Brumadinho, the estimates both the ones we have on the balance sheet and the ones being discussed with the government, they are very similar. On the dividends, yes, the interest on capital that was the clarity '19, and it's due to the shareholders back then in December '19 will be paid in a week, like next week. And in addition to that, the minimum dividend related to the first half performers will be paid in September. And it will be decided in September because the board has always the prerogative to increase and pay an extraordinary dividend. And again as you said, in March there will come another dividend related to the second half performers. When September comes, we will look into our cash position trajectory of the markets, we will have a better idea of the performance on the second half and therefore of how much we will need to pay in March. Remember that first quarter is usually a weaker quarter in terms of cash flow. So, you need to look at your balance sheet already considering probably the commitment to pay another dividend in March. We'll look at the share price. For example, in order to make a decision of buybacks. So, all those variables will be considered and towards a decision if any on extraordinary dividends or buybacks. But let's remember guys, as we're seeing today in the headlines, this is a very uncertain world. So, a little bit of caution is the name of the game here.

Our next question comes from Alex Hacking, Citi.

Right, good morning everyone, I hope you're doing well. Luciano, just a follow-up on the dividend question. Could you remind us what your balance sheet targets are in terms of net debt? I remember at one point you were kind of targeting net debt of 10 billion but that feels like a lifetime ago and obviously a lot have changed since then. And so, I'm just trying to remind myself about how you kind of thinking about that thorough the cycle at this point. And then the second question would be I guess to Marcello. On the 400 million iron ore target kind of midterm, is there any flexibility or latency in your in Vale's ability to achieve that 400 million tons. Or effectively does every single thing have to go correct? So, those would be my two questions, thank you.

Okay Alex, thanks. We said US$10 billion, we continue to stick to it as the target absolute net debt. Perhaps and maybe in a circumstance like the one we're living right now, you could be a little more conservative. But the way to make the correspondence with the situation we are in right now is our net debt is 4.7 today. So, it's well below 10 billion. However, we still have 3.4 in Brumadinho related liabilities that we didn’t have when we established that target. So, in comparable on terms would be at eight for example 4.7 plus 3.4 and that would compare to 10 and that would say okay we are where we want to be, perhaps even a little better which means that pretty much all the accident extra cash flow should be returned back to shareholders. And this is it, that's the way we think about it and through the cycle. Again, I would say the only circumstance which is different right now is COVID which may warrant a little bit more caution but nevertheless we are where we want it to be.

Alex, thank you for your question. But talking about flexibility, that's a midterm plan. But I luckily remind you some new acts and capacities that we worked here before Brumadinho. So, we are we have Gelado that is coming in the North operation. The plus 10, the expansion of S11D to 100 million tons, we also have as I mentioned the two dams that we give flexibility in our operations in the Southeastern system. We also have new pits are coming into the North ranch, and small pits that can stabilize your operation there. And say how last years is the East range that wasn’t here before Brumadinho. So, all those assets and improvements are weren't even considering the operations before but obviously we have challenges. And then if you consider the COVID today, sometimes we have some bumps, sure to make it happen. But some midterm we have also this new capacity that can give us some flexibility rather we wait for the return of the Coleman operation that used to have in the past.

And Marcello, and just to reiterate, the 20 million tons that we will submit to the board would add to that package of flexibility as well.

And then Luciano, just to remind as our old gold time or good old times when Jesus used to be our one big barrow and axle, there's nothing more on that. So, we can go up on that not need them and little bit more longer to 260 on the North because if we needed right. So, there is a not in his two to three years' time horizon but for sure we have a huge flexibility on the infrastructure both on the South and then the North. We just got and need to get back the mine, the mine fronts and the dams in the South as we move into -- and explain on the immediate term and on the medium term. So, I think we used to have even more than 400 million tons of the available capacity. So, we need to, we do have flexibility.

Our next question comes from Jon Brandt, HSBC.

Hi, good afternoon. Thanks for the opportunity. Luciano, first I wanted to ask you about the working capital. I know there is about US$1 billion in working capital increase and I know a big part of that was because of the production in the sales in June plus a higher percentage going to China. Should we and it sounds like a lot of that is reversed out in the first 15 days but I guess I am wondering should we expect the complete reversion of that US$1 billion in the third quarter even as production continues to increase into the second half? And then my second question is just related to the US$560 million provision that you took for Samarco and Renova. Could you just maybe give me a little bit of clarity as to what was driving that, was it just sort of broad based increase across the variety of different things. And then if I could just confirm the 400 million tons in production that you are expecting in 2022. Is that for the year or do you expect to reach a run rate of 400 million tons by the end of 2022? Thanks.

Okay. Just a color on working capital. So, we had sales outstanding of about 5 million tons at the end of the first quarter and then we have at the end of the second quarter about 11 million tons. So, 6 million tons times the current price, just that we have over 600 million of buildup in working capital in terms of accounts receivable. Then you have the provisional price which is very strong, it adds a little bit to that. So, it's basically explained by the better rate of production in sales in June compared to March which is the close of the prior quarter. So, these collections are already happening. So, as I mentioned most of these sales were already collected in the month of July and the cash flow generation in July is already were approaching the end of the month is already substantially higher than for the full first semester of this year. And when you look at the third quarter end-to-end, it is expected that there will be outstanding sales also at the end of the third quarter, so therefore I would say what we're seeing here is a kind of a normalization of working capital at a higher level because it's normal times you would have more sales outstanding than what we ended up in the first quarter, right. So, this you will not recover at that working capital but collections will be much higher. The fourth quarter will be the same. So, we will start the quarter with a lot of collections but we will end the quarter also with many collections. Maybe only on the first quarter of 2021 when usually because of seasonality we produce less, then you collect a lot of money in January however in March then you have…

And more importantly, Luciano, you use it if needed, right. So, there's an another thing. So, we needn’t build that flexibility that was asked with prior. So, we need to, we're not saying that we're going to shift or sell or else 400. We're not giving guidance, we're just saying that we are going to put our assets back to a 4 million run rate. We even had large numbers but we believe that is a reasonable target to be in a run rate for 2022.

Yes.

Our next question comes from Andreas Bokkenheuser, UBS.

Thank you, very much. Just two effectively incoming investor questions. Can you provide a little bit more clarity on how the negotiations where the State of Minas Gerais is going about any liabilities relating to Brumadinho. Also in terms of timing and where do you stand versus what the other part is asking for at this point in time. So, just giving a little bit of clarity around that. And secondly if you would, just in terms of credit buybacks or bond buybacks, any thoughts as to whether you would think about buying back Samarco bonds given where they're trading at this point in time; those are the two questions. Thank you very much.

Okay, thanks Andreas. We'll be pointing out that we are on the table with the people say the agreement is with the persecutors not it's with more people in there, right. So, there is the state of Minas Gerais and then and the agreement there is the public defenders, there is the prosecutors, and there is Vale. So, we stand exactly in the discussions of how we create a right governance, how we create gaps, and how we create the scope to be executed. Because most importantly we want to how can I say that to get the responsibility to execute things that can be executed. So, that's one of the most important matters and of course I have legal certainty about the civil actions they are undergoing now. So, those are the key issues that we on the table converging this four main stakeholders are discussing now. Actually I mentioned there is even a meeting today about that. So, there is no timeline because they of course there are divergences but not necessarily on value because I think you're asking more concerned about what we perceive as provisions and I think Luciano mentioned that before on the last question that we are very comfortable what has been provisioned. And the footnotes that we put in our balance because we discussed that with the government, with everybody on the list of projects and not only those compensatory projects but on the reparatory as well. So, we believe that the numbers that we are working in either in our provisions and in the footnotes are more than comfortable to strike an agreement. That's not what impending our agreement now, it's much more on the governance and much more on how we create a legal certainty to be sure that we will be able to execute what is supposed to do. So, I think this is and I think if Luciano can add a little bit more on that part and then go back to the buyback, I think it's the same as we mentioned before. It will be of course something that we need to assess all the time. Time is not now because of course we just resume our policy. In September, we can take a look again and I think well of course we can submit to bar but I think there are so many variables right so that I think Luciano can explain again how we see this, how is our mindset around, right?

Eduardo, nothing to add on the provisions, you were comprehensive. On the credit buybacks that Andres asked, bond buybacks they will on Vale, they will come back to the table at a moment in time when we -- look many most companies are going through that crisis with a greater cash balance. And even if we're not talking about net debt levels here, the amount of gross debt and the amount of cash that you want to hold, I would say its higher now than pre-pandemic. So, therefore we need to, we're not in a hurry to continue to buy back bonds or that because of that. We would prefer at least for the next couple of quarters to have a greater cash balances. On Samarco, I am sorry but I cannot do any comment on this because of the ongoing legal arrangements for the -- with the creditors. So, I cannot comment on credit buybacks.

I'm sorry Andreas, I confused the question. I thought we were talking about buybacks from Vale, sorry. Sorry, for that.

Excuse me. This concludes today's question and answer session. Mr. Eduardo Bartolomeo, at this time you may proceed you’re your closing statement.

Okay. Thank you very much for your attention for the questions. I think we need to, we had a more comprehensive explanation in the beginning but was necessary I think to give you clarity on how we see. But I want to separate things in two to then, two to length that's more time. One is the most immediate what people expect about the second semester. And I think we built a very strong basis even after COVIDs to be ready to deliver in our guidance and our commitments. But I would like to stress that we're not in nice plate in Vale, we are in a marathon. We are looking to de-risk this company profoundly. And we need to see those five, those four elements that I mentioned in my initial comments as interrelated. They are not separate. If I say "Oh look, like now we pay dividends, so?" Now, no. Dividends just show that the Vale management has confidence in their in our business and we see that we can we have robust financial position to face our commitments. We need first of all as I want to again emphasize we need to repair Brumadinho. We are advancing, we need to do much more and we are doing. We need to improve our safety, we are doing that. We need to effectively turn around the safety perspective of the company and we are trying and we will do that and we have a name to be one of the safest and maybe give an obligation to be among the safest mining company in the world. Third, is the resumption of capacity. I think the questions were around that, how much you can do in the second semester but what is our goal in the medium term? We need…

That does conclude Vale's conference call for today. Thank you very much for your participation. You may now disconnect your line.