Check out the 2Q24 performance
ÀÖ²¥´«Ã½ reported that Iron ore shipments increased by 5.4 Mt (+7%) y/y and 16.0 Mt (25%) q/q, driven by record production for a second quarter since 2018, as well as by inventory sales.
The strong shipment performance led to a Proforma EBITDA of US$ 4.0 billion. Year-on-year, Proforma EBITDA was slightly lower (-6%), mainly due to higher freight costs and concentration of maintenance activities to maximize performance in the 2H24. Proforma EBITDA increased 15% sequentially.
Iron ore fines C1 cash cost ex-3rd party purchases was 6% higher q/q, reaching US$ 24.9/t, mainly due to a seasonal inventory turnover impact and concentration of maintenance activities. These effects were partially offset by the positive impact of higher production volumes and the BRL depreciation. We remain highly confident in achieving our C1 cost guidance of US$ 21.5-23.0/t in 2024, especially as lower-cost volumes from the Northern System ramp-up in the 2H, while the heavier maintenance activities during the 1H set the stage for a stronger cost and operating performance in the 2H.
Iron ore fines freight cost decreased US$ 0.3/t q/q, reaching US$ 19.0/t, US$ 6.8/t lower than the Brazil-China C3 route average in Q2, driven by our long-term affreightment contracts exposure.
Copper and nickel all-in costs were US$ 3,651/t and US$ 15,000/t in the quarter, respectively, with both businesses on track to deliver their respective cost guidances for the year.
Below you can see the main highlights, as well as the full report.
Eduardo Bartolomeo
CEO
Fot¨®grafo: Ricardo Teles
Highlights
Capital expenditures of US$ 1.3 billion in Q2, US$ 0.1 billion higher y/y, in line with the year¡¯s guidance (US$ ~6.5 billion).
Gross debt and leases of US$ 15.1 billion as of June 30th, 2024, US$ 0.5 billion higher q/q. In the quarter, ÀÖ²¥´«Ã½ implemented a liability management strategy with a US$ 1.0 billion bond offering and a US$ 1.0 billion tender offer and redemption program. The bond offering was concluded in June and the settlement of the tender offer and redemption in July, resulting in a temporary increase in gross debt, which was partially offset by a US$ 0.5 billion debt repayment.
Expanded net debt of US$ 14.7 billion as of June 30th, 2024, US$ 1.7 billion lower q/q, mainly driven by the proceeds received from Manara Minerals, following the ÀÖ²¥´«Ã½ Base Metals partnership deal. ÀÖ²¥´«Ã½¡¯s expanded net debt target remains at US$ 10-20 billion.
US$ 1.6 billion in interest on capital to be paid in September 2024, consistent with ÀÖ²¥´«Ã½¡¯s minimum dividend policy applied to 1H24 results.
Allocation of US$ 114 million as part of the 4th buyback program in the quarter. As of the date of this report, the 4th buyback program was 22% complete, with 33.1 million shares repurchased.
The On?a Puma nickel mine and the Sossego copper mine resumed activities in June, after the ±Ê²¹°ù¨¢ State environmental authority reinstated their operating licenses, which were halted since April.
The Salobo 3 processing plant operations resumed in July, after being halted for 31 days due to a fire at the conveyor belt. ÀÖ²¥´«Ã½¡¯s 2024 copper production guidance of 320-355 kt has been maintained.
Gaining momentum on Iron Ore Solutions:
Key growth projects are underway: +15 Mt at Vargem Grande and +15 Mt at Capanema are 96% and 83% complete and on track to start-up in 4Q24 and in mid-2025, respectively.
ÀÖ²¥´«Ã½ signed, in July, a partnership to build an iron ore concentration plant in Sohar, Oman. With an initial production capacity of 12 Mtpa of high-grade iron ore concentrates, primarily suitable for direct reduction agglomerates, the plant will feed ÀÖ²¥´«Ã½¡¯s pellet plants and future briquette plants in the region. The start-up is expected in 2027. The partner will wholly own and operate the plant, and ÀÖ²¥´«Ã½ will invest in the infrastructure to connect the concentration plant to its agglomeration facilities in the region. The concentration plant development is an important step in ÀÖ²¥´«Ã½¡¯s strategy to develop low-carbon solutions for the steel industry. ÀÖ²¥´«Ã½ aims to replicate this asset-light investment model for metallics production in the Mega Hubs.
Building a unique Energy Transition Metals vehicle:
In April, ÀÖ²¥´«Ã½ completed the strategic partnership with Manara Minerals, a joint venture between Ma¡¯aden and Saudi Arabia¡¯s Public Investment Fund. Manara invested US$ 2.5 billion for a 10% equity interest in ÀÖ²¥´«Ã½ Base Metals Limited (VBM), the holding company of ÀÖ²¥´«Ã½¡¯s Energy Transition Metals business.
In June, PT ÀÖ²¥´«Ã½ Indonesia Tbk (PTVI) divestment obligation was concluded. In connection with that, the special license for PTVI was renewed until December 2035 with the possibility of an extension beyond that period. ÀÖ²¥´«Ã½ Canada Limited now owns 33.9% of PTVI¡¯s shares and will continue to influence PTVI through nominations to the Board of Commissioners. Moreover, its offtake rights are preserved. ÀÖ²¥´«Ã½ will deconsolidate PTVI and add its proportionate EBITDA starting in Q3.
The B3/B4 dam decharacterization was completed in May. The dam, located in Nova Lima, Minas Gerais, was classified with the highest emergency level in 2019. The B3/B4 dam was ÀÖ²¥´«Ã½¡¯s 14th upstream dam decharacterized since the Upstream Dam Decharacterization Program was created in 2019.
ÀÖ²¥´«Ã½ has voluntarily adopted the international standard issued by the International Sustainability Standards Board (ISSB) for preparing and reporting financial information related to sustainability. The first report under the ISSB standard is expected to be released in 2025, based on the fiscal year of 2024.
ÀÖ²¥´«Ã½ has published the TNFD (Taskforce on Nature-related Financial Disclosures) report for the year of 2023, presenting results of the application of the LEAP (Locate, Evaluate, Assess and Prepare) approach to our direct operations in Brazil.
ÀÖ²¥´«Ã½ and Komatsu have signed an agreement to develop and test, in partnership with Cummins, Dual-Fuel haul trucks, powered by a mixture of ethanol and diesel. They will be the world's first trucks of their size, with payloads of 230 to 290 tons, to run on ethanol. The Dual Fuel Program will contribute to ÀÖ²¥´«Ã½¡¯s goal of reducing scope 1 and 2 carbon emissions (direct and indirect) by 33% by 2030 and becoming net-zero by 2050.
The Brumadinho Integral Reparation Agreement continues to progress with 75% of the agreed-upon commitments completed and in accordance with the settlement deadlines. In addition, R$ 3.6 billion were paid in individual compensation since 2019.
In the Mariana reparation, ÀÖ²¥´«Ã½, alongside Samarco and BHP, is in advanced negotiations to seek a settlement of the obligations under the Framework Agreement, the Federal Public Prosecution Office Claim, and other claims by government entities relating to Samarco¡¯s Fund?o dam failure. ÀÖ²¥´«Ã½ remains fully committed to supporting the extensive ongoing remediation and compensation efforts in Brazil and is engaged in reaching mutually beneficial resolution for all parties. Renova continues to progress with its disbursements, which reached R$ 37 billion in the end of the quarter.
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