淡水河谷 (VALE) 2015 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to Vale's conference call to discuss the second quarter of 2015 results. (Operator Instructions). As a reminder, this conference is being recorded, and the recording will be available at the Company's website at Vale.com, at the Investors link.

The replay of this conference call will be available by phone until August 5, 2015, on 5511-3193-1012, or 2820-4012, access code 3865508#. This conference call and the slide presentation are being transmitted via Internet as well, also through the Company's website.

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks, and other factors.

With us today are Mr. Murilo Ferreira, Chief Executive Officer, CEO; Mr. Luciano Siani, Executive Officer of Finance and Investor Relations, CFO; Mr. Peter Poppinga, Executive Officer of Ferrous Minerals; Mr. Galib Chaim, Executive Officer of Capital Project Implementation; Mr. Roger Downey, Executive Director of Fertilizers and Coal; Mr. Humberto Freitas, Executive Officer of Logistics and Mineral Research; Miss Jennifer Maki, Executive Officer of Base Metals; and Mr. Clovis Torres, General Counsel.

First, Mr. Murilo Ferreira will proceed to the presentation, and after that we will open for questions and answers.

It's now my pleasure to turn the call over to Mr. Murilo Ferreira. Sir, you may now begin.

Ladies and gentlemen, welcome to our webcast and conference call. Thank you all for joining us to discuss our second-quarter 2015 results. First of all, I'm pleased to report that Vale had a sound operational result, with production records for the second quarter in iron ore, copper, and gold. Adjusted EBITDA was $2.2 billion, 38% higher than first-quarter 2015, as a result of lower costs and higher sales volume in most of our business segments.

Gross revenue increased to over $7 billion. despite lower iron ore and nickel reference price, based on higher sales volumes and better price realizations. Costs and expenses decreased by more than $1.6 billion in the first half of 2015 when compared to the same period in 2014, despite the higher sales volume. Our SG&A and other expenses decreased by over 15%, while R&D decreased by 22%. And our pre-operating and stoppage expenses decreased by roughly 16% versus the first half of 2014.

Our CapEx was $4.3 billion in the first half, showing a reduction of over $700 million when compared to the first half of 2014. In line with our divestment plan, we concluded the sale of four Valemax for $445 million in the quarter. Our gross debt increased by $1.3 billion amounting to $29.8 billion, mainly as a result of, first, the lower cash collected from seasonally lower sales volume in the first quarter of the year; second, the impact of the end-to-end appreciation of the Brazilian real on the translation of Brazilian reais denominated debt in US dollars; and, third, the $1 billion paid as dividends in the quarter.

Now, talking about ferrous minerals, our adjusted EBITDA for iron ore and pellets reached $1.8 billion, increasing roughly $800 million from last quarter, despite the decrease in iron ore Platts 62% reference price. This increase in EBITDA was driven by higher realized prices, higher sales volume, and lower cost of goods sold.

For the second quarter, our CFR reference price for iron ore fines on a dry metric basis was $61.50 per tonne, being $2.09 per tonne higher than $58.40 per tonne Platts 62% reference price for the same period. Our realized price considering the mix of FOB and CFR sales was $50.60 per tonne.

Above all, I'm proud to inform you that our iron ore cash cost, excluding [royalties], decreased by $2.50 per tonne and reached $15.08 per tonne this quarter. And [I'd also] like to highlight that our production cash costs from Carajas at FOB port was already less than $12 per tonne in June.

Our freight costs also decreased, reaching $16.08 per tonne due to successful renegotiation of our chartering contracts. Our unit cash costs and expenses for iron ore fines landed in China, adjusted for quality and moisture -- landed in China reduced from $43 in the first-quarter 2015 to less than $40 in second-quarter 2015 on a dry metric ton basis.

Physical progress on the S11D mine and plant project reached 6% to 7%, while the physical process at CLN S11D railway and port achieved 41% and 62% progress on the railway spur.

Base metals adjusted EBITDA was $406 million in second-quarter 2015, having improved by roughly $40 million after the effect of goldstream transaction and the first quarter, and lower realized prices during this quarter. This improvement was driven by lower unit cost of production.

Nickel production was 136,000 tonnes in the first half of 2015, and should increase in the second semester as Long Harbour continues its ramping up, and also as our facilities in Indonesia and New Caledonia and Onca Puma operate at full capacity after the completion of the planned maintenance shutdowns for the year.

Copper production was 212,000 tonnes in the first half of 2015, with roughly 35% coming from Salobo. We expect Salobo's production to increase in the second semester as it continues its ramping up this year.

With coal, we continue to develop those projects which are key to our long-term business profitability, as we eliminated the existing logistical bottleneck in Mozambique. In this regard, we achieved 93% physical process in Moatize II, and 89% in the Nacala Corridor.

With fertilizer, I am very pleased to inform you that our adjusted EBITDA continues to improve, and reached $163 million in the second quarter of 2015, compared to the $90 million in the first quarter of 2015. This $73 million increase was mainly driven by lower costs and expenses, and higher sales volumes. More than ever, we remain confident in the long-term perspective of our fertilizer business segment.

In the second quarter of 2015, we foresee to deliver our promise, having first reduced expenses and cash costs, especially in iron ore. The granting of operational licensing for the extension of N5S mine together with the opening of N4WS mining, and with the ramping up of the Itabirites projects, will support the improvement in our average product quality and reduce our production costs going forward, further improving our competitive position.

We also progressed in the implementation of our project portfolio, laying down the foundations of an even more competitive and profitable company in the near future.

But before we go to our question-and-answer session, I would like to mention that, as you may have seen today, we just announced two other transactions. The first one for the sale of further four additional Valemax for about $450 million. And the second one for the sale of a minority stake in MBR, the owner of the assets in the iron ore Southern System, for BRL4 billion. Both transactions were part of our divestment plan for the year.

I think that I would like to highlight that in the context of these transactions, we don't have any obligation to buy back the preferred shares, and we have the right to buy these shares. We cannot avoid it to say that we are not -- pay dividends. But we must pay these dividends, based on the results of MBR. And in accordance with the Brazilian law, we must pay 50% of the profit.

We are open for your questions, and thank you very much.

(Operator Instructions). Wilfredo Ortiz, Deutsche Bank.

Just wanted to get a better sense as far as the ongoing efforts to increase production, which as far as we understand it, you are pushing forward with all your projects. Now, considering the improvement that we saw in the EBITDA margin for the iron ore business, how are you monitoring, or will monitor, production versus sales going forward, i.e. would you consider selling less in an effort to balance the market and perhaps keep your margins? And how are you monitoring our queuing that?

And secondly, as far as your CapEx, obviously it's trending at much lower levels than the budget for the year. Based on what you're seeing now, where do you see things going? I know that there's the FX potential benefits. But are certainly trying to reduce the overall cash outlays, so just wanted to see it where more or less these levels could come this year, next year, as the two largest projects are moving forward, i.e., S11D and Moatize. Thank you.

Peter Poppinga.

Thank you, Wilfredo. Regarding your question about increased production and balancing the market, it's not exactly like that, that we are looking to it. We have said that it is about margin in our case. We look at market share, but it's not the most important thing. So we are going to -- in 2015 we're going to substitute a low-margin, high [CD] products and purchase from third parties, around 25 million tonnes on an annualized basis. And we are going to substitute that by higher great material from Carajas and the Southeastern System, the new project getting ready. So that roughly the 340 target for 2015 is being kept for 2016, however. What we are saying is that we have -- you may recall that we had a target in the Vale Day last year about getting to 376 production.

We will optimize our margins, and the -- we don't know yet what will be the production level. It will be, for sure, higher than the 340 this year, and it will be less than the 376 announced during the Vale Day last year. The exact number, we are going to announce during the next Vale Day in December. But it will be -- in order to -- it will depend on our margin optimization results. And that's all what I can say to that; so margin is more important than volume.

And Luciano.

Yes, so we have CapEx this year probably will be between $8 billion and $8.5 billion. We were targeting this range even before the recent, more drastic depreciation of the Brazilian real, so it obviously helps to achieve that. And for next year, we are still reviewing the plans. We are actually getting better performance in terms of controlling our sustaining capital that we envisioned before. But I think a good target should be anything between $6.5 billion and $7 billion.

Reminding you that for the next year, the only major project remaining to have expenditures is S11D. So we conclude the expenditures in the Itabirites projects and the Moatize expansion and Nacala project this year. So for next year, we have basically just sustaining capital and S11D, should be between $6.5 billion to $7 billion.

Thank you very much.

Carlos de Alba, Morgan Stanley.

Quick questions regarding [further] Nacala Corridor financial transaction or the [way you] finance. Can you give us an update on how that is going, and if it is still expected to be closed in the second half of this year? And in case it doesn't, how does that affect the payment of the second -- or the dividends in the second half of the year?

And then regarding the MBR transaction that was announced, how should we interpret the lease payments that Vale will make to MBR? Are those going to be paid out as dividends to shareholders, out of which around 36% will go to the new partner of Vale in MBR? Thank you.

Luciano, can you start about the MBR, please?

Okay, Carlos, thanks for your question. The existing lease agreement between Vale and MBR, this is actually an old agreement, so this has been in place for quite a while. So Vale pays the lease payments to MBR. MBR has to repay part of those payments to its own sustaining investments, so it's around BRL500 million per year. And that shows in the income statement as costs, because it is the depreciation of the existing assets of MBR. And basically it's repaid in order to finance the sustaining investments within MBR.

After that, MBR pays the regular taxes on its profits, which is around, again, around BRL400 million to BRL500 million. So therefore what is left out after all those payments, around BRL1 billion; so therefore, under the current lease conditions of around BRL30 per tonne.

So therefore it is going to be paid mostly as dividends. And so we should expect the investor to receive anywhere between -- around BRL400 million of dividend payments, which should be around a 10% yield for him.

However, obviously this is variable according to the iron ore price and to the South System production. So both risks -- these are equity risks of the ownership of the MBR shares. (technical difficulty)

Regarding the first question, Carlos, at this point of time we don't have any change in our agenda regarding the project finance. Then we continue work to have to finalize everything in the second half of this year.

About dividends, I think that we had our recommendation in the beginning of the year. The subject will be discussed internally in the Board meeting at the beginning of October. But, for sure, everything is depend off the free cash flow of the Company, but we cannot say because it's absolutely in the hands of our Board. Thank you very much.

Tony Rizzuto, Cowen and Company.

I've got several questions. The first one is -- solid cost performance, by the way, on iron ore; but it seems like you've already exceeded your target -- your landed cost target to China; I believe that's by year end.

So my first question is, are you resetting that target now, and what is that level now, maybe for the end of the year, or early part or first half of 2016?

Second, I wanted to find out how you were thinking about the Chinese steel and iron ore market. As the mill margins continue to be under pressure, I'm wondering if you are seeing an acceleration in steel production curtailments? And is there any scope for steel price increases in China?

For what we note, so that recently we note some improvement in the steel production in China. It used to be below -- it was roughly 1.6% of the low last year, and this month it's 1.3% below last year. I think that we note some improvement in the production and sales in the Chinese steel industry.

Regarding the first issue, Peter Poppinga.

Yes, thanks for the question. You saw that our landed in China -- theoretical landed in China price decreased to around $39 a tonne. We of course continue with the efforts to -- and there will be a more [competitive] business coming, just mainly through the ongoing productivity efforts. Also the higher iron content helps when you deduct from the cost as a credit. And the S11D, of course, when it comes will be something very, very powerful.

So what we are -- we have no number. But what we think is -- yes, we have $39 in the first quarter. This will go back -- yes, in this quarter and in the existing quarter, the Q2. What we see is this going down in the next two years, in 2018, when the S11D is almost fully ramped up. This will be very close to the 30s. And so -- but we don't have any firm guidance on that. It will come down dramatically from now going on.

One thing is clear, that we promised in Barcelona in the Merrill Lynch conference, about to reach a target of $37 to $41, and we are under this range here. And we're working hard in order to (technical difficulty).

I think just completing Murilo's comments on China and on the steel industry, it is true that there is a transition phase here now. We still believe that that peak is still ahead of us, and we'll be over [900 million] tonnes steel production per year between 20 and 25, so that's going to come. However, the steel exports will increase, that's for sure. And they are already at the pace of 100 million tonnes per year.

Thank you very much.

Amos Fletcher, Barclays.

I have two questions, if possible. The first one is in iron ore. If we look at your sales volumes relative to your production, it says that you've built over 10 million tonnes of inventory over the last 18 months. Is that just a reflection of the new shipment centers that you've been building? And should we expect to see this to be released at any stage over the coming years?

And then secondly, I saw your maintenance CapEx of $4.1 a tonne in the iron ore business in the quarter. Can that go down any further from here, do you think? Thank you very much.

Thanks for the question. We are -- although you are seeing in this quarter is a slightly increase in our inventory, until the

end of the year -- and then you are also doing -- until 2016, end of 2016 -- you will see a dramatic decrease of inventory, actually. This is because it's a very simple equation.

We reduced the low-margin products coming out of the Southern System purchased and [owned] ore. And so less space on the railway, the on the MRS system. And we are going, and not everybody knows, but we have around 20 million tonnes of rich ore, rich stockpiled product, sitting in the Southern System.

So this railway -- this free space will be used to sell those 20 million tonnes in 2015 and 2016. So this means that actually probably 50 million tonnes will go down in this respect; compensating a little bit in the next quarters, when we are fully operating in Malaysia.

So yes, this quarter we had a slight stock increase. But until end of 2015 and mainly in 2016, you will see a drastic reduction in stock levels in Vale.

And what was the second question?

About the distribution center.

The sustaining CapEx, the trend is to go down. I'm not sure it was maintenance, or whether it was sustaining.

Sustaining.

It was sustaining, yes. Sustaining is already falling. Probably in the past, we were $5 to $6 a tonne; now we are on $4 a tonne, and probably this will go down another $1 in the next years. Thank you.

Alex Hacking, Citigroup.

Let me ask you a couple of things, if it's okay. The first one is, is there anything that you can disclose about the terms of the call option on the MBR transaction -- in terms of the timing or the price levels there, if it's not all confidential?

And then the second question is a bit more strategic. You talked about keeping iron ore in the ground. That doesn't make money. You don't want to basically pay the Chinese to take it. At what nickel price do you start to make similar kinds of calculations or assessments on the assets there? Thank you very much.

Luciano, please.

And also complementing Carlos' question, the lease payments to MBR, in order to be available for the investor, has to be deducted first on the expenditures in sustaining capital within MBR, which shows in the income statement as a deduction to revenues, as depreciation of the existing assets. So that runs around BRL500 million per year; and also the tax payments, another BRL400 million to BRL500 million.

So, therefore, what's left over after current lease payments and current iron ore prices is something around BRL1 billion, which has -- if paid out 100% of the dividends, would yield a 10% return to the investor. But there's other, smaller expenses as well.

The call option, it is exercisable between the third and the tenth year. And the price, we cannot disclose the exact terms; but we can say it's pretty much close to the sale price to a wide range of iron ore prices. But if iron ore prices climb high enough, then there's a kicker, and their strike price increases a little bit. So that's all we can say.

With regards to your question on nickel operations, when you look at our operations across Canada, in the second quarter we had a cash cost of $3,200 a ton, which is first quartile there. So we don't have any concerns in our Canadian operations. And I would add that in Long Harbour we're in the early days of the ramp-up; but it's going very well, and we're exceeding our plans that we had for 2015.

In Indonesia, at $7,100 a ton, we've seen very good cost reduction and cost control there, so the operations are doing very well. And in New Caledonia, we're just coming back from a three-week-long shutdown where we did some major maintenance and overhauls, and I think the next six months will be very key in New Caledonia. And happy to say today we know they're doing about 100 to 110 tonnes a day. And we believe that number will only get stronger as the next six months go on. And Onca Puma is also doing well, so we're not reviewing the operations in the manner you suggest.

Thank you very much.

Jeremy Sussman, Clarkson.

Just following up on an earlier question, you mentioned that you plan to drastically reduce inventory over the next 18 months. Can you just remind us where your inventory levels are at today?

Thank you. Yes, so roughly we have -- the inventories are a little more than 30 million tonnes in the mines. There are 9 million tonnes in the ports, and 6 million tonnes on the [sea ore] in Malaysia and floating in -- so we are talking about 50 million tonnes. And I am saying that we are going -- at the same time that we are going to increase a little more the stocks overseas because of our vending strategy in Malaysia, we are going to reduce 15 million tonnes sitting in the mines -- we have 20 million tonnes in the Southern System, and we are going to reduce that by 15 million tonnes over the next 18 months.

Thank you very much.

John Tumazos, John Tumazos Very Independent Research.

Congratulations on so much progress. Concerning the boat transaction and the MBR transaction -- roughly, do you expect that there would be any gain or loss?

Luciano, please.

No. No gain or loss. They are being made at very close to the book value of the assets.

Thank you.

Thiago Lofiego, Merrill Lynch.

Just to follow up on the MBR transaction, how is it impacted by the 25 million to 30 million tonnes of high silica ore volumes you are taking out of the market? As I understand, they are mostly coming from the Southern System. So just wanted to understand if volumes -- if we can consider lower volumes for MBR in the outer years.

And the second question is, if you could give us an update on the potential timing for an eventual deal on the fertilizer assets. Is the idea still to sell a minority stake, like 30% to 40%? Would you give us some color on that? Thank you.

Thiago, at this point of time, we cannot share with you regarding some analysis and some discussion that we have about fertilizer. We continue to work hard in order to provide a strategic movement, but nothing that could be announced now.

And Peter?

Regarding the MBR transaction and our production profile in this region, the only thing I can say is that there is no interference. Our efforts to optimize margins and maybe reduce some production there, compensating it someplace else, or not depending on the margin. There is no interference between this operational business effort and the MBR transaction itself.

Any further comment, Luciano?

No, I just would say that, just let you know that MBR is not the entire South System. So there are assets in the South System that are outside of MBR.

Thank you very much.

Marcos Assumpcao, Itau BBA.

Congratulations on the results. First question is on the nickel business. Given the low prices that we're seeing right now, when do you expect to see some capacity shutdowns in the industry, or eventually even consolidation as well? Basically why we're not seeing that yet.

And the second question on the iron ore business, if you could comment a little bit, Peter. You mentioned in the press release that you were expecting some capacity to be taken out of the market this year. Where this is coming from? We know that [icehouse] producers in China are shutting capacity. You also announced it. I don't know if you were expecting other players to be announcing capacity shutdowns at well, given the tight or difficult or challenging price environment right now. Thank you very much.

Marcus, first of all about the nickel, I will leave it with Jennifer Maki. But the displacement in the market, it's mainly the nickel pig iron that's used to produce 150,000 tonnes, and now it's probably around the 300,000, 320,000 tonnes.

But to Jennifer, go ahead.

I think the reason we're not seeing some of the shutdowns is because the nickel operations tend to be integrated, and the shutdowns would be relatively permanent, with high shutdown costs. But if prices continue at these levels, we would expect some shutdowns in quarters to come, and that's more in the non-integrated nickel operations. But we have seen, as Murilo mentioned, some small NPI producers shut down in China. And we also see the responses in terms, say, the Filipino ore, or a lack of demand for the Filipino ore.

Yes Jennifer, I think that NPI producers, they need at least $13,000 per tonne to produce in China, is a floor. And that for sure below this level they are underwater.

Peter?

Marcos, regarding your question on the challenged tonnage and on the seaborne balance, what we can say is that there is two factors, in my opinion, which the market is underestimating very much. One is the so-called depletion. It's a question between tonnage and quality. Vale alone is taking out 50. So we invested in the Southern System much more than we are going to produce, and this means taking out 50 million tonnes in terms of depletion.

But the other effect is the cost reductions. Some of the cost reductions we are seeing out there is not sustainable. So, under today's market, around $55 today's market, we for sure know that even in spite of the cost deflation we have seen and cost efforts of everybody, there are around 150 million tonnes are not competitive. And 50% of the Chinese concentrates productions are probably not competitive.

This year, in 2015, what we are seeing is that we are -- that another around 40 million tonnes of Chinese concentrate is exiting the market, and this is more or less in line with the figures you have seen that runoff mine production in China in the first six months decreased by 10% year-on-year. If you transform this into concentrate and extend this through the whole year, you are reaching 40 million tonnes which will be exiting.

And there's another 50 million tonnes of some junior companies in Brazil, as some integrated steel companies, some exotics suppliers like from Mexico, Indonesia, et cetera, exiting. So we are talking about 90 million tonnes exiting, really. And there is about the same quantity coming in.

And so, this is the situation today. And it's really -- if you compare what's going on with the runoff mine production in China this year, the first six months, you see that more or less these figures are going to happen. Next year and 2017, again I'm saying people are underestimating very much the depletion. And this will probably show some surprises going forward.

Thank you.

Andreas Bokkenheuser, UBS.

Thanks very much for taking my question. It's a two-part question, just going back to your inventories. You mentioned 50 million tonnes of iron ore inventories at the moment. First question -- I mean, it sounds like a high number, but it's really eight weeks of production. Is that a high number in historical terms? What is the normalized levels? That's the first question.

And secondly, how do you think about your inventory strategy? Is that predominantly based on where iron ore price levels are? Or are there other factors that you take into consideration in determining how much inventories to hold? Those are the questions. Thank you.

Peter, I think that to see what's happened as normalized, it's not easy. Because in the last few years Vale, was struggling just to produce in order to go from the hands to the mouth because of some constraint that we had, meaning the environmental perspective. Now we are going to the normal level that it used to be right.

But your comments, please?

We are going to our normal level like it used to be, but there is only two caveats. One is the fact that we are building up the Malaysia branding facilities, so the stocks there will increase. That's part of our strategy to brand offshore. But the other thing is that we -- there is one anomaly in the mines, because the mines have very normal stock levels. Around 30 million tonnes is a normal operation level, and the ports as well.

But this anomaly has to do with the Southern System. There's MBR and there's others. And those -- we have 20 million tonnes sitting there from all stockpiles. They are rich stockpiles which we can only now export because now we will have space in the MRS railway.

And so this will bring, in spite of us increasing the stock level in Malaysia, the fact that we are going to use this railway capacity, because we have taken out our high silica material, will be used for the next 18 months to reduce this 20 million tonne stockpile sitting, this anomaly in the Southern System, and going back to our normal stockpile level of 5 million tonnes. So 15 million tonnes will be reduced.

So, overall, the stockpile, the stock level, the inventory level of Vale will be significantly reduced. That's all I can say. I have no details yet, but that's the trend.

Thank you.

Rodolfo Angele, JPMorgan.

I just wanted to ask you about the Brazilian brand -- the Brazilian brand that you had started to sell. And I wanted to ask you to compare it with the Tubarao fines. How does it compare in terms of quality, in terms of overall product characteristics? And if you could also could comment on how it's being received by the markets.

Thank you for the question. The Brazilian brand, as I said, is now some months old only, and is going very well. It gets a premium. In the beginning it was $1 to $2. Now we already and over $3, so the market is really receiving it very well because we are selling it at a premium of $3. And the quality is higher than the referenced brand, the Tubarao brand. And in terms of our existing standard [center feeds] it's very comparable. So this is another success story. The first was that we sold the Carajas fines with a premium, which is much higher than that because of the quality.

Now I just mentioned in the previous call that it used to be $6 to $7. Now we are talking $9 and up on the Carajas brand, the premium. And here in the Brazilian brand, it is the same path. People value very much the liquidity, the stability; and that's where we are going. Thank you.

Leonardo Correa, BTG Pactual.

My first question is regarding the core business. We've been seeing still a (technical difficulty) loss on the EBITDA loss of roughly $100 million per quarter. Clearly this is explained by some of the logistics bottlenecks that you have, and the Nacala Corridor is still ramping up.

So just wanted to get a sense on how this could potentially normalize with met coal prices now below -- or probably continue below $100 for the foreseeable future.

What type of normalized EBITDA level can you see from the coal business at Vale, which now -- which still continues consuming some capital in the meantime? So that's the first question.

The second question is still on dividends guidance. Sorry to return to this topic. I know that you spoke about the dividend in the first semester -- for the second semester, sorry -- of the year, that it will be reassessed by the Board. But just wanted to say how you are looking to the dividend in 2016.

There could be some mark-to-market risks. When you look at cash flows now with current spot prices in iron ore and base metals, potentially that could be another year of negative free cash flow generation. You came out with this deal on the redeemable shares.

So my question is, would you be looking to issue additional operations or additional capital, like the one we just saw with a counterpart, to cover the potential cash flow gap and pay a dividend in 2016?

So my question is, would you be willing to issue this type of instrument to pay -- to cover up for the dividend payment in 2016? Or would you be willing to temporarily perhaps reduce dividend payments or suspend dividend payments to [down return] to dividend payments with the ramp-up of S11D?

So those are the two questions. First on the coal business, what type of normalizing could we see with Nacala fully ramped up at these pricing levels, and these depressed pricing levels?

And the second question on the dividend for 2016: how could you continue paying a similar dividend in 2016 from 2015? That's it, guys. Thank you.

Roger Downey?

Hi, Leonardo. Well, the coal business and the coal markets have been very difficult lately. And today it's really testing whether you can stay afloat even with the prices we have today. Obviously in Australia we've seen the exchange rate benefit straight in production. But even so, a lot of the Australian mines are underwater. So it really is very testing and very challenging to give you any sort of guidance on what EBITDA levels are going to be in the future.

Mozambique has no relief from exchange rate benefits and variations. The metical has been very much pegged to the dollar, so we haven't seen any of that. But what we will see in Mozambique is our operation -- as soon as we start moving coal through the Nacala Corridor, which is very close to completion, as Galib mentioned earlier today, we'll see the much-expected ramp-up of our operations. And once we reach nominal capacity, we will certainly be a coal producer within -- comfortably within the first half of the cost curve, and really moving and pointing towards a first quarter. That's the target we're working with.

About the dividends policy, this discussion we [intended] to have until the end of the year. We are now in the beginning of the year in our budget process. One thing I can tell you, we are not going ahead with any equity transaction like we did with MBR, looking to pay dividends. It's not our purpose. I think that must be considering based on the operational income and the cash flow basis in our operations.

Thank you very much, Leonardo, for your question. And I would like to say thank you everybody. We appreciate having you with us and doing so many good questions. Thank you very much.

That does conclude Vale's conference call for today. Thank you very much for your participation. You may now disconnect.