Vale S.A. (VALE3) Earnings Call Transcript

Okay. Hello, everyone. Thank you so much for being here. Welcome to Vale Day 2021. I'm Ivan Fadel, Head of Investor Relations here at Vale. First of all, I'd like to thank you all very much for being here with us today. I think we're still transitioning to this in person meetings. So it really means a lot to have you all here with us. I'd also like to thank our live audience online for your time and interest in our company today. So the idea here, we have the top management team of Vale to have a slide presentation. We're going to talk about the main deliveries and main milestones for the last 12 months. We're going to also update you on our strategy, how we're looking into the future, how we're positioning ourselves in this decarbonization world. And we're also going to make some announcements, so stay tuned for that. The presentation should take about 1 hour and 15 minutes, 1 hour and 30 minutes. After that, we're going to have a Q&A session. It should take also about 30 minutes to 45 minutes. We're going to take questions from everyone here present. We're also going to be capturing questions from our live audience on the webcast for that. You're going to see an e-mail address on the screen. You can send your question to that email, and we're going to read them all out here. So without further ado, I would like to invite Mr. Eduardo Bartolomeo, our CEO. I hope you enjoyed this event. Eduardo, please, floor is yours. Thank you.

Thank you. Thank you, Ivan. Good morning, everyone. It's very nice to be here in presence, right. It's our first -- actually, it's my first presentation in person since 2020, the only negative side that we cannot do in Bermudas -- 2020 because of the pandemic. So anyhow, I think it's -- I would like to reinforce the acknowledgment that Ivan said about being here today. Thanks a lot for making the effort to come here to talk to us. And for the audits as well, they are listening to our story. We'll be here. And today, I'm going to quickly pass a little bit over the -- what we're going to try to convey and tell you how we are advancing on our strategy and actions. I remember, of course, you do remember our five strategic pillars. They are things that were embedded, 2 of them embedded after Brumadinho, the first 2 ones, the safety and operational excellence and what we call the new pact with society. They are the drivers to an ambition that Vale has to be a safer, more reliable, a more human driven, talent driven organization, a sustainable miner and obviously a creator and a shareholder -- sharing value with the shareholders or with the society as well. So those ambitions in the end, I think, what is the main line around what we're talking here today. We believe that the homework that Vale has been undergoing since Brumadinho. It's -- I wouldn't say -- because it's hard to say, it's a continuous process, but obviously, is almost completed. But on the other hand, you're going to see there is something in the very short-term that we understand that it's the biggest value on our story, on an equity story is that, obviously, world has the biggest challenge. Everybody knows, is climate change. It's been recently very exposed by COP26. And we want to be as a miner and as a specific company, not only necessary, but wanted to the world because we are essential to that. And specifically, when you look at Vale assets, you're going to see that we are extremely well exposed to both iron ore and base metals. So the baseline is this. We're going to talk a little bit around the homework. The first 2 pillars are much of -- a lot about what we're doing inside Vale to transform Vale and the last 3 pillars are around how getting from this homework done to capture the opportunities that our assets have in this new world. This first part, I'm going to do together with Carlos. Carlos Medeiros is our Executive Officer for Operational Excellence. And of course, and this is obvious for us. We will never forget Brumadinho. Brumadinho, as you know, has been the driving force in everything that we are undergoing inside Vale. All those behaviors that we need to change, all the things that we need to do is driven from a process of learning that was derived from this. It's a lot of listening. Because you have to engage with community that are affected. In this case, it's a tapestry. I would say it is tapestry [Indiscernible] . It's a very nice piece of work done by the affected people, a widow, of one of the victims, and it has been exposed in Inhotim. Inhotim is an open air museum in Brazil, very, very nice. And it's true, a process of, as I mentioned before, of learning and acting, but fundamentally engaging to respond to the demands of the community. As you also know, in February '20, we stroke a deal, an agreement with -- with the local authorities in Minas Gerais with the affected people with the prosecutors of BRL 37.7 billion. And of course, it brought legal certainty. We brought governance and it brought ability to execute. But to show you some concrete actions because, as I mentioned in the beginning, we want to show you concrete actions that we are taking in that direction, I would like to show a more video of what is being done in Brumadinho. [Presentation]

As you can see, a lot of things has been done. 55% of the total payments that we're supposed to do, and Gustavo will come later on the disbursement profile of that has been done. As I mentioned, with legal certainty with execution, more important with governance, because when you see the projects that we are listing years are things that you have to execute, you have to listen to society. And that, by the way, was, for us, maybe the biggest wake-up call to move to transform our culture, is the active way of listening, understanding what are areas of improvement. Of course, I won't go for the right side of the slide because that was mentioned in the video. But I would like to jump for an important thing that is undergoing inside Vale. It's that we need to transform our culture, but of course, that culture is transformed by the people that are inside Vale. There's people putting people at the center, as we mentioned before in Brumadinho, putting people at the center, as we do inside the company is critical. And we chose a path. I'm going to share in a moment, what are the key behaviors that we want to change. We actively engage our managers on that. 80% of our miners are activated on that. Of course, we have 99% critical roles of successor mapped. So human resources or people is a key element of our bet. But interestingly, we started to -- because of this, and we said in one of those our Vale day presentations, we need to double our gender diversity. We had 13%, mining normally is a men's world. And of course, as everybody knows, a diverse inclusive company performs much better than a non diverse inclusive company. And then this is another very important point I want to make here. This concrete. This is not something I'm talking about. Since 2019, we increased our workforce by 39% female workforce. We added 4,500 hundred women in our workforce. And we have 80% increase in senior leadership roles. Actually, Malu was supposed to be here. I even doubled my VPs. Now we have my human resource and my sustainability as a leadership in females. But there is a second diversity issue, more focused in Brazil that I think is being brought to our attention and has a huge impact as well in diversity is ethnicity. We just made a census in Brazil, specifically, around what is self declaratory, of course. We asked people what color they are. We have 65% non-white in Brazil. What that implies here when we have this goal that I'm going to mention next. We only have 29% of our leadership roles from supervisors as blacks. So there's an imbalance that's not acceptable. It demonstrates a structural racism problem. So we have this goal as well to increase our leadership roles for 40% by 2026. And and it is not enough to be [Indiscernible] . So last week or week before, we just launched a manifesto of entire season because it's very important. We are in a country as U.S. has the same issues, and we have to target very clearly, very openly. And as I mentioned before, we will bring to us a much better -- much more inclusive, much better performance company to achieve those ambitions that I mentioned before. But culture is something hard to manage. Everybody else, are you transforming culture? How do we measure that? It's -- we have a tool, it's called Echoes Pulse. Its standards is more or less standard in the real industry. We too, how can you say that surveys, of course, undefined. I myself, I answered the survey. And you see the 5 behaviors that we have that we believe they will change the company. They are especially safety, active listening, engaging, as I mentioned already, ownership, empowerment. That's very important. People feel empowered to do what they need to do and open a transparent dialogue. When you look at the graphs, I'm not going to bother you with the graphs, but you see that we have a huge perception in Vale today with obsession safety. Because of the obvious reasons, people believe that we are actually truly. But when you look at the other behaviors, actually, the lowest here is the empowerment. But the active engagement is the society is the lowest that we -- or should be the one that we should drive more. What we tried to say here is that we had gaps still. That's why I said the homework is being done. But of course, there's a continuous homework that will never end. But anyhow, our leadership is truly committed to make it happen because if we don't change the culture, we will never get to the results we want, even if we have the better assets in the world. And just to conclude and as a good engineer, although maybe too long ago, we believe in every simple equation that I'll try to share with you, and then Carlos is going to help me with that. If you have the right people, if you have the right people with the right behavior, if you have the right process, you have the right results and results not defined as just financial results. Of course, in this room here, financial results makes a little bit more logic, but financial results as a consequence. When we talk results, we're talking about safety, we're talking about predictability. We talk about even how society perceives you, so we believe that our management model is something that was lacking inside Vale that some of you might have known or heard about is the VPS, is a value process system. It's all around ABS, like [indiscernible] or Toyota, it's a structure, it's an architecture, but we call it it's VPS, it's culture put in action. So we -- and we will show you how this thing together will improve our performance. And I invite now Carlos to share its views because he's the owner of the ball in this case, and then I'll come back to talk about the social part.

Good morning to you all. I'm here to provide an update on our operational excellence and safety performance. And hopefully, I'll try to make it clear how it ties up to the cultural transformation that we are going through. So we have been in this journey for 2.5 years. So Vale is implementing its integrated management system or, as we call it VPS. So this is a system based on operational excellence or lean manufacturing, like Eduardo described, a system that defines how we do things. This -- and we truly believe that our people with the right processes and the right culture that will be capable to deliver consistent and positive results. The examples we brought here today, they corroborate our thinking. So as you look at this chart, as our VPS maturity index goes up, the safety as well as the maintenance performance improve. Consequently, the overall production performance also improves. So we picked here 3 examples, one of our mining complex, one from our -- one of our railways and one of our ports. And they described pretty well how operational discipline can leverage performance. And this is very much what has been going on at Vale. We truly believe that the VPS or our management system is a reflection of our culture put into practice. Specifically talking about our safety performance, you can see on your left-hand side, this graph #1 shows the [indiscernible] evolution. [indiscernible] events that are precursors to significant injuries and fatalities. Our objective is to 0 the [indiscernible] by 2025. On the right-hand side, you can see the total recordable injury frequency rate, or TRIF. The top graph shows the TRIF progress through time, while the bottom shows the ICMM 2020 benchmark. Here, the [indiscernible] is a leading indicator, while the TRIF is a lagging indicator, and we are making progress on both. We're also making good progress on occupational exposure. Since we are reducing our workforce exposure to agents such as noise, heat, dust and chemical hazardous materials. Vale also has a very thorough methodology for operational risk identification. This is called HIRA, hazard identification and risk assessment. The first HIRA cycle encompassing all Vale sites was concluded during 2021. The second cycle will start next year. During this process, risks are mapped, controls and mitigation plans are identified through a [Indiscernible] diagram and then registered. On the right-hand side, you can see tangible examples of risks that have been either eliminated or minimized. And I'll highlight one in Canada, at port Colborne where the chlorine gas was replaced by bleach, therefore, eliminating the risk entirely. And another one that Mozambique where the ammonium nitrate inventory was significantly reduced and then also reorganized then the risk was minimized. When we talk about dams, dams have always been a major point of concern. So far, Vale has de-characterized 7 dams and one of them was announced today in the press, a dike at a Pontal dam that was de-characterized. So there are 23 more to go. So decharacterizing an upstream dam is a very complex and slow process. This is why we had to review our decharacterization schedule, and now it shows completion by 2035. Now it's important to reiterate that the intrinsic risks associated to an upstream dam will be significantly reduced before the decharacterization is completed, therefore, minimizing the risk to our neighboring communities and to the environment. You will now watch a video showing the -- our decharacterization program. [Presentation]

So when we talk about emergency levels, Vale looks at these structures with a precautionary and risk-informed approach. We have a very strong governance in place that allows us to treat any discrepancies in a conservative and qualified way. Currently, there are 31 structures at different emergency levels. And as you can see, by 2025, that is a significant improvement given all the work that's going on. Now in order to ensure that everybody understanding is on the same page, I'm going to walk you through the difference between emergency levels 1, 2 and 3. So at emergency level 1, it means that we are talking about anomalies that require information, attention or simply monitoring. At emergency level 2, we refer to anomalies that require treatment, but these treatments have not been concluded yet. At emergency level 3, there is a higher liquefaction risks. However, for all these structures, they have these backup dams as you saw in the video that allow us to carry on with the decharacterization work. So the main point here is that by 2025, we will not have any structure at emergency level 3, which means the most critical safety condition. So as you are well aware, the ICMM jointly with the PRI and UNEP, they have jointly launched the global industry standard for tailing management, or GISTM as we refer to it. So there is an industry's commitment that by August 2023, all the structures with extreme or very high potential consequences will be compliant to these standards and the remaining ones by August 2025. Since Vale has been working on its tailings management system for a while, we have recently run a self-assessment that indicated that we are 60% compliant with the GISTM. In February of next year, will carry out an external assessment that will help us identify the gaps that we will still have. So the plan is that by the end of next year, will be at least 90% compliance to the GISTM. So this makes us feel confidence that Vale will be able to comply with the industry's deadline. So as you could note through all these slides, there have been important progress on operational excellence through our VPS, our safety performance is improving. We have a very strong methodology for identifying the operational risks, and all the decharacterization program is -- all decharacterization program is moving forward according to plan. Therefore, we can say that Vale is gradually becoming a safer and more reliable company. Thank you. I will hand over back to Eduardo.

Thank you, Carlos. Okay. Let's move to the second chapter of other soft issues, but I think they are not that soft. Myself and Luciano will do that together, is the New Pact with Society. That, as I mentioned before, was done when I arrived. What does that mean? We want to impact society beyond paying taxes, beyond social projects, and we have been doing that. So quickly run over those achievements because Luciano is going to come back on the environmental side. We were one of the first miners that came with a very strict and strong, we changed our 2030 agenda on Scope 1 and 2. We gave facts and concrete actions around that. We announced a huge amount -- not huge, but a high amount of investments that are done positively impacting our business as well because we see -- by the way, is in the storyline how we see climate change. We see as an opportunity, not a threat. But in the end, we are moving towards more reporting, more transparent. We just launched the TFCD and ISO 14001 certification. On social side, that's where we want to explore our time a little bit more today because we have some announcements to do on that. We have already 300 community plans under execution. This year, we launched a very important -- we standardize our human rights due diligence program. And we, as mentioned already, increased a lot of female contribution. And I'm going to come back to the social ambition, I think that's very important if we want to be desired not needed by society. And then governance, you already know that in April 2021, we from the finishing of our shareholders' agreement. We turned into a true corporation with an independent Board with the majority of our Board independent. Our Chairman also elected by the general assembly as an independent member. We have the Nomination Committee, the Chief Compliance Officer, the Audit committee, a lot of changes that were done inside the governance. And finally, our ESG gaps, the math, 64 51, anyhow we closed a lot of the gaps that we mapped, still missing 12. One I think is going to be end of this year, and it's going to be leaving 11, Gustavo is going to mention about that. And by the way, we were the first ones to link all these elements of ESG to compensation, first miner to make that. We did that, I think, in Vale 2019 -- Vale day 2019. But we want to talk about Social, because I think on the Environmental, Social and Governance, there is still a gap to be covered. By the way, Malu is our Vice President for Sustainability. She was supposed to be here, but she wasn't able to come. But anyhow, let me just recap because the Social [indiscernible] today with Vale. But let's just recap what we have been doing so far, and I'll explain a little bit later what our ambition is. Can I show the video, please? [Presentation]

Well, as you can see in the video there, I think there's one thing that we are very proud of, is the food support that we gave in Brazil, 1 million food baskets. Everybody knows that pandemic brought extreme poverty to a new level. Brazil was really impacted by that. Even I heard -- I was here last week and the U.S. as well -- the U.S. has done that. And another issue that I forgot to mention that we are very proud of. We have 80% of our working force already vaccinated, double vaccinated. So that's extremely important. We say vaccination, yes. In Brazil, although a lot of problems we have, this is the problem that we don't have. So that's a good thing, and we're doing very well, although a little bit delayed. We went through the pandemic, and we are in a good shape. Of course, always with the guards up because of the obvious reasons that we are seeing today. But what you saw in the video, how will we define our social ambition. First of all, we want to be this partner company in the development of Brazilian communities. And I just want to give a step back here. How we did that? I mentioned Malu. Malu was hired. We didn't come up with something that we said always nice, looks nice, and that's what people think is nice. No, we went and talked to everyone, talked to NGOs, talked to ourselves, talked to our leaders, talked to institutions, to shareholders as well. And we understood that those are fundamental issue that we have to tackle. First of all, we have to help the resiliency of the communities. What does that mean? They have to be autonomous. We don't choose to go to a place. Mining is a given, mining is not an option. You have to create value there when you're there. And when you live there. Because you're going to leave one day. Second, because of the size of our company, because of the spend that we have, we operate in over 30 countries. We have to be engaged with relevant issues to humanity. I'm going to come to them in a minute. And of course, we have to be committed to sustainable mining. So the first thing, what's resilient communities. Its income generation, its health and its education. You don't take people out of poverty, if you don't do these 3 things. Second, global causes. Human rights, we chose to start. There are several other dimensions in human rights, but of course, indigenous relationship is important to us, not only because of Brazil, but Canada, we work on the Arctic with the [indiscernible] needs. So the relationship with indigenous people is key, and we can help that a lot. And of course, as a global cause, Amazon forest, we are there present, mining there for more than 40 years. By being a reference, I think we can extend that. And being a sustainable miner, we have to be a good neighbor. We have to do no harm. We have to be sure that we are affecting positively the communities that we are in. And, of course, creating social value, as I mentioned before. But as we did in 2019, when we came with the goals for or the environmental side, we came with those 3 goals, and we'd like to share with you because they are bold and they will take the commitment of our leadership. And as a shareholder, you should be acquainted with. First of all, we want to lift 500,000 people out of extreme poverty. Just to have an understanding in our areas of influence, we have 1.9 million people. The reference for stream profit is $1.90-something of dollar per day per capita in a family unit. So it's not acceptable to have that. We're going to have a plan to do is until 2030. But of course, and I forgot -- I mentioned in the beginning that we reinforce that. It's not Vale that's going to do. It's Vale with the social communities, it's Vale with society, it's Vale with other companies. It's Vale using it's power with suppliers, it's Vale bringing to the local community's growth. Indigenous people. We want to develop the right plans or development plans with them under -- I won't even try to say what UNDRIP, it is United Nations guidelines for indigenous people. So there, we have 13 communities -- 13 additional communities that are around our operations, and we are developing a plan with them to demonstrate their rights and to ask them what they really need and want. In Canada, it's obvious and different than from Brazil. But we have to create and to reinforce their well-being. And lastly, is a goal that is -- and beginning goal. In the social side when we were mapped by Sustainalytics, MSSI and Dow Jones, we want to be in the top 3 when you look at the social elements of that. You might even say, but this is out -- that's auto reflection goal. No. It's a matter that if we're doing the right things, doing the requirements that are needed to be there, we will be achieving our social goals. So -- and will be a credit, because it's very important not to say that I'm beautiful, somebody has to say to you that you're doing the right thing. So I think that's the main issue around those 3 goals. And I want to make a transition, as I mentioned to you in the beginning. This looks a lot about the soft issues and somebody asked me yesterday, I do think ESG is important. It's critical. First of all, we don't do greenwashing. What we come here and talk to you, we do it. We put money where we are, we execute and we give transparency. But the things that when we take 10 in the environment, 10 in social, 10 in governance, we allow us to be a company that will deliver the results. And now I want to make the transition to the future. And I will ask my new VP that is known from you as the ex-CFO is Luciano Siani, that will show you how we're going to move this company and a lot of opportunities that people, even in iron ore are not gasping because when you talk about transition, the new world, it's copper, cobalt, nickel, lithium and iron ore is there. And I think -- and I'm spoiling your presentation.

So these social goals are a nice last brick in the ESG construct of Vale. And I will remind you of the first announcements of targets that we made 2 years ago in the same room of the environmental goals as a starting point. So you see those 6 goals on the left-hand side. You may say, well, Scope 1 and 2 emissions, net 0, reduce Scope 3. Now this is the standard in the industry. Everyone talks about it. On the right-hand side of the goals, we have some that play to our strengths, renewable electricity forests, for example, and you have a nice progress in the case of forest protection about 120,000 hectares of forest, like we signed agreements in order to protect beyond the million hectares that we already do. So here, it's all about execution. And focusing on Scopes 1 and 2, this is just a reminder of what the profile of emissions in the middle -- in the donut in the middle shows you, which is no different from other mining companies. Most of our emissions come from the furnaces that we have, the pelletizing and metallurgy furnaces, and you see the rest of the profile. So we're very focused on this. The question here as this has become a baseline for the industry, everyone has to achieve that is how credible it is that we are going to achieve our targets in 2030 and then in 2050. The message for you is, we have an abatement curve for Scopes 1 and 2. We have a technology road map. We have an internal price for carbon, and we have capital allocated to that, and we have the proper governance, a very senior forum with the Executive Vice Presidents managing the process. So as a result of that, there's a lot of stuff already going and the next video will show you examples of that. [Presentation]

We think, well, Vale has 85% of its revenues and profits generated by iron ore. But please do not miss the fact that electrification isn't the only theme of the low carbon economy. The other thing is reducing emissions in the manufacturing of things and steel making is almost 10% of worldwide CO2 emissions. So it is an industry that will go a dramatic revolution in order for humanity to succeed in fighting climate change. And we're going to show you that we are the best positioned to create new markets, new opportunities and to create value by playing into the decarbonization of the steel industry. So let me share some things here. The left-hand side talks about iron ore right-hand side, I'll make comments about nickel and copper. Vale has the highest Fe content on average of any portfolio of iron ore products compared to our peers. This you know. What you may not be well familiar with is that the more the world transitions into, for example, hydrogen-based steelmaking, and it will need to go towards that direction through stages, maybe first with direct reduction natural gas, that kind of stuff. The more high-quality iron ore will be important and it will be valued. So this is going to be a key differentiation in the future. And see in the bottom how the market share that we have in the segments that will dominate this decarbonization trend, how dominant we are in comparison with our peers. You see the green portion of Vale market share, leaders in the high-quality segment. So we'll talk more about that. On the right-hand side, now talking about the traditional metals that we need to offer to help the world electrify. This is a curve of CO2 emissions of nickel Class 1. What's the point here? Many people are saying, well, the Chinese will crack the code and we'll produce Class 1 from nickel pig iron, for example. They are exploring some route towards that direction. But most of those routes are also carbon-intensive. So it defeats the purpose, right? So you want to electrify the world and produce Class I nickel through routes at a mid CO2 2 So the Vale Class 1 nickel is by far the lowest carbon intensity in the world. For example, thanks to higher metallurgic processes in Long Harbour. So the footprint here for those who are going to seek -- to source low carbon nickel, we're going to be winners. So in both of our key businesses, we have great opportunities tied to the decapitalization of the economy. And I'll invite Marcello Spinelli now to start introducing you to how we're going to play in this future world.

Thank you. Thank you, Luciano. It's a pleasure to be here again. Now in personal meeting. I'm really happy to be here. Well, I'll drive through one of Vale's strategic pillar that is called maximize flight-to-quality in iron ore. My presentation has 3 chapters. First one, new way to operate, I'll bring some updates about our resumption plan. The way we are reducing the necessity of them and also improving the quality. Second chapter, as Luciano said, why Vale is a supplier of choice for this new green world in the steel mill industry. And finally, the third chapter is about all this together, how can we enhance our competitiveness. So let's move forward to a new way to operate. But we've been sharing our actions to reduce the use of them. So today, we have an exposure of 70%. And you know that some years ago, we started a Blending strategy. We bring Carajás fine from the north of Brazil and the low-grade ore from the south of Brazil we're blending China, we formed the BRBF. BRBF today is half of our sales. It's a very successful strategy. So as we do this, we don't need to use water to concentrate in the South. That's the main -- it was the first strategy so we can introduce it in a dry processing method. But we are saying that we're moving to 85% in this journey. So how are we going to do this? Five actions. First one, improve the capacity in the north. We need to go to 240 million tons of capacity. We have the road map. In the north specific, we have one plant that you still reuse water. That's the plant one in north range, and we need to convert to a dry process. We're going to do this in a few months; second action, the main volumes that were coming, the brown and greenfields are coming in the south, are coming in the dry processing method. So as an example, we have Capanema. Third action, filtration. You're going to see some more updates about this. We are extracting the water. After using the water to concentrate, we're extracting the water to dry stack the tailings, and we don't need also the dams. Fourth action, dry concentration. It's a new technology. It's going really well. We have under construction. I'll give some more color about that; and finally, we have here, it's a new thing here, it's co-products. Again, it's a very nice initiative that we also have. You're going to hear about this a lot in the few months, and I'll give more details. Moving to the filtration. I want to check the box here. We've been promising this for some now, we are delivering. I want to show a video now that can see the progress. [Presentation]

That's great. So now dry concentration. As I mentioned, we have a plant that is under construction, 1.5 million tons in Vargem Grande. This is a breakthrough technology, magnetic concentration, we don't need water. We can produce pellet feed, sinter feed, high-quality ores. And this is something that we have a lot of flexibility. We can bring this plant close to the mine or we can locate close to the clients. That's a flexible plan, simple plan and believe we are doing something that we are not considering that we are using this technology as a cleaner. We produce the pellet feed for blast furnace. And using this process, you can upgrade to direct recognition, a pellet feed use for pellets. And you know very well that the direct reduction route will be their product in the future when you consider the decarbonization process. Now going to the coal products. You've never saw this before with us, but it's not something new inside Vale. Just to bear in mind, we're going to generate 50 million to 60 million tons of materials coming from filtration, dry concentration and dry processing, a lot of materials. At the end of the day, it's about sand with some part of iron. Now you're seeing that this Vale sand, we've been using this in testing. Now we have permits to use this sand, an application for cement, concrete, mortar and also products like quartz. This year, we sold and donate 750,000 tons of this material. We are planning to go next year to 1 million to 1.4 million tons. What is the rationale here. As we need to move this amount of -- this size of 50 million to 60 million tons, we need areas. If we need area, we need permits. If we need permits, we need a time line to get the permits. And if we don't get, we can jeopardize the production of iron ore. So that's a mindset here. And the beauty of this action that we can bring -- we can create value and can share value with our communities when we bring industries related to the sand and also donate like in paving works close to our communities. This is something, again, you're going to hear a lot in the future in Vale. Well, I'm talking about a new way to operate. So this is nothing new here when you see the extended supply chain. We have the capability of logistics over a well. We bring iron ore from China, from Brazil to China or from Europe. We need to be good in logistics. But I want to drag your attention for something new that is in this chart here. First, in the blending strategy, we're not only using our more than 17 ports in Asia to blend our products of 4 BRBF. But now we are bringing other ores to do as one product to our client. We want to serve our clients, be close to them and reduce their costs here. This one thing really nice is going on there. Another information from the port side. For a lot of years, we used to touch -- to call only 4 BRBF -- actually less than that with our Valemaxes in China. Only this year, we now are birthing 7 ports in China. We're going to 9 port next year. We'll bring -- already bring a lot of flexibility and making our fleet faster and moving better. And in my right-hand side, you see the concentration of facilities in China. We are taking advantage in the air capacity, to concentrate there. And as we were sending high silica ore to China, you know that, this year, we are now concentrated in China and selling the sand there. This is a niche yet, but there's a possibility to grow. And again, the main message here, we are closer to our clients in China in all the world to strengthen our relationship. Well, now let's go to the numbers. I know you love it. So in my left-hand side, capacity. This is the chart of capacity. We're going to talk about the production in some minutes. We have the capacity today of 341 million tons. We're going in the end of next year, by the end of next year to 370 million tons of capacity. We're going to do this, right-hand side road map. The beginning of next year, we don't expect to improve our volumes, but we are bringing quality. You saw the progress -- progression of the filtration. So we are converting our exceed of high silica or low silica ore to pellet feed to high-grade ores. So the main impact in the beginning of the year is related to quality. During the year, in the north, we have very good news. We have several products that are coming online. I'll remind you, the S11D crushers, S11D plus 10, Salobo. We don't consider that they're going to bring volumes to the total number to Vale because we are offsetting, and you remember that we have a delay in what we call rolling licensing the north ranch. So we don't have, in average, the increase of volumes in the north, but it will be really important to the increase that will happen in 2023 in the north, but it's an important road map in the north. By the end of the year, yes, we're going to bring capacity with Brucutu dam -- total dam in Brucutu and also the raising of Itabiruçu in Itabira. So that's a road map. Now moving to the numbers of production. First information here. We are narrowing the guidance for this area. We are in the guidance, and we are just putting a lower -- the up range now 3 20. For next year, our production guidance is 3 20 to 3 35 and 2 masses here's. You know, very above this value over volume is our mantra. Yes, and this number of production is what we believe what the market will need in terms of volume, but in terms of quality that we can deliver. That's our vision. And I want to drag your attention again for one more information that is in this chart -- the high -- higher Fe content. Take a look on what is going on in 2021. We're improving the quality on average to 63.5 [indiscernible] content. It represents [Audio Gap] today and around 350 million tons -- $350 million in margins only considering the impact of the quality. I'm not talking about the premiums here. So that are the numbers for this year and next year. Moving to the second chapter of our presentation. Why Vale is ready now for the future for this greener world. So there is a common sense of the road map, the pathway to decarbonize these 2 industries. I think we are seeing every time that we need to reduce the use of blast furnaces. Today, 73% of the steel mill production is based on blast furnace. We are going to move to direct reduction routes, using -- in the beginning the natural gas; later, the hydrogen. That's the main pathway. And in the first decade, we need to improve the efficiency of the blast furnace. We need to reduce the emissions of the blast furnace. That's the whole picture we have. Beyond MOUs because everybody is connected to the clients, but beyond the MOUs, we are bringing solutions now, we're bringing products and services now. That's what Eduardo and also Luciano said. We have 3 main actions here, 3 main ideas to attack this necessity. First one, increase the quality portfolio. So we are talking about expanding the north, Carajas fines, we're talking about dry concentration, expanding the pellet feed production. That's our road map of production. That's what we do. Second action. We strongly believe that we're going to need what we call agglomerated products. In any route of direct reduction or to reduce emissions in the blast furnace, we need pellets. We used to have only 1 kind of product here, pellets from pelletizing plants. Now we have the green briquette also. And we are talking here about 100 million tons of capacity in a few years to serve this market. And third, we call asset light solutions when we have technology inside value like Tecnored, that's the melter or a furnace. And we also can co-locate the briquette plants or the dry concentration plants with our clients and design the best solution through this journey of decarbonization. That's our road map. That's what we've been doing. I want to deep dive. I really love this green briquette. We've been developing business for more than 15 years. When I arrived in Vale, again, and I saw this is an amazing solution for our clients. We can reduce 10% if we use this product as a substitute of lamp or as a substitute of sinter, we can reduce 10% in our Scope 3 emissions or in our emissions in the blast furnace for our clients. This is half of the OpEx comparing to the pellet plants and is 1/3 of the CapEx intensive if you compare to the pellet plant. This is an amazing solution. We are already -- we have already under construction 7 million tons of capacity, and we are planning to expand this to 50 million tons of capacity. That's a breakthrough. You see a lot of these initiatives in the near future. And finally, to close this section, I want to emphasize 2 things. The main -- 2 main takeaways that I can see from this journey to decarbonize, we can see 2 things. One is what just Luciano said, we need for any route to decarbonize, we need high-quality ores. We need high-quality ores. We're going to need high quality ore and Vale is really well positioned to do that. The second takeaway, never in this world, mining industry have to be so close to the steel industry, never. And we need to work together. And that's the reason why in the last year -- this year actually, we engaged with more than 40% of our Scope 3, our clients. So there's no solution without them. We need to work together to find and to fight against this challenge. Now moving to the final part, the third part. How can we rebuild Vale's competitiveness? Well, I'm going to show -- I'll use the all-in cost to show this road map. And I'll split this analysis in 3 components: the C1; the freight and the premiums. So let's start with the C1. Another common sense that if you increase our volumes, we can dilute the cost. It's right. So we are still growing our production when you reach 400 million tons, we can dilute our costs, it's right. But there's another point here that I want to emphasize that we are producing with a lot of constraints or inefficiencies that we need to remove. There's another point here that we need to add. I'll give an example with Timbopeba site, we had Timbopeba production halted in March of 2019. We brought back this production in May of 2020, half of the production. This year, in the first quarter, we brought back the remaining 3 lines in Timbopeba, so we got the full capacity, but we didn't produce the full capacity full year. Next year, you're going to reach the full year capacity for Timbopeba. That's the impact we see, a 20% in reduction of cost because we are just producing with a leaner way and the full capacity coming from $27, the unit cost, to $21. That's the impact. And in near future, when we bring Capanema project in this site, we're going to $15. That's the same pattern you see in Vargem Grande, Brucutu and Itabira. That's the same. So it's important to consider in near future. And now I can bring the numbers of C1 costs. We're saying that we're coming this year from $17. I'm not considering here the impact of third parties' purchase. We're going to reduce $0.7 coming from dilution or increase of volume. The cost efficiency that I just mentioned represents another $1. And once you say something here, in spite we have a leaner production in the future when we restore our capacity, we are committed to bring also an optimization in cost. Gustavo will show more colors about that. But we have part of this number related to the cost optimization that we already started. We are in the turning point of the cost in Vale, and we have the analysis for 2023, and that's the reason why I put this time line here because we are going to have some value from that. So in 2023, we expect to have the C1 in $15.5 to $16. And if you consider the evolution of the production, we have another $2 decreasing to $14 to $15 a ton in long term. Just to compare to the number that we gave to you 2 years ago, 1 year ago, we have some adjustments here. The inflation that we had in the last 2 years is huge. And also, we adjusted our perspective about geotechnical costs and also some depletion. So that's the reason we are changing our long-term idea for C1. Second component, freight. You know very well about our strategy in freight, vessels, big vessels. We have a long-term fleet. We've been working hard to offset the impact of the IMO regulation. So it's working well. If you see the $27 comparing to $19, it's a huge protection that we have. What can you expect for the future? A reduction of $3, part of that coming from the macro conditions, spot rate and the bunker. But we also have 20% of this number coming from an improvement that we can improve the fleet and also the eco shipping. That is a program that you can reduce the consumption of fuel. It's going really well. We're already passing in our fleet, and we can capture value from that. So our long-term vision from this component is $16 a ton in long term. The third component, premiums. You always say that our clients are willing to pay premiums if they consider some factors here, if they're making money or not the margins. If they need to improve their efficiency, their production, they need to save the cost of energy, coke, or you need to consider that the availability of high-quality ores to get this value from the premium. That's what happens when you see the past, you see the history in 2018 when we had the supply side reform, they were making a lot of money. They need to improve their capacity. So we got the premium at that time. That's what happened this year, the first half, and we need to add another point here, the cost of the coke in China, was in a very high level, different from the second half of this year. What we can expect for the future, near future, near future, we're going to bring back the pelletizing capacity. I'm talking here going back to 50 million tons in average or more and also adding the briquette to this premium and the increase of Carajás production, we bring another component for the premium in the short term. In the long term, we may consider that the cost of carbon. And as Luciano said, all the journey we see, our products will have premiums because of the capacity to get more -- to give more efficiency to reduce the CO2 emissions in our clients. So to summarize this, we expect to reduce $10 in our all-in costs coming from 45% to 35% when we reach 400 million tons. We have a step in the middle. That's in the middle for $40 per ton in 2023, that's in the middle. If you believe that the price of iron ore will decrease, we have an extra reduction here coming from the royalties and the impact of the third-party purchase. And an extra reduction can come from the premiums in this new green world. So we can reduce -- can be below $30 a ton our unit cost, our all-in cost. So before I pass to Mark, I want to emphasize 3 main things. First one, we are committed to bring back the 400 million tons capacity. It's important to get the full -- the leaner production, the full capacity to get the best cost in our operations. The second message, overall, I'll say, again, valuable volume is our mantra. We are not going to produce if you -- the market doesn't need. We don't -- we are not going to deliver something out of the quality they need. So we're going to stick to our strategy of valuable volume. And third, definitely, Vale is the supplier of choice of the steelmaking industry for this new green world. Now Mark, pass to you.

Thanks, Marcello. In Base Metal in Vale, we recognized that we must succeed in the base metals transformation, where base metals contribute significantly to the Vale of the future. But we recognized that 2021 was a challenging year where we didn't -- where things did not go according to plan. In Salobo, broad safety and maintenance reviews led to suboptimal mine movement impacting production significantly in the first half of this year. Delays in the SAG mill maintenance in Sossego impacted production and a 2-month strike in Sudbury. We know that we need to exercise the levers that Carlos Medeiros spoke about earlier, safety, risk management as well as operational excellence. And that's where our journey lies. It wasn't all bad. We did have some successes where we did make some progress on the risk side and safety side, just last week, the Voisey's Bay mine was awarded the minor of the year by the Canadian Institute of Mining and Metallurgy for excellence in safety, risk management through the operations as well as the construction of the underground mine. On the production side, we had good success in a number of our surface operations. Long Harbour is ramping up well. Our refineries in Sudbury, Long Harbour as well as in the U.K. have operated very well as have our smelters in Sudbury and Indonesia. And it sets the course for a bright future. And 2022 is the year where we must succeed in our base metals transformation and show progress. Here, I'll review our copper and nickel guidance for next year. On the copper side, our production guidance is 330,000 to 350,000 tons of copper. Significant point here compared to last Vale's Day projections on copper is the absence of the start-up of Salobo 3, which has a significant impact on our production next year. We must execute on our key milestones that I've set out here. The first one is a milestone for both copper and nickel. We need our Sudbury mines to produce. We need stable production coming out of our mines. We need to improve that mine movement in production in Salobo and we are making good progress. We're hitting the right rates for next year as we speak in Salobo mine. And we must execute well our SAG maintenance -- SAG mill maintenance in Sossego. On the nickel side, our production guidance is 175,000 to 190,000 tons, primarily impacting next year by the rebuild of one of our furnaces -- one of our 4 furnaces in PT Valley. As I mentioned, key milestone is the Sudbury mine production and the ramp-up of 2 critical replacement capacity projects, the Voisey's Bay underground mine as well as the copper cliff mine expansion in Sudbury. And we need to make sure Onça Puma produces stably next year. I want to talk to you about what we see as a very bright future for our copper portfolio. In this picture here, this is a picture of the older Igarapé Bahia gold mine in Carajás region, which is the future site of our copper project, our Alemão copper project. Let me tell you a little bit more about our copper portfolio in Carajás and the bright future that we see. We see Carajás as a Tier 1 copper mining complex. It is now, and it will be growing in the future. I just want to orient you a little bit to highlight the proximity of a number of our copper iron ore operations in the Carajás region, leveraging off of synergies in the area. I'll point out the 2 red dots and the bottom right-hand corner is our Sossego mine. And you have the proximity to a number of projects, all of which I will review in the coming slides, such as Cristalino and some what we call our satellite projects like Bacaba and Visconde. In the top left-hand corner, you have our Salobo property. Underneath that, you have the future Alemão project. And over to the right of that, you have something that we call the North Hub with a number of potential deposits that we've been drilling, such as Paulo Afonso and Furnas. We are advancing on Salobo 3, and it's coming on stream next year, with ramp-up beginning in the second half. It will be contributing over a life of mine 30,000 to 40,000 tons of copper. Earlier years, it will contribute more. In fact, by 2023, you will see in excess of 50,000 tons of copper coming out of Salobo 3. We are also looking at a future expansion for Salobo 4, which could result in an additional 30,000 tons of copper. We are currently studying that. And I will highlight, we still have coming the gold stream payment once we demonstrate through commissioning, depending on timing and ramp up, a potential payment in excess of $500 million, again in 2023. And here's a little bit about the potential for growth. Alemão, which I've mentioned, will add approximately 60,000 tons of copper and about 100,000 ounces of gold per year. The investment decision will come at the end of next year or beginning of 2023, dependent upon the environmental license being issued. Discussions are going well, but it will take that time before we get that permit. In the middle, talk a little bit about the South Hub. The Cristalino project is absolutely necessary for the ongoing operations in Sossego as the Sossego mines diminish in the coming years. The studies are going well for Cristalino. But we also have the satellite deposits, a number of deposits in close proximity to Sossego where we are looking at the options and bringing those forward and feeding the Sossego mine and actually providing an opportunity for further expansion of Sossego. And we're looking at that North Hub that I mentioned, the Paulo Afonso and Furnas. We had significant exploration, 60 kilometers of drilling this year, and we are seeing the resources being increased. This could be a project or a number of projects that add 70,000 to 100,000 tons of copper in the future. Switching over to Indonesia. We have what we call a world-class copper discovery. We see it as the third largest copper find in the past 10 years. Since the last issuance of a resource statement in February of 2020, our studies and our drilling have derisked that project, and they have added about 15% contained copper to the project. We estimate that this project could produce between 300,000 and 350,000 tons of copper with in excess of 200,000 ounces of gold per year for the next 45 years. This potential project is high tonnage, high grade and low cost. Just pointing out in this slide, the details aren't important. It's just about the work that we're doing to make sure this comes on stream. If you put it together, what we're doing, investing in the midterm to stabilize our production adding in Salobo 3, our production gets above 400,000 tons per annum. And then when you add in South Hub, Alemão and the Victor startup, a mine in Sudbury, Canada, we're looking at a joint venture with Glencore. We are above 450,000 tons of production past the middle of the decade. And then on the right, when you add the growth of the North Hub, Salobo 4, South Hub expansion and Hu'u, we are more than potentially doubling our copper production in the next decade. There are not many players who have this kind of copper portfolio. Let's talk a little bit about nickel. In the base metals transformation, there were a couple of key levers that we needed to execute on in the past few years. One was dealing with the difficulty of New Caledonia and one was replacement capacity of our mines in Canada. Here's a little bit about both. And earlier this year, we did successfully transfer the New Caledonia asset finding a sustainable solution for the continuation of that project, but we have taken it off of our hands. On the right-hand side, you have a number of advancements that we have made in the replacement capacity in the Sudbury mines, as the Sudbury mines with the [Audio Gap] Getting first ore in the copper cliff mine extension. We've had first ore received in the Reid Brook Voisey's Bay underground mine. And significantly, we approved an investment of $120 million to expand the Thompson mine by 10 years, also adding potential production increase of about 30% by 2023 and 2024. And our portfolio makes us very well positioned to pivot towards the EV. The growth of the EV supply chain in North America as well as Europe. Our mines are producing the nickel that the industry wants. Our Class I nickel, as Luciano was saying, is low carbon, strong ESG credentials. We're currently selling about 5% of our Class I nickel to the EV supply chain. We anticipate that growing to 30% to 40% in the coming years. Listed a couple of other opportunities here that are in our hands as well. The critical minerals that are going into the EV batteries will lead to an issue that we need to deal with as an industry, providing a solution to the OEMs to recycle that material and bring it back into the supply chain, creating that circular economy. We have tested and can recycle what we call the black mass in our current flow sheet to recover nickel and cobalt. And finally, we are looking at a nickel sulfate plant investment with a decision at the end of next year, and we're having very good discussions with the Canadian government as well as the province of Quebec. Delivering on the stability of nickel, I'm going to talk in the next 2 slides a little bit about how we support the Canadian mines for the decades to come. In this slide, we're talking about what we're doing in the mines today. As I mentioned, we're ramping up the Voisey's Bay underground mine. Next year, we'll bring on Eastern Deeps, which is the second of 2 mines in Voisey's Bay, replacing the capacity of the open pit. In the middle, as I mentioned, the Manitoba extension, we approved that. We're going to see advances in 2023, but we're also studying and doing significant drilling on what we call Phase 2, which could extend the Thompson mine for decades to come. We're also studying in Sudbury. The copper cliff mine has extensions, 3 and 4, the studies. We've just completed pre-feasibility studies, and we're looking to make decisions in the coming years. There are other studies that we're also doing, such as the Creighton Deep and other things in surface deposits, where we will be advancing the engineering and bringing them soon for decisions in the coming years. And also Onça Puma, we're going to be looking at the investment decision on the second furnace in Onça Puma early next year. This deposit has an extended life of many decades and has the potential for future furnaces 3 and 4, if we so choose. This slide I want to tap into something that is critically important. And in Canada, we have the largest nickel sulfide resources in the world, high-grade polymetallic ore bodies, and we own a great deal of this. And we are investing the money and the drilling and the studies to make sure that we have ore for decades to come. We have a very extensive drilling program, 300 kilometers per year of drilling in and around our current mines in Sudbury, in Voisey's Bay and Thompson. And Voisey's continued look to extend the Reid Brook and Eastern Deeps well past the current mine life of 2034, 2035. And Thompson, we're doing the drilling in the current mine, but there are many other areas that we're drilling around the Thompson nickel belt, including an ultramafic large tonnage ultramafic ore body. And in Sudbury, we know there's more to come in a mining camp that's been around for 120-plus years. We also have unique access in Indonesia. And in the coming year, we will be making decisions about expansions in Bahodopi, where we've just announced this year a joint venture study with TISCO and Xinhai. And then we also have the investment decision on the Pomalaa - HPAL project. These 2 projects together can add 110,000 tons of production in the coming years. We will only be doing these with partners. So in the end, with nickel, we're building a stable business where we will recover and stabilize at a production rate of 200,000 tons per annum, increasing to 220,000 once the Onça Puma second furnace comes. But more importantly, as we go through the base metals transformation, we become a stable operator. We reduce our unit costs. We have optionality for growth in the future. So in summary, in transforming the base metals business, we're creating a solid base for the future, well positioned to participate in the build-out of the EV supply chain in North America and Europe. We have a Tier 1 mining complex for copper in the Carajás region of Brazil, and we have unique access to optionality and growth in Indonesia. And with that, I'll pass it over to Gustavo Pimenta, who is going to talk to us about capital allocation and a future vision for Vale.

Thanks, Mark. Good morning, everyone. This is my first Vale Day, so I'm very excited to be here and look forward to work with you all. So I'd like to start with this first page that you are all very familiar with. I think Eduardo highlighted some of these elements over the last couple of years. Those are the 3 themes of our value creation of our equity story. And the themes are derisking, which we talked about today, reshaping and re-rating. What I would like to do today is to go over a few of them, the most relevant ones from a financial standpoint and share with you at least my first initial impressions in terms of potential re-rate of Vale stock. So starting with the reparation agreement. I think Eduardo highlighted, we've done -- we've had a lot of progress this year, right? So up to the end of 2021, we should have fulfilled approximately 55% of the obligations that we had under the agreement. So if you look in terms of cash flow projections, '21 was a very heavy year for us, right? We've disbursed approximately $2.4 billion under the agreement, which is good in terms of getting those things behind us, right, in terms of financial responsibility. Over the next couple of years, the responsibility and the payments and the disbursement should be anywhere between $500 million and $800 million. Renova Is another one, right, in terms of derisk. So Samarco is back in operation since the last time we talked. So that's positive for the business. We see 2022 as an important year in terms of accelerating individual indemnifications following some of the federal court orders. We also see a year in terms of finalizing the opportunity to finalize the revision of the 42 programs under the existing framework that we have. So that is going to be a busy year for Renova standpoint. In terms of simplifying the portfolio, in terms of reshaping, Kudos to Luciano and the team, we have done a tremendous job from my perspective on that regard, right? We've sold a lot of assets. We've resolved a lot of assets that we're underperforming in our portfolio. Specifically, in 2021, we've sold and we got rid of VNC. There was a drain in terms of financial performance for us. We are able also to monetize a noncore asset, our stake at Mosaic. So we should expect us to continue to be very focused on portfolio optimization, right? We want to make sure that every single asset that we have in our portfolio makes sense to be there. It's adding value to the portfolio. We are currently working, as we've mentioned before, on Moatize in Mozambique, our co-asset in Mozambique. We hope to have news there very soon. It's a noncore asset [Audio Gap] Put that as part of our sales process, and we are moving forward as expected, the same with CSI. So you should expect us to continue to trim down the portfolio and be focused on what we are good at. What is one of the benefits of the simplification of the portfolio? Here is a list of assets that were classified under this category of underperforming assets over the last couple of years, right? So as we sell, then you see the going forward in terms of cash drain gets to 0, right? And we were spending anywhere between $0.5 billion and $2 billion in those assets over the last couple of years. So it's a very significant relief in terms of cash pressure that we have. The case of Moatize, even if we don't sell, we are not expecting to have any cash need in that business because we've ramped up the production, and we are already in positive EBITDA territory. But in any way, that's -- I think it's a very positive -- when you compare Vale 2 years ago versus today, those were very important improvements in terms of the cash story of Vale. This is new. So we are announcing today. I think this is a very important priority that we are putting together. Spinelli highlighted some of the things that he's doing there. So we are announcing today an initiative and a program that was discussed and approved with our Board to reduce the overall cost of Vale totaled at $1 billion. That is on top of or over our total fixed cost plus sustaining. We are about $14 billion there. We want to reduce this by $1 billion. And where we are focused on. We have 3 main levers here. We have productivity gains. So Spinelli highlighted, removal of inefficiency as we ramp up and recover production, better planning as we implement VPS, improve things like 2x. There is incorporation of digital solutions that we can reduce OpEx. We appreciate the need to get leaner. So there is a second large initiative here associated with organizational redesign. We will pursue that and sourcing with third-party services, right? So we buy more than $10 billion a year. So we see an opportunity here to review scope, review a specification, control internal demand. So all of that should be bringing us about $1 billion of savings. The good thing is we are already expecting to have benefits in 2022. So our expectations for 2022 to have flat cost compared to 2021, right, even with all the inflation pressure that all the sectors are suffering. So we'll be able to absorb that as we implement those programs. My idea is that we bring this in more detail in our Feb call, and we monitor this quarterly with each one of you guys. So you guys will see the evolution of this program as we go along. So what does that mean for us, right? We free up cash for growth. So there's an opportunity here for us to continue to grow organically in a very accretive way. We are not talking about M&A here. We are talking about expansion of existing facilities where we have a lot of synergies to expand, right? So I think we've highlighted, Mark highlighted some of them. So it's an opportunity. Some of them have been approved and we are pursuing, but we have more to do. I don't think, based on everything that I've seen so far, there is anyone better prepared now in this space to drive the energy transition. I think we highlighted the quality of the products. We see opportunities to grow in copper in Carajás, very synergetic. We see all these resources we have in nickel. So I think Vale is very uniquely positioned to capture value as we continue to grow this business. Capital discipline is a major focus of mine, and it has been a major focus of Eduardo team and Siani. Last year, we've returned 90% of our free cash to shareholders, right? So we appreciate and I fully recognize there is no better investment, so they didn't buying back my shares, right? So we have that very clearly. And we'll make sure that we will continue to be extremely disciplined on how we allocate every dollar out of this company, right? So this has been the case. I think we have a very attractive dividend policy, right, 30% of EBITDA means sustaining. And we want to continue to be extremely disciplined on capital allocation, and we can talk a little bit about that in the Q&A. So this is a slide to try to show what is out there in terms of potential value unlocking for Vale, right? So we've run some scenarios in terms of sales volumes. This is a 2023 time frame, and I'll explain you why. So we've run a couple of scenarios in terms of volumes of sales, different prices. So you see us being able to generate anywhere between $17 billion and $24 billion of EBITDA in that time frame with a CapEx of about $6 billion. So our expectations for the total CapEx, including growth, should be between $5 billion and $6 billion. So if you run the math here, you're going to see us with the ability to provide a free cash flow yield for our investors, right? I do appreciate in the very short term, we have some challenges, right? We have what I'm calling here transitory expenses. If we take Brumadinho then the characterization, Renova plus some of the assets that were underperforming in 2021, all of that cost us $4 billion, right, in 2021. We do expect that 2022 to be also heavy, right? We still have some of those commitments pretty much along the same lines, maybe different zip codes, but the magnitude of the spend is probably going to be as relevant in 2022, but we shouldn't expect this to stay there. This will get resolved, and we are resolving those issues. And once we do that, we should be able to unlock significant value for our shareholders. So what is the thesis here, combining my so far, 4 weeks in the job, my internal view with some fresh eyes as well. I do see very clear catalysts for us in the next 12 to 18 months in terms of unlocking value, right? So if you take the 3 categories here, you have derisking. So in 12 to 18 months, we're going to have a substantial progress on reparating the liabilities. We've talked about that today. We'll have 6 dams to be decharacterized. Medeiros talked about all the progress we've done there. And we have closed all of the SG gaps, right? So that's very important because a lot of the overhang in the stock, we know it's associated with the risk perception. So we will be resolving that, and we expect it by 12 -- in 12 to 18 months to be in a much better position. Capacity increase. This is very clear. I mean you have 2 main categories. I'm not talking here about 5, 10 years for 100 million tons. What I'm saying is in the next 12 to 18 months, we should be able to bring 30 million tons, assuming the market can absorb that. The value over volume will prevail. And we should be able to have Salobo operations, right? So that category, just that those 2 buckets is $2 billion of margins that we're bringing to the business. And the third one is cost reduction, another $1 billion, right? If you sum it up, you're going to see us being able, in 12 to 18 months, assuming -- and we feel good about delivering those, we will be able to unlock significant value to shareholders and to have a different value in terms of financial performance by then and financial projections, right? So it's very exciting from our perspective. I think those things are in our -- a lot of them in our control. I mean, we have a lot of visibility about delivering on them. So I'm personally very excited about delivering. And our commitment is, as we go along, we want to check the box and show you guys the progress along those items, all right? So with that, we'll open up for Q&A. I think we have some time to assemble and we'll get started. Thank you.

Hello, hello, yes. We'll just need about 30 seconds, 1 minute. We're going to just have everyone here sitting in the stage and then we can start with the Q&A. So as I said in the beginning, please raise your hand. We're going to try to take as many questions as possible here from the audience. Also, we're going to be taking questions online. You just need to send to the email address that is on your question, okay? So just bear with us for about 30 seconds or so. Thank you.

Thiago Lofiego from Bradesco BBI. Two questions. Spinelli, on the guidance for next year, how much of those tons will you not be selling depending on the iron ore price. So basically, if you consider today's iron ore price, how much of that you think you're not going to be able to sell? Or maybe another way to ask this is, what kind of price level have you considered for that specific guidance? And then my second question is on the cost for 2022, the all-in cost. I'm not sure if it's for Spinelli, for Eduardo or Gustavo, but thinking about the all-in delivered cost in -- for 2022, are we talking about $45 per ton, give or take, given inflationary pressures, C1 costs are going to be stable? Are we talking about $4 to $5 per ton level for delivered costs for next year?

Okay. First of all, production, we're not considering to sell what we did this year, the high silica, the low-grade ores directly to the market. So we are using our supply chain to blend and sell as our BRBF blending product. Again, to sell directly, it's not a question only of the level of the price, it depends on the freight. Freight is a very important component and discount. The discount of the high silica was really high. So we're going to track this. Remember that we're going to convert that high silica in high-grade ores. When you do these, we reduce the mass. So that's -- in the beginning of the year, there will be more availability capacity of this high silica. During the year with the filtration, we are reducing this capacity. So we -- you can ask this question. What is the availability of this high silica, it can be 10 million tons in the beginning of the year. But during the year reduce this possibility. So again, we're not considering this number inside our guidance. And related to the costs that you're right, we consider a C1 stable for next year, stable with a lot of work because we are offsetting the inflation and hard work. In Brazil, we had some -- in all of the world, but in Brazil specific, we had impact. But we are considering the other components. Freight probably slightly lower than this year. The macro conditions for that, it's important point probably offsetting the better -- VIO better Fe content, the quality will be better. The premium will be better because you saw the impact. And you'll see the impact of the high silicon our average of price. So average is slightly lower, it can be a good view for that.

Daniel McConvey, Rossport Investments. A couple of technology, ESG questions, which is unusual for me. But the -- who's in charge of the electrification storage products you're looking at? How is that managed in the company?

Well, I have the -- for iron ore, we have in our business, different perspective, yes.

Okay. Can you kind of describe what the hierarchy is and what your -- what are the big products you're looking at? And if you're doing it directly or doing it through consultants or how is that working?

Yes. For Scope 1 and 2, we have the MAC curve, all the projects in our pipeline to reduce till the end of this decade. We are considered for whole Vale actually and iron ore is more intensive, but it's a $4 billion to $6 billion to invest. We have several actions. The main action is in the pelletizing plants was the main impact for that. So the kind of action is related more to source of energy, to change the coal or use biomass. So there is -- the actions are related to that. Electrification, we have the -- in the railroad, the -- we call the Vale locomotive that is we're already running for -- to shift, but we're going to put it in a long range. We also have development with the supplier for the trucks. And we are already investing in catenary, I don't know in English. Yes, catenary. For electrification in part of the mines. So the road map is a transition today, bringing some electrification in part of the consumption of fuel of jeeps but going to a full electric vehicle and the -- with the trucks and locomotives. I think you have other initiatives in the mine side.

Yes. In terms of electrification, as Luciano's video showed, we obviously are bringing in electric trucks and loaders, et cetera, into the mines. We're testing more. We have 40 coming in by the end of the year, but there's, obviously, a lot more work. If it's questions around broader decarbonization, then we get into some other initiatives, for example, replacing diesel fuel in Northern Labrador with wind power and things like that. And we obviously have similar type of process where we're trying to replace coal and carbon and things like that with heat recovery and biomass, et cetera. So very similar, we have our own agendas into this MAC curve.

On briquettes, this is -- this new technology, which I'm not that familiar with. Can you describe how it works and how much carbon if you can quantify the carbon savings per ton of steel produced?

Yes. Well, we agglomerate with products. In a pelletizing plant, we need to use the furnace to agglomerate the product and other binding components. And it's almost a cold agglomeration with the briquettes. We still use furnace, but for the end of the process. We don't use this to agglomerate but just to a kind of final part of the process. Thinking about Scope 1 and 2, we can reduce by 80%, 85%, if you compare to a pelletizing plant in terms of intensity of emissions of CO2. This is the -- our side, our client side in Scope 3, this is really important. The beauty of this that as a cold agglomeration, we can mix other kind of products. So we can make this briquette acid or basic. If they are acid, we can use as a lab. Just the wax charging the -- in the glass firms like a lump -- like a pellet. But you can add other components like MgO. It's impossible to do this in the pellet. It's impossible to build this in the center. But you can do this inside the -- with the briquette including side of the blast furnace. This is amazing. This is a breakthrough, because we can -- and methodological, technical information, we can in a simple way, you can keep the furnace with more efficiency, a higher level of heat and efficiency really goes better and better. So that's the idea. We already tested this technology in 5 furnaces and big ones, not only in small. And this -- we already -- we are converting 2, pelletizing plants into briquette plants and we have a new one in Vargem Grande. We're already doing this and testing together because it's going really well. The results are fantastic, and our clients are really excited about that.

Spinelli, I'll just make...

Above 10% reduction.

Yes. 10% reduction on the route. On the...

In Scope 3 and our Scope 1 is...

So it's a matter if we are going to replace by -- the pellets by the cold agglomeration. We don't see that today. So it's not in a MAC curve, substituting our palletizing plants. Those 2 were very old plants that we decided to adapt to the briquette. So when you say 100 million tons of agglomeration has to be pellets on that as well. Our plants for briquette is around 50 million tons. And we believe it's a real breakthrough. We -- as Mr. Spinelli said, we tested already in big furnaces. We are very optimistic that we will work very well for this transition part now.

Carlos?

Carlos Alba with Morgan Stanley. First question on iron ore, maybe just following up on the conversation. Just to confirm, the iron ore guidance, production guidance, does that include third-party purchases? And what are you thinking about iron ore inventories and potential sales of those to bridge -- right to bridge production versus shipments? And on green briquettes, have you signed any contracts? Do you have any firm orders for the capacity that you are investing or bringing in the future?

Okay. Yes, we consider the third part purchase. The level that we purchased this year, we're now repeating probably for next year because part of that was based on high silica products. So albeit in average that what had happened in the last year or before that. So I think this year was a peak in terms of third-party purchase that we don't have yet there's a list to make this contract. The first round, we expect to launch this to start up in the beginning of 2023. So we have the whole year to make this happen. And this amount today will be -- probably they will go to Europe, part of that and partly in Brazil. So the main clients that we are targeting today. But the road map of 50 million tons, we can not only consider the production as a hub like the pelletizing plant, but we can consider to co-locate or to be closer to the clients, go to Europe, go to site to expand this capacity. In this case, we definitely -- we need contracts with the clients in the long-term relationship, but we didn't -- we don't have yet.

Carlos, but we have MOUs with like...

Yes, a lot of MOUs.

Ternium where we tested already. So it's going to be like a step-by-step change to adapt. We talked to some steel plants in Europe, and they say, look, people of course this is a technological change, but we are pretty confident that this, as Spinelli mentioned in the beginning, 15 years of his studies, and we did a lot of the test to be sure that this cold agglomeration is going to work out.

All right. Let me make my last question maybe a combined one, I'm going to keep a little bit here. Gustavo, any comments on the characterization disbursements in the coming years, maybe I missed that. And then maybe Alexandre, I'm going to take the opportunity that you are here as well to make your comment. We have seen a lot of news since Friday on the investigation of the federal police. What does that mean in terms of -- potentially of the agreement that you have already very thoroughly negotiated. Does this open the possibility for potentially higher payments?

On the characterization disbursements, it's anywhere between $300 million and $500 million per year. So that's what we should expect for the following decade.

Carlos, thanks for the question. Last week, what we had, we saw the federal police issue a report where they pointed out basically the same charges that the state police and the state prosecutors have pointed in the past. Recently, the Supreme Court decided that the jurisdiction for this case should go to federal court rather than state court. By doing that, the Supreme Court dismissed all the charges that were brought in state court. Hence, federal police and now the federal prosecutors would have to evaluate this report and decide whether to bring these charges now in federal court. So specifically about your question, nothing changes in the Brumadinho reparation agreement, absolutely nothing, also because that agreement did not address anything criminal. And purposely, we did not -- it wasn't a plea bargain or anything like that and not a deferred prosecution agreement. What it was is a settlement that solved all the civil actions, all public civil actions, collective actions brought also by prosecutors and the state, okay? So I think that's simple.

It's a pleasure to be here. Leonardo Correa from BTG Pactual. The first question for Luciano. During your presentation, Luciano, you mentioned on the ESG road map for Scope 1 Scope 2, which is in Vale's control, right? I think the big question that the world is asking is Scope 3 where Vale basically can help. But at the end of the day, you need the Chinese steel industry to invest trillions of dollars to decarbonize and we know that the steel industry is the one that most pollutes, right? So I just wanted to hear you how these conversations have been evolving with counterparts in China? And how confident you are that Scope 3 will be reduced going forward? And the second question maybe for Eduardo, on diversification, right? It's an old theme. Vale did its move in 2006 with Inco. Over the past years, the story has been to focus on the core. How do you see potentially looking at greener metals and diversifying into other businesses, Vale is still seen as an iron ore play, a pure play trades on 3x EBITDA. So it just -- if you guys are potentially looking at any targets to diversify. That's it.

Okay. So the difference between us and other peers is that most are celebrating and we are as well, MOUs with clients to investigate ways of reducing emissions, right. But basically, these efforts within Vale are different, because we come in with a suite of solutions and we offer detailed knowledge to our clients to see how can we fit in those solutions within their plans. So we have the briquettes. We have, for example, the Tecnored technology to produce pig iron with biofer. We have potentially HBI. We have this ability to using the cleaner to increase the grade of our blast furnace pellets towards direct reduction. So another agglomeration technology that we are developing, for example, for biofer, so instead of they getting coke in their blast furnaces, they're getting a kind of briquette also from biomass. So we're coming in with a suite of technologies. And some of those technologies, they open up product opportunities for us. So that, we believe, is the difference between our approach and others. We're just not going there to -- look, what are you doing here? But we're offering a suite of solutions, and we hope that this way we can find a path.

But I think what -- is that up on -- what Leonard is starting to ask is how serious the Chinese are on that. And I think we just had a meeting like I think -- when was that just...