VALE

Hello, everyone. Thank you for joining Vale's second quarter 2026 conference call. First, I would like to briefly reinforce our strategic direction and ambition to create superior value for our shareholders. In this context, we have been consistently focused on our key priorities of operational excellence, disciplined capital allocation, and the advancement of highly accretive growth projects, particularly in copper and iron ore. Our objective is to build a business that is resilient through the cycle, competitive under different market environments, and well-positioned to deliver sustainable returns. Despite the uncertainties that continue to shape the global landscape, I'm very confident about Vale's future. What gives me that confidence it's not only the quality of our assets, but also the consistency in which our teams are executing and delivering results.

Based on the strong performance in the first half of 2026, yesterday our board of directors approved $1.7 billion in dividends and interest on capital to be paid in September. The board also approved the extension of our share buyback program for up to 2.3% of our outstanding shares, reflecting our positive view on Vale's long-term outlook and our continued commitment to delivering superior returns to our shareholders. Let me now turn to the highlights of the second quarter performance. We once again delivered solid year-on-year results across all commodities, reinforcing our confidence in achieving all production guidances for the year. In the particular case of VBM, we have now narrowed the guidance ranges for copper and nickel, implying higher midpoints on the back of continued strong operational performance in both businesses.

Starting with iron ore in Q2, production reached the highest second quarter levels since 2018, supported by the continued ramp-up of the Capanema and Vargem Grande projects, as well as the record output at S11D. Sales volumes also increased by 3% year-on-year. In copper, we delivered our strongest Q2 production in the last nine years with a 6% year-on-year increase, while sales volumes grew 10% in the same period. This growth was driven by record second quarter output at Salobo and a very strong performance at Sossego. In nickel, we also achieved solid results. Production increased by 4% year-on-year, while sales volume grew 7%, supported by additional volumes from Onça Puma and Voisey's Bay. Looking ahead, I would like to highlight two important milestones at Serra Sul that will further enhance the performance of this world-class asset.

First, I'm very pleased to announce the startup of the Serra Sul +20 project with the commissioning of S11D's second long-distance conveyor belt in July. This project, which also includes mine and plant expansions, will provide greater operational flexibility to the site. Second, in the fourth quarter, we expect to start commissioning the Compact Crusher project, which is designed to address operational constraints related to jaspilite ore at the Serra Sul mine, helping improve production consistency and strengthen asset reliability. Together, these projects will deliver 20 million tons of incremental capacity at Serra Sul, strengthening Vale's competitiveness and expanding our high-grade product portfolio. Turning now to our copper growth story. Last year, we launched the New Carajás Program with the vision of accelerating the development of strategic projects in one of the world's most attractive mineral provinces.

Today, I'm pleased to announce the earlier startup expected for the Bacaba project. Construction is progressing ahead of schedule. As a result, Bacaba is now planning to begin commissioning in Q3 2027, significantly ahead of the original first half 2028 schedule. With 50,000 tons capacity, Bacaba is the first of six accretive growth projects that will support our ambition to double copper production to approximately 700,000 tons per year by 2035. Our second project, the Salobo coarse particle flotation, is expected to be formally announced soon and represents another important step in unlocking the potential of our unique endowment. As we continue to execute our project portfolio with below-average capital intensity and compelling rates of returns, we believe investors will increasingly recognize the significant upside embedded in our copper platform.

Before moving on to our financial performance, I would like to briefly talk about innovation, a key enabler of Vale's long-term strategy. As we've discussed throughout this presentation, our operational results and growth projects are the outcome of consistent execution and a relentless focus on performance. Having said that, we continue to focus on innovation and on developing new technologies that increase our efficiency, enhance safety, reduce environmental impact, and strengthen our competitiveness. This is our vision for the mining of the future, a strategic agenda built around five key pillars outlined here in this slide that will help shape Vale's journey. To provide greater transparency on this agenda, we recently published Vale's first research, development, and innovation report, showcasing several initiatives that are already transforming the way we operate.

Among them, I would highlight the progress we are making with the model plan in Itabira and our autonomous mining initiatives at Brucutu, Capanema, and Serra Norte, which demonstrate how innovation is being translated into tangible operational gains. I encourage everyone to explore this report and learn more about how innovation supports our strategic agenda and creates opportunities across the businesses. With that, I'll hand over to Marcelo Bacci to discuss our financial performance. I will return later for my closing remarks before the Q&A session. Marcelo, please.

Thanks, Gustavo, and good morning, everyone. In the second quarter of 2026, our pro forma EBITDA reached $4.1 billion, representing a strong 19% increase year-on-year, despite continued pressure from external cost factors. This performance reflects another quarter of solid execution across our businesses, supported by higher volumes, improved commercial performance, and better price realization. At Vale Base Metals, EBITDA totaled $1.3 billion, increasing nearly 80% year-on-year. This performance was driven by stronger realized prices and solid operational execution. In iron ore, EBITDA exceeded $3 billion, supported by higher realized prices and increased sales volumes. These positive effects more than compensated for the higher freight costs and the appreciation of the Brazilian real. Overall, this quarter's numbers demonstrate the resilience of our business and our ability to consistently deliver a solid operational performance, even in a more challenging external environment.

Let me turn to the details of our cost performance. In the quarter, our C1 cash cost, excluding third-party purchases, was $24.1 per ton, an increase of 9% year-on-year. The all-in cost reached $61.6 per ton, 18% higher year-on-year. The higher costs were mainly driven by external factors. The appreciation of the BRL impacted both C1 costs and expenses, while diesel and freight costs also increased during the quarter. As I mentioned in our last call, while external variables can introduce volatility into our cost structure, they also reinforce the importance of our relentless focus on productivity and operational excellence. The results of our efficiency program, combined with higher production from low-cost assets such as S11D, demonstrate that we're moving in the right direction.

Together, these initiatives contributed to a $0.50 per ton reduction in C1 costs year-on-year, strengthening our structural competitiveness throughout the cycle. In addition, our hedging program helped reduce the impact of external variables in our results. Our Brent oil hedging program resulted in approximately $100 million benefit, equivalent to $1.6 per ton. Considering this effect, our all-in costs were $60 per ton. If oil price volatility persists, this strategy will continue to provide cash flow support in the second half of 2026. Given the increased volatility in external variables, we have decided to update our 2026 iron ore C1 and all-in cost guidance. The revised guidances reflect an average BRL exchange rate of 5.13 compared to 5.60 in our previous guidance, as well as an average Brent oil price of $86 per bbl versus $68 previously assumed.

As a result, we now expect C1 cash costs, ex third-party purchases, to range between $22.50-$23.50 per ton in 2026, compared with our previous guidance of $20-$21.50 per ton. Roughly 70% of this increase is explained by the combined impact of external effects such as FX and diesel costs. In the same way, we're also updating the all-in cost guidance to $58-$62 per ton, compared with the previous range of $52-$56 per ton, with around $5 per ton related to oil, FX, and iron ore premiums. Despite this more challenging external backdrop, we remain fully focused on the variables within our control. Our teams continue to advance a robust pipeline of efficiency and productivity initiatives across the businesses. These efforts are targeting further gains in asset utilization, maintenance optimization, supply chain efficiency, and procurement.

These initiatives do not fully offset the impact of FX and oil prices in the short term, they are essential to improving our structural cost position over time. Combined with the ramp-up of our low-cost assets, they will continue to strengthen our competitiveness throughout the cycle and support long-term value creation for our shareholders. Turning now to Vale Base Metals, both copper and nickel delivered another quarter of strong cost performance, reflecting solid operational execution across our assets and a more supportive market environment. In copper, all-in costs reached a -$300 per ton, an improvement of $1,700 per ton year-on-year, once again in negative territory. In nickel, all-in costs declined 17% year-on-year, reaching $10,300 per ton. We expect Vale Base Metals to continue delivering operational improvements beyond the contribution from by-product prices.

As a result, we're lowering our cost guidance for the year. For copper, we now expect all-in cost to range between 0 and $500 per ton, compared to our previous guidance of $1,000-$1,500 per ton. For nickel, we now expect all-in cost to range between $10 and $11,500 per ton, compared to our previous guidance of $12,000-$13,500 per ton. These revised ranges reflect the operational progress we continue to deliver and reinforce the value creation potential for Vale Base Metals. With that, let me move on to our cash generation. Our free cash flow totaled $1.5 billion in the quarter, supported by our strong EBITDA performance and by the settlement of our currency and oil hedging programs, which contributed a positive cash impact of $337 million.

CapEx totaled $1.1 billion, reflecting our continued capital discipline and the benefits of the efficiency initiatives we have implemented across the businesses. As Gustavo mentioned, consistent with our commitment to shareholder returns, our board of directors approved $1.7 billion in dividends and interest on capital to be paid this September. In addition, we bought back $140 million in shares during the quarter, bringing total repurchases to $214 million year-to-date. Building on this track record, our board also approved a new share buyback program of up to 100 million shares over the next 18 months, equivalent to 2.3% of our outstanding shares. These decisions reflect our confidence in the strength of our business, our ability to generate cash throughout the cycle, and our continued commitment to creating value for shareholders. With that, let's move to the next slide.

Driven by our solid cash flow generation, expanded net debt closed the quarter at $16.7 billion, a reduction of over $1.1 billion from the previous quarter. We expect expanded net debt to continue converging toward our reference level of $15 billion over the coming quarters. As we approach that level, we create additional flexibility for shareholder remuneration while maintaining the financial discipline and balance sheet strength. Before handing back the call to Gustavo, I would like to reinforce that we remain focused on strengthening our competitiveness across all of our businesses. Despite the external headwinds facing the industry, our priorities remain unchanged. We continue to advance productivity and efficiency initiatives, improve asset performance, optimize our cost structure, and maintain a disciplined approach to capital allocation.

Together, these actions are strengthening Vale's position through the cycle, supporting consistent cash generation and reinforcing our ambition to lead value creation in the mining industry. Gustavo, please.

Thanks, Marcelo. Before we move to the Q&A session, let me go over the key takeaways from today's call. First, we continue to deliver a strong operational performance across our businesses, achieving record production and higher sales volumes, reinforcing our confidence in meeting our guidances for the year. Second, we are accelerating our pipeline of high-return growth projects with the startup of the Serra Sul +20 project and the earlier startup expected for Bacaba. This demonstrates our ability to advance initiatives that will support Vale's growth and generate significant value to our shareholders. Third, we remain focused on enhancing cost competitiveness across the company by improving operational reliability, increasing efficiency, and strengthening resilience through the cycle. At Vale Base Metals, we continue to capture the benefits of the carve-out. Operational performance is improving, consistently delivering gains not only in production, but also in costs.

I'm very confident that we will continue to make meaningful progress over the coming quarters as we build a leading global energy transition metals business. Fourth, we continue to advance our Mining of the Future agenda, leveraging innovation and technology to improve safety, productivity, and sustainability while creating new opportunities across the businesses. Finally, our commitment to shareholder returns remain unchanged. Supported by solid operational results and a strong balance sheet, we continue to allocate capital responsibly through dividends and share buybacks while also investing in Vale's future. Let's open for the Q&A session. Thank you.

We are going to start the question and answer section of the call. If you have a question, please click on the Raise a Hand button. If your question has already been answered, you can leave the queue by clicking on the Lower Hand button. Please ask your question in English and limit your questions to two at a time. Our first question is from Rodolfo Angele from JPMorgan. You can open your microphone.

Okay. Thank you very much for the presentation. My two questions are the following. First, on the iron ore business, we noticed that the company was very successful in its freight strategy, being able to perform and pay more than $10 lower than the benchmark freight rate to China. I wanted to hear from you what you expect looking forward, because that's a substantial material gain? That's my first question. The second, we're more and more talking about base metals when we discuss Vale, and there is, of course, a lot of questions around the growth profile. It's very interesting to hear that you are being able to anticipate Bacaba, the first of six.

I just wanted to ask if you could comment a little bit on what was learned, what was the reasons for that, and what does that mean for the other five? Should we expect a similar performance? Or if you could comment on how mature each, the key projects on that front are, that would be very helpful. Those are my two questions, and thank you very much.

Rodolfo, we'll start with Rogério, and then Shaun can contribute with the VBM question.

Thank you, Gustavo. Thank you, Rodolfo. Obviously, what we expect looking forward will depend a lot on the oil prices. We do have a hedge program also in place. Let me give you a little bit of a background on our freight strategy and why we've been successful. Okay? In general, we have about 75% of our freight portfolio secured under long-term time charter contracts, which give us a stable cost base. For example, in 2026, we have been reducing our spot exposure effectively through mini COAs, which are short-term contract of affreightments, and also using derivatives market for freights, the Forward Freight Agreement. With those two instruments, we've been able to decrease the exposure that we had of 25% to about 10%, actually less than 10%. This is also what we're doing for the years ahead.

For 2027, 2028, we're seeking opportunities to get into the market and reduce that exposure. Okay, this is on the time charter. Also on the oil, on the Brent, we have a hedge program in place to reduce the volatility and the impact of freight on our costs.

Yeah. Rodolfo, hi, it's Shaun. On your Bacaba projects question, I think if I take you back on our journey, I think very simply the restructure of VBM was setting us up for execution. If you remember late 2024, we moved to a decentralized organizational model, really simplified and completely changed our approach to capital allocation, project studies, and project execution. What that has meant, and I'll direct you to both some of our Vale Day presentations and indeed the Vale Base Metals Day that we did a few months ago, where we've got some materials there to just show the evolution on the approach, the rates of return, and hopefully the market's starting to appreciate. I think every quarter I've been with this team, this team has excelled and has delivered on operating guidance or exceeded it.

This is, I think, our seventh or eighth consecutive quarter. Those are table stakes. On the projects, it's earning the credibility, which hopefully this latest announcement enhances in order to ensure that we can start seeing this being captured by the market, because it simply is not. In Bacaba, we started that project in, I'd say, roughly a mid-teen return before I restructure, with the difference in approach, both in terms of breaking down silos, simplifying, and focusing on our execution model. What we found there was we were able to, as you saw in our Vale Day materials a while ago, substantially reduce the capital, a couple hundred million dollars, nearly 50% reduction. As you're seeing here, we're able to accelerate this now in actual execution. We're nearly 40% progressed already. We're able to move that forward.

The returns that we had previously at about 50% are now closer to 70%. The point is, it's one thing for mining companies to talk about it, but the question is, what can we make happen? When you look at Bacaba as the first cab off the rank, the real focus has been on what are the things that we can intelligently do to identify bottlenecks, accelerate our execution, do so safely, which we've been doing, and indeed, continue to deploy that model in a very direct way to the other five that Gustavo has shown. I'll direct you to a few quick things just as you look to the future in the materials that I've mentioned for you. This is a fundamental change in our complete regional focus on copper growth in that area.

We will update the market again later as we advance in our life of business planning. It starts with everything from capital allocation on our drilling, our project execution, and our operational delivery, where again, we've hit some new records at Sossego, and obviously, Salobo's continued its good performance. Very quickly, we went from 30,000 m of drilling to 60,000 m last year. We guided to 120,000 m this year. We're already at 140,000 m that we're targeting. On Bacaba specifically, around the pit, we're seeing extension potential, high grade at depth and at the side. We were targeting 10,000 m, we're already at 22,000 m. I give you that context because there's value beyond, not just on this project. I think we guided to about a 30% capital reduction, well below industry capital intensity.

At some point, I would like to think that the analyst and investment community would look at our materials and start actually building some of this in, just given our footprint and our established track record in that area. This approach does translate across to, I think, the risk and the confidence in our ability to deliver on that pipeline Gustavo mentioned. Thank you.

Our next question is from Daniel Sasson from Itaú BBA. You can open your microphone.

Hi, everyone. Thank you so much for the opportunity. My first question is actually a follow-up on Rodolfo's question. Shaun, if you could, the six month, you're basically bringing forward Bacaba six months ahead of the original schedule, that's pretty significant. Is it already possible for you to see that the differences that you made in the planning of this project that led it to be brought forward could actually be replicated to similar projects that you have in your pipeline for your ambition to double your copper production by 2035? Is it too soon to tell, or do you think that we could see Vale reaching its goals ahead of what you've communicated to the market on other occasions? My second question maybe to Bacci.

Marcelo, if you could walk us through your thought process in regards to if the upward revisions in your cost guidance is still high given the Mina Samarco related cash outflows over the next couple of years. How do you think about the trade-off between shareholders' return and balance sheet resilience? What are you tracking to decide on executing your buyback program, maybe more aggressively or paying extraordinary dividends at some point in the second half of this year, versus choosing to be more cautious due to the volatile operating environment? Maybe that could change your focus from shareholders' remuneration to preserving your balance sheet position, the healthy balance sheet position you have. That would be great. Thank you.

Daniel, hi. I think to your question, the short answer is yes. I think we're not assuming that any two projects are the same, because they're not, but we are looking at each of these projects on their distinctive attributes. Again, I'd direct you to some of those materials from our Base Metals Investor Day some months ago, where we've also published some technical studies to equip analysts and investors to start really having the tools to appreciate what we're talking about here. We should, in the next number of weeks, publish the coarse particle flotation announcement, which is the next cab off the rank, which will increase throughput and sustain throughput at a very high rate of return at Salobo brownfield, of course. That'll be the next manifestation. That's sort of the 2029 timeframe. Again, we've targeted improvements.

You'll see them there when we make our announcement. The really big one, I remember the first one towards the end of the decade is Zalmar, we're on track for that. I don't want to, at this stage, suggest that that is going to happen earlier. What we're doing is we've taken half a billion dollars of capital out. We substantially boosted the return. As part of our life of business planning, I suspect for the foreseeable future, because of what we're finding in our drilling in the region and our life of business planning evolution, even the sequencing of some of these projects with an idea execution, the real focus is on perhaps in that 20 to 2035 timeframe and beyond. What can we do to go perhaps beyond the 700?

The rocks are there, the metal is there, to ensure we can actually execute that. We'll continue to provide, I think, at the next Vale Day, some more information. We'll continue to make sure that you can watch our quarterly and indeed our other execution on these projects. I'm confident this team is really delivering, I don't know what it takes to convince the market beyond that, beyond quarterly performance, really high rates of return, then, of course, being able to do so on budget and early. That's the real focus for us with all these projects.

Daniel, this is Marcelo speaking. On your second question, we believe that first you know that most of our cash flow generation comes in the second half of the year, the performance in the second half is going to be key to determine capital allocation for that period. The new cost guidances, they don't materially change our potential for cash flow generation in the second half. The cash outflows related to reparation and other things are already provided for and considered in the expanded net debt. We are confident that we should be approaching close to $15 billion of expanded net debt at year-end. That number, where we're going to land at year-end, will determine capital allocation for the second half. We decided to reestablish the share buyback program to leave that option open.

The decision about the total level of shareholder remuneration will depend on cash flow generation, and if that's the case, the decision between share buybacks and dividends will take into consideration, of course, where the share price is and the tax aspects of it. This will come later in the third quarter, beginning of the fourth quarter.

Thank you, Marcelo and Shaun.

Our next question is from Carlos de Alba from Morgan Stanley. You can open your microphone.

Yeah, thank you very much. I wanted to just follow up on some of the questions on freight. I understand that the exposure was reduced to 10%, but is that also the case for the second half of the year? Typically, you have more volumes in the last semester, and therefore, typically more exposure to freight. I just wanted to make sure that that 10% already includes this increased exposure in the second quarter. The second question is on the iron ore and pellet operations. Any updates on Fábrica and Vega? When are those expected maybe to come back, as well as the progress of the ramp-up at Oman, given that the conflict in the Middle East sort of reinitiated or escalated again? Any color on São Luís, given that we saw a big reduction in the second quarter production. Thank you.

Okay. Carlos, on freight. You're right. Generally, we have more exposure in the second semester. The 10% number is a flat number, but we average for the year. We do have a low exposure also for the second semester, okay? I also would like to highlight another point, which is important, I didn't mention in my first answer, is that differently from the seaborne, the spot market on seaborne. We have vessels which are scrubber-fitted. Generally, when you're talking about the spot prices, you're talking about low sulfur oil, which currently is carrying a very high spread to the low sulfur oil. Generally, we're paying about $250 per ton lower than the spot prices on bunker, okay? The exposure for the second semester is also low.

Carlos, Gustavo here. On your second question, both Fábrica and Vega from an operation standpoint are ready to be resumed. We've got the authorizations from the municipalities. We're now working with the state and federal authorities to resume operations. We are optimistic we'll be able to do that in the near future, and we are not expecting to have any impact in our annual guidance for the year.

In Oman. Oman is actually in operations, Carlos. I think one important point is that Oman, it actually supplies direct reduction to the Middle East. Important to notice that Bahrain pelletizing plant, which is one of the main producers of direct reduction in the region, has stopped. The demand for DR pellets is high in the region. We are arranging different logistics to get to our clients. Oman is operational. We'll have a stoppage in October to do a tie-in for the new concentration plant that we're building in Oman. Other than that, the plant is operating quite well.

Our next question is from Rafael Barcellos from Bradesco BBI.

Hello, good morning. Thanks for taking my questions. The first question, looking at your new all-in cost guidance for iron ore, and given what you delivered in the first half of the year, it seems that your guidance implies an all-in which is sort of flattish with the first half. While when we look at your C1 guidance, it implies a more significant decline over the course of the second half. I just wanted to better understand what drives the difference between your expectations for C1 and all-in trends into the second half. As a second question, in your new R&D and innovation report, you mentioned a very interesting initiative, at the Conceição II operation, delivering a 25% increase in productivity, right? On top of that, you also mentioned other cost savings from AI applications, right? Firstly, congratulations for this report. Very informative.

Secondly, to what extent you believe it has potential to be something more significant for Vale? Whether these initiatives make you more confident in lower costs going forward. Thank you.

Rafael, thank you. This is Marcelo. I'm going to take the first question on cost. You have to remember that if you look at the all-in, the relative weight of the oil prices is a lot higher than on C1. That's why you see this difference, the C1 reducing in the second half of the year, whereas the all-in tends to be flattish. Also on top of that, remember that the oil price effect was basically concentrated in the second quarter, not on the first quarter, where prices were a lot lower than they are today. Also, we have a lagging effect. Some of the realized cost of the first half of the year, especially in the first quarter, was actually based on the cost formed at the end of last year. Those accounting effects also play a role here.

This is basically what explains that the all-in for the second half is going to be flattish when compared to the first half, but lower than the second quarter.

Rafael, thanks for the question. This is Carlos Medeiros. At Conceição, this project is really a milestone for us. After it started operating in March, what we noticed was a 25% increase in production volume, besides a fundamental difference in the production split. Prior to the project, this concentration plant used to produce 50% of the time direct reduction feeds and the other 50% for blast furnace. Now, after the project completion, the mixer changed to 75% direct reduction and 25% blast furnace. That is a fundamental change in the mix, and we are rolling out, as we speak, this technology to all the concentration plants. Now, Brucutu is going through the same process, and we expect to complete during the first half of next year.

Bearing in mind that Conceição II is a concentration plant that produce now between 11 million tons, 12 million tons a year, Brucutu produce 30. Once Brucutu is completed, we will roll out to Vargem Grande complex, Vargem Grande 1 and 2, and also the Pico concentration plants. There is a tremendous potential for having more stable processes that will leverage our profitability in our products there in Minas Gerais.

The next question is from Alex Hacking from Citi. You can open your microphone.

Yeah, thanks. A couple of questions on copper. How should we be modeling Sossego for the next two or three years with Bacaba accelerated? More broadly on Sossego, if you have success with additional drilling at Bacaba or other satellite deposits, what's the limit on the processing capacity there? Thank you.

Thanks. It's Shaun. Thanks for those. As you recall, Sossego, as you know, is nearing its end of life with the Sequeirinho pit. Vini and his team have done a remarkable job even now with diesel price increases. They've actually reduced their specific consumptions, totally offsetting their energy costs, and they continue on that vein. I think last year alone, they took out something like 40% of the unit mining cost. What that's done is it's just made previously uneconomic or economic. They're continuing to be able to, let's say, extend the back end. You'll recall, perhaps in Vale Day, we talked a bit about the drill programs that we're doing and the acceleration there. We're targeting in our portfolio as a whole, more than 20% increase in reserves and resources over 18 months to two years. We put out our statements earlier.

We're well on track, I expect our constraint, particularly in Pará, is really how many drills we can get turning sooner because we're finding some really good targets, particularly nearby. Specific to your question, if you remember Sossego, the stuff that we're finding, those intercepts that we helped publish a while ago, we're doing, I think, something like 60,000 m of drilling to see at depth. None of that is currently in our life of mine plan. As that comes forward, I would see that as upside potential. It's not something, as you'd appreciate, just given the timing on all of that happens quickly. You'll see, I think, to your question on acceleration elsewhere, as we get to Vale Day, the churn of our latest guidance for 2027 and beyond, we will put into that. Generally, we're seeing acceleration, and we're finding more opportunity.

Just to remind you, I think others on this, Bacaba 30,000 tons or so increase. Sorry, 50. What we're finding is with the depletion as we get to the back end of Sossego, we're not allowing for any additional discovery or extension, as we say, from that existing infrastructure. The work we're doing on the SAG mill now will take us from 12-15, which is really central to the southern hub economic potential unlock. That's the 110 days of downtime from August through November which we've guided very, very clearly for the back end of this year, which will impact both costs and volumes for copper in the second half of the year.

Importantly, as you think about that towards the back end of the year, the incremental tons as you transition to the back end of Sossego and Bacaba is coming online is sort of that 25,000 ton, 15,000-25,000 ton incremental. I would like to think that we can prove up more and to be able to exceed that's really what we've provided to this date. Of course, we're six to nine months ahead, just stay tuned. We'll update the market in the back end of the year as we revise our life of business plans.

The next question is from Caio Ribeiro from Bank of America.

Good morning, everyone. Thank you for the opportunity. My first question is, I wanted to see if you could share some color on the iron ore market, right? In particular, after the recent escalation of the conflict and the impact that that's generated on oil prices. We're still seeing freight prices at very high levels, yet iron ore has been correcting, which suggests that it hasn't really benefited from that cost-push inflation, right? In the same way that it did when the conflict first started. Curious to hear from you what you're seeing on the ground that is driving the recent weakness and what your perspective is for the next six months, right? Whether you've noted at this point that there's any slowdown in shipments or curtailments from the smaller miners, just given that those FOB prices remain very depressed.

Secondly, I wanted to touch base on the Caves Decree with a new format being proposed. Just wanted to get some color from you on what implications you see that this could have for your long-term targets, in terms of product mix, cost structure, and perhaps the implications on your ability to compensate for depletion in the northern system. Thank you.

Okay, Caio, Rogério, I'll give you a view for the second half of the year. Let me give you first a general perception of the market as we see it. Overall, we see that the market fundamentals remain resilient. To me, especially when you look into global pig iron production, which is the most important indicator for iron ore demand, we see that it is broadly stable. This is happening because demand outside China is improving. We believe that the China story is more balanced than the domestic indicators suggest. China specifically, when we look into the official data, you see that crude steel production has declined by about 3% year-over-year in the first half. When you look into public market information, public market sources, the number is slower than that. It's closer to -0.5%.

Completing and complementing that at the same time, we see that the export market is actually offsetting the weakness that we see in the domestic market. Direct steel export has actually reached 55 million tons in the first half of 2026. We think this is going to be an important stabilizer for steel production. Also, outside China, the picture is a bit more constructive. Steel production has increased about 2% year-over-year, and this is providing more resilience to the market. Look, for the second half of the year, especially on your question, when we simulate the cost curves with freight rates and Brent crude, and crude actually near $90 per bbl, what we see is that at $95 per ton of prices, you'd have about 120 million tons of iron ore that would actually be reaching the cost limit.

This is pretty significant, and we think this would create a stabilizing response in the market.

Caio, Gustavo here. On the Caves Decree, we are certainly monitoring the modernization of the decree. We think it's going to be an evolution, including for environmental protection. I think it's well-balanced to provide both good environmental protection, at the same time provide clarity for the development of projects. We don't know yet the details, so it's early to say what is the potential impact. Certainly, the northern range is the one that has more impact over the years due to Caves restrictions, so we are hopeful it will mitigate some of that impact. It's still early to say, and we are still dependent on the final terms of the decree.

Next question is from Amos Fletcher from Barclays.

Good afternoon, gents. A couple of questions from me. First one, I just wanted to ask your current thoughts on the future structure of VBM, just given the positive outlook for copper and your diversified peers are trying to grow exposure to copper. Does it make sense for Vale to reduce exposure? The second question I just wanted to ask was on the unit cost guidance in copper specifically. It implies some sharp increases in H2. Is that all driven by what's happening at Sossego, or is there anything going on at Salobo we should be aware of as well? Thanks.

Amos, Gustavo here. I'll do the first. Shaun can complement on the second one. You saw the prospects that Shaun articulated. I had the chance to do the same in the prep remarks. There is tremendous opportunity for us to substantially grow the share of copper within the overall Vale's portfolio. We are now targeting to double. Shaun indicated potentially to go beyond that. You're going to hear from us more at Vale Day. For Vale, from the portfolio standpoint, we want to continue to be vested in copper. We think it's a fundamental part of our story. A lot of the growth is within Carajás, where we already have a very strong operation. You should expect us to continue to be highly vested in that business.

I must just to complement Gustavo's point. We'll cover it more at Vale Day. If you look at our last stuff, I just encourage people again to look at the capital intensities and even under sort of lower price assumptions, the records that we're hitting in multiple assets in the portfolio and the execution here. These are really robust growth exposures. I think for Vale, the sort of asymmetry, if I can call it that, in terms of opportunity and endowment, I think we're manifesting that. With nearly two years of both operational execution in this, and the exploration that we're ramping up, I think it's an unusual story in the copper space.

To your other question, I think the Vale IR team, it was in one of the appendices, has put in the schedule of biannual maintenance that's occurring in the nickel business. We obviously did a lot last quarter. You'll see some in Q3. In copper, you'll see, as I say, August 1st through November. It's really going to impact us more in Q3 with Sossego. That's the primary impact. You'll see that flow through in all-in costs. The revised improved cost guidance that we have factors all of that in. It is a tale of two halves.

Vini and his team, it was necessary what they've done to sort of produce ahead of, candidly, our budgets to set us up for the second half where they're going to be, I think there's 2,000 people on site replacing the SAG mill liner, the input trunnion, and then also redoing the electronics at the back end. 55 and 55 days. That's really the primary driver as we go into the back end. Then we have ongoing cost improvement programs that really are beyond what we're working on that will continue to feed into our competitiveness in the future. I think that just sets us up to have a, let's just say, a defensive posture in the face of some of the inflation we're all seeing.

The next question is from Marcio Farid from Goldman Sachs.

Morning, everyone. Thanks for the opportunity. A couple of follow-ups on my side. Rogério, I know we've discussed freight a lot, it's obviously getting increasingly important given how high prices have been. I know we talked about second half of the year. I'm more interested about the mid to longer term, if you can comment, please. I know the long-term contracts usually have are anywhere between 2-10 years, right? From time to time, they expire, and you need to roll them over. I'm just wondering, obviously, your contracts in terms of freight rates are just below $15-$20 a ton. Spot rates are nearly $30. Wondering, the new contracts that have been rolling, have you been able to roll them over at similar rates? Or have the spot prices contaminating the negotiations in some way or another?

I remember the last time we spoke, you were doing some forward contracts on fuel prices to hedge bunker exposure into next year as well. I think you were at 30%. Just wondering if you have sped up that hedging program as well, or if you've managed to just keep those 30% level. Just a follow-up on the Caves Decree. Gustavo, I know you mentioned you are obviously following the situation closely. Seems quite important for Vale. When we look at the production report between concentration in China with pellet feed, some run-of-mine sales, there's quite a lot going to China, right? Which is, it seems to have a strategic merit at this point. Just wondering, if you're able to get the flexibility on the Caves Decree in Carajás, and obviously, if you're to have more production capacity.

Can we see a scenario in which you continue to run those products and concentration in China and you add incremental supply from Carajás? Or are you going to be replacing those higher costs, lower margin volumes once you have better ability to ramp up production in the north? Sorry, long questions. Thank you.

Marcio, Rogério, on freight, I think you're absolutely right. The way we look at it is actually we manage the whole book for over 20 years. When we talk about long-term contracts, some of them, some of the long COAs, contract of affreightments, they actually have contracts for 20 years, right? We do manage this on an ongoing basis. Some contracts expire. We're always actually entering into new contracts. This is actually always ongoing. This year alone, we've done, I think, three rounds of book building for freights. The level of freights that we are contracting, and this is about TC, time charter, okay? Because what we do is on the time charter, we contract the long-term contracts, and we've done three book buildings for this year already, and we've contracted long-term. I cannot disclose exactly the numbers, but the numbers have been pretty good, okay?

This is on the freight side. We also work on mini COAs, which actually tend to be five years long. We operate with some forward instruments for freight, for time charter, which is the Forward Freight Agreement. With those instruments, I think we have a pretty balanced book for the coming, say, five, 10, and then the longer term. This is a sort of ongoing work that we're managing, and we always do like this. On the hedge, Bacci can complement, but we've actually improved that. We have increased our hedging program to roughly 70% of our requirements on a combination of zero cost collars and forward agreements.

Yeah, that's correct. Close to 70% hedging for 2027 at an average price of about $77 per ton Brent equivalent.

Thanks, Marcelo. Just to highlight, I mean, we've talked about that maybe a year ago and when Rogério took over the position on our strategy to actually increase the long-term freight ratios of the company implement the hedges. It's great to see that strategy paying off. We've put those hedges way before the war, in terms of increasing not only the freight, but also enhancing the protection for few costs. It's something we've decided to do a few years ago and we're seeing the benefits today, as you guys pointed out. On the caves.

Answering Carlos. I checked with Carlos. Our exposure for the second half is below 10%. Okay, just to confirm it here.

On the caves, look, I think the industry in general, and Rogério can also complement, it's facing an overall degrading, not only depletion that you've heard us talking about depletion for a long period of time, but in general, a very large degrading going on to a point that the index has changed from 62 to 61. For us, being able to bring those volumes from the Northern range into production is fundamental. It's very strategic, and we are certain it will create substantial value from a portfolio standpoint. Especially in the Northern range and also S11D where we have the ability to bring volumes at a very competitive rate. It also improves, for example, the C1 cash cost, also the all-in. For us, those type of improvements is very strategic and enhances the portfolio.

We will assess how does that play into the overall portfolio value, including how much we are doing in terms of concentration in China and so on. It does add a lot of flexibility for us from a portfolio standpoint.

I would say that Gustavo is absolutely right. I think the word is flexibility. Just one complement. Our concentrate in China is becoming a very important product. One, because China is actually replacing some sintering strands to pellets, to pelletizing plants, and we are actually promoting, quite successfully, our pellet feed concentrated in China. Demand is increasing significantly. The other flexibility element that it brings us is the possibility of blending and developing different products. Flexibility is the key here, and we'll decide it based on the market and based on our mines.

Next question is from Marina Calero from RBC.

Good morning. Thanks for the call and the opportunity to ask questions. I have a couple of follow-ups on cost. The first one is on your FX strategy. We've talked a lot about freight, but FX has been another headwind. Can you remind us your hedging strategy when it comes to the currency and whether you're seeing any opportunities there, particularly for 2027?

Marina, this is Marcelo speaking. When it comes to FX, we have a very strong strategy related to the real denominated debt, which is basically 100% hedged into dollars. A significant part of our other obligations, especially the reparation obligations, are also hedged into dollars. For the running costs, we operate from time to time. I think, if you look at the market recently, it hasn't given a lot of opportunity for us to hedge. The volatility has been relatively low, and the currency has been around five, 5.10 for a while now. We have not been operating short-term cost-related FX hedges recently.

This concludes today's question and answer session. Vale's conference is now

Good morning, ladies and gentlemen. Welcome to Vale's First Quarter 2026 Earnings Call. This conference is being recorded, and the replay will be available on our website at vale.com. The presentation is also available for download in English and Portuguese from our website. To listen to the call in Portuguese, please press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. Select Mute Original Audio so that you won't hear the English version in the background. We would like to inform that all participants are currently in a listen-only mode for the presentations. Further instructions will be provided before we begin the question-and-answer section of our call. We would like to advise that forward-looking statements may be provided in this presentation, including Vale's expectations about future events or results encompassing those matters listed in the respective presentation.

We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. To obtain information on factors that may lead to results different from those forecast by Vale, please consult the report Vale files with the U.S. Securities and Exchange Commission, the Brazilian Comissão de Valores Mobiliários, and in particular, the factors discussed under forward-looking statements and risk factors in Vale's annual report on Form 20-F. With us today are Mr. Gustavo Pimenta, CEO; Mr. Marcelo Bacci, Executive Vice President of Finance and Investor Relations; Mr. Rogério Nogueira, Executive Vice President, Commercial and Development; Mr. Carlos Medeiros, Executive Vice President of Operations; and Mr. Shaun Usmar, CEO of Vale Base Metals. Now, I will turn the conference over to Mr. Gustavo Pimenta. Sir, you may now begin.

Hello, everyone, thank you for joining Vale's first quarter 2026 conference call. I would like to start by briefly reinforcing our strategy and our ambition to create superior value for our shareholders. This strategy is grounded in a relentless focus on operational excellence, combined with disciplined capital allocation and the development of highly accretive growth opportunities, particularly in copper and iron ore, leveraging Vale's unique asset base and endowment. Recent geopolitical events and the volatility they have introduced to the markets only reinforce the importance of building a resilient and competitive business that can perform across a wide range of market conditions. This is exactly what we are doing at Vale. Despite near-term uncertainties, I'm very excited about our Q1 performance and very optimistic about delivering another great year.

I'm highly confident about Vale's future and in our ability to navigate the current environment while delivering robust, value-accretive growth over the long run. With that in mind, I would like to now turn to the highlights of our first quarter performance. Safety is a core value at Vale and remains at the center of everything we do. In the first three months of the year, we safely removed two additional structures from any emergence level, reaching an 80% reduction since 2020. These achievements reflect disciplined governance, continuous investment in monitoring and engineering solutions, and a strong safety mindset across the organization. This journey goes beyond procedures and systems. It is fundamentally about culture, accountability, and leadership at every level of the organization. By consistently advancing safety, we not only protect our people and communities, but also reinforce Vale's position as a trusted partner.

Now let me turn to our operational performance. In iron ore, our focus on operational excellence, combined with the flexibility of our product portfolio, once again translated into solid performance this quarter. Production grew 3% year-on-year, supported by record output at S11D and Brucutu, as well as the successful ramp-up of the Capanema and Vargem Grande projects. At the same time, we continued to make solid progress on the Serra Sul +20 project. It has now reached 86% physical completion and remains on track to start up in the second half of the year. Once delivered, Serra Sul +20 will further strengthen our operational flexibility and add incremental volumes to one of the most competitive iron ore assets in the world. Sales volumes increased by 4% year-on-year, reflecting higher production and supported by healthy global demand.

Importantly, this volume growth leveraged our flexible product portfolio, allowing us to improve price realization with all link premiums increasing by $2.6 per ton quarter-on-quarter. This translates into around $800 million in annualized revenue, reinforcing the value of our commercial strategy. Let me now turn to Vale Base Metals. At Vale Base Metals, we continue to deliver a strong operational performance with double-digit production growth in both copper and nickel. In copper, production reached 102,000 tons in the first quarter, the highest level since 2017 and 13% higher year-on-year. This performance was supported by record output at Salobo and Sossego, as well as solid contribution from our Canadian polymetallic operations, especially at Voisey's Bay. In nickel, production also grew strongly, increasing 12% year-on-year, the best first quarter performance since 2020.

This reflects the stable production from the Voisey's Bay mining expansion project, along with the successful commissioning of the second furnace at Onça Puma, bringing total production to 49,000 tons. During the quarter, we also announced an agreement to form a consortium for the Thompson operations. This transaction is part of our strategic review of assets and supports our broader objective of strengthening the competitiveness of VBM's global mining portfolio while positioning these operations for long-term value creation. To that end, I would like to also highlight the release of new standalone asset reports post our VBM Day held in March. This initiative reinforce our commitment to transparency and to providing the market with greater visibility into the quality, scale, and potential of our Base Metals portfolio.

We firmly believe that this increased transparency will support a better understanding of the strategic importance and value creation potential of Vale Base Metals. Finally, I would like to highlight a pioneering initiative that reinforces Vale's leadership in innovation and decarbonization. In April, we announced an unprecedented agreement to introduce the world's first ethanol-powered ocean-going vessels with operations expected to begin in 2029. These next-generation Guaibamax vessels have the potential to reduce carbon emissions by up to 90%, marking a major milestone for decarbonization in global maritime transportation. Combined with advanced efficient technologies and wind-assisted rotor sails, this approach delivers environmental impact, operational flexibility, and energy security. This initiative reinforces our commitment to reducing Scope 3 emissions and positions Vale as a leader in shaping a more sustainable and competitive future for the industry. Now I'll turn to Marcelo Bacci to talk about our financial performance.

I'll be back for closing remarks before the Q&A session.

Thanks, Gustavo. Good morning, everyone. In the first quarter of 2026, our pro forma EBITDA reached $3.9 billion, representing a 21% increase year-on-year. This strong performance was primarily driven by another very solid operational execution in our three commodities, benefiting from higher volumes and improved price realization. Vale Base Metals' EBITDA more than doubled compared to last year, reaching $1.2 billion in the quarter. This is yet another demonstration of the significant value being unlocked in this business. VBM's EBITDA would have been even higher, absent the approximately $140 million negative impact of provisional price adjustments made at the end of the quarter. Based on today's forward curves, this impact would have been positive, implying a potential reversal in Q2.

In iron ore, EBITDA reached BRL 2.9 billion with a flat but solid performance year-on-year, supported by higher sales volumes and better all-in premiums, more than offsetting the appreciation of the Brazilian real during the quarter. Let's take a closer look at our cost performance. In the quarter, our C1 cash cost, excluding third-party purchases, reached $23.6 per ton, an increase of 12% year-on-year. As expected, this increase was mainly driven by the BRL's appreciation, combined with the effect of inventories consumption carried from the previous quarters at higher costs. The all-in cash cost, in turn, increased by 8%, with stronger all-in premiums and a solid performance in freight, helping to partially mitigate cost pressures.

While external variables such as exchange rates and oil prices can introduce volatility to our cost structure, they further reinforce the importance of our ongoing focus on efficiency, productivity, and operational excellence. Assuming market consensus estimates for 2026 of an average BRL of 5.25, an average oil prices of $90 per barrel, we are working to achieve the top end of our original guidances on a 61% FE basis. In this slide, you can see the different sensitivities for our C1 and all-in costs for iron ore. Through disciplined execution and a strong focus on controllable cost drivers, we remain confident in our ability to progressively and structurally reduce our cost base, supporting competitiveness and value creation across the cycle. Turning now to Vale Base Metals, both copper and nickel once again delivered solid and consistent reduction in all-in costs.

Starting with copper, all-in costs once again reached negative territory, declining by BRL 1,800 per ton year-on-year, reaching BRL -600 per ton. This very strong result was mainly driven by robust by-product revenues, supported by higher prices and increased gold volumes. In nickel, all-in costs declined by 48% year-on-year, reaching BRL 8,200 per ton. This improvement reflects stronger by-product revenues from our polymetallic assets, benefiting from favorable pricing as well as cost optimization initiatives at Voisey's Bay. Fixed cost dilution, driven by a 12% increase in production volumes, also further supported results. Looking ahead, we expect Vale Base Metals to continue delivering operational improvements beyond the contribution from by-product prices. In nickel, our focus is now on maximizing cash flow generation, leveraging on continued cost efficiency and on the polymetallic nature of our assets.

Let's talk about our cash generation. Our recurring free cash flow generation reached $813 million in the quarter, representing a 61% increase year-over-year. This stronger performance was primarily driven by solid EBITDA, combined with the settlement of currency swap and oil hedging programs. The more negative working capital variation reflected higher inventory levels and an increase in accounts receivable, with collections expected over the coming quarters. Despite the volatility that oil prices can introduce to the cost structures, we remain well-positioned thanks to our risk management strategy, which helps protect and stabilize our cash flow. Our oil hedge program was designed to limit exposure to tail scenarios through the use of zero-cost collar instruments.

These hedges provide Brent crude oil price protection above BRL 80 per barrel for around 70% of our bunker oil demand in 2026, supporting greater visibility and stability in cash generation. I would like to highlight the strength of our cash position and our continued commitment to shareholder returns. In the first quarter, we distributed BRL 2.7 billion in dividends and interest on capital, while we also repurchased nearly 5 million shares under the current share buyback program. As you can see on the next slide, these distributions resulted in a seasonally expected increase in extended net debt, which reached BRL 17.8 billion in the quarter. Our target range remains unchanged at BRL 10 billion-BRL 20 billion, with a clear objective of operating around the midpoint of this range.

Important to say that under the current price environment for iron ore, copper and nickel, we are increasingly confident on the possibility of paying extraordinary dividends and on further executing on our buyback program throughout the year. Before passing the floor back to Gustavo for his closing remarks, I would like to reinforce that we're building a company designed to be resilient through the cycle. Our flexibility, cost discipline, and capital allocation approach are key pillars of this strategy. With these elements in place, we expect to continue benefiting from the strength of our iron ore portfolio while fully unlocking the potential of our base metals business, consistently delivering value to all stakeholders. Gustavo, please.

Thanks, Marcelo. I would like to highlight the key takeaways from today's call. First, safety remains a core value at Vale, and we continue to make consistent progress in strengthening our safety culture and performance. Second, we continue to execute with discipline across our 3 business lines, maintaining a strong focus on operational excellence. Third, we are persistently pursuing cost efficiencies to preserve competitiveness and build resilience in the face of ongoing external cost pressures. Fourth, we remain fully committed to our sustainability agenda and our 2030 goals, advancing innovative solutions that support our decarbonization and sustainability targets. Lastly, our disciplined approach to capital allocation remains unchanged, enabling us to generate strong cash flow and deliver attractive returns to our shareholders. Now let's open for the Q&A session. Thank you.

We are now going to start the question and answer section of the call. If you have a question, please click on the Raise Hand button. If your question has already been answered, you can leave the queue by clicking on the Lower Hand button. Please ask your question in English and limit your questions to two at a time. Our first question comes from Leonardo Correa with BTG. You can open your microphone.

We're talking.

I believe Leonardo is having some problems with the connection. We are going to go ahead with Alexander Pearce with BMO. You can open your microphone, sir.

Great. Thanks. Can you hear me?

Yes, perfectly.

Yes, we can hear you.

Excellent. My question is just around the iron ore market at the minute. You've redirected pellet feed to Brazil, given Oman is offline at the minute. Maybe you can just talk about, is there any knock-on impact to product mix and cost? Then the second part of the question is, you know, can you provide an overview on what you're seeing in terms of demand for the premium products at the minute?

Thanks, Alexander. Let me start by giving you our view of the impact of the conflict in Iran and specifically what happens to Oman, and then I can give you a broader view on the market. Okay. The way we see it is the steel production remains stable globally. In the Middle East, specifically as per your question, steel production is also stable because they are keeping production based on scrap and pellet inventory. This is despite a contraction in Iran crude steel production. As you know, Iran crude steel production has been halted, but the rest of our clients in the region, they're still producing. Okay?

Important to say that in terms of pellet production, Bahrain, which is an important pellet plant in the region, has been mothballed because they had difficulties in receiving pellet feed. This pellet feed has been diverted to other markets, essentially for China and Asia in general. There's actually this additional supply has been offset by no exports from Iran in terms of iron ore. Our view on the market, specifically out of the conflict, is neutral. There has been a neutral impact on the global iron ore supply with the conflict in Iran. Just maybe to take the opportunity to highlight that looking forward, we believe that with the conflict, the cost curve has shifted upwards.

If we calculate, it has shifted forwards between $5-$10 per ton. We also noticed that this shift upwards is actually asymmetric, with some marginal players in the cost curve being more impacted, actually by more than $10 per ton, which actually supports a bit of the prices that we're seeing today. Okay, this is more general aspects of the conflict in Iran. Market in itself, I think you asked about the high quality iron ore, high quality pellet feed. We do expect the market to be stable for pellets, even with an eventual increase in supply net of supply of high-grade pellet feed and demand of high-grade pellet feed.

Coming the next quarter, we expect pellet premiums to be stable or even with a slight increase. On the general market, I think it's just a broader overview. We also see the broader market stable despite the conflict in Iran. China, as we see crude steel production is stable according to independent institutes. As a proxy, we always look into blast furnace utilization, and blast furnace utilization is at about 90%, which is extremely positive and high. We still believe and see continued annualized steel exports at a number of 100 million tons in 2026. Infrastructure and manufacturing offsetting a weak property sector that's still actually a challenged sector for China.

Another important point is when you look into iron ore port inventories, they actually reached 166 million tons, which is an increase of quarter-on-quarter. I'd like to highlight that our inventories of value ores have decreased about 10 million tons quarter-on-quarter. This is extremely important, right? The days to cover in the whole value chain remains at about 30 days. Ex-China, we see a stable overall market. There's a variation by region, but it is stable. Yeah. All in all, we see supply demand balance and the price outlook is also balanced.

Thank you. Our next question comes from Leonardo Correa with BTG. You can open your microphone.

Okay, everyone. Very sorry for the technical difficulties I had before. A couple questions on my side. First one on the cost side, specifically for iron ore, right? I mean, when we look at the C1 costs, clearly a lot of debate on trends and on what you reported, right? There was about $23 per ton with about 10% inflation year-over-year, right? I guess the question we've been receiving over the past hours is, how comfortable are you with your guidance at these levels, considering what you're seeing and so many moving parts with some cost inflation items, right? I think the guidance for the year is $21. You just delivered $23.

Just wanted to see how confident you are on that guidance. That's the first one. The second one, I can't not ask about CMRG and all the implications, right, for the iron ore markets. We've been seeing this back and forth with BHP. I think several observers in the market, they think that there could be some pressure from those inventories at Chinese ports, mainly Jimblebar Fines and some other specifications, moving back into the market and potential implications. I think that's one point. More importantly, we've been seeing other companies also settle with CMRG, right? Fortescue, I think, also announcing some deals. I wanted to hear from Vale's perspective, right? If anything changes.

I know that Vale already has about, I think, 10% of shipments in Yuan settled in China. I just wanted to hear how the relationship is with CMRG and what Vale has been doing with the group over the past weeks and implications. Those are the questions. Thank you so much.

Leo, this is Marcelo speaking. I'll take the first question on cost guidance. As you saw on our presentation, the main effect on costs come from seasonality, which is always the case on the first quarter of the year and also in the second quarter as a consequence of higher costs on the first one. FX and oil prices. If you take the forward curves that we see today on the market for oil, and if you take the projection for FX that we see on the focus report from the Central Bank of Brazil, which is currently at 5.25. If oil converges to $90 and FX at 5.25, we should be able to deliver the top end of our guidance in C1 for the whole year.

Second quarter is not gonna be too different from first quarter, we should see a second half better than the first half, in a way that we deliver the top end of the guidance for year-end. It's important to mention that the external factors are the main factors behind the cost inflation, and they impact everyone in the industry. It's not a Vale-specific situation. We're confident that if the market goes in the direction that the futures markets are indicating today, we should be able to deliver the top end of the guidance.

Leo, on CMRG, I think, acknowledging what you just said, they're talking to all the major players. As you mentioned, they've talked to BHP now, trying to come to an agreement with Fortescue. They have reached an agreement with Hancock. There will be probably negotiation with Rio. Same happened to us. We keep a collaborative dialogue with them. We're always seeking efficiencies, and that has to be the basis for us to negotiate. Also important to say that they understand the corrective nature of our iron ore grades and also the physical and metallurgical properties of our iron ore, which actually differentiates us a little bit. What we're doing with them is that we are working together to design the way we can collaborate to develop well-suited blends for the Chinese steel industry.

It's a bit of a different focus, trying to find the efficiencies, as I just mentioned. Ultimately, just to highlight the prices, we do believe the prices will be set up based on the supply demand, which is the ultimate driver.

Our next question comes from Liam Fitzpatrick with Deutsche. You can open your microphone.

Good morning. Hopefully you can hear me. It's Liam Fitzpatrick from Deutsche Bank. I've got two questions. Firstly, on the buyback, how do you want us to think about the pace of buybacks through the year? You're still some way above the midpoint of your net debt range, but you did repurchase some shares in Q1. Should we think about the pace picking up as net debt falls, or will this be more opportunistic around the share price levels? The second question is just on costs. I think you've answered most of it and you touched on it in your previous comments, but curious as to where you currently see marginal costs for the industry landed into China at current diesel and freight rates. Thank you.

This is Marcelo. I'll take the first question. We not only look at the current state of the expanded net debt, but most importantly, to the trend. The first quarter, it is always because of the dividend payment that we make. Seasonally, it's always a quarter where the net debt goes up. Our decision to start buying back again has to do with the outlook that we have for the year. As we mentioned before, we did have an impact on costs, but the price is more than compensated that impact in the way that margins are going up. We have a positive view for cash flow generation for the year. As a consequence of that, we have decided to start buying back again.

As we mentioned before, if we are in a situation where net debt trends below $15 billion, we should be, deciding, to distribute more to our shareholders in the form of a combined, situation between, extraordinary dividends and buybacks. This is what you can expect for the coming, months and quarters.

Liam, on the impact of diesel and bunker freight, ultimately, on the cost curve, I think as I mentioned, we believe that the industry cost curve has shifted upwards, as I just mentioned, from $5-$10 per ton. This is not so it's not symmetric. Some of the players who sit on the last quartile of the cost curve are more impacted, for example, for distances. What we view is that this asymmetric impact in the cost curve may actually shift it up, so the last quartile by about $10 per ton. It's a significant impact on the last quartile of the cost curve.

Liam, Gustavo here. I'll just add to this last question that Rogério answered that this only reinforces that the strategy that we have for long-term affreightment is the right one, and it's paying off, right? Because I think one of the things Rogério has done recently is to increase the level of affreightment for our fleet. We decided to do this last year for this year. This year, for example, we are mostly contracted close to 100%. The increase that we've seen in time charter, for example, we haven't been able or we're not impacted. Plus the hedges that we put on bunker.

We've been able to manage some of that impact to our own operations, and I think that is very important to highlight.

Next question from Daniel Sasson with Itaú BBA. You can open your microphone.

Hello, everyone. Thank you so much for taking my questions. My first question is actually related to the cost front also. More specifically, with the macro changes that you've already discussed, the change in FX, oil costs, how do you think that it has changed Vale's relative competitive position versus the Australian guys and maybe versus the junior miners in Brazil or the smaller players in Brazil? Because in the end of the day, it's a matter of what weighs more, right? Iron ore prices have actually increased more than the negative effect of your higher, of higher costs because of the higher oil prices and stronger BRL and so on, so forth.

If you could guide us on how you are thinking about your relative cost position versus the Australian guys or the main players, that would be great. The second thing, you also mentioned a little bit about the strong performance you had in copper volumes in the first quarter. We know that you have an important maintenance stoppage of Sossego throughout the year, and therefore maybe it's, it would be too optimistic to believe that you would be able to exceed your 350,000-380,000 tons copper production guidance for the year. Whether you think it's feasible or likely that it could stay somewhere closer to the upper range of this guidance.

How you're thinking about the evolution of your, of your base metal division throughout the year considering the maintenance stoppages, I guess the question is that. Thank you.

No, Daniel. Good. Thank you. Thank you for the question. Look, I think, dividing between the Australian miners and the Brazilian miners. I think, in regards to Australia, you know, we have a disadvantage of the distance. In absolute terms, when a bunker oil increases specifically, we have a disadvantage. Right? Having said that, we have been able to offset a lot of disadvantage by our hedge program. As Gustavo mentioned, we've reduced our exposure to the TC market. We had previously operated with between 25%-30% spot exposure. This year, we're operating with less than 5%, especially to Asia, which is a great advantage.

We have, as Marcelo Bacci talked in the beginning, a program that we are hedging about 70% of our exposures to the oil, to the bunker market. This actually has helped us to offset this logistics and geographic distance disadvantage. You will see more of this coming on the next quarter, but you shouldn't expect a full impact of bunker oil prices increase in our relative competitiveness. Okay. In regards to Brazilian players, I think we're really well-positioned because we have done all the hedging that I just talked about. We're shipping larger vessels which are more efficient. They do rely on spot market prices. Relative to the other Brazilian players, we have increased our competitive position.

Daniel, Gustavo here. Before passing on to Shaun, I'll just add to this question, the positive effect of premiums as well. If you look at our price realization, quarter-on-quarter, we have also improved substantially to $0.6 per ton. IOCJ premiums have improved BRBF. This is also just as an extent of setting some of the impacts that Rogério was saying. When you look at the overall margin of the company, it has expanded, in fact, right? More than offset the cost increase that we faced.

Yeah. Daniel, hi. It's Shaun. Look, I think firstly, the Q1 results for the portfolio as a whole really set us up well to answer your question directly. It was important for both the polymetallic or nickel part of the business that contributes meaningful amounts of copper as well as the copper side to deliver well this quarter. They've done that. Just to highlight that point, Sossego, I think it's the best performance since 2008. It was an 81% year-on-year increase. Even Salobo with lower grade did the same mine movement with 30% longer haul distances, slightly lower grade, and had 4.6% better recoveries and were able to actually increase copper output. How was that site loss? two weeks ago, they're knocking it out the park.

They're doing well. We've got that 110 day shutdown, as you've mentioned, at Sossego. We're gonna remain very focused and disciplined on that. Then in the polymetallic side that contributes, you know, Gustavo and Bacci commented on the performance overall. Voisey's where we, you know, we get meaningful copper. That was a 64% year-on-year increase, and they've hit record production. Across the board of what we control, I think the team is setting us up well to do exactly what you said. We're gonna remain cautious, and we'll update the market as we go through the PMP.

Next question from Rafael Barcellos with Bradesco BBI. You can open your microphone.

Hello, good morning. Thanks for taking my questions. My first question is on your commercial strategy. Can you give us more color on your strategy around the medium-grade Carajás going forward? I mean specifically, what is the outlook for growing these product shares in your mix? To what extent does that come at the expense of the IOCJ volumes? I'm particularly asking this because we have seen the 65, 62 spread improving recently. Moving to VBM on copper. I would say that Alemão appears to be your most important project as VBM. I know that you published your new reserve report recently, but my understanding is that the full potential of the project hasn't been fully disclosed yet, right?

Given that the drilling and exploration is only now being initiated in the second quarter, so probably as we speak, right? Can you give us a sense of what we can expect from these drilling and exploration initiative? You know, more important, I would say that when should we expect that the exploration plan will be concluded? Thank you.

Rafael, no, thanks for the question. Rogério, on the product portfolio. I think just restating what Gustavo has just mentioned, our fine premiums has actually been very positive this semester. $4.1 per ton versus $ 1.9 per ton in the fourth quarter of 2025. This is just on the fines, not accounting for pellets, right? This has to do with some factors. The first one, as you mentioned, is that we have seen a very good acceptance of our mid-grade Carajás globally. We're actually planning to increase it because the market has not only appreciated the product from a chemistry point of view, but also from a metallurgical performance.

We're actually moving to have 50 million tons-55 million tons of this product into the market, which is actually, quite frankly, beyond our expectations because the market accepted it so well and there's a huge demand for the product. Just to add some other points on the portfolio, which helps our realized premiums. The other one is a very good acceptance of our China concentrate. It is really becoming a standard product. This year, we expect to have an annual sales of about 40 million tons of the Chinese concentrate product. I mean, very good, very good for us, very good for the market.

Last but not least, I think the control as we look into the mid-grade Carajás, we can control, we can adjust the volumes of Carajás that we have, standalone Carajás that we have in the market, and that actually defines the premiums. We're always trying and looking into how to optimize it, shifting from mid-grade to high-grade Carajás to achieve the best result. Again, not the best result only on price realization, but as we have always been talking about, it's about maximizing total contribution, total margin contribution, optimizing production costs, price realization. Again, this semester we've been able to do it all and still increase price realization. Okay.

Rafael, hey, it's Shaun. I was actually at the project at Alemão a couple weeks ago with the team. Look, they're making incredible progress. Just to remind you, we published, you remember, just around BRBF and our MRMR statements. We are roughly doubling, where we already doubled last year, our exploration in Pará. A lot of that is gonna be concentrated around all our projects and sites. You know, we'll keep, as we get through probably a year from now, we're looking to target over 20% increase, as you'll recall, from 2024 in our mineral inventory. The real focus is on increasing NPV. You can expect that not just on Alemão, but on our projects as a whole.

When I was at site, we were just in the process of removing a very small alligator from an old exploration adit and starting the dewatering process to actually focus on some of that exploration drilling at that project. Just to reorient you again, remember we changed the mining method there. It's about half a billion BRL in CapEx improvements. We're on track, and the real focus at the moment is on the permitting timeframes and progressing the study. We'll have updates probably by Vale Day and certainly on the exploration, you know, similar time next year.

Our next question comes from Marcio Farid with Goldman Sachs. You can open your microphone.

Thank you. Morning, everyone. Two follow-ups on my side. I think the first one on Simandou, not only, you know, the view on volumes. We've seen Rio reporting two weeks ago. I think that's relatively clear. If you have any views in terms of expectations for ramp up. Also obviously, Simandou, everybody sees it as, you know, high-grade Fe content, right? Above 65%. At least the grades we've seen so far also show a high alumina content as well, which is interesting, right? It seems like Vale, it's still one of the few producers at scale that can offer the low alumina product.

Just wanna check with you on that, you know, and how you see Simandou obviously affecting the, you know, the premium market in terms of Fe grade, but how can Vale be positioned for that scenario with the current portfolio that you, that you guys have? Maybe secondly, quickly, maybe to Gustavo and to Shaun, in terms of Base Metal VBM IPO, there has been some news suggesting that you guys wanna be IPO ready. Just, you know, and we get a question a lot from investors, so it's probably good opportunity to, you know, have a view in terms of how to think about a business IPO, when, why, and why not. Thank you.

Hi, Marcio. Rogério, on Simandou, I think it's you're absolutely right. In the first quarter of 2026, the reported production was 1.5 million tons. There's gonna be, as we're seeing, a gradual ramp-up. The numbers for the years, again, official from them is from 10 million-15 million tons. Again, it's gradual, as we expected, right? To your point on the chemistry side, yes, it is indeed a high alumina relative to silica, which is a very important parameter for blast furnaces. That means that for this ore to be used effectively in blast furnaces, they need to have a blend with complementary ores, which have silica higher than alumina. A silica ratio to alumina higher. Again, the one who has this kind of iron ore in scale is Vale.

That actually positions us in the whole portfolio strategy to provide the ores that make the blends, the ultimate optimizer of blast furnace performance. We are looking into this and thinking about how to design and where to sell our ores on a product market strategy.

Marcio, Gustavo.

Well, on the VBM IPO question, what we've been, you know, sharing and discussing with our shareholders in the market is that the company had initially the goal to stabilize operations. I think Shaun and the team have been able to achieve that. As you've seen, as we've seen in the performance Q1, it's been very strong. It's been strong in the last several quarters. That has shown that the carve-out has worked. The next step is to make sure we can grow the business. We see an enormous potential to grow, particularly the corporate business. We have a goal to double the size of our corporate business. The more we drill and the more we explore, especially in Carajás, the more excited Shaun and the team get.

This is certainly a key priority. Any strategic market transaction will depend on market conditions if it is necessary for us to achieve that future. The priority today is to make sure we continue to operate our assets well, and we can grow the business. That's exactly what the team is working on. The good thing of the carve-out is that it gave us optionality, so we can do many things. I always say, the IPO, potential IPO, it is a means to an end. It's not an objective in itself and we continue to think that way.

Marcio, if I can add to Gustavo's comments. You know, our job, I think from the beginning, was to take a platform that wasn't visible and wasn't creating value and then position it where essentially Vale, [SM and Yara] have choices. I've mentioned before, I think we're probably two years ahead of what I thought the team could deliver. I think you would have seen in our VBM Day, which is part of also just revealing the value potential that I think was invisible. I think Marcelo pointed out that where the business had traditionally contributed maybe 10% or 15% of EBITDA to Vale, you know, it was on track for, say, 30%-35%. You can see this quarter, we're over 30% on EBITDA. We have further to go.

I think as Gustavo said, it's about maintaining that performance, also creating possibilities. We do not need the funding for our growth at this stage. I think if we deliver and prices remain even this year, we'll be around zero net debt in this business, and we can self-fund. It's more a strategic question for our owners at the right time.

Our next question comes from Carlos de Alba with Morgan Stanley. You can open your microphone.

Yeah. Thank you very much. Just wanted to ask a follow-up on the excess cash and return to shareholders. Given the earlier comments by Marcelo, what do you think Marcelo is where your preference is between buybacks and dividends? You clearly are already paying a regular dividend. Does that mean, or is fair to assume that maybe excess cash return to shareholders would be more on the buyback than special dividends? On the second question, I don't know, Gustavo, you can provide, please, an update on the railway discussions with the government. Clearly, it seems that you're back in the negotiating table, maybe that is a good indication. I don't know, any color in terms of timing, what are they asking?

Anything you can provide just to give us more certainty on the potential outcome.

Carlos, last year we gave a clear preference for dividends, because of the change in taxation that came at the year-end. This year the situation is different, and we tend to be more balanced between buybacks and dividends. Of course, depending on where share price is. I would say the answer is a balanced approach between buybacks and extraordinary dividends.

[Stellar], and Carlos, thanks for your question. On the railway concession discussions, just to recap everybody, we had signed an agreement, no mining agreement 2024, we're not able to conclude. To your point, we have resumed conversations with the several governmental entities early this year. I'm hopeful that we'll be able to conclude this in a way that works for everybody's, everybody including Vale. We are working hard and hopeful that we'll be able to conclude this discussion this year still.

Our next question comes from Marina Calero with RBC. You can open your microphone.

Good morning. Thanks for the call. I have a follow-up question on cost. Can you clarify whether the sensitivities you presented today include the impact of your hedges on the currency and the fuel? Maybe as an extension of that, have the recent developments in the Middle East changed the way you are thinking about your hedging strategy for 2027?

Thank you, Marina. The sensitivities do not include the hedging policy because the percentage of hedging that we have at different points in time is different. But for specifically for 2026, we have a significant hedging position on oil and also some of the effects exposure that is partially compensating, but the result of that comes as a financial result and not as part of our EBITDA or included in the C1 cost or all-in cost calculations. We tend to be, you know, balanced and also careful when talking about the hedging for 2027.

I think for 2026, what we have in our portfolio is already very significant, and we discuss at this moment what we're gonna do for 2027, in terms of a freight plan, in terms of oil exposure and also effects. The market gives us some opportunities. The market in oil, for instance, is very much inverted, and we are looking at the markets and deciding what to do.

Yes. Thank you.

Our next question comes from Alfonso Salazar with Jefferies. You can open your microphone.

Hello. Can you hear me?

We can. Yes, yeah, we can.

Thank you. Just quick question for Rogério. Rogério, regarding production of domestic concentrates in China, there were some targets to expand that capacity. It hasn't materialized. Just wondering what is your expectation for the future years regarding production in China, and also your expectations regarding more scrap use in China for the steel iron units. That would be interesting to hear your thoughts.

Hello, Alfonso. Thank you. Domestic concentrate in China these days because of not being so much impacted by freight. They've gained some relief. Longer term, it's really challenging because it's low grade iron ore in the ranges of lower than 20% Fe content. A lot of the mines are underground. They're smaller operations. Our perspective is that currently they are producing about 260 million tons per year, and they're gonna come down to about 160 million tons. That's our view, our expectation for the future, which is a decline in domestic iron ore production in China of concentrate. This is one of the trends. In terms of scrap, in the past we had a sort of more optimistic view.

Today, we believe the scrap is gonna increase gradually from the level they're operating, about 300 million tons of scrap per annum. This is gonna be very gradual and it's gonna be absorbed naturally within the system. Nothing that would create a major impact or disruption in the iron ore supply, seaborne imports.

Thank you, Alfonso Salazar from Scotiabank for your question. Now we're gonna go ahead with our next question from Yuri Pereira with Santander.

Hi, guys. Thank you. Back to Rogério. Please, back to the cost topic. Regarding your comments about high cost producers having a cost impact of more than $10 per ton, do you have it in terms of volumes? I mean, what's the negative impact on iron ore supply? I remember you guys talking about, roughly 150 million tons, if I'm not mistaken, impact with spot prices below $90 per ton.

Just trying to figure out this. How about now considering that $100 is the new $90, right? Thank you.

No. Yuri, this is a good question. You know, with this location, we've actually done a sort of initial calculation, okay. With layers would actually be on the anchor point of the cost curve. Our estimate is that prices reduced by $10 with the current other elements such as freight and diesel, staying the same, there will be more than 50 million tons of iron ore production that is going to be out of the market with negative margins. This is our preliminary assessment.

Our next question comes from Igor Guedes with Genial. You can open your microphone.

Good morning, everyone. Can you hear me?

We can.

Yeah. Thank you. Thank you for the opportunity. We have seen an increase in expenses related to iron ore, both in terms of the CFEM, the royalty rate, and the distribution costs, given the concentration of volumes in Chinese ports for subsequent. More specifically, regarding royalties, we note a recent decision by the Federal Attorney General Office overturning the preliminary injunction that deducted the CSM calculation basis using the CFEM payments. I'd like to get you guys' perspective on what you expect from this standpoint regarding royalty regulation and also on the level of distribution costs we have seen, which rose like 40% quarter-over-quarter, even as the volume declined sequentially. How can we model these expenses going forward? Thank you very much.

Igor, thank you for your question. Those are two different subjects. On the concentration part, I think this has to be seen as difficult to model on an isolated way because it is part of a portfolio strategy. This will tend to vary depending on how our commercial team is looking at the market and the different products that we're gonna offer to the market. You're gonna see always the flip side of these costs on the margin. That changes, and it's a dynamic decision. It's going to be difficult to model as an expense. When it comes to royalties, there is a continuing discussion with the different authorities. It's difficult to make comments about decisions that may come from justice, we are always working towards trying to reduce those costs.

There are some things that don't depend on us.

Even on the, on the second part of your question, we have started a strategy of concentration in China, especially because, you know, it, in one side, it increased costs for the concentration processing. It reduced recovery, but it does increase our, our realization price. Net, it is net zero or positive impact, but that has a very important impact in our product portfolio. Specifically to your question, we're actually improving this because sometimes we have concentrated volumes in certain regions, and we need to redistribute in China to find markets with better demand. This is a cabotage within China, and we have many initiatives in place to do that without incurring this redistribution cost. You should see an improvement.

Our next question comes from Caio Ribeiro with Bank of America. You can open your microphone.

Good morning, everyone. Thank you for the opportunity. I wanted to once again touch on the subject of your expanded net debt concept, you know, particularly as the proportion of non-financial liabilities within that metric drops significantly from 2027 onwards. I wanted to see if you can give us some color on how you think about that range, if you would consider increasing it. If you can give us some color as to what levels you could be contemplating. Assuming you change it to, say, a level closer to $15 billion-$25 billion, what that means for extraordinary dividends. You know, particularly as you had been looking at that $15 billion as that anchor to dictate these decisions to pay extraordinary dividends or not. Secondly, shifting gears here to the nickel front.

There were some important changes recently in Indonesia in the past six months to the mining quotas, to the reference price upon which royalties and taxes are calculated. I wanted to see if you could discuss from your point of view the implications that that has for your business and whether the price surge that we've seen on the nickel side of things since those measures were announced, if that compensates for that higher cost of operating in the country. Thank you, gentlemen.

To Caio, on the expanded net debt, today, around a third of our expanded net debt is related to the present value of the commitments related to reparation, which is a part of our debt that is not manageable. You cannot roll over, you cannot do anything other than pay. This number is going to reduce significantly between 2026 and 2027 as we pay the commitments that we have. I would say that for this year and next year, it is not in our plans to change the rule that we follow or to change the criteria or the range. But as the number of the expanded part of the net debt gets smaller, in the future, we probably are going to review this, but not till the end of 2027.

Yeah, it's Shaun. I think to your point, we started seeing late last year the impacts of the Ministry of Energy and Mineral Resources adjusting those RKAB quotas. I think they said, what, 250 million-260 million tons, whereas it was at, say, 379 million tons in the prior year. I think given that they're responsible now for about 65% of global nickel supply, I think we're realizing, you know, the impact of probably similar to what you see with the DRC and cobalt. We did see the market respond. I think what you're seeing at the moment is a combination of that effect.

Given that something like 90% of the sulfur supply, particularly impacting MHP and HPAL's Indonesian nickel production come from the Middle East. You know, the sulfuric acid and the sulfur supply going in there is having, I think, quite a significant impact on cost of production. I think we're seeing some early signs of curtailment of the supply for some of those areas. I think on our numbers, you know, you could see if these things sustain something like about a $3,000-$4,000 a ton increase in the cost of MHP. If, you know, if this persists, we're looking at about 500,000-600,000 tons of nickel and MHP should be produced in 2026. A fairly significant impact.

For us, we're net long sulfuric acid and sulfur. We're benefiting, I guess, from, you know, the higher pricing environment, which is obviously good news. I think we're all just making sure we can control costs and be as agile as we can. Our supply from PTVI of MHP, they currently have enough sulfur supply, so that's not a concern for us. We're definitely seeing, I'd say, the combination to your point of both that curtailment, but also some of the cost increases for producers in the country.

Thank you. This concludes today's question and answer session. Vale's conference is now concluded. We thank you for your participation.