VALE S.A. 2026 Q3 Earnings Call

Hello, everyone, and thank you for joining Vale's third quarter 2026 conference call. Let me start by saying how proud I am of the progress our teams have been able to make on our strategic priorities, even under very volatile market conditions. We continue to consistently execute on our plans with discipline, focusing on operational excellence and on unlocking the enormous potential of our endowment and unique supply chain. All these actions are translating into tangible results, protecting our margins and helping us build a more resilient and valuable company. Let me now turn to the highlights of the quarter. Starting with iron ore, production declined 6% year-on-year, mainly reflecting Serra Norte's performance. Despite lower production, sales remained solid at 86.3 million tons, slightly above last year, supported by strong performance at S11D and the Southeastern system, along with the sale of inventories built in previous quarters.

At Serra Norte, which has been operating since 1985, production has gradually declined in recent years as run-of-mine availability has decreased. This reflects the natural evolution of the ore body, together with the operational constraints in areas close to cave-related exclusion zones. In addition, the quarter's mine plan was impacted by a lower-quality section of the ore body, which temporarily affected processing efficiency across our plants. We have taken a series of actions to mitigate these impacts, including the increased access to hematite ore in newly licensed areas, and expect these initiatives to increase ore availability and support year-on-year production growth in the fourth quarter. Combined with the resumption of Fábrica and Viga and a solid performance across the rest of our asset base, including S11D, we remain well-positioned to deliver at the low end of our production guidance for the year.

Looking further ahead, we remain confident in our operational performance, and more importantly, in our ability to generate value for shareholders. Projects such as Capanema, Serra Sul +20, and the Compact Crushing plant are adding flexibility while improving the resilience of our portfolio. At the same time, we remain fully committed to our value-over-volume strategy. Our focus is not simply on producing more tons, but on delivering the right volumes at the right cost and quality to maximize value creation. On the next slide, I would like to spend a few minutes on freight and explain how our strategy has protected our business. The spot freight market rose sharply in 2026, affecting the entire iron ore industry.

In this context, and in order to understand how our freight strategy has created substantial value, it is important to look at two main variables: the cost of the vessels, or time charter, and the cost of fuel, or bunker. Each has different market dynamics, and our initiatives address both. On the time charter side, our medium- to long-term vessel contracting strategy provides greater predictability and supports a more competitive cost base. Over the coming years, around 75% of Vale's shipping needs are covered by long-term contracts at fixed rates. Most of the remaining 25% is managed through shorter-term contracts, generally lasting one to two years. This structure provides flexibility while limiting direct exposure to the spot market.

For the fourth quarter, we are fully covered on our freight needs, and for 2027, we have already secured over 80%, giving us time and flexibility to capture opportunities for the remaining requirements. The fleet composition also provides an important advantage. Larger and more efficient vessels, including Valemax and Guaibamax ships, consume less fuel per ton transported and operate at structurally lower cost. On the fuel side, our hedging program provides another layer of protection and reduces our exposure to fuel cost volatility. Marcelo will discuss this in more detail shortly. To put all of this into perspective, since the first quarter, spot freight rates on the Brazil-China route have increased by $12 per ton, while rates on the Australia-China route have risen by $4.9 per ton. Over the same period, Vale's realized freight costs increased by only $4.7 per ton.

This shows that despite the increase in spot freight rates, our relative margin position has been preserved. Altogether, our freight strategy is generating a total benefit of more than $3 billion vis-à-vis the spot market in 2026. Overall, the message is clear. The freight environment has become more challenging, but our scale and strategy provided meaningful protection and preserved our competitiveness. Turning now to base metals. I am very pleased with the progress we continue to make at VBM. Copper production declined 6% year-on-year, while sales were 4% lower, reflecting the planned maintenance at Sossego, as expected. At the same time, Salobo delivered its highest third quarter production on record. This is a very positive result and reinforces the strength of our copper platform as we prepare for further growth. In nickel, production increased 6% while sales grew 16% year-on-year.

The Sudbury refinery delivered its highest quarterly output since the fourth quarter of 2013. Onça Puma also achieved its strongest third quarter performance, supported by the commissioning of the second furnace. Year to date, copper production has increased 4%, while nickel production has grown 8%. Based on these results and on the operational performance we are already seeing in October, we are confident in reaching the upper half of the production guidance for both metals. in October, we also completed the Thompson transaction. Vale Base Metals retained an 18.9% interest and secured a multi-year offtake agreement for nickel concentrate, allowing us to preserve strategic exposure while maintaining access to nickel units for our downstream assets. Looking ahead, we continue to advance our copper growth strategy with the approval of the Coarse Particle Flotation, or CPF project, at Salobo.

The project is part of the new Carajás program and will add 6 million tons per year to Salobo's ore processing capacity, bringing the total to 42 million tons. Once fully ramped up, it is expected to add approximately 30,000 tons of copper per year, contained in concentrate, as well as approximately 15,000 ounces of gold as a byproduct. Startup is expected in the first half of 2028. Together with Bacaba and our productivity initiatives in Canada, this project reinforces our confidence in achieving our production target of up to 500,000 tons of copper by 2030. We have also quadrupled our drilling meters in Carajás compared with 2 years ago. The results we are seeing give us even greater confidence in the copper potential, and we look forward to sharing more of this at our Vale Day in December.

We believe Vale is well-positioned to deliver above-average copper growth over the coming years. Much of this potential comes from brownfield opportunities that leverage our existing assets, infrastructure, and technical capabilities, allowing us to pursue growth with low capital intensity and attractive returns. This creates a strong foundation for long-term value creation. With that, I'll hand over to Marcelo Bacci to discuss our financial performance. I'll return later for my closing remarks before the Q&A session.

Marcelo, please. Thanks, Gustavo, and good morning, everyone.

Proforma EBITDA totaled $3.5 billion in the third quarter of 2026, 20% lower year-on-year. The decline mainly reflected external pressures on the iron ore business, including a 10% decline in realized prices, higher bunker costs, and the appreciation of the Brazilian real. At Vale Base Metals, EBITDA reached $1.1 billion, increasing more than 60% year-on-year and representing 31% of Vale's EBITDA in the quarter. This solid performance was supported by higher realized prices across the portfolio, combined with solid and consistent operational execution, as Gustavo presented. Let's take a closer look at this quarter's details. Starting with iron ore, our C1 cash cost, excluding third-party purchases, was $23.1 per ton. This was 12% higher year-on-year and 4% lower quarter-on-quarter.

The all-in cost was $60.4 per ton, increasing 21% year-on-year and declining 2% sequentially. The year-on-year increase reflected mostly a combination of currency and energy-related pressures. In the quarter, the stronger Brazilian real affected both the C1 and the all-in, while higher diesel and bunker fuel prices had an additional impact on operational costs and freight. Even in this more challenging environment, we expect both C1 and all-in costs to finish 2026 within their respective guidance ranges. Our hedging program continues to play an important role in managing this volatility. Including the cash benefit from the oil hedge, all-in cost was $59 per ton in the quarter. At the same time, we are intensifying our focus on the factors that we can control. We recently launched a company-wide productivity program structured around specific work streams across operations, procurement, maintenance, and logistics.