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Vale S.A. Regulatory Filings 2021

Oct 29, 2021

30050_ffr_2021-10-29_2c163cc6-fa45-4779-9e69-63e90d71a655.zip

Regulatory Filings

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6-K 1 tm2131065d2_6k.htm FORM 6-K

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United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the

Securities Exchange Act of 1934

For the month of

October 2021

Vale S.A.

Praia de Botafogo nº 186, 18º andar, Botafogo 22250-145 Rio de Janeiro, RJ, Brazil

(Address of principal executive office)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

(Check One) Form 20-F x Form 40-F o

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))

(Check One) Yes o No x

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))

(Check One) Yes o No x

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

(Check One) Yes o No x

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82- .)

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Interim Financial Statements

September 30, 2021

BRGAAP in R$ (English)

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Vale S.A. Interim Financial Statements

Contents

Report on review of quartely information 3
Consolidated and Parent Company Income Statement 5
Consolidated and Parent Company Statement of Comprehensive Income 7
Consolidated and Parent Company Statement of Cash Flows 8
Consolidated and Parent Company Statement of Financial Position 10
Consolidated Statement of Changes in Equity 11
Consolidated and Parent Company Value Added Statement 12
Notes to the Interim Financial Statements 13
1. Corporate information 13
2. Basis of preparation of the interim financial statements 13
3. Significant events in the current period 13
4. Information by business segment and by geographic area 14
5. Costs and expenses by nature 19
6. Financial results 20
7. Income taxes 20
8. Basic and diluted earnings per share 21
9. Accounts receivable 22
10. Inventories 22
11. Other financial assets and liabilities 23
12. Acquisitions and divestitures 24
13. Investments in subsidiaries, associates and joint ventures 27
14. Intangible 28
15. Property, plant and equipment 29
16. Financial and capital risk management 30
17. Financial assets and liabilities 37
18. Participative stockholders’ debentures 38
19. Loans, borrowings, leases, cash and cash equivalents and short-term investments 39
20. Brumadinho’s dam failure 41
21. Liabilities related to associates and joint ventures 45
22. Provisions 47
23. Litigations 48
24. Employee benefits 50
25. Stockholders’ equity 51
26. Related parties 52
27. Parent Company information (individual interim information) 54

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Report on review of quarterly information

To the Board of Directors and Stockholders

Vale S.A .

Introduction

We have reviewed the accompanying consolidated and parent company interim accounting information of Vale S.A. ("Company"), included in the Quarterly Information Form (ITR) for the quarter ended September 30, 2021, which comprises the parent company and consolidated statements of financial position as of September 30, 2021 and the respective parent company and consolidated income statements and the statements of comprehensive income for the three and nine-month periods then ended, the statement of changes in equity for the nine-month period then ended, the parent company statement of cash flows for the nine-month period then ended and the consolidated statements of cash flows for the three and nine-month periods then ended, and a summary of significant accounting policies and other explanatory information.

Management is responsible for the preparation of the consolidated and parent company interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC) and International Accounting Standard (IAS) 34, Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on the interim information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated and parent company interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

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Other matters

Value added statements

The quarterly information referred to above includes the parent company and consolidated statements of value added for the nine-month period ended September 30, 2021. These statements are the responsibility of the Company's management and are presented as supplementary information under IAS 34. These statements have been subjected to review procedures performed together with the review of the interim accounting information for the purpose of concluding whether they are reconciled with the interim accounting information and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in the accounting standard CPC 09 - "Statement of Value Added". Based on our review, nothing has come to our attention that causes us to believe that these statements of value added have not been properly prepared, in all material respects, in accordance with the criteria established in this accounting standard, and consistent with the parent company and consolidated interim accounting information taken as a whole.

Rio de Janeiro, October 28, 2021

PricewaterhouseCoopers Patricio Marques Roche
Auditores Independentes Ltda. Contador CRC 1RJ081115/O-4
CRC 2SP000160/O-5

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Income Statement In millions of Brazilian reais, except earnings per share data
Three-month
period ended September 30, Nine-month
period ended September 30,
Notes 2021 2020 2021 2020
Net operating revenue 4(c) 66,261 57,906 223,409 129,591
Cost of
goods sold and services rendered 5(a) (30,533 ) (25,893 ) (86,505 ) (67,775 )
Gross profit 35,728 32,013 136,904 61,816
Operating expenses
Selling and administrative expenses 5(b) (603 ) (684 ) (1,889 ) (1,864 )
Research and evaluation expenses (708 ) (563 ) (2,003 ) (1,476 )
Pre-operating and operational
stoppage 3 and 20 (858 ) (1,011 ) (2,648 ) (3,480 )
Brumadinho event 20 (847 ) (613 ) (2,437 ) (2,014 )
Other operating
expenses, net 5(c) (162 ) (612 ) (638 ) (2,161 )
(3,178 ) (3,483 ) (9,615 ) (10,995 )
Impairment
and disposals of non-current assets 12 and
15 (12,622 ) (1,608 ) (15,700 ) (4,004 )
Operating income 19,928 26,922 111,589 46,817
Financial income 6 475 370 1,331 1,576
Financial expenses 6 (678 ) (6,571 ) (9,178 ) (11,993 )
Other financial items, net 6 (1,736 ) (1,179 ) 7,594 (10,040 )
Equity results
and other results in associates and joint ventures 13 and
21 670 (211 ) (1,688 ) (3,763 )
Income before income taxes 18,659 19,331 109,648 22,597
Income taxes 7(b)
Current tax (12,867 ) (4,018 ) (27,409 ) (7,352 )
Deferred
tax 14,782 (241 ) 8,356 5,341
1,915 (4,259 ) (19,053 ) (2,011 )
Net income 20,574 15,072 90,595 20,586
Net income
(loss) attributable to non-controlling interests 371 (543 ) (267 ) (1,302 )
Net
income attributable to Vale's stockholders 20,203 15,615 90,862 21,888
Earnings per share attributable
to Vale's stockholders:
Basic and diluted earnings
per share:
Common share (R$) 8 3.98 3.04 17.94 4.27

The accompanying notes are an integral part of these interim financial statements.

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Income Statement In millions of Brazilian reais, except earnings per share data
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Net operating revenue 72,587 39,698 178,123 83,346
Cost of goods sold and services rendered (16,689 ) (11,939 ) (44,094 ) (30,498 )
Gross profit 55,898 27,759 134,029 52,848
Operating income (expenses)
Selling and administrative expenses (281 ) (344 ) (986 ) (944 )
Research and evaluation expenses (407 ) (241 ) (974 ) (621 )
Pre-operating and operational stoppage (470 ) (957 ) (1,797 ) (3,118 )
Equity results and others results from subsidiaries (25,999 ) 3,461 (2,800 ) 3,456
Brumadinho event (847 ) (613 ) (2,437 ) (2,014 )
Other operating expenses, net (424 ) (747 ) (1,385 ) (2,590 )
(28,428 ) 559 (10,379 ) (5,831 )
Impairment and disposals of non-current assets (212 ) (76 ) (335 ) (214 )
Operating income 27,258 28,242 123,315 46,803
Financial income 292 74 608 626
Financial expenses (624 ) (6,409 ) (8,809 ) (11,822 )
Other financial items, net (1,836 ) (1,373 ) 832 (8,187 )
Equity results and other results in associates and joint ventures 670 (211 ) (1,688 ) (3,763 )
Income before income taxes 25,760 20,323 114,258 23,657
Income taxes
Current tax (12,388 ) (3,298 ) (25,654 ) (5,713 )
Deferred tax 6,831 (1,410 ) 2,258 3,944
(5,557 ) (4,708 ) (23,396 ) (1,769 )
Net income attributable to Vale's stockholders 20,203 15,615 90,862 21,888
Earnings per share attributable to Vale's stockholders:
Basic and diluted earnings per share:
Common share (R$) 3.98 3.04 17.94 4.27

The accompanying notes are an integral part of these interim financial statements.

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Statement of Comprehensive Income

In millions of Brazilian reais
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Net income 20,574 15,072 90,595 20,586
Other comprehensive income (loss):
Items that will not be reclassified to the income statement
Retirement benefit obligations (note 24) 498 422 2,270 (624 )
Fair value adjustment to investment in equity securities (note 11) 834 815 1,901 312
1,332 1,237 4,171 (312 )
Items that may be reclassified to the income statement
Translation adjustments 7,310 3,753 3,009 25,967
Net investments hedge (note 16) (662 ) (458 ) (441 ) (3,484 )
Net cash flow hedge (note 16) 50 (299 ) (56 ) (291 )
Reclassification of cumulative translation adjustment to net income (note 12) (48 ) - (8,490 ) -
6,650 2,996 (5,978 ) 22,192
Total comprehensive income 28,556 19,305 88,788 42,466
Comprehensive income (loss) attributable to non-controlling interests 688 (726 ) (108 ) (2,976 )
Comprehensive income attributable to Vale's stockholders 27,868 20,031 88,896 45,442
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Net income 20,203 15,615 90,862 21,888
Other comprehensive income (loss):
Items that will not be reclassified to the income statement
Retirement benefit obligations (7 ) 210 (17 ) 191
Fair value adjustment to investment in equity securities 685 680 1,559 344
Equity results 654 347 2,629 (847 )
1,332 1,237 4,171 (312 )
Items that may be reclassified to the income statement
Translation adjustments 6,993 3,936 2,850 27,641
Net investments hedge (662 ) (458 ) (441 ) (3,484 )
Net cash flow hedge 31 - 56 -
Equity results 19 (299 ) (112 ) (291 )
Reclassification of cumulative translation adjustment to net income (48 ) - (8,490 ) -
6,333 3,179 (6,137 ) 23,866
Total comprehensive income 27,868 20,031 88,896 45,442

Items above are stated net of tax and the related taxes are disclosed in note 7.

The accompanying notes are an integral part of these interim financial statements.

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Statement of Cash Flows

In millions of Brazilian reais
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Cash flow from operations (a) 53,261 29,916 149,534 50,141
Interest on loans and borrowings paid (note 19) (904 ) (1,117 ) (3,204 ) (3,126 )
Cash received (paid) on settlement of derivatives, net (note 16) 114 (672 ) (674 ) 62
Interest on participative stockholders' debentures paid (note 18) - - (1,073 ) (506 )
Income taxes (including the settlement program) (5,172 ) (2,509 ) (18,301 ) (6,189 )
Net cash provided by operating activities 47,299 25,618 126,282 40,382
Cash flow from investing activities:
Capital expenditures (notes 14 and 15) (6,526 ) (4,693 ) (18,099 ) (14,893 )
Additions to investments (note 13) - (1 ) (237 ) (366 )
Acquisition of NLC, net of cash (note 12) - - (11,800 ) -
Disbursement related to the disposal of VNC (note 12) - - (3,134 ) -
Dividends received from associates and joint ventures (note 13) 24 10 254 419
Short-term investment 2,193 - 834 3,318
Investment fund applications - (172 ) - (672 )
Other investments activities, net 98 (557 ) (959 ) (1,562 )
Net cash used in investing activities (4,211 ) (5,413 ) (33,141 ) (13,756 )
Cash flow from financing activities:
Loans and borrowings from third-parties (note 19) - 9,585 1,633 34,004
Payments of loans and borrowings from third-parties (note 19) (573 ) (29,368 ) (8,506 ) (31,674 )
Lease payments (note 19) (297 ) (244 ) (860 ) (726 )
Dividends and interest on capital paid to stockholders (note 25) (40,200 ) (18,492 ) (73,112 ) (18,492 )
Dividends and interest on capital paid to non-controlling interest (16 ) (15 ) (47 ) (56 )
Share buyback program (note 25) (14,854 ) - (25,261 ) -
Net cash used in financing activities (55,940 ) (38,534 ) (106,153 ) (16,944 )
Increase (decrease) in cash and cash equivalents (12,852 ) (18,329 ) (13,012 ) 9,682
Cash and cash equivalents at the beginning of the period 68,275 66,333 70,086 29,627
Effects of exchange rate changes on cash and cash equivalents 3,634 1,885 1,983 10,580
Cash and cash equivalents at end of the period 59,057 49,889 59,057 49,889
Non-cash transactions:
Additions to property, plant and equipment - capitalized loans and borrowing costs 75 67 235 274
Cash flow from operating activities:
Income before income taxes 18,659 19,331 109,648 22,597
Adjusted for:
Provisions related to Brumadinho event (note 20) - - - 108
Equity results and other results in associates and joint ventures (note 13) (670 ) 211 1,688 3,763
Impairment and disposal of non-current assets 12,622 1,608 15,700 4,004
Depreciation, depletion and amortization 3,657 4,162 12,146 12,174
Financial results, net (note 6) 1,939 7,380 253 20,457
Changes in assets and liabilities:
Accounts receivable 20,399 (1,513 ) 22,351 (4,031 )
Inventories (2,984 ) (1,626 ) (4,952 ) (3,157 )
Suppliers and contractors (i) 1,851 1,064 1,969 (1,260 )
Provision - Payroll, related charges and other remunerations 305 792 (886 ) 538
Payments related to Brumadinho event (note 20) (ii) (973 ) (1,176 ) (3,410 ) (2,975 )
Other assets and liabilities, net (1,544 ) (317 ) (4,973 ) (2,077 )
Cash flow from operations (a) 53,261 29,916 149,534 50,141

(i) Includes variable lease payments.

(ii) In addition, the Company has incurred in expenses in the amount of R$847 and R$2,437 for the three and nine-month periods ended September 30, 2021, respectively (R$613 and R$1,906 for the three and nine-month periods ended September 30, 2020).

The accompanying notes are an integral part of these interim financial statements.

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Statement of Cash Flows

In millions of Brazilian reais
Nine-month period ended September 30,
2021 2020
Cash flow from operations (a) 144,605 34,181
Interest on loans and borrowings paid (3,993 ) (4,426 )
Cash paid on settlement of Derivatives, net (896 ) (735 )
Interest on participative stockholders' debentures paid (1,073 ) (506 )
Income taxes (including the settlement program) (16,439 ) (5,379 )
Net cash provided by operating activities 122,204 23,135
Cash flow from investing activities:
Capital expenditures (10,644 ) (7,534 )
Additions to investments (598 ) (1,563 )
Proceeds from disposal of assets and investments 59 174
Dividends received from associates and joint ventures 254 422
Short-term investment 542 3,234
Investment fund applications - (672 )
Other investments activities, net (i) (11,005 ) 7,807
Net cash used in investing activities (21,392 ) 1,868
Cash flow from financing activities:
Loans and borrowings from third-parties 1,633 25
Payments of loans and borrowings from third-parties (7,913 ) (3,210 )
Lease payments (204 ) (136 )
Dividends and interest on capital paid to stockholders (73,112 ) (18,492 )
Share buyback program (15,574 ) -
Net cash used in financing activities (95,170 ) (21,813 )
Increase in cash and cash equivalents 5,642 3,190
Cash and cash equivalents at the beginning of the period 14,609 9,597
Effects of disposals of subsidiaries and merger, net of cash and cash equivalents 1,195 188
Cash and cash equivalents at end of the period 21,446 12,975
Non-cash transactions:
Additions to property, plant and equipment - capitalized loans and borrowing costs 235 274
Cash flow from operating activities:
Income before income taxes 114,258 23,657
Adjustments for:
Provisions related to Brumadinho event - 108
Equity results and others results from subsidiaries 2,800 (3,456 )
Equity results and other results in associates and joint ventures 1,688 3,763
Impairment and disposal of non-current assets 335 214
Depreciation, depletion and amortization 6,266 5,984
Financial results, net 7,369 19,383
Changes in assets and liabilities:
Accounts receivable 17,201 (14,555 )
Inventories (401 ) (853 )
Suppliers and contractors (ii) 1,400 (116 )
Provision - Payroll, related charges and other remunerations (148 ) 539
Payments related to Brumadinho event (note 20) (iii) (3,410 ) (2,975 )
Other assets and liabilities, net (2,753 ) 2,488
Cash flow from operations (a) 144,605 34,181

(i) Includes loans and advances with related parties.

(ii) Includes variable lease payments.

(iii) In addition, the Company has incurred in expenses in the amount of R$847 and R$2,437 for the three and nine-month periods ended September 30, 2021, respectively (R$613 and R$1,906 for the three and nine-month periods ended September 30, 2020).

The accompanying notes are an integral part of these interim financial statements.

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Statement of Financial Position

In millions of Brazilian reais

Notes September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Assets
Current assets
Cash and cash equivalents 19 59,057 70,086 21,446 14,609
Short-term investments 19 2,834 4,006 892 1,811
Accounts receivable 9 4,747 25,944 30,175 46,559
Other financial assets 11 7,430 1,707 6,144 37
Inventories 10 27,659 21,103 7,536 6,142
Recoverable taxes 4,484 2,646 2,192 1,036
Others 2,199 1,313 1,510 2,199
108,410 126,805 69,895 72,393
Non-current assets held for sale 12 326 - - -
108,736 126,805 69,895 72,393
Non-current assets
Judicial deposits 23(c) 6,644 6,591 6,495 6,265
Other financial assets 11 883 9,271 562 3,838
Recoverable taxes 7,188 5,670 3,704 2,244
Deferred income taxes 7(a) 62,020 53,711 44,618 42,760
Others 3,710 3,380 938 725
80,445 78,623 56,317 55,832
Investments 13 11,418 10,557 164,071 181,319
Intangible 14 48,483 48,309 27,908 28,243
Property, plant and equipment 15 223,492 213,836 118,273 111,338
363,838 351,325 366,569 376,732
Total assets 472,574 478,130 436,464 449,125
Liabilities
Current liabilities
Suppliers and contractors 22,282 17,496 12,356 11,601
Loans, borrowings and leases 19 7,318 5,901 3,446 3,804
Other financial liabilities 11 8,472 9,906 7,185 4,747
Taxes payable 14,112 4,950 13,295 3,509
Settlement program ("REFIS") 7(c) 1,793 1,769 1,793 1,733
Liabilities related to associates and joint ventures 21 8,437 4,554 8,437 4,554
Provisions 22 6,400 9,711 4,423 4,819
Liabilities related to Brumadinho 20 12,709 9,925 12,709 9,925
De-characterization of dams 20 2,367 1,981 2,367 1,981
Dividends payable 193 6,342 177 6,342
Others 3,290 3,303 3,309 3,960
87,373 75,838 69,497 56,975
Liabilities associated with non-current assets held for sale 12 69 - - -
87,442 75,838 69,497 56,975
Non-current liabilities
Loans, borrowings and leases 19 66,578 72,187 15,256 21,646
Participative stockholders' debentures 18 22,452 17,737 22,452 17,737
Other financial liabilities 11 15,366 23,719 95,545 107,470
Settlement program ("REFIS") 7(c) 11,314 12,493 11,314 12,245
Deferred income taxes 7(a) 10,486 9,198 - -
Provisions 22 39,566 43,829 14,117 13,016
Liabilities related to Brumadinho 20 10,988 13,849 10,988 13,849
De-characterization of dams 20 7,732 9,916 7,732 9,916
Liabilities related to associates and joint ventures 21 3,885 6,228 3,885 6,228
Streaming transactions 10,532 10,419 - -
Others 766 1,731 4,382 4,258
199,665 221,306 185,671 206,365
Total liabilities 287,107 297,144 255,168 263,340
Stockholders' equity 25
Equity attributable to Vale's stockholders 181,296 185,785 181,296 185,785
Equity attributable to non-controlling interests 4,171 (4,799 ) - -
Total stockholders' equity 185,467 180,986 181,296 185,785
Total liabilities and stockholders' equity 472,574 478,130 436,464 449,125

The accompanying notes are an integral part of these interim financial statements.

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Statement of Changes in Equity

In millions of Brazilian reais

| Balance at
December 31, 2020 | Share
capital — 77,300 | Capital
reserve — 3,634 | Profit
reserves — 36,598 | | Treasury
shares — (6,452 | ) | Other
reserves — (7,307 | ) | Cumulative translation adjustments — 82,012 | | Retained
earnings — - | | Equity attributable to Vale’s stockholders — 185,785 | | Equity
attributable to non-controlling interests — (4,799 | ) | Total stockholders' equity — 180,986 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net income (loss) | - | - | - | | - | | - | | - | | 90,862 | | 90,862 | | (267 | ) | 90,595 | |
| Other comprehensive income | - | - | - | | - | | 3,943 | | (5,909 | ) | - | | (1,966 | ) | 159 | | (1,807 | ) |
| Dividends
and interest on capital of Vale's stockholders (note 25) | - | - | (22,935 | ) | - | | - | | - | | (43,834 | ) | (66,769 | ) | - | | (66,769 | ) |
| Dividends of non-controlling interest | - | - | - | | - | | - | | - | | - | | - | | (141 | ) | (141 | ) |
| Acquisition and disposal of non-controlling
interest (note 12) | - | - | - | | - | | (1,666 | ) | - | | - | | (1,666 | ) | 9,219 | | 7,553 | |
| Share buyback program (note 25) | - | - | - | | (25,261 | ) | - | | - | | - | | (25,261 | ) | - | | (25,261 | ) |
| Share-based payment (note 24) | - | - | - | | - | | 274 | | - | | - | | 274 | | - | | 274 | |
| Treasury shares utilized in the
period (note 25) | - | - | - | | 37 | | - | | - | | - | | 37 | | - | | 37 | |
| Treasury
shares cancellation (note 25) | - | - | - | | 6,347 | | - | | - | | (6,347 | ) | - | | - | | - | |
| Balance at September 30,
2021 | 77,300 | 3,634 | 13,663 | | (25,329 | ) | (4,756 | ) | 76,103 | | 40,681 | | 181,296 | | 4,171 | | 185,467 | |

| | Share
capital | Capital
reserve | Profit
reserves | | Treasury
shares | | Other
reserves | | Cumulative translation adjustments | Retained
earnings | Equity attributable to Vale’s stockholders | | Equity
attributable to non-controlling interests | | Total stockholders' equity | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance
at December 31, 2019 | 77,300 | 3,634 | 28,577 | | (6,520 | ) | (5,673 | ) | 64,162 | - | 161,480 | | (4,331 | ) | 157,149 | |
| Net income
(loss) | - | - | - | | - | | - | | - | 21,888 | 21,888 | | (1,302 | ) | 20,586 | |
| Other comprehensive
income | - | - | - | | - | | (1,470 | ) | 25,024 | - | 23,554 | | (1,674 | ) | 21,880 | |
| Dividends
and interest on capital of Vale's stockholders | - | - | (12,350 | ) | - | | - | | - | - | (12,350 | ) | - | | (12,350 | ) |
| Dividends
of non-controlling interest | - | - | - | | - | | - | | - | - | - | | (42 | ) | (42 | ) |
| Capitalization
of non-controlling interest advances | - | - | - | | - | | - | | - | - | - | | 71 | | 71 | |
| Treasury
shares utilized in the period (note 25) | - | - | - | | 68 | | - | | - | - | 68 | | - | | 68 | |
| Balance
at September 30, 2020 | 77,300 | 3,634 | 16,227 | | (6,452 | ) | (7,143 | ) | 89,186 | 21,888 | 194,640 | | (7,278 | ) | 187,362 | |

The accompanying notes are an integral part of these interim financial statements.

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Field: Split-Segment; Name: 7

Value Added Statement

In millions of Brazilian Reais
Nine-month period ended September 30,
2021 2020 2021 2020
Generation of value added
Gross revenue
Revenue from products and services 226,085 130,618 180,645 84,263
Revenue from the construction of own assets 6,439 4,194 2,472 1,617
Other revenues 2,129 797 1,401 479
Less:
Cost of products, goods and services sold (28,997 ) (19,050 ) (16,457 ) (9,806 )
Material, energy, third-party services and other (32,316 ) (27,572 ) (10,342 ) (8,203 )
Impairment of non-current assets and others results (15,700 ) (4,004 ) (335 ) (214 )
Brumadinho event (2,437 ) (2,014 ) (2,437 ) (2,014 )
Other costs and expenses (12,395 ) (11,253 ) (6,422 ) (6,965 )
Gross value added 142,808 71,716 148,525 59,157
Depreciation, amortization and depletion (12,146 ) (12,174 ) (6,266 ) (5,984 )
Net value added 130,662 59,542 142,259 53,173
Received from third parties
Equity results from entities (1,688 ) (3,763 ) (4,488 ) (307 )
Financial income 3,709 9,159 3,568 7,622
Total value added to be distributed 132,683 64,938 141,339 60,488
Personnel and charges 7,154 6,303 3,987 2,998
Taxes and contributions 29,768 8,257 33,548 7,478
Interest (net derivatives and monetary and exchange rate variation) 3,725 29,318 10,803 26,795
Other remunerations of third party funds 1,441 474 2,139 1,329
Dividends and interest on capital - 12,350 - 12,350
Reinvested net income 90,862 9,538 90,862 9,538
Loss attributable to noncontrolling interest (267 ) (1,302 ) - -
Distributed value added 132,683 64,938 141,339 60,488

The accompanying notes are an integral part of these interim financial statements.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

1. Corporate information

Vale S.A. and its subsidiaries (“Vale” or the “Company”) are iron ore and iron ore pellets producers, which are key raw materials for steelmaking, and nickel producers, which is used to produce stainless steel and metal alloys employed in the production process of several products. The Company also produces copper, coking and thermal coal, manganese ore, platinum group metals, gold, silver and cobalt. The information by segment is presented in note 4.

Vale S.A. (the “Parent Company”) is a public company headquartered in the city of Rio de Janeiro, Brazil with securities traded on the stock exchanges of São Paulo – B3 S.A. (VALE3), New York - NYSE (VALE) and Madrid – LATIBEX (XVALO).

2. Basis of preparation of the interim financial statements

a) Statement of compliance

The consolidated and individual interim financial statements of the Company (“interim financial statements”) have been prepared and are being presented in accordance with IAS 34 Interim Financial Reporting (Technical pronouncement - CPC 21 (R1) Interim Financial Reporting) of the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), as implemented in Brazil by the Brazilian Accountant Pronouncements Committee ("CPC"), approved by the Brazilian Securities Exchange Commission ("CVM") and by the Brazilian Federal Accounting Council (“CFC”). All relevant information from its own interim financial statements, and only this information, are being presented and correspond to those used by the Company's Management.

The presentation of the parent company and consolidated statements of value added is required by the Brazilian corporate legislation and the accounting practices adopted in Brazil for listed companies, while it is not required by IFRS. Therefore, under the IFRS, the presentation of such statements is considered supplementary information, and not part of the set of financial statements.

b) Basis of presentation

The interim financial statements have been prepared to update users about relevant events and transactions that occurred in the period and should be read in conjunction with the financial statements for the year ended December 31, 2020. The accounting policies, accounting estimates and judgements, risk management and measurement methods are the same as those applied when preparing the last annual financial statements, except for the change in the accounting practice for the share-based payment plans as disclosed in note 24.

The interim financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Parent Company is the Brazilian real (“R$”).

The exchange rates used by the Company to translate its foreign operations are as follows:

Closing rate Three-month period ended Nine-month period ended
September 30, 2021 December 31, 2020 September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
United States dollar 5.4394 5.1967 5.2286 5.3772 5.3317 5.0793
Canadian dollar ("CAD") 4.2931 4.0771 4.1517 4.0366 4.2624 3.7505
Euro ("EUR") 6.2983 6.3779 6.1623 6.2876 6.3769 5.7207

These interim financial statements were authorized for issue by the Executive Committee on October 28, 2021.

3. Significant events in the current period

The financial position, cash flows and performance of the Company were particularly affected by the following events and transactions during the three-month period ended September 30, 2021:

· Since the announcement of the Company’s divestiture intention in the coal segment, it started looking for a potential buyer to purchase the coal assets. Due to the negotiations carried out during the current quarter, the Company decided to impair those assets in full, resulting in a loss of R$12,165 (US$2,304 million) recognized in the income statement as "Impairment and disposal of non-current assets” for the three-month period ended September 30, 2021 (note 12).

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

· In September 2021, the Company approved and paid dividends of R$40,200 ( US$7,391 million) to its shareholders (note 25).

· In August 2021, production and maintenance employees of Sudbury, Canada, represented by United Steelworkers (“USW”) approved the new five-year collective bargaining agreement, that was previously rejected in June 2021 and led to the stoppage of the operation at that location. The agreement became effective immediately after its approval and the strike came to an end Due to the stoppage, the Company recorded expenses of R$265 ( US$51 million) recognized as "Pre-operating and operational stoppage" for the three-month period ended September 30, 2021 ( R$561 ( US$110 million) for the nine-month period ended September 30, 2021).

· In October 2021 (subsequent event), the Company approved the prepayment of the concession grant related to the Estrada de Ferro Carajás (“EFC”) and Estrada de Ferro Vitória Minas (“EFVM”) in the amount of R$1,871 (US$344 million) (note 11).

· In October 2021 (subsequent event), the Superior Court of Justice issued a decision to exclude the Risoleta Neves hydroelectric plant out of the Energy Reallocation Mechanism. Therefore, the Company would be requested by the National Electric Energy Agency (“ANEEL”) and the Chamber of Electric Energy Commercialization (“CCEE”) to pay approximately R$392 (US$72 million), for which the Company has a provision as at September 30, 2021 (note 22).

· In October 2021 (subsequent event), the Company approved a new share buyback program for its common shares, limited to a maximum of 200,000,000 common shares and their respective ADRs due to the upcoming conclusion of the current program in place as the cap number approved is close to being reached (note 25).

4. Information by business segment and by geographic area

The Company operates the following reportable segments: Ferrous Minerals, Base Metals and Coal. The segments are aligned with products and reflect the structure used by Management to evaluate Company’s performance. The responsible bodies for making operational decisions, allocating resources and evaluating performance ("chief operating decision maker" under IFRS 8 - Operating Segments) are the Executive Boards and the Board of Directors. Accordingly, the performance of the operating segments is assessed based on a measure of adjusted LAJIDA (EBITDA).

The Company allocates to “Others” the revenues and cost of other products, services, research and development, investments in joint ventures and associates of other business and unallocated corporate expenses. Additionally, the costs related to the Brumadinho event are not directly linked to the Company's operating activities and, therefore, are allocated to "Other" as well.

The Company has allocated the financial information of Vale Nouvelle-Calédonie SAS (“VNC”) operation to “Others” as this operation is no longer analyzed by the chief operating decision maker as part of to the performance of the Base Metals business segment due to the sale of this operation. The comparative periods were restated to reflect this change in the allocation criteria.

a) Adjusted LAJIDA (EBITDA)

The definition of Adjusted LAJIDA (EBITDA) for the Company is the operating income or loss plus dividends received and interest from associates and joint ventures, and excluding the amounts charged as (i) depreciation, depletion and amortization and (ii) impairment and disposal of non-current assets.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated
Three-month period ended September 30, 2021
Net operating revenue Cost of goods sold and services rendered Sales, administrative and other operating expenses Research and evaluation Pre operating and operational stoppage Dividends received and interest from associates and joint ventures Adjusted LAJIDA (EBITDA)
Ferrous minerals
Iron ore 44,560 (16,038 ) (162 ) (276 ) (317 ) - 27,767
Iron ore pellets 10,492 (3,197 ) (10 ) (5 ) (57 ) - 7,223
Ferroalloys and manganese 241 (171 ) 4 (4 ) (20 ) - 50
Other ferrous products and services 489 (400 ) (1 ) (1 ) - - 87
55,782 (19,806 ) (169 ) (286 ) (394 ) - 35,127
Base metals
Nickel and other products 4,681 (4,092 ) 311 (100 ) (268 ) - 532
Copper 3,549 (1,267 ) (30 ) (125 ) (5 ) - 2,122
8,230 (5,359 ) 281 (225 ) (273 ) - 2,654
Coal 1,843 (1,639 ) (27 ) (8 ) - - 169
Others 406 (318 ) (736 ) (190 ) (6 ) 24 (820 )
66,261 (27,122 ) (651 ) (709 ) (673 ) 24 37,130
Brumadinho event - - (847 ) - - - (847 )
COVID-19 - - (52 ) - - - (52 )
Total 66,261 (27,122 ) (1,550 ) (709 ) (673 ) 24 36,231
Three-month period ended September 30, 2020
Net operating revenue Cost of goods sold and services rendered Sales, administrative and other operating expenses Research and evaluation Pre operating and operational stoppage Dividends received and interest from associates and joint ventures Adjusted LAJIDA (EBITDA)
Ferrous minerals
Iron ore 39,614 (11,110 ) (270 ) (164 ) (649 ) 2 27,423
Iron ore pellets 6,416 (2,313 ) 7 (8 ) (89 ) - 4,013
Ferroalloys and manganese 274 (233 ) (21 ) (1 ) (49 ) - (30 )
Other ferrous products and services 436 (324 ) 2 (1 ) - 8 121
46,740 (13,980 ) (282 ) (174 ) (787 ) 10 31,527
Base metals
Nickel and other products 6,543 (4,172 ) (119 ) (42 ) (1 ) - 2,209
Copper 3,156 (1,017 ) (13 ) (81 ) (1 ) - 2,044
9,699 (5,189 ) (132 ) (123 ) (2 ) - 4,253
Coal 551 (1,726 ) (28 ) (47 ) - 110 (1,140 )
Others (i) 916 (1,095 ) (728 ) (220 ) (12 ) - (1,139 )
57,906 (21,990 ) (1,170 ) (564 ) (801 ) 120 33,501
Brumadinho event - - (613 ) - - - (613 )
COVID-19 - - (76 ) - - - (76 )
Total 57,906 (21,990 ) (1,859 ) (564 ) (801 ) 120 32,812

(i) Includes the reclassification of the negative EBITDA of VNC in the amount of R$118.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated
Nine-month period ended September 30, 2021
Net operating revenue Cost of goods sold and services rendered Sales, administrative and other operating expenses Research and evaluation Pre operating and operational stoppage Dividends received and interest from associates and joint ventures Adjusted LAJIDA (EBITDA)
Ferrous minerals
Iron ore 158,876 (42,275 ) (609 ) (686 ) (1,215 ) - 114,091
Iron ore pellets 27,390 (8,044 ) 159 (11 ) (194 ) 114 19,414
Ferroalloys and manganese 763 (498 ) (6 ) (5 ) (64 ) - 190
Other ferrous products and services 1,541 (1,139 ) 15 (6 ) - - 411
188,570 (51,956 ) (441 ) (708 ) (1,473 ) 114 134,106
Base metals
Nickel and other products 20,472 (13,379 ) 115 (257 ) (570 ) - 6,381
Copper 10,239 (3,390 ) (36 ) (332 ) (16 ) - 6,465
30,711 (16,769 ) 79 (589 ) (586 ) - 12,846
Coal 3,207 (5,180 ) (18 ) (29 ) - 424 (1,596 )
Others (i) 921 (1,195 ) (1,840 ) (675 ) (12 ) 140 (2,661 )
223,409 (75,100 ) (2,220 ) (2,001 ) (2,071 ) 678 142,695
Brumadinho event - - (2,437 ) - - - (2,437 )
COVID-19 - - (145 ) - - - (145 )
Total 223,409 (75,100 ) (4,802 ) (2,001 ) (2,071 ) 678 140,113

(i) Includes the negative EBITDA of VNC in the amount of R$358.
Nine-month period ended September 30, 2020
Net operating revenue Cost of goods sold and services rendered Sales, administrative and other operating expenses Research and evaluation Pre operating and operational stoppage Dividends received and interest from associates and joint ventures Adjusted LAJIDA (EBITDA)
Ferrous minerals
Iron ore 85,058 (28,001 ) (677 ) (402 ) (2,054 ) 2 53,926
Iron ore pellets 15,098 (6,191 ) 65 (17 ) (291 ) 283 8,947
Ferroalloys and manganese 851 (682 ) (21 ) (6 ) (105 ) - 37
Other ferrous products and services 1,222 (939 ) 10 (6 ) - 8 295
102,229 (35,813 ) (623 ) (431 ) (2,450 ) 293 63,205
Base metals
Nickel and other products 15,608 (9,494 ) (292 ) (149 ) (156 ) - 5,517
Copper 7,674 (2,940 ) (23 ) (237 ) (1 ) - 4,473
23,282 (12,434 ) (315 ) (386 ) (157 ) - 9,990
Coal 1,734 (5,369 ) (6 ) (119 ) - 434 (3,326 )
Others (i) 2,346 (3,023 ) (2,333 ) (540 ) (38 ) 126 (3,462 )
129,591 (56,639 ) (3,277 ) (1,476 ) (2,645 ) 853 66,407
Brumadinho event - - (2,014 ) - - - (2,014 )
COVID-19 - - (545 ) - - - (545 )
Total 129,591 (56,639 ) (5,836 ) (1,476 ) (2,645 ) 853 63,848

(i) Includes the reclassification of the negative EBITDA of VNC in the amount of R$587.

Adjusted LAJIDA (EBITDA) is reconciled to net income as follows:

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Selected Notes to the Interim Financial Statements
Expressed
in millions of Brazilian reais, unless otherwise stated
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Net income attributable to Vale's stockholders 20,203 15,615 90,862 21,888
Net income (loss) attributable to non-controlling interests 371 (543 ) (267 ) (1,302 )
Net income 20,574 15,072 90,595 20,586
Depreciation, depletion and amortization 3,657 4,162 12,146 12,174
Income taxes (1,915 ) 4,259 19,053 2,011
Financial results 1,939 7,380 253 20,457
LAJIDA (EBITDA) 24,255 30,873 122,047 55,228
Items to reconciled adjusted LAJIDA (EBITDA)
Equity results and other results in associates and joint ventures (670 ) 211 1,688 3,763
Dividends received and interest from associates and joint ventures (i) 24 120 678 853
Impairment and disposal of non-current assets 12,622 1,608 15,700 4,004
Adjusted LAJIDA (EBITDA) 36,231 32,812 140,113 63,848

(i) Includes the remuneration of the financial instrument of the Coal segment.

b) Assets by segment
September 30,
2021 December 31,
2020
Product
inventory Investments
in associates and joint ventures Property,
plant and equipment and intangibles (i) Product
inventory Investments
in associates and joint ventures Property,
plant and equipment and intangibles (i)
Ferrous minerals 15,294 6,556 156,030 10,483 5,995 152,970
Base metals 7,006 91 107,134 6,398 91 101,593
Coal (note 12) 460 - - 129 - -
Others - 4,771 8,811 - 4,471 7,582
Total 22,760 11,418 271,975 17,010 10,557 262,145
Three-month
period ended September 30,
2021 2020
Capital
expenditures (ii) Capital
expenditures (ii)
Sustaining
capital Project
execution Depreciation,
depletion and amortization Sustaining
capital Project
execution Depreciation,
depletion and amortization
Ferrous minerals 3,073 714 2,150 2,160 198 2,160
Base metals 1,696 591 1,185 1,658 378 1,884
Coal (note 12) 257 - 264 146 - -
Others (iii) 6 189 58 150 3 118
Total 5,032 1,494 3,657 4,114 579 4,162
Nine-month
period ended September 30,
2021 2020
Capital
expenditures (ii) Capital
expenditures (ii)
Sustaining
capital Project
execution Depreciation,
depletion and amortization Sustaining
capital Project
execution Depreciation,
depletion and amortization
Ferrous minerals 8,807 1,750 6,734 7,136 919 6,620
Base metals 5,188 1,329 4,857 4,596 951 5,099
Coal (note 12) 607 - 350 659 - 83
Others (iii) 70 348 205 607 25 372
Total 14,672 3,427 12,146 12,998 1,895 12,174

(i) Goodwill is allocated to ferrous minerals and base metals segments in the amount of R$7,133 and R$10,533 in September 30, 2021 and R$7,133 and R$10,008 in December 31, 2020, respectively.

(ii) Cash outflows.

(iii) Includes the reclassification of VNC under the captions “Sustaining capital” and “depreciation, depletion and amortization”, in the amount of R$144 and R$48, respectively, for the three-month period ended on September 30, 2020 and in the amount of R$591 and R$171, respectively, for the nine-month period ended on September 30, 2020.

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Selected Notes to the Interim Financial Statements
Expressed
in millions of Brazilian reais, unless otherwise stated

c) Net operating revenue by geographic area
Three-month
period ended September 30, 2021
Ferrous
minerals Base
metals Coal Others Total
Americas, except
USA and Brazil 1,192 415 - - 1,607
United States of America 370 1,432 - - 1,802
Germany 916 908 - - 1,824
Europe, except Germany 2,862 2,253 115 - 5,230
Middle East, Africa and Oceania 2,885 21 191 - 3,097
Japan 6,752 749 77 - 7,578
China 27,994 1,257 376 - 29,627
Asia, except Japan and China 4,990 1,156 1,096 - 7,242
Brazil 7,821 39 (12 ) 406 8,254
Net
operating revenue 55,782 8,230 1,843 406 66,261
Three-month
period ended September 30, 2020
Ferrous
minerals Base
metals Coal Others
(i) Total
Americas, except
USA and Brazil 607 194 - 529 1,330
United States of America 546 950 - - 1,496
Germany 231 1,617 - - 1,848
Europe, except Germany 1,466 3,621 65 - 5,152
Middle East, Africa and Oceania 2,152 17 65 - 2,234
Japan 2,499 504 - - 3,003
China 33,037 1,506 - - 34,543
Asia, except Japan and China 2,926 1,134 382 - 4,442
Brazil 3,276 156 39 387 3,858
Net
operating revenue 46,740 9,699 551 916 57,906

(i) Includes the reclassification of VNC in the amount of R$529.
Nine-month
period ended September 30, 2021
Ferrous
minerals Base
metals Coal Others
(i) Total
Americas, except
USA and Brazil 3,698 1,629 - 21 5,348
United States of America 1,762 4,515 - - 6,277
Germany 2,669 5,926 - - 8,595
Europe, except Germany 11,314 9,218 245 - 20,777
Middle East, Africa and Oceania 7,926 62 398 - 8,386
Japan 14,655 1,904 180 - 16,739
China 110,663 3,526 700 - 114,889
Asia, except Japan and China 14,468 3,693 1,684 - 19,845
Brazil 21,415 238 - 900 22,553
Net
operating revenue 188,570 30,711 3,207 921 223,409

(i) Includes the revenue of VNC in the amount of R$21.
Nine-month period ended September 30, 2020
Ferrous minerals Base metals Coal Others (i) Total
Americas, except USA and Brazil 1,136 645 - 1,225 3,006
United States of America 903 2,844 - - 3,747
Germany 1,416 3,990 - - 5,406
Europe, except Germany 3,947 7,597 462 - 12,006
Middle East, Africa and Oceania 4,745 79 308 - 5,132
Japan 5,747 1,504 56 - 7,307
China 69,168 2,900 75 - 72,143
Asia, except Japan and China 6,997 3,164 771 - 10,932
Brazil 8,170 559 62 1,121 9,912
Net operating revenue 102,229 23,282 1,734 2,346 129,591

(i) Includes the reclassification of VNC in the amount of R$1,225.

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Field: Split-Segment; Name: 10
Selected Notes to the Interim Financial Statements
Expressed in millions of
Brazilian reais, unless otherwise stated

Provisionally priced commodities sales – The commodity price risk arises from volatility of iron ore, nickel, copper and coal prices. The Company is mostly exposed to the fluctuations in the iron ore and copper price (note 16). The selling price of these products can be measured reliably at each period, since the price is quoted in an active market.

The sensitivity of the Company’s risk on final settlement of provisionally priced accounts receivables is presented below:

Thousand metric tons Provisional price (US$/tonne) Change Effect on Revenue
Iron ore 21,772 100.2 +/-10 % 1,141
Iron ore pellets 407 167.2 +/-10 % 36
Copper 104 10,981.8 +/-10 % 598

5. Costs and expenses by nature

a) Cost of goods sold and services rendered

Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Personnel 2,055 2,221 6,539 6,025
Materials and services 4,209 4,351 12,386 12,022
Fuel oil and gas 1,500 1,167 4,050 3,531
Maintenance 4,237 3,703 12,012 10,021
Royalties 2,092 1,144 5,320 2,768
Energy 902 948 2,613 2,584
Ores acquired from third parties (i) 3,312 1,494 8,823 2,829
Depreciation, depletion and amortization 3,411 3,903 11,405 11,136
Freight (ii) 6,159 5,018 15,647 11,842
Others 2,656 1,944 7,710 5,017
Total 30,533 25,893 86,505 67,775
Cost of goods sold 29,701 25,140 84,187 65,632
Cost of services rendered 832 753 2,318 2,143
Total 30,533 25,893 86,505 67,775

(i) The increase in “Ores acquired from third parties” is mainly due to the significant increase in the reference price of iron ore compared to 2020.

(ii) The increase in "Freight" is mainly due to the significant increase in volumes of CFR sales and higher international freight prices reference price and the effect of the devaluation of the R$ against the US$, considering that this cost is totally denominated in US$.

Tax on mineral production ( Taxa de Fiscalização de Recursos Minerais - “TFRM”) – Several Brazilian states, including Minas Gerais, Pará and Mato Grosso do Sul, charge a TFRM, which is currently assessed at rates ranging from R$0.50 to R$3.72 per metric ton of minerals produced in or transferred from the state. The expenses related to the TFRM are presented in these interim financial statements under “Royalties”. In March 2021, a state decree increased the TFRM rate in the state of Para to R$11.19 per metric ton, effective in April 2021. According to the prior rule, which would expire in 2031, the TFRM rate was R$3.72 per ton until the production of 10 million metric tons and R$0.74 for volumes over than 10 million metric tons. The Company did not apply this increase in the current period based on the Brazilian constitutional principle of mandatory notice period, which sets out the tax increase would become in force only in the subsequent year of its enactment and does not expect any impact for the year ending December 31, 2021. The Company is also evaluating other legal aspects to avoid this increase in the future.

b) Selling and administrative expenses

Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Selling 132 110 362 293
Personnel 150 271 689 695
Services 149 151 361 405
Depreciation and amortization 61 50 162 203
Others 111 102 315 268
Total 603 684 1,889 1,864

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Selected Notes to the Interim Financial Statements
Expressed in millions of
Brazilian reais, unless otherwise stated

c) Other operating expenses (income), net
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Provision for litigations 122 55 356 381
Profit sharing program 155 184 558 402
COVID-19 expenses 52 76 145 545
Others (i) (167 ) 297 (421 ) 833
Total 162 612 638 2,161

(i) Includes the gain related to the exclusion of ICMS from the PIS and COFINS computation tax base, as detailed in note 23(e).

6. Financial result
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Financial income
Short-term investments 368 138 731 517
Others (i) 107 232 600 1,059
475 370 1,331 1,576
Financial expenses
Loans and borrowings gross interest (note 19) (819 ) (1,119 ) (2,887 ) (3,110 )
Capitalized loans and borrowing costs 75 67 235 274
Participative stockholders' debentures (note 18) 825 (3,002 ) (5,886 ) (4,341 )
Interest on REFIS (87 ) (50 ) (180 ) (228 )
Interest on lease liabilities (note 19) (85 ) (90 ) (273 ) (261 )
Financial guarantees (ii) (180 ) (1,905 ) 1,636 (2,771 )
Expenses with cash tender offer redemption (note 19) - - (354 ) -
Others (407 ) (472 ) (1,469 ) (1,556 )
(678 ) (6,571 ) (9,178 ) (11,993 )
Other financial items, net
Net foreign exchange gains (losses) 1,883 (80 ) 1,572 (1,822 )
Derivative financial instruments (note 16) (2,393 ) (1,051 ) (263 ) (7,866 )
Reclassification of cumulative translation adjustment (note 12) 48 - 6,439 -
Indexation gains (losses), net (1,274 ) (48 ) (154 ) (352 )
(1,736 ) (1,179 ) 7,594 (10,040 )
Total (1,939 ) (7,380 ) (253 ) (20,457 )

(i) During nine-month period ended on September 30, 2020, includes amounts related to Eletrobras contingent assets in the amount of R$301, due to differences of monetary adjustments and interests due over to the third convertible bonds. (ii) Refers to the fair value adjustments on financial guarantees given to associates due to their rating improvement, leading to a decrease in the probability of default on the guaranteed loans. Further details are disclosed in note 13 and 17.

7. Income taxes

a) Deferred income tax assets and liabilities

Assets Liabilities Deferred taxes, net
Balance at December 31, 2020 53,711 9,198 44,513
Effect in income statement 8,252 (104 ) 8,356
Transfers between asset and liabilities 34 34 -
Translation adjustment 709 369 340
Other comprehensive income (686 ) 989 (1,675 )
Balance at September 30, 2021 62,020 10,486 51,534
Consolidated
Assets Liabilities Deferred taxes, net
Balance at December 31, 2019 37,151 7,585 29,566
Effect in income statement 4,931 (410 ) 5,341
Translation adjustment 3,178 2,395 783
Other comprehensive income 8,950 (350 ) 9,300
Balance at September 30, 2020 54,210 9,220 44,990

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Selected Notes to the Interim Financial Statements
Expressed in millions of
Brazilian reais, unless otherwise stated

b) Income tax reconciliation – Income statement

Income tax expense is recognized based on the estimate of the weighted average effective tax rate expected for the full year , adjusted for the tax effect of certain items that are recognized in full on the interim tax calculation . Therefore, the effective tax rate in the interim financial statements may differ from management’s estimate of the effective tax rate for the year.

The total amount presented as income taxes in the income statement is reconciled to the statutory rate, as follows:
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Income before income taxes 18,659 19,331 109,648 22,597
Income taxes at statutory rate - 34% (6,344 ) (6,573 ) (37,280 ) (7,683 )
Adjustments that affect the basis of taxes:
Tax incentives 5,067 2,642 13,715 4,991
Equity results 358 (10 ) 490 (110 )
Addition(reversal) of tax loss carryforward 570 596 (4 ) 2,555
Others 2,264 (914 ) 4,026 (1,764 )
Income taxes 1,915 (4,259 ) (19,053 ) (2,011 )

c) Income taxes - Settlement program (“REFIS”)

Current liabilities 1,793 1,769
Non-current liabilities 11,314 12,493
REFIS liabilities 13,107 14,262
SELIC rate 6.25% per year 2.00% per year

The balance mainly relates to the settlement program of the claims related to the collection of income tax and social contribution on equity gains of foreign subsidiaries and affiliates from 2003 to 2012. As at September 30, 2021, the balance is due in 85 remaining monthly installments, bearing the SELIC interest rate (Special System for Settlement and Custody), which is the Brazilian federal funds rate.

d) Uncertain tax positions

In September 2021, in the judgement of the leading case (RE 1.063.187), the Brazilian Federal Supreme Court (“STF”) ruled that is unconstitutional to include the gain related to the monetary adjustments, calculated based on the SELIC (Special System for Settlement and Custody), over certain tax credits on the computation of the Corporate Income Tax ("IRPJ") and Social Contribution on Net Income ("CSLL"). Despite the favorable conclusion to taxpayers, the decision is not yet final, as the publication of the decision is pending and may be appealed.

Vale filed a lawsuit to discuss the matter and is awaiting for the publication of the STF decision to assess the potential effects on the eventual gain involved, which is estimated at US$35 (R$190 million). Considering that the decision is not even published, the Company's external legal advisors consider a gain is not yet probable. Therefore, the Company did not record any gain in these interim financial statements.

  1. Basic and diluted earnings per share

The basic and diluted earnings per share are presented below:

2021 2020 2021 2020
Net income attributable to Vale's stockholders:
Net income 20,203 15,615 90,862 21,888
Thousands of shares
Weighted average number of common shares outstanding 5,080,890 5,129,911 5,065,750 5,129,475
Basic and diluted earnings per share:
Common share (R$) 3.98 3.04 17.94 4.27

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Selected Notes to the Interim Financial Statements
Expressed
in millions of Brazilian reais, unless otherwise stated

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The Company does not have potential outstanding shares or other instruments with dilutive effect on the earnings per share computation.

  1. Accounts receivable
September 30, 2021 December 31, 2020
Accounts receivable 5,004 26,205
Expected credit loss (257 ) (261 )
4,747 25,944
Revenue related to the steel sector 89.66 % 87.25 %
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Impairment of accounts receivable recorded in the income statement 7 5 20 46

The decrease in the accounts receivable is mainly due to the reduction in average prices and volumes of provisional sales of iron ore.

As at September 30, 2021, there is no customer that individually represents more than 10% of the Company’s accounts receivable or revenues. In 2020, the Company had a customer of the Ferrous Minerals Segment whose revenue individually represented 10.1% of the Company’s total revenue.

  1. Inventories
September 30, 2021 December 31, 2020
Finished products 18,459 13,659
Work in progress 4,301 3,351
Consumable inventory 4,899 4,093
Total 27,659 21,103
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Reversal for net realizable value 153 236 156 15

Finished and work in progress products inventories by segments are presented in note 4(b) and the cost of goods sold is presented in note 5(a).

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Selected Notes to the Interim Financial Statements
Expressed
in millions of Brazilian reais, unless otherwise stated

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11. Other financial assets and liabilities

Current Non-Current
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Other financial assets
Restricted cash - - 659 197
Derivative financial instruments (note 16) 790 698 191 347
Investments in equity securities 6,640 - 33 3,936
Related parties (i) - 1,009 - 4,791
7,430 1,707 883 9,271
Other financial liabilities
Derivative financial instruments (note 16) 1,816 1,712 3,428 3,578
Related parties (i) 721 3,759 - 4,655
Financial guarantees provided (note 13 and 17) - - 2,926 4,558
Liabilities related to the concession grant (note 14) 2,130 1,088 9,012 10,928
Advances received 3,805 3,347 - -
8,472 9,906 15,366 23,719

(i) The decrease refers to the settlement of the loans due to the transaction for the acquisition of NLC, as detailed in note 12.

Investment in equity securities – Mainly refers to 34.2 million common shares of The Mosaic Company (“Mosaic”), which is accounted for as a financial instrument measured at fair value through other comprehensive income. The fair value of this instrument is measured using the Mosaic’s share price at the end of each financial reporting period. In addition, the Company holds an investment of R$33 (US$6 million) made in February 2021 to acquire a non-controlling interest of 3.24% in Boston Electrometallurgical Company, aiming to promote the development of a technology focused on the reduction of carbon dioxide on the steel production.

Liabilities related to the concession grant - On October 28, 2021 (subsequent event), the Board of Directors approved the prepayment in the amount of R$1,871 (US$344 million) of the concessions grant. With the prepayment, the liability will be remeasured and the outstanding balance is estimated to be R$973 (US$179 million).

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Selected Notes to the Interim Financial Statements
Expressed
in millions of Brazilian reais, unless otherwise stated

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  1. Acquisitions and divestitures

a) Business Combinations

The Company has coking and thermal coal mining and processing operations in Mozambique. Vale Moçambique S.A. (“Vale Moçambique”) is a company controlled by Vale, with a non-controlling interest held by Mitsui & Co. Ltd. (“Mitsui”) until the acquisition completed on June 22, 2021, as detailed below in (a.i). Coal products are transported from the Moatize mine to the maritime terminal by the Nacala Logistics Corridor (“NLC”), which were a joint venture between Vale and Mitsui. The NLC’s main assets are the railways and port concessions located in Mozambique and Malawi.

(a.i) Acquisition of non-controlling interest in Vale Moçambique

On June 22, 2021, the Company acquired the 15% interest held by Mitsui in Vale Moçambique for an immaterial consideration, which resulted in a loss of R$1,666 (US$331 million) due to the negative reserves of Vale Moçambique at the conclusion of the transaction. This transaction with non-controlling interests was recognized in the Stockholders’ Equity for the period ended June 30,2021 as “Acquisition and disposal of non-controlling interest”. After the acquisition of the interests previously held by Mitsui, the Company holds 95% of the share capital of Vale Moçambique, and the remaining interest is held by the government of Mozambique.

(a.ii) Business combinations - NLC

Also on June 22, 2021, the acquisition was concluded with the settlement of NLC’s loans with third parties (“Project Finance”) in the amount of R$12,665 (US$2,517 million), satisfying all conditions to acquire the additional 50% held by Mitsui. Therefore, the Company started consolidating the NLC’s assets and liabilities on its balance sheet.

In addition, the Company has updated the discounted cash flow model to assess the fair value of the acquired business, resulting in a loss of R$3,880 (US$771 million) (R$4,015 (US$798 million) as at December 31, 2020) on the fair value of the loans receivable from NLC, mainly due to the decrease in the long-term price assumption for both coking and thermal coal as well as the reduction in the expected production to reflect the operational challenges to reach the ramp-up of the coal business, after the revamp of the processing plants. The cash flows were discounted at a rate of 11.6%, and the loss was recognized as “Impairment and disposals of non-current assets” for the period ended June 30, 2021.

The fair values of identifiable assets acquired and liabilities assumed as a result of the NLC’s acquisition were as follows:
Acquired assets
Cash and cash equivalents 865
Inventory, recoverable tax and other assets 2,128
Intangible 11,166
Property, plant and equipment 6,858
Assumed liabilities (795 )
Net identifiable assets acquired 20,223
Fair value adjustments (i) (8,001 )
Total identifiable net assets at fair value (ii) 12,222
Pre-existing relationship (Loans receivable from NLC) 4,322
Loss on pre-existing relationship (3,880 )
12,665
Cash consideration 12,665
(-) Balances acquired
Cash and cash equivalents 865
Net cash outflow 11,800

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Expressed
in millions of Brazilian reais, unless otherwise stated

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(i) Of this amount, R$2,218 was allocated to property, plant and equipment and R$3,978 was allocated to intangible and the remaining amount was allocated to other assets.

(ii) The fair value was assessed using the fair value less costs of disposal model, through discounted cash flow techniques, which is classified as “level 3” in the fair value hierarchy. The cash flows were discounted by using a post-tax discount rate expressed in real terms, which represents an estimate of the rate that a market participant would apply having regard to the time value of money and the asset’s specific risk.

(a.iii) Fair value adjustments

On the announcement of the Investment Agreement with Mitsui, the Company has also informed the market its divestiture intention in the coal segment. Since then, interactions during the current quarter with potential interested parties in acquiring the Company’s coal assets have led management to decide to fully impair those assets, resulting in the recognition of an impairment loss of R$12,165 (US$2,304 million) in the income statement as "Impairment and disposal of non-current assets” for the period ended September 30, 2021. Therefore, in the event of a potential sale, the Company will recognize a gain of approximately R$10,080 (US$1,910 million) related to the accumulated translation adjustments on the disposal.

Additionally, due to the current stage of the sale process, the coal segment does not yet meet the “highly probable” definition under IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations to quality as held for sale as at September 30, 2021. Therefore, the Company will continue assessing the criteria at each period for financial reporting purposes.

Furthermore, the Company concluded that its Australian subsidiaries (part of the coal segment), which are no longer operational, were considered "abandoned" under IAS 21 - The Effects of Changes in Foreign Exchange Rates and, therefore, the Company recognized a gain related to the accumulated translation adjustments in the amount of R$2,134 (US$424 million), which was reclassified to net income as “ Impairment and disposals of non-current assets ” for the period ended June 30, 2021.

b) Other acquisitions and divestitures

Vale Nouvelle-Calédonie S.A.S. (“VNC”) – In December 2020, the Company signed a binding put option agreement to sell its interest in VNC for an immaterial consideration to Prony Resources, a consortium constituted and led by the current management and employees of VNC supported by the Caledonian and French authorities with Trafigura Pte. Ltd. as a non-controlling shareholder. Under the terms of agreement, the Company has assumed an obligation to pay to the buyers an amount of R$2,573 (US$500 million) upon closing of the transaction and this amount has been provided for as at December 31, 2020.

In March 2021, the Company signed the share purchase and sale agreement with Prony Resources, concluding the transaction to sell its interest in VNC. With the final agreement, Vale's obligation to pay to buyers increased by R$302 (US$55 million), which combined with other working capital adjustments, resulted in an additional loss of R$549 (US$98 million), recorded as “Impairment and disposals of non-current assets”. On March 31, 2021, the Company disbursed R$3,134 (US$555 million) to VNC on the closing of the transaction.

The agreement also established that Vale has an offtake agreement to purchase a certain amount of VNC’s annual nickel production with a cap price over a period of 13 years. Such cap included in contract is an embedded derivative, however, it is deemed closely related to the host contract (nickel supply agreement) because the cap was out of the money on inception of the contract. Therefore, this derivative will not be separated from the host contract, which will be accounted for as an executory contract.

Upon closing of the transaction, the Company also recognized a gain of R$6,391 (US$1,132 million) arising from the accumulated exchange differences reclassified from the stockholders’ equity to the income statement under “Other financial items, net”.

Manganese ferroalloys operations classified as non -current assets and liabilities held for sale – In September 2021, the Company signed an agreement to sell its assets and liabilities located in the state of Minas Gerais, which are part of Vale Manganês S.A. and relates to the manganese ferroalloys business, for R$218 (US$40 million). Due to that agreement, those assets and liabilities were classified as "held for sale" and measured at fair value less costs of disposal, resulting in the recognition of an impairment loss of R$98 (US$18 million) recognized in the income statement as "Impairment and disposal of non-current assets” for the three-month period ended September 30, 2021. The completion of the transaction is subject to review of the Brazilian Administrative Council for Economic Defense ("CADE") and is expected to occur within the next 12 months. Those assets and liabilities were classified as non-current held for sale as follows:

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Selected Notes to the Interim Financial Statements
Expressed
in millions of Brazilian reais, unless otherwise stated

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Assets
Accounts receivable 117
Inventories 59
Recoverable taxes 91
Other current asset 1
Property, plant and equipment 58
Non-current assets held for sale 326
Liabilities
Suppliers and contractors 43
Provisions 26
Non-current liabilities held for sale 69

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Field: Split-Segment; Name: 15

Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

13. Investments in associates and joint ventures

a) Investment information
Investments
in associates and joint ventures Three-month
period ended September 30, Nine-month
period ended September 30, Three-month
period ended September 30, Nine-month
period ended September 30,
%
ownership %
voting capital September 30, 2021 December 31, 2020 2021 2020 2021 2020 2021 2020 2021 2020
Associates and joint ventures
Ferrous
minerals
Baovale
Mineração S.A. 50.00 50.00 122 103 5 5 19 16 - 2 - 2
Companhia
Coreano-Brasileira de Pelotização 50.00 50.00 383 249 77 11 161 36 - - 9 89
Companhia
Hispano-Brasileira de Pelotização (i) 50.89 50.89 210 223 3 25 4 41 - - 35 72
Companhia
Ítalo-Brasileira de Pelotização (i) 50.90 51.00 376 228 86 (2 ) 153 49 - - 30 119
Companhia
Nipo-Brasileira de Pelotização (i) 51.00 51.11 755 627 81 - 147 40 - - 40 -
MRS
Logística S.A. 48.16 46.75 2,382 2,069 171 65 362 133 - - - -
VLI
S.A. 29.60 29.60 2,328 2,495 (121 ) (3 ) (168 ) (95 ) - 8 - 8
6,556 5,994 302 101 678 220 - 10 114 290
Base
metals
Korea
Nickel Corp. 25.00 25.00 91 91 1 (3 ) 2 (2 ) - - - -
91 91 1 (3 ) 2 (2 ) - - - -
Others
Aliança
Geração de Energia S.A. (i) 55.00 55.00 2,076 1,909 216 27 307 111 24 - 140 126
Aliança
Norte Energia Participações S.A. (i) 51.00 51.00 591 606 1 (9 ) (16 ) (24 ) - - - -
California
Steel Industries, Inc. 50.00 50.00 1,718 1,218 547 (44 ) 870 (46 ) - - - -
Companhia
Siderúrgica do Pecém ("CSP") (ii) 50.00 50.00 - - - - (237 ) (364 ) - - - -
Mineração
Rio do Norte S.A. 40.00 40.00 - 367 (14 ) 27 (29 ) (28 ) - - - -
Others 386 372 (11 ) (129 ) (145 ) (190 ) - - - 3
4,771 4,472 739 (128 ) 750 (541 ) 24 - 140 129
Total 11,418 10,557 1,042 (30 ) 1,430 (323 ) 24 10 254 419

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Field: Split-Segment; Name: 16
Selected Notes to the Interim Financial Statements
Expressed in millions of Brazilian reais, unless otherwise stated

(i) Although the Company held a majority of the voting capital, the entities are accounted under the equity method due to the stockholders' agreement where relevant decisions are shared with other parties.

(ii) CSP is a joint venture and its results are accounted for under the equity method, in which the accumulated losses are capped to the Company ́s interest in the investee’s capital based on the applicable law and requirements. That is, after the investment is reduced to zero, the Company does not recognize further losses nor liabilities associated with the investee.

(iii) “Equity results and other results in associates and joint ventures” presented in the Income Statement considers, in addition to the equity results in associates and joint ventures shown in the table above, the results of Renova Foundation and Samarco (note 21) and other results with group entities.

b) Movements during the period

2021 2020
Balance at January 1, 10,557 11,278
Capital contribution to CSP 237 366
Translation adjustment 76 484
Equity results in income statement 1,430 (323 )
Equity results in statement of comprehensive income 2 (9 )
Impairment of Mineração Rio do Norte S.A. (338 ) -
Dividends declared (701 ) (507 )
Others 155 193
Balance at September 30, 11,418 11,482

The investments by segments are presented in note 4(b).

c) Financial guarantees provided

As at September 30, 2021 and December 31, 2020, the notional value of corporate financial guarantees provided by the Company (within the limit of its direct or indirect interest) for certain associates and joint ventures were R$8,213 (US$1,510 million) and R$8,091 (US$1,557 million), respectively. The fair value of these financial guarantees is shown in note 17.

14. Intangible

Movements during the period

| Goodwill | Concessions | | Contract
right | Software | | Research
and development project and patents | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at December 31, 2020 | 17,141 | 28,015 | | - | 396 | | 2,757 | 48,309 | |
| Additions | - | 642 | | - | 118 | | - | 760 | |
| Disposals | - | (23 | ) | - | - | | - | (23 | ) |
| Amortization | - | (994 | ) | - | (124 | ) | - | (1,118 | ) |
| Acquisition of NLC (note 12) | - | 7,188 | | - | - | | - | 7,188 | |
| Impairment (i) | - | (7,510 | ) | - | - | | - | (7,510 | ) |
| Translation adjustment | 525 | 345 | | - | 7 | | - | 877 | |
| Balance at September 30, 2021 | 17,666 | 27,663 | | - | 397 | | 2,757 | 48,483 | |
| Cost | 17,666 | 40,717 | | - | 4,030 | | 2,757 | 65,170 | |
| Accumulated amortization | - | (13,054 | ) | - | (3,633 | ) | - | (16,687 | ) |
| Balance at September 30, 2021 | 17,666 | 27,663 | | - | 397 | | 2,757 | 48,483 | |

| Goodwill | Concessions | | Contract
right | | Software | | Research
and development project and patents | | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at
December 31, 2019 | 14,628 | 16,005 | | 563 | | 304 | | 2,757 | | 34,257 | |
| Additions | - | 629 | | - | | 62 | | | | 691 | |
| Disposals | - | (25 | ) | - | | (1 | ) | - | | (26 | ) |
| Amortization | - | (683 | ) | (4 | ) | (84 | ) | - | | (771 | ) |
| Translation
adjustment | 2,935 | - | | 171 | | 51 | | (1 | ) | 3,156 | |
| Balance at September 30,
2020 | 17,563 | 15,926 | | 730 | | 332 | | 2,756 | | 37,307 | |
| Cost | 17,563 | 20,969 | | 1,274 | | 3,965 | | 2,756 | | 46,527 | |
| Accumulated
amortization | - | (5,043 | ) | (544 | ) | (3,633 | ) | - | | (9,220 | ) |
| Balance at September 30,
2020 | 17,563 | 15,926 | | 730 | | 332 | | 2,756 | | 37,307 | |

(i) In the current year, the Company recognized an impairment loss related to coal assets incorporated in the acquisition of NLC in the amount of R$ 7,510 (note 12).

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Selected Notes to the Interim Financial Statements
Expressed in millions of Brazilian reais, unless otherwise stated

15. Property, plant and equipment

a) Movements during the period

| Building and land | | Facilities | | Equipment | | Mineral properties | | Railway equipment | | Right
of use assets | | Others | | Constructions in progress | | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance
at December 31, 2020 | 44,646 | | 39,448 | | 25,637 | | 41,853 | | 13,108 | | 8,121 | | 12,968 | | 28,055 | | 213,836 | |
| Additions
(i) | - | | - | | - | | - | | - | | 292 | | - | | 18,624 | | 18,916 | |
| Disposals | (18 | ) | (138 | ) | (315 | ) | - | | (25 | ) | - | | (5 | ) | (239 | ) | (740 | ) |
| Asset retirement
obligation (ii) | - | | - | | - | | (2,508 | ) | - | | - | | - | | - | | (2,508 | ) |
| Depreciation,
depletion and amortization | (1,774 | ) | (1,923 | ) | (2,632 | ) | (1,713 | ) | (687 | ) | (700 | ) | (1,053 | ) | - | | (10,482 | ) |
| Acquisition
of NLC (note 12) | 1,185 | | 663 | | 515 | | - | | 1,640 | | 167 | | 10 | | 460 | | 4,640 | |
| Impairment
(iii) | (1,220 | ) | (604 | ) | (451 | ) | - | | (1,653 | ) | (172 | ) | (10 | ) | (1,240 | ) | (5,350 | ) |
| Translation
adjustment | 717 | | 432 | | 849 | | 1,635 | | 52 | | 297 | | 265 | | 991 | | 5,238 | |
| Transfers | 1,194 | | 1,959 | | 2,750 | | 1,144 | | 447 | | - | | 1,133 | | (8,627 | ) | - | |
| Transfer
to net assets held for sale (note 12) | (16 | ) | (12 | ) | (17 | ) | (8 | ) | - | | - | | (5 | ) | - | | (58 | ) |
| Balance
at September 30, 2021 | 44,714 | | 39,825 | | 26,336 | | 40,403 | | 12,882 | | 8,005 | | 13,303 | | 38,024 | | 223,492 | |
| Cost | 82,728 | | 65,479 | | 59,271 | | 90,692 | | 20,379 | | 10,593 | | 29,717 | | 38,024 | | 396,883 | |
| Accumulated
depreciation | (38,014 | ) | (25,654 | ) | (32,935 | ) | (50,289 | ) | (7,497 | ) | (2,588 | ) | (16,414 | ) | - | | (173,391 | ) |
| Balance
at September 30, 2021 | 44,714 | | 39,825 | | 26,336 | | 40,403 | | 12,882 | | 8,005 | | 13,303 | | 38,024 | | 223,492 | |

| Building and land | | Facilities | | Equipment | | Mineral properties | | Railway equipment | | Right
of use assets | | Others | | Constructions in progress | | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance
at December 31, 2019 | 43,137 | | 38,713 | | 22,921 | | 33,302 | | 13,064 | | 6,819 | | 12,137 | | 17,640 | | 187,733 | |
| Additions
(i) | - | | - | | - | | - | | - | | 196 | | - | | 14,107 | | 14,303 | |
| Disposals | (35 | ) | (194 | ) | (8 | ) | (38 | ) | (26 | ) | - | | (21 | ) | (161 | ) | (483 | ) |
| Asset retirement
obligation | - | | - | | - | | 1,912 | | - | | - | | - | | - | | 1,912 | |
| Depreciation,
depletion and amortization | (1,677 | ) | (1,879 | ) | (2,802 | ) | (1,839 | ) | (699 | ) | (671 | ) | (1,084 | ) | - | | (10,651 | ) |
| Impairment | (816 | ) | (1,653 | ) | (78 | ) | (785 | ) | - | | (3 | ) | (439 | ) | (800 | ) | (4,574 | ) |
| Translation
adjustment | 4,378 | | 2,939 | | 4,704 | | 8,279 | | 348 | | 2,072 | | 1,538 | | 1,782 | | 26,040 | |
| Transfers | 937 | | 1,709 | | 1,772 | | 1,769 | | 276 | | - | | 988 | | (7,451 | ) | - | |
| Balance
at September 30, 2020 | 45,924 | | 39,635 | | 26,509 | | 42,600 | | 12,963 | | 8,413 | | 13,119 | | 25,117 | | 214,280 | |
| Cost | 80,411 | | 60,690 | | 57,356 | | 90,981 | | 19,678 | | 10,392 | | 31,088 | | 25,117 | | 375,713 | |
| Accumulated
depreciation | (34,487 | ) | (21,055 | ) | (30,847 | ) | (48,381 | ) | (6,715 | ) | (1,979 | ) | (17,969 | ) | - | | (161,433 | ) |
| Balance
at September 30, 2020 | 45,924 | | 39,635 | | 26,509 | | 42,600 | | 12,963 | | 8,413 | | 13,119 | | 25,117 | | 214,280 | |

(i) Includes capitalized borrowing costs.

(ii) Refers to changes in discount rates.

(iii) Due to the Company's assessment of the fair value of the coal assets, the assets acquired during the year are provided for impairment in full, resulting in a loss of R$124 and R$597 for the three and nine-month periods ended September 30, 2021 (R$173 and R$546 for the three and nine-month periods ended September 30, 2020). In the current year, the Company also recognized an impairment loss related to NLC assets in the amount of R$4,655 (note 12).

b) Right-of-use assets (Leases)

Ports 3,732 - - (181 ) 144 3,695
Vessels 2,779 - - (172 ) 127 2,734
Pellets
plants 683 200 - (147 ) - 736
Properties 579 16 - (127 ) 2 470
Energy plants 287 2 - (27 ) 12 274
Mining
equipment and locomotives (i) 61 241 (172 ) (46 ) 12 96
Total 8,121 459 (172 ) (700 ) 297 8,005

(i) "Additions and contract modifications" includes the effects arising from the acquisition of NLC in the amount of R$167.

(ii) Impairment loss related to the NLC assets (note 12).

Lease liabilities are presented in note 19.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

16. Financial and capital risk management

a) Effects of derivatives on the balance sheet
Assets
September 30, 2021 December 31, 2020
Current Non-current Current Non-current
Foreign exchange and interest rate risk
IPCA swap 218 - 37 197
Eurobonds swap - - - 13
Pre-dollar swap and forward (NDF) 125 64 - 46
Libor swap - 25 - -
343 89 37 256
Commodities price risk
Base metals products 174 39 158 -
Gasoil, Brent and freight 271 - 503 -
Thermal and coking coal 2 - -
447 39 661 -
Others - 63 - 91
- 63 - 91
Total 790 191 698 347
Liabilities
September 30, 2021 December 31, 2020
Current Non-current Current Non-current
Foreign exchange and interest rate risk
CDI & TJLP vs. US$ fixed and floating rate swap 929 2,592 576 2,724
IPCA swap 11 633 382 520
Eurobonds swap - - 19 -
Pre-dollar swap and forward (NDF) 328 203 324 303
Libor swap 11 - 5 31
1,279 3,428 1,306 3,578
Commodities price risk
Base metals products 157 - 242 -
Gasoil, Brent and freight - - 64 -
Thermal and coking coal 353 - - -
510 - 306 -
Others 27 - 100 -
Total 1,816 3,428 1,712 3,578

a.i) Net exposure

| September 30,
2021 | | December 31, 2020 | | |
| --- | --- | --- | --- | --- |
| Foreign exchange and interest rate risk | | | | |
| CDI & TJLP vs. US$ fixed and floating rate swap | (3,521 | ) | (3,300 | ) |
| IPCA swap | (426 | ) | (668 | ) |
| Eurobonds swap | - | | (6 | ) |
| Pre-dollar swap and forward (NDF) | (342 | ) | (581 | ) |
| Libor swap (i) | 14 | | (36 | ) |
| | (4,275 | ) | (4,591 | ) |
| Commodities price risk | | | | |
| Base metals products | 56 | | (84 | ) |
| Gasoil, Brent and freight | 271 | | 439 | |
| Thermal and coking coal | (351 | ) | - | |
| | (24 | ) | 355 | |
| Others | 36 | | (9 | ) |
| | 36 | | (9 | ) |
| Total | (4,263 | ) | (4,245 | ) |

(i) In July 2017, the U.K. Financial Conduct Authority (FCA), which regulates the London Interbank Offered Rate (‘‘LIBOR’’), announced the effective discontinuation of LIBOR. After June 30, 2023, the FCA will no longer require panel banks to submit quotes for any U.S. dollar LIBOR settings. The Company is currently evaluating the potential impact of the eventual replacement of the LIBOR interest rate.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

a.ii) Effects of derivatives on the income statement and cash flows
Gain (loss) recognized in the income statement
Three-month
period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Foreign exchange and interest rate risk
CDI & TJLP vs. US$ fixed and floating rate swap (1,024 ) (312 ) (781 ) (4,407 )
IPCA swap (219 ) (316 ) 148 (1,528 )
Eurobonds swap - 137 (154 ) 30
Pre-dollar swap and forward (NDF) (1,245 ) (310 ) (192 ) (1,117 )
Libor swap 8 (30 ) 47 (58 )
(2,480 ) (831 ) (932 ) (7,080 )
Commodities price risk
Base metals products 10 - (3 ) -
Gasoil, Brent and freight 62 200 627 (898 )
72 200 624 (898 )
Others 15 (420 ) 45 112
15 (420 ) 45 112
Total (2,393 ) (1,051 ) (263 ) (7,866 )
Financial settlement inflows (outflows)
Three-month
period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Foreign exchange and interest rate risk
CDI & TJLP vs. US$ fixed and floating rate swap (56 ) (343 ) (584 ) (591 )
IPCA swap - - (97 ) 1
Eurobonds swap - - (162 ) (24 )
Pre-dollar swap and forward (NDF) 15 (176 ) (435 ) (234 )
Libor swap (1 ) 3 (5 ) (1 )
(42 ) (516 ) (1,283 ) (849 )
Commodities price risk
Base metals products (78 ) - (117 ) -
Gasoil, Brent and freight 322 (183 ) 814 (880 )
Thermal and coking coal (88 ) - (88 ) -
156 (183 ) 609 (880 )
Others - 27 - 1,791
- 27 - 1,791
Total 114 (672 ) (674 ) 62

a.iii) Hedge accounting
Gain (loss) recognized in the other comprehensive income
Three-month period ended September 30, Nine-month period ended September 30,
2021 2020 2021 2020
Net investments hedge (662 ) (458 ) (441 ) (3,484 )
Thermal and coking coal cash flow hedge (63 ) - (87 ) -
Cash flow hedge (Nickel and Palladium) 113 (299 ) 31 (291 )

Net investment hedge:

In March 2021, the Company redeemed all its euro bonds (note 19). As a result, the amount of debt designated as a hedge instrument for this investment is R$12,281 (US$2,258 million) as at September 30,2021.

Cash flow hedge (Coking Coal) :

To reduce the volatility of its cash flow as a result of fluctuations in coking coal prices, in July 2021, the Company implemented a Coking Coal Revenue Hedge Program. Under this program, hedge transactions were executed through forward contracts to protect a portion of the projected sales of this product at fluctuating prices that is highly probable to occur. Hedge accounting treatment is being given to the program. The contracts are traded over-the-counter and the cash settlement in/out results are offset by the protected items' loss/gain results due to coking coal price variations.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

| Flow | Notional
(ton) — September 30, 2021 | December 31,2020 | Fair
value — Bought
/ Sold | Average strike (US$/t oz) | September 30, 2021 | December 31, 2020 | September 30, 2021 | | September 30, 2021 | 2021 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Coking Coal
Revenue Hedging Program | 69,000 | - | S | 303 | (11 | ) | - | (6 | ) | 4 | (11 | ) |

Cash flow hedge (Thermal Coal) :

| Flow | Notional
(ton) — September 30, 2021 | December 31, 2020 | Fair
value — Bought
/ Sold | Average strike (US$/t oz) | September 30, 2021 | December 31, 2020 | September 30, 2021 | | September 30, 2021 | 2021 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Thermal
Coal Revenue Hedging Program | | | | | | | | | | | | |
| New
Castle Forward | 300,000 | - | S | 108 | (176 | ) | - | (104 | ) | 31 | (176 | ) |
| API4 Forward | 195,000 | - | B | 105 | (101 | ) | - | (38 | ) | 15 | (101 | ) |
| Total | | | | | (277 | ) | - | (142 | ) | 46 | (277 | ) |

Cash Flow Hedge (Nickel):

| Flow | Notional
(ton) — September 30, 2021 | December 31, 2020 | Fair
value — Bought
/ Sold | Average strike (US$/ton) | September 30, 2021 | December 31, 2020 | | September 30, 2021 | | September 30, 2021 | 2021 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Nickel Revenue Hedging Program
(i) | | | | | | | | | | | | | |
| Call options | 15,330 | 58,620 | S | 17,505 | (77 | ) | (239 | ) | (162 | ) | 26 | (77 | ) |
| Put options | 15,330 | 58,620 | B | 15,000 | 2 | | 143 | | - | | 1 | 2 | |
| Total | | | | | (75 | ) | (96 | ) | (162 | ) | 27 | (75 | ) |

(i) With the hedge structure, the company ensures prices between US$15,000/t and US$17,505/t for the program’s sales volume.

Cash flow hedge (Palladium) :

| Flow | Notional
(t oz) — September 30, 2021 | December 31, 2020 | Fair
value — Bought
/ Sold | Average strike (US$/t oz) | September 30, 2021 | December 31, 2020 | | September 30, 2021 | | September 30, 2021 | 2021 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Palladium Revenue Hedging
Program | | | | | | | | | | | | | |
| Call Options | 55,795 | 7,200 | S | 3,414 | (8 | ) | (5 | ) | (2 | ) | 2 | (8 | ) |
| Put Options | 55,795 | 7,200 | B | 2,412 | 185 | | 1 | | 4 | | 24 | 185 | |
| Total | | | | | 177 | | (4 | ) | 2 | | 26 | 177 | |

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

b) Protection programs for the R$ and EUR denominated debt instruments and other liabilities

Flow Notional — September 30, 2021 December 31, 2020 Index Average rate September 30, 2021 December 31, 2020 September 30, 2021 September 30, 2021 2021 2022 2023+
CDI
vs. US$ fixed rate swap (2,717 ) (2,454 ) (227 ) 230 (117 ) (577 ) (2,022 )
Receivable R$ 8,545 R$ 9,445 CDI 100.44 %
Payable US$ 2,003 US$ 2,213 Fix 2.57 %
TJLP
vs. US$ fixed rate swap (804 ) (846 ) (195 ) 43 (80 ) (253 ) (471 )
Receivable R$ 1,331 R$ 1,651 TJLP
+ 1.11 %
Payable US$ 360 US$ 460 Fix 3.14 %
R$
fixed rate vs. US$ fixed rate swap (355 ) (575 ) (476 ) 129 (15 ) (287 ) (53 )
Receivable R$ 6,132 R$ 2,512 Fix 3.72 %
Payable US$ 1,162 US$ 621 Fix -1.59 %
IPCA
vs. US$ fixed rate swap (645 ) (900 ) (332 ) 48 (4 ) (23 ) (618 )
Receivable R$ 1,563 R$ 2,363 IPCA
+ 4.54 %
Payable US$ 387 US$ 622 Fix 3.88 %
IPCA
vs. CDI swap 219 232 35 1 - 219 -
Receivable R$ 744 R$ 694 IPCA
+ 6.63 %
Payable R$ 1,350 R$ 550 CDI 9.88 %
EUR
fixed rate vs. US$ fixed rate swap - (6 ) (162 ) - - - -
Receivable - EUR 500 Fix 0.00 %
Payable - US$ 613 Fix 0.00 %
Forward R$ 6,449 R$ 916 B 4.34 13 (6 ) 82 116 3 92 (82 )

c) Protection program for Libor floating interest rate US$ denominated debt

Flow Notional — September 30, 2021 December 31, 2020 Index Average rate September 30, 2021 December 31, 2020 September 30, 2021 September 30, 2021 2021 2022 2023+
Libor
vs. US$ fixed rate swap 14 (36 ) (5 ) 11 (2 ) (7 ) 24
Receivable US$ 950 US$ 950 Libor 0.13 %
Payable US$ 950 US$ 950 Fix 0.48 %

d) Protection program for product prices and input costs

| Flow | Notional — September
30, 2021 | December 31, 2020 | Bought
/ Sold | Average strike (US$/bbl) | Fair
value — September
30, 2021 | December 31,
2020 | September 30, 2021 | September 30, 2021 | 2021+ | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Brent
crude oil (bbl) | | | | | | | | | | |
| Call
options | 1,209,405 | 13,746,945 | B | 55 | 152 | 478 | | 743 | 18 | 152 |
| Put options | 1,209,405 | 13,746,945 | S | 30 | - | (59 | ) | - | - | - |
| Forward
Freight Agreement (days) | | | | | | | | | | |
| Freight
forwards (days) | 195 | 1,625 | B | 13,288 | 41 | 22 | | 127 | 4 | 41 |

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

e) Embedded derivatives in contracts

| Flow | Notional — September
30, 2021 | December 31, 2020 | Bought
/ Sold | Average strike | Fair value — September 30, 2021 | December 31, 2020 | | September 30, 2021 | | September 30, 2021 | 2021+ | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Option
related to a Special Purpose Entity “SPE” (quantity) | | | | | | | | | | | | | |
| Call
option | 137,751,623 | 137,751,623 | B | 3.10 | 63 | | 95 | | - | | 10 | 63 | |
| Embedded
derivatives in contracts for the sale of part of its shareholding (quantity) | | | | | | | | | | | | | |
| Put option | 1,105,070,863 | 1,105,070,863 | S | 4.47 | (5 | ) | (100 | ) | - | | 3 | (5 | ) |
| Embedded
Derivative in natural gas purchase agreement (volume/month) | | | | | | | | | | | | | |
| Call options | 729,571 | 746,667 | S | 233 | (22 | ) | - | | (11 | ) | 14 | (22 | ) |
| Hedge
program for finished products | | | | | | | | | | | | | |
| Nickel forwards | 634 | - | S | 19,139 | 4 | | - | | (1 | ) | 1 | 4 | |
| Fixed
prices sales protection | | | | | | | | | | | | | |
| Nickel forwards | 360 | - | B | 16,277 | 3 | | - | | 8 | | 1 | 3 | |
| Embedded
in raw material purchase contract (ton) | | | | | | | | | | | | | |
| Nickel forwards | 573 | 1,979 | S | 19,271 | - | | 10 | | - | | 2 | - | |
| Copper forwards | 450 | 976 | S | 9,361 | - | | 2 | | - | | 1 | - | |

f) Sensitivity analysis of derivative financial instruments

The following tables present the potential value of the instruments given hypothetical stress scenarios for the main market risk factors that impact the derivatives positions. The scenarios were defined as follows:

  • Probable: the probable scenario was defined as the fair value of the derivative instruments as at September 30, 2021

  • Scenario I: fair value estimated considering a 25% deterioration in the associated risk variables

  • Scenario II: fair value estimated considering a 50% deterioration in the associated risk variables

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

| Instrument — CDI
vs. US$ fixed rate swap | Instrument's
main risk events — R$
depreciation | (2,717 | ) | (5,525 | ) | (8,334 | ) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | US$
interest rate inside Brazil decrease | (2,717 | ) | (2,853 | ) | (2,996 | ) |
| | Brazilian
interest rate increase | (2,717 | ) | (2,927 | ) | (3,142 | ) |
| Protected
item: R$ denominated liabilities | R$
depreciation | n.a. | | - | | - | |
| TJLP
vs. US$ fixed rate swap | R$
depreciation | (804 | ) | (1,323 | ) | (1,841 | ) |
| | US$
interest rate inside Brazil decrease | (804 | ) | (819 | ) | (835 | ) |
| | Brazilian
interest rate increase | (804 | ) | (865 | ) | (918 | ) |
| | TJLP
interest rate decrease | (804 | ) | (840 | ) | (875 | ) |
| Protected
item: R$ denominated debt | R$
depreciation | n.a. | | - | | - | |
| R$
fixed rate vs. US$ fixed rate swap | R$
depreciation | (355 | ) | (1,901 | ) | (3,447 | ) |
| | US$
interest rate inside Brazil decrease | (355 | ) | (387 | ) | (419 | ) |
| | Brazilian
interest rate increase | (355 | ) | (583 | ) | (794 | ) |
| Protected
item: R$ denominated debt | R$
depreciation | n.a. | | - | | - | |
| IPCA
vs. US$ fixed rate swap | R$
depreciation | (645 | ) | (1,214 | ) | (1,784 | ) |
| | US$
interest rate inside Brazil decrease | (645 | ) | (674 | ) | (704 | ) |
| | Brazilian
interest rate increase | (645 | ) | (749 | ) | (851 | ) |
| | IPCA
index decrease | (645 | ) | (705 | ) | (766 | ) |
| Protected
item: R$ denominated debt | R$
depreciation | n.a. | | - | | - | |
| IPCA
vs. CDI swap | Brazilian
interest rate increase | 219 | | 205 | | 192 | |
| | IPCA
index decrease | 219 | | 210 | | 201 | |
| Protected
item: R$ denominated debt linked to IPCA | IPCA
index decrease | n.a. | | (210 | ) | (201 | ) |
| US$
floating rate vs. US$ fixed rate swap | US$
Libor decrease | 14 | | (14 | ) | (41 | ) |
| Protected
item: Libor US$ indexed debt | US$
Libor decrease | n.a. | | 14 | | 41 | |
| NDF
BRL/USD | R$
depreciation | 13 | | (1,427 | ) | (2,866 | ) |
| | US$
interest rate inside Brazil decrease | 13 | | (6 | ) | (25 | ) |
| | Brazilian
interest rate increase | 13 | | (135 | ) | (275 | ) |
| Protected
item: R$ denominated liabilities | R$
depreciation | n.a. | | - | | - | |

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

Instrument Instrument's main risk events
Fuel oil protection
Options Price input decrease 152 75 57
Protected item: Part of costs linked to fuel oil prices Price input decrease n.a. (75 ) (57 )
Forward Freight Agreement
Forwards Freight price decrease 41 27 13
Protected item: Part of costs linked to maritime freight prices Freight price decrease n.a. (27 ) (13 )
Nickel sales fixed price protection
Forwards Nickel price decrease 3 (6 ) (14 )
Protected item: Part of nickel revenues with fixed prices Nickel price decrease n.a. 6 14
Hedge program for products acquisition for resale
Forwards Nickel price increase 4 (2 ) (7 )
Protected item: Part of revenues from products resale Nickel price increase n.a. 2 7
Nickel Revenue Hedging Program
Options Nickel price increase (75 ) (418 ) (793 )
Protected item: Part of nickel future revenues Nickel price increase (75 ) 418 793
Palladium Revenue Hedging Program
Options Palladium price increase 177 73 (9 )
Protected item: Part of palladium future revenues Palladium price increase 177 (73 ) 9
Thermal Coal Revenue Hedging Program
Forwards Thermal coal price increase (277 ) (418 ) (559 )
Protected item: Part of thermal coal future revenues Thermal coal price increase (277 ) 418 559
Coking Coal Revenue Hedging Program
Forwards Coking coal price increase (11 ) (42 ) (74 )
Protected item: Part of coking coal future revenues Coking coal price increase (11 ) 42 74
Option - SPCs SPCs stock value decrease 63 28 12
Instrument — Embedded derivatives - Raw material purchase (nickel) Main risks — Nickel price increase - (16 ) (31 )
Embedded derivatives - Raw material purchase (copper) Copper price increase - (6 ) (11 )
Embedded derivatives - Gas purchase Pellet price increase (22 ) (42 ) (60 )
Embedded derivatives - Guaranteed minimum return Stock value decrease (5 ) (236 ) (1,525 )

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

g) Financial counterparties’ credit risk ratings

The table below presents the credit risk ratings published by Moody’s regarding the main financial institutions that we hire derivative instruments, cash and cash equivalents transactions.

September 30, 2021 December 31, 2020
Cash and cash equivalents and short-term investment Derivatives Cash and cash equivalents and short-term investment Derivatives
Aa1 552 - 11,487 188
Aa2 1,124 117 1,884 79
Aa3 1,368 180 8,735 214
A1 5,597 32 14,612 109
A2 21,459 216 20 105
A3 6,849 175 27 188
Baa1 - - 18 -
Baa2 63 - 8 -
Ba1 - 17 15,516 -
Ba2 16,518 32 21,767 31
Ba3 8,291 - - -
Others 70 212 18 131
61,891 981 74,092 1,045

17. Financial assets and liabilities

a) Financial instruments classification

Consolidated
September 30, 2021 December 31, 2020
Financial assets Amortized cost At fair value through OCI At fair value through profit or loss Total Amortized cost At fair value through OCI At fair value through profit or loss Total
Current
Cash and cash equivalents (note 19) 59,057 - - 59,057 70,086 - - 70,086
Short-term investments (note 19) - - 2,834 2,834 - - 4,006 4,006
Derivative financial instruments (note 16) - - 790 790 - - 698 698
Accounts receivable (note 9) 6,430 - (1,683 ) 4,747 7,865 - 18,079 25,944
Investments in equity securities - 6,640 - 6,640 - - - -
Related parties (note 26) - - - - 1,009 - - 1,009
65,487 6,640 1,941 74,068 78,960 - 22,783 101,743
Non-current
Judicial deposits (note 23) 6,644 - - 6,644 6,591 - - 6,591
Restricted cash 659 - - 659 197 - - 197
Derivative financial instruments (note 16) - - 191 191 - - 347 347
Investments in equity securities - 33 - 33 - 3,936 - 3,936
Related parties (note 26) - - - - 4,791 - - 4,791
7,303 33 191 7,527 11,579 3,936 347 15,862
Total of financial assets 72,790 6,673 2,132 81,595 90,539 3,936 23,130 117,605
Financial liabilities
Current
Suppliers and contractors 22,282 - - 22,282 17,496 - - 17,496
Derivative financial instruments (note 16) - - 1,816 1,816 - - 1,712 1,712
Loans, borrowings and leases (note 19) 7,318 - - 7,318 5,901 - - 5,901
Dividends payable 193 - - 193 6,342 - - 6,342
Liabilities related to the concession grant (note 14) 2,130 - - 2,130 1,088 - - 1,088
Related parties (note 26) 721 - - 721 3,759 - - 3,759
Other financial liabilities (note 11) 3,805 - - 3,805 3,347 - - 3,347
36,449 - 1,816 38,265 37,933 - 1,712 39,645
Non-current
Derivative financial instruments (note 16) - - 3,428 3,428 - - 3,578 3,578
Loans, borrowings and leases (note 19) 66,578 - - 66,578 72,187 - - 72,187
Related parties (note 26) - - - - 4,655 - - 4,655
Participative stockholders' debentures (note 18) - - 22,452 22,452 - - 17,737 17,737
Liabilities related to the concession grant (note 14) 9,012 - - 9,012 10,928 - - 10,928
Financial guarantees (note 13) - - 2,926 2,926 - - 4,558 4,558
75,590 - 28,806 104,396 87,770 - 25,873 113,643
Total of financial liabilities 112,039 - 30,622 142,661 125,703 - 27,585 153,288

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

b) Hierarchy of fair value
September 30, 2021 December 31, 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Financial assets
Short-term investments 2,834 - - 2,834 4,006 - - 4,006
Derivative financial instruments - 918 63 981 - 950 95 1,045
Accounts receivable - (1,683 ) - (1,683 ) - 18,079 - 18,079
Investments in equity securities 6,673 - - 6,673 3,936 - - 3,936
Total 9,507 (765 ) 63 8,805 7,942 19,029 95 27,066
Financial liabilities
Derivative financial instruments - 5,239 5 5,244 - 5,190 100 5,290
Participative stockholders' debentures - 22,452 - 22,452 - 17,737 - 17,737
Financial guarantees - 2,926 - 2,926 - 4,558 - 4,558
Total - 30,617 5 30,622 - 27,485 100 27,585

There were no transfers between levels 1, 2 and 3 of the fair value hierarchy during the nine-month period ended September 30, 2021.

b.i) Changes in Level 3 assets and liabilities during the period
Derivative financial instruments
Financial assets Financial
liabilities
Balance at December 31, 2020 95 100
Gain and losses recognized in income statement (32 ) (95 )
Balance at September 30, 2021 63 5

c) Fair value of loans and financing

September 30, 2021 December 31, 2020
Carrying amount Fair value Carrying amount Fair value
Quoted in the secondary market:
Bonds 40,513 50,822 38,709 52,100
Eurobonds - - 4,783 5,118
Debentures 2,170 2,170 2,576 2,578
Debt contracts in Brazil in:
R$, indexed to TJLP, TR, IPCA, IGP-M and CDI 2,143 2,143 4,470 4,452
R$, with fixed interest 98 98 180 180
Basket of currencies and bonds in US$ indexed to LIBOR 120 291 290 291
Debt contracts in the international market in:
US$, with variable and fixed interest 18,141 17,895 16,759 17,036
Other currencies, with variable interest 484 60 - -
Other currencies, with fixed interest 587 645 616 698
Total 64,256 74,124 68,383 82,453

Due to the short-term cycle, the fair value of cash and cash equivalents balances, financial investments, accounts receivable and accounts payable approximate their book values.

18. Participative stockholders’ debentures

At the time of its privatization in 1997, the Company issued a total of 388,559,056 debentures to then-existing stockholders, including the Brazilian Government. The debentures’ terms were set to ensure that pre-privatization stockholders would participate in potential future benefits that might be obtained from exploration of mineral resources. This obligation will cease when all the relevant mineral resources are exhausted, sold or otherwise disposed of by the Company.

Holders of participative stockholders’ debentures have the right to receive semi-annual payments equal to an agreed percentage of revenues less value-added tax, transport fee and insurance expenses related to the trading of the products, derived from these mineral resources. On October 1, 2021 (subsequent event), the Company made available for withdrawal as remuneration the amount of R$1,244 (US$236 million) for the first semester of 2021, as disclosed on the “Shareholders’ debentures report” made available on the Company’s website.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

To calculate the fair value of the liability, the Company uses the weighted average price of trades in the secondary market for the last month of the quarter. The average price increased from R$45.65 per debenture for the year ended December 31, 2020, to R$57.78 per debenture for the period ended September 30, 2021 (R$36.76 for the period ended September 30, 2020), resulting in an expense of R$5,886 (US$1,109 million) recorded in the income statement for the nine-month period ended September 30, 2021 (R$4,341 (US$833 million) for the nine-month period ended September 30, 2020), respectively. As at September 30, 2021 the liability was R$22,452 (US$4,128 million) (R$17,737 (US$3,413 million) as at December 2020).

The average price decreased from R$60.34 per debenture for the period ended June 30, 2021, to R$57.78 per debenture for the period ended September 30, 2021 (R$29.04 for the period ended June 30, 2020), resulting in a gain of R$825 (US$152 million) recorded in the income statement for the three-month period ended September 30, 2021 (R$3,002 (US$553 million) for the three-month period ended September 30, 2020).

19. Loans, borrowings, leases, cash and cash equivalents and short-term investments

a) Net debt

September 30, 2021 December 31, 2020
Debt contracts (d.i) 65,008 69,426
Leases (d.ii) 8,888 8,662
Total of loans, borrowings and leases 73,896 78,088
(-) Cash and cash equivalents 59,057 70,086
(-) Short-term investments 2,834 4,006
Net debt 12,005 3,996

b) Cash and cash equivalents

Cash and cash equivalents include cash, immediately redeemable deposits and short-term investments with an insignificant risk of change in value. They are readily convertible to cash, being R$27,529 (US$5,061 million) (R$14,805 (US$2,849 million) as at December 31, 2020) denominated in R$, indexed to the CDI, R$30,043 (US$5,523 million) (R$52,979 (US$10,195 million) as at December 31, 2020) denominated in US$ and R$1,485 (US$273 million) (R$2,302 (US$443 million) as at December 31, 2020) denominated in other currencies as at September 30,2021.

c) Short-term investments

At September 30, 2021, the balance of R$2,834 (US$521 million) (R$4,006 (US$771 million) as at December 31, 2020) is substantially comprised of investments in an exclusive investment fund immediately liquid, whose portfolio is composed of committed transactions and Brazilian Financial Treasury Bills (“LFTs”), which are floating-rate securities issued by the Brazilian government.

d) Loans, borrowings and leases

d.i) Total debt
Current liabilities Non-current liabilities
Average interest rate (i) September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Quoted in the secondary market:
US$, Bonds 6.02 % - - 40,513 38,709
Eurobonds - - - 4,783
R$, Debentures (ii) 10.48 % 1,001 555 1,169 2,021
Debt contracts in Brazil in (ii):
R$, indexed to TJLP, TR, IPCA, IGP-M and CDI 10.17 % 636 1,662 1,507 2,808
R$, with fixed interest 2.74 % 87 107 11 73
Basket of currencies and bonds in US$ indexed to LIBOR 2.32 % 120 232 - 58
Debt contracts in the international market in:
US$, with variable and fixed interest 2.23 % 3,400 942 14,741 15,817
Other currencies, with variable interest 4.09 % 430 - 54 -
Other currencies, with fixed interest 3.36 % 65 61 522 555
Debts contracts 5,739 3,559 58,517 64,824
Accrued charges 752 1,043 - -
6,491 4,602 58,517 64,824

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

(i) In order to determine the average interest rate for debt contracts with floating rates, the Company used the rate applicable as at September 30, 2021.

(ii) The Company entered into derivative transactions to mitigate the exposure to the cash flow variations of all floating rate debt contracted in Brazil, resulting in an average cost of 2,93% per year in US$.

Future flows of debt payments, principal and interest

Principal Estimated future interest payments (i)
2021 312 694
2022 5,853 3,192
2023 2,398 2,999
2024 10,913 2,904
Between 2025 and 2029 11,511 5,464
2030 onwards 33,269 19,796
Total 64,256 35,049

(i) Based on interest rate curves and foreign exchange rates applicable as at September 30, 2021 and considering that the payments of principal will be made on their contracted payments dates. The amount includes the estimated interest not yet accrued and the interest already recognized in the interim financial statements.

Credit and financing lines

The Company has two revolving credit facilities to assist the short-term liquidity management and to enable more efficiency in cash management in the available amount of R$27,197 (US$5,000 million), of which R$10,879 (US$2,000 million) will mature in 2022 and R$16,318 (US$3,000 million) in 2024. As at September 30, 2021, these lines are undrawn.

Funding and payments

In January 2021, the Company contracted the credit line R$1,633 (US$300 million) with The New Development Bank maturing at 2035 and indexed to Libor + 2.49% per year.

In March 2021, the Company redeemed all of its 3.750% bonds due January 2023, in the total amount of R$4,946 (EUR750 million) and for it paid a premium of R$354 (US$63 million), which was recorded as “Expenses with cash tender offer redemption” under the financial results for nine-month period ended September 30, 2021. The remaining amount paid were made in connection with the schedule of disbursements in accordance with the terms of the contracted debts.

Covenants

Some of the Company’s debt agreements with lenders contain financial covenants. The primary financial covenants in those agreements require maintaining certain ratios, such as debt to EBITDA (LAJIDA) (as defined in note 4(a)) and interest coverage. The Company has not identified any instances of noncompliance as at September 30, 2021.

Reconciliation of debt to cash flows

| Quoted in the secondary market | | Debt
contracts in Brazil | | Debt contracts on the international market | | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| December 31, 2020 | 47,010 | | 4,980 | | 17,436 | | 69,426 | |
| Additions | - | | - | | 1,633 | | 1,633 | |
| Payments (i) | (5,722 | ) | (497 | ) | (2,287 | ) | (8,506 | ) |
| Interest paid (ii) | (2,201 | ) | (331 | ) | (672 | ) | (3,204 | ) |
| Effect on cash flow | (7,923 | ) | (828 | ) | (1,326 | ) | (10,077 | ) |
| Effect of exchange rate | 2,486 | | (2,048 | ) | 2,622 | | 3,060 | |
| Interest accretion | 1,785 | | 269 | | 545 | | 2,599 | |
| Non-cash changes | 4,271 | | (1,779 | ) | 3,167 | | 5,659 | |
| September 30, 2021 | 43,358 | | 2,373 | | 19,277 | | 65,008 | |

(i) Includes expenses with the redemption in the amount of R$354.

(ii) Classified as cash flows arising from operating activities.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

d.ii) Lease liabilities

December 31, 2020 Additions and contract modifications Payments (i) Interest (ii) Translation adjustment September 30, 2021
Ports 3,860 - (338 ) 113 135 3,770
Vessels 2,770 - (255 ) 85 125 2,725
Pellets plants 708 200 (42 ) 26 - 892
Properties 738 16 (150 ) 15 (15 ) 604
Energy plants 322 2 (20 ) 21 6 331
Mining equipment and locomotives (iii) 264 336 (55 ) 13 8 566
Total 8,662 554 (860 ) 273 259 8,888

(i) The total amount of the variable lease payments not included in the measurement of lease liabilities, which have been recognized straight to the income statement, for the three and nine-month periods ended September 30, 2021 was R$866 and R$1,457 (R$54 and R$253 for the three and nine-month periods ended September 30, 2020), respectively.

(ii) The interest accretion recognized in the income statement is disclosed in note 6.

(iii) "Additions and contract modifications" includes the effect of R$262 due to the NLC acquisition (note 12).

Annual minimum payments

Ports 92 334 326 321 4,344 5,417
Vessels 89 346 336 328 2,200 3,299
Pellets plants 190 202 67 67 581 1,107
Properties 89 143 119 107 209 667
Energy plants 9 37 35 31 325 437
Mining equipment and locomotives 31 116 90 83 433 753
Total 500 1,178 973 937 8,092 11,680

The table above presents the undiscounted lease obligation by maturity date. The lease liability recognized in the balance sheet is measured at the present value of such obligations.

e) Guarantees

As at September 30, 2021 and December 31, 2020, loans and borrowings are secured by property, plant and equipment in the amount of R$451 (US$83 million) and R$915 (US$176 million), respectively. The securities issued through Vale’s wholly-owned finance subsidiary Vale Overseas Limited are fully and unconditionally guaranteed by Vale.

20. Brumadinho dam failure

On January 25, 2019, a tailings dam (“Dam I”) failed at the Córrego do Feijão mine, in the city of Brumadinho, state of Minas Gerais. The failure released a flow of tailings debris, destroying some of Vale’s facilities, affecting local communities and disturbing the environment. The tailings released have caused an impact of around 315 km in extension, reaching the nearby Paraopeba River. The dam failure in Brumadinho (“event”) resulted in 270 fatalities, including 8 victims still missing, and caused extensive property and environmental damage in the region.

As a result of the dam failure, the Company has recognized provisions to meet its assumed obligations, individual indemnification to those affected by the event, remediation of the affected areas and compensation to the society. The Company also recognized a provision for de-characterization of the dams. Below are the changes in during the current period:

December 31, 2020 Operating expense Monetary and present value adjustments Disbursements (ii) September 30, 2021
Global settlement for Brumadinho 20,726 - 1,267 (495 ) 21,498
Provision for individual indemnification and other commitments 3,048 - (49 ) (800 ) 2,199
Liabilities related to Brumadinho 23,774 - 1,218 (1,295 ) 23,697
De-characterization of dams 11,897 - (442 ) (1,356 ) 10,099
Incurred expenses (i) - 2,437 - (2,437 ) -
35,671 2,437 776 (5,088 ) 33,796

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

(i) The Company has incurred expenses, which have been recognized straight to the income statement, in relation to communication services, accommodation and humanitarian assistance, equipment, legal services, water, food aid, taxes, among others. For the three and nine-month periods ended September 30, of 2021, the Company incurred expenses in the amount of R$847 and R$2,437, respectively (R$613 and R$1,906 for the three and nine-month periods ended September 30, 2020).

(ii) Disbursement is presented net of the judicial deposits utilization.

a) Global Settlement for Brumadinho

On February 4, 2021, the Company entered into a Judicial Settlement for Integral Reparation (“Global Settlement”), which was under negotiations since 2019, with the State of Minas Gerais, the Public Defender of the State of Minas Gerais and the Federal and the State of Minas Gerais Public Prosecutors Offices, to repair the environmental and social damage resulting from the Dam I rupture. The Global Settlement was ratified by the Minas Gerais State Court on February 4, 2021, and the res judicata was drawn up on April 7, 2021.

With the Global Settlement, the requests contained in public civil actions regarding the socio-environmental and socioeconomic collective damages caused by the dam rupture were substantially resolved and the parameters for the reparation and compensation of said damages were established. As a result, the Company recorded an additional provision as at December 31, 2020.

The provision is discounted at presented value using an observable rate that reflects the current market assessments of the time value of money and the risks specific to the liability at the reporting date. During the current year, the discount rate applied on the provisions for the Global Settlement, individual indemnification and other commitments, has increased from 2.0% at December 31, 2020 to 4.6% at September 30, 2021. Additionally, the provisions were updated by the consumer price index (IPCA), as required by the Global Agreement, resulting in an impact of R$1,737 (US$329 million), recorded in income statement for the three-month period ended September 30, 2021.

Based on the present value of the projected cash outflows, the provision related to Global Settlement is detailed as follows:

September 30, 2021 December 31, 2020
Cash settlement obligation, net of judicial deposits 12,656 12,172
Provision for socio-economic reparation and others 4,673 4,468
Provision for social and environmental reparation 4,169 4,086
21,498 20,726
September 30, 2021 December 31, 2020
Current liabilities 11,428 8,110
Non-current liabilities 10,070 12,616
Liabilities 21,498 20,726

(a.i) Cash settlement obligation

The cash settlement obligation relates to the socio-economic reparation and socio-environmental compensation projects that will be carried out or managed directly by the State of Minas Gerais and Institutions of Justice, mainly aiming to develop the urban mobility program and strengthening public service programs, as well as other projects that will be proposed by the affected population. In addition, resources will be used in a program of income transfer to those affected by the event, which will be carried out by Institutions of Justice. Of the total amount, R$4,400 (US$809 million) relates to the income transfer program that will be fully paid in 2021. The remaining amount of R$8,256 (US$1,518 million) is the present value of the semiannual fixed payments obligation, which will last 5 years on average.

(a.ii) Provision for socio-economic reparation and others

The Global Settlement includes remediation projects for Brumadinho and other affected municipalities of the Paraopeba basin. The socioeconomic reparation actions aim to strengthen the productive activities of the affected region, through measures for greater economic diversification of the municipality of Brumadinho, reducing its historical dependence on mining, and, for the rest of the Basin, finding ways to support the transformation of the economy of the impacted municipalities. These projects will be carried out directly by the Company for an average period of 3 years.

The estimated amounts for the project execution, although set in the agreement, may vary since the implementation of those projects are Vale's responsibility and changes against the original budget may result in changes in provision in future reporting periods.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

(a.iii) Provision for social and environmental reparation

The Global Settlement establishes the rule for the development of the environmental reparation plan, and projects for the compensation of environmental damage already known. These measures aim to repair the damage caused, restore the ecosystems disruption, restore local infrastructure, repair social and economic losses, recover affected areas and repair the loss of memory and cultural heritage caused by the dam rupture. It also includes several actions to clean up the affected areas and improvements to the water catchment system along the Paraopeba River and other water collection points near the affected area. These measures and compensation projects will be carried out directly by the Company for an average period of 5 years.

The estimated amount to carry out the environmental recovery actions is part of the Global Settlement. However, it has no cap due to the Company's legal obligation to fully repair the environmental damage caused by the dam rupture. Therefore, this provision may change in the future depending on several factors that are not under the control of the Company.

b) Provision for individual indemnification and other commitments

For the individual indemnification, Vale and the Public Defendants of the State of Minas Gerais formalized an agreement on April 5, 2019, under which those affected by the Brumadinho’s Dam failure may join an individual or family group out-of-Court settlement agreements for the indemnification of material, economic and moral damages. This agreement establishes the basis for a wide range of indemnification payments, which were defined according to the best practices and case law of Brazilian Courts, following rules and principles of the United Nations (“UN”). As at September 30, 2021, the provision recorded is R$693 (US$127 million) (R$930 (US$179 million) as at December 31, 2020).

In addition to the Global Settlement, the Company has been working to ensure geotechnical safety of the remaining structures at the Córrego do Feijão mine, in Brumadinho, and the removal and proper disposal of the tailings of Dam I. As at September 30, 2021, the provision recorded is R$1,216 (US$224 million) (R$1,387 (US$267 million) as at December 31, 2020).

In addition, the Company was notified of the imposition of administrative fines by the Brazilian Institute of the Environment and Renewable Natural Resources (“IBAMA”), in the amount of R$250 (US$46 million). The Company signed an agreement with IBAMA, of which R$150 (US$27 million) will be used in environmental projects in 7 parks in the state of Minas Gerais, covering an area of approximately 794 thousand hectares, and R$100 (US$18 million) will be used in basic sanitation programs in the state of Minas Gerais.

c) De-characterization of other dams in Brazil

Following the Brumadinho Dam rupture, the Company has decided to speed up the plan to “de-characterize” its tailings dams built under the upstream method (same method as Brumadinho’s dam), certain “centerline structures” and dikes, located in Brazil. In September 2020, the federal government enacted Law no. 14,066, which modified the National Dam Safety Policy (Law no. 12.334/2020), reinforcing the prohibition of constructing and raising upstream dams in Brazil. The statute also requires companies to decharacterize the structures built using the upstream method by 2022, or by a later date if it is proven that the decharacterization is not technically feasible by 2022.

The Company's projects of de-characterization of dams are projected to last 8 years on average and were discounted at the present value using an observable rate, which increased from 3.5% at December 31, 2020 to 5.0% at September 30, 2021. The Company has a total provision to comply with these assumed obligations in the amount of R$10,099 (US$1,857 million) at September 30, 2021 (R$11,897 (US$2,289 million) as at December 31, 2020).

(c.i) Operation stoppages

The Company has suspended some operations due to judicial decisions or technical analysis performed by Vale on its upstream dam structures. The Company has been recording losses in relation to the operational stoppage and idle capacity of the ferrous mineral segment in the amounts of R$330 (US$63 million) and R$1.376 (US$256 million) for the three and nine-months periods ended September 30,2021 (R$600 (US$111 million) and R$1,879 (US$378 million) for the three and nine-months periods ended September 30, 2020), respectively. The Company is working on legal and technical measures to resume all operations at full capacity.

d) Contingencies and other legal matters

(d.i) Requests for fines or forfeit of assets

On August 26, 2020, the Public Prosecutor's Office of Minas Gerais (“MPMG”) and other plaintiffs of the Public Civil Actions presented a request for ruling condemning Vale to indemnify alleged economic losses of the State of Minas Gerais and collective moral damages, both claims already considered in said Public Civil Actions filed against Vale in January 2019 as a result of the Brumadinho dam rupture. In that submission, the plaintiffs also requested the immediate freezing of R$26.7 billion (US$4.9 billion) from the Company as a guarantee for the reimbursement of the alleged economic losses, which was dismissed by the judge of the 2nd Lower Court of Public Treasury of Belo Horizonte on October 6, 2020. This claim was extinguished with the Global Settlement.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

In other proceeding, in May 2020, the MPMG requested the imposition of fines or forfeit of assets, rights and amounts of the Company, allegedly based on Article 5, item V of Brazilian Law 12.846/2013. According to the MPMG, Vale would have, through its employee’s actions, hindered the inspection activities of public agencies in the complex. Vale was not required to present any guarantees of R$7.9 billion (US$1.4 billion) based on a judicial decision. The Company believes that the likelihood of loss is remote.

In January 2021, the Comptroller General of the State of Minas Gerais (“CGE”) notified Vale to present it defense against the Administrative Liability Proceeding (“PAR”) initiated based on the same article. Vale presented its defense in March 2021, and filed a writ of mandamus in the face of the establishment of this PAR, which had the injunction granted to suspend the proceeding of the PAR.

In October 2020, the Company was informed that the Brazilian Office of the Comptroller General (“CGU”) initiated an administrative proceeding based on the same allegations made by the MPMG. As this is a discretionary procedure from the CGU, the Company estimates its likelihood of a loss during the administrative phase as possible, but it reaffirms its assessment of loss as remote in the annulment lawsuit to be instituted against any decision by CGU, if necessary.

(d.ii) U.S. Securities putative class action suit

Vale is defending itself in a putative class action brought before a Federal Court in New York and filed by holders of securities - American Depositary Receipts ("ADRs") - issued by Vale. The Lead Plaintiff alleges that we made false and misleading statements or omitted to make disclosures concerning the risks of the operations of Dam I in the Córrego do Feijão mine and the adequacy of the related programs and procedures.

Following the decision of the Court, in May 2020, that denied the Motion to Dismiss presented by the Company, the Discovery phase has started, and the fact Discovery was expected to be concluded by June 2021. However, due to the pandemic, the fact Discovery term has been extended to be concluded by March 2022, the fact Discovery is currently ongoing. In parallel, in February 2021 the Plaintiff filed a motion for class certification, which we opposed in April, 2021. In June, 2021 a Reply was filed by the Plaintiff and rebuttal expert reports were filed by the parties. A decision by the Court on the motion for class certification is expected to be issued in the upcoming weeks.

Based on the evaluation of the Company's legal counsel and given the very preliminary stage, the expectation of loss of this process is classified as possible. However, considering the initial stage of this putative class action, it is not possible at this time to reliably estimate the amount of a potential loss.

(d.iii) Arbitration proceedings in Brazil filed by shareholders and a class association

In Brazil, Vale is a defendant in (i) one arbitration filed by 351 minority shareholders, (ii) one arbitration filed by a class association allegedly representing all Vale’s minority shareholders, and (iii) one arbitration filed by foreign investment funds.

In the three proceedings, the Claimants argue Vale would be aware of the risks associated with the dam, and failed to disclose it to the shareholders, which would be required under the Brazilian applicable laws and the rules of Comissão de Valores Mobiliários (Securities and Exchange Commission of Brazil). Based on such argument, they claim compensation for losses caused by the decrease of the value of the shares.

Based on the evaluation of the Company's legal counsel and given the very preliminary stage, the expectation of loss of these proceedings is classified as possible.

Specifically, in the proceeding filed by foreign funds, the Claimants estimated the amount of the alleged losses at approximately R$1,800 (US$330 million). However, the Company disagrees with the estimated losses alleged by the foreign funds and believes that the likelihood of loss is remote based on the current status of the proceeding.

(d.iv) Investigation by the Securities and Exchange Commission (“SEC”) and CVM

Vale has been notified that the SEC staff has made a preliminary determination to recommend that the SEC commence proceedings against Vale alleging violations of U.S. securities laws related to Vale’s disclosures about its dam safety management and the dam at Brumadinho. If the SEC authorizes an action against Vale, the SEC could seek an injunction against future violations of U.S. federal securities laws, the imposition of civil monetary penalties, disgorgement and other relief within the SEC's authority in a lawsuit filed in a federal court. The CVM is also conducting investigation relating to Vale's disclosure of relevant information to shareholders, investors and the market in general, especially regarding the conditions and management of Vale's dams. At this time, it is not yet possible to estimate the value or a range of potential loss to the Company.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

(d.v) Criminal proceedings and investigations

In January 2020, the MPMG brought criminal charges against 16 individuals (including former executive officers of Vale and former employees) for a number of potential crimes, including homicide, and against Vale S.A. for alleged environmental crimes. These charges were accepted by the state criminal judge in the city of Brumadinho on February 14, 2020, however, on October 19, 2021, the Superior Court of Justice annulled this decision and determined that it should be judged by the Federal Court. Vale intends to vigorously defend itself against the criminal claims, and the Company cannot estimate when a decision on this criminal proceeding will be issued.

( d.vi) Labor Collective Civil Action

In 2021, public civil actions were filed by a labor union in the Labor Court of Betim in the Brazilian State of Minas Gerais, claiming the indemnification payment for death damage to each direct and outsourced employee who has died due to the Dam I rupture. They are claiming to represent 246 workers and have requested indemnification payments ranging between R$1.5 (US$276 thousand) and R$3 (US$552 thousand) to each fatal victim. There has been an initial decision condemning Vale to pay R$1 (US$184 thousand) per each direct employees (131 fatal victims). Vale is defending itself against these actions and believes that, despite the lack of provision in the Brazilian legal framework, the likelihood of loss is deemed possible.

e) Insurance and financial guarantees

(e.i) Insurance

The Company is negotiating with insurers the payment of indemnification under its operational risk and civil liability. However, these negotiations are still at a preliminary stage, therefore any payment of insurance proceeds will depend on the coverage definitions under these policies and assessment of the amount of loss. Due to uncertainties, no indemnification to the Company was recognized in these interim financial statements.

(e.ii) Financial guarantees

In April 2021, the financial guarantees related to the Brumadinho event were released, due the Global Settlement. As at December 31, 2020, the Company had financial guarantees in the amount of R$5,843 (US$1,124 million).

21. Liabilities related to associates and joint ventures

In November 2015, the Fundão tailings dam owned by Samarco Mineração S.A. (Samarco) failed, releasing tailings downstream, flooding certain communities and causing impacts on communities and the environment along the Doce river. The rupture resulted in 19 fatalities and caused property and environmental damage to the affected areas. Samarco is a joint venture equally owned by Vale S.A. and BHP Billiton Brasil Ltda. (‘‘BHPB’’).

In June 2016, Samarco, Vale and BHPB created the Fundação Renova, a not-for-profit private foundation, to develop and implement (i) social and economic remediation and compensation programs and (ii) environmental remediation and compensation programs in the region affected by the dam rupture. The creation of Fundação Renova was provided for under the agreement for settlement and conduct adjustment (the ‘‘Framework Agreement’’) signed in March 2016 by Vale, BHPB, Samarco, the Brazilian federal government, the two Brazilian states affected by the rupture (Minas Gerais and Espírito Santo) and other governmental authorities.

In June 2018, Samarco, Vale and BHPB entered into a comprehensive agreement with the offices of the federal and state (Minas Gerais and Espírito Santo) prosecutors, public defenders and attorney general, among other parties, improving the governance mechanism of Fundação Renova and establishing, among other things, a process for potential revisions to the remediation programs provided under the Framework Agreement based on the findings of experts hired by Samarco to advise the MPF (Federal Prosecutor’s Office) over a two-year period (the ‘‘June 2018 Agreement’’). Under the Framework Agreement, the June 2018 Agreement and Renova’s by-laws, Fundação Renova must be funded by Samarco, but to the extent that Samarco is unable to fund, Vale and BHPB must ratably bear the funding requirements Under the Framework Agreement.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

On April 9, 2021, Samarco announced the request for Judicial Reorganization (“RJ”) was filed with the Minas Gerais Court to renegotiate its debt, which is held by bondholders abroad. The purpose of RJ is to restructure Samarco’s debts and establish an independent and sustainable financial position, allowing Samarco to keep working to resume its operations safely and to fulfill its obligations related to the Renova Foundation.

The RJ does not affect Samarco's obligation to remediate and compensate the impacts of the Fundão tailings dam failure. However, as Samarco began the gradual resumption of operations in December 2020, it is not yet possible to reliably estimate when Samarco will generate cash to comply with its assumed obligation in the TTAC. Thus, the liability recorded by Vale on September 30, 2021 does not consider Samarco's potential cash flows generation. Therefore, the RJ did not have any additional impact on these interim financial statements.

Therefore, the provision related to Renova is R$11,212 (US$2,061 million) as at September 30, 2021 (R$9,634 (US$1,853 million) as at December 31, 2020). In addition, the Company has a provision of R$1,110 (US$204 million) (R$1,148 (US$221 million) as at December 31, 2020) for the de-characterization of the Germano dam.

Movements during the period

2021 2020
Balance at January 1, 10,782 6,853
Provision 2,820 2,939
Disbursements (743 ) (1,586 )
Present value valuation (537 ) 169
Balance at September 30, 12,322 8,375
Current liabilities 8,437 4,554
Non-current liabilities 3,885 6,228
Liabilities 12,322 10,782

Renova Foundation

During the second quarter of 2021, Fundação Renova reviewed the assumptions used on the preparation of the estimates incorporated into the mitigation and compensation programs mainly due recent judicial decisions increasing the scope of some TTAC programs. The periodic review, resulted in an additional provision of R$2,820 (US$560 million), recorded in the nine-month period ended September 30, 2021, which corresponds to its portion of the responsibility to support the Renova Foundation. There was no additional provision for the three-month period ended September 30, 2021.

Samarco’s working capital

In addition to the provision, Vale S.A. made available R$113 (US$21 million) during the first quarter of 2021 (2020: R$246 (US$56 million)), which was fully used to fund Samarco’s working capital. This expense was recognized as “Equity results and other results in associates and joint ventures”. No additional amount was made available during the nine-month period ended September 30, 2021 (2020: R$594 (US$119 million)). Vale S.A. may provide an additional short-term credit facility up to R$348 (US$64 million) in 2021.

Contingencies related to Samarco accident

These proceedings include public civil actions brought by Brazilian authorities and multiple proceedings involving claims for significant amounts of damages and remediation measures. The Company expects the Framework Agreements to represent the settlement of the public civil action brought by the MPF and other related proceedings. There are also putative securities class actions in the United States against Vale and some of its current and former officers and a criminal proceeding in Brazil. The main updates regarding the lawsuits in the period were as follows:

(i) Public Civil Action filed by the Federal Government and others and public civil action filed by the Federal Public Prosecutors ("MPF")

The Framework Agreement (“TAC-Gov”) considers the renegotiation of the Renova Foundation's reparation programs depending on the results of the studies carried out by the experts. The negotiations started in April 2021 and a letter of principles was signed in June 2021 by Vale, BHP and Samarco with the representatives of the government and various justice institutions. Negotiations, with mediation by the National Council of Justice, are ongoing.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

There has been issued judicial decisions in relation to the “ Eixo Prioritário 7 ”, which aims individual indemnification, including new categories in the scope of the compensation, other municipalities that are not part of the TTAC and the increase of the compensation system related to the municipality of Mariana, which already has its specific conditions set for individual indemnification. Therefore, considering that those decisions are still being disputed and depending on the definitive decisions of these proceedings, the provision recorded by the Company may increase in future reporting periods.

On January 31, 2020, “Eixo Prioritário 10” was created to address the different understanding of parties regarding the scope, deadlines and purpose of the experts hired to assist the affected people, which is a requirement of the TacGov. On October 4, 2021 (subsequent event), a decision was issued determining adjustments to the work plans presented by the experts. Additionally, considering that some groups of affected people have filed a request to dismiss the hiring of these experts, a hearing was scheduled, and it did not yet happen. The Company is assessing the aspects related to this decision, which is not yet definitive and is subject to appeal. Therefore, depending on the judicial developments of this proceeding, the provision recorded by the Company may increase in future reporting periods.

(ii) Class Action in the United States

In March 2017, the holders of securities issued by Samarco Mineração S.A. filed a potential collective action in the New York Federal Court against Samarco, Vale, BHP Billiton Limited, BHP Billiton PLC and BHP Brasil Ltda. based on U.S. Federal Securities laws, which was dismissed without prejudice, in June 2019. In December 2019 the plaintiffs filed a Notice of Appeal to the NY Court of Appeals.

In January 2021, it was held a hearing before the Second Circuit of the New York State Court of Appeals. In March 2021 the Second Circuit denied the plaintiff’s appeal. This decision became res judicata in June 2021, since no further appeal has been filed by the Plaintiff. Thus, the case is closed and should be filed by the Court.

(iii) Criminal proceeding

In September 2019, the federal court of Ponte Nova dismissed all criminal charges against Vale representatives relating to the first group of charges, which concerns the results of the Fundão dam failure, remaining only the legal entity in the passive pole. The second group of charges against Vale S.A. and one of the Company’s employees, which concerns the accusation of alleged crimes committed against the Environmental Public Administration, remained unchanged. In June 2021, the Company filed an appeal with the Superior Court of Justice against the decision of the Federal Regional Court of the 1st Region that did not decided in favor of Vale. In July 2021, the Federal Prosecutor filed an appeal with the Federal Regional Court of the 1st Region, against the judge's decision that rejected the resumption of the procedural instruction, requesting the review of the decision. The Company cannot estimate when a final decision on the case will be issued.

Insurance

Since the Fundão dam rupture, the Company has been negotiating with insurers the indemnification payments based on its general liability policies. For the nine-month period ended September 30, 2021, the Company received payments in the amount of R$181 (US$33 million) and recognized a gain in the income statement as “Equity results and other results in associates and joint ventures”.

22. Provisions

Current liabilities Non-current liabilities
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Payroll, related charges and other remunerations 3,968 4,560 - -
Onerous contracts 201 302 4,598 4,360
Environmental obligations 396 533 952 1,038
Asset retirement obligations (i) 446 516 19,525 21,413
Provision related to VNC sale (note 12) - 2,598 - -
Provision related to the Candonga Consortium (ii) 392 213 - -
Provisions for litigation (note 23) 434 455 5,565 5,216
Employee postretirement obligations (note 24) 563 534 8,926 11,802
Provisions 6,400 9,711 39,566 43,829

(i) As at September 30, 2021, the Company has issued letters of credit and surety bonds to guarantee an amount of R$3,308 of its asset retirement obligation related to the Base Metals operations.

(ii) As at December 31, 2020, the provision related to Candonga Consortium was presented in the balance sheet under "Others" in the current liabilities.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

Provision related to the Candonga Consortium - On October 6, 2021 (subsequent event), the Superior Court of Justice issued a judicial decision to suspend the effects of a decision of the Federal Regional Court which assured the maintenance of the Risoleta Neves hydroelectric plant in the Energy Reallocation Mechanism (“MRE”). Thereby, the financial compensation within the MRE for its temporary incapacity of generating electric energy shall not apply to the Candonga Consortium, which is a joint operation between Vale and Aliança Geração de Energia. The plant has been halted since November 2015, due to the dam failure of Fundão, and the carrying value of the consortium assets are fully impaired. Therefore, the Company would be requested by the National Electric Energy Agency (“ANEEL”) and the Chamber of Electric Energy Commercialization (“CCEE”) to pay approximately R$392 (US$72 million), for which the Company has a provision as at September 30, 2021.

23. Litigations

a) Provision for legal proceedings

The Company has considered all information available to assess the likelihood of an outflow of resources and in the preparation on the estimate of the costs that may be required to settle the obligations. The main litigations refer to:

Tax litigations - Mainly refers to the lawsuit filed in 2011 by Valepar (merged by Vale) seeking the right to exclude the amount of dividends received in the form of interest on stockholders’ equity (“JCP”) from the PIS and COFINS tax base. The amount reserved for this proceeding as at September 30, 2021 is R$2,224 (US$409 million) (R$2,197 (US$423 million) as at December 31, 2020). This proceeding is guaranteed by a judicial deposit in the amount of R$2,563 (US$471 million) recorded at September 30, 2021 (R$2,529 (US$487 million) as at December 31, 2020).

Civil litigations - Refers to lawsuits for: (i) indemnities for losses, payments and contractual fines due to contractual imbalance or non-compliance that are alleged by suppliers, and (ii) land claims referring to real estate Vale's operational activities.

Labor litigations - Refers to lawsuits for individual claims by in-house employees and service providers, primarily involving demands for additional compensation for overtime work, moral damages or health and safety conditions.

Environmental litigations - Refers mainly to proceedings for environmental damages and issues related to environmental licensing.

Tax litigation Civil litigation Labor litigation Environmental litigation Total of litigation provision
Balance at December 31, 2020 2,520 1,354 1,741 56 5,671
Additions and reversals, net (5 ) 23 333 5 356
Payments (25 ) (112 ) (216 ) (21 ) (374 )
Acquisition of NLC (note 12) - 11 38 - 49
Indexation and interest 30 115 147 1 293
Translation adjustment - 1 3 - 4
Balance at September 30, 2021 2,520 1,392 2,046 41 5,999
Current liabilities 38 84 311 1 434
Non-current liabilities 2,482 1,308 1,735 40 5,565
2,520 1,392 2,046 41 5,999
Tax litigation Consolidated Civil litigation Labor litigation Environmental litigation Total of litigation provision
Balance at December 31, 2019 2,804 1,213 1,835 43 5,895
Additions and reversals, net 89 226 57 9 381
Payments (66 ) (64 ) (230 ) - (360 )
Indexation and interest 72 78 88 3 241
Translation adjustment 133 4 1 - 138
Balance at September 30, 2020 3,032 1,457 1,751 55 6,295
Current liabilities 40 80 340 1 461
Non-current liabilities 2,992 1,377 1,411 54 5,834
3,032 1,457 1,751 55 6,295

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

b) Contingent liabilities

The main contingent liabilities, updated by applicable interest rates, for which the likelihood of loss is not considered remote are presented by nature as follows:

September 30, 2021 December 31, 2020
Tax litigations 43,392 35,914
Civil litigations 8,985 7,005
Labor litigations 2,844 2,926
Environmental litigations 5,116 4,717
Total 60,337 50,562

The contingent liabilities related to the Brumadinho event and Samarco are not presented above. The information is presented in notes 20 and 21.

As reported in the annual financial statements for 2020, the Company is a counterparty in several actions and the main updates on contingent liabilities since then, are discussed as follows:

(b.i) Assessments regarding the disallowance of JCP:

In 2021, Vale received tax assessment for collection of corporate income taxes (IRPJ and CSLL) and penalties regarding the disallowance of the JCP deducted from the 2017 and 2018 taxable income, in the amount of R$5,323 (US$979 million). There was also a reduction in tax losses, with the corresponding tax impact of R$698 (US$128 million). The Company had filed administrative appeals and the decision is pending. As of September 30,2021, the likelihood of loss is possible for both tax assessments.

(b.ii) Proceeding related to income tax paid abroad:

In March 2021, Vale was assessed for the collection of R$2,171 (US$399 million) due to the disregard of taxes paid abroad that were offset by the IRPJ debt in 2016. Tax authorities allege the Company has failed to comply with the applicable rules relating to the offset, in Brazil, of income taxes paid abroad. The Company had filed an administrative appeal and a decision is pending. As at September 30, 2021, the likelihood of loss is possible.

c) Judicial deposits

September 30, 2021 December 31, 2020
Tax litigations 5,299 5,132
Civil litigations 413 441
Labor litigations 808 924
Environmental litigations 124 94
Total 6,644 6,591

d) Guarantees contracted for legal proceedings

In addition to the above-mentioned tax, civil, labor and environmental judicial deposits, the Company contracted R$12.1 billion (US$2.2 billion) in guarantees for its lawsuits.

e) ICMS included in PIS and COFINS computation tax base

Vale has been discussing the issue regarding the exclusion of ICMS in PIS and COFINS tax basis in two judicial proceedings filed before March 2017. In one of the proceedings includes refers to the taxable events from March 2012 onwards and has a definitive favorable decision (res judicata). This proceeding gave rise to the recognition of a gain in the amount of R$313 (US$63 million) in the income statement for the year ended December 31, 2020. This amount was calculated based on the thesis that the collected ICMS was supposed to be excluded from the contribution basis. With the definition of the subject by Federal Supreme Court in the leading case (RE 574.706), which is binding to all taxpayers, and has determined that the ICMS to be excluded shall be the amount stated in the invoices, the Company recognized an additional gain of R$146 (US$29 million) for the three-month period ended June 30, 2021.

The other proceeding, which covers the taxable events occurred between December 2001 and February 2012, resulted in a gain of R$808 (US$162 million) for the three-month period ended June 30, 2021, due to the favorable decision to the Company, in accordance with the recent decision of the Federal Supreme Court about the referred leading case.

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

24. Employee benefits

a) Long-term incentive programs

For the long-term awarding of eligible executives, the Company compensation plans includes Matching program and Performance Share Unit program (“PSU”), with three years-vesting cycles, respectively, with the aim of encouraging employee’s retention and encouraging their performance.

Matching Program

For the Matching program, the participants can acquire Vale’s common shares in the market without any benefits being provided by Vale. If the shares acquired are held for a period of three years and the participants keep it employment relationship with Vale, the participant is entitled to receive from Vale an award in shares, equivalent to the number of shares originally acquired by the executive. It should be noted that, although a specific custodian of the shares is defined by Vale, the share initially purchased by the executives have no restriction and can be sold at any time. However, if it’s done before the end of the three-year-vesting period, they would lose its right of receiving the related award to be paid by Vale.

Performance Shares Units

For PSU program, the eligible executives may receive during a three year-vesting cycle an award equivalent to the market value of a determined number of common shares and depending on the Vale’s performance factor, which is measured based on indicators of the total return to the shareholders (“TSR”) and Environmental, Social, and Governance (“ESG”). It is comprised by 80% of TSR metrics and 20% of ESG indicators.

At the Annual and Extraordinary Shareholders' Meeting ("AGOE") held on April 30, 2021, the Company's shareholders approved changes in the PSU program to be implemented as from the 2021 grant, consisting of (i) a change in the payment of the program award, which will be paid with common shares of the Company, and (ii) additional payment at the end of each cycle based on the remuneration that will be paid by Vale to its stockholders during the cycle.

b) Modification altering manner of settlement

Both programs were classified as “cash-settled” due to the PSU requirements and the Company’s settlement practice for the Matching program and, therefore, presented as a liability. However, the decision taken at the AGOE (“modification date”) demonstrates the Company's declared intention to change the form of liquidation of the programs. As a result, those programs were modified to become “equity-settled” and were remeasured at the modification-date fair value.

Fair value at modification date

The fair value of the Matching program was estimated using the Company’s stock price and ADR at the modification date, which was R$109.02 and US$20.12 per share, respectively. The number of shares granted for the 2019, 2020 and 2021 cycles were 1,222,721, 2,154,534 and 1,046,255, respectively. The fair value of the program will be expensed on a straight-line basis over the three-year required service period, net of estimated forfeitures.

For the PSU, the program was measured using Monte Carlo simulations to estimate the TSR indicator and ESG indicators. The assumptions used in the Monte Carlo simulation to estimate the fair value of the TSR indicator are shown below:

PSU
Granted shares 1,474,723
Date shares were granted 04/30/2021
VALE (BRL) 109.02
VALE ON (USD) 20.12
Expected volatility 39.00%p.y.
Expected dividend yield (i) 3.18%p.y.
Expected term (in years) 3
Expected value of the total shareholder return (TSR) 51.20%
Expected value of the performance factor (Total) 60.96%

(i) Source: Bloomberg April 30, 2021

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

Reclassification from cash-settled to equity-settled

Matching — Liability 164 23 (187 - - -
Stockholders' equity - - 187 187 65 252
Net income - (23 ) - (23 ) (65 ) (88 )
PSU — Liability 16 (5 (11 - - -
Stockholders' equity - - 11 11 14 25
Net income - 5 - 5 (14 ) (9 )

(i) The Company has incurred in expenses in the amount of R$40 and R$8 with Matching and PAV programs, respectively, for the three-month periods ended September 30, 2021.

c) Employee post-retirement obligations

Reconciliation of net liabilities recognized in the statement of financial position

Consolidated
September 30, 2021 December 31, 2020
Overfunded pension plans Underfunded pension plans Other benefits Total Overfunded pension plans Underfunded pension plans Other benefits Total
Amount recognized in the statement of financial position
Present value of actuarial liabilities (15,816 ) (22,861 ) (8,349 ) (47,026 ) (16,138 ) (24,073 ) (9,007 ) (49,218 )
Fair value of assets 19,672 21,721 - 41,393 20,626 20,744 - 41,370
Effect of the asset ceiling (3,856 ) - - (3,856 ) (4,488 ) - - (4,488 )
Liabilities - (1,140 ) (8,349 ) (9,489 ) - (3,329 ) (9,007 ) (12,336 )
Current liabilities - (204 ) (359 ) (563 ) - (204 ) (499 ) (703 )
Non-current liabilities - (936 ) (7,990 ) (8,926 ) - (3,125 ) (8,508 ) (11,633 )
Liabilities - (1,140 ) (8,349 ) (9,489 ) - (3,329 ) (9,007 ) (12,336 )

25. Stockholders’ equity

a) Share capital

As at September 30, 2021, the share capital was R$77,300 (US$61,614 million) corresponding to 5,132,458,410 shares issued and fully paid without par value.

Stockholders September 30, 2021 — Common shares Golden shares Total
Shareholders with more than 5% of total capital 2,204,322,997 - 2,204,322,997
Previ 415,366,682 - 415,366,682
Capital World Investors 335,249,101 - 335,249,101
Capital Research Global Investors 326,001,911 - 326,001,911
Bradespar 293,907,266 - 293,907,266
Mitsui&co 286,347,055 - 286,347,055
Blackrock, Inc 279,562,772 - 279,562,772
Capital International Investors 267,888,210 - 267,888,210
Others 2,687,617,480 - 2,687,617,480
Golden shares - 12 12
Total outstanding (without shares in treasury) 4,891,940,477 12 4,891,940,489
Shares in treasury 240,517,921 - 240,517,921
Total capital 5,132,458,398 12 5,132,458,410

The information presented above is based on the communications provided by the stockholders in connection with the Instruction 358 issued by the Brazilian Securities and Exchange Commission (“CVM”).

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

b) Share buyback program

On April 1, 2021, the Board of Directors approved a share buyback program for Vale’s common share which will be limited to a maximum of 270,000,000 common shares, and their respective ADRs, representing up to 5.3% of the total number of outstanding shares. The program was approved to be carried out over up to a 12-month period and the repurchased shares will be cancelled after the expiration of the program or utilized on the executive compensation programs (note 24). The shares are acquired in the stock market based on regular trading conditions.

As at September 30, 2021, the Company purchased 238,860,947 common shares at an average cost of US$20.28 per share (R$105.76 per share), representing R$25,261 (US$4,845 million). Of that amount, R$9,687 (US$1,837 million) or 99,842,600 shares were purchased through wholly owned subsidiaries and R$15,574 (US$3,008 million) or 139,018,347 shares directly by the parent company.

As the Company is close to reaching the limit for the buyback of shares in the current program, the Board of Directors approved on October 28, 2021 (subsequent event), a new share buyback program for Vale’s common share which will be limited to a maximum of 200,000,000 common shares, and their respective ADRs, representing up to 4.1% of the total number of outstanding shares. The program will be carried out over up to an 18-month period.

c) Treasury shares

The Company utilized 890,482 and 1,628,485 units from its treasury shares, for the share-based payment program of its executives (note 24), corresponding to R$37 (US$7 million) and R$68 (US$14 million) recognized as “Treasury shares utilized in the period” in the Statement of Changes in Equity, for the periods ended September 30, 2021 and 2020, respectively.

On September 16, 2021, the Board of Directors approved the cancellation of 152,016,372 common shares of the Company acquired in previous buyback programs and held in treasury, without reducing its capital stock.

d) Stockholder’s remuneration

On February 25, 2021, based on the Company’s dividends policy, the Board of Directors approved the stockholder’s remuneration in the amount of R$21,866 (US$3,972 million), equivalent to R$4.262386983 per share, which was fully paid on March 15, 2021. Of the total amount, R$4,288 (US$762 million) was in the form of interest on stockholders’ equity and R$17,578 (US$3,122 million) in the form of dividends.

On June 17, 2021, the Board of Directors approved an additional stockholder’s remuneration in the total amount of R$11,046 (US$2,200 million), equivalent to R$2.177096137 per share, which was fully paid on June 30, 2021. Of the total amount, R$3,634 (US$724 million) relates to the anticipation of the 2021 year-end result and R$7,412 (US$1,476 million) was paid from the balance on the Company’s profit reserves.

On September 16, 2021, the Board of Directors approved the stockholder’s remuneration in the total amount of R$40,200 (US$7,391 million), equivalent to R$8.108316476 per share, which was fully paid on September 30, 2021. The amount distributed relates to the anticipation of the 2021 year-end result.

  1. Related parties

The Company’s related parties are subsidiaries, joint ventures, associates, stockholders and its related entities and key management personnel of the Company. Transactions between the parent company and its subsidiaries are eliminated on consolidation and are not disclosed in this note.

In June 2021, the Company concluded the transaction for the acquisition of the interests held by Mitsui (related party) in Vale Moçambique and Nacala Logistics Corridor (note 12).

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a) Transactions with related parties
Three-month
period ended September 30,
2021 2020
Joint Ventures Associates Stockholders Total Joint Ventures Associates Stockholders Total
Net operating revenue 933 359 271 1,563 590 320 259 1,169
Cost and operating expenses (1,466 ) (30 ) - (1,496 ) (1,199 ) (37 ) - (1,236 )
Financial result (5 ) (3 ) (1,905 ) (1,913 ) 26 (6 ) (215 ) (195 )
Nine-month
period ended September 30,
2021 2020
Joint Ventures Associates Stockholders Total Joint Ventures Associates Stockholders Total
Net operating revenue 2,769 1,042 882 4,693 1,268 897 697 2,862
Cost and operating expenses (3,221 ) (80 ) - (3,301 ) (3,811 ) (90 ) - (3,901 )
Financial result (48 ) (10 ) (4,118 ) (4,176 ) 102 10 (382 ) (270 )

Purchases, accounts receivable and other assets, and accounts payable and other liabilities relate largely to amounts charged by joint ventures and associates related to the pelletizing plants operational lease and railway transportation services.

Net operating revenue relates to sale of iron ore to the steelmakers and right to use capacity on railroads. Cost and operating expenses mostly relates to the variable lease payments of the pelletizing plants and the logistics costs for using the Nacala Logistics Corridor, which has been consolidated since June 2021, as described in note 12.

b) Outstanding balances with related parties
September 30, 2021 December 31, 2020
Joint Ventures Associates Stockholders Total Joint Ventures Associates Stockholders Total
Assets
Cash and cash equivalents (i) - - 6,787 6,787 - - 10,820 10,820
Accounts receivable 820 111 1 932 565 236 11 812
Dividends receivable 561 - - 561 101 - 101
Loans (ii) - - - - 5,800 - - 5,800
Derivatives financial instruments (i) - - 31 31 - - 12 12
Other assets 276 17 - 293 354 8 - 362
-
Liabilities -
Supplier and contractors 1,492 37 268 1,797 627 54 181 862
Loans (ii) - - - - - 7,192 4,907 12,099
Derivatives financial instruments (i) - - 1,494 1,494 - - 1,255 1,255
Other liabilities 721 432 - 1,153 1,222 248 - 1,470

(i) Refers to regular financial instruments with large financial institutions that are deemed related parties.

(ii) Refers to loans settled upon completion of the NLC acquisition (note 12).

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

  1. Selected notes to Parent Company information (individual interim information)

a) Other financial assets and liabilities

Parent company — Current Non-Current
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Other financial assets
Restricted cash - - 360 20
Derivative financial instruments 343 37 127 338
Investments in equity securities 5,801 - 33 3,438
Related parties - Loans - - 42 42
6,144 37 562 3,838
Other financial liabilities
Derivative financial instruments 959 1,166 3,167 3,076
Related parties - Loans 4,072 2,484 80,440 88,908
Financial guarantees - - 2,926 4,558
Liabilities related to the concession grant 2,130 1,088 9,012 10,928
Advance receipts 24 9 - -
7,185 4,747 95,545 107,470

b) Investments

2021 2020
Balance at January 1st, 181,319 144,594
Additions and Capitalizations 598 2,039
Disposals - (117 )
Translation adjustment (3,477 ) 41,834
Equity results and others results from subsidiaries (2,800 ) 3,461
Equity results and other results in associates and joint ventures 1,430 (323 )
Equity results in statement of comprehensive income 2,500 (1,150 )
Equity results in statement of non controlling (1,600 ) -
Dividends declared 741 (1,304 )
Share buyback programs (i) (9,687 ) -
Impairment of Mineração Rio do Norte S.A. (338 ) -
Merger (ii) (3,546 ) (2,105 )
Others (1,069 ) 736
Balance at September 30, 164,071 187,665

(i) Refers to the share buyback program carried out by subsidiaries (note 25).

(ii) In 2021, refers to the merger of the spun-off net assets of Minerações Brasileiras Reunidas S.A., and the wholly owned subsidiaries Valesul Alumínio S.A. and Companhia Paulista de Ferro-Ligas, all approved at the Extraordinary General Meeting held on April 30, 2021. In 2020, refers to the merger of the wholly owned subsidiary Ferrous Resources do Brasil S.A., approved at the Extraordinary General Meeting held on April 30, 2020.

c) Intangible

Concessions Contract right Software Total
Balance at December 31, 2020 28,015 - 228 28,243
Additions 555 - 79 634
Disposals (41 ) - - (41 )
Amortization (868 ) - (60 ) (928 )
Balance at September 30, 2021 27,661 - 247 27,908
Cost 33,602 - 2,703 36,305
Accumulated amortization (5,941 ) - (2,456 ) (8,397 )
Balance at September 30, 2021 27,661 - 247 27,908
Concessions Contract right Software Total
Balance at December 31, 2019 15,993 99 179 16,271
Additions 640 - 53 693
Disposals (24 ) - - (24 )
Amortization (683 ) (4 ) (43 ) (730 )
Merger of Ferrous - - 5 5
Balance at September 30, 2020 15,926 95 194 16,215
Cost 20,969 223 2,581 23,773
Accumulated amortization (5,043 ) (128 ) (2,387 ) (7,558 )
Balance at September 30, 2020 15,926 95 194 16,215

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

d) Property, plant and equipment

Building and land Facilities Equipment Mineral properties Railway equipment Right of use assets Others Constructions in progress Total
Balance at December 31, 2020 28,299 30,567 10,232 9,016 12,713 2,115 7,065 11,331 111,338
Additions (i) - - - - - 201 - 11,255 11,456
Disposals (ii) (1 ) (20 ) (33 ) - (29 ) (1,010 ) (2 ) (265 ) (1,360 )
Asset retirement obligation - - - (683 ) - - - - (683 )
Depreciation, amortization and depletion (1,030 ) (1,238 ) (1,157 ) (524 ) (599 ) (116 ) (814 ) - (5,478 )
Merger of MBR 434 293 277 641 25 - 104 1,226 3,000
Transfers 981 1,393 1,943 474 408 - 1,033 (6,232 ) -
Balance at September 30, 2021 28,683 30,995 11,262 8,924 12,518 1,190 7,386 17,315 118,273
Cost 40,649 44,309 22,545 12,834 19,583 1,964 16,773 17,315 175,972
Accumulated depreciation (11,966 ) (13,314 ) (11,283 ) (3,910 ) (7,065 ) (774 ) (9,387 ) - (57,699 )
Balance at September 30, 2021 28,683 30,995 11,262 8,924 12,518 1,190 7,386 17,315 118,273

| | Parent company — Building and
land | | Facilities | | Equipment | | Mineral
properties | | Railway equipment | | Right
of use
assets | | Others | | Constructions
in progress | | Total | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance
at December 31, 2019 | 28,352 | | 30,219 | | 10,213 | | 7,153 | | 12,766 | | 2,114 | | 6,840 | | 8,218 | | 105,875 | |
| Additions
(i) | - | | - | | - | | - | | - | | 163 | | - | | 6,991 | | 7,154 | |
| Disposals | (6 | ) | (139 | ) | (8 | ) | (30 | ) | (13 | ) | - | | (4 | ) | (4 | ) | (204 | ) |
| Asset
retirement obligation | - | | - | | - | | (247 | ) | - | | - | | - | | - | | (247 | ) |
| Depreciation,
amortization and depletion | (909 | ) | (1,341 | ) | (1,056 | ) | (373 | ) | (678 | ) | (272 | ) | (773 | ) | - | | (5,402 | ) |
| Merger
of Ferrous Resources do Brasil S.A. | 679 | | 325 | | 73 | | 990 | | - | | 3 | | 6 | | (136 | ) | 1,940 | |
| Transfers | 443 | | 1,545 | | 861 | | 1,170 | | 510 | | - | | 824 | | (5,353 | ) | - | |
| Balance
at September 30, 2020 | 28,559 | | 30,609 | | 10,083 | | 8,663 | | 12,585 | | 2,008 | | 6,893 | | 9,716 | | 109,116 | |
| Cost | 37,458 | | 41,277 | | 19,481 | | 11,647 | | 18,816 | | 2,588 | | 15,359 | | 9,716 | | 156,342 | |
| Accumulated
depreciation | (8,899 | ) | (10,668 | ) | (9,398 | ) | (2,984 | ) | (6,231 | ) | (580 | ) | (8,466 | ) | - | | (47,226 | ) |
| Balance
at September 30, 2020 | 28,559 | | 30,609 | | 10,083 | | 8,663 | | 12,585 | | 2,008 | | 6,893 | | 9,716 | | 109,116 | |

(i) Includes capitalized borrowing costs.

(ii) The write-off of “Right of use assets” refers to the termination of the lease agreement between Vale and MBR, which was incorporated this year.

e) Loans and borrowings
Current
liabilities Non-current
liabilities
Average
interest rate (i) September 30,
2021 December 31,
2020 September 30,
2021 December 31,
2020
Quoted
in the secondary market:
Bonds 6.02 % - - 2,831 2,704
Eurobonds - - - 4,783
Debentures 10.48 % 1,003 555 1,171 2,021
Debt
contracts in Brazil in:
R$,
indexed to TJLP, TR, IPCA, IGP-M and CDI 10.17 % 635 1,203 1,504 2,808
R$,
with fixed interest 2.74 % 79 84 11 71
Basket
of currencies and bonds in US$ indexed to LIBOR 2.32 % 121 232 - 58
Debt
contracts in the international market in:
US$,
with variable interest 2.23 % 680 871 8,649 7,405
Others,
with variable interest 4.09 % 432 - 55 -
Accrued
charges 113 369 - -
Total 3,063 3,314 14,221 19,850

(i) In order to determine the average interest rate for debt contracts with floating rates, the Company used the rate applicable as at September 30, 2021.

The future flows of debt payments (principal) are as follows:

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Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated
Debt principal
2021 305
2022 2,771
2023 2,326
2024 5,399
Between 2025 and 2029 1,908
2030 onwards 4,462
17,171

Reconciliation of debt to cash flows arising from financing activities

Quoted in the secondary market Debt contracts in Brazil Debt contracts on the international market Total
December 31, 2020 10,396 4,471 8,297 23,164
Additions - - 1,633 1,633
Repayments (5,328 ) (1,691 ) (894 ) (7,913 )
Interest paid (755 ) (284 ) (67 ) (1,106 )
Cash flow from financing activities (6,083 ) (1,975 ) 672 (7,386 )
Effect of exchange rate 200 (341 ) 843 702
Interest accretion 548 207 49 804
Non-cash changes 748 (134 ) 892 1,506
September 30, 2021 5,061 2,362 9,861 17,284

f) Provisions

Current liabilities Non-current liabilities
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Payroll, related charges and other remunerations 2,772 3,154 - -
Environmental obligations 340 419 708 583
Asset retirement obligations 221 323 4,844 4,405
Provision related to the Candonga Consortium (i) 392 213 - -
Provisions for litigation 429 455 5,261 4,782
Employee postretirement obligations 269 255 3,304 3,246
Provisions 4,423 4,819 14,117 13,016

(i) As at December 31, 2020, the provision related to the Candonga Consortium was presented in the balance sheet under "Others" in the current liabilities.

Field: Page; Sequence: 57; Value: 2

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Field: /Page

Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

g) Provisions for litigation

Tax litigation Civil litigation Labor litigation Environmental litigation Total of litigation provision
Balance at December 31, 2020 2,410 1,090 1,687 50 5,237
Additions and reversals, net (4 ) 21 303 6 326
Payments (25 ) (111 ) (198 ) (21 ) (355 )
Indexation and interest 31 92 146 2 271
Merger (note 12) 79 125 4 3 211
Balance at September 30, 2021 2,491 1,217 1,942 40 5,690
Current liabilities 38 79 311 1 429
Non-current liabilities 2,453 1,138 1,631 39 5,261
2,491 1,217 1,942 40 5,690
Tax litigation Civil litigation Labor litigation Environmental litigation Total of litigation provision
Balance at December 31, 2019 2,325 1,004 1,734 39 5,102
Additions and reversals, net 90 96 93 7 286
Payments (54 ) (42 ) (213 ) - (309 )
Indexation and interest 38 75 86 2 201
Merger of Ferrous Resources do Brasil S.A. 1 3 3 2 9
Balance at September 30, 2020 2,400 1,136 1,703 50 5,289
Current liabilities 40 80 340 1 461
Non-current liabilities 2,360 1,056 1,363 49 4,828
2,400 1,136 1,703 50 5,289

Field: Page; Sequence: 58; Value: 2

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Field: /Page

Selected Notes to the Interim Financial Statements Expressed in millions of Brazilian reais, unless otherwise stated

h) Contingent liabilities

September 30, 2021 December 31, 2020
Tax litigations 42,083 32,902
Civil litigations 7,129 5,522
Labor litigations 2,756 2,846
Environmental litigations 4,222 3,837
Total 56,190 45,107

i) Income taxes

The total amount presented as income taxes in the income statement is reconciled to the rate established by law, as follows:
Nine-month period ended September 30,
2021 2020
Income before income taxes 114,258 23,657
Income taxes at statutory rates - 34% (38,848 ) (8,043 )
Adjustments that affect the basis of taxes:
Tax incentives 13,005 4,438
Equity results (467 ) 1,068
Others 2,914 768
Income taxes (23,396 ) (1,769 )

Field: Page; Sequence: 59; Value: 2

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Field: /Page

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant)
By: /s/ Ivan Fadel
Date: October 28, 2021 Head of Investor Relations

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Field: /Page

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