Vale (VALE3) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 iron ore production since 2018, with S11D setting a new quarterly record and a 7% year-over-year increase in shipments, driven by strong operational performance.

• Major growth projects Vargem Grande and Capanema are nearing completion, set to add 30 million tons of high-quality iron ore capacity by mid-2025; Sohar Concentration Plant approved as a pilot for mega hub strategy, targeting high returns and low CapEx.

• Onça Puma, Sossego, and Salobo plants resumed operations, supporting energy transition metals guidance and cost reductions.

• ESG initiatives advanced with TNFD and ISSB adoption, B3/B4 dam decharacterization completed, and ongoing settlement discussions for Mariana.

• New CEO appointed for Base Metals, reinforcing leadership and transformation.

Financial highlights

• Pro forma/adjusted EBITDA reached $4.27 billion in Q2, up 15% sequentially, driven by higher iron ore sales volumes and operational performance.

• C1 cash cost for iron ore was $24.9/ton in Q2, impacted by inventory turnover, but June cost dropped to $22/ton; 2024 guidance reaffirmed at $21.5–23/ton.

• Free cash flow was negative $178 million in Q2, mainly due to working capital and supplier payments, but cash and equivalents rose by $3.1 billion, mainly from Base Metals partnership proceeds and bond issuance.

• Capital expenditures reached $1.33 billion in Q2, on track for $6.5 billion annual guidance.

• Board approved $1.6 billion in interest on capital for H1 2024, to be paid in September; $114 million allocated to share buybacks in Q2.

Outlook and guidance

• Confident in reaching the top end of 310–320 million tons iron ore production guidance for 2024, with long-term goal of 340–360 million tons by 2026.

• Iron ore C1 cost guidance reaffirmed at $21.5–23/ton for 2024; copper and nickel cost and production guidances maintained.

• Expect higher share of premium iron ore products in 2H24, supporting price premiums.