Vale S.A. Aktie

Good morning, ladies and gentlemen. Welcome to Vale's First Quarter 2026 Earnings Call. This conference is being recorded, and a replay will be available on our website at vale.com. The presentation is also available for download in English and Portuguese from our website. [Operator Instructions]

We would like to advise that forward-looking statements may be provided in this presentation, including Vale's expectations about future events or results, encompassing those matters listed in the respective presentation. We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties.

To obtain information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission, the Brazilian Comiso de Valores Mobilaris and in particular, the factors discussed under forward-looking statements and Risk Factors in Vale's annual report on Form 20-F.

With us today are Mr. Gustavo Pimenta, CEO; Mr. Marcelo Bacci, Executive Vice President of Finance and Investor Relations; Mr. Roger Nogueira, Executive Vice President, Commercial and Development; Mr. Carlos Medis, Executive Vice President of Operations; and Mr. Shaun Usmar, CEO of Vale Base Metals.

Now I will turn the conference over to Mr. Gustavo Pimenta. Sir, you may now begin.

Hello, everyone, and thank you for joining Vale's First Quarter 2026 Conference Call. I would like to start by briefly reinforcing our strategy and our ambition to create superior value for our shareholders. This strategy is grounded in a relentless focus on operational excellence combined with disciplined capital allocation and the development of highly accretive growth opportunities, particularly in copper and iron ore, leveraging Vale's unique asset base and endowment. Recent geopolitical events and the volatility they have introduced to the market only reforce the importance of building a resilient and competitive business that can perform across a wide range of market conditions.

This is exactly what we are doing at Vale. Despite near-term uncertainties, I am very excited about our Q1 performance and very optimistic about delivering another great year. I'm highly confident about Vale's future and in our ability to navigate the current environment while delivering robust value accretive growth over the long run. With that in mind, I would like to now turn to the highlights of our first quarter performance.

Safety is a core value at Vale and remains at the center of everything we do. In the first 3 months of the year, we safely removed 2 additional structures from any emergence level, reaching an 80% reduction since 2020. These achievements reflect disciplined governance, continuous investment in monitoring and engineering solutions and a strong safety mindset across the organization. This journey goes beyond procedures and systems. It is fundamentally about culture, accountability and leadership at every level of the organization.

By consistently advancing safety, we not only protect our people and communities, but also reinforce Vale's position as a trusted partner.

Now let me turn to our operational performance. In iron ore, our focus on operational excellence, combined with the flexibility of our product portfolio once again translated into solid performance this quarter. Production grew 3% year-on-year supported by record output at SLLD and Brucutu as well as the successful ramp-up of the Capanema and VarginGrande projects. At the same time, we continue to make solid progress on the Serra Sul plus 20 project. It has now reached 86% physical completion and remains on track to start up in the second half of the year.

Once delivered, Serra Sul plus 20 will further strengthen our operational flexibility and add incremental volumes to 1 of the most competitive iron ore assets in the world. Sales volumes increased by 4% year-on-year, reflecting higher production and supported by healthy global demand. Importantly, this volume growth leveraged our flexible product portfolio, allowing us to improve price realization with all linked premiums increasing by $2.6 per ton quarter-on-quarter. This translates into around $800 million in annualized revenue, reinforcing the value of our commercial strategy.

Let me now turn to Vale-based metals. At value-based models, we continue to deliver a strong operational performance with double-digit production growth in both copper and nickel. And copper production reached 102,000 tons in the first quarter the highest level since 2017 and 13% higher year-on-year. This performance was supported by record output at Salobo and Sosego as well as solid contributions from our Canadian polymetallic operations, especially at Voisey's Bay.

In nickel, production also grew strongly, increasing 12% year-on-year, the best first quarter performance since 2020. This reflects the stable production from the Voisey's Bay mining expansion project, along with the successful commissioning of the second furnace at Onça Puma, bringing total production to 49,000 tons. During the quarter, we also announced an agreement to form a consortium for the Thompson operations. This transaction is part of our strategic review of assets and supports our broader objective of strengthening the competitiveness of VBM's global mining portfolio while positioning these operations for long-term value creation.

To that end, I would like to also highlight the release of new stand-alone asset reports post our VBM Day held in March. This initiative reinforced our commitment to transparency and to providing the market with greater visibility into the quality, scale and potential of our base metals portfolio. We firmly believe that this increased transparency will support a better understanding of the strategic importance and value creation potential of Vale Base Metals.

Finally, I would like to highlight a pioneering initiative that reinforces Vale's leadership in innovation and decarbonization. In April, we announced an unprecedented agreement to introduce the world's first ethanol-powered ocean-going vessels with operations expected to begin in 2029. This next-generation Guabaax vessels have the potential to reduce carbon emissions by up to 90%, marking a major milestone for decarbonization in global maritime transportation.

Combined with advanced efficient technologies and wind-assisted rotor sales, this approach delivers environmental impact, operational flexibility and energy security. This initiative reinforces our commitment to reducing Scope 3 emissions and positions Vale as a leader in shaping a more sustainable and competitive future for the industry.

Now I'll turn to Marcelo Bacci to talk about our financial performance. I'll be back for closing remarks before the Q&A session.

Thanks, Gustavo, and good morning, everyone. In the first quarter of 2026, our pro forma EBITDA reached $3.9 billion, representing a 21% increase year-on-year. This strong performance was primarily driven by another very solid operational execution in our 3 commodities, benefiting from higher volumes and improved price realization. Vale Base Metals' EBITDA more than doubled compared to last year, reaching $1.2 billion in the quarter. This is yet another demonstration of the significant value being unlocked in this business.

VBM's EBITDA would have been even higher absent the approximately $140 million negative impact of provisional price adjustments made at the end of the quarter. Based on today's forward curves, this impact would have been positive, implying a potential reversal in Q2. In iron ore, EBITDA reached $2.9 billion with a flat but solid performance year-on-year, supported by higher sales volumes and better all-in premiums, more than offsetting the appreciation of the Brazilian real during the quarter. Now let's take a closer look at our cost performance.

In the quarter, our C1 cash cost, excluding third-party purchases, reached $23.6 per ton, an increase of 12% year-on-year. As expected, this increase was mainly driven by the BRL's appreciation combined with the effect of inventories consumption carried from the previous quarters at higher costs. The all-in cash cost in turn increased by 8% with stronger all-in premiums and a solid performance in freight, helping to partially mitigate cost pressures. While external variables such as exchange rates and oil prices can introduce volatility to our cost structure, they further reinforce the importance of our ongoing focus on efficiency, productivity and operational excellence.

Assuming market consensus estimates for 2026 of an average BRL of BRL 5.25 and average oil prices of $90 per barrel, we are working to achieve the top end of our original guidances on a 61% FE basis. In this slide, you can see the different sensitivities for our C1 and all-in costs for iron ore. Through disciplined execution and a strong focus on controllable cost drivers, we remain confident in our ability to progressively and structurally reduce our cost base, supporting competitiveness and value creation across the cycle.

Turning now to Vale Base metals. Both copper and nickel once again delivered solid and consistent reduction in all-in costs. Starting with copper, all-in costs once again reached negative territory, declining by $1800 per tonne year-on-year, reaching minus $0,600 per tonne. This very strong result was mainly driven by robust byproduct revenues, supported by higher prices and increased gold volumes.

In nickel, all-in costs declined by 48% year-on-year, reaching $8,200 per tonne. This improvement reflects stronger byproduct revenues from our polymetallic assets, benefiting from favorable pricing as well as cost optimization initiatives at Voisey's Bay. Fixed cost dilution driven by a 12% increase in production volumes also further supported results.

Looking ahead, we expect Vale Base Metals to continue delivering operational improvements beyond the contribution from byproduct prices. In nickel, our focus is now on maximizing cash flow generation, leveraging on continued cost efficiency and on the polymetallic nature of our assets. Now let's talk about our cash generation. Our recurring free cash flow generation reached $813 million in the quarter, representing a 61% increase year-on-year, this stronger performance was primarily driven by solid EBITDA combined with the settlement of currency swap and oil hedging programs.

The more negative working capital variation reflected higher inventory levels and an increase in accounts receivable with collections expected over the coming quarters. Despite the volatility that oil prices can introduce to the cost structures, we remain well positioned, thanks to our risk management strategy, which helps protect and stabilize our cash flow. Our oil hedge program was designed to limit exposure to tail scenarios through the use of zero cost collar instruments.

These hedges provide Brent crude oil price protection above $80 per barrel for around 70% of our bunker oil demand in 2026, supporting greater visibility and stability in cash generation. Finally, I would like to highlight the strength of our cash position and our continued commitment to shareholder returns. In the first quarter, we distributed $2.7 billion in dividends and interest on capital, while we also repurchased nearly 5 million shares under the current share buyback program.

As you can see on the next slide, these distributions resulted in a seasonally expected increase in expanded net debt, which reached $17.8 billion in the quarter. Our target range remains unchanged at $10 billion to $20 billion with a clear objective of operating around the midpoint of this range. Important to say that under the current price environment for iron ore, copper and nickel, we are increasingly confident on the possibility of paying extraordinary dividends and on further executing on our buyback program throughout the year.

Before passing the floor back to Gustavo for his closing remarks, I would like to reinforce that we are building a company designed to be resilient through the cycle. Our flexibility, cost discipline and capital allocation approach are key pillars of this strategy. With these elements in place, we expect to continue benefiting from the strength of our iron ore portfolio while fully unlocking the potential of our base metals business, consistently delivering value to all stakeholders. Gustavo, please.

Thanks, Marcelo. I would like to highlight the key takeaways from today's call. First, safety remains a core value at Vale, and we continue to make consistent progress in strengthening our safety culture and performance.

Second, we continue to execute with discipline across our 3 business lines, maintaining a strong focus on operational excellence. Third, we are persistently pursuing cost efficiencies to preserve competitiveness and build resilience in the face of ongoing external cost pressures. Fourth, we remain fully committed to our sustainability agenda and our 2030 goals, advancing innovative solutions that support our decarbonization and sustainability targets.

And lastly, our disciplined approach to capital allocation remains unchanged, enabling us to generate strong cash flow and deliver attractive returns to our shareholders.

Now let's open for the Q&A session. Thank you.

[Operator Instructions] Our first question comes from Leonardo Correa with BTG.

I believe Leonard is having some problems with the connection. We are going to go ahead with Alexander Pearce with BMO.

Excellent. So my question is just around the iron ore market at the minute. So you've redirected pellet feed to Brazil given Oman is offline at the minute. Maybe you can just talk about -- is there any knock-on impact to product mix and cost? And then the second part of the question is, can you provide an overview on what you're seeing in terms of demand for the premium products at [indiscernible].

Thanks, Alexander. Let me start by giving you our view of the impact of the conflict in Iran and specifically what happens to Oman, and then I can give you a broader view on the market, okay. So the way we see it is the steel production remains stable globally. In the Middle East, specifically as per your question, steel production is also stable because they're keeping production based on scrap and pellet inventory. This is despite a contraction in Iran crude steel production. So as you know, Iran crude steel production has been halted. But the rest of our clients in the region, they're still producing, okay?

Important to say that in terms of pellet production, Bahrain, which is an important pellet plant in the region has been mothballed because they had difficulties in receiving pellet feed. This pellet feed has been diverted to other markets, essentially for China and Asia in general. But there's actually -- this additional supply has been offset by no exports from iron in terms of iron ore. So our view on the market, specifically out of the conflict is neutral. There has been a neutral impact on the global iron ore supply with the conflict in Iran.

Also, just maybe to take the opportunity to highlight that looking forward, we believe that with the conflict, the cost curve has shifted upwards. And if we calculate, it has shifted forwards between $5 to $10 per ton. We also noticed that the shift upwards is actually asymmetric with some marginal players in the cost curve being more impacted -- being impacted actually by more than $10 per ton, which actually supports a bit of the prices that we're seeing today, okay? This is more general aspects of the conflict in Iran.

Market in itself, I think you asked about the high-quality iron ore, high-quality pellet feed. We do expect the market to be stable for pellets, even with an eventual increase in supply net-net of supply of high-grade pellet feed and demand of high-grade pellet feed. So coming in the next quarter, we expect pellet premiums to be stable or even with a slight increase.

On the general market, I think it's just a broader overview. We also see the broader market stable despite the conflict in Iran. China, as we see crude steel production is stable according to independent institutes. As a proxy, we always look into blast furnace utilization and blast furnace utilization is at about 90%, which is extremely positive and high. We still believe and see continued analyzed steel exports at a number of 100 million per ton in million tons in 2026.

Infrastructure and manufacturing offsetting a weak property sector that's still actually a challenged sector for China. Another important point is when you look into iron ore port inventories, they actually reached 166 million tons, which is an increase quarter-on-quarter. But I'd like to highlight that our inventories of value ores have decreased about 10 million tons quarter-on-quarter. This is extremely important, right? And the days to cover on the whole value chain remains at about 30 days. Ex China, we see -- so a stable overall market. There's a variation by region, but it is stable. And all in all, we see supply-demand balance and the price outlook is also balanced.

Our next question comes from Leonardo Correa with BTG.

Yes. So very sorry for the technical difficulties I had before. Yes. So a couple of questions on my side. First one on the cost side, specifically for iron ore, right? I mean when we look at the C1 costs, clearly a lot of debate on trends and on what you reported, right? It was about $23 per ton with about 10% inflation year-over-year, right? So I guess the question we've been receiving over the past hours is how you feel your guidance at this -- how comfortable are you with your guidance at these levels, considering what you're seeing and so many moving parts with some cost inflation items, right?

I think the guidance for the year is $21 you just delivered '23. So I just wanted to see how confident you are on that guidance. That's the first one.

The second one, I can't not ask about CMRG and all the implications, right, for the iron ore market. We've been seeing this back and forth with BHP. I think several observers in the market, they think that there could be some pressure from those inventories at Chinese ports, mainly gimmliblar fines and some other specifications moving back into the market and potential implications. I think that's one point.

But more importantly, we've been seeing other companies also settle with CMRG, right, Fortescue, I think, also announcing some deals. I wanted to hear from Vale's perspective, right, if anything changes I know that Vale already has about, I think, 10% of shipments in Yuan settled in China. So I just wanted to hear how the relationship is with CMRG and what Vale has been doing with the group over the past weeks and implications. Those are the questions.

Leo, this is Marcelo speaking. I'll take the first question on cost guidance. As you saw on our presentation, the main effect on costs come from seasonality, which is always the case in the first quarter of the year and also in the second quarter as a consequence of higher costs on the first one, FX and oil prices. If you take the forward curves that we see today on the market for oil and if you take the projection for FX that we see on the focus report from the Brazilian Central Bank, which is currently at $5.25. So if oil converges to $90 and FX at $5.25, we should be able to deliver the top end of our guidance in C1 for the whole year.

Second quarter is not going to be too different from first quarter, but we should see a second half better than the first half in a way that we deliver the top end of the guidance for year-end. It's important to mention that the external factors are the main factors behind the cost inflation, and they impact everyone in the industry. It's not a Vale specific situation. But we're confident that if the market goes in the direction that the futures markets are indicating today, we should be able to deliver the top end of the guidance.

Leo, on CMRG, I think acknowledging what you just said, they are talking to all the major players. And as you mentioned, they've talked to BHP now trying to come to an agreement with Fortescue. They have reached an agreement with Hancock. -- and there will be probably a negotiation with Rio.

Same happened to us. We keep a collaborative dialogue with them. We're always seeking efficiencies, and that has to be the basis for us to negotiate.

Also important to say that they understand the corrective nature of our iron ore grades and also the physical and metallurgical properties of our iron ore, which actually differentiates us a little bit. So what we're doing with them is that we are working together to design the way we can collaborate to develop well-suited blends for the Chinese steel industry. So it's a bit of a different focus, trying to find the efficiencies, as I just mentioned.

And ultimately, just to highlight the prices, we do believe the prices will be set up based on the supply and demand, which is the ultimate driver.

Our next question comes from Liam Fitzpatrick with Deutsch.

Hopefully you can hear me. It's Liam Fitzpatrick from Deutsche Bank. I've got 2 questions. Firstly, on the buyback. How do you want us to think about the pace of buybacks through the year? Because you're still some way above the midpoint of your net debt range, but you did repurchase some shares in Q1. So should we think about the pace picking up as net debt falls? Or would this be more opportunistic around the share price levels? And then the second question is just on costs. I think you've answered most of it, and you touched on it in your previous comments. But curious as to where you currently see marginal cost for the industry landed into China at current diesel and freight rates.

This is Marcelo. I'll take the first question. We not only look at the current state of the expanded net debt, but most importantly to the trend. And the first quarter, it is always because of the dividend payment that we make. Seasonally, it's always a quarter where the net debt goes up. But our decision to start buying back again has to do with the outlook that we have for the year.

As we mentioned before, we did have an impact on costs, but the prices more than compensated that impact in a way that margins are going up. So we have a positive view for cash flow generation for the year. And as a consequence of that, we have decided to start buying back again. And as we mentioned before, if we are in a situation where net debt trends below $15 billion, we should be deciding to distribute more to our shareholders in the form of a combined situation between extraordinary dividends and buybacks. So this is what you can expect for the coming months and quarters.

Leo, on the impact of diesel and bunker freight ultimately on the cost curve, I think as I mentioned, we believe that the cost curve has -- the industry cost curve has shifted upwards, as I just mentioned, from $5 to $10 per ton. But this is not symmetric. Some of the players who sit on the the last quartile of the cost curve are more impacted, for example, for distances. So what we view is that this asymmetric impact in the cost curve might actually shift it -- so the last quartile by about $10 per ton. So it's a significant impact on the last quartile of the cost curve.

Leo, Gustavo here. I'll just add to this last question that Rod answered that it only reinforces the strategy that we have for long-term operate is the right one, and it's paying off, right? Because we've been able -- I think one of the things Rogero has done recently is to increase the level of affreightment for our fleet. We decided to do this last year for this year. So this year, for example, we are mostly contracted, close to 100%. So the increase that we've seen in time charter, for example, we haven't been able -- or we're not impacted, plus the hedges that we put on bunker. So we've been able to manage some of that impact to our own operations. And I think that is very important to highlight.

Next question from Daniel Sasson with Itaú BBA.

My first question is actually related to the cost front also. But more specifically, with the macro changes that you've already discussed, the change in FX, oil costs, how do you think that it has changed Vale's relative competitive position versus the Australian guys and maybe versus the junior miners in Brazil or the smaller players in Brazil? Because in the end of the day, it's a matter of what weighs more, right? Iron ore prices have actually increased more than the negative effect of higher costs because of the higher oil prices and stronger BRL and so on and so forth. So if you could guide us on how you are thinking about your relative cost position versus the Australian guys or the main players, that would be great.

And the second thing, you also mentioned a little bit about the strong performance you had in copper volumes in the first quarter. We know that you have an important maintenance stoppage of Sogo throughout the year. And therefore, maybe it would be too optimistic to believe that you would be able to exceed your 350,000 to 380,000 tonne copper production guidance for the year. But whether you think it's feasible or likely that you could stay somewhere closer to the upper range of this guidance. So how you're thinking about the evolution of your base metals division throughout the year, considering the maintenance stoppages, I guess the question is that.

Thank you for the question. Look, I think dividing between the Australian miners and the Brazilian miners. I think in regards to Australia, we have a disadvantage of the distance. And in absolute terms, when the bunker oil increases specifically, we have a disadvantage, right? But having said that, we have been able to offset a lot of disadvantage by our hedge program.

As Gustavo mentioned, we've reduced our exposure to the TC market. We had previously operated with between 25% to 30% spot exposure. This year, we're operating with less than 5%, especially to Asia, which is a great advantage. And also, we have, as Marcelo Bacci talked in the beginning, a program that we are hedging about 70% of our exposures to the oil -- to the bunker market. So this actually has helped us to offset this logistics and geographic distance disadvantage. You will see more of this coming on the next quarter, but you shouldn't expect a full impact of bunker oil prices increase in our relative competitiveness, okay?

In regards to Brazilian players, I think we're really well positioned because we have done all the hedging that I just talked about. We're shipping larger vessels, which are more efficient. So -- and they do rely on spot market prices. So relative to the other Brazilian players, we have increased our competitive position.

Daniel, Gustavo here. Before passing on to Shaun, I'll just add to this question, the positive effect of premiums as well. If you look at our price realization quarter-on-quarter, we have also improved substantially $2.6 per ton, IOCJ premiums have improved BRBF. So this is also, to a certain extent, offsetting some of the impacts that Roger was saying. So when you look at the overall margin of the company, it has expanded, in fact, right? So more than offset the cost increase that we faced.

Yes, Daniel, it's Shaun. Look, I think, firstly, the Q1 results for the portfolio as a whole really set us up well to answer your question directly. And it was important for both the polymetallic or nickel part of the business that contributes meaningful amounts of copper as well as the copper side to deliver well this quarter, and they've done that. Just to highlight that point, Sasesego, I think it's the best performance since 2008. It was an 81% year-on-year increase. Even Salobo with lower grade did the same mine movement with 30% longer haul distances, slightly lower grade and had 4.6% better recoveries, and we're able to actually increase copper output.

I was at site last 2 weeks ago, they're knocking it out the park. So they're doing well, but we've got that 110-day shutdown, as you've mentioned, at Sasesego. We're going to remain very focused and disciplined on that. And then on the polymetallic side that contributes, Gustavo and Bachi commented on the performance overall. But Voisey's where we get meaningful copper, that was a 64% year-on-year increase and they've hit record production. So across the board of what we control, I think the team is setting us up well to do exactly what you said, but we're going to remain cautious, and we'll update the market as we go through the PMP.

Next question from Rafael Barcellos with Bradesco BBI.

My first question is on your commercial strategy. Can you give us more color on your strategy around the medium-grade Carajás going forward? I mean, specifically, what is the outlook for growing these product shares in your mix? And to what extent does that come at the expense of the IOCJ volumes? I'm particularly asking this because we have seen the 65, 62 spread improving recently.

And then moving to VBM on copper. I would say that Alamo appears to be your most important project at DBM. I know that you published your new reserve report recently. But my understanding is that the full potential of the project hasn't been fully disclosed yet, right, given that the drilling and exploration is only now being initiated in the second Q, so probably as we speak, right? So can you give us a sense of what we can expect from this drilling and exploration initiative? And more important, I would say that when should we expect that the exploration plan will be concluded?

Rafael, thanks for the question, [indiscernible], on the product portfolio. I think just restating what Gustavo has just mentioned, our fine premiums has actually been very positive this semester, $4.1 per ton versus $1.9 per ton in the fourth quarter 2025. This is just on the fines, not accounting for pellets, right? This has to do with some factors. The first one, and as you mentioned, is that we have seen a very good acceptance of our mid-grade Carajás globally.

We're actually planning to increase it because the market has not only appreciated the product from a chemistry point of view, but also from a metallurgical performance. We're actually moving to have 50 million tons to 55 million tons of this product into the market, which is actually quite frankly, beyond our expectations because the market accepted it so well, and there is a huge demand for the product.

So just to add some other points on the portfolio, which helps our realized premiums. The other one is a very good acceptance of our China concentrate. It is really becoming a standard product. And this year, we expect to have an annual sales of about 40 million tons of the Chinese concentrate product. I mean, very good for us, very good for the market. Last but not least, I think -- the control -- as we look into the mid-grade Carajás, we can control, we can adjust the volumes of Carajás that we have, stand-alone Carajás that we have in the market, and that actually defines the premiums.

So we're always trying and looking into how to optimize it, shifting from mid-grade to high-grade Carajás to achieve the best result. And again, not the best result only on price realization. But as we have always been talking about, it's about maximizing total contribution, total margin contribution, optimizing production costs, price realization. But again, this semester, we'll be able to do it all and still increase price realization.

Rafael, it's Shaun. Yes, I was actually at the project at Alamar a couple of weeks ago with the team. And look, they're making incredible progress. Just to remind you, we published, you remember, just around BBM, our MRMR statements. We are roughly doubling where we already doubled last year, our exploration in Para. A lot of that is going to be concentrated around all our projects and sites. So we'll keep -- as we get through probably a year from now, we're looking to target over 20% increase, as you recall, from '24 in our mineral inventory. And the real focus is on increasing NPV. And so you can expect that not just on Alamar, but on our projects as a whole.

When I was at site, we were just in the process of removing a very small alligator from an old exploration it and starting the dewatering process to actually focus on some of that exploration drilling at that project. And just to reorient again, remember, we've changed the mining method there. It's about $0.5 billion in CapEx improvement. We're on track and the real focus at the moment is on the permitting time frames and progressing the study. So we'll have updates probably by Veladay and certainly on the exploration similar time next year.

Our next question comes from Marcio Farid with Goldman Sachs.

A couple of follow-ups on my side. I think the first one on Simandou, but not only the view on volumes, we've seen real reporting a couple of weeks ago. So I think that's relatively clear. But if you have any views in terms of expectations for ramp-up. But also, obviously, Simandou, everybody sees it as a high-grade Fe content, right, above 65%. But at least the grades we've seen so far also show a high alumina content as well, which is interesting, right?

So it seems like Vale is still one of the few producers at scale that can offer the low alumina product. Just want to check with you on that and how you see Simandou obviously affecting the premium market in terms of Fe grade, but how can Vale be positioned for that scenario with the current portfolio that you guys have?

And maybe secondly, quickly, maybe to Gustavo and to Sean, in terms of B met or DBM IPO, there has been some news suggesting that you guys are going to be IPO ready. Just -- and we get a question a lot from investors. So it's probably good opportunity to have a view in terms of how to think about business IPO, when, why and why not?

Roger, on Simandou, I think you're absolutely right. In the first quarter of 2026, the reported production was 1.5 million tons. So there's going to be, as we're seeing, a gradual ramp-up. The numbers for the years, again, the official from them is from 10 million to 15 million tons. So again, it's gradual as we expected, right? To your point of -- on the chemistry side, yes, it is indeed the high alumina relative to silica, which is a very important parameter for blast furnaces. And that means that for this ore to be used effectively in blast furnaces, they need to have a blend with complementary ores, which have silica higher than alumina, silica ratio to alumina higher.

So -- and again, the one who has this kind of iron ore in scale is Vale. So that actually positions us in the whole portfolio strategy to provide the ores that make the blend the ultimate optimizer of blast furnace performance. And we are looking into this and thinking about how to design and where to sell our ores on a product market strategy.

Marcio, Gustavo here, on the VBM [indiscernible] question, what we've been sharing and discussing with our shareholders in the market is that the company had initially the goal to stabilize operations. I think Shaun and the team have been able to achieve that as you've seen in the performance Q1, it's been very strong. And it's been strong in the last several quarters. So that has shown that the carve-out has worked.

And the next step is to make sure we can grow the business. So we see an enormous potential to grow particularly the copper business. We have a goal to double the size of our copper business. The more we drill and the more we explore, especially in Carajás, the more excited Sean and the team gets. So this is certainly a key priority.

Any strategic market transaction will depend on market conditions, if it is necessary for us to achieve that future. But the priority today is to make sure we continue to operate our assets well and we can grow the business. So that's exactly what the team is working on. The good thing of the carve-out is that it gives us optionality. So we can do many things. But I always say the IPO, potential IPO, it is a mean to an end. It's not an objective in itself, and we continue to think that way.

And Marcio, if I can add to Gustavo's comments. Our job, I think, from the beginning was to take a platform that wasn't visible and wasn't creating value and position it where essentially Valeus and Menara have choices. I've mentioned before, I think we're probably 2 years ahead of what I thought the team could deliver. And I think you would have seen in our VBM Day, which is part of also just revealing the value potential that I think was invisible.

I think Marcelo pointed out that where the business had traditionally contributed maybe 10% or 15% of EBITDA to Vale, it had -- it was on track for, say, 30% to 35%. And you can see this quarter, we're over 30% on EBITDA, and we have further to go. And I think as Gustavo said, it's about maintaining the performance, but then also creating possibilities. We do not need the funding for our growth at this stage. I think if we deliver and prices remain even this year, we'll be around 0 net debt in this business, and we can self-fund. So it's more a strategic question for our [indiscernible] at the right time.

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

Just wanted to ask a follow-up on the -- on the excess cash and return to shareholders. Given the earlier comments by Marcelo, what do you think Marcelo is where your preference is between buybacks and dividends? And you clearly are already paying a regular dividend. So does that mean or it's fair to assume that maybe excess cash return to shareholders would be more on the buyback than special dividends?

And then on the second question, I don't know, Gustavo, if you can provide, please, an update on the railway discussion with the government. Clearly, it seems that you're packing the negotiating table. Maybe that is a good indication. But I don't know, any color in terms of timing? What are they asking? Anything that you can provide to give us more certainty on the potential outcome.

Carlos, last year, we gave a clear preference for dividends because of the change in taxation that came at the year-end. This year, the situation is different, and we tend to be more balanced between buybacks and dividends, of course, depending on where share price is. But I would say the answer is a balanced approach between buybacks and extraordinary dividends.

Carlos, thanks for your question. So on the railway concession discussions, just to recap everybody, we had signed an agreement -- no mining agreement in 2024, we're not able to conclude. But to your point, we have resumed conversations with several governmental entities early this year. And I'm hopeful that we'll be able to conclude this in a way that works for everybody, including Vale. So we are working hard and hopeful that we'll be able to conclude this discussion this year still.

Our next question comes from Marina Calero with RBC.

I have a follow-up question on cost. Can you clarify whether the sensitivities you presented today include the impact of your hedges on the currency and the fuel? And maybe as an extension of that, have the recent developments in the Middle East changed the way you are thinking about your hedging strategy for 2027?

Thank you, Marina. The sensitivities do not include the hedging policy because the percentage of hedging that we have at different points in time is different. But specifically for 2026, we have a significant hedging position on oil and also some of the FX exposure that is partially compensating, but the result of that comes as a financial result and not as part of our EBITDA or included in the C1 or all-in cost calculations.

And we tend to be balanced and also careful when talking about the hedging for 2027. I think for '26, what we have in our portfolio is already very significant. And we discussed at this moment what we're going to do for '27 in terms of affreightment, in terms of oil exposure and also FX. The market gives us some opportunities. The market in oil, for instance, is very much inverted, and we are looking at the markets and deciding what to do.

Our next question comes from Alfonso Salazar with Jefferies.

Just a quick question for Roger. Roger, regarding production of domestic concentrates in China, there were some targets to expand that capacity. It hasn't materialized. So I was just wondering what is your expectation for the future years regarding production in China and also your expectations regarding more scrap use in China for steel iron units. So that would be interesting to hear your thoughts.

Alfonso, thank you. Domestic concentrate in China these days because of not being impacted so much impacted by freight. They've gained some relief. But longer term, it's really challenging because it's low-grade iron ore in the ranges of lower than 20% Fe content. A lot of the mines are underground, very smaller operations. So our perspective is that currently, they are producing about 260 million tons per year, and they're going to come down to about 160 million. So that's our view, our expectation for the future, which is a decline in domestic iron ore production in China of concentrate. So this is one of the trends.

In terms of scrap, in the past, we had a sort of more sort of optimistic view. Today, we believe the scrap is going to increase gradually from the level they are operating about 300 million tons of scrap per annum, but this is going to be very gradual, and it's going to be absorbed naturally within the system. So nothing that would create a major impact or disruption in the iron ore supply, seaborne imports.

Now we're going to go ahead with our next question from Yuri Pereira with Santander.

Back to Nogira, please, back to the cost topic. Regarding your comments about high-cost producers having a cost impact of more than $10 per ton. Do you have it in terms of volumes? I mean, what's the negative impact on iron ore supply? I remember you guys talking about roughly 150 million tons, if I'm not mistaken, impact with spot prices below $90 per ton. So just trying to figure out this. So how about now considering that $100 is the new 90 is right?

Yuri, this is a good question. With this dislocation, we've actually done a sort of initial calculation, okay, with plays would actually be on the on the anchor point of the cost curve. And our estimate is that prices reduced by $10 with the current other elements such as freight and diesel staying the same, there will be more than 50 million tons of iron ore production that is going to be out of the market with negative margins. This is our preliminary assessment.

Our next question comes from Igor [indiscernible] with [indiscernible].

We have seen an increase in expenses related to iron ore, both in terms of the TRFM, the royalty rate and the distribution costs given the concentration of volumes in Chinese ports for subsequent -- more specifically regarding royalties, we note a recent decision by the Federal Attorney General Office overturning the preliminary injunction that deducted the CFM calculation basis using the TRFM payments. I'd like to get you guys' perspective on what you expect from this standpoint regarding royalty regulation and also on the level of distribution costs we have seen, which rose like 40% quarter-over-quarter, even as the volume declined sequentially. How can we model these expenses going forward?

Igor, thank you for your question. Those are 2 different subjects. On the concentration part, I think this has to be seen it is difficult to model on an isolated way because it is part of a portfolio strategy. So this will tend to vary depending on how our commercial team is looking at the market and the different products that we're going to offer to the market. And you're going to see always the flip side of these costs on the margin -- and that changes, and it's a dynamic decision. So it's going to be difficult to model as an expense.

When it comes to royalties, there is a continuing discussion with the different authorities. It's difficult to make comments about decisions that may come from justice, but we are always working towards trying to reduce those costs, but there are some things that don't depend on us.

And then Igor, on the second part of your question, we have started this strategy of concentration in China, especially because in one side, it increased costs for the concentration processing. It reduced recovery, but it does increase our realization price. So net, it is net 0 or positive impact, but that has a very important impact in our product portfolio. But specifically to your question, we're actually improving this because sometimes we have concentrated volumes in certain regions, and we need to redistribute in China to find markets with better demand. So this is a cabotage within China. And we have many initiatives in place to do that without incurring this redistribution costs. So you should see an improvement.

Our next question comes from Kai Ribeiro with Bank of America.

So I wanted to once again touch on the subject of your expanded net debt concept, particularly as the proportion of nonfinancial liabilities within that metric drops significantly from 2027 onwards. I wanted to see if you can give us some color on how you think about that range, if you would consider increasing it, if you can give us some color as to what levels you could be contemplating and assuming you change it to, say, a level closer to $15 billion, $25 billion, what that means for extraordinary dividends, particularly as you had been looking at that $15 billion as that anchor to dictate these decisions to pay extraordinary dividends or not?

And then secondly, shifting gears here to the nickel front. There were some important changes recently in Indonesia in the past 6 months to the mining quotas to the reference price upon which royalties and taxes are calculated. So I wanted to see if you could discuss from your point of view, the implications that, that has for your business and whether the price surge that we've seen on the nickel side of things since those measures were announced, if that compensates for that higher cost of operating in the country.

[indiscernible], on the expanded net debt, today, around 1/3 of our expanded net debt is related to the present value of the commitments related to reparation, which is a more -- which is a part of our debt that is not manageable. You cannot roll over, you cannot do anything other than pay. This number is going to reduce significantly between '26 and '27 as we pay the commitments that we have. So I would say that for this year and next year, it is not in our plans to change the rule that we follow or to change the criteria or the range. But as the number of the expanded part of the net debt gets smaller in the future, we probably are going to review this, but not until the end of '27.

Yes, it's Shaun. I think to your point, we started seeing late last year, the impact of the Indonesia's Ministry of Energy and Minerals adjusting those RKB quotas. I think they said what 250 million to 260 million tonnes, whereas it was at, say, 379 million tonnes in the prior year. And I think given that they're responsible now for about 65% of global nickel supply and I think realizing the impact of probably similar to what you see with the DOC and cobalt, we did see the market respond.

I think what you're seeing at the moment is a combination of that effect, but also given that something like 90% of the sulfur supply, particularly impacting MHP and HPELs in Indonesian nickel production come from the Middle East. And so the sulfuric acid and the sulfur supply going in there is having, I think, quite a significant impact on cost of production. And I think we're seeing some early signs of curtailment of the supply for some of those areas.

I think on our numbers, you could see if these things sustain something like about a $3,000 to $4,000 a tonne increase in the cost of MHP if this persists. And I think we're looking at about 500,000 to 600,000 tonnes of nickel in MHP should be produced in 2026. So a fairly significant impact.

For us, we're net long sulfuric acid and sulfur. We're benefiting, I guess, from the higher pricing environment, which is obviously good news. And I think we're all just making sure we can control costs and be as agile as we can. And our supply from PTVI of IMHP, they currently -- they have enough sulfur supply. So that's not a concern for us. We're definitely seeing, I'd say, the combination to your point of both that curtailment, but also some of the cost increases to producers in the country.

Thank you. This concludes today's question-and-answer session. Vale's conference is now concluded. We thank you for your participation.

Good morning, ladies and gentlemen. Welcome to Vale's Fourth Quarter 2025 Earnings Call. This conference is being recorded, and the replay will be available on our website at vale.com. The presentation is also available for download in English and Portuguese from our website. [Operator Instructions] We would like to advise that forward-looking statements may be provided in this presentation, including Vale's expectations about future events or results encompassing those matters listed in the respective presentation. We caution you that forward-looking statements are not guarantee of future performance and involve risks and uncertainties. To obtain information on factors that may lead results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission, SEC, the Brazilian Comissão de Valores Mobiliários, CVM, and in particular, the factors discussed under forward-looking statements and Risk Factors in Vale's annual report on Form 20-F.

With us today are Mr. Gustavo Pimenta, CEO; Mr. Marcelo Bacci, Executive Vice President of Finance and Investor Relations; Mr.Rogério Nogueira, Executive Vice President, Commercial and Development; Mr. Carlos Medeiros, Executive Vice President of Operations; and Mr. Shaun Usmar, CEO of Vale Base Metals.

Now I'll turn the conference over to Mr. Gustavo Pimenta. Sir, you may now begin.

Hello, everyone, and welcome to Vale Fourth Quarter 2025 Conference Call. Last year, we delivered outstanding results by exceeding all production guidances while maintaining a strong focus on cost performance and capital discipline, both in iron ore and Base Metals. Our flexible commercial strategy in iron ore and the successful ramp-up of key growth projects such as Capanema, Vargem Grande, Onça Puma furnace 2 and Voisey's Bay expansion were fundamental in driving value for 2025 and will continue to do so in the years to come.

At Vale Day, we outlined our strategy and presented our ambition to create superior value for our shareholders, driven by a relentless focus on operational excellence and adding high-quality growth projects to our portfolio, particularly in copper and iron ore, leveraging our unique endowment. I am extremely confident that by executing on this long-term strategy, we will generate significant value for all of our stakeholders.

With that, I would like to now turn to the highlights of our 2025 performance. As I mentioned earlier, we were able to make significant progress in 2025. On our core value safety, we achieved a 21% reduction in high potential incidents, reflecting the continued evolution on our safety culture and on our focus on building an accident-free work environment. On tailings dams, in August, we fulfilled the commitment made to society in 2020 by eliminating all dams classified at emergency level 3 by 2025. We also ended the year with a 77% reduction in structures at any emergency level compared to 2020, and we expect it to reach an 86% reduction by the end of 2026. These are meaningful milestones in our commitment to nonrepetition. We also continue to make solid progress on reparations efforts, reaching 81% execution of the Brumadinho agreement and disbursing BRL 73 billion under the Mariana agreement, ensuring fair and comprehensive reparation.

Operationally, 2025 was simply an outstanding year. We exceeded production guidances across all businesses while continuing to sharpen our competitiveness, once again delivering meaningful and sustainable cost reductions. I will cover that in more detail in the next slides. In February, we launched the Novo Carajás program, a transformation initiative that will help us double the copper output while enabling accretive growth in the world's highest quality iron ore endowment. Finally, the combination of strong execution in a more favorable cycle allowed us to exceed initial market expectations in terms of shareholder remuneration with a double-digit dividend yield. We entered 2026 with great optimism and the same focus to deliver strong results.

Now let's look in more detail at our businesses, starting in the next slide. Iron ore production reached 336 million tons in 2025, 3% higher year-on-year and the highest level since 2018. The growth was primarily driven by the start-up of low capital-intensive projects such as Capanema and Vargem Grande, combined with a very solid performance in Brucutu and S11D. Together, these assets enhance the flexibility of our operations and strengthen our product mix. In the second half of 2026, we will begin commissioning the Serra Sul plus 20 million tons project, which will further increase volumes from our most competitive asset in terms of quality and cost. Enhanced operational flexibility, combined with our active product portfolio management enabled us to maximize value creation in the iron ore business while continuing to meet the evolving needs of our customers.

Vale Base Metals also delivered outstanding results in 2025, achieving double-digit production growth in both copper and nickel. In copper, production reached 382,000 tons in 2025, 10% higher year-on-year, supported by record output in Brazil and solid performance across our polymetallic assets in Canada. Nickel production also showed a strong growth of 11% year-on-year, driven by the ramp-up of the Voisey's Bay mine extension project and the commissioning of the second furnace at Onça Puma, reaching 177,000 tons. This strong performance at Vale Base Metals underscores the exceptional work of our team in unlocking value from our existing assets and positioning the company to deliver on its long-term growth ambitions, particularly in copper.

In 2025, we delivered cost reductions across all 3 commodities. This year-on-year improvement reflects the success of our efficiency programs and greater operational stability, which continued to translate into lower unit costs. In iron ore, all-in costs reached $54 per ton, representing a $2 per ton year-on-year reduction despite a much lower contribution from pellet premiums. In copper and nickel, all-in costs declined by 77% and 27%, respectively, driven by higher byproduct prices and volumes. Looking ahead, we remain firmly committed to further strengthen our cost competitiveness across the portfolio. We are very confident in our ability to deliver our guidance once again in 2026, reinforcing Vale's position at the very low end of the global industry cost curve.

Before passing on to Marcelo, let me briefly touch on capital allocation. Our capital allocation remains robust and disciplined, combining consistent organic growth with above-average shareholder remuneration. The new Carajás program continues to advance as planned. In January, we received the construction license for the Bacaba project and construction works started on schedule. The start-up is expected in the first half of 2028, with an annual copper production capacity of 50,000 tons. We also conduct a thorough review of our CapEx program in 2025. This resulted in an annual optimization of more than $500 million and allowed us to establish a new long-term CapEx guidance below $6 billion.

Finally, in November, we announced a $2.8 billion in dividends and interest on capital. In 2025, Vale delivered a dividend yield of 16%, reflecting our confidence in the long-term prospects of our businesses. As I mentioned at the beginning of this presentation, our ambition is clear. We are committed to creating superior value within the sector, and I'm highly confident we will achieve that by consistently executing on our strategy.

I will now pass the floor to Marcelo Bacci, who will walk you through our financial performance. I will return afterwards for closing remarks. Marcelo, please.

Thanks, Gustavo, and good morning, everyone. As Gustavo highlighted in his opening remarks, 2025 was an outstanding year for Vale with strong performance and consistent execution across all 3 businesses. We delivered robust results and entered 2026 with great confidence and clear momentum. In the fourth quarter of 2025, our pro forma EBITDA reached $4.8 billion, representing an increase of 17% year-on-year and 10% quarter-on-quarter. As shown on the slide, this strong performance was primarily driven by an excellent quarter at Vale Base Metals, supported by favorable pricing conditions for copper and byproducts, while continuing to capture meaningful operational gains across our polymetallic operations in Canada.

As a result, Vale Base Metals EBITDA more than doubled both year-on-year and sequentially, reaching $1.4 billion in the quarter, clearly demonstrating improved operating performance as well as the earnings power of this business. In iron ore, we also delivered strong results with EBITDA remaining at a solid $4 billion with higher sales volumes and improved realized prices compensating for the BRL appreciation in -- the quarter.

Now let's turn to our cost performance. During the quarter, our C1 cash cost, excluding third-party purchases, increased by 13% year-on-year. This was primarily driven by the unfavorable BRL exchange rate and higher planned maintenance activities in the northern system with a clear focus on optimizing performance and ensuring long-term asset reliability. In addition, higher production volumes in the Southern and Southeastern systems contributed to higher overall average unit costs. However, this impact was more than offset by the positive contribution to EBITDA, reflecting the strong operating leverage of our portfolio. Importantly, this cost increase in Q4 was expected and fully in line with our 2025 guidance, which closed the year at $21.3 per ton, right at the midpoint of the guidance range.

Looking ahead to 2026, we expect C1 cash costs to range between $20 and $21.5 per ton, representing a further year-on-year reduction supported by continued operational discipline and efficiency initiatives. The all-in cost also performed in line with full year guidance, reaching $54.3 per tonne in the fourth quarter and averaging $54.2 per ton in 2025. This annual performance reflects the downward trajectory in our C1 as well as gains from our long-term affreightment strategy.

Turning now to Vale Base Metals. Once again, both copper and nickel delivered consistent reductions in all-in costs. In copper, all-in costs decreased by $2,000 per ton, moving into negative territory at minus $0.900 per ton, the lowest level in the history of the business. This outstanding performance was driven by strong byproduct revenues, supported by higher gold prices and increased gold production at Salobo, combined with solid operating performance in our Brazilian assets. In nickel, all-in costs declined 35% year-on-year, reaching $9,000 per ton. This significant improvement was mainly driven by higher byproduct revenues, particularly copper, as well as stronger performance at Voisey's Bay and Onça Puma, which helped dilute fixed costs.

Looking ahead, we expect Vale Base Metals to continue delivering operational improvements throughout 2026, further reducing operating costs beyond the positive contribution from byproducts. In nickel, our focus remains firmly on achieving at least a cash breakeven position by the end of the year and we are clearly on track to deliver on this objective. Now let's move on to cash generation. Our recurring free cash flow generation reached approximately $1.7 billion in Q4, more than double versus a year ago. This improvement was driven by our strong EBITDA performance as well as cash inflows from exchange rate swap settlements, reflecting the appreciation of the Brazilian real. Our annual CapEx closed fully in line with the guidance we had announced, totaling $5.5 billion.

Looking ahead to 2026, we remain firmly committed to disciplined and efficient capital allocation with expected CapEx in the range of $5.4 billion to $5.7 billion. We are confident that we can deliver all the growth initiatives discussed at Vale Day while keeping our operations at a very high standard with an annual CapEx below $6 billion in the long term, positioning Vale as one of the most accretive growth opportunities in the industry. Also in 2026, we already expect to see a significant reduction in cash outflows related to reparations and then decharacterization commitments as these programs advanced meaningfully over the last year. As a result, we anticipate a reduction of approximately $1.5 billion in cash disbursements compared to 2025.

Finally, as Gustavo highlighted, we announced $2.8 billion in dividends and interest on capital. Of this amount, $1 billion were extraordinary dividends paid in January, while the remaining amount is scheduled for payment in March. As you can see on the next slide, our strong cash generation in the quarter led to a significant reduction in expanded net debt, which closed the period at $15.6 billion. Our target range remains unchanged at $10 billion to $20 billion with a clear objective of operating at the midpoint of this range. This level will continue to serve as our reference for additional shareholder remuneration. Before handing back to Gustavo, I would like to emphasize that the strong results we delivered in 2025 were made possible by clearly defined priorities and a company-wide focus on disciplined execution. Our value creation is anchored on a consistent, disciplined approach to capital allocation, which will continue to guide our decision going forward. With this foundation in place, we expect to continue advancing our growth strategy while consistently returning value to our shareholders.

With that, I turn the call back to Gustavo for the key takeaways.

Thanks, Marcelo. I would like to highlight the key takeaways from today's call. First, safety remains at the center of everything we do, and our performance over the last years reinforces that we are on the right direction. Second, our culture and strategy are strong enablers of our ambition to consistently deliver superior value to our shareholders. Third, operational excellence continues to be a core pillar of our performance. We have delivered on all of our guidances in 2025 and we remain laser-focused on maintaining a solid operational performance in our businesses. At the same time, we are accelerating value-accretive growth opportunities such as the Novo Carajás program, offering a highly competitive and compelling value proposition. And finally, our disciplined approach to capital allocation remains unchanged, supporting our ability to deliver attractive shareholder returns.

Before we open up the call for questions, I would like to reaffirm our confidence in the company and in its ability to unlock even greater value in 2026 and beyond. We experienced the strongest operational performance in Vale's history, allowing us to maximize value from our existing assets while positioning the company for accretive growth opportunities. All of that at a special moment for the industry, where mining becomes essential to everything we do from energy transition to AI, and we believe Vale can play a key role in that future.

Now let's move on to the Q&A session. Thank you.

[Operator Instructions] Our first question comes from Leonardo Correa from BTG Pactual.

So a couple of ones for me. First one, maybe for Shaun on the very solid results coming from DBM, right, Shaun. So we saw a very strong cost performance, and my question relates to that. If we look at the copper all-in numbers, they were negative, right, around $800 per ton. Nickel was $9,000 per ton in the quarter, which I can imagine is highly influenced by the very strong byproduct credits that you guys are realizing in several precious metals and also gold, right? So curious to see, apart from that byproduct credit scenario, which isn't helping, I mean, just curious to hear about some other, let's say, bottom-up initiatives.

In terms of the guidance, right, I mean, on this topic, the guidance at Vale Day is about $1,000 to $1,500 in copper all-in costs. In nickel, it's around, let's say, $13,000 all-in cost. So you guys are materially below the guidance that you delivered a couple of weeks ago, right? So I just wanted to understand whether you see, let's say, some upside potential or better, some downside potential on the cost guidance you gave some weeks ago. That's my first question.

The second one, and this is for Gustavo. Gustavo, I think the introduction was very clear on how strategic this is all becoming, especially your copper assets, which the market for many years has not really looked into, right? And has not really valued. At this point, the market is still ascribing basically the same multiple for iron ore and copper, we think, right, something around 5x EBITDA inside Vale. You see a series of copper plays in the world trading at around 10x EBITDA or even higher. Vale has a lot of potential. There's a lot of growth in-house, which you guys are working on. I just wanted to hear a bit more of this opportunity and how to unlock this value, right? Is it going to be -- at some point, we're going to discuss again the IPO of VBM? Or you think it's more about delivering being consistent and just giving more, let's say, visibility on these projects?

It's good to chat to you again, and thank you for the 2 questions there. I think the questions around cost and ongoing improvements and sustainability. I mean, your thesis is correct. And I think we've talked a lot about this in the last year or so. You remember when I started in this role, we initiated a lot of restructuring, taking out significant -- about 1/3 of our global overhead. As a sort of catalyst as we changed the operating model for the organization to one that was more sort of lean and decentralized. Our targets at the time you'll recall, were about $200 million on a cash basis, almost half split between costs and capital as we improved capital allocation.

And as we went through the year, we found more and more opportunity as we then also focused on operating execution. So as you think about this, we ended up over $400 million, so double what we expected. There is an intense focus on -- you've seen we successfully ramped up multiple projects. So we've reduced fixed costs. We've diluted fixed costs by increasing volumes, and we continue to focus on keeping discipline in copper as well as nickel. So you'll see that in our Vale Day guidance. You will see this year as we go forward that there's an increasing focus on getting our tons and also continuing to drive the cost performance of the business. So that's our commitment and we'll continue to update it. And as for guidance numbers, obviously, it's early in the year. I'd say we're well on track. You can appreciate the volatility on everything from gold price to the various byproducts that we have. But yes, it's definitely a feature. And I think if it continues in the sort of price regime, there's obvious upside.

So I'll take the second question. Yes, look, I think the market starts to appreciate and see the value that our Base Metals business can bring to the table. If you remember a few years ago, we had a series of discussions around turnaround, and it's great to see the business performing operationally well. That was our first objective when we did the carve-out, and I'm very happy to see the strong performance from the business.

Now I think we still have a lot of work to do in terms of showing we can deliver growth. There is enormous growth potential within the endowment that Vale has. So we are doing, as you saw, around 380 kilotons a year. We can certainly work to double it and that's the mandate for the team. And the more Shaun and the team looks into our portfolio of assets and the development projects, the more excited they get in terms of the opportunity. So I think now it's on us to show that we'll be able to advance those projects. We got the installation license for Bacaba. We filed a preliminary license for Alemão last year. So things are moving forward.

And I think once we can demonstrate to the market that we can operate the assets well, but also that we can grow faster than our peers, our copper endowment and portfolio, I think we will continue to, from our perspective, get share price recognition for it. So that's what the team is working on. And then if we, at some point in time, decide to do some particular capital market transactions, we will assess, right, what is the ideal way to fund the business. But at this point, I think the focus is making sure we continue to operate well and we accelerate the growth program.

Our next question comes from Daniel Sasson from Itau BBA.

My first question is for Rogério. Rogério, you changed the way Vale thinks about its product portfolio, right, shifting from a goal of maximizing value for the company instead of maximizing iron content in the portfolio. But looking at your realized prices in 4Q, there was actually a decline versus 3Q with weaker quality premiums. Can you try to help us think about the dynamics of that in the last quarter and discuss how comfortable you are with the implementation of your current strategy, which also involves the mid-grade products and so on and so forth?

And my second question to Shaun, maybe a follow-up to Leo's previous question. It didn't become clear to me if you have -- what are your alternatives to try and reduce, for instance, your cash costs, especially in the nickel business, right, which is where you likely have more opportunities to -- so as not to depend on high byproduct revenues, right, which prices you can't really control. So what would you say are your more urgent operational goals that are not related only to ramping up volumes that would obviously allow you to dilute fixed costs if you could get in more detail on what are your goals to reduce costs? And that obviously, coupled with a more rational capital allocation also in the nickel business would drive you to become free cash flow neutral even if byproduct revenues decline, right? Those would be my questions.

Daniel, Rogério, I'll take the first question, and thank you for asking it. Indeed, our price realization for iron ore fines is slightly decreased, but primarily due to lower market premiums and mix optimization. But it's important to notice that it was not due to structural premium deterioration. This is a very important point here. There were 2 main drivers for this quarter-on-quarter change in price realization. First, the decline in premiums for IOCJ. We had about a decline of about $3.5 per ton. And also, we had a decline in premiums for BRBF of roughly $0.50. The second one was our sort of plan design, I would say, of another mid-grade product from Carajás, and we're trying to do it to optimize production, but also to maximize the use of our resources and test some additional specs in the market and see customer response.

But having said that, I think we are always saying and I would like to reinforce that our revised commercial strategy aims primarily at optimizing contribution margin across the supply chain. We've been saying that it's not about optimizing price realization independently. It's looking at the whole supply chain and optimizing contribution margin. I think also I'd like to call the attention to the fact that the premiums of our flagship products, especially the main ones, remained very resilient despite low steelmakers margin globally. So in particular, if you look at IOCJ, it sustained premiums of around $13 per ton and BRBF about $2 per ton if you average all the indexes $62. So very resilient premiums for those products.

And I guess more important to your question is that going forward, I think what we see is that this flexibility will be a real strength for Vale will be a real strength for us. So it may introduce some swings in price realization. I think this is something that you probably will observe. But we believe that it also will create optionality through the cycles. And with that, we believe we will be able to boost value through these cycles. So this is the view. It's always looking to total contribution across the supply chain, and that's why we're trying to drive a very flexible supply chain.

Yes. And Daniel, to your second question, just to give you a bit more color. I think the first thing is, as you say, we have to develop a track record of execution, not just on costs, but obviously, on volumes and asset integrity, maintenance, reliability and obviously, to do so safely. It's been 5 quarters you've seen the results relative to both market expectation. But I'll give you an example. Your question was specific to nickel. It's the first time, I think, since Vale acquired the business nearly 20 years ago that we actually -- we met budget. We obviously set stretched budgets. We are running this business not on backward-looking metrics, but we're continuing to build in low probability opportunities we see as we mature them into our rolling forecast and continuing to improve above and beyond what we can see.

So specifically, Onça Puma last year brought on, on time, under budget, 13%. We achieved record production even last year for that asset with that second furnace. This year, we will be running at full entitlement and will, even in a lower cost environment, be generating cash. And [indiscernible] and her team have done a great job of both cost control, asset reliability and bringing that on. And we -- I have to say every single one of our assets contributed savings in that restructuring I mentioned, both in cost and CapEx. And to Gustavo's point earlier in his opening remarks, continue to find these opportunities, and that's what we're pushing. Voisey's Bay Long Harbour, we ramped up about 20% ahead of plan. That meant we had nearly a $200 million improvement in our EBITDA relative to our internal plans, not because of price.

As you know, nickel price was weak, but because of the successful execution debottlenecking. And what happened in turn is the feed that we put through Long Harbour allowed us for the first time in its 11-year history to hit record production. Now with that asset now fully ramped up at Voisey's the challenges for us to continue to run that at capacity in the year ahead, which will -- while we continue to lower cost and dilute fixed costs. Sudbury, you remember, we were looking to maximize the throughput of our 6 mines through the Clarabelle Mill. It's the biggest throughput at 5 million tons we've had since 2016. We have to go, and we will go beyond towards 7 million in the coming years. And there's an intense focus. We've got broke out of where the dominant constraints are, what are the key value drivers in each of these different areas.

There's initiatives that are going above and beyond, we'll perhaps talk about in an Investor Day later this year alongside our copper projects and others and just give you a bit more of a flavor. So the idea is beyond our current plans, we recognize that we have to be in the lower half of the cost curve, not relying on byproduct credits, and we're not there yet. And you'll recall Gustavo at Vale Day last year saying that we have made a commitment to get to cash flow breakeven in lower price environments by the end of this year, and there's a lot of initiatives to focus on us doing that. So hopefully, that gives you a bit of a focus, but I'd say things like that asset integrity, asset reliability and development rates in underground mines and improving productivities are a core focus.

Our next question comes from Alex Hacking from Citi.

I had a couple of questions on nickel. Given your experience operating in Indonesia, how do you interpret the changes to the licenses there, firstly? And then secondly, do you see this as something that could be a structural change for the nickel market in terms of supply and price?

Alex, I think it's a question that everyone is asking. You've seen the price response in the last periods. We've seen very clear guidance and I think a realization with the Indonesian government that they have an ability here to address some of the significant oversupply. And there's also environmental and other aspects, I think they're focusing on. So I'd say going to the thematic that was, I think, raised in the last couple of questions, we're cautiously optimistic, but we recognize we're on the wrong end of the cost curve still on our journey. And candidly, from a competitive point of view, I don't want to rely on the kindness of strangers to make sure that this business is resilient.

So I'm cautiously optimistic. You will see that you saw the write-downs that we took on nickel really is a focus on our disciplined capital allocation. This is focused on legacy I want to make sure that this business is run as lean and as efficient and as cost competitive as we can. And then indeed, if we continue to find, let's say, more rational participation and supply occurring in Indonesia and elsewhere, we'll be -- our shareholders will be the net beneficiaries of that. The focus is on what we can control.

Our next question comes from Caio Ribeiro from Bank of America.

So my first question is on Fabrica and Viga. I just wanted to see if you could provide some color on the latest developments with these operations, if you have yet a conclusion on what caused the sentiment overflow and whether you see this generating any broader impacts to your other operations? In other words, if you see the need to upgrade safety parameters to prevent this type of event at other operations? And also, what is the current status quo in terms of freezing of assets or fines deriving from this incident?

And then secondly, clearly, the company has been making notable progress with derisking with the decharacterization of dams, reduction of emergency levels of dams as well. And this has been key to unlock restricted AUM, right? So I just wanted to see if you could share some color on how much AUM you perceive is still restricted from investing in Vale at this point? And what you see as the key triggers catalysts that you as a company can deliver over the next years to unlock this restricted AUM?

Caio, thanks for the question, Gustavo here. I'll cover the first one and then Marcelo will cover the second one. So on Fabrica, Viga, what we had there was overflow of water with sediments, mostly related with very heavy rainfalls that we faced during that particular period. We've been since then working to restore the operational conditions of the site. The impact has been limited. So we expect that in the next 2 to 3 weeks, most of the work will be done and we'll be ready to reestablish operations, certainly depending on the authorities for us to resume operations. We are taking a deeper look at our facilities to see what else can we do to make sure we become even more resilient given the changes that we are all facing in terms of climate change and so on. And we will incorporate those learnings for our existing facilities and others.

I think it is important to highlight that none of our dams and geotechnical structures have faced any impact. And they -- in fact, they performed very well during this rainy season. We do monitor them 24/7 and the work that we've been doing over the years have demonstrated that they continue to be resilient and performing very well. Nonetheless, we will look back at what else can we do to make sure a similar event doesn't happen, and that's what the team is working on. But from a practical standpoint, the impact has been limited, and we are working as we speak to make sure we can put those facilities in conditions to resume operations.

Caio, this is Marcelo speaking. About your second question, our estimate is that right after the accidents, we had about $5 trillion of assets under management between equity and fixed income that became restricted from investing in Vale. And since then and more recently, I would say, most of the recovery that we had was last year, apparently something like 30% of that or $1.5 trillion have been unlocked or unblocked from this restriction. I think the main events related to that is the improvement -- first, the improvement in the ESG ratings that some of these investors follow, and we've been consistently improving. But some of them also have their own criteria. So in parallel to working on delivering the KPIs that are important for the ESG ratings, we're also working directly with some of these investors in order to understand what we still have to do to come back to their portfolios.

For instance, next month of May, we're going to have another roadshow in Scandinavia, which is an important part of those -- where those restrictions are to show our improvements and to have a direct interaction with those investors. So this is gradually coming. It's up to us to continue to deliver the results so that we can accelerate the process.

Our next question comes from Christopher LaFemina from Jefferies.

I apologize if you addressed this earlier, I had to dial in late. So my question is around the commercial strategy in iron ore. And I'm wondering a couple of different factors there. So first, obviously, with the emergence of CMRG, which is doing a lot of blending, does that impact the potential premiums that you might get on some of your blended ores because your blending strategy has been far ahead of your peers, and I'm wondering how what, CMRG is doing might impact that?

And secondly, just in terms of your pricing, I mean, pricing against the benchmark historically, effectively against the Pilbara blend, which was 62% Fe content ore and now that's 61%. And I'm wondering if your discussions with your customers are in pricing relative to the benchmark, like where it is today versus where it's been historically? Or are you looking at bigger premiums just because the benchmark is lower quality? In other words, the Chinese that I would say historically you've gotten a 5% premium to the benchmark or whatever is 5% premium today, but the benchmark is lower quality ore, your premium should be bigger. Are you getting bigger premiums as a result of that? I'm not sure if that question was clear, but if it was, any help would be appreciated.

Chris, Rogério, it was very clear. To your first point about CMRG and the blending strategy, more broadly, I think we've been discussing with CMRG always with the view of creating win-win opportunities. So it has to be something for us to operate on a differential basis that we create value for both of us. In regards to the blending strategy, CMRG has its own goals of having its own blending yards, but it hasn't, and we don't believe it will affect our blending strategy in China. And in particular, even if they have their own blending yards, I think you may think about the world as a single big blast furnace. So whatever comes in makes is what makes a difference, and it's not how it is blended. So the strategic thinking is about what kind of product, what kind of chemistry, what kind of size distribution we offer to this sort of big world blast furnace, okay, if you will.

Your second question about the benchmark. It's -- what we do generally in our contracts is that we have a basket of indexes. So some of them will use Platt 62, some of them will use metal bulletin 62, metal bulletin 62 low alumina. So to a certain extent, some clients are actually looking to move from the 62 to 61, which will become a more liquid index in the market, and it's a reality. But it doesn't affect our price realization, if you will. I think if anything, it will change the price differential.

Our next question comes from Marcio Farid from Goldman Sachs.

Maybe a follow-up to Rogério. Rogério, probably an important point there, what's happening in the market in terms of overall grade decline. And you mentioned that the 61% benchmark does not change our price realization. But I'm just wondering how does it change Vale's overall resources and ability -- I mean, if you think about cutoff grade being cut, you probably talk about potentially increasing life of mine, reducing replacement CapEx, to some extent, reducing OpEx as well. And that seems to be where the liquidity and where the demand for China is going to come from, right? So just trying to understand how does this kind of degrading trend we are seeing globally affects Vale's resources on the ground. That would be great.

And if you can follow up in terms of CMRG discussions. So obviously hearing a lot about what's happening between CMRG and BHP at least on the news. But just wondering if that kind of hard conversation is -- it can eventually contaminate Vale as well. It's been very specific to this one case. And maybe an update on the Base Metals side. I think there was an expectation that some technical reports can pop up in early 2026. Just trying to understand how VBM is performing in terms of exploration program so we can better track the projects?

Marcio, thanks for the question. On the -- good that you follow up on the price realization on 61. Indeed, I think to your point, when everybody is moving down to a lower grade to a 61 index, alumina, in most cases, the ratio of alumina silica might increase. And if anything, that actually offers us an opportunity to improve our product mix to better suit to this new reality. So it tends to be favorable to us. To your second question about how do we use this mix optimization and you're spot on because the idea here is one to increase our resource base or to better use our resource base. If we keep the cutoff grades too high, sometimes what we end up being waste is really good iron ore. So the idea here was really think about an integrated portfolio, one that actually looks into the market and also look into our resources and capabilities.

And obviously, as we reduce the cutoff grades, as you just pointed out, it actually increases the ability for us not only to improve the resource base but to reduce CapEx, reduce OpEx, increase production. So this is an integrated view together with [indiscernible] and we're working very close together to optimize the supply chain in this regard. CMRG, I think to your third question, this is hard for us to comment on third-party negotiations. But I mean, from what we know, BHP's conversations with CMRG are still ongoing. They will have second rounds or another rounds of negotiations with other -- more intense negotiations actually with other suppliers, iron ore suppliers, including ourselves. But we'll see it in due time.

Yes. And Marcio, on your questions on the technical exploration side and those reports, you recall Vale Day, there's a huge amount of work that's been done to take a different approach with our restructuring on projects in a fundamental way. We talk about what that looks like at a high level. The technical studies, SK 1300 level standard studies, a couple of hundred page reports are in final draft form right now, which we're reviewing. And the idea would be for us, certainly before the end of the quarter to be publishing those on the VBM website to make those available. So we just went through and discussed some of this with our Board today, and we'll be finalizing that work and looking to make that available to investors and analysts. And also the MRMR and the exploration results, the extensions and the results that we're seeing, which we're very excited about will be unveiled, and we will be able to talk more about that at an upcoming Investor Day. So stay tuned.

And the last thing to reemphasize, you remember, we -- last year, particularly in copper and the Carajás, the exploration potential is huge. We do about $170 million a year of exploration globally, and we reprioritized. We went from about 8 to 23 drills in Pará. And indeed, from 20,000, 30,000 meters to 600 last year, we're on track for the 100,000 this year. And we'll be looking to update the market more regularly on some of those results because I think they're very exciting. I think it's a lot of what Gustavo had referred to in terms of the upside and the growth potential that we're focusing on simultaneously.

[Operator Instructions] Our next question comes from Rodolfo Angele from JPMorgan.

Interesting to see conference call Vale more biased towards Base Metals this time around. But I have a question on each of the 2 sides of the business, and I want to start with iron ore. And this is probably for you, Rogério. I think one question we got a lot from investors into this year is about the strength of iron ore pricing. I guess investors were more on the bear side. There is capacity coming in. Simandou is a reality already. But -- and we look at a few statistics, China importing record levels of iron ore despite the fact that data suggests that peak steel consumption or production is already behind us. So I don't know, I would like to hear from you what is your assessment? What is the state of affairs? What do you expect for 2026 in terms of iron ore business environment and whatever you can talk about prices. So this is my first question.

My second is I'm going to get back to Base Metals. I'm not sure if I understood correctly, but there is some additional information to come up on the development plans soon. But I think investors are not yet pricing in the growth that Vale can deliver on iron ore. And ultimately, once we have a more detailed plan. Today, I think it's a very real ambition. But if we get like this is the -- how we're going to get there. It's 50 from this project with this CapEx intensity. So I think that will be a trigger to see everyone kind of starting to put more numbers and pricing that growth in Vale's copper growth story. So is it reasonable to expect that in the short term? And if not, if you could comment a little bit, at least on what should we expect in terms of CapEx intensity, at least on a relative basis compared to industry, if you cannot share numbers, just to give us an idea as well of potential returns.

Rodolfo, Rogério here. I know that China is not easy to understand these days, but we see indication of good fundamentals, I mean, for both steel and also iron ore. And we do see that globally. China, as you know, infrastructure and manufacturing continue to provide positive support to steel demand despite the challenges that we see and we know in the property sector. I think also, as we have seen, direct and indirect steel exports that we believe are likely to remain at very high levels. This is at least our view. So based on this, I mean, what we anticipate is that crude steel production for 2026 will be at the same level as last year in China.

And outside China, we see market fundamentals are very positive or positive, I should say, across most regions. Some recovery we see more broadly in most of the world regions. In terms of iron ore supply and demand, we expect it to remain balanced at about 1.650 billion tons. That's our view. And we -- as you pointed out, we expect China's iron ore imports to remain broadly stable. This is our view. One point that everybody is noticing is the inventories, the high level of inventories at Chinese ports, which are roughly at 170 million tons currently, closed the year at 160 million. We believe that when you look at this on an aggregated basis, consolidated basis with steel mill inventories, you'll see that there is an offset. Steel mill inventories have increased about 20 million tons. So overall, when we look at it on a consolidated basis, iron ore inventory remains about 35 days of consumption, which is if you look back, it's within the typical range for this time of the year.

So when we put this all together, we see that steel and iron ore fundamentals, and they point to a healthy price level for 2026 despite the usual volatility that we see. So when we say similar to last year, we're acknowledging that there may be volatility throughout the year, okay? Specifically on Simandou, we -- as you asked, we believe Simandou will come to the market gradually. And as we have been talking and we emphasized during the Vale Day, the Simandou additional volumes will be offset by depletion in the industry.

Yes. Thanks. And then specifically to your question, look, firstly, I came to this job excited actually about exactly what you just said that I think I can't think of, I'd say, a better underrecognized copper growth profile and what we are seeing in this business. And I think there was the very idea that brought Gustavo and the team to sort of carve out VBM. I'd direct you to a few quick things. The first is, and I think you see it in these results, we have to deliver in the immediate term. So there's quarterly delivery that we've been focusing on and you see that in a number of occasions exceeding guidance. That's the earning at least some recognition of what is possible operationally.

And then if you go back to the Valid Day material on the website, there was a huge focus on this. We actually overlaid on the slide as we restructured our approach to projects, particularly the copper growth side, we took projects where we've dramatically lower capital intensity. So for example, Bacaba, we just got the LI. We're well on track now in execution, which will bring online in the first half of 2028. That is nearly half the capital it was a year ago. The return has gone from mid-teens to over 50%. And it's more of a brownfields project in terms of risk. As you can appreciate, it's extremely attractive from a capital intensity point of view.

Of course, particle flotation at Salobo, next one, nearly 30,000 tons of additional copper. That's the 2029 time frame. We're well advanced on that. We're looking at actually doing some early works now and that's nearly half the capital intensity, and you're talking over 50% rate of return, brownfield site project. Alemão is the next one. It's a brownfield site. We've changed the mining method from sublevel cave to sublevel stoping. The returns have gone from mid-teens to mid-20s plus. And that will be the -- we just November last year, submitted the first license for that. So we've got this mapped out. We've accelerated. We've changed the sequence. It compares extremely favorably. You'll see it on our website, the capital intensities.

And to your point, the technical studies, the execution, and I don't think at this point, the IR team has released a date. But in the near term, we'd be looking to have an Investor Day to go through more of the detail with the team on the projects, the details, the operational improvements and the things that have been discussed on this call in terms of cost improvements in both nickel and copper. And the other one is exploration because I think it's extremely exciting and it's underappreciated.

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

I want to go back now to capital allocation. Given the share price strong rally and where you are in the expanded net debt range, what is the view on returning excess cash to shareholders potentially more buybacks, more special dividends? How is the company thinking about it?

Carlos, Marcelo speaking here. I think the current market conditions are favorable for cash flow generation. So in case we start to go in the direction of lower than the midpoint of our range in terms of expanded net debt, there is a chance that we have additional returns to shareholders. Last year, we favored the dividends because of the change that came on the taxation that was effective in the beginning of this year. For future allocations, we will see what is the situation at the moment. We tend to be more balanced, but it will depend on the relative valuation. But definitely, we will consider both dividends and buybacks.

Our next question comes from Rafael Barcellos from Bradesco BBI.

Congratulations for the results. Rogério, how do you -- how should we think about your mid-grade volume strategy this year? I mean, especially considering the increase in this type of product coming from Carajás. And what are you seeing in the freight market, I mean, which appears seasonally stronger this year. I mean forward curves are pointing higher. So I'm interested to understand. I understand that Vale is protected against the short-term volatility, but what could be the potential impact of the freight dynamics on the company and in the overall cost curve?

And my second question regarding M&A initiatives. Gustavo, we've continued to see a very active M&A news flow across the sector. So how should we think about Vale's positioning in this environment? And most recently, I mean, we saw discussions involving Rio Tinto and Glencore. So if something were to materialize there, how could that affect Vale's partnership with Glencore in the Victor operation in Canada? And more broadly, how should we think about future partnerships in Canada?

Rafael, thanks for the question. In terms of your question on mid-grade products from Carajás and the volume. I think as we mentioned, we are increasing recently, and we're expecting from 40 million to 50 million tons this year. But it is based on the market assumption of what the market wants is looking at what the market dynamics is currently. But again, the volume, the final volume will depend on the market. What we're trying to do, as we said in the beginning, is adjust our product offering according to the market. So if the market values more higher quality products, which actually yield higher productivity to the steel mills, we may shift our product portfolio. But again, it's all about maximizing total contribution, not necessarily volume, not necessarily price realization.

On the freight market, the freight market, as you pointed out, is really going up for the future. But we have actually -- and I won't be able to give too much detail. We have revised our freight strategy this year with very positive results. And what I can tell you is that our exposure to the freight spot market today is very low. So the impact on us would be very limited. And I think on the positive side, it would increase our competitive position against other players.

Rafael, Gustavo here on your M&A question. Look, we continue to believe that we'll be able to capture more value by developing our unique endowment. This is a sort of competitive advantage for Vale vis-a-vis our peers. We have a tremendous endowment with the ability to bring projects online at below average cost of capital and capital intensity, as Shaun pointed out with some examples there. That applies also for iron ore. So we think from a value creation standpoint long term, developing our own endowment makes more sense, and that's where we're going to get more value. We are looking at alternatives and potential transactions all the time. But we have to appreciate we still trade at a discount to peers of about 20%. So for us, from a value accretion standpoint, it is certainly better to develop the endowment that we have.

Now if we look at our story and the reason why I'm so optimistic about it is if we are able to deliver growth at very competitive capital intensity below market, but at the same time, return strong cash remuneration to shareholders. So I think this is highly unique within the sector these days. So we'll continue to be focused on that. If tomorrow, as we pointed out long term, if we are doing 360 million tons in iron ore, C1 below $20, all-in below $50 per ton, and we are doing 700 kilotons in copper. This is certainly a very valuable portfolio of assets, and that's what this team is going to pursue.

This concludes today's presentation. You may now disconnect, and have a nice day.

Hello, everyone. I'm Thiago Lofiego, Director of Investor Relations at Vale. Thank you all for being here, and welcome to the 2025 Vale Day. Well, it's been an amazing year, very positive accomplishments. And today, not only we celebrate, but we look into the future. We're going to look into our main strategic pillars, our main numbers and the main levers that will take us to this brighter future.

For that, we're going to have our executive team, Gustavo Pimenta, our CEO; Carlos Medeiros, Chief Operating Officer; Rogerio Nogueira, Chief Commercial Officer; Shaun Usmar, VBM's CEO; Grazielle Parenti, our Chief Sustainability Officer; and last but not least, Marcelo Bacci, our CFO.

We'll go through the presentation, which will be followed by a Q&A session, which will be moderated by my colleague, Luciana Oliveti.

Gustavo -- floors -- floor is yours.

All right. Thanks, Thiago. Good afternoon, everybody. It is a great pleasure for me and my team to be here today in London. This is my second Vale Day since I became the CEO, my fifth as part of the Vale family, for the first time now with my full team in place, so you're going to hear from them today. I also want to recognize the presence of several of our Board members here and the name of our Chairman, Daniel Stieler. Thank you for taking the time to come and see and hear a little bit about our story.

So I would like to start with what is most important for us. Safety. When you look at our recent trajectory since 2020, the company has improved substantially in all of our safety metrics. If you look at the total frequency injury rate, we are the lowest in the industry today. This is a result of a series of initiatives we've taken to improve process, invest in new technologies, train our team and the performance since then has been substantial.

We have also improved materially in one of the key metrics, the N2, which are the high potential recordable injuries. They are 23% lower compared to last year and we have been reducing that number over the last several years. [indiscernible] something very important for us, we've put more effort on this in the last -- since the last 3 years, which are process-related events. Those are failures in our equipment that can lead to some financial loss. But in many circumstances can also lead to some safety issue. So we've been improving all of them. The journey is not done yet. There is still a lot of work for us to make a Vale an accident-free organization, but I'm very happy with the progress to date.

2025, just a quick recap, has been an outstanding year for us. So remember, last year, we were in New York with Vale Day and we made several promises to you. And I'm very happy to be here today and tell you that we delivered on everything.

If we start with the operational performance, something that I'm very focused on with my team, we delivered at the top end of the guidance metrics on all of the indicators. So we're delivering at 335 million tons for iron ore, copper at around 370-kilo tons, nickel at 175, those are the expected numbers by the end of the year. So very strong progress.

We are also able to bring 4 critical projects online. Vargem Grande, Capanema, remember, we talked about 3 big projects in the iron ore space. The 2 of them we brought online and we are ramping up. We also brought 2 very critical projects in VBM, Voisey's Bay expansion and also on [indiscernible]. They were fundamental for us to lower the all-in cost of the nickel business as you're going to see later in the presentation.

On the balance sheet side, a lot of focus in terms of freeing up capital. So for example, we sold a minority stake in our energy business by bringing a partner there and freeing up $1 billion of capital that we can then invest in things that will generate more return, more [indiscernible] to our core businesses. So we monetize that stake.

We also made a series of improvements in CapEx. You see one of the things we've been very focused is to make sure we are more efficient in terms of the capital deployment of the company. So we started the year with a guidance of $6.5 billion for total CapEx, and we are delivering at $5.5 billion. So it's $1 billion in savings. And we are not leaving anything behind neither postponing any relevant investment. We are just looking at the way we allocate capital more efficiently, and this is generating substantial value.

Third element, very important. I think you've heard me say in the last several years since I was the CFO about the importance of us being focused on shareholder remuneration. And we've done this consistently over the years. This year alone, we paid $3.4 billion. But last week, we announced dividends of $2.8 billion to be paid in 2026, out of which $1 billion in extraordinary dividends. That just reinforces our confidence in the performance of the business and in the market dynamics.

Third element, also very important, our decharacterization program, the dam elimination program and the progress we've done to date. We have promised that by 2025 Vale would not have any dam Level 3, and we achieved that. Forquilha was the last one, we lowered from Level 3 to Level 2 and that's a very important achievement for us.

We have also advanced on the reparation, 80% complete in Brumadinho. Last year, we signed Mariana, and we've been fulfilling the commitments under both agreements as we agreed.

Just a snapshot on the dam decharacterization. We always present this slide, so I don't want to lose sight of this because it's important for our story. We have eliminated about 60% of our upstream dams since we initiated the program. And again, we no longer have any dam in Level 3 at Vale. As importantly, we had promised a few years ago that Vale in 2025 would be 100% in conformance with the GSTN, the global industry standard for telemanagement and we achieved that. This year, we are now 100% in conformance with the GISTM, very important achievement as well.

All of that is leading us to improve consistently the ESG rating agencies for the company. Today -- as we sit here today, all of those metrics are better than they were before Brumadinho accident, right? If you look at 2018 vis-a-vis where we are today on the 3 agencies, we have improved substantially as a result of the work we have been doing. But today, I want to talk a lot less about the past and a lot more about the future.

This one page summarizes our strategy and where we want to take the company towards. There are 3 major themes in this page. One is the ambition, second are the businesses that we want to focus on, and the third one are the levers. So those are levers that either we master already or we should master in order to deliver on our long-term objectives, meaning operational excellence, safety, innovation. And you're going to hear a lot from my team in the next slides on several of those elements.

I want to cover the 2 first elements of this page, the ambition and the businesses. Back in 2010, Vale was the second largest mining company globally in terms of market cap. We are no longer at that position for many reasons, and I'm sure you guys have your own considerations for it. But I think we all agree that the company, despite the recent improvement in share performance continues to be substantially underlevered and have valued vis-a-vis our intrinsic value. And our goal then, our ambition, is to make sure that over the next several years, we'll work and we think in terms of capital allocation, in terms of decisions to make sure we create greater value per share vis-a-vis our competitors. I'm sure that by doing what we have laid out in terms of long-term vision, we'll be able to achieve that.

The second element are on the businesses that we want to be focused on. Once -- after I took over, I've asked my team, let's evaluate everything out there that eventually Vale should be considering alternative commodities, should we consider X, Y and Z commodity that it's not in our pipeline today. And after a very deep work, thoughtful work, looking at long-term supply and demand, macro indicators, where we positioned vis-a-vis our competitive advantages, our conclusion was our best bet and where we should be focused on are on the assets that are in the businesses that we already have and that where we have competitive advantage, which are iron ore, copper and nickel.

In the R&R space, what we're going to do is to make sure we create the most profitable, competitive and efficient platform in the industry. I totally believe we can get to that point. You're going to see some of the actions that we are taking to take the company to really become the most profitable and competitive iron ore platform in the industry.

Copper, an enormous opportunity for us to unlock the potential, you're going to hear from Shaun the ability and the opportunity for us to double. Nobody has this in the industry from the starting point that we have to double the potential and eventually even going further than that. You're going to hear a lot of exciting news and learnings that VBM team has achieved lately.

And nickel yes, very challenging market conditions, but we continue to have a very unique endowment there, right, given where we are, the fact that we serve the U.S. market and the Western Hemisphere, so continues to have a very substantial option value for us, and we are working to make this business as efficient as possible.

Why do I believe this is possible and that future and that ambition is possible because you're building those based on our strengths. First one that we always talk about is our endowment. I don't think anybody has the endowment that Vale has. If you look at Carajas, particularly, we have the opportunity to grow at a higher-than-average rate compared to competitors with very limited capital intensity. This is sometimes overlooked.

I think if you look at in the industry today, one of the challenges is to bring projects online at decent capital intensity levels. We have an enormous competitive advantage on that, given where we are, given the infrastructure already built, and you're going to see some of the numbers later in the presentation.

So the vision is that 5 years from now, and we're going to ramp up, we're going to be delivering 360 million tons and producing 360 million tons of iron ore with a better mix which is very important to maintain the flexibility that Vale has to navigate through the cycle.

As I mentioned, we will double the size of the copper business in the next 10 years. This year, we had some already some very good start with, for example, the preliminary license for Bacaba. We filed a few days ago for the preliminary license of [indiscernible], people who has been following us for a long period of time, know that [indiscernible] was there probably in Vale [indiscernible] 2007 or 2008. And we now finally took a very different approach, and we are very confident we'll be able to move that project along. This will allow us to continue to post sales volume growth year-on-year, just this year, we are growing 3%, which is sometimes from my perspective, overlook that Vale also has some growth with very limited capital intensity.

The other element is about the flexibility. This is just a picture we've shown to you during some of our road shows and conversations. We have a very sophisticated supply chain and logistics in the iron ore. I would say irreplicable today. We built this over many, many decades, which today give us enormous flexibility to navigate through this like. We have 20 blending facilities distributed globally. You're going to hear from Rogerio. This is what allowed us, for example, this year, to move our product offering iron ore and capture incremental margin by changing the way we are offering our products. Sometimes we sell high silica, sometimes we concentrate, sometimes we blend, we can play a long depending on the market conditions and nobody has that capability. So this is a unique competitive advantage, and we'll leverage that as we go along.

The third one is about efficient. It's an element that you heard me saying, every year, we are very focused on cost efficiency, but we're going to do it right. We don't want to leave any liability for the future. So we've been very thoughtful in looking into every lever that we have at the company. In the last 2 years, we reduced the cost between 6% and 16%. This is excluding any benefit of byproduct. Otherwise, these numbers would be substantially larger than that. This is on a comparable basis, just actual [indiscernible] reduction in [indiscernible] and we're able to deliver in our commodities by applying better planning in our minds, by innovating, by reducing overhead, by being more efficient with our process. So we've been working very hard on cost efficiency, CapEx efficiency because you know about the importance to be as lean as possible, and this will continue to be a key priority for me and my team.

Nickel, as I mentioned early on, challenging market conditions, but the team has been doing a tremendous job in terms of bringing the cost down. You've seen us delivering Q3 performance with 30% drop nickel cost. And you've seen the numbers that I -- that I have shown in the prior slide. It's been one of our priorities to make sure we drive the nickel business to a breakeven point late 2026, early 2027. So with sustaining CapEx, we reached breakeven. And we are -- as we look into the numbers and other work that Shaun and the team has been doing, we are very confident we'll be able to get there and keep an enormous option value that this portfolio has for us given the unique position it has.

The last element here in terms of the strength, it is about our ability to innovate in the industry. Vale has been always very innovative about product offering, and we are taking this further by implementing a series of initiatives to become more efficient, more lean, put in AI, you're going to see one of the examples from Carlos Medeiros in our operations, our ability to anticipate failure, use better our equipment. There is a tremendous amount of potential here for us to lower the cost, be more efficient, be safer, and we're going to be very focused on that.

The last element in this page -- just to close on this one is regarding the circular mining. I'm very excited about this topic, especially for Vale. Today, we are producing 20 million tons out of reprocessing of tailings, dams that we, over the years, processed, then -- but we still have very high FE content there. So we are reprocessing those materials, and we expect it to deliver 10% of our production based on circular mining. This is important because you have low environmental footprint, lower cost and at the for -- a quicker time to market. So this is something we'll be very focused on. Also [indiscernible] is working on that. I think there is an enormous opportunity for us to continue to advance on this platform.

So just before I move to Carlos for his section, I just want to make sure I highlight the key takeaways from these initial remarks. We'll continue to be very focused on operating consistently our assets. This is something we've heard very loud and clear for [indiscernible], it is important for us and my team is extremely focused on making sure we get the most out of our assets.

Second, we see an enormous opportunity for Vale to grow again especially in iron ore as we already have a strong position, but we can have even a stronger position, but particularly on copper, enormous opportunity there. And we're going to continue to focus on things like innovation and doing the right things to become a trusted partner to at the end, being able to generate and deliver on that ambition, which is to create greater value per share for our shareholders in the coming years.

So with that, I'd like to invite Carlos to cover the operational side. Thank you.

Good afternoon. It's a pleasure to be here presenting Vale's iron ore operations during Vale Day 2025. Today, I'll be sharing how we are driving operational excellence, leveraging technology and prioritizing safety to deliver sustainable growth. At Vale, we have managed to reduce our high-potential recordable injuries or N2s by 25% at iron ore, strengthening our commitment towards an accident-free work environment. We have also increased our [indiscernible] report or N3s by 8x over the last 2 years, reinforced our preventive mindset, which allows us to learn from incidents before they turn into accidents.

We have also reduced the process safety events of greater severity or events by 25%, thanks to our rigorous controls and open safety dialogues. These results, they highlight our commitment towards the protection of our people and our assets. Reliable growth is based on operational stability and the smart use of technology. We have managed to optimize our preventive maintenance scope and implemented a robust asset reliability strategy. Smart monitory and engineering solutions help us mitigating critical and recurring failures. There is a steady decline on the amount of time dedicated to corrective maintenance as a consequence of ongoing improvements each year. And these efforts combined have led us to produce 14 million tons more between January and October this year compared to the same time frame in 2022.

You now watch a video highlighting some examples of efficiency and innovation in our operations.

[Presentation]

Conceicao II at Itabiritos has been selected as Vale's model plant. This project is a step change in iron ore processing because it has adopted several different technologies such as AI, Gen AI, image processing, digital twins and a very sophisticated control system. This plant is expected to start up late December this year. Production, as you saw in -- watched in the video will be managed by a central control room where every process stage will be overseen. We have implemented layers of technology. And at the end, 14,000 instruments we work simultaneously. The results so far are encouraging. So for instance, the daily production rate increased by 10%. Fiscal availability is up by 13% points. Iron content in our waste is down 20%. And the best one, the amount of direct reduction feed production increased by 38%.

These results, although preliminary, make us believe that when this plant is fully operational, it will set a new benchmark for performance. This technology is being rolled out as we speak to Brucutu and in 2027, it will be rolled out Vargem Grande.

Another interesting example on how AI is helping Vale to solve problems is on the TML calculation. TML stands for transportable moisture limit. This limit is crucial to us because if the cargo moisture exceeds the TML, it can liquefy and shift during the voyage causing potentially the vessel to capsize. Through AI, the TML and the -- or moisture can be calculated very accurately and having this information beforehand helps us to have better adherence to our shipping plants, lower demurrage costs and obviously, a much safer operation. By adopting this too, our shipments in Q1 in the North, our most critical area, have increased by 8% comparing Q1 this year against Q1 2023.

We have also enhanced Carajas mining plant flexibility through a new product portfolio. This advancement has allowed us to eliminate the blending activity and Rogerio will give you more details during his presentation. This also delivers a competitive C1 cash cost. Our recovery has achieved optimal levels and the strip ratio has reduced by 4% when compared with the mining plan prior, the portfolio change. This new portfolio has also allowed us to build a small buffer to cope with eventual licensing delays and supporting operational continuity and resilience.

I'll talk a little bit now about projects. In the beginning of 2025, the capital project implementation team was integrated into the operations organization. This transition resulted in several beneficial outcomes for us. Strong project governance has led to a much closer collaboration between the project teams and the operations teams during the initial phases of our project implementation. It has also led to an improved execution particularly during the commissioning and the preoperational stages, which obviously minimize the risk of during the start-up.

Our [indiscernible], which are the connections between the new and the existing systems are being much more effectively planned. And as a matter of fact, this year, we had 4 high complexity [indiscernible] in our Plus [indiscernible] project acts at SLG and all of them executed successfully. These actions collectively they contribute for a smooth commissioning and accelerated ramp-ups.

Capanema and Vargem Grande 1, they exemplify this great teamwork collaboration. Both lines are ramping up and are expected to support value growth objectives during 2026. Each line was designed -- each facility was designed to produce 15 million tons per year and their ramp-up will be fully concluded by the end of next year.

The Plus 20 project at SLG is moving according to schedule, and its completion is expected to be in December next year. In the image, you can see the second long-distance conveyor. We will have the loaded trials starting for this conveyor in the second quarter of next year. All the environmental permits have been retained for this project. The compact crusher project, you can see it here, is also moving according to schedule, and we expect this to be finished also by the end of next year. This project will be the definitive solution for the [indiscernible]. Once these operational constraints is removed, Vale will be able to process all the contact material in the mine as well as handling more waste.

This slide shows our project portfolio for the short, medium and long term. I would like to highlight the midterm [indiscernible] expansion and the N3 projects because they combined, we had 10 million tons per year in our Northern system. Our teams are now assessing whether [indiscernible] can be further expanded. Also, the [indiscernible] concentration plant, which will be completed in the second half of 2027.

On the tailings waste disposal areas, we have the [indiscernible] which -- that we're going to -- is going to be essential for our Brucutu operation, should be up and running in the beginning of 2028.

We have also plans for upgrading our Vargem Grande 2 and the [indiscernible] process plants in the Vargem Grande sites. As you can see from the long-term projects, Vale has plenty of optionalities to sustain long-term growth. Vale -- as you are well aware, Vale has been consistently delivering on top of guidance recently.

Our 2026 guidance of 335 million, 345 million tons is influenced by market conditions rather than operational constraints. It's important also to say that Vale does not depend on any new environmental license to deliver the target volume. Vale is advancing safety and operational consistency through technology-driven initiatives, strategic project execution and enhanced flexibility to deliver reliable guidance.

Operational excellence remains an ongoing pursuit and steadfast commitment for scaling achievements to sustain long-term growth by integrating people, process and technology into a robust organizational culture. Vale continues to deliver solid, safe and sustainable outcomes, paving the way for the future of mining.

Thank you. I'll hand over now to Rogerio.

Thank you, Medeiros. Good afternoon. It's a pleasure to be here today. It's a great opportunity for us to talk about the iron ore market, also to talk about Vale's strategy and the performance we have achieved so far. Let's start by taking a view at our expectation for crude steel production for the years to come. From 2025 to 2040, we expect a compounded annual growth rate of 1.2%. So this is a significant increase in crude steel production. But as you look at it, you will see that we have a view that there will be a gradual decline in crude steel production in China. It will be offset by an increase in crude steel production in other regions primarily India, Southeast Asia and the Middle East.

But when we translate this into demand for iron ore seaborne supply, what we'll see is that the market is actually flattish. China, as we just talked about, we're expecting a decline of about 160 million tons of seaborne iron ore demand. This is driven by the decline in crude steel production that we just mentioned, but also by the use of additional scrap. Conversely, you will see India, Southeast Asia and the Middle East, increasing demand for seaborne iron ore. It is less than one would expect when you look into crude steel production growth in these regions primarily because India has a significant domestic supply a significant domestic production of iron ore. And we also have other regions adding another 20 million tons.

But what I'd like to call your attention to in this chart is that look at the green part of the bars. There's going to be a significant increase in iron ore agglomerates, and extends for more need for higher grade iron ore. I don't know what it's going to be used for decarbonizing the steel world.

Let's take a look at this because sometimes we talk about these numbers, but I would like to give you some evidence that this is really happening and it is really happening right now. So we've actually put here for you a view of the best proxy, which is the construction of electric [indiscernible] furnaces sort of along the world. And I also should say that I particularly have visited most of this in most of the regions that we have been to.

Let me give you just a couple of examples just to show that this is real. If you take Europe, for example, take Germany, all the large, all the major integrated steelmakers are really going towards electric [indiscernible] furnaces and direct production. [indiscernible]. If you go to Austria, [indiscernible] with electric [indiscernible] furnaces in [indiscernible], Sweden with SSAB with a staggering [indiscernible] all under construction. If you go to the Netherlands, if you go think about that electrical furnaces and [indiscernible] with shaft furnaces, a new electric arc furnace being built in [indiscernible].

If you go to Spain, you see [indiscernible] putting an electric arc furnace in [indiscernible]. You see [indiscernible] a new start-up looking to put in another electric arc furnace. Same in France where [indiscernible] is putting electric arc furnace in [indiscernible] and there is hybrid.

But that's not only in Europe, if you go to Asia, think about Japan, JFE, Nippon Steel and even [indiscernible], all are implementing constructing electric arc furnaces. In Korea, [indiscernible]. If you go to the U.S., the traditional SDI, [indiscernible] new electric arc furnaces. And now with the acquisition of say, acquisition of U.S. steel by Nippon Steel, new electric arc furnaces being planned for replacing blast furnaces. You also have Hyundai announced a new electric arc furnace in Indiana. So you name it. If you go to Mexico, you have [indiscernible].

Anyway, I'm not even pointing here to China. My point is that sometimes we hear people talking about the pace of decarbonization has changed, has decelerated. But the reality is, if you go bottom line, you see that these numbers here that I'm showing in this chart of electric arc furnaces, these numbers are real. That means that the world is transitioning. And it's very, very important for our strategy, as we'll talk about in a few slides.

But let's go back to iron ore seaborne supply. We've done an exercise -- it's a very simple exercise just to show this to you. So we've taken the iron ore demand that we've just shown previously and say, if we were to match iron ore supply with iron ore demand, what would the price, what would iron ore price need to be for those to be matched?

And here, I would like to tell you that the price that actually matches supply demand in the longer term is $100 per ton in the longer term of iron ore. I know that this number might surprise some of you and it's not to say that there's not going to be volatility throughout the time. Obviously, I don't know if prices can come down, it can come up. But longer term, if you are to match supply/demand our expectation throughout all the exercises and the knowledge that we have of the industry is that prices need to be structurally anchored at $100 per ton.

Take, for example, 2025, the iron ore supply. What we calculate is that there will be from 2025 to 2030, a depletion of 230 million tons, which is based of a roughly 3.5% depletion rate -- annual depletion rate. Also, you have about 85 million tons of iron ore production that would be above that threshold of $100 per ton that would need to come out of the market.

And on the other hand, there are projects which will have incentive prices, which are below $100 per ton that will come back to the market. That's how we -- that's how we believe and that's sort of the final equation that we believe that we'll get to the $100 per ton. This is the number that we believe the long term really match supply and demand in iron ore.

Last but not least, as the industry as the quality of the iron ore producers downgrade, aluminum silica will continue to be an important issue. But I would like to call your attention to phos. We generally don't talk much about phosphorus, but phosphorate is becoming a critical issue because it is increasing under the existing reserves. And as the world starts to produce more flat steel rather than rebar, phos is becoming and will be a very important component of [indiscernible] iron ores.

Let me stop here and move from the market to Vale. So how do we think about our strategy and what role do we believe that we play? First of all, we look into the short and we look into the long term. But those are not static. There is always a transition. There's always something in between. In the short term, the bulk of the industry, the bulk of steelmaking is coal-based. And what we're doing in this regard is optimizing our product portfolio to satisfy the existing prevailing steelmaking routes. But we also look into the long term as the industry decarbonizes, how do we establish ourselves to be the pioneer in the decarbonization of steelmaking.

And how do we create the most competitive supply chain that no one can copy us that we will believe that we will be the player for the decarbonized world. Obviously, there will be a transition and those 2 worlds will need to live together throughout the years.

But lets for the time being focused on the short term, and I'd like to share with you some of the exercise that we have done this year in terms of portfolio optimization, leveraging on what Carlos Medeiros just mentioned.

So before presenting this chart, I'd like to highlight the following. Over the past decades, you have heard Vale saying that our strategy is predicated in high-grade iron ore. We have done an extensive thinking about this. And we now have changed it. It seems sudden but it's not. We say we can produce high-grade iron ore. But our strategy is predicated on flexibility. If we need to produce lower grade ore because this is what is the best result in the value chain. That's what we're going to do.

But preserving the flexibility to go back and forth depending on market realities, depending on competitors' reactions, depending on the mines realities. So that's what we have been doing. So looking to -- if you look into this chart, it reflects a little bit what we have done. From 2023 to 2025, look at in the very bottom of the chart, we've actually decreased the percentage of high-grade ores that we are selling. And we shifted to sell more [indiscernible]. So when we say premium is because premium, we have a very positive relationship between alumina and silica and we also reduced the amount of high silica ores. We were only able to do that because we have a very sophisticated, very comprehensive supply chain that allows us to react very quickly and to adjust our offering very quickly.

In the next slide, I'll show you the kind of results that we've been able to achieve by adopting this new strategy. But before we go there, I think there is one chart that we've covered extensively during our [indiscernible]. I'm not going to get too much into the details, but the concept I'd like to highlight here to you.

In addition to FE and phos, there are 2 very important chemical elements that one needs to look at, which is alumina and silica. And there are actually 2 factors in alumina silica. One is that relationship between alumina and silica cannot be too high. And the second one is that there is an optimum range of silica in the center that the blast furnace operator needs to operate with. And the combination of those 2 variables or those 2 goals actually lead us to the shaded area in this chart that we call the idea blast furnace [indiscernible] or the sweet spot. So this is exactly where the blast furnace operator would like to operate.

And how they do that, they do that by blending different kinds of ores, trying to get the blend into that region with the maximum economic result. But here comes the situation. If you go and look for specific stand-alone iron ores, very rarely you will find an iron ore that by itself would get into that position. So what they do is that they need to blend. And that's why, for example, we have actually -- since 2015, we started to do some blending ourselves. So for example, BRBF, which is illustrated here within the sweet spot is a blend of IOCG with our high silicon.

This year, as we've noticed that the market was actually not paying that much for our very high-grade iron ore from Carajas, we started to migrate through the mine plans that Medeiros just talked about, some of our IOCJ to this mid-grade iron ore here, which is or that comes straight from the mine actually is within the sweet spot for the blast furnace operator.

Last but not least, we've also taken this high silica iron ore and started to concentrate not only Brazil, but outside Brazil, and I'll talk about the kind of flexibility one needs to have for this to happen. But why have we done so? Because these ores that I just highlighted that I just talked about, IOCJ, which is a very low alumina iron ore, is a corrective iron ore for alumina. This ore, this high silica here, is a corrected iron ore for the relationship between alumina and silicon. So keep this in mind.

Now looking into just exemplifying the kinds of ores from our competitors, the Australian competitors, okay? They're all above this line which represents the threshold for alumina silica, and they need to come down in order for them to come down, they need to have this corrective worse that only Vale has in its portfolio. So the whole idea of managing the portfolio is understanding and managing the supply of this correct divorce. Once you can manage the supply of these ores that you can eliminate or if the market is not paid, the outcome is that they will increase its value. So that's what we have done.

We've looked into the portfolio broadly, comprehensively understanding where our clients are positioning their products so that we could maximize it. Simply put, after making those changes, I'll just highlight to you the kind of results that we have achieved. So once we started to think on this basis, more comprehensively, we are able to achieve a premium improvement of $3 per ton on our mid-grade iron ores. This equates to on an annualized basis, $500 million just by purely changing our strategy. And this is the kind of results that one can expect by managing appropriately its portfolio.

Well, in order to do that, as I said, we need to have capability in the supply chain. One is the ability to concentrate our high silica iron ore. And as you can see on the left-hand side or the right-hand side of the slide, is that we are continuously increasing our capacity to beneficiate being it in China, being it in Brazil, being it in other regions.

The other thing that we are doing is actually increasing not only concentration beyond 2026, but also increasing our blending capability and blending in China and in Europe, in the Middle East and India. We are creating a very unique and sophisticated supply chain that allows us to allocate products and actually maximize the value by defining where our products are really wanted [indiscernible] paid for.

Just one point to highlight, as you look into the right-hand side of this slide, Vale is the only major mining company that sales for the whole world. We cover all continents. We sell in North America, South America, Middle East, North Africa, you name it. So that allows us -- that capability allows us to really segment the market and place the products where they really need it.

Having said that, once we then define the amount of IOCJ, for example, that we want to have available stand-alone we can choose where to sell it. We can choose to sell it in Europe. We can choose to sell it in the Middle East. We can choose to sell in the regions and in the clients that really pay for the right premiums. And I should say the same applies for our agglomerates. Well, we won't have time to talk much about the medium to long term, which is actually where we're thinking about decarbonization.

And as I said in the beginning, we believe Vale is uniquely positioned to be the best mining player and the dominant player in a decarbonized world. We've talked a lot about these mega hubs, but what are the mega hubs? The mega hubs are large industrial complexes that we're developing in selected regions, regions in which, for example, the Middle East, for example, in the Gulf of Mexico, for example, in the northern part of Brazil, regions in which you can bring together the production of HBI, DRI, which is going to be the feed of the future, green HBI, green DRI in regions where you have good logistics good infrastructure, that we have competitive natural gas that you have competitive renewable energy that will allow us -- allow one to produce green hydrogen and create large-scale industrial complex. That will be the basis for exporting green metallics to the world.

So this is the whole concept. But we want to do this first on an asset-light basis, mostly through partnerships. The reason being is because as we migrate towards that solution, there will be a lot of capital required. And we need to find ways to do it very effectively through very, very reliable partners. And we're trying this model as Medeiros just talked about [indiscernible] for the first time, not only partnerships for asset light, but we're also looking for developing technologies. So selecting the good places, the partnerships and the technologies that will make decarbonization really economically viable.

And the most important of this technology is the [indiscernible] technology. I'm not going to get into too much detail, but I should tell you that for direct reduction, the results that we have achieved outstanding, most of our clients believe that this is the real breakthrough in the steelmaking industry for many and many decades.

Just a couple of examples. We are achieving compared to [indiscernible] 4% to 5% higher metalization in the DRI. We're getting over or above 50% increase in productivity. Again, I'm not going to get into the details, but I should tell you that we are designing what we believe is going to be the most competitive supply chain for the decarbonized world.

So in conclusion, I think we're very comfortable that we are designing, developing this company to generate value through the cycle, not only on the existing processes which are coal-based through the maximization of value through the portfolio, the flexible portfolio, the portfolio adjustment, but also thinking about the -- and creating the options for the future as we believe we're going to be the leading mining company in the decarbonized world. Thank you.

Good afternoon. It's a great pleasure to be able to provide an update for you today on our journey and our transformation at [indiscernible] metals. I started this journey with this team 14 months ago with an incredibly compelling mandate at a world that now suddenly has discovered that needs critical minerals, there's an underappreciated platform to be able to create truly a global champion. But it's a platform that has gone without realization for many years.

We've talked about endowment. We've talked about growth. So just to reconnect you. Fundamentally, and Gustavo touched on this, we have a low-cost multi-decade life copper operating platform at the moment with an incredible growth rate ahead of us that is organic and high return. And on the nickel business, it's polymetallic. It's in great jurisdictions. We ultimately have something here that the Western world is tapping out on, but it cannot be subsidized.

So the idea was to have something which we could get into the right part of the cost curves to have a robust platform that has significant strategic significance. 13 mines underground and open pit, 5 mills concentrators, 2 smelters and refineries. It's a very broad, diverse, vertically integrated platform. Importantly, we sit about doing this in a big way with huge expectations. And I have to say, this is a tribute to my team in this last year. I've participated in a lot of transformations in mining over the last 35 years. I've never personally been part of anything quite like this.

We had to change how we were doing things in order to achieve different results, and it started off with changing the model from a highly centralized quite siloed organization that was working awfully hard into something where we had to reconnect people with a holistic view of business and allow our assets to see the same detail and data that we saw at the center to simplify that radically to ensure we had the right controls and risk management and to create an ecosystem where people are working together and where we could dynamically allocate capital and enhance performance at the center. And boy, it's been remarkable.

This time last year, I remember sharing with you that we were hoping to take out a significant amount of our overhead. We've achieved double that. I think transformations show that only 1 and 4 achieved their objectives. I shared with you at the last quarter, we had a run rate this year of about USD 360 million of controllable cash improvement from that initiative. We're now at just over USD 400 million. Our net debt this year is going to be $600 million. We're on track for better than the start of this year. It's an incredible performance from this team. But importantly, that lower overhead has allowed us to reconnect with the essence of how we unlock value in a complex business like this. I'm going to touch on a lot more of this in the coming slides.

But the important thing in a period of potential chaos is ultimately to make sure we took care of our people. So we use this as an opportunity to really prioritize our time with our people on the ground from a safety point of view to make sure we did not achieve what we were seeking to achieve at their expense. And we actually invested more in risk management in this business while we were reducing overhead elsewhere.

Here's what we've done. For the first time in the history of this business, we're on track to achieve the top end of guidance in both copper and in nickel. But at the same time, we've lowered our all-in cost guidance for 2 consecutive quarters. Bear in mind, the improvements we make in this business typically lag about 4 months before they reflect in cost of goods sold. So Q1 was quiet, Q2 people went, hmm, something is happening. Q3, it's not just a one-hit wonder, and we're focusing on continuing to deliver this performance.

You'll see our revised guidance, and you'll see on nickel over there that the same thing we've achieved a dramatic improvement in our all-in cost, but we have further to go. And bear in mind, this took place at a time of ramping up of Voisey's Bay as well as on [indiscernible] furnace too. And those who know the industry know that ramp-up never go to script we were 20% to 30% ahead on our ramp-up at Voisey's Bay, which has allowed us for the first time in 11 years to achieve nameplate capacity recently at Long Harbour. It's remarkable what those teams have done and [indiscernible] to delivered on time, 13% under budget.

Salobo Sossego has achieved its -- at the end of its life, has achieved nearly a 40% unit mining cost improvement with this model. Salobo is achieving new record capacities. It's remarkable. It has been across the portfolio performance. And you'll see as we go to next year, that will continue. We have 110 downtime -- day downtime planned for Sossego next year, which shows the sort of modest increase in copper we expect next year.

And you'll see the focus for us on nickel is ultimately for us to fully ramp up and stabilize those operations at Voisey's Long Harbour and to continue to drive throughput through our fixed cost structure to dilute the overall value chain or the unit cost through the value chain. We will hit this year just over 5 million tonnes through the mill in Sudbury, for example, first time since 2016, and we will continue to go further. This has to be competitive.

But here's the sizzle. I'm very excited about this. And to me, this is the best kept secret in this industry. We've talked about it a lot. You've seen we've delivered this year. We're on track. But really, the projects that are primarily brownfields, lower risk, with a lot of infrastructure already setting us up now where we've fundamentally got like a complete revamp of how we do life of mine planning and budgeting in this business. We're on track, I think, with far greater levels of resolution for 420 to 500 in the 5-year time frame, and that's 700,000 tonnes in the 2035 time frame.

We're looking to provide published technical studies for all our assets and all our projects early in the new year. SK 1300 compliant documents so that investors have what they need to form their own opinions with technical detail. We'll also look to try and coordinate Investor Days to give you what you need to form your own opinion.

But right now, the market doesn't believe us. It's flat. The investors that are out there are pretty much giving us no credit for this growth in a world that is underperforming, there's about a 6% underperformance in delivery for the sector in copper this year. We're an outlier as we are delivering. And you'll see those growth rates compare incredibly favorably to the rest of the sector. That's the reason Gustavo is excited.

And I'll show you with what we're finding on exploration in this portfolio. This portfolio, particularly in [indiscernible] has not been drilled at depth. We're finding incredible intersections. And there's a lot of brownfield opportunity on these existing projects and ore bodies. And that's before we factor in [indiscernible]. Now the portfolio optimization, we're well advanced on our discussions on [indiscernible] as well as on Thomson. I will not be providing updates on those today. We hope to give you updates on those sooner. This is all about the organic pipeline.

The key thing this year with the fundamental change, we took away our project silo that we had, and we reconnected it with the commercial side of our business. We had separate silos from an operating point of view at all reports now to my Chief Operating Officer, who's awfully tired, he flies a lot. But what's happened with this is it's really broken down these barriers and it's allowed us to look at first principles, how do we create value and diminish risk. You'll see the dramatic increase or decrease here in capital intensity that has occurred over this period compared to the industry average.

And so in the interest of time, unfortunately, I can't go into tons of detail here, but it's across the board pretty much, and it's quite remarkable. That has translated into a surprise, significant improvements, like a drastic improvement in rates of return across [indiscernible].

Now that's partly through a range of issues as to how teams have looked how they can actually remove overhead, look at individual specific rather than color by numbers approaches to the execution of these projects, and we'll touch on a bit more there. We've also changed the sequence. 118 now is 16 years sooner than we've previously seen because the risk reward, we believe is more favorable.

Bacaba, those of you who've been for these days for a while, heard a lot about this. That photograph is with early works pre-strip, we've got our approvals for [indiscernible] clearance for a 13-kilometer road, early construction of the bridge, which is on the critical path, and you'll see the pre-strip for the pit. This is 13 kilometers from our [indiscernible] infrastructure. This is barely a project. And it's really the -- now under our Chief Operating Officer and our General Manager at that site for execution.

The CapEx is radically reduced, the overhead is radically reduced and the model we're using allows us to potentially execute sooner. We fulfilled all the requirements for the license. It's on the governor's desk and we're hoping to be able to announce something later this year. We're on track for the time line we had allocated previously, and you can see the returns.

[indiscernible] particle flotation, we've done the detailed design now. These are -- this is money for [indiscernible]. It's brownfields, it allows another nearly 30,000 tonnes over at Salobo and brings us into that zone where we can operating that 220,000, 230,000 to 250,000 tonnes per annum range in this. You'll see the returns again. They're well advanced, and that's in the 2029 time horizon.

And this one I'm really excited about. We've talked about Alma coming on at the back end of the decade. First quartile, I mean this is 140,000 ounces of gold a year, net alone, the sort of 70,000 to 80,000 tonnes of copper. In fact, what's really happened here with the reimagination of this is it's a brownfield site. It was originally due to be a sublevel cave. We've really looked at it from first principles. It's now sublevel stope. Smaller footprint, less -- a smaller tailings dam, the ability to access or perhaps a year sooner than we would have had with the prior design a higher rate of return and designed for low risk on licensing, which we submitted in November of this year.

And this one is a personal one. I'm very excited to announce it. We have a long way to go. I arrived in Canada in 2006 on the back of a hostile takeover on [indiscernible]. I presented to [indiscernible], a proposal for Sudbury Synergies in December just before Christmas in 2006, didn't work. We tried again, didn't work. [indiscernible] hasn't worked. This is not a done deal, but we have an agreement here with Glencore now to be able to actually utilize existing infrastructure, which I was CFO of the business when we built that in 2007, 2008. It's the best shaft infrastructure in the [indiscernible]. We're looking to lengthen that, develop and access ore bodies that neither party would be able to access otherwise.

Copper rich, polymetallic, high return. We need to do more of these, but let's start with one. And if we can do one, it should set the conditions to do more. And the industry needs more of this. This is high return, critical minerals that can come at a much lower risk. I don't have to hire like -- create an ecosystem of workforce. We don't have to create a lot of infrastructure. There it is. The best return, the best bang for the buck in the portfolio comes through the drill bit. My CTO just sent us photos of some drilling, we won't disclose where at this point. It is ridiculous the intercepts that we're finding. We have dynamically in the year rather than be slaves to the budget. We have allocated capital within the budget, but our highest return is through the drill bit in copper and [indiscernible] right now. And you'll notice, even we've gone from [indiscernible] drills in operation [indiscernible] 23 this last year. We're doing over 60,000 meters of drilling. We'll look to increase that to over 100 and beyond. My constraint is not capital. It's how quickly we can get these things turning. And you'll see with that there's a significant reduction in drilling costs. We're drilling a lot at depth.

And also the -- we're seeing, and you'll see that one bubble on the end. We believe that given the open nature of a lot of these deposits at depth [indiscernible] the side, we're targeting perhaps 20% production upside potential post 2035 on an organic basis. Here is a small example. And what you'll see, so this is just to [indiscernible] Sossego, that's below the [indiscernible] pit. I mentioned this is unexplored or underexplored [indiscernible]. [indiscernible] drill holes. I mean, we're getting intercepts here nearly 30 meters of 5% copper, including 11 meters of 11. Another drill result we received a little over 20% copper of nearly 7%. And we have a lot more to go on this, and I'm really excited about that. And you'll see a significant amount of underground drilling, particularly here because this is near exhaustion, our ability perhaps to prove out things that are not in our plan could be an exciting update for us in the future.

So that's putting it all together our journey, I do think we'll reserve more detail for when we have the time. And once we publish those technical studies and can give you the information you need populate your own models and form your own views, but there's more to come from that 700.

And nickel is about ensuring that we're in the money option in a strategically significant business. We've got farther doors operators underground in Sudbury that have been going for over 4 generations or their fourth generation miners there. We've been in operation over 100 years but we cannot subsidize this. So the real focus has been on trying to target cash breakeven operationally by the end of next year and for us to be able to have their flow through into cost of goods sold beyond that.

Importantly, $240 million of the savings that we've achieved so far are in the nickel business. They've really stepped up, lower G&A, improved costs and capital, and there's more to go. We have a number of initiatives that we're pursuing rather than running according to a budget. And importantly, as we look at nickel, similar to iron ore, it's not about volume. We have the ability to crank up more volume. But it is about ensuring if you don't have the upstream you don't have the contribution margins to make the returns you need through your vertically integrated downstream. And that has been a challenge. We've been in decline with the mine feed. We're fixing that. We will run for the first time in the history now with 2 furnaces at Onca Puma as well as be able to run at nameplate at Voisey's Bay. And we'll continue to go beyond in Sudbury so that we can actually ensure our competitiveness.

And I started with this, but I think it's an important thing. People remember things in the beginning, and they often remember things at the end. We're ending with safety. And the real reason, as I mentioned to you, you can imagine if you're taking hundreds of people out of the system at a time where you have to make sure that you can actually execute and that you can get the business reset for delivery. That is a very dramatic event for the organization.

At the same time, we've made sure that our safety numbers are there. And our cultural indicators just in recent weeks, we're very proud to stand with some of our colleagues from across the business. We received in Brazil, the EXAM Award for the best large mining company in Brazil for Salobo Sossego. And for the first time in the history of Vale Base Metals, we're recognized as Canada's -- one of Canada's Top 100 Companies, something we didn't expect, we're really -- we're very proud to achieve.

So I'll leave you with that. That's us. This organization is now delivering. We're excited. We have an energized group of people I think there's more opportunity as we do more drilling and we revamp our life of mine plans and our projects advance every year. And on the nickel side, we're striving incredibly hard to be able to ensure that we have a strategically competitive asset for the future in the face of oversupply.

And all that improvement this year has meant that what you've seen in that outlook is fully self-financed at less than 1x net debt to EBITDA. It wasn't that way a year ago, and it's quite remarkable.

So with that, thank you. I will hand over to Grazielle.

Thank you, dear. Hello, everyone. I'm very honored to be here today for my very first Vale Day, and also to share with you a very simple but also powerful message about how Vale see sustainability. For us, sustainability is not just a responsibility, it is really a business advantage. You could see the presentations of my colleagues here before how we are tackling in different dimensions of it. And I'm going to go a little bit deep on that.

For us, sustainability is business value creation and shared value. But let me go deeper. And one thing we have been working as a new way of thinking, a new way of working on sustainability. We are in a natural resource industry. So it's very important that we work to be a responsible operator and also that we are able to protect climate in nature, but at the same time, bringing people together. This is the only way for us to be able to create business value, to improve people's lives and also to have our social license to operate. These things are all together interconnected. They are not separate.

And I'm going to now show you a video where we can demonstrate a little bit of what we are doing for our climate and nature agenda.

[Presentation]

In this video you could see some examples on what we are doing to decarbonize our operations. What we are doing to [indiscernible] Brazil, the land of biofuels. So there is not only a way to decarbonize our operations. Sometimes you're going to go electric, some time is going to be biodiesel or ethanol and we are piloting and testing them to escalate this. To reduce Scope 3, [indiscernible] Scope 3 target was really valid pioneering this agenda in the industry. .

And how we are doing that, Rogerio mentioned a lot about how we have been doing to decarbonize the steel value chain. But the target was to reduce 15% by 2035. And today, we are about 88% achieved it. For that, also, we were able to invest in the carbonization activities, $1.7 billion in the last 5 years, and this has been proven that we are finding and developing technologies together with our partner to decarbonize the industry.

Moving to nature. Vale was one of the very first companies to report TF&D nature, the risk that impacts in our operations. And also nowadays, as we saw in the video, we protect around 1.1 million hectares across our geographies of native vegetation but we want to go beyond that. So we set up a target of 500,000 hectares and we are around half of it and a big player on the industry and the business of restoration and preservation of native vegetation.

Also, when we talk about nature, we have a partnership with ICM [indiscernible], as we said in the video, where we have work to protect [indiscernible] species like the Jaguar and many others. But also, it's important that Amazon is so big, but there is a lot of science that we need to do that to be able to protect it. So we have worked in our Institute of Technology in Vale also with the national authority to sequence the genome [indiscernible] of the Amazon. This is critical for us to be able to work on the preservation.

But now let's talk about people. There is no successful business when you don't have people together with us. And we were able to identify that across our geographies we had a lot of people still facing extreme poverty, and we should not accept that.

So years ago, we started to figure out how to do that? Because poverty, one thing we learned, it's not just about the income. So we went to the market to find what is the right way to have a KPI and a long lasting impact. And we were able to find a methodology from Oxford University professors where we identified 5 dimensions of poverty. So yes, income but also health, education, infrastructure and nutrition. And the target was both 500,000 people out of poverty, a major city, a medium city. So nowadays, we saw the program a little more than 1.5 years ago. We are around 52,000 people already in the program and having a better life. We understand that now we are able to escalate that.

Doing [indiscernible] that was 2 weeks ago in Brazil in Sao Paulo in Berlin -- in Brazil. We were able to also launch a movement together against poverty where we have around 27 partners, companies and organizations, NGOs, together with us. to move on that to advance on this agenda because we cannot do this alone. And tomorrow, in New York, at New York Stock Exchange, we've been launching this initiative also a fund there to have other companies, organizations that share the same purpose that we have to move on this.

And going to the third pillar, responsible operator. As I said, we are in a natural resource industry. So how we are able to do this, reducing impact, generating value, but also building trust. We cannot do this alone. So Gustavo mentioned in the beginning, how we are proud about our circularity efforts. And I'm not going to repeat that, but it's important to say that Vale is very pioneering this, including the secularity protocols around the world and reporting on this. Also, it's not just about circularity but about how you use the other resources we have, like freshwater.

So year-to-date, we have been reducing 31% of the use of net fresh resources -- freshwater resources. And there is nothing, no business without people. So human rights is a nonnegotiable principle. We have been conducting frequently due diligence about it and training and engaging suppliers in our value chain, always follow the UN guiding principles. And you don't build trust without communicating. So we have been active listening to our communities. We identified 170 top priority communities for us, and we established a target of having 100% of specific plans for each of them [indiscernible] next year. Now year-to-date, we are with 94% of plans, and we have teams all across our geographies to put this in place.

What makes us very comfortable that we are in the right direction? Confident also is that the people that -- according to our survey, the people that interact engage more with Vale are the ones that value more our presence and what we do. And before moving -- passing the floor to my friends, Marcelo Bacci, I would like to share this picture, which shows the simple people and the nice people that we have around us and to reinforce the purpose of Vale, which is we exist to improve life and transform the future. And we are not going to do this alone. We want to have other organizations that have shared the same bandwidth us. Thank you.

Good afternoon, everyone. It's a great pleasure to be here. I was at Vale Day in New York last year when I was with the company for one day. I had started in the previous day. So now I have one year and one day, and I know a bit more about the company. So I feel a bit more comfortable today than one year ago.

But one year ago, we were talking about the commodity cycles and how a company like Vale has to manage costs, CapEx, capital intensity and capital allocation to create value. And today, I'm back here to discuss the same topics with a different approach and to tell you what we're doing and what we're going to do to continue to go in the right direction.

So let's start with efficiency. We've been able to, over the years, keep reducing our fixed cost, which is a very important part of our cost structure. We are a business where fixed cost is about 60% to 70% of our total cost. So it's important to keep working on volumes, but also on the quantum of the fixed cost to deliver efficiency. And we were at the level of $6.3 billion a few years ago, and we've been reducing and now we are closing this year with $5.8 billion of fixed expenses, fixed spending and going for 5.7% for next year. It is a daily effort to fight inflation with efficiency measures, and we've been delivering, and we have another important challenge in front of us for 2026.

Delivering that, we are going to have as a consequence in the iron ore business, a good C1 cash cost. As you see, we have a path towards getting to $20 per ton of C1. We come from $22.3 in 2023. We are going to close this year around $21.3, which is more or less at the center of the target that we established for the year. And we're guiding for a range of $20 to $21.5 for next year. We want to get to $20 and in order to do that, we are continuing the efforts on efficiency to fight the inflation, to find the geological inflation.

And also, we are counting with the additional volumes that we are producing and the new assets that are coming that in the first moment, they have a ramp-up, but after they will contribute positively to this equation. That is on the C1 for iron ore. If we look at the whole portfolio and if we look at the all-in costs, we have been delivering and we will continue to deliver a very good performance.

If you look at iron ore, we are closing this year with an all-in of $55 per tonne, and we are guiding for a range between $52 and $56 for next year. which is going to be delivered with the C1 that we just discussed, plus the portfolio strategy that Rogerio and Carlos mentioned and also the long-term affreightment strategy that is contributing very positively to our cost performance this year.

In copper, we are closing this year close to $1,000 per ton of all-in cost with a big help from the byproducts. We are guiding for a range between $1,000 and $1,500 for next year, assuming that gold prices are going to be lower next year. If we have the same gold prices we had this year, we're probably going to do even better than this year.

In nickel, we are closing at 13,000 roughly, and we're guiding for a better performance between 12 and 13.5 that will lead us to all in including sustaining around 15 to 16. And the idea is to reach the end of the year of next year with a sustainable operation in terms of cash flow in nickel at current prices.

But in order to do that and in order to deliver the results and the returns that we expect, we also have been working very extensively on CapEx. One year ago, we were discussing long-term CapEx program of the company between $6 billion and $6.5 billion per year. And we guided for a number around $6 billion for this year. We are finishing the year with $5.5 billion within the revised range of $5.4 billion to $5.7 billion and we are introducing the same range that we had this year for next year, $5.4 billion to $5.7 billion and below $6 billion as a long-term guidance for CapEx. We believe that we can do all the growth that we are -- we have discussed here, plus keeping our operations in very good level with less than $6 billion per year, which is among the majors, the lowest CapEx program.

What we're going to see in the coming years in the growth CapEx part is a growing participation of copper assets in the growth projects, of course, to be able to deliver the growth that Shaun just mentioned to you.

In terms of our capital structure, a very important part of it is the commitments related to Samarco Brumadinho and the characterization. And this is an important change that we're going to see in the coming years. This year, we're going to close with $4.2 billion of disbursements related to those 3 things, plus the incurred expenses related to those.

Next year, it's going to be $2.6 billion. And the year after that, $1.9 billion. And then it's going to come close to $1 billion and then below $1 billion. So this -- the performance that we are having here is allowing the company to create for the future a lot more capital flexibility that will enable us to have better decisions in terms of capital allocation.

Capital allocation for us is about balancing between the 3 things that we have to do with the cash flow that we generate. We have to make new investments in order to sustain the company and grow the company we have to strengthen our balance sheet to go through the cycles with a healthy financial situation. And we also have to remunerate properly our shareholders. And we will continue to have in the coming years, the same kind of approach that we have, making the necessary investments we have and we're going to have the necessary cash flows to fund all the investments that we discussed here.

And in terms of the balance sheet, we have established a range for the expanded net debt between $10 billion and $20 billion. That gives us some flexibility also to invest more or less depending on where the opportunities are. But we want to keep on the balance sheet level, the expanded net debt between $10 billion and $20 billion. I think in the next 2 years, this concept will continue to be the same and the range the same. We're going to probably revise this when the payments of commitments will become lower and it's a lot smaller than today in 2 years' time. But for the time being, we like the concept.

We're going to continue to take advantage of the opportunities the market offers from time to time for liability management. But keeping a very close eye on having a very, very strong and robust balance sheet because we know we are in a cyclical industry.

And in terms of shareholder returns, this year, we just announced for the beginning of next year, $1 billion of additional dividends. We are going to continue to do that when the balance sheet and the cash flow allows. And we are going to make sure that we have a superior cash flow remuneration to our shareholders when compared to our industry. We talked about costs and CapEx. We talked about capital allocation, and let's discuss value to conclude the presentation here.

In this first graph that we see here, you see that prior to 2019, Vale had a price to NAV ratio very similar to our competitors, an average 3% discount. After 2019, that gap widened. And more recently, we are getting to a lower number with an average of 10%. Today, we're close to 10%. But we still lag behind our competitors. And on the other hand, if you look at that part of the table, you see that our free cash flow yield has been very good and it's probably going to increase in the coming years, reaching 2-digit levels. So we have a situation here, which I think is a big opportunity. We have been delivering very good cash flow yields. We have been delivering growth, and we have a valuation that lags behind our competitors.

But in addition to the cash flow yields, there are some other things that we are doing that we'll continue to do and some of them that we're going to start doing that we also contribute to deliver better returns to our shareholders.

The first one is the growth story. I need to emphasize what my colleagues here discussed the growth in copper, the continuous growth and the growth in iron ore, which is compatible with what's happening in the industry. This will mean that we will continue to grow above the industry average. And this has to be an important element in terms of value creation.

Operational stability that will continue to deliver both the safety measures that we have here, the volumes and the costs. This is very important. We've been delivering and we will keep a very close focus on operational stability. Cost and CapEx efficiency, which is a consequence of that, we've been, I think, delivering good -- very good results, and we have the focus of the organization on that.

ESG credentials, Gustavo showed in his initial presentation that we've been evolving ESG ratings. This is bringing back to our investor base a significant number of investors that were blocked from investing in Vale. We continue with a focus on that. And this will all create the necessary environment and the elements for us to deliver superior shareholder returns and making everyone in this room and everyone online, very happy with the investment in Vale.

So with that, I conclude here, and I pass back to Gustavo. Thank you.

All right. So Thanks, Marcelo. It is desert time, so we'll wrap up here and organize ourselves. But I just want to close with the key takeaways. One I want to say how proud I am of having built this team from me the best in the industry, and you've seen the consistent delivery that we've been able to achieve this year. It's truly a result of the work that this team does, but also the 60,000 people, many of them connected listening to us today.

And we will be focused on -- if I were to summarize the 3 main themes of today's presentations, we will continue to be highly focused on extracting most value from our assets, operating then efficiently, safely and make sure we deliver on the full potential of each one of those sites. This will be fundamental for us to deliver above average free cash flow yield for the industry. And I'm very confident we'll be able to achieve that in the next following years.

Second, we'll accelerate the growth agenda that Vale has put together where it makes sense for us to grow because we do have some sort of competitive advantage, such as in iron ore, as I talked about, but also in the corporate space that we are very excited. You saw some of the numbers that's shown was able to share today very exciting all the information that we are getting from the team there. And we're going to be doing this by being a trusted partner, doing the right thing, being a good neighbor.

We are here for the long run, and we understand that's the only way for us to be able to have the license to operate is by operating the assets well by bringing society with us in this journey. So the sustainability conversation and journey that we embarked it is for [indiscernible] Vale because we understand this is fundamental here for us to create long-term value and again, have the license to operate. With those 3 elements, I am sure we'll be able to deliver on my initial remarks on the ambition of generating above average per share value for our shareholders.

With that, I want to thank you all people here in London for coming and joining, to listen to our story, everybody connected as well. We'll give a few minutes here to settle and we'll then start the Q&A. Thank you very much.

Thank you again for joining us today. It's a real pleasure to be here with you. I'm Luciana Oliveti, Investor Relations Manager. We will start our Q&A session now. [Operator Instructions]

I invite to take the stage again, our CEO, Gustavo Pimenta, please. And our executives, Carlos Medeiros, Grazielle Parenti, Rogerio Nogueira, Marcelo Bacci; and Shaun Usmar. My apologies guys because I just need you to have you in the right [indiscernible].

I got it right.

Thank you very much. Okay. Here's the right one. Please, Rogerio.

So let's go, let's start with Caio Ribeiro.

Caio Riberio here from Bank of America. Thank you very much for the presentation. Thank you for that presentation, very detailed, very thorough. Really appreciate the disclosure. So my question is for Shaun. Shaun, I thought it was very interesting, the transaction that you announced with Glencore to develop that potential copper project. And you did mention that if you achieve this, that could be a basis for additional things in the future. So I'm curious to see if you can expand a little bit further on that.

I mean, there's this potential for a much bigger transaction they're involving the full Canadian assets. So I'm wondering if eventually this could be a starting point for something that could lead to a joint venture, a merger of the full Canadian assets with Glencore?

Yes. It's a common question, which I get from investment bankers normally. When I started this role last year, my first day was LME week, and I met up with Gary Nagel who I've known for 25 years. And at that point, I think it was very much in their minds more a big business combination, which would have made sense. And I said Tim, look, we need to live in the universe of the possible because it's clear businesses have tried for very long time to affect a combination. Let's do the deal that can be done.

And I know well enough to say if indeed we can't deliver, we'll be very upfront about that. I did think coming into this role initially because I was CFO of what is now their nickel business in Sudbury [indiscernible]. I hadn't appreciated how far their business has evolved relative to our business. So their operating platform is very different. They've got [indiscernible] up in the northern part of Canada. It's an incredible operation that provides a lot of feed.

But nickel room has exhausted now. The -- I think they're finished with [indiscernible] this year, and then they still are bringing on the new mine in [indiscernible]. We have 5 operating mines. We are investing in order to get that, as I mentioned in the presentation, to get our minds in order to feed and fill our infrastructure so that the unit cost can be competitive, and we'll continue to explore and to do that.

So I guess my -- I'll give you that background because I do think people remember a time where like a [indiscernible] transaction would be the way to go for Sudbury, like this big unitized combination. I don't see that. But I do think there are other opportunities which could add value in the future, but it starts with one. So we need to land this transaction because, as I mentioned in the presentation, the reality is, just economically, [indiscernible] don't have the ore that's required in order to create a viable longer-term alternative on their own. They have the infrastructure. They do have some 30% or so of the reserves and resources that contribute, and we contribute the lion share and the prospectivity. It's a lovely marriage. We need to finally get it done, and then we'll move on from there. So we just start with one.

Daniel Sasson from Itau BBA. My question actually goes to Medeiros. If you could tell us a little bit about what's embedded in your guidance projections in terms of cost and volumes for the mid- to long term? All has been -- has done a great job in taking care of a lot of the overhang it had to the story over the past 12, 18 months, maybe something that is still missing is [indiscernible] in your view, Medeiros, what would be the main challenges if you do not get the [indiscernible] signed? How are you guys preparing the company for this potentially challenging situation, right? And do you think that what would be more at risk your guidance for volumes, [indiscernible] guidance for costs?

Well, the -- today, with what we have in our hands is -- are projects like the [indiscernible] expansion and the only 3 projects that I mentioned that combined can add $10 million per year of production capacity. And we are fairly optimistic that [indiscernible] could be -- could go further than $4 million. How further, we don't know yet, and we'll probably bring the news in 1 or 2 conference calls, I think we should be ready to say. But between these 2 projects, plus some other possibilities in [indiscernible] they provide you at least for the foreseeable future, medium term, the peace of mind that we can hit the 360.

Now taking into account that like Marcelo Bacci mentioned our business is a fixed cost business basically, hitting this volume have we should also be capable of addressing as well the desired cost. So I think for now, this would be the -- our thinking.

Daniel, if I can add just a point because this is an important change in the way we see planning for Vale, and we changed it in the last couple of years. So the numbers you're seeing here do not account for the cave decree. So everything was modeled based on what we have or we have high likelihood of [indiscernible]. And what the team started to do is to think about blends [indiscernible] such as the ones that Carlos mentioned, for us to be able to, in any scenario be able to deliver. So the confidence on these numbers these days are substantially larger than we were a few years ago. Now if the [indiscernible], it's going to be great. It's going to give us more flexibility.

Next question, Lucas.

Thank you for the presentation. I have a question on base metals as well for Shuan. Very insightful presentation on incremental return for the project that you guys are aiming. I think it became clear that your focus is on increasing ROIC over time, return on capital would be kind of a focus and a priority for the division going forward? I would just like to better understand how should we think of the timing for such ROIC expansion over time? Because I think it's clear that we should see ROIC levels by 2030 way higher than the level that we're seeing right now for base metals.

But just thinking of the timing, I mean, is there any significant room for ROIC improvement considering a better utilization of your asset base? Or should we think of this return increase over time, mostly coming from the ramp-up of future growth projects with a higher margin ROIC given the low intensity of such projects as you guys mentioned?

So just to think of this return perspective going forward, if it is only a 2030 story or if you should start to see the benefits of such better utilization of our asset base already in the short term?

Yes, it's a great question. And I suppose the way I think about it is a tale of 2 cities in some way, it's the best of times and the worst of times. Copper is the best of times, nickel, not so much. And so I think the nickel story is one that provides at this time in the cycle, the discipline to get the portfolio in shape, not just in nickel, but also having that tension in copper, which is quite useful organizationally.

Our ROIC, as you'd expect, in our copper business is substantial. I do think one thing I get with investors, though, where they talk about sustaining capital in the nickel business is an apples and oranges conversation. A lot of governments spoke about vertical integration. We produce a concentrate that gets shipped off and other people then go and convert that into high-purity outside of Canada. So the idea that we've got a business that's vertically integrated and nickel with those smelters and refineries and all that infrastructure versus something where you're producing concentrate is a different level of sun capital and capital intensity as you start thinking about those segments, net alone, the revenue profiles or the price profiles over time.

Primarily our challenge, though, is ROIC often -- it has to look at the balance sheet, and that has to do [indiscernible] calculation. I think our challenge here is a simple one, and it goes back to that Slide 7 or whatever it is.

Firstly, I don't think that market can take us seriously if we don't hit and deliver our guidance consistently, the premium valuations and multiples in the sector come with that. And the next piece for us is making sure that ultimately, like we've done with our growth, and I can't share it with you, unfortunately, in any detail today. But we fully revamped our life of business planning, understanding that we're not here to just mother assets, we're here to create value.

And so that evolution as we also do the advancements on projects and do further work on the drill bit, I expect that we'll see NPV grow over time on a similar set of macro assumptions and that will continue to evolve through execution.

So to your point, if anything, we're going to, was mentioned earlier on, accelerate the amount of spending in copper over time, which on an accounting basis in the short term, we should see lower returns before we see the actual revenue and they kick in on that. Whereas a nickel, it's largely a story of the sunk capital that's in there. The replacement value of that is [indiscernible]. So we have a job to do to actually generate, firstly, get to cash flow breakeven as quickly as possible. And I think the way you compete and generate those returns through the cycle is low leverage be an in-the-money option and then when you do get the price recovery that you have the tonnes of metal that you can generate your return at that time. So that's how I think of it.

And Lucas, if I can also add on this one. If you look at next couple of years, including next year, we are posting an improvement in the EBITDA potential of this business, right? So we are growing on both in terms of volumes lower costs. So the overall return on invested capital for this business next year has already an improvement. There is more to take from these assets, and that's what the team is working on. So I wouldn't expect to get this by 2030 only. I think we can get a lot of value between now and then.

Great presentation. Gustavo, maybe just continuing with the discussion on base metals. There was recently discussions in the press that [indiscernible] have talked to Canadian producer or Canadian-based company on something -- a JV or some combination in the base metal business. How do you see right now value-based metals fit in the portfolio as you deliver on all these fantastic growth opportunities in copper and improving the cash flow generation in the nickel business. And maybe if you could provide some color why this potential combination did not materialize?

Well, I won't comment on that. Who is party X. I don't know. But what I can say is that the job that Shaun and the team are doing is exactly what we expected that the team would do when we did the carve-out. Remember when we talked about the carve-out a few years ago, we had a vision that this business is operating in a more autonomous way would create value by operating the assets better by being able to bring people from the industry, base metals is very different from iron ore in terms of the operations, project development.

So it's very -- and we were only talking about VBM IPO for years turnaround. IPO [indiscernible] remember that. So today, we are sitting in a better position because we are extracting more value from the assets. And I think we can get even more than that. That's what Shaun covered in his presentation.

The focus now is not only to continue to expand on this operational excellence theme but also to accelerate growth. We don't think we get any credit on our shares because people don't believe we can grow this business. And I think it's fair to say that because if you go back to Vale Day 2008, 2009, many of these projects that we are talking about, now they were there already. And 15 years later, we are not able to do.

I think it's -- now it is different. It is different because this team understands better the endowment. I think we put a dedicated management team with the right incentives to only focus on this platform. And over time, this is going to pay off, right, as we are seeing already. A particular transaction needs to create value. And it's to add to that long-term vision that Vale will have a broader diversified with a growing share, particularly in copper.

If we can answer that and deliver a transaction that can get to that point, there are a lot of considerations, as you can imagine, we'll certainly entertain. We are talking to many of the players about opportunities. We are out there indeed discussing transaction and opportunities for us to accelerate that future of having more exposure to copper volumes, and we'll continue to do so.

Today, we think most of the value that we have is on unlocking the endowment. Nobody has this endowment. So if we're able to bring projects at 20-plus IRRs in corporate consistently over the years, I'm sure it will create a lot of value, and we're going to get some recognition for it. It doesn't mean we're not going to talk to people to see if there is a way to get bigger, faster, again, looking at value. If there is no value proposition, we want to just for the sake of growing.

Amos Fletcher from Barclays. Kind of a follow-up to that question. I just wanted to ask for an update on your thinking on the future capital structure of Vale-based metals, whether an IPO is still the central aim or your preference is to retain ownership of the business given the growth profile you set out?

Yes. We like very much the exposure to the business today. So our intention is that we continue to have exposure, especially because of this potential growth that we see. The carve-out gives us optionalities to do other things. So I think that was one of the reasons why we did the separation. But we like the exposure. And a lot of the growth, as you could see is in Carajas, where we see a lot of synergies with our existing operations, both in VBM but also in the iron ore space.

Marina Calero from RBC. I have a question for Shaun. You've talked about the potential to double your copper production. Can you talk a bit more about the main constraints that you have to date to achieve that? And what are the -- what is the different approach that you're taking to resolve those?

Yes. I think as you'd appreciate, my numbers might be stale, but I think the average time from discovery to first ore and copper mines these days have been something like 20 years. And all governments that certainly we've been dealing with as a priority of finding ways to see what they can do to reduce the bureaucratic burden and to ensure though that there's still the requisite standards from an environmental and social perspective, and we obviously support that.

So I know just -- pay a tribute to certainly the Vale team and Gustavo specifically, who's done a lot in this last year to really help us enhance our social license and help us on that pathway with our team to improve that particular component because I think it's the soft issues more so than the technical ones. There's a proud tradition of, let's say, overruns and all sorts in the sector and particularly on very large projects. We are focusing explicitly on those because those are things that we believe that are more in our control.

And as I try to demonstrate there through 2030 in particular, there are projects that they're basically brownfield projects. Alamos a bit more so. But the risk profile is very different. So if I was having a chat to you about where I've got a deal for you, $6 billion up in the [indiscernible], it's going to be great.

So we have the infrastructure, an underappreciated asset from my perspective as well. The workforce is perhaps the most almost irrationally exuberant and loyal that I've seen in the industry, just like delevering the [indiscernible], they love the association and that talent of engineers and others that we essentially utilize throughout, and we see this in Indonesia as well, is actually an underappreciated differentiator.

So to answer your question, I think the work the team has done in the CTO in combination with Marcelo, the operator is stepping up and really wanting to show what they can do, is creating an energy -- I use [indiscernible] as an example with Sossego. Usually, the end of life is like really challenging because at bottom of pits, they're very congested. But the work that he's done with engineers to actually help them improve their time on machinery, the utilization, the availabilities, dramatically lowering its cost structure. He brings that into the projects.

So when you think brownfields, those demonstrated capabilities enhance our ability to unlock value, not just in our technology centers, but really with the operators that will execute, but it comes down to the soft components. And I think we're better now than we were a year ago. we'll continue to focus on that.

[indiscernible]. Can I move to the market for iron ore, very good presentation. Indeed, lots of at -- could I ask for your views on 2 trends that we see now? One of them is the new ore coming out of Simandou and where that fits and what it might do? And the second one is the geopolitical tensions between China and the West. And what that seems to be doing to some customer relationships between China and a certain big competitor of yours?

Okay. I think Simandou is probably the most important change in the industry as we know it. The point being is that Simandou will come to the market gradually. The expectation -- the general market expectations, the Simandou will come with 20 million tons only in 2026 and will take up until the end of the decade to get to 120 million tons. In the meantime, I think we expect that depletion will offset some of this additional volumes that will come with Simandou. This is from a volume point of view.

From a quality point of view, Simandou is a very high-quality iron ore. It has a very high FE content. But that diagram -- alumina silica diagram that I just shown in the presentation, it's very similar to our IOCJ. So despite the fact it's low alumina has a very high alumina to silica ratio and in needs to be blended with other kinds of iron ore, so that gets into the ideal, I would say, the sweet spot for blast furnace operators.

So for example, if you just blend it with iron ore from Australia, you sort of get some of the FE benefits, but you won't get the alumina silica benefits. So they still need to blend with some other different kinds of ores. And that's then going back to what we're talking about is there's a new product coming into the market, our ability to move and shape what we are supplying can help us reposition the relative values of iron ore. So Simandou is really very important, but we feel that Vale is probably in a unique position to sort of counterbalance the entry of Simandou.

The second question in relation to the geopolitics. I think the point is on a global basis, I don't know where in steel would still be produced. The question is where it's going to be produced? Now with the U.S. under the 232 section -- Section 232 with Europe, with new tariffs and quotas, 50% tariffs and 50% new quotas. We believe that a lot of the Chinese exports, which we're currently actually going to these markets, they're going to decrease and China will decrease the level of exports and more steel is going to be produced in Europe, in the U.S., in South America.

So there's going to be a rebalancing of where steel is going to be produced. Interesting, for us, at least, these markets which are closer to the Western side, markets which are more favorable for Vale. And not only that, once you need to have Europe going back and increasing its production they will need more productivity. In that sense, it is better demand for agglomerates such as pellets. It is better demand for higher-grade iron ore.

So all in all, I think we see a stable market in terms of demand, just with the repositioning with more demand for higher grade iron ores closer to here Vale. So the ultimate result, we believe, is going to be positive overall.

It's Myles Allsop from UBS. Thanks for the presentation. Probably one of the biggest developments that we haven't really talked about today is the cash returns that we've started that process of returning cash to shareholders. If you're right, the iron ore holds $100, you'll have more decisions to make around cash returns. Maybe how should we think about it between dividends versus buybacks? And should we expect every quarter if net debt or expanded net debt below 15 is potentially a check in the post?

Thank you for the question. I think the decision is more on a semiannual basis than rather than on a quarterly basis, given the volatility and the seasonality that we have. But on every half year, the analysis that we do, I think the most important KPI to track is the expanded net debt. So if we are below 15 or trending below 15, we have better conditions to pay cash returns. The decision between dividends and buybacks, I think at this point, this year, specifically this year, we have an important change coming on taxation of dividends in Brazil that favored declaring dividends right now that would be exempt. So that's why 100% of the additional amount this year was allocated to dividends. For the coming years, we can expect a more balanced approach between dividends and buybacks.

Thanks for the followup opportunity. So my question is linked to Myles' question. And it's just to discuss the expanded net debt range policy, right? In light of this drop of the nonfinancial liabilities proportion within the expanded net debt content over the next few years, when do you think would be the appropriate time to potentially consider a revision of that expanded net debt range policy? And could that come hand in hand with a change in your dividend policy or perhaps adopting a more robust buyback program?

I think, as I mentioned in the presentation about the commitments, this year of '26 and '27, we still have a combined $4.5 billion of commitments to be paid. So it's important at this point to keep the expanded net debt concept. I think the timing for a revision would be more towards the end of '27. And I think at that point, the difference between the expanded net debt and financial net debt would be very small. So that would be maybe the ideal timing for discussing coming back to the original concept. And at this point, we have not discussed any potential change in the dividend policy as a consequence of that. But I think the chances of revising the net debt rule are present and will be present in 2 years' time.

Thanks for the followup opportunity. Shaun, Rogerio mentioned that he thinks that the level -- the $100 per ton level for iron ore prices was sustainable given supply and demand dynamics. I'm just curious about what do you consider to be long-term copper prices? Or how do you think about them in order to approve new expansion projects? And specifically about the expansion projects in your presentation was super clear the low CapEx in [indiscernible] CapEx per ton for your projects, the opportunity that you have there. What are the -- maybe the bottlenecks for you to accelerate that expansion? Or is there any chance because it doesn't seem to be a CapEx problem, right? Bacci is there, he would be happy to give you money for those accretive projects. Are there any chances that you could speed up those volume increases expected to 2035?

Short answer is yes. We're obviously not guiding the way the work that our team has done even this year is very much centered around what -- you saw 118 when we actually step back and we look at fresh eyes. We look at execution methodology, redesigning our surface footprint, the quantities, the volumes, the amount of earthworks displacement. We have to do all of that feeds through into how you think about risk and reward as we move forward. So the team is fundamentally doing that.

And I mentioned before, we're looking -- we're well advanced on these 200 pages thick documents because the market hasn't seen our assets and also hasn't seen some of these projects in any detail. So we'll be working with the Vale team to publish those in the new year to equip the teams to do that.

But I also think as we start looking and we get the drill results we're seeing, I think you're going to see an iteration, not just in the possibilities that it unlocks because as you will appreciate, when you've been looking for shallow open pits and it turns out the drill results I just received in my call earlier, are deep, but they're really good. I think there's a possibility to look at even further organic growth in the future, which I think is very exciting.

And the social piece is that barrier. So it's -- we have 4 core pillars in our business. Emily leads it for us. It is embedded now in our operators' frameworks, and we're making sure that the incentives and how they think about the social value we bring over and above just the financial values there. We're at the early stages. But I do think that it's not good enough to just see it on a screen as a department. It has to be embedded, and it is. So it's core to our strategy. [indiscernible] on your first.

Crisis?

Yes, yes. There's a reason I forgot that one. Look, I wouldn't this stage. I've been -- my last business was essentially investing in the mining space. And I usually try to understand from a long-term capital allocation point of view. How do we reflect our views on pricing relative to where the market is? Usually, it's not great to bet against the market. But having said that, I think when you've got such a buffer and you're executing, it gives you a lot of flexibility and freedom. We have to get our operating costs low. We're in the right end of the curve. And there's no copper price scenario that I see in any of the punters out there that would actually detract from the sort of returns on investment that we're looking at.

It is not a capital constraint. We're 1x -- less than 1x net debt to EBITDA, so I don't have to go to Bacci yet. And I think the copper price, if anything, has asymmetry to the upside and the reason is the sector is struggling to deliver. Like the inducement price, you can do that math, it's -- I don't understand it.

And Daniel, if you look at the health IRRs that we were able to show, I think that gave us a lot of buffer to navigate even substantially lower prices, right? So that gives us confidence to move ahead with those projects even at lower prices.

And those were calculated with prices below the spot. So they're still...

Thank you, everyone. One -- time from a one final question. [indiscernible], thank you.

Yes. Carlos, you have been, I guess, doing a great job on the iron ore business because not a lot of questions there, right? But maybe if you think about going forward, what aspects do you still would like to really focus on delivering sustainable strong performance with safety that you think maybe you didn't explore as much in the presentation and that you see that is achievable in the next 2 years?

Well, I believe that our next steps [indiscernible] really believe that we can still produce a bit more provided some conditions are satisfied. And my team and I are working on it. So I believe there is still room for that. Second, the [indiscernible]. So we've been making progress in the [indiscernible] line, but we're still not there yet. There is a fundamental milestone for us at the year-end with a new dosing system. We have been producing great direct reduction quality and -- and I think -- and we just now have installed the fourth [indiscernible] machine, the same line. So I believe this with our new mix that should be around by October, November next year would be the final step for the bricking line.

Besides all this, there is important work to be carried out for us to gain more productivity in our railways and ports, how to do more with the existing assets. And during this year, we revisited the operational model at our ports, and we are taking important steps to debottleneck, particularly the [indiscernible]. And we manage in both railways to reduce our cycle time. This is key for us to cope with the additional volume, I believe, will be coming up from the Northern system as well as from the Southeastern system.

And the model plant that you saw today because I think these will be really a breakthrough in high-quality feed being produced in different quantities. So historically, we used to have our split as 50% [indiscernible] reduction and 50% blast furnace. Now without the plan being fully operational, we are running at 75-25, and there were weeks that we are running at 90% direct reduction.

So what's going to be when it's fully operational? I don't know. What I'm sure is that with the technology support, I don't know what the limit is. But what I do know is that we'll be capable of producing substantially more high value-added products in our processing plants, like [indiscernible], Vargem Grande and Brucutu and these will have an important financial contribution to Vale's results. I think it's pretty much in these areas.

Thank you very much. With that, we conclude our Q&A session. Thank you, everyone. And our management team and the Board members will be available for those in-person here in the next 30 minutes. Gustavo?

Thank you very much. Thanks, again, for your interest. Everybody connected here. It's been a pleasure. Now you think you understand why I'm so optimistic about the future. Thank you again. Have a great day.

Good morning, ladies and gentlemen. Welcome to Vale's Third Quarter 2025 Earnings Call. This conference is being recorded and the replay will be available on our website at vale.com. The presentation is also available for download in English and Portuguese from our website. [Operator Instructions] We would like to advise that forward-looking statements may be provided in this presentation, including Vale's expectations about future events or results encompassing those matters listed in the respective presentation.

We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. To obtain information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission, the Brazilian Comissão de Valores Mobiliários and in particular, the factors discussed under forward-looking statements and Risk Factors in Vale's annual report on Form 20-F. With us today are Mr. Gustavo Pimenta, CEO; Mr. Marcelo Bacci, Executive Vice President of Finance and Investor Relations; Mr. Rogério Nogueira, Executive Vice President, Commercial and Development; Mr. Carlos Medeiros, Executive Vice President of Operations; and Shaun Usmar, CEO of Vale Base Metals. Now I will turn the conference over to Mr. Gustavo Pimenta. Sir, you may now begin.

Hello, everyone, and welcome to Vale's Third Quarter 2025 Conference Call. I would like to start by highlighting how excited I am about what we are building at Vale. Our vision to become a trusted partner with the most competitive and resilient portfolio in the industry remains solid, and we continue to make significant progress towards this future. This quarter, we once again delivered solid operational and cost performance across the board, and we are on track to deliver all of our guidances for the year. We continue to advance our safety agenda, most notably by removing the last dam from emergency Level 3, a significant milestone in our derisking journey. Our key initiatives and growth projects are also moving forward as planned, reinforcing our long-term strategic focus and disciplined capital allocation approach. These results give me great confidence in Vale's future and in the value we are creating, not only for our shareholders but also for society.

Now let's move on to the quarter performance on the next slide. First, I would like to highlight the solid operational results we delivered across all 3 commodities, positioning us to reach the upper limit of our annual production guidances. This achievement reflects the outstanding performance of our operational teams, and I want to congratulate them for their hard work and consistency throughout the year. This quarter, iron ore production reached 94 million tons, an increase of 4% year-on-year and our highest quarterly output since 2018. This growth was primarily driven by a record third quarter performance at S11D, along with the ramp-up of Brucutu, Capanema and Vargem Grande projects, which added flexibility to our operations and product mix.

Copper also delivered a strong performance with production growing 6% compared to last year, supported by Salobo's solid performance. This was the best third quarter result for our copper business since 2019. Nickel production remained flat year-on-year, but with an increase in our own production, thanks to the ramp-up of the Voisey's Bay underground project. This allowed us to significantly reduce our unit costs year-on-year as Marcelo will present later. Also in nickel, we started operations at the second furnace of Onça Puma in September. The project was completed on schedule and 13% below the planned CapEx, reinforcing our commitment to efficiency. The second furnace adds 15,000 tons of production capacity per year, and it is expected to further reduce unit cost by approximately 10%, enhancing the competitiveness of our nickel business.

We also reached other important milestones this quarter through our new Carajás program, which aims to accelerate the development of key projects in one of the world's most attractive mineral deposits. As many of you know, in June, we received the preliminary license for the Bacaba copper project and have since begun preparations for construction, which is set to start in the coming months following the issuance of the construction license. In iron ore, we received the operating license for the Serra Sul plus 20 million tons per annum expansion. The project has reached 80% physical progress and should start up by the end of 2026.

Additionally, we secured approval to expand Serra Leste's capacity from the current 6 million tons per year to 10 million tons per year, bringing extra volumes to the Northern System with a highly competitive capital intensity of just $20 per ton. Now looking at our portfolio. One of Vale's key competitive advantages is our ability to adapt to different market conditions, offering a product mix that meets the evolving needs of our customers. This is possible given the flexibility of our supply chain, supported by multiple blending, concentration and distribution facilities across the world. Throughout 2025, we actively adjusted our iron ore product portfolio, concentrating our high silica products and launching a new medium-grade product from Carajás. This flexibility results in significant value creation.

In Q3, our iron ore fines premium increased by nearly $2 per ton quarter-on-quarter. From an EBITDA perspective, those initiatives represent over $500 million improvement on an annualized basis. Safety is at the center of every decision we make at Vale, and I'm very proud of the significant progress we have achieved this quarter in dam safety and management. Back in 2020, we made a public commitment by 2025, Vale would no longer have any dams classified at emergency Level 3, the highest risk category. Last August, we fulfilled that commitment. The Forquilha III dam, the last one at Level 3 had its emergency status officially lowered to Level 2 by Brazilian authorities. This is an important milestone in our commitment to society and neighboring communities and a key mark in our safety journey.

Also in August, we announced that Vale successfully implemented the global industry standard on tailings management, the GISTM, meeting the requirements of this internationally recognized benchmark. Lastly, in September, we completed the decharacterization of the Grupo Dam in Minas Gerais, marking the 18th structure eliminated under our program. Advancing the dam safety agenda is essential to ensuring non-repetition and becoming a trusted partner to society. We remain committed to delivering results and being a reference for safety and operational excellency in our industry. Our efforts to transform Vale are beginning to be recognized by ESG rating agencies. We've demonstrated substantial improvements in governance, dam safety and management, health and safety and climate change. These advancements have led to upgrades in our ratings now surpassing levels seen prior to Brumadinho.

I would also like to highlight that over the last 1.5 years, a relevant number of ESG-focused investors have removed Vale from their exclusion lists. We estimate roughly 1.5 trillion in AUM can now invest again in our shares and fixed income instruments. We remain dedicated to transparently showcasing the progress we've made across the company, and we remain firmly committed to the principles of the UN Global Compact, including respect for human rights, labor standards and environmental protection.

I will now pass the floor to Marcelo Bacci to discuss our financial performance. I'll be back for closing remarks before the Q&A session. Marcelo, please go ahead.

Thanks, Gustavo, and good morning, everyone. As Gustavo highlighted, we delivered another quarter of solid operational performance, which gives us even more confidence in the long-term value we are creating for our shareholders. This quarter, our pro forma EBITDA reached $4.4 billion, an increase of 17% compared to the same period last year and 28% higher than the last quarter. As you can see on the slide, this consistent result was driven by robust sales, lower all-in costs across all 3 commodities and more favorable pricing conditions. In Base Metals, EBITDA grew by more than $400 million year-on-year, reaching almost $700 million, thanks to better results in both copper and nickel. In iron ore, EBITDA was close to $4 billion, an increase of almost $250 million, supported by higher realized prices and quality premiums, reflecting the success of our portfolio strategy. This improvement was also supported by the higher sales of iron ore fines, as I'll detail on the next slide.

Our iron ore sales increased by 5% year-on-year, reaching 86 million tons, the highest level for a third quarter since 2018. This growth was driven by stronger production performance and solid demand for iron ore fines with benchmark prices staying above $100 per ton for most of the quarter. This quarter, we built up around 4 million tons of inventory. It's important to highlight that this was mainly due to volumes in transit to our 20 distribution and concentrating facilities in Asia and Europe, supporting our portfolio strategy. We expect these inventories to be converted into sales over the coming quarters, helping us maximize the value generated by the business.

Now looking more closely at our cost performance. I'm very pleased to see that we are on the right track to meet our 2025 iron ore cost guidance. Iron ore all-in costs declined 4% year-on-year, supported by our portfolio strategy, which led our average iron ore fines quality premiums to increase by almost $2 per ton quarter-on-quarter and $3 per ton year-on-year. Our long-term affreightment strategy is also delivering excellent results, reducing cost volatility and coming in $5 per ton below spot freight rates to China during the period.

Our C1 cost, excluding third-party purchases, remained flat year-on-year, reflecting a positive impact from inventory turnover compared to last year, which offset the effects from the exchange rate and higher maintenance and materials costs. These effects led to an increase in our production cost, which reached $20.3 per ton this quarter. The production cost from this quarter, along with the less favorable exchange rate compared to last year are important factors to consider when estimating our C1 cost for Q4, which is expected to increase year-on-year. Despite this, we remain highly confident in achieving our full year guidance of $20.5 to $22 per ton.

In Base Metals, our performance stood out once again, showing the great potential of this business as we continue to unlock value through ongoing initiatives. Copper all-in costs decreased by 65%, falling below $1,000 per ton. This was the fifth quarter in a row that we've seen cost reductions year-on-year. In nickel, all-in costs fell by 32% year-on-year to $12,300 per ton, reaching the lowest level since the second quarter of 2022, even after taking into account the impact of the PTVI deconsolidation. These improvements came from Vale Base Metals consistent focus on efficiency initiatives, combined with higher byproduct revenues in our polymetallic sites with gold being the main contributor. Because of the lower-than-expected costs so far this year and the favorable outlook for byproduct revenues, we are once again lowering our 2025 cost guidance. We now expect nickel all-in cost to be between $13,000 and $14,000 per tonne and copper all-in cost to be between $1,000 and $1,500 per ton. This continued cost improvement means an EBITDA increase of nearly $900 million compared to our expectations at the start of the year.

Now let's move on to cash generation. Recurring free cash flow reached $1.6 billion in Q3, an increase of $1 billion year-on-year. This improvement was primarily driven by our solid EBITDA in the quarter and a reduced impact from negative working capital. Our total CapEx was $1.3 billion this quarter. We expect investment disbursements to increase in the fourth quarter, keeping us on track to meet our $5.4 billion to $5.7 billion full year guidance. On top of our recurring free cash flow generation, we also had a positive impact from the Aliança Energia transaction, which helped boost total free cash flow in the quarter to $2.6 billion. This strong free cash flow generation and strong cash position were primarily used to return value to our shareholders with the payment of $1.5 billion in interest on capital and a net borrowing of $600 million as part of liability management. Next slide, please.

As a result, our expanded net debt decreased by $800 million quarter-on-quarter, reaching $16.6 billion, with iron ore prices remaining above $100 per ton, we expect the free cash flow generation in the fourth quarter to bring us down at least to the midpoint of our target range of $10 billion to $20 billion. In this context, we see increased room to consider additional shareholder remuneration even in the context of the participated debenture tender offer. Before handing over to Gustavo for his closing remarks, I want to emphasize the value we are consistently delivering to our shareholders. Through our growth strategy, cost efficiency and disciplined capital allocation, we are building a more resilient and high-performing company. These efforts strengthen our financial position and create conditions for sustainable and increasing returns to our shareholders over time. Gustavo, please.

Thanks, Marcelo. Before opening up for the Q&A session, I would like to highlight the key takeaways from today's call. Safety remains our core value, and this third quarter performance only reinforces that as we continue to advance on building an accident-free work environment and on delivering on our upstream dam decharacterization program. We once again delivered a solid operating performance with cost reductions across all businesses, reflecting our focus on operational excellence. Our flexible product portfolio allows us to maximize free cash flow and long-term value creation under different market conditions, and we are seeing those benefits in our financial performance. We are making solid progress on strategic projects in the Carajás region, leveraging one of the richest and lowest cost mining endowments globally. And finally, our disciplined capital allocation approach ensures we seize the best opportunities to generate long-term value for all of our stakeholders.

Now let's move on to the Q&A session. Thank you.

[Operator Instructions] Our first question comes from Rodolfo Angele with JPMorgan.

My two questions are the following one. So first, I would like to ask Rogério a question about the portfolio strategy. That was a thing that we discussed a lot in the recent investor tour, and it's amazing to see it already showing a large impact already in the third quarter. So I wanted to ask you to give us a little bit more color on how this should progress? What is the potential? Just an overview on what should we expect about portfolio strategy, which seems to be yielding pretty interesting results.

And my second question, I think, is for Bacci or Gustavo or for Bacci. I think what we hear from investors is company is showing a very strong performance. The operations seem to be much more -- it seems like you have your hands on the wheel and things are really improving, and we're seeing limited surprises, which is always very good. And when we see a quarter like this one where the company generated over $2.6 billion in free cash flow, the question that I'm getting a lot from investors is how should we think about dividends as one part of the capital allocation strategy going forward? So those are my two questions.

Thank you, Rodolfo, for the question. On the portfolio, I think up to now, our joint actions, and I mean joint because those are actions from the commercial operations and technical areas in optimizing our product portfolio, they have yielded very positive results. Just a few examples for BRBF and SSCJ. SSCJ is our mid-grade product from the northern part, which are both low aluminum mid-grade ores. They have commanded very high premiums versus the index 62%. As Gustavo mentioned, it was close to $3 per ton normalized to a 62% Fe content iron ore, which was a way higher than a year ago. If you look into the third quarter of 2015, fine premiums reached $0.7 per ton, which is actually $2.6 per ton higher than the third quarter of 2024 and $1.8 per ton higher than the 2Q 2025. And this is -- and I would like to say that this is actually despite a relatively lower quality product mix. So I mean, very positive results so far.

Last but not least, IOCJ premiums also kept a very healthy level at about $15 per ton, obviously, driven by some good steel margins, but also by wiser product allocation, and we can talk more about it. But I think what I would like to reinforce is that we're very confident in our product portfolio. I think we see that IOCJ and BRBF will remain our core products with a strategic allocation to regions and clients who really require their unique properties. That means that we will sell it, but we're well allocated to clients and regions that actually value or have a higher VIU or pay a higher VIU for these products. SSCJ, as I said, which is the mid-grade product from Carajás that we just introduced, has already achieved sales of about $30 million per ton -- 30 million tons and is becoming a global product with potential to further increase its sales in 2026. So as we look into 2026, we believe that our volumes of SSCJ will increase gradually.

Last but not least, our Chinese concentrate, which we started as a -- not such standard product is becoming a highly valued product in the Chinese market. So this is very good news. This product is also commanding very good premiums in the Chinese market. I think the only other one is the pellets market that we have been talking about. 2025 has been a challenging year for pellets. We see 2026, 2027 as years that will gradually recover our pellet premiums, especially with the start-up of new projects that will demand pellets, mostly projects that are going to look into direct reduction, looking for decarbonization.

And also with the Chinese exports cooling down a little bit, and which will add more demand for regions that need pellets. Look, I think we will keep proactively optimizing our portfolio solutions, not only based on market demand, but also on our mine plan possibilities as we have been doing with the operations team. And we'll keep observing the market, observing the market needs and our competitors' positioning so that we can define our best allocation in our best portfolio.

Rodolfo, Gustavo here. Let me just add one thought here, and then I'll pass to Bacci to cover the capital allocation. But I think what you are seeing in the market is seeing is that one thing we've been sharing with investors is the enormous flexibility that Vale has in its portfolio, right? I think nobody in the industry has that flexibility. We've talked about 20 blending facilities across the globe, several concentration facilities. So that allows us to put into the market what our client needs at the right time. And I think this more dynamic product allocation and development that we've been able to show just reinforces the enormous competitive advantage that we have to play along the cycle. So I'm very happy with the outcome. And I think we'll be able to capture even greater value as we move forward. So to your second question, I will ask Bacci to cover.

Thank you, Gustavo, and thank you, Rodolfo, for the question. As you mentioned, Rodolfo, the stability of the company and the stability of the market are creating better conditions for us to think about the extraordinary dividends for the coming months. As I said during the presentation, the price is above $100 on a consistent way plus the operational performance are creating a very nice cash flow position for us, which is better than we expected at the beginning of the year, plus the positive performance coming from the Base Metals business. So we cannot anticipate the decision right now because there's still a few things to happen, but it is likely that we have extraordinary dividends announced in the coming months.

Our next question comes from Rafael Barcellos with Bradesco BBI.

So as a first question, are there any plans to revise the offering structure of the participating debentures announced in early October? I mean any updates you could share on that front? And that said, maybe connecting with this Bacci speech on the dividends, I mean, what would be the implication or the implications for Vale's dividend payouts, particularly, of course, for extraordinary dividends?

And as a second question, first, Gustavo, congratulations for the results that you have been delivering on the copper side. And that said, are there any plans or ways that you could -- that you believe that Vale could accelerate or speed up the growth initiatives in the copper business?

Thank you, Rafael. This is Marcelo speaking. On the participative debentures, I guess, we have to -- first, the offer is to be concluded today. And this offer has been unique. It's the only one that we have ever done since the issuance of those debentures 28 years ago. And I would like to stress out that the executive committee does not expect to make another movement like this in the foreseeable future. We also believe that the price that we're offering is quite reasonable and above the fair value that we believe we have with a 15% premium compared to the price before announcement.

So if we consider our production volume guidance, is the offer price of BRL 42 implies an iron ore price of $100 per ton -- around $100 per ton in the long term. So we think it's a very interesting offer to the holders. And of course, if you believe prices are to be above $100 per ton, probably positioning in the shares is a better deal. So I think we are not considering any change to the offer, especially because, at this point, it is about to be closed today.

Rafael, for your question. I will pass to Shaun. I think he'll be able to provide more color. What I can say is based on everything I've been hearing from the team, from Shaun and the ExCo of VBM is that the more we look into the growth opportunities in Carajás, the more excited we are. So this is something, hopefully, at Vale Day, we'll be able to talk more about it, give you concrete examples. But let me bring Shaun to the debate here. I think he'll be able to share more details with you.

Thanks, Gustavo, and thanks for the question, Rafael. I think the short answer is we will cover more of this as Gustavo say, in Vale Day. But really, we've fundamentally focused on 2 things right now to do exactly what you're saying. The first one is you've seen the industry, I think, on track this year to under-deliver against the original expectations with a series of issues by about 6%. An issue for us, just get the basics right in our existing operations. So you've seen our quarter, I did guide in Q2 that this was expected in both our segments to actually be our weakest quarter with planned maintenance, like at Sossego. And despite that, we've seen our operators do incredible work and we're on track, particularly at Salobo for record performance. And I think we're looking at Sossego a mature asset for the best operating performance, which is tough for an older asset in certainly 5 years, which is exactly what we need as a baseline.

The other thing then goes down to capital allocation and the project growth pipeline, specifically on Pará. And here, we're not waiting for an annual time frame. We've taken -- we discussed this a bit during LME Week. Historically, 2024, for example, we do about 20,000 meters of drilling in the district. And this year alone, we've dynamically reallocated R&D spend, we've tripled our drilling this year. And we will share more on what we're finding, but it's incredibly exciting.

So it creates this very dynamic question about drilling, drill results, the endowments and how do we actually optimize, not only to accelerate, but to see what we can do to increase volumes over and above what we thought was conceivable. We're very careful to make sure that we don't make the mistakes, I think you see in the sector more broadly, which is get over-enthusiastic. We have to ground this in delivery. But I think as Gustavo said in his opening remarks, first cab of the rank is Bacaba. We've worked with the government to be able to accelerate ahead of getting our work, so we hit the weather window here on early works on the bridge, which is critical path. They're about 40% ahead of plan currently. We hope to get that soon and we'll obviously communicate with the market soon. But we are set up there for lower capital intensity and to do that faster.

And I won't spill the lead on some of what we're seeing with the life of business planning our projects, but all of that is around reducing capital intensity, execution risk and working more closely with governments on reducing permitting time frames. And I think we've got some really good news that we're working on in that area.

The other thing is we're seeing with the ramp-up also on our polymetallics, we're ahead on both the Voisey's Bay, and we've seen our highest output in Sudbury in 5 or 6 years, we'll put over 5 million tons for Clarabelle this year. We are seeing a significant copper byproduct that is a material, it's over 20% of our total copper contribution. So that is a significant contribution to that business segment's all-in cost improvements as well.

Rafael, this is Marcelo again. I forgot to mention about the question on the effect of the buyback of the debentures on a potential dividend payment. I would say that at this point, there is no effect or a minor effect. So this would not change our strategy in relation to dividends.

Our next question comes from Leonardo Correa with BTG.

So a couple of things on my side. And sorry, it's going to be a bit similar to Rodolfo, so sorry, Rodolfo, for that and Vale management. But moving back to these 2 points, which I think are at this point critical, right, for the investment case. Rogério, starting with the commercial strategy, right? I mean great results so far I think you gave a very good qualitative assessment of everything that's happening. Things have been delivered very fast, right? So there's been a, let's say, a U-turn in the direction of things and you can already see an improvement in price realizations of -- depending on how you look at it, right, $1.8 to $2.5 per ton in better realized prices, right?

It's natural, I think, for everyone to question, given the fast speed and improvement, where do you think we are in this, let's say, in this S-curve, right, of this entire journey on the commercial strategy? I know there's no guidance, and I know there's -- it's very difficult to quantify, but would you say we're at the early stages of this optimization and that these results, they could continue improving, maybe doubling from where we are? So anything quantitatively, I think would be very helpful, at least to me, so we can understand the, let's say, the economic impacts of what you're doing.

The second point, to Marcelo. Marcelo, we spoke a lot about the potential extraordinary dividends. You talked about the [indiscernible] and how they impact that decision, which is close to 0 or very little. You're talking about iron ore prices have been ahead of expectations and how that helps and the cash flow projections going forward, I can imagine, have improved. What we haven't debated yet is the potential changes in regulation in the country, right? I mean Brazil is on the verge of increasing taxation on dividends to 10%. And every single company, every single management team and every single tax department is obviously running the numbers and trying to assess implications and what the next steps are, right?

I mean looking into the numbers for Vale specifically, right, I mean, one can simply conclude that there's about 30% of the market cap in retained earnings, right, which is a relevant number. I know leverage is not high but maybe a bit higher than what -- the mid-range of your guidance, but still manageable. I want to see from you if that changes the calculus, right? This potential regime change in Brazil on taxation of dividends, does that change in the short term your calculus on the extraordinary dividend that you're about to announce?

Okay. Well, no, thank you very much. This is a very fair question. Let me break it down in 2 steps. First, let me give you a view of what we're doing and then I'll give you an idea of the potential impact, okay?

So what we have been doing is that we keep proactively optimizing our portfolio solutions. So always looking to the market demand, as I said, and looking at our mine plan possibilities. Just to give you a few examples of things we're doing. We're developing additional, more competitive concentration capacity on a global basis so that we have less costly, better logistics for the concentrate production that we produce. And those concentrate production or this concentrate production allows us to think about different optionals in terms of blending.

We are establishing alternative blending facilities outside China on a global basis wherever possible. For example, we're putting blending facilities in Sohar, we're putting blending facilities in Europe, we're looking at some other options in Malaysia. So we want to increase our flexibility to distribute on a worldwide basis, and that actually helps us to better allocate the products and optimize not only the service to clients, but also our price realization.

Where -- there's a third element, that we're also improving process flow sheets, so to increase metallic recovery in the concentration facilities. We created a small technical group to develop and deploy best practices. This is extremely important because the metallic recovery on those concentration plants do have an enormous value.

And last but not least, we're improving logistics. So trying to figure out the places where we should be positioning blending facilities, concentration, so that we can optimize logistics costs. So those are the things that we are doing.

But ultimately, to your question, so the potential impact depends a little bit on a few factors. First is the competitors' reaction and how they are developing their own portfolio and how we would fit, complement their own portfolio.

Just to give an example, you might see some of our clients their view on product portfolio is decreasing quality to optimize resources and reduce C1 costs. This is where they're going. I mean it's very accretive for them. But as long as they're going this direction, that actually offers us a possibility to put more complementary material into the market. And our view is that this will increase the value in use of our products.

So the second one just to think about is how the market will react in terms of this anti-evolution capacity closures. The less capacity you have available to produce the same amount of steel or the same amount of pig iron, the higher the premiums one would expect because the higher quality of iron ore would be demanded to maintain productivity of the remaining blast furnaces.

So I'm just giving you a few examples that this game will need to played -- would need to be played as we go, but that we have developed an enormous flexibility and we're monitoring the market very closely so that we can maintain the current premiums and try to optimize it even further.

Well, thank you for your question. Of course, we are monitoring very closely the potential and the changes that have happened and the potential additional changes in regulations, especially related to tax -- income tax on dividends and interest on capital. The situation we have at Vale is that we can pay -- if you look at the minimum dividend policy that we have, most of it, if not the totality of it, can be paid using interest on capital. So the immediate impact on the regulation -- of the regulation on dividends for us is limited.

But we are monitoring. Still, there is some confusion in the market about the potential conflict between the corporate law and the new regulation that was created by -- for dividend payments related to profits that already have been recorded, in terms of the -- when those dividends can be paid after declared. So we are still working on that. But we are monitoring that very closely, as I said. And if there is any opportunity to optimize the situation of the company and our shareholders in relation to tax, we're going to look very closely into that.

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

Congrats on the solid results. I wanted to focus a little bit on Base Metals. And maybe, Shaun, can you elaborate a little bit more on how do you see the timing of Vale pursuing more aggressively the copper growth opportunity that it has? Obviously, several projects in the portfolio. How do you see the sequence of those? When can we start to see the Board, maybe management presenting the projects for Board approval, and then hopefully start on the path of expanding that copper output?

And then my second question, also on Base Metals, will be if you can share maybe some color as to how the cash cost without byproducts or before byproducts in Base Metals has performed. Obviously, kudos to the company and to you on the lower all-in cost guidance. But that definitely were influenced by strong byproducts, which they count, we'll take them. But just if you can shed some light on how the cost performance has been before byproduct benefits.

Thanks for that. So the copper growth, I'm going to punch, I think that mostly to give you the detail on Vale Day, as much as I'm jumping it a bit to share with you now. I can just say we've fundamentally redesigned our life of business planning this year and very much with an eye to exactly the dynamics you've mentioned. So we are prioritizing, as I said earlier, dynamically capital to copper in Pará, specifically on R&D spend. And the constraint that we have on copper growth is not throwing more money at that.

I just want to be clear. Like our plans currently, we are fully self-funded through our planning horizon, mostly through, not just, as you said, byproduct credits, but really fundamentally through our entire business restructuring, our capital intensity, reducing our working capital and fundamentally reducing our overhead and our cost in this business, so things that we control.

So we are seeing opportunity. I will disclose more within weeks of how we're seeing that opportunity to look at sequencing and growth opportunities. And I'd sort of direct you to say, as far as I can see from the market analysis that we see with analysts and others, we're not even getting credit for what we've guided to yet. So I recognize that the market is sort of waiting to see what we're capable of delivering. I hope that we -- I hope that it's evident, particularly against the backdrop of the copper sector that's struggling to deliver. Our assets are hitting records. We have to get that done fundamentally to earn, frankly, the right from Vale and Manara for further capital, and we're delivering that. And then in addition, I think we're finding significant opportunities on how we approach projects and work with our partners and our stakeholders to unlock their copper growth.

So I know it's not the -- this is a little of the detail you're looking at, but we will provide that within a matter of weeks. And I am, I think, to just coin what and echo what Gustavo said, the more work we do, the more excited we get. And I expect that as we get more drill results, and we will continue to increase our drilling. The constraint is just getting enough drills, frankly, for us to continue to do more. What we will find is, I think each year, for the foreseeable future, we'll be able to continually dynamically improve. But we've seen a step-change in copper and I'm super excited about that. We see it in our internal valuations.

The next, on just more broadly for Base Metals. If you remember in prior quarters, we started restructuring this business about a year ago. In fact, it was about 6 weeks into my tenure in the role. And the team, I was actually with our operating teams out, we do quarterly reviews with all the asset and functional leads, so just last week, I'd say each of our assets is exceeding their internal commitments and plans. It's quite remarkable.

And that is looking not at, to your point, byproducts, and as you said, we'll take it, and we're obviously doing the things that we can to enhance recoveries. We've seen Salobo as an example, compared to just a few years ago, we're about 10% ahead on gold recovery. These guys are doing an incredible job, and we're seeing -- we're on track for record copper and gold production this year in Salobo as an example.

But at the same time, the focus is on reliability and fixed overhead reductions, which we're seeing flow through, things we control, which we're seeing flow through into the enablement of the decentralized model that we've spoken about previously. And that is manifesting in things like Sossego. Within a matter of months, a controllable 40% reduction in unit mining costs with changes in practices and engaging that workforce. We're seeing fixed cost dilution in practically all our operations, specifically the work that has been done in Voisey's where they're now about 20% ahead. And that has enabled Long Harbour in the first time in its 11-year history within a period of months to actually be achieving its design capacity. It's never done that before. And they're doing that through enhanced availability, reliability of the equipment specifically, but significant cost control and being able to drive that through and enhance productivities.

And we've still got a long way to go, I'd say, for the business as a whole. We've done well, but we've got more opportunity to achieve benchmark productivities. Sudbury, I mentioned earlier, is, with the 5 mines, has achieved significant improvements, and they've done it safely. We've had about a 40% improvement in TRIFR. We -- as you heard in the opening remarks, celebrated in September, bringing the Onça Puma furnace 2 on about 13-or-so percent under budget and on time.

And importantly, that is -- we're already -- Kilma this year with her team has taken that asset now with the fixed cost dilution. And being ahead of her cost commitments, we'll bring that down into the second quartile, which is the ambition for the nickel business to be sustainable. And I know specifically on that segment, because I know it's been a challenging one historically, the focus that we've mentioned there is not just to be the beneficiary, which we are as we've ramped up, but more byproducts. And to remind you, at the moment, in the Canadian nickel assets, about half of our revenue is derived from nickel at these prices, and the remainder is copper, cobalt, PGMs and precious metals just generally.

We are the beneficiaries and we're seeing enhanced volumes and higher prices that are helping us there. But importantly, the increased volumes that we're seeing flow through are significantly contributing to and the low overheads are contributing to the fixed cost dilution and those improvements. And even Thompson, we're seeing the best throughputs in that operation at this stage since, I think, it's 2021. So every asset that I'm seeing at the moment is coming to the party and contributing on what they control. And we have further to go. So I hope that gives you a sense.

Our next question comes from Caio Ribeiro with Bank of America.

So my first question is in regard to your expanded net debt. I just wanted to get a sense from you on if and when you could possibly consider a revision of your current range of $10 billion to $20 billion. What's the rationale behind a decision like that? And if you do make any changes, what implications that carries for buybacks and dividends to be announced going forward, particularly if you increase that expanded net debt range at some point?

And then in second place, my question is on pellets and briquettes. This year, Vale took the decision to cut its pellet production as a reflection of less favorable market conditions. I just wanted to see if you can give us a sense of what signs you're looking for to bring that capacity back, and if there is a particular level of premiums for pellets that you're looking for to take that decision.

And bringing briquettes into the discussion, I just wanted to see if you can give an update on how the development of this product is evolving and whether you're confident at this point of the large-scale applicability of applications of this product.

Caio, on the expanded net debt we are not envisioning a change in that policy in the short term. I guess the company will gain more and more capital flexibility over time as the relative weight of the reparation commitments becomes smaller in the expanded net debt over time, especially in the next 1.5 years. So a few months from now, we're going to be in a position where the difference between the net -- the financial net debt and the expanded net debt will be lower and lower. And at some point, we're going to have to review the concept. But for the time being, we believe that both the concept and the range are adequate to our reality.

Caio, thanks for the question. In terms of pellets, there has been a decrease in demand, at least up until the end of the year, so steel mills outside China, they are operating at lower capacity utilization, primarily due to competition from imported steel from China. And with that, there is a less need for blast furnace productivity, what impacts negatively blast furnace pellet demand. So that's the scenario that we are facing.

Also we have had some additional increase in supply coming from Samarco and from LKAB. The way we see it is the medium term as of end of 2026, 2027, there's going to be a significant increase in demand, especially driven by electric arc furnaces, which are coupled with direct reduction furnaces. So only in Europe, you have many projects ongoing, like all the German companies, from ROGESA Roheisen, Salzgitter, you have Austria with Wüster, you name it. You have, in Mexico, you have Ternium, Psqueria So the amount of the demand for pellets over time is going to increase gradually, also some in the U.S.

But the point is we don't have a target for pellet premiums to open up plants and continue to increase volumes. I mean we will react to the market on a continuous basis. So we'll bring volumes to the market as we see fit. But our expectation for the years to come is actually very positive. We need just to overcome the sort of this point in time where China is exporting significantly and hurting steel mills, blast furnaces around the globe.

In terms of briquettes and briquettes development, we are extremely confident. I think we have 2 kinds of briquettes, one for blast furnace, which have been -- we have a few blast furnaces which are already operating at very high participation of briquettes in their burden mix, in some cases even 100% with very good performance in terms of productivity, in terms of fuel consumption. And our challenge now is actually to prove it for direct production. We are running some industrial trials by the end of this year, beginning of next year. And our expectation is extremely positive. We should be able to give a better view of the results of this test or these industrial trials in the next call.

Our next question comes from Daniel Sasson with Itaú BBA.

Most of them have actually been answered, but maybe I'll try to do one that we don't talk that much or that frequently about, which is on Samarco, right? The company got out of its judicial reorganization in third quarter. For those that have been following the story for a long time, I think, and correct me if you think I'm wrong, but investors in general, have kind of zeroed the dividends received that could be received by Vale from Samarco. And then right after, the dam burst happened and then Vale started to disclose the potential contributions to the Renova Foundation and so on and so forth. .

But if you could comment a little bit on how the ramp-up of the second concentrator is doing. And if it's too soon or not maybe to think about the reversal of some of the provisions that you've made for the contribution to the Renova Foundation, if you think that Samarco will be able to take care of those payments themselves and therefore, some that could alleviate the contributions that could be made or that would have to be made by Vale and BHP, that would be great.

And my second question, since we're talking about this, the overhangs or most of the overhangs that Vale has solved over the past 1 year, 1.5 years, you've gone a long way, if you have any updates on the legal case ongoing in the United Kingdom, if we've had any developments there, that would be great. Those are my questions.

Thanks, Daniel. Gustavo here. I'll do the first one and Bacci will cover the second one. Look, we are very happy with the progress that the team in Samarco has been doing. They've ramped up the second concentrator, doing around 15 million tons. They are about to make a decision of going to the third concentration, so Samarco could be getting all the way up to 28 million tons in a few years out. So we are very happy with the operational performance. They now also incorporated the responsibility for the reparation and they've been doing an outstanding work there.

So it is a very strategic asset for Vale I think it's early to talk about impact on provisions. There is still a lot of work to be done there. But from an asset perspective, it is a very strategic asset that we like very much, and we are very excited with the work that the team has been doing so far.

On your second question, Sasson, the U.K. case is still going on. We expect potential decision of this phase of the case in the coming weeks, sometime in November. That could mean the end of the process if we win or actually not we, but technically BHP, but we share any consequences with BHP. But if BHP prevails, that would end the process. If not, that would leave the process to another phase that will take a few years in order to quantify the potential losses of the climates.

Important to mention that some of the claimants that were initially part of the lawsuit in the U.K. have decided to join the Brazil agreement, which we believe is the main means to compensate the impacted people. So out of the more than 300,000 individuals that joined the Brazil agreement, half of those at least were part of the U.K. agreement. So they decided to give up on the U.K. in order to join the Brazil agreement, and they have been also already paid in Brazil. And a part of the municipalities also joined the Brazil agreement. And the part that have not joined have been provided for in the provisions that we constituted in Brazil.

So we consider that the case in the U.K. still goes on. There may be an additional impact in our numbers coming from that, but part of that has been resolved already.

Our next question comes from Caio Greiner with UBS.

My first question, to Rogério on China Mineral Resources Group. So Rogério, we understand they have reached a significant portion overall Chinese iron ore purchases. And so I wanted to hear from you. How are the talks going with between Vale and them? There are obviously news of a competitor that has been having some issues on those discussions. So I just wanted to understand what has been Vale's strategy on negotiating with them, and if you can share with us what has been the focus point of those negotiations, if there are any talks of any sort of long-term supply agreement. Any color there would be helpful to us.

And the second one, actually a follow-up to the previous expanded net debt question, but more focus on the methodology. I guess for Bacci. More questions have been emerging since you guys announced the perpetual debenture repurchase and whether or not this would raise the expanded net debt figure, if it would impact dividends, which you guys already talked about. But at the end of the day, I think the point is, there are other debt-like instruments on Vale's balance sheet, which are not really included in the expanded net debt methodology. So I wanted to understand, how does Vale internally look at its overall debt burden or obligations, whatever we can call it? And is the expanded net debt method actually the one that you most use inside of the company? And if not, if there are any plans to rethink this methodology, change the methodology going forward and eventually even raise the target range?

Okay. Caio, Rogério, thanks for the question. Now first of all, I think we're following closely the negotiations CMRG has been having with other iron ore players. And we are also in talks with CMRG. But I'd like to just reinforce that China has been a very historical partner for us and we have an extensive history of cooperation with our Chinese partners. For example, we've developed the BRBF with Chinese clients. We have a comprehensive network of blending facilities, which we've developed with the Chinese ports. We've developed the VLOCs with Chinese shipyards and ship owners. So there's a long history of collaboration.

So given this, as I say, long-standing relationship, and the value that we place in China, we have held comprehensive conversations with CMRG along the years, but we've always explored win-win alternatives, understanding that and this is important, that we have a product portfolio that is unique and it's very complementary to the all other offering that China has.

So having that in mind, we are working with them just to find win-win solutions. I'll be there, I will be -- next weeks. We're talking to them. But we hope to find sort of win-win solutions for Vale and for China.

Caio, on the expanded net debt, it is indeed the indicator that we use internally for the evaluation of our capital structure. We do have the participation of debentures as an additional instrument that is not included in the net debt concept, but that's because of the nature of that instrument. That is a perpetual instrument where we have the net present value of that recorded as a liability but as a nonfinancial liability in our balance sheet.

So it is an obligation anyway that will have to be paid in terms of the interest or the semiannual interest that we pay. But the principal amount is recorded in another balance sheet line. We continue to think that the expanded net debt is the right way to look at this because we still have a significant amount of reparations to be paid. As I said, during '26 and '27, a very important part of those payments will have to be performed. So by the end of '27 or mid-'27, we're going to have a much lower difference between financial debt and expanded debt, which means that we may be in a position to review the concept.

It is important to notice that the obligation related to reparations is different from a regular debt because it cannot be refinanced. We need to pay as they mature. So that's why it's important to keep that concept at this point. But as I said, in the coming years, we're going to be in a position to review that.

Our next question comes from Marcio Farid with Goldman Sachs.

Rogério, another one for you. You're In very high demand today. How should we think about the change in the benchmark grades into next year? Obviously, Platts is moving from 62% to 61% FE, alumina and I think phosphorus benchmarks also increasing into next year as well. Seems to be part of a natural industry transition into lower-grade assets. But how should we think about that? And our understanding is that, especially for flat steel, which is -- I think is becoming more relevant than long steels now in China, flat steel is relatively more -- it's more important, especially when you think about phosphorous content, and I think they are more sensitive to that. So how does Vale places into that trend in terms of benchmark change and the change in terms of product mix in China going forward as well?

And maybe the second one to Gustavo. Gustavo, obviously, good job on the operational front being done in the last year or so. I think you've been talking on the media and you've mentioned that Vale has regained the first part in terms of the largest iron ore producer potentially this year, but with higher confidence next year. So it's great. But obviously, when we look at company size in terms of market cap or whatever other metrics you want to look at, Vale has clearly lagged peers as well, right?

So everybody is asking about how we can expedite copper growth. And we obviously have other iron ore projects to be delivered into next year as well, especially in the north. So there's more value to be created for sure. But is that an ex-side from the Board or from management to catch up to that to that lag. I mean when we look at Vale's ranking on a global scale, again, it's lost some position, right? So is that an ex-side to there? Or is it just it is what it is and you keep doing what you have in terms of internal endowment? That's obviously another way to ask about M&A or any other ways to grow the business in a faster mode.

Marcio, to begin with the benchmark with the PRAs, this is a very good question. Indeed, there's a bit of uncertainty right now as most of our competitors are moving their product grades more towards 61%, such as the Pilbara Blend at 60.8%. The agencies are discussing about migrating from the index 62% to an index 61%. At this point in time, they are going to be publishing a very differential between the index 62% and the index 61%. But probably down the road, the prevailing index will be a 61%.

We are -- our products are actually higher, even our BRBF is a 63% FE content. We're discussing with the index, for example, the possibility of launching and with the PRAs, that we're talking about metal bulletin platts, argus [indiscernible] okay? About the possibility of launching a low alumina 61. It's important to say that our products are always sold at the specification, which is higher FE. Let's say, BRBF is 63% but when we bring it to an index, it's normalized for FE, okay?

So there shouldn't be much of a change. We will be discussing with the agencies what makes sense for us to sort of to compare our products with, what is the best reference, what's the most liquid reference. But this is still ongoing, okay?

In terms of FOS content, you're absolutely right FOS is becoming more and more important, especially when you have such large volumes of products such as the Yandi from BHP and Rio Tinto coming out of the market. And FOS should be one of the specific elements that has to come into the specs, has to be valued and put into a value difference. We are working on this front, so we'll give you more update as we firm up a solution.

So Marcio, Gustavo here. On your second question, look, we agree with you. I think there is still enormous opportunity for Vale to unlock value. I think this management team is highly focused on that. And despite some of the rerate we had recently, we still believe there is a lot of opportunities for us to continue to advance and regain our position in the market from a market cap standpoint. That's what we are working on. And this is the legacy we want to leave, be very focused on value creation as we go along.

And our view is that the value we will accrue and we'll regain it if we continue to operate our assets well, that we are outstanding in terms of operational performance. So the results you've seen, it is highly encouraging, and I think we can do even better, not only in iron ore, but also in Base Metals. So this is a key priority for us. And in this industry, this is one of the most important things that you have to master.

But we also see Vale as a company with potential highly-accretive growth opportunities. If we look at the comps and the capital intensity for some of our competitors, just to stand still, is substantially larger than us. And I think sometimes this is underappreciated by the market. Vale has a unique potential to bring volumes and grow with a capital intensity that is substantially better and more competitive than our competitors.

So if a few years out we are doing 360 million tons of iron ore, with the right mix of assets, lower cost, this is going to be, for sure, the most competitive iron ore platform in the world, I have no doubt about it. And I'm feeling more comfortable that we'll be able to get to that future. And if we can double the size of copper and tomorrow, do 700 kilotons, not 350, leverage the endowment, another unique advantage of Vale, the endowment that we have. We don't have to go to other places. M&A, yes, a lot of people are doing M&A. But we don't need to do. We do have the resources here.

So it may take a little longer. But remember, we are very focused on value creation here. So I'd rather take a little more time, but develop the right projects with the right level of returns and grow consistently. Because I think that's what it's going to, a few years out, create sustainable value for our shareholders. That's what this team is very focused on. And I think it's in our hands to deliver.

Thank you. This concludes today's question-and-answer session. I would now like to close the conference. We thank you for your participation, and wish you a nice day.

Good morning, ladies and gentlemen. Welcome to Vale's Second Quarter 2025 Earnings Call. This conference is being recorded, and the replay will be available on our website at vale.com. The presentation is also available for download in English and Portuguese from our website. [Operator Instructions]

We would like to advise that forward-looking statements may be provided in this presentation, including Vale's expectations about future events or results, encompassing those matters listed in their respective presentation. We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. To obtain formation and factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission, the Brazilian Comissão de Valores Mobiliários. And in particular, the factors discussed under forward-looking statements and Risk Factors in Vale's annual report on Form 20-F.

With us today are Mr. Gustavo Pimenta, CEO; Mr. Marcelo Bacci, Executive Vice President of Finance and Investor Relations; Mr. Rogério Nogueira, Executive Vice President, Commercial and Development; Mr. Carlos Medeiros, Executive Vice President of Operations; and Mr. Shaun Usmar, CEO of Vale Base Metals.

Now I will turn the conference over to Mr. Gustavo Pimenta. Sir, you may now begin.

Hello, everyone, and welcome to Vale's Second Quarter 2025 Conference Call. First, I would like to take a moment to remind you of our strategic direction as defined by our Vale 2030 vision. We are building a leading mining platform with the right portfolio of assets as we leverage our unique endowment to deliver accretive growth opportunities in both copper and iron ore. We are also highly focused on continuing to gain competitiveness across all commodities. And this quarter's performance only reinforces that we are on the right track to achieve our stated goals.

Another key element of our strategy is the increased focus on talent development and leadership. To that end, I'm very happy to have a world-class executive committee team fully in place now with the recent arrivals of Sami Arap as our General Counsel and Grazielle Parenti as our VP of Sustainability. Both professionals bring enormous experience and expertise and will certainly help us to deliver on our long-term strategy.

Now let's move on to the highlights of this quarter. On safety, we are pleased to see clear progress towards creating an accident-free work environment across all of our operations. Our safety indicators for the first half of 2025 have clearly improved compared to last year as represented by a 55% reduction in the high-potential recordable injuries indicator, and we continue to lead our peers in TRIFR. These results are reassuring and confirm that we are on the right path to becoming the safest mining company in the world.

This quarter was also marked by another solid operational performance across all business segments. This shows that our focus on operational excellence and on building a superior portfolio are paying off, putting us on track to meet all of our guidances for the year.

Iron ore production reached 84 million tons this quarter, 4% higher year-on-year and our highest second quarter output since 2018. Growth was mainly driven by the ramp-up of new assets, such as Capanema, along with a strong and consistent performance from other sites. S11D, for example, hit another production record this quarter. We remain committed to increasing the flexibility of our product portfolio, which allows us to respond more effectively to market conditions and capture greater value through our commercial strategy.

In our Energy Transition Metals business, we continue to make solid progress. Nickel production rose 44% year-on-year, driven by productivity initiatives and the successful ramp-up of the Voisey's Bay underground mine. I'm also happy to announce that we have started Onça Puma's second furnace commissioning. The furnace when fully ramped up, will contribute with 12 to 15 kilotons of nickel production and will be very cost-competitive.

Copper production also performed strongly, increasing 18% compared to the same period last year, our best second quarter since 2019. The strong performance at VBM highlights the great work Shaun and the team are doing to unlock value from our existing assets and position the company to deliver on our long-term goals, including the highly promising copper growth.

Early in the year, we launched the New Carajás program with the vision to accelerate the development of essential projects in one of the most attractive mineral deposits globally. Since then, the team has been working on several fronts to advance those projects, including increasing the exploration spend to better understand the endowment in the region with very promising results to date.

The first important milestone for the New Carajás program was the preliminary license for Bacaba granted in June. Bacaba will extend the life of our Sossego plant with 50 kilotons a year and a very competitive capital intensity of $5,400 per ton, a clear demonstration of the potential value creation we have in the region.

As we advanced on our growth story, one thing remains clear, being a performance-driven company is at the core of our strategy. Our efficiency program driven by innovation and technology is enabling us to consistently reduce costs at a time when much of the industry is struggling to contain inflation. This was the fourth consecutive quarter of year-on-year reduction in our C1 cash cost, putting us on track to meet our 2025 guidance of $20.5 to $22 per ton. Becoming more competitive and efficient is a top priority for our team, and we will continue to pursue this objective as a key element of our strategy and culture evolution.

Finally, talking about the third pillar of our vision, which is on becoming a trusted partner for society. Vale recently published its first sustainability-related financial information report, being the first company in Brazil and the first major mining company globally to do so. The report outlines climate-related risks, making clear how Vale is managing those while identifying key opportunities for the company, such as the steel industry decarbonization and the increasing need for critical metals like copper and nickel. I encourage you all to explore this report, which reflects our commitment to leading the industry in transparency and sustainable mining initiatives.

I will now pass the floor to Marcelo Bacci to discuss our financial performance. I will be back for closing remarks before the Q&A. Marcelo, please go ahead.

Thanks, Gustavo, and good morning, everyone. Our pro forma EBITDA reached $3.4 billion in the second quarter of '25, improving 7% quarter-on-quarter, but down 14% year-on-year, driven by the 13% decline in iron ore reference prices. We once again delivered a solid operating performance with production volumes rising and cost declining year-over-year across all commodities. This efficiency-driven mindset is increasingly shaping the way we operate and our results reflect the commitment and discipline of our teams.

Let's take a closer look at the details of this quarter. Starting in iron ore. Our cost performance continues to show strong momentum, marking the fourth consecutive quarter of year-on-year decline. In Q2, our C1 cash cost reached $22.2 per ton, down 11% year-on-year, driven by our efficiency initiatives and a favorable exchange rate. The all-in cost declined 10% year-on-year, reaching $55.3 per ton. This improvement was not only driven by a lower C1 but also by lower expenses and improved premium realization on iron ore fines. We are starting to see the benefits of our portfolio optimization strategy with more to come in the coming quarters. We remain highly confident in achieving our full year guidance for both our C1 and all-in costs, implying year-over-year cost reductions despite inflationary pressures.

Our Energy Transition Metals business delivered another strong quarterly result with substantial improvements across all assets, reflecting the impact of the Asset Review initiative led by Shaun. In copper, the all-in costs decreased by 60%, reaching $1,400 per ton. This reduction was driven by strong performance at both Salobo and Sossego, along with higher byproduct revenues benefiting from higher gold prices.

The lower-than-expected costs in the first half of the year combined with a more favorable outlook for byproduct revenues allow us to revise down our 2025 all-in cost guidance for copper. We now expect a range of $1,500 to $2,000 per ton, which considering everything else constant, would imply a $300 million EBITDA improvement for the year.

In nickel, the all-in cost decreased by 30% year-on-year as a result of robust operating improvements in Sudbury and Voisey's Bay with the ramp-up of the underground mines as well as higher revenues from byproducts.

Now moving on to cash generation. Recurring free cash flow reached $1 billion in Q2, $500 million higher than in Q1, driven by a higher pro forma EBITDA and a lower working capital variation. Our CapEx continues to trend downward, reflecting gains from our efficiency program and the completion of key projects like VBME and Capanema. We remain confident in delivering the $5.9 billion CapEx guidance for the year.

Additionally, yesterday, our Board of Directors approved a distribution of $1.4 billion in interest on capital to be paid in September, in line with our dividend policy, reinforcing our continued commitment to return value to shareholders.

As you can see on this slide, our recurring free cash flow enabled a reduction in our expanded net debt, which ended the quarter at $17.4 billion. Our target range for expanded net debt remains between $10 billion and $20 billion. We expect to gradually move back towards the midpoint of that range in the coming quarters, supported by strong cash flow generation in the second half of the year and the positive impact of the Aliança Energia deal, which we expect to close in Q3.

To conclude, I would like to reinforce our continued disciplined capital allocation approach, keeping our expanded net debt within our target range, controlling CapEx, investing in accretive projects and delivering strong shareholder returns through dividends and buybacks. As Gustavo mentioned earlier, we also remain firmly committed to our efficiency program, ensuring we become an even more competitive company.

With that, I would like to pass the floor back to Gustavo for the key takeaways.

Thanks, Marcelo. Before we open up for the Q&A session, I would like to highlight the key takeaways from today's call.

Safety and sustainability are core values, and we are committed to continuously improve our performance while also increasing transparency and keeping an open dialogue with all of our stakeholders. We continue to consistently advance on our operational excellence efforts, which are enabling us to reach record production levels across all of our businesses.

Competitiveness and efficiency remain a top priority as the resulting all-in cost reductions will make us more resilient to generate value through the cycle. Carajás is one of the best copper provinces globally. Through our New Carajás program, we are accelerating copper growth by developing accretive projects in the region, such as Bacaba creating long-term value for our shareholders.

And finally, our disciplined capital allocation approach will continue to ensure health, shareholder remuneration and value creation for all of our stakeholders.

Now let's move on to the Q&A session. Thank you.

[Operator Instructions] Our first question comes from Marcio Farid with Goldman Sachs.

Maybe my first question to Rogério, please. Rogério, when you look at the production report, it was very clear that Vale's commercial and product strategy was very adapted to the environment. So we saw big swings in terms of product delivery, right? IOCJ was basically cutting half, low grade basically doubled, pellets was quite down a bit in line with the guidance. So trying to understand how you're thinking about product mix going forward when you consider where premiums are that Simandou is probably ramping up high-grade ore into next year. And obviously, considering Vale's asset base in Brazil and also the blending facilities as well, please?

And secondly, my second question to Shaun, on the Base Metals side. Nickel was quite robust, obviously, from low levels, but even adjusting for nonrecurring items was very strong and EBITDA basically increased 4x, right? So just wondering if it's a new recurring level, can we expect more cost savings and more profitability improvement, both on nickel and copper as well, generally speaking?

Marcio, thank you for the question. On the product portfolio, I think what I would like to reinforce is that we are focusing on value, as we said last time and more broadly optimizing total contribution considering premiums, costs, volumes. So it's not only -- it's a complete understanding of where we can generate value. We keep working on building flexibility in our supply chain. We are looking to adjust product offering dynamically. As just mentioned, as market changes, as premium changes, as steel margin changes, we need to adjust our portfolio. And in order to enhance this flexibility, we are seeking to increase our concentration capacity and blending capacity, not only in China but also outside China.

But just to give you some examples of supply chain flexibility, as you just asked. As the steel margins declined in the past couple of months. We -- and quality premiums narrowed. We revised completely our portfolio. As an example, we revised our IOCJ, our iron ore from Carajás specification. We introduced, as I just mentioned last time, a mid-grade Carajás ore. We increased our concentration of high silica ores. So all this, with the goal of not only simply -- not only adjusting the products to the market, but also of simplifying our mining operations, improving this way the conversion of resources. This also helps us to decrease costs, increase production, decrease the number of products. So it is a total optimization of the system. And so that you know today, we just tendered new projects of Carajás and new products of mid-grade very successfully.

I think you may be able to see this impact, which has been quite positive. For example, if you look into BRBF premiums versus the premiums on an Index 62%, we have had a tremendous change and a tremendous increase in the premiums on BRBF. The premiums on concentrates also increased, especially on the spot market in China. And more remarkably, silica penalties narrowed by about $2 per ton on a percentage point relative to alumina ores from April to July. This all are very significant improvements in price realization.

So this actually, when you look into Vale's overall portfolio has a very significant impact primarily because all our ores are relatively higher in silicon. But obviously, I think you also asked about Simandou. Simandou would change the dynamic into the market. But what I can tell you is that we are prepared to make the necessary adjustments, changing our product mix, changing channel allocation as Simandou comes into the market.

And Marcio, it's Shaun speaking. So to your question, I think you may recall late last year, Vale Day and then in Q1, we set about with the Base Metals business doing a few things. The first was looking to lower our global overhead through efficiency programs to make the organization as effective as possible and reengage the operations so that they can effectively be as productive as possible and successfully compete for capital. We call it internally project catalyst. And what we've seen to date on that initiative has been quite remarkable with the team's responding.

So you'll recall in Q1, we said that we'd removed about 1/3 of our global overhead and G&A. We've actually gone beyond that. I think at the time in Q1, it was about a $285 million cash flow improvements on our internal budgets from last year. We're looking out at about $340 million, and I see more opportunity. And I think what you see in this quarter is the first with the lag between what appears in our actual accounts and then the timing on cost of goods sold, you're seeing the flow-through.

So our latest numbers now are in our forecast. We're banking about $340 million of cash improvements where more than half of that is in OpEx, the rest in CapEx. To your point, nickel, out of necessity just given the point in the cycle, I think we're seeing is a disproportionate amount of those savings. And we're also seeing a large impact from fixed cost dilution and also the benefit of polymetallic. So just a few things to consider.

I think we're on track for certainly the -- on the copper side, the best performance we've seen in -- certainly at Salobo. And at Sossego, with the productivity improvements, the unit cost improvements alone, we're seeing nearly a 40% improvement with the work that Vinicius and his team is doing. So despite the copper price environment and gold price environment being very supportive, those efficiency programs are driving. So you're seeing fixed cost dilution that's occurring with increased volumes, but also low overhead. So there's that double whammy plus the benefit of the byproducts.

And to put that in context for you, I think we had mentioned this on the last call, but it's worth just reiterating it. For every $100 an ounce move in gold price, it's about $135 a ton improvement in all-in cost for copper, for example.

Importantly, when you go to nickel, we're seeing a big volume effect in addition to a very large fixed cost reduction that we're just starting to reveal Voisey's Bay, as Gustavo has mentioned, we're seeing a very successful ramp-up of the underground there. Peter and his team are about 30% ahead of our internal plans and are well set to continue with the successful ramp-up.

And very pleasingly, because of the owned feed feature that is going into Long Harbour, we've actually seen the team for the first time in the history of their operation actually achieved nameplate of that operation in May. And we look forward to seeing those teams continue to deliver the throughputs, particularly driven through our own feed, which has cash flow benefits for our business.

Sudbury, we've seen significant improvements, not just in overhead reductions, but throughput. You'll see that Totten for example, it's the highest ore hoist that we've seen in the first half of the year there in over 6 years. And in Creighton, it's the highest metal produced month in June since nearly a decade. And Ontario itself, when you look at copper and just to remind you, I think in these pricing environments, only about 40% of our revenue coming from that complex is actually nickel, the rest is copper, cobalt, PGMs, and that diversification is really helpful. But we're seeing about 6% more copper in the first half versus the same period in the last year.

And just going back to the polymetallic piece, as you consider the sustainability and a potential going forward. For every $1,000 a ton move in copper, our all-in costs move were about $460 a ton. Platinum for every $100, it's about $55. Palladium, for every $100 an ounce, it's about $60 a ton. And gold for every $100 an ounce is about $25 a ton.

So I'm seeing across-the-board performance. Onça Puma, as Gustavo mentioned, that just started the second furnace, even before then, [indiscernible] and her team are heading second quartile improvements and we should be on track for metal by the end of Q3 in that operation and a very competitive position.

So I'm very proud of the team. I think we're on track, and I think you should expect to see continuation of us focusing on delivery of increased volumes, fixed cost dilution, a reduction of fixed costs and improvements in productivities.

Next question from Rodolfo De Angele with JPMorgan.

So I have a couple of questions. I think more towards Bacci, but feel free to jump in whoever wants to help. But I think I want to explore a little bit more the side of cost. It's clearly the highlight of the quarter. As Gustavo mentioned, 10% lower iron ore, 60% on copper, 30% on nickel, that's quite impressive. And I wanted to explore a little bit of the future on the cost side. So what is structural here? And probably more important, is the baseline of opportunities on the cost side, is it still pretty healthy? Can you give us a little bit more color? You do seem very comfortable on the guidance, but I just wanted to hear a little bit more detail on the cost opportunity on VBM and on iron ore as well. That's my first question.

And the second is on shareholder return. This is a recurring question that I get from investors. The company is doing well. Clearly, we're seeing the performance stable, the company is generating cash, and the stock is cheap, at least, that's our assessment. So the question is on shareholder returns, Bacci. So looking forward, what -- do we have to see a buyback program being something that the company will be pursuing more aggressively? Those are my 2 questions.

Rodolfo, thank you for the questions. On the cost side, we feel very confident about delivering the guidance for this year in iron ore. The operational performance has been very stable, and the new operations are coming in at a very good pace, and we feel very good about continuing to deliver according to the guidance.

Of course, in the second half of this year, we have tougher comps since the performance at the end of last year was very good. But we are feeling very, very confident about the guidance that we have for iron ore.

On the Base Metals side, as Shaun mentioned, we also have a very consistent and robust operation today that enables us to believe that we are going to continue to deliver the same level of cost in nickel, around the same level that we have today in the second half of the year. And we have this new guidance that we published for copper that we also feel very confident about that. So the performance and the stability of our operations are making us believe that the cost performance will continue to be within the ranges of the guidances that we provided to the market.

When it comes to shareholder return, we just announced the dividend in the form of interest on capital for this first half. which is related to the minimum policy that we have, 30% of operating cash flow. We will -- during the second half of this year, depending on how we perform on cash flow, we will decide about potential additional dividends and/or buybacks. We just announced today the approval by our Board for also the usage potentially for the buybacks of derivative instruments that could enable us to manage the cash flow on a better way.

So I would say that we continue to see a mismatch between the operating performance and the valuation that we see in the market. So we are getting prepared to move forward with some of these actions during the second half of this year.

Next question from Amos Fletcher with Barclays.

I had 2 questions. The first one actually just following up on that last answer, just around the use of financial instruments and derivatives to do the buyback. Can you just go into a bit more detail to explain exactly how that would work and the potential quantum of it? And does it enable you to start a buyback earlier than you might otherwise have done potentially in the second half of the year?

And then my second question was just on Vale Base Metals. I just wanted to ask about the recent departure of Mark Cutifani and whether that indicates any potential change in strategy to VBM over the long term?

Thank you, Amos. In relation to the derivatives usage, it's important to mention that according to the regulations of the Brazilian authorities, we have to be very precise about what kind of derivatives that we use for the buyback program. So the approval that we got yesterday from our Board was just an explanation of what would be the different kind of derivatives that we are authorized to use.

Basically, the decision between buying straight in the market or using derivatives is related to the cost of capital and also related to the cash flow management of the company. So we wanted to have the options open to go one way or the other, depending on how the market performs in the second half of this year.

But in relation to the decision of actually going to the market and performing the buybacks, this will depend, of course, on how comfortable we feel in terms of cash flow generation and the room that we have on our net debt policy.

Amos, Gustavo here. On the VBM Board and the departure of Mark, no change in its strategy. That was always the design when we invited Mark to join us. The idea there was to set up the Asset Review, help us build the team, and that has been achieved. So he was extremely helpful, and we are very grateful for the work that he did. And it was the design once we had the team in place that they would then take over and move their strategy along. So no change in strategy. If anything, what you want to do is to accelerate the future that we laid out for VBM.

Next question from Leonardo Correa with BTG.

Yes. So a couple of questions on my side. Number one, just moving back to perhaps to Rodolfo's question on the cash returns, which I think is the, let's say, the central element to Vale's investment thesis. I mean there's a bit of a glass half full or half empty. Vale, I mean when you look at the dividend that was announced, it's a 7% yield. So we sensed, this is higher than the Australian peers. However, lower than some Brazilian peers and much lower than the CDI rates, which are the reference interest rates in the country.

So the question always ends up being, I mean, what Vale needs to see, what needs to happen for extraordinary dividends for Vale to return to those, let's say, to those brighter days, very strong cash returns, double digits with Vale paying quite a lot of extraordinary dividends. So maybe a bit redundant again, but we've been seeing iron ore prices surprise on the upside. I think many observers have been waiting and waiting for a correction, which hasn't come and maybe will not come, who knows. It's very difficult to forecast.

But would it be fair to say that in the current environment, with some of the proceeds coming in, in the third quarter from Aliança and with, let's say, with the resilient iron ore price, would you see Vale back to extraordinary dividends towards the end of the year? So that's my first question. Again, trying to address the marginal buyer at Vale. With that in the mindset. I mean it depends on who you talk to, people see the dividend as high or low, or relatively low.

The second question to Marcelo specifically, on the CapEx guidance. I mean, the free cash flow number in the quarter was solid, 10% yield. It was based off a relatively low CapEx figure in the quarter. I mean $1 billion of outflows in CapEx. I know it's wrong to annualize this, but it's natural to do. I mean $4 billion, your guidance is almost $6 billion, slightly under $6 billion for the year. I know there's an erratic pace to CapEx, but I think the natural question would be, why not reduce the guidance or what are the risks that you end up with lower outlays versus your guidance? Those are the 2 questions.

Thank you, Leo. On the cash returns, I think, first, I don't think it's fair to compare with CDI, right? This is not our cost of capital. But I understand where you come from. The scenario is one that if we continue to see iron ore prices around $100, I think there's a good chance that we have room for additional payouts in the form of buybacks or additional dividends in the second half of this year as we did last year.

But we're going to have to see how the market performs. We are very confident on the tools that are under our control on the cost side. But of course, we depend on market prices to determine the cash flow that we're going to have available in our hands to determine the allocation of capital that will most likely include more returns to shareholders if we are more towards a situation where our net debt, expanded net debt moves towards the midpoint of our range, which is $15 billion. So if we feel that we are going in the direction of going below $15 billion, increases the chances of additional payouts will probably increase. And we're going to have to decide if we're going to go in the direction of buybacks or additional dividends depending on how the market is performing.

On the CapEx side, we do recognize that the number for this quarter was relatively low. That was a seasonal effect. We feel very confident about the $5.9 billion guidance that we have for the year. At this point, there is no indication of a change in the guidance for the year, but rather only a seasonal effect for this quarter.

Next question from Daniel Sasson with Itaú BBA.

My first question is related to pellets and maybe Rogério, you can talk about the strategy of maximizing value and not necessarily quality in your portfolio. How do you see -- or to what you attribute, Rogério, the recent decline in pellet premiums? Do you think that maybe the anti-involution or the supply side reforms in China could help on that front if steel producers' margins increase? And do you see that happening at some point given that you're all-in guidance for premiums this year would likely imply a significant improvement in the second half?

And maybe my second question to Shaun, you talked a little bit about the reduction in your guidance for copper production costs. And you mentioned that a chunk of that came on the back of higher gold prices, right, or higher byproduct sales. But specifically for gold, a big chunk of that or almost all of it is you don't get to keep it, right, because of the streaming transactions you've made in the past. Do you think or are you interested at all in maybe renegotiating some of the terms of those acquisition -- of those deals? Or do you see in any way the possibility of increasing your exposure to gold? Or is it something that you'd like to do?

Daniel, thank you very much for the question on pellets. I think, first, the market that we serve is the market of the Atlantic. We also serve the MENA region, the U.S., in Japan and Korea and Taiwan, not so much China. So the dynamic is a little bit different.

I think what we're facing and when we look into the short term is a decrease in demand because China has been exporting a significant amount of steel. And those products are actually coming into the regions that I just mentioned, and they are reducing the necessity for higher production in these regions. Thus, with less productivity requirements, most of our clients are reducing the amount of pellets they use in their burden. So this is a lot related to the steel exports going to those regions.

In addition to that, I think there is also the increase in supply from Samarco and some from LKAB. We are monitoring this situation very closely. I mean, obviously, we expect this to change and gradually more demand will come from pellets. When you look into the medium- to long term, we see a significant increase in demand. There are several electric arc furnaces being blamed around the world in different geographies, just to name a few. If you think about Europe, you may see ROGESA, thyssenkrupp, Salzgitter, [ Vist ], [indiscernible], SSAB. If you go for the MENA region, so you go North Africa, Tosyali, LISCO, Suez, some mills in Oman as well. In the U.S., you might -- we're just following the decision from Hyundai to install a new electric arc furnace in Louisiana. Ternium Mexico is expanding. There's also a Big River #2. In Japan and Korea, Nippon, JFE, POSCO, they're all looking into electric arc furnaces.

So I think the view is that gradually. And these projects that I'm talking about, they are all planned to come into place by 2030. So what we see is that despite the exports from China, which is impacting primarily the blast furnace market, we see that there's going to be a lot of demand coming on board gradually and pellet prices should actually recover. I mean how fast this recovery will be is still a bit difficult to define, but we're monitoring that closely and taking the necessary solutions in terms of capacity, in terms of production of our pellets.

Yes. And Daniel, a good question on the streaming transaction. You may recall my role before this was having founded streaming and royalty business. So I've been on the other side of this sort of question. I think it's useful. So firstly, we have a contractual arrangement primarily with Wheaton, on Salobo, and these are financing transactions that go back a long way, right? The management team in Vale at the time, would have had a choice between issuing equity or debt. And just the same there where you're not going to, let's say, renege on contracts that you got with your equity or debt holders, we have a contract that we're delivering into.

But to put it in context, proceeds received so far on those streaming transactions going back to 2013, excluding the ongoing payments are about $4.1 billion that the business has received. And to your point, our focus here is on really where we can control. We've actually outperformed on gold in the first half just with the ebbs and flows of both the performance of Salobo as well as the sort of mine sequence. So we expect that to be a bit less in the second half. But really, the focus for us is on optimizing the production as a whole. We are the beneficiary of the residual gold regardless, and if we were ever to look at financing alternatives in the future for future growth, we consider all options as we have, albeit using a lot of the experience, obviously, that I've got from having done these before.

So yes, hopefully, that answers your question. But our main focus is on optimizing free cash and allocating our capital well and honoring our contracts.

Next question from Carlos De Alba with Morgan Stanley.

All right. Maybe a follow-up on what we just discussed for Carlos Medeiros, maybe for Rogério, on the briquettes project that you finished given that it's no longer there as part of the project you're working on. How does the -- given the current market situation that Rogério just elaborated, how are your customers accepting and buying the briquettes that you are now producing? And how is the ramp-up of the project? When do you think you can achieve a stable performance and maybe optimum cost? And any comments that you can give us in terms of the margins that you could potentially achieve in these products?

And then maybe for Shaun, just a continuation of the last response. Shaun, look, fantastic performance, very good to see the 2025 all-in cost guidance declining as dramatic as it did. I just would like to see if you can share some color on how you see the sequential performance in the third quarter and the fourth quarter. The all-in cash cost in the second quarter $1,450 is slightly lower than the new -- the low end of the range that you provided.

When we looked at the 6 months, you are at $1,336 per ton. So again, is the new guidance a little bit conservative or because the lower gold production that I understood, you mentioned you might see in the second half of the year, it is prudent to have a new range that, again, fantastic decline, but would suggest maybe an increase from where you were in the second quarter.

Thanks for your question, Carlos. I will start answering, and then I will hand over to Rogério to talk about the market aspects and the tests with our customers. So the briquettes line so far is stabilizing. So in July, we produced 40,000 tons, so which was our best mark in a month. We had the line down during the month of June to correct a few things that we believe were necessary. And what we see is that the line will ramp up and also quality is improving on a daily basis. So we are confident that we'll come up -- that we are coming up with a product that will be helpful to our customers.

So Rogério, if you complement that.

Thank you, Medeiros. Thank you, Carlos. On the briquettes side, Carlos, we have a lot of interest from our clients. We have a huge backlog of clients looking to test it. But let me give you the current status. We need to separate this between blast furnace briquettes and direct production briquettes. On the blast furnace briquettes, we have done more than 10 in the pre-industrial trials very successfully. We have completed 2 full industrial trials, one of which actually getting to 100% of briquettes in the burden mix in a smaller blast furnace and another one achieving 50% of the burden mix with a larger blast furnace.

I think what I can tell you is that the results were excellent in terms of productivity and in terms of coke rate better than running with pellets, right? And we're now planning for -- still for this year, another 2 very large industrial trials, which is the final product validation.

Direct reduction, we have run -- I think we didn't have a chance to talk about this before, but we have run more than 10,000 basket tests with different clients around the globe, all basket tests have been extremely success -- most of it actually extremely successful with a very high metalization of the product, much better than actually in pellets.

And we also have had very good indication of productivity. This is one of the things that we've noticed, especially in direct reduction that the briquettes, because of its configuration, it's morphology, they actually yield a much higher productivity of the shaft furnaces. We're now completing and going to larger industrial trials as well with selected clients. But upon confirmation of the results, we believe that this is going to be a real breakthrough for the industry.

Yes. Carlos, it's Shaun. On your question on the second half, I know my Chief Operating Officer is online listening to this call and feeling the heat in the second half as we go into this. And I think I say that because clearly, each of our operations have stepped up and the performance you've seen to date is not isolated to just copper or nickel or just Salobo or, say, Ontario. We're seeing these opportunities across the board.

I would caution that as you think about the second half, we are looking at more planned maintenance, which will impact volumes and obviously some cost in Q3. So you should think about H2 as being somewhat similar, but more back-end loaded.

And I think the only other thing to frame is, bear in mind, we're ramping several operations right now. And so we are factoring that into our risk assessments in the numbers we're putting out publicly. We've -- as we've just communicated, we just started the second furnace at Onça Puma. We are still in the midst through for the next many, many months for expansion at the underground in Voisey's Bay. And effectively, we're expanding production in our own mines in Sudbury in several of them. We're aiming at 5.5 million tons this year through the mill. We'll be looking to take that to 7. There's a significant amount of development and work that's going through that. So we have really factored that in.

I think the last bit of context, I mentioned before that the actions we've taken late last year and this year that we're identifying and delivering cost improvements, there is a lag between what we produce and what we sell. And so you're seeing that starting to manifest in this quarter with cost of goods sold. Our internal targets on what I mentioned earlier as project catalyst where we've identified and delivered in our forecast so far, about $340 million of improvement this year. We are internally continuing to push beyond those numbers, but we will only bake those into forecasts and actually communicate those later as indeed, we deliver as opposed to things that we have identified but yet have to succeed.

So to summarize, you should see more of this. It should be more back-end loaded. And as you'd appreciate in this industry with this volatility, it's essential that we are as productive as we can be and is cost competitive, and that's our focus.

Next question from Rafael Barcellos with Bradesco BBI.

My first question is for Rogério. Rogério, it would be interesting to understand how the new volumes from Capanema and even from the Serra Sul project will change your overall commercial strategy?

And then my second question is really about your views on the iron ore markets. I mean, despite the fact that we are dealing with several macro uncertainties, key data points remain very solid for iron ore and steel, with steel prices and margins increasing in recent months. So I just wanted to hear your thoughts on the second half for iron ore markets. particularly what are you seeing in terms of demand trends for the second half?

Thank you, Rafael. Let me start with the second one, which is the global outlook. And then I'll talk specifically about the new volumes from Capanema and Serra Sul. When you look into the world global steel market, it's still volatile as some of you just pointed out. But we feel it's more stable after the intense rounds of tariff negotiations. If we divide this in China and ex-China, just in China, I think you all might have seen the recent reports from the Politburo meeting suggesting mild economic incentives. And this is because in the first half of 2025, the Chinese government has achieved a GDP growth over 5%. So this is -- we don't expect a lot of change but mild incentives.

Secondly, I think they also emphasized industry capacity rationalization under the anti-involution policy, which affects steel. I think some might think this is negative for us, but quite on the contrary, what happens is the mills which are left outstanding, they were probably going to have higher margins. With higher margins, they will need more productivity. And with more productivity, they will need higher quality ores. And that actually is very positive for us in Vale specifically.

More specifically looking to the Chinese steel mill and starting with crude steel production, one may see that according to the National Bureau of Statistics in China, crude steel production has declined by 3% year-on-year. But here is the caveat. When we look into pig iron production, which is the steel which is produced with iron ore, the decline has been only of 0.8%. That indicates that the bulk of the crude steel decline has come from scrap-based electric arc furnaces.

I think important to think that blast furnaces, the integrated processes are more competitive these days than the electric arc furnaces when one factors in the demand for seaborne iron ore. I think other than that, the more traditional indicator did not offer much of a surprise. When you look into fixed asset investments, steel mills profitability or even steel inventory, I think there was no surprise there. I think there has been not much change into the Chinese market.

Regarding iron ore, still in China, I think still very stable from what we've seen in the past, imports of iron ore, iron ore inventory at ports hanging around 140 million tons. So no real surprise. I think the point to highlight here is the ex-China, and that connects a bit with the previous question on pellets. The exports coming out of China, which we forecast will exceed 100 million tons for this year are impacting negatively crude steel production and productivity requirements to that extent outside of China.

But what I would like to highlight on the positive side is India. India crude steel production has increased by about -- by over 9% this year, which is very significant. And that's a lot of iron ore from India, which was going to the seaborne market is actually coming out. And more importantly, India is opening up for imports, especially for our kind of ores which are very complementary to their ore in terms of chemistry, in terms of size distribution. So this year, we anticipate that we will be selling to India more than 10 million tons, and we expect to grow this over the next years as we partner with some of the Chinese players.

But all in all, I think the way we look at it is despite the volatility that I mentioned in the beginning is that the global iron ore market is balanced.

To your second question, I think it's a very good one. Capanema and Serra Sul will be part of a broader portfolio design. When we look into how we define products, regions to sell, marketing channels, Capanema and Serra Sul will be integrated into the broader supply chain, and we'll define how to better allocate it. So depending obviously on steel margins, depending on premiums. So this is part of the broader portfolio optimization.

Next question from Caio Greiner with UBS.

So 2 questions on iron ore. The first one on the production outlook, it's actually great to see the higher production coming in, Capanema and Brucutu and the Northern Range are also performing quite well. But I mean, production growth year-to-date has been quite low, right? So I just wanted to get an update from you on the ramp-up expectations of your multiple assets looking into the second half of the year and into 2026. You're arguably tracking in line with your 2025 guidance.

But for 2026, the question is, I mean, it implies a 20 million-ton growth when you think about the midrange. So I just wanted to hear from you if you remain confident on your 340 million to 360 million tons guidance, which again implies a relevant growth from where we are. And is that Vale's plan under pretty much any iron ore price scenario? Or could we see lower depending on market conditions. If we see iron ore prices moving to $90 per ton next year, for example, is this still going to be with the level of production that we should be looking at?

And the second one, which is also related, but on the caves decree, just wanted to get an update from you in terms of how the conversations and engagement with the government has been evolving in recent months. It's arguably taking longer than expected. So I wanted to get this update and also hear from you if Vale is already working with the possibility of not getting this decree and what could be the eventual implications for the company if that's the case?

So regarding the new projects, Capanema and Vargem Grande, they continue to ramp-up as planned. So to give you numbers at Capanema, we have already produced a little bit more than 1 million tons. And as a matter of fact, we are ahead of schedule in our ramp-up curve in Capanema. At Vargem Grande, we are slightly below our ramp-up curve. But all in all, we remain confident that we will achieve the 325, 335 guidance for 2025. As far as 2026 is concerned, we remain also confident that the 340 to 360 guidance is achievable and will provide a more accurate number during the Vale Day later in the year.

On the caves decrees, I will hand over now to Gustavo that will talk about it.

Caio, Gustavo here. Just to complement on the prior one, and then I'll talk about the caves. But we'll continue to play value over volume as we always did, right? Remember last year, Q4, we removed 8 million tons from the market because it didn't make sense for us to place those volumes. So we'll continue to be highly disciplined. I think one of the beauties of Vale vis-a-vis competitors is that we can bring projects online with substantially lower capital intensity.

If you look at Capanema, Vargem Grande, the ones we brought, it is probably a 1/4 of a typical capital intensity that you're going to see in a similar iron ore projects globally. So that allows us, for example, to operate with a CapEx level that is substantially lower than our competitors, freeing up free cash flow to our shareholders. I think that's something that it's always very important to remind. But bringing those projects makes sense because it does bring us more flexibility to play value over volume as we go along, and Rogério highlighted some of those benefits today.

On the caves decree, look, we are hopeful we'll continue to monitor. It's certainly an initiative that is led by the government. What we would like to say is that, if you look in the last couple of years, we've taken a lot of actions internally to improve the way we process the license, the way we prepare ourselves for the licensing process in terms of anticipating some of those issues. We also work very closely with the environmental bodies at the state and federal levels. And if we look at the status today is that the licensing process for Vale projects have improved vis-a-vis where we were 2 years ago. And you're seeing this as part of the operational stability of the company. We think we can improve even further by modernizing the caves decree, and that's what we are working and hopeful that we can have as an outcome.

To your question on, are we prepared for a new caves decree scenario? Yes, the team and ourselves, we continue to work under any scenario, even under a new caves decree scenario, we will make sure that we deliver on our long-term targets and we're developing alternative plans as we go along to make sure we have a very resilient master plan and production plan.

Next question from Caio Ribeiro with Bank of America.

So my first question is on copper. It's pretty clear that the company is focused on extracting growth from projects in Brazil like Bacaba, Paulo Afonso and Cristalino, among others. And these, they tend to be smaller deposits especially in comparison to Hu'u in Indonesia, right? So I just wanted to see if you could provide some color as to what drives that preference to develop several relatively smaller deposits as opposed to focusing on one larger project like Hu'u in Indonesia. And possibly even under a JV structure, right, to mitigate the execution risk of developing a larger project, similar to what other miners have been doing.

And then secondly, on Thompson, if you could discuss how the strategic review of that asset is going what would be the preferred avenue to explore with this asset? And if whatever option is chosen with Thompson, if that could be an indication of future plans with other assets in Canada?

Caio, some good questions. So firstly, on the copper side, I wouldn't think of these things as a bipolar choice. Like it's -- I'm only going to do big or I'm only going to do small. I think you have to be focused on value. And if you -- and execution. So if you think of the sector, I do believe the data will show that the sector's ability to deliver new projects has been pretty bad. And I think the capital overruns, particularly on large projects has been in the order on average of about 40%.

And so when we look at our best way to unlock copper growth and create value, we heard from Gustavo earlier on the capital intensity of Bacaba. It's quite clear that we've got regional presence we've had for decades there. We have infrastructure. We've got know-how, we've got capability. So I think about risk as much as anything on our ability to deliver into that and what can we do by ways of returns.

And so those projects that we're looking at, and I'll use Bacaba as an example because when I first arrived here in October, it would have been my second week, I looked at what was presented on that project. And it was a very different construct at that time with nearly double the capital intensity to what we've been able to do through working through that. And we're seeing lots of opportunities as we look at New Carajás and we look at Pará as a whole. To look at these things in a way which is, are we best placed on some of these to build them ourselves? Are we like we've done elsewhere with Ero Copper, better placed to partner? Or are we better placed to perhaps contract mine?

And I guess my point is we have to look at this as both miners and investors to find the best path forward. We've just finished our life of business planning. We're going to evolve that. We're seeing opportunities to significantly improve, I think, the risk profile and the economics, and that's something we'll talk about more at Vale Day. So stay tuned. But I do think you shouldn't underestimate both the capital intensity, the risk and the value potential of that district in there, and that's the reason we're focusing on that.

The Hu'u, I mentioned earlier in the year, we initiated that strategic review. And one of the possibilities exactly what you said. It could be some sort of joint venture from a risk and reward basis. It would be inappropriate or premature to sort of foreshadow where we're going to get to. And we will certainly communicate where we've got to with that review, which is in advanced stage now in the back half of this year.

But just to remind us of what we're talking about, 300,000 to 400,000 tons of copper over 400,000 ounces of gold, first half of the cost curve, give or take $5 billion or so and nearly half a century of life. You don't get off assets like that every day. Obviously, there's a lot of work to do, and we'll communicate that at the right time. We have not built that into the guidance or in the projections that we shared at Vale Day, but it's clearly an intrinsically valuable asset.

So just to summarize, we can walk and chew gum. We are looking at these things as investors and portfolio managers as much as we are as miners. And I think the themes that you've drawn out are very consistent with how we're trying to grow copper not, just in Pará, but in general.

On Thompson, we, at around a similar time, initiated that review. It's at an advanced stage. We are still looking at multiple futures in there, and we'll look to communicate where we get to on that because it will be inappropriate commercially to update you at this stage, but we should be able to update you in the next quarter. That's progressing well.

I just want to pay tribute to my GM and the teams there who have had to deal with devastating wildfires in the province and have done a remarkable job of safety leadership and keeping both employees and communities safe. But that's well advanced and is on track. And I think you shouldn't read across necessarily any one action from a portfolio optimization point of view, whether it's Thompson or others. Recall Thompson has a huge endowment. It's one of the assets that is not polymetallic. We're looking to optimize our portfolio and our capital allocation, and we're continuing to look beyond these to see what are the right things to do with our project portfolio, our exploration portfolio and our assets before. Our focus now is on optimizing each asset in the portfolio.

This concludes today's question-and-answer session. Vale's conference is now concluded. We thank you for your participation and wish you a nice day.