Vale(VALE) - 2022 Q4 - Annual Report

Overview This section provides a comprehensive overview of Vale's business, strategic direction, and the key risks impacting its operations and financial performance Business Overview Vale is a global metals and mining leader focused on iron ore, pellets, and energy transition metals, pursuing sustainable mining, low-carbon solutions, and capital discipline while managing dam collapse reparations Net Operating Revenues by Line of Business (2020-2022) | Line of Business | 2022 (US$ million) | 2022 (% of total) | 2021 (US$ million) | 2021 (% of total) | 2020 (US$ million) | 2020 (% of total) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Iron Solutions | | | | | | | | Iron ore | 28,188 | 64.3% | 38,324 | 70.3% | 27,123 | 68.6% | | Iron ore pellets | 6,256 | 14.3% | 7,053 | 12.9% | 4,242 | 10.7% | | Total Iron Solutions | 34,916 | 79.7% | 45,925 | 84.2% | 31,916 | 80.7% | | Energy Transition Metals | | | | | | | | Nickel and other products | 6,619 | 15.1% | 5,377 | 9.9% | 4,652 | 11.8% | | Copper | 1,779 | 4.1% | 2,589 | 4.8% | 2,175 | 5.5% | | Total Energy Transition Metals | 8,398 | 19.2% | 7,966 | 14.6% | 6,827 | 17.3% | | Total Net Operating Revenues | 43,839 | 100% | 54,502 | 100% | 39,545 | 100% | - Vale's business strategy is centered on three pillars: promoting sustainable mining (including safety and dam management), fostering low-carbon solutions (focusing on high-quality products for energy transition), and maintaining capital discipline (efficient capital allocation and shareholder returns)[24][29][32] - The company is actively divesting non-core assets to streamline its portfolio, including the sale of its coal operations, Midwestern System assets, and interests in California Steel Industries (CSI) and Companhia Siderúrgica do Pecém (CSP)[37][38][40] - Vale is advancing its ESG agenda with commitments to reduce Scope 1 and 2 absolute emissions by 33% by 2030 and achieve net-zero by 2050. The company plans to invest US$4 to US$6 billion by 2030 in low-carbon solutions[59][60] - In response to the Brumadinho dam collapse, Vale has incurred over R$23.7 billion in compensation and reparation actions as of December 31, 2022, under the R$37.7 billion Integral Reparation Agreement. The company is also executing a plan to de-characterize all 30 of its upstream dam structures in Brazil, having completed 12 by the end of 2022[99][104][105] - Regarding the 2015 Samarco dam collapse, Fundação Renova has paid R$13.6 billion in total indemnities and aid to over 409,000 people as of December 2022. Samarco, which is 50% owned by Vale, filed for Judicial Reorganization in April 2021 to restructure its financial debt[122][125] Forward-Looking Statements This report contains forward-looking statements concerning the company's intentions, beliefs, and current expectations regarding commodity prices, operational developments, legal proceedings, ESG targets, and financial strategy - The report includes forward-looking statements identified by words like "anticipate," "believe," "expect," and "plan," covering topics such as commodity trends, project development, the impact of dam collapses, and ESG commitments[128][130] - Readers are cautioned that actual results may differ materially from these statements due to risks related to the global economy, commodity price cyclicality, regulation, operational incidents, and competition[129] Risk Factors Vale faces diverse risks including commodity price volatility, dam collapse liabilities, operational disruptions, geopolitical tensions, stringent environmental regulations, and legal and cyber threats Financial Risks Vale's financial performance is highly sensitive to commodity price volatility, currency exchange rate movements, and energy costs - The company's financial performance is highly sensitive to commodity price volatility. A US$1 per dmt reduction in the average iron ore price would have decreased 2022 operating income by approximately US$279 million[132][134] - Vale is exposed to currency exchange risk, as most revenues are in U.S. dollars while a significant portion of costs are in Brazilian reais (42.3% in 2022) and Canadian dollars (5.7% in 2022). In 2022, the company recorded net foreign exchange losses of US$398 million[135] - Energy costs, representing 6.8% of the total cost of goods sold in 2022, pose a significant risk. Potential energy shortages or price hikes could force production curtailments or increase costs[138][139] Geotechnical Risks Geotechnical risks, particularly dam collapses, pose significant threats, with ongoing financial and operational impacts from the Brumadinho incident and de-characterization efforts - The collapse of a dam or other geotechnical structure remains a primary risk, with potential for severe personal, property, and environmental damage. The company is de-characterizing all its upstream dams in Brazil, a process expected to be completed by 2035[141][142][143] - The 2019 Brumadinho dam collapse continues to have adverse effects, including ongoing liabilities, legal proceedings, increased production costs, stricter regulations, and reputational damage[145][146] - As of December 31, 2022, the provision for the de-characterization of Vale's structures is US$3.378 billion, and for Samarco's structure is US$197 million[143] Operational Risks Operational risks include capital project delays, critical infrastructure failures, and inadequate insurance coverage for potential damages and business interruptions - Capital projects are subject to risks such as financing challenges, equipment and service delays, lack of infrastructure, and failure to obtain permits, which can lead to increased costs and implementation delays[148] - The business relies on critical infrastructure, such as the single-line Carajás railroad bridge over the Tocantins River, where any interruption could significantly impact the ability to sell production from the Northern System[152][153] - Insurance coverage may not be adequate for all risks, particularly environmental damages and business interruptions, and some insurance may not be available at a reasonable cost or at all[154] Strategic Risks Strategic risks encompass geopolitical tensions, adverse economic developments in China, and technological shifts impacting demand for Vale's products - Geopolitical tensions, such as the Russia-Ukraine conflict, can disrupt supply chains, cause commodity price volatility, and create financial market instability, potentially impacting production and sales[157][158] - Adverse economic developments in China, which accounted for 50% of net operating revenues in 2022, could significantly reduce demand for Vale's products and negatively impact revenues and profitability[163] - The development of new battery technologies using less nickel or low-carbon steelmaking technologies that use lower-grade iron ore could negatively impact demand and pricing for Vale's high-quality products[164][167] Health, Safety, Environmental and Social Risks The company faces extensive health, safety, environmental, and social risks, including hazardous substance incidents, stricter regulations, and community disagreements - The company's activities involve hazardous substances and natural resource use, posing significant risks of incidents that could result in environmental damage, personal injury, fatalities, and legal liability[173] - Stricter environmental, health, and safety regulations, including those for climate change, dam safety, and protection of caves, could increase costs, restrict activities, and impact production volumes and reserves[176][178] - Disagreements with local communities, including indigenous peoples, can cause operational delays, increase costs, and damage the company's reputation and ability to develop reserves[184] Cyber Risks Cyber risks involve potential failures in IT systems and cyber-attacks, leading to data theft, financial misappropriation, and business disruptions - Failures in cybersecurity controls and IT systems, whether from technical failure or cyber-attacks, could lead to data theft, misappropriation of funds, and business disruptions, materially affecting operations and reputation[185] Legal, Political, Economic, Social and Regulatory Risks Legal, political, economic, social, and regulatory risks include significant dam-related legal proceedings, Brazilian instability, and adverse government policy changes - The company is involved in significant legal proceedings related to the Brumadinho and Samarco dam collapses, which could result in substantial payments, operational suspensions, and reputational harm[189][190] - Political and economic instability in Brazil, where a significant portion of operations are concentrated, could adversely affect financial results through changes in exchange rates, inflation, tax policy, and other government actions[192][193] - Changes in government policies, such as resource nationalism, new taxes or royalties on mining, and trade barriers, could adversely affect the business[195][198] Culture and Talent Management Risks Culture and talent management risks relate to the company's ability to transform its corporate culture and retain skilled professionals, impacting reputation and competitiveness - The company's performance depends on its ability to transform its corporate culture and to attract, develop, and retain skilled professionals. Failure to do so could adversely impact its reputation and competitive position[205][206] Mineral Reserves and Mineral Resources Risks Mineral reserves and resources estimates are inherently uncertain, subject to geological, regulatory, and economic factors, potentially affecting future production and financial performance - Estimates of mineral reserves and resources are inherently uncertain and may differ from actual recoverable volumes due to geological, regulatory, and economic factors, potentially affecting future production and financial performance[207][208][209] Corporate Structure Risks Corporate structure risks include the Brazilian government's golden share veto power and the absence of a controlling shareholder, leading to potential shareholder activism - The Brazilian government holds 12 golden shares, granting it veto power over certain company actions, such as changes to the company's name, headquarters location, and corporate purpose related to mining[210] - Vale does not have a controlling shareholder, which exposes it to risks such as shareholder activism and potential difficulties in reaching the minimum quorum for certain decisions at shareholder meetings[211] Depositary Shares Risks Depositary shares risks involve ADR holders potentially having different rights than direct shareholders and facing limitations in remitting foreign currency without proper registration - Holders of American Depositary Receipts (ADRs) may not have the same rights as direct shareholders and may face limitations in exercising voting and preemptive rights[216][217][218] - If ADR holders exchange their ADSs for underlying shares, they risk losing the ability to easily remit foreign currency abroad unless they obtain their own registration with the Central Bank of Brazil[214] Information on the Company This section details Vale's core business segments, mineral reserves and resources, capital expenditure plans, and the regulatory environment governing its global operations Lines of Business Vale operates in Iron Solutions and Energy Transition Metals segments, encompassing iron ore and pellet production, integrated nickel and copper mining, supported by extensive logistics and energy infrastructure - The company's main operating segments have been renamed from "Ferrous Minerals" to "Iron Solutions" and from "Base Metals" to "Energy Transition Metals"[224] Iron Ore Production by System (2022) | System | 2022 Production (million metric tons) | | :--- | :--- | | Northern System | 171.6 | | Southeastern System | 72.7 | | Southern System | 63.6 | | Total | 307.9 | Nickel Finished Production by Source (2022) | Source | 2022 Production (thousand metric tons) | | :--- | :--- | | Sudbury (Canada) | 39.0 | | Thompson (Canada) | 9.9 | | Voisey's Bay (Canada) | 24.4 | | Sorowako (Indonesia) | 63.9 | | Onça Puma (Brazil) | 23.6 | | External | 18.3 | | Total | 179.1 | Copper Finished Production by Source (2022) | Source | 2022 Production (thousand metric tons) | | :--- | :--- | | Salobo (Brazil) | 127.8 | | Sossego (Brazil) | 43.2 | | Canada (as co-product) | 75.3 | | External | 6.8 | | Total | 253.1 | - Vale operates significant logistics assets to support its Iron Solutions business, including the Vitória a Minas (EFVM) and Carajás (EFC) railroads, and major maritime terminals like Tubarão and Ponta da Madeira in Brazil[311][312][316][317] Reserves and Resources Vale reports S-K 1300 compliant mineral reserves, with 2022 proven and probable reserves at 11.8 billion metric tons for iron ore, 257.8 million metric tons for nickel, and 1.3 billion metric tons for copper, reflecting dynamic estimates - The company reports mineral reserves and resources in accordance with SEC's S-K 1300 regulations, using a structured governance process with internal controls and peer reviews to ensure accuracy[478][480][481] Summary of Proven & Probable Mineral Reserves as of Dec 31, 2022 | Mineral | Tonnage (million metric tons) | Key Grade/Comments | | :--- | :--- | :--- | | Iron Ore | 11,831.5 | 56.7% Fe | | Nickel | 257.8 | 1.56% Ni | | Copper | 1,301.4 | 0.67% Cu | - Total iron ore reserves decreased from 12.5 billion metric tons in 2021 to 11.8 billion metric tons in 2022, mainly due to mine production depletion (approx. 306 million metric tons) and downgrades from mine design reviews and disposal constraints[497][501] - Nickel reserves at Sudbury operations increased by 34% to 72.4 million metric tons in 2022 from 53.8 million metric tons in 2021. This was primarily due to the conversion of mineral resources to reserves after completing pre-feasibility studies at Creighton Mine and Copper Cliff Pit projects[518] Capital Expenditures Vale's 2022 capital expenditures totaled US$5.45 billion, increasing from 2021, with US$6.0 billion guided for 2023, supporting sustaining operations and key growth projects like Serra Sul 120 and Salobo III Capital Expenditures (2021-2022) | Category | 2022 (US$ million) | 2021 (US$ million) | | :--- | :--- | :--- | | Project execution (growth) | 1,587 | 999 | | Sustaining operations & replacement | 3,859 | 4,034 | | Total | 5,446 | 5,033 | - The company's capital expenditure guidance for 2023 is approximately US$6.0 billion[561] Key Investment Projects - Budget and Status | Project | Business Area | Est. Start-up | Total Expected CAPEX (US$M) | Executed in 2022 (US$M) | | :--- | :--- | :--- | :--- | :--- | | Serra Sul 120 | Iron Solutions | 2H25 | 1,548 | 323 | | Salobo III | Copper | 1H23 | 1,128 | 292 | | VBME (Voisey's Bay) | Nickel | 1H24 | 2,690 | 557 | | Sol do Cerrado | Energy | 2H23 | 591 | 376 | | Onça Puma 2nd furnace | Nickel | 1H25 | 555 | 16 | Regulatory Matters Vale's operations are subject to extensive global regulations, including Brazilian mining royalties and increasingly strict environmental laws, particularly on dam safety and climate change, impacting costs and operations - The company is required to pay a mining royalty in Brazil known as CFEM, with a rate of 3.5% for iron ore, and state-level taxes (TFRM) in states like Minas Gerais and Pará[592][593] - Following the Brumadinho dam collapse, Brazilian regulations now prohibit the construction of new upstream dams and require the de-characterization of existing ones, with a federal law mandating this process be completed by 2022 or a later technically feasible date[616][618] - Vale is subject to extensive environmental regulations in Brazil for the protection of caves, which may require limiting or modifying mining plans and incurring additional costs for preservation or compensation[602] - The company is exposed to evolving climate change regulations globally, stemming from the Paris Agreement, which may impact operational costs through carbon taxes and higher fuel prices[605] Operating and Financial Review and Prospects This section analyzes Vale's financial performance, including revenues, costs, and profitability, along with its liquidity, capital resources, and risk management strategies Overview Vale's 2022 financial performance declined due to lower iron ore prices, reducing net income to US$16.8 billion and Adjusted EBITDA to US$19.8 billion, while managing significant dam-related provisions - Net income from continuing operations decreased to US$16.81 billion in 2022 from US$24.844 billion in 2021. Adjusted EBITDA from continuing operations fell to US$19.76 billion from US$31.343 billion in 2021[628] - The primary driver for the decline in earnings was a 24.6% drop in the average iron ore price (Platts IODEX 62% Fe) to US$120.16/dmt in 2022, which had a negative impact of US$9.768 billion on results[628][632] - As of December 31, 2022, total provisions related to the Brumadinho dam collapse were US$3.312 billion, and provisions for dam de-characterization were US$3.378 billion[648][649] - Provisions related to the Samarco dam collapse and Fundação Renova stood at US$3.321 billion as of December 31, 2022[658] Results of Operations Vale's 2022 net operating revenues decreased to US$43.8 billion due to lower iron ore prices and volumes, leading to a 37.9% drop in operating income and reduced EBITDA across segments Consolidated Income Statement Highlights (2021 vs 2022) | Metric | 2022 (US$ million) | 2021 (US$ million) | % Change | | :--- | :--- | :--- | :--- | | Net operating revenue | 43,839 | 54,502 | (19.6)% | | Cost of goods sold | (24,028) | (21,729) | 10.6% | | Operating income | 17,208 | 27,693 | (37.9)% | | Net income from continuing operations | 16,810 | 24,844 | (32.3)% | | Net income attributable to Vale's shareholders | 18,788 | 22,445 | (16.3)% | Adjusted EBITDA by Segment (2021 vs 2022) | Segment | 2022 (US$ million) | 2021 (US$ million) | | :--- | :--- | :--- | | Iron Solutions | 19,443 | 31,480 | | Energy Transition Metals | 2,493 | 3,193 | | Other | (2,176) | (3,330) | | Adjusted EBITDA from continuing operations | 19,760 | 31,343 | - The decrease in Iron Solutions revenue was driven by lower realized iron ore prices (US$9.8 billion impact) and lower sales volumes (US$837 million impact)[689] - The company recorded a gain from discontinued operations of US$2.06 billion in 2022, primarily from the sale of its coal assets, compared to a loss of US$2.291 billion in 2021[705] Liquidity and Capital Resources Vale's 2022 liquidity decreased with cash at US$4.8 billion and operating cash flow at US$11.5 billion, primarily used for capital expenditures, dividends, and share repurchases, while total debt reduced to US$11.2 billion - Net cash generated by operating activities decreased significantly to US$11.485 billion in 2022 from US$25.679 billion in 2021, primarily due to lower commodity prices[710] Major Uses of Funds (2022) | Use of Funds | Amount (US$ million) | | :--- | :--- | | Capital Expenditures | 5,446 | | Distributions (Dividends & Interest on Equity) | 6,615 | | Share Repurchases | 6,036 | | Debt Repayments | 2,300 | | Brumadinho-related payments | 1,713 | | Dam de-characterization payments | 349 | - Total outstanding debt decreased to US$11.181 billion as of December 31, 2022, from US$12.18 billion at year-end 2021. The company maintains US$5 billion in available revolving credit lines[720][723] - The company was in compliance with all financial covenants as of December 31, 2022, which include maintaining a total debt to adjusted EBITDA ratio not exceeding 4.5 to one and an interest coverage ratio of at least 2.0 to one[725] Risk Management Vale utilizes a three-lines-of-defense risk management framework, overseen by the Board, to manage market, geotechnical, operational, strategic, sustainability, compliance, cyber, and financial credit risks - Vale's risk governance is structured around a three-lines-of-defense model, with oversight from the Board's Audit and Risks Committee and five specialized Executive Risk Committees[732][733][741] - In 2022, the company created a Risk Appetite Statement, approved by the Board, to guide management in business decisions and capital allocation across various risk categories[729] - Market risks from commodity prices, foreign exchange rates, and interest rates are managed using financial instruments, including swaps, forwards, and options[742][743][745] - Geotechnical risks are managed through the Tailings and Dam Management System (TDMS) and a Hazard Identification and Risk Assessment (HIRA) process, which was extended to 100% of tailing dams in 2022[749][750][752] - Cyber risk is managed through a combination of protection technologies, threat monitoring, employee awareness training, and testing of response and recovery procedures[771][772] Share Ownership and Trading This section covers Vale's ownership structure, major shareholders, related party transactions, dividend distribution policies, and the trading markets for its securities Major Shareholders As of March 31, 2023, Vale's 4.54 billion common shares are widely held with no controlling shareholder, and the Brazilian government retains veto power via 12 golden shares Major Shareholders as of March 31, 2023 | Shareholder | % of Class | | :--- | :--- | | Caixa de Previdência dos Funcionários do Banco do Brasil ("PREVI") | 8.9% | | BlackRock, Inc. | 6.8% | | Capital World Investors | 6.6% | | Mitsui & Co., Ltd. | 6.4% | - The Brazilian government holds 12 golden shares, which provide veto power over actions such as changing the company's name, headquarters location, or corporate purpose related to mining[779] - Since 2020, Vale no longer has a controlling shareholder or a formal control group[783] Related Party Transactions Vale conducts arm's-length related party transactions, reviewed by the Audit and Risks Committee, with affiliates of major shareholders, associates, joint ventures, and provides funding to Samarco and Fundação Renova - The company has a policy on related party transactions, overseen by the Audit and Risks Committee, to ensure transparency and arm's-length terms[784] - Vale engages in ordinary course transactions with entities affiliated with major shareholders, including Mitsui and Previ (a pension fund for employees of Banco do Brasil)[784][787] - The company provides funding to its 50%-owned joint venture Samarco and the Fundação Renova for remediation and compensation efforts related to the 2015 dam collapse[785] Distributions Vale's bylaws mandate an annual dividend of at least 25% of distributable amount; in 2022, two distributions totaled R$7.29 per share (US$1.37 per share) - Under Brazilian law and its bylaws, Vale must distribute a mandatory dividend of at least 25% of the distributable amount annually, unless deemed inadvisable by the Board of Directors[788] Cash Distributions (2021-2023) | Year of Result | Payment Date | Total Reais per share | Total U.S. dollars per share | | :--- | :--- | :--- | :--- | | 2021 | Mar 16, 2022 | 3.72 | 0.72 | | 2022 | Sep 1, 2022 | 3.57 | 0.65 | | 2022 | Mar 22, 2023 | 2.12 | 0.41 | Trading Markets Vale's common shares trade on Brazil's B3 (VALE3) and its American Depositary Shares (ADSs) trade on the NYSE (VALE) - Common shares trade on the B3 (Brazil) under ticker VALE3 and on the LATIBEX (Madrid) under XVALO[795] - American Depositary Shares (ADSs) trade on the NYSE under the ticker VALE, with each ADS representing one common share. As of December 31, 2022, ADSs represented 26.92% of the total share capital[796] Depositary Shares Citibank N.A. is the depositary for Vale's ADSs, with ADR holders paying fees for services, and the depositary reimbursed Vale US$3 million for the ADR program in 2022 - ADR holders are required to pay fees for various depositary services, including up to US$5.00 per 100 ADSs for cash distributions and ADS services[799][800] - The depositary reimbursed Vale US$3 million for expenses related to the ADR program for the year ended December 31, 2022[802] Purchases of Equity Securities by the Issuer and Affiliated Purchasers In 2022, Vale repurchased 357.4 million common shares for US$6.04 billion under two programs, one completed and another ongoing for up to 500 million shares Share Repurchases in 2022 | Metric | Value | | :--- | :--- | | Total Common Shares Purchased | 357,442,577 | | Average Price Paid per Share | US$16.89 | | Total Amount Paid | US$6,036 million | - The repurchases were conducted under two publicly announced programs. A program for up to 200 million shares was completed in May 2022. A new program for up to 500 million shares was approved in April 2022 and remains active[805] Management and Employees This section outlines Vale's corporate governance structure, including its Board and Executive Committee, executive compensation policies, and employee demographics and relations Management Vale's management includes a Board of Directors with independent members and advisory committees, an Executive Committee for operations, and an independent Fiscal Council overseeing financial statements - The Board of Directors consists of 11 to 13 members, with 8 of the current 13 members being independent. One director is directly elected by employees[810] - The Executive Committee, led by the CEO, is responsible for daily operations and is appointed by the Board for three-year terms[819][821] - The company has five permanent advisory committees to the Board: Audit and Risks, Capital Allocation and Projects, People and Compensation, Sustainability, and Nomination and Governance[832] - The Audit and Risks Committee is composed entirely of independent board members and oversees financial reporting, compliance, risk management, and the activities of internal and independent auditors, in compliance with NYSE and Brazilian regulations[828][829][830] - A permanent Fiscal Council, independent from management, is elected by shareholders to supervise management's activities and review financial statements[841] Management Compensation Vale's executive compensation aligns with shareholder and ESG goals, comprising fixed, short-term, and long-term incentives; total 2022 compensation for executive officers was R$205.0 million - Executive compensation is benchmarked against global mining companies and includes fixed salary, short-term bonuses, and long-term incentives (Matching and PSU programs)[851][860] - A significant portion of compensation is variable and linked to performance, with a strong emphasis on ESG metrics. For short-term bonuses, at least 30% of goals are ESG-driven, and for long-term incentives (PSU), at least 25% are based on ESG metrics[90][865] Aggregate Compensation in 2022 (R$ million) | Group | Total Amount Paid | | :--- | :--- | | Executive Officers (active & former) | 205.0 | | Board of Directors | 18.05 | | Fiscal Council | 1.63 | | Board Committees | 8.20 | - The company has implemented stock ownership guidelines for executives, as well as "Malus" and "Clawback" clauses that allow for the suspension or return of variable compensation in cases of exceptionally serious events[874] Employees As of December 31, 2022, Vale had 64,516 employees, primarily in Brazil, and utilized 150,831 third-party employees, with collective bargaining agreements and pension plans in key operating locations Number of Employees by Location (Year-End) | Location | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Brazil | 53,341 | 55,067 | 58,249 | | North America | 6,565 | 6,448 | 6,169 | | Asia | 4,287 | 4,382 | 4,454 | | Other | 323 | 6,379 | 5,444 | | Total | 64,516 | 72,266 | 74,316 | - The number of third-party employees was 150,831 as of December 31, 2022[880] - Vale has collective bargaining agreements with unionized employees in Brazil, Canada, Indonesia, the UK, and Oman[878] - The company provides pension plans for its employees, with Brazilian plans primarily managed by Valia, and a mix of defined benefit and defined contribution plans for its energy transition metals operations[888][889] Additional Information This section provides additional information on Vale's significant legal proceedings, corporate bylaws, debentures, exchange controls, taxation, internal controls, and corporate governance practices Legal Proceedings Vale faces numerous significant legal proceedings, primarily related to the Brumadinho and Samarco dam collapses, alongside environmental, labor, and tax disputes in Brazil involving billions of dollars - The company is engaged in multiple legal proceedings and investigations related to the Brumadinho dam collapse, including criminal charges against the company for environmental crimes and against former officers for homicide, a securities class action in the U.S., and shareholder arbitrations in Brazil[894][904][909][917] - In March 2023, Vale reached a US$56 million settlement with the SEC to resolve a lawsuit alleging violations of U.S. securities laws related to dam safety disclosures prior to the Brumadinho failure[903] - Related to the Samarco dam collapse, Vale is a defendant in a public civil action where federal prosecutors are seeking R$155 billion (approx. US$29 billion) in damages. Negotiations for a definitive settlement are ongoing[927][931] - Vale is contesting numerous tax proceedings in Brazil. Key disputes include claims related to CFEM mining royalties (R$9.56 billion), PIS/COFINS tax credits (R$9 billion), and income tax on profits of foreign subsidiaries[976][983][1000] Bylaws Vale's bylaws define its corporate purpose, include Brazilian government's golden share veto rights, adhere to Novo Mercado rules for tender offers, and mandate a 25% annual dividend distribution - The Brazilian government holds 12 "golden shares" which grant veto power over key corporate actions, including changes to the company's name, location, mining purpose, and liquidation of core iron ore system assets[1008][1009][1010] - In case of a transfer of control, the acquirer must launch a tender offer for all outstanding common shares at the same price paid for the controlling stake[1025][1029] - The company is required to distribute a mandatory dividend of at least 25% of the annual distributable amount, which can be paid as dividends or interest on shareholders' equity[1030] Participative Shareholders' Debentures Vale's 1997 participative debentures entitle holders to semi-annual payments based on net revenues from specific mineral resources, with US$371 million available in 2022 - These debentures were issued in 1997 to allow pre-privatization shareholders to share in future benefits from certain mineral resources[1035] - Payments are triggered when sales volumes from specified assets exceed defined thresholds. In 2022, US$371 million was made available to holders, down from US$418 million in 2021[1036] Exchange Controls and Other Limitations Affecting Security Holders Foreign ownership of Vale's stock requires Central Bank of Brazil registration for fund remittance, with ADSs having electronic registration, but direct share conversion necessitates individual registration, and temporary remittance restrictions may apply - Foreign investment in Vale's shares requires registration with the Central Bank of Brazil to enable the conversion of reais and remittance of funds abroad[1037] - An electronic registration for the ADSs facilitates currency conversion for dividend payments. Holders who convert ADSs to local shares must obtain their own registration within 5 business days to maintain this facility[1040] - The Brazilian government may impose temporary restrictions on remittances abroad in the event of a serious balance of payments imbalance[1041] Taxation This section details Brazilian and U.S. tax implications for non-resident holders of Vale's shares or ADSs, covering dividend withholding, interest on equity, and capital gains taxation - In Brazil, dividends paid from current year profits are generally not subject to withholding tax. Interest on shareholders' equity is subject to a 15% withholding tax (25% for residents of low-tax jurisdictions)[1048][1049] - Capital gains on the sale of shares on a Brazilian stock exchange are exempt for qualified foreign investors (4,373 Holders) not in a low-tax jurisdiction. Other non-resident holders are subject to progressive tax rates from 15% to 22.5%[1060][1062] - For U.S. holders, distributions are generally taxable as foreign source dividend income. Qualified dividends may be taxed at preferential long-term capital gains rates[1077][1082] - Gains from the sale of common shares or ADSs by a U.S. holder are generally treated as U.S. source capital gains for U.S. foreign tax credit purposes[1087] Controls and Procedures As of December 31, 2022, Vale's management concluded its disclosure controls and internal control over financial reporting were effective, with no material changes identified during the fiscal year - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective at providing reasonable assurance[1095] - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[1097] - The effectiveness of internal control over financial reporting was audited by PricewaterhouseCoopers Auditores Independentes Ltda[1098] Corporate Governance As a NYSE-listed foreign private issuer, Vale adheres to a limited set of corporate governance rules, noting differences from U.S. standards in committee independence, while complying with IBGC code on a 'comply or explain' basis - Vale must comply with key NYSE rules, including the audit committee requirements of Exchange Act Rule 10A-3, but is exempt from others applicable to U.S. domestic issuers[1101] - A significant difference from NYSE standards is that Vale's People and Compensation Committee is not composed entirely of independent directors, although the number of independent members must be at least equal to non-independent members[1105] - The company's Audit and Risks Committee is composed of three independent directors and complies with Rule 10A-3 under the Exchange Act[1105] Code of Conduct Vale's Code of Conduct, central to its Ethics & Compliance Program, applies to all stakeholders; its Whistleblower Channel received 6,736 reports in 2022, leading to 2,941 corrective actions and 171 terminations - The Code of Conduct applies to all directors, officers, employees, and suppliers and is a key part of the Ethics & Compliance Program[1107][1108] - A confidential Whistleblower Channel, managed by an independent department, is available for reporting breaches. In 2022, it received 6,736 reports[1110][1112] - Investigations in 2022 resulted in 2,941 corrective actions and disciplinary measures, including 171 terminations of employment for confirmed violations[1114] Principal Accountant Fees and Services In 2022, Vale paid its independent auditor, PwC, US$5.50 million for services, primarily comprising US$5.44 million in audit fees and US$69 thousand for audit-related services Accountant Fees (2021-2022) | Fee Type | 2022 (US$ million) | 2021 (US$ million) | | :--- | :--- | :--- | | Audit fees | 5.435 | 5.860 | | Audit-related fees | 0.069 | 0.081 | | Total fees | 5.504 | 5.941 | Information Filed with Securities Regulators Vale files periodic reports and financial statements with securities regulators in Brazil (CVM, B3) and the United States (SEC), all publicly available - The company files reports with the CVM and B3 in Brazil, and the SEC in the United States[1118][1119][1120] Financial Statements This section contains Vale's consolidated financial statements, including balance sheets, income statements, and cash flow statements, providing detailed financial performance data