Vale announces early extension of railway franchise

On December 16, local time, Vale announced that its board of directors had approved the revised terms of the early extension of the concession agreement between the (EFC) of the Caracas Railway and the (EFVM) of the Victoria-Minas Railway, according to the revised terms, the franchise of the two railways will be extended for 30 years after the original agreement expires in 2027.

Mr. Berandor (Eduardo Bartolomeo), CEO of Vale, said: "We are pleased that the company has taken another important step in reducing risk. The measure of extending the railway franchise in advance has greatly eliminated the uncertainty of the existence of some links in the company's integrated logistics chain. " He then added: "the Caracas Railway and the Victoria-Minas Railway are pioneers in the implementation of (V PS), the Vale production system, in which we invested 35.7 billion reais (US $6.6 billion) between 2006 and 2019, making them among the safest trains in the world. We will continue to invest in the maintenance and expansion of these two railways. "

Vale will sign the revised terms in the next few days, in which Vale has pledged to invest 24.7 billion reais 5 (US $5.1 billion) by 2057, including: (1) 11.8 billion reais (US $2.5 billion) in royalties; (2) 9 billion reais (US $1.9 billion) in FICO and FIOL railway construction spending; (3) other spending commitments of 3.9 billion reais (US $800 million), including the expansion of passenger train services and the implementation of urban congestion relief projects.

The Brazilian National Land Transport Agency will also assess the possibility of building a spur line of around 82 kilometres along the coast of the state of Esp í rito Santo, which will be an extension of the Victoria-Minas railway, with (Ramal Anchieta), costs deductible from the total concession costs in the cities of Santa Leo Poldina and Ansheta, respectively.

Vale also announced that it has taken into account the costs associated with the early extension of the railway concession in its long-term planning, which will be included in the balance sheet of the quarter signed by the revised terms in terms of present value, intangible assets related to the concession, and the costs of FICO and FIOL railway projects. These payment commitments will not affect Vale's earnings before interest, tax, depreciation and amortisation. Expenses of less than 5 per cent of (EBITDA), will be counted as capital expenditure, but amortization of intangible assets will reduce net profit.

Vale believes that the extension of railway concessions is beneficial to society because they bring a series of benefits to the surrounding communities and the economic development of Brazil. Taking into account the nature of the company's business, this is also beneficial to the company, which is the company's investment based on a long-term vision, which can ensure the operation of the integrated logistics system and the company's railway capacity. it has laid a good foundation for the company's future investment decision and sustainable operation.