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Section 1: 8-K/A (8-K/A - VALE FERTILIZANTES CLOSING)

Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K/A
(Amendment No. 1)
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 8, 2018
 
 
THE MOSAIC COMPANY
(Exact name of registrant as specified in its charter)
  
 
 
Delaware
 
001-32327
 
20-1026454
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
3033 Campus Drive
Suite E490
Plymouth, Minnesota
 
 
 
 
 
55441
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (800) 918-8270
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
¨ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
 





Explanatory Note
 
On January 8, 2018, The Mosaic Company (“Mosaic”) filed a Current Report on Form 8-K with the Securities and Exchange Commission (the “Initial 8-K”) reporting the completion of Mosaic’s acquisition of Vale Fertilizantes S.A. (“Vale Fertilizantes”), a “carve-out” entity from Vale S.A. Mosaic is filing this Amendment No. 1 (this “Amendment No. 1”) to include the audited and unaudited financial statements of Vale Fertilizantes required by Item 9.01 of Form 8-K and other pro forma financial information required by Item 9.01 of Form 8-K.
Item 9.01.
Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The unaudited interim condensed consolidated financial statements of Vale Fertilizantes as of and for the nine months ended September 30, 2017 and September 30, 2016, respectively, are attached as Exhibit 99.1 hereto and incorporated herein by reference. The audited consolidated financial statements of Vale Fertilizantes as of and for the year ended December 31, 2016 and unaudited consolidated financial statements of Vale Fertilizantes as of December 31, 2015 are attached as Exhibit 99.2 hereto and incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial statements, which include the unaudited pro forma condensed combined balance sheet as of September 30 2017, and the unaudited pro forma condensed combined statements of earnings for the nine months ended September 30, 2017 and year ended December 31, 2016, and the notes to such unaudited pro forma condensed combined financial statements, all giving effect to the acquisition of Vale Fertilizantes, are attached as Exhibit 99.3 hereto and incorporated herein by reference.
(d) Exhibits.

Exhibit No.
  
Description
 
 
23.1
  
99.1
 
99.2
 
99.3
 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
THE MOSAIC COMPANY
 
 
 
 
Date: March 26, 2018
 
 
 
By:
 
/s/ Mark J. Isaacson
 
 
 
 
Name:
 
Mark J. Isaacson
 
 
 
 
Title:
 
Senior Vice President, General Counsel and Corporate Secretary



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Section 2: EX-23.1 (EXHIBIT 23.1 - CONSENT OF KPMG LLP)

Exhibit


Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors

Vale Fertilizantes S.A.

We consent to the incorporation by reference in the registration statements on Form S-3 (Nos. 333-216133, 333-175087 and 333-177251) and Form S-8 (Nos. 333-120501, 333-120503, 333-120878, 333-142268, and 333-198332) of The Mosaic Company of our report dated December 1, 2017, with respect to the carve-out combined consolidated statement of financial position of Vale Fertilizantes S.A. as of December 31, 2016 and the related carve-out combined consolidated statements of profit or loss, comprehensive income, changes in net assets and cash flows for the year ended December 31, 2016, and the related notes, which report appears in the Form 8-K/A (Amendment No. 1) of The Mosaic Company dated March 26, 2018.

/s/ KPMG LLP

Sao Paulo, Brazil
March 26, 2018




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Section 3: EX-99.1 (EXHIBIT 99.1 - UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS OF VF)

Exhibit
Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Exhibit 99.1

Contents




Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Vale Fertilizantes S.A
 
 
 
 
 
 
 
 
 
 
Combined Consolidated Statements of Financial Position
 
 
 
 
 
 
(In thousands of United States dollars)
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
Note
 
September 30, 2017

 
December 31, 2016

 
Liabilities
 
Note
 
September 30, 2017

 
December 31, 2016

 
 
 
 
(unaudited)

 
 

 
 
 
 
 
(unaudited)

 
 
Current assets
 
 
 
 
 
 

 
Current liabilities
 
 
 
 
 
 
Cash and cash equivalents
 
3
 
62,982

 
104,419

 
Trade and other payables
 
11
 
263,051

 
186,995

Trade and other receivables, net 
 
4
 
119,304

 
106,333

 
Supply chain finance
 
12
 
68,798

 
72,401

Inventories
 
5
 
349,877

 
318,447

 
Loans and borrowings
 
 
 

 
17,447

Recoverable taxes
 
6
 
81,107

 
62,020

 
Taxes payable
 
 
 
14,055

 
13,061

 
 
 
 
613,270

 
591,219

 
Payroll and related charges
 
 
 
62,408

 
46,775

Non-current assets held for sale
 
8
 
562,298

 
549,250

 
Provisions
 
13
 
8,229

 
17,650

 
 
 
 
1,175,568

 
1,140,469

 
Finance leases
 
 
 
4,842

 
4,506

 
 
 
 
 
 
 
 
 
 
 
 
421,383

 
358,835

 
 
 
 
 
 
 
 
Liabilities associated with non-current assets held for sale
 
8
 
184,430

 
181,854

 
 
 
 
 
 
 
 
 
 
 
 
605,813

 
540,689

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-current assets  
 
 
 
 
 
 
 
Non-current liabilities
 
 
 
 

 
 

Trade and other receivables, net
 
4
 
236,743

 
220,763

 
Trade and other payables
 
11
 
37,722

 
34,741

Inventories
 
5
 
21,557

 
21,909

 
Loans and borrowings
 
 
 

 
15,889

Judicial deposits
 
13
 
64,702

 
61,003

 
Finance leases
 
 
 
49,021

 
52,694

Deferred income taxes
 
7a
 
604,954

 
504,616

 
Provisions
 
13
 
414,499

 
361,526

Recoverable taxes
 
6
 
177,702

 
172,476

 
Employee benefits
 
 
 
211,482

 
174,394

Investments in associates
 
9
 
93,969

 
90,138

 
Advance for future increase of share capital
 
 
 
163,734

 

Property, plant and equipment, net
 
10
 
3,067,679

 
3,001,759

 
 
 
 
 
876,458

 
639,244

Intangibles, net
 
 
 
9,783

 
10,412

 
Net assets attributable to parents of the Company
 
 
 
3,755,824

 
3,808,642

 
 
 
 
4,277,089

 
4,083,076

 
Non-controlling interests
 
 
 
214,562

 
234,970

 
 
 
 
 
 
 
 
Net assets
 
 
 
3,970,386

 
4,043,612

Total assets
 
 
 
5,452,657

 
5,223,545

 
Total liabilities and net assets
 
 
 
5,452,657

 
5,223,545

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these carve-out combined consolidated financial statements


2

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Vale Fertilizantes S.A
 
 
 
 

 
 

Carve-out Combined Consolidated Statements of Profit or Loss 
 
 
(In thousands of United States dollars)
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
Note
 
September 30, 2017

 
September 30, 2016

 
 
 
 
 
 
 
Net operating revenue
 
 
 
1,374,566

 
1,493,442

Cost of goods sold and services rendered
 
14a

 
(1,521,328
)
 
(1,500,283
)
Gross loss / income
 
 
 
(146,762
)
 
(6,841
)
Selling and administrative expenses
 
14b

 
(38,430
)
 
(40,262
)
Other operating expenses, net
 
14c

 
(45,231
)
 
(58,852
)
Share of profit of equity-accounted investees, net of tax
 
 
 
470

 
2,275

Operating loss / income
 
 
 
(229,953
)
 
(103,680
)
Financial income
 
15

 
29,908

 
74,212

Financial expenses
 
15

 
(39,634
)
 
(50,247
)
Financial result, net
 
 
 
(9,726
)
 
23,965

Net income (loss) before income taxes
 
 
 
(239,679
)
 
(79,715
)
Income tax and Social contribution
 
 
 
 
 
 
Current
 
7b

 
(35
)
 
3,661

Deferred
 
7b

 
78,986

 
30,950

Net loss for the year
 
 
 
(160,728
)
 
(45,104
)
Net income attributable to non-controlling interests
 
 
 
(20,398
)
 
1,182

Net loss attributable to the parent
 
 
 
(140,330
)
 
(46,286
)
 
 
 
 
 
 
 
The accompanying notes are an integral part of these carve-out combined consolidated financial statements


3

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Vale Fertilizantes S.A
 
 
 
 

Carve-out Combined Consolidated Statements of Comprehensive Income (Loss)
(In thousands of United States dollars)
 
 
 
 

(Unaudited)
 
 
 
 
 
 
Nine Months Ended
 
 
September 30, 2017

 
September 30, 2016

 
 
 

 
 

 
 
 

 
 

Net loss
 
(160,728
)
 
(45,104
)
Other comprehensive income (loss), net of taxes
 
 

 
 

Items that will not be reclassified to profit or loss;
 
 
 
 
  Translation adjustments
 
99,417

 
728,198

  Employee benefits - Defined benefit plans
 
(11,702
)
 
(19,194
)
 
 
(73,013
)
 
663,900

Total comprehensive loss
 
(73,013
)
 
663,900

Comprehensive income attributable to non-controlling interests
 
(20,408
)
 
1,182

Comprehensive loss attributable to the parent
 
(52,605
)
 
662,718

 
 
 
 
 
The accompanying notes are an integral part of these carve-out combined consolidated financial statements


4

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Vale Fertilizantes S.A
 

 

 

 

 

 

 

 

Carve-out Combined Consolidated Statements of Changes in Net Assets
(In thousands of United States dollars)
 
 
 
 
 
 

 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

Results from

 

 

 

Net assets

 
 
 
 
operation with

Unrealized fair

Cumulative

 
attributable

 
 
 
Share

Non-controlling

value gain

 translation

Accumulated

to owners

Non-controlling

 
 
capital

interest

 (losses)

 adjustments

losses

of the Company

interests

Net assets

 
 
 
 
 
 
 
 

 
Balance at January 01, 2015 (Unaudited)
12,007,626

(379,458
)
35,533

(3,703,116
)
(2,481,065
)
5,479,520

278,479

5,757,999

(Loss) net income




(75,564
)
(75,564
)
9,061

(66,503
)
Capital Increase
129,236





129,236

13,698

142,934

Allocation of fertilizer business result from Vale (Note 2a)
(11,781
)




(11,781
)

(11,781
)
Dividends of non-controlling interest






(40,188
)
(40,188
)
Translation adjustments


(6,381
)
(1,687,016
)

(1,693,397
)

(1,693,397
)
Changes of NCI without a change in control

(15,275
)



(15,275
)

(15,275
)
Employee benefits - Defined benefit plans, net of taxes


8,687



8,687


8,687

Balance at December 31, 2015 (Unaudited)
12,125,081

(394,733
)
37,839

(5,390,132
)
(2,556,629
)
3,821,426

261,050

4,082,476

(Loss) net income




(801,037
)
(801,037
)
1,921

(799,116
)
Capital Increase
188,504





188,504


188,504

Allocation of fertilizer business result from Vale (Note 2a)
(4,785
)




(4,785
)

(4,785
)
Dividends of non-controlling interest






(27,991
)
(27,991
)
Translation adjustments


122

677,915


678,037

(10
)
678,027

Changes of NCI without a change in control

698




698


698

Employee benefits - Defined benefit plans, net of taxes


(74,201
)


(74,201
)

(74,201
)
Balance at December 31, 2016
12,308,800

(394,035
)
(36,240
)
(4,712,217
)
(3,357,666
)
3,808,642

234,970

4,043,612

(Loss) net income




(140,330
)
(140,330
)
(20,398
)
(160,728
)
Allocation of fertilizer business result from Vale (Note 2a)
(213
)




(213
)

(213
)
Translation adjustments


(6,426
)
105,853


99,427

(10
)
99,417

Employee benefits - Defined benefit plans, net of taxes


(11,702
)


(11,702
)

(11,702
)
Balance at September 30, 2017 (Unaudited)
12,308,587

(394,035
)
(54,368
)
(4,606,364
)
(3,497,996
)
3,755,824

214,562

3,970,386

 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these carve-out combined consolidated financial statements





5

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Vale Fertilizantes S.A
 
 

 
 

Unaudited Carve-out Combined Consolidated Statements of Cash Flows - Indirect Method
(In thousands of United States dollars)
 
 
 
 
(Unaudited)
 
 
 
 
 
 
Nine Months Ended
 
 
September 30, 2017

 
September 30, 2016

 
 
 
 
 
Cash flows from operating activities
 
 

 
 

 
 
 

 
 

Net income (loss) before income taxes
 
(239,679
)
 
(79,715
)
 
 
 
 
 
Depreciation, amortization and depletion
 
221,526

 
305,820

Results on measurement or sale of non-current assets
 
(15,612
)
 
7,984

Share of profit of equity-accounting investees, net of tax
 
(470
)
 
(2,275
)
Unrealized financial results, net
 
27,036

 
20,889

Provision for litigations and employee benefits
 
(1,405
)
 
7,838

Allocations of corporate overheads from companies combined that not impact cash
 
(213
)
 
(6,366
)
 
 
(8,817
)
 
254,175

Changes in assets and liabilities
 
 
 
 
Trade and other receivables, net
 
12,445

 
(32,472
)
Recoverable taxes
 
(19,120
)
 
6,187

Inventories
 
1,811

 
139,458

Trade and other payables
 
15,684

 
72,130

Supply chain finance
 
14,057

 
(128,294
)
Income tax paid
 
(538
)
 
(5,808
)
Interests paid on loans and borrowings
 
(335
)
 
(2,635
)
Net cash provided by operating activities
 
15,187

 
302,741

Cash flow (used in) investing activities
 
 
 
 
Purchase of investments
 
(2,100
)
 
(3,206
)
Acquisitions of fixed and intangible assets
 
(186,599
)
 
(275,963
)
Others
 

 
2,837

Net cash used in investing activities
 
(188,699
)
 
(276,332
)
Cash flows provided by (used in) financing activities
 
 
 
 
Dividends paid to shareholders
 

 
(27,990
)
Capital increase and advanced payment for future increase of capital
 
167,548

 
2,723

Cash absorbed by acquisition of subsidiary
 

 

Payment of loans and leases
 
(34,474
)
 
(13,751
)
Net cash provided by (used in) financing activities
 
133,074

 
(39,018
)
Effect of exchange rate changes on cash and cash equivalents
 
(999
)
 
(34,286
)
(Decrease) increase in cash and cash equivalents
 
(41,437
)
 
(46,895
)
Cash and cash equivalents in the beginning of the year
 
104,419

 
221,798

Cash and cash equivalents at end of the year
 
62,982

 
174,903

 
 
(41,437
)
 
(46,895
)
 
 
 
 
 
Non-cash transactions
 
 
     
 
Additions to property, plant and equipment
 

     
1,220

 
 
 
 
 
The accompanying notes are an integral part of these carve-out combined consolidated financial statements


6

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Notes to the Combined Consolidated Financial Statements

(Expressed in thousands of United States dollars, unless otherwise stated)

1 Corporate information

Vale S.A. and its direct and indirect subsidiaries (“Vale”) are global producers of iron ore and iron ore pellets, key raw materials for steelmaking, and producers of nickel, which is used to produce stainless steel and metal alloys employed in the production of several products. Vale also produces copper, metallurgical and thermal coal, potash, phosphates and other fertilizer nutrients, manganese ore, ferroalloys, platinum group metals, gold, silver and cobalt.

In December 2016, Vale entered into an agreement with The Mosaic Company (“Mosaic”) to sell (i) the phosphate assets located in Brazil, except those mainly related to nitrogen assets located in Cubatão (Brazil); (ii) the control of Compañia Minera Miski Mayo S.A.C., in Peru (“Miski Mayo”); (iii) the potassium assets located in Brazil; and (iv) the potash projects in Canada.

On the January 8, 2018, Mosaic announced the completion of the acquisition of Vale Fertilizantes S.A. The aggregate consideration paid by Mosaic to Vale S.A. at the closing of the transaction was comprised of (i) approximately $1.08 billion in cash, and (ii) 34,176,574 shares of Mosaic common stock, par value $0.01 per share issued and delivered to Vale and Vale Netherlands.

Vale may receive additional earn-out of the transaction up to US$260,000 in circumstances where the phosphate price (“MAP”-Monoammonium Phosphate) and the Real exchange rate exceed certain levels during each of the twelve month periods after the completion of the transaction during two years.

On November 17, 2017 Vale S.A. announced that it entered into a quota purchase agreement with Yara International ASA (“Yara”), a company listed on the Oslo Stock Exchange, to sell its fully owned subsidiary Vale Cubatão Fertilizantes Ltda., which currently owns and operates the nitrogen and phosphate assets located in Cubatão, Brazil. 

These carve-out combined consolidated financial statements comprise the combination of Vale Fertilizantes S.A., Vale International and selling, general and administrative expenses for fertilizer segment recorded in Vale S.A (together the “Vale Fertilizantes Group” or the “Group” and defined as “Vale Fertilizantes” in these combined consolidated financial statements). The carve-out combined consolidated financial statements presented herein reflect the assets and liabilities, income and expenses, and cash flows of those operations that have been carved out from Vale’s consolidated financial statements for the purpose of presenting the financial position, results of operations and cash flows of Vale Fertilizantes on a stand-alone basis as explained in the section basis for preparation of the carve-out combined financial statements.

2 Basis of preparation of the carve-out combined financial statements

Vale Fertilizantes S.A. has prepared these Carve-out Combined Consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by International Accounting Standards Board (“IASB”)

Vale Fertilizantes S.A. used the same accounting policies and valuation methods for the preparation of these Carve-out Combined Financial Statements, as those used by the Vale companies for the preparation of the financial information included in Vale S.A.’s Consolidated Financial Statements. These accounting policies have been disclosed in the respective notes to the financial statements.


7

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


The carve-out combined consolidated financial statements have been prepared on a carve-out basis using the historical assets and liabilities, income and expenses, and cash flows attributable to operations subject of the carve-out combined transaction as described in note 1.

The purpose of these Carve-out Combined Consolidated Financial statements is to provide general purpose historical financial information of the fertilizer segment in connection with the transaction with Mosaic described in note 1. Therefore, the Carve-out Combined consolidated financial statements present only historical information of those entities that are combined as part of Vale Fertilizantes.

The carve-out financial statements are presented to provide additional analyses of Vale Fertilizantes Group operations; accordingly, they do not represent the parent company or consolidated financial statements of Vale S.A. and its subsidiaries, and are not be used as basis for dividend and tax calculations or any other corporate purposes or profitability and performance analysis.

The preparation of the carve-out financial statements requires Management to use its judgment to determine and record accounting estimates. Assets and liabilities subject to these estimates and assumptions substantially relate to deferred income tax assets, the provision for litigation liabilities, asset retirement obligation, provision for employee benefits, the fair value measurement of the financial instruments and allocation of expenses from the Parent. The settlement of transactions involving these estimates may result in amounts that differ from those estimated due to inaccuracies inherent to its determination. The estimates and assumptions adopted are periodically reviewed by Vale Fertilizantes Group Management.

The carve-out combined consolidated financial statements have been prepared on the historical cost basis.

IFRS does not provide guidance for the preparation of carve-out financial statements, and accordingly in preparing the carve-out combined consolidated financial statements certain accounting conventions commonly used for the preparation of historical financial statements have been applied. The criteria below were adopted for the carve-out of the parent company financial statements of each company that comprise the combined business:

a.
Carve-out criteria

During the period Vale Fertilizantes operated as part of the larger group of companies controlled by Vale S.A., and accordingly, a process has been completed to specifically identify assets, liabilities, revenues, expenses and cash flows associated to the Group in preparing the carve out combined consolidated financial statements. Assets, liabilities and costs that were related to the larger business of Vale S.A. were also assessed to allocate these items between Vale Fertilizantes S.A. (Fertilizer) and the rest of the business of Vale S.A. This allocation has been completed based on the following general process:

i.
Vale International, a subsidiary of Vale S.A. acquires phosphate rock from Miski Mayo (subsidiary of Vale Fertilizantes) and resells to the market, the outcome of this operation is related to the fertilizers business. The outcome of the aforementioned transaction is being combined at Vale Fertilizantes Group.

ii.
Corporate overhead functions performed for the Group - These functions include, but are not limited to executive oversight, legal, finance, human resource, internal audit, financial reporting and tax planning. The costs of such services has been allocated to the Business based on the most relevant allocation method to the service provided, primarily based on the headcount. Management of Vale Fertilizantes S.A. (Vale S.A.) believes that such allocation is reasonable, however, they may not be indicative that would have been incurred had the Group been operating as a separate entity apart from Vale S.A. The cost allocated for these functions is included in administrative expenses in the carve-out financial statements for the relevant periods presented. The amount related to the aforementioned corporate expenses is disclosed on note 18.


8

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


The Group believes the basis for preparation described above results in the financial information reflecting the assets and liabilities associated with the business and reflects cost associated with the functions that would be necessary to operate independently.

b.
List of companies included in the carve-out combined consolidated financial statements

The significant direct and indirect subsidiaries of Vale Fertilizantes, included in the carve-out combined consolidated financial statements, are as follows:
 
 
 
 
 
Equity interest - %
Subsidiaries
Location
 
Main activity/Business
 
September 30, 2017
 
September 30, 2016
 
 
 
 
 
 
 
 
Vale Fertilizer International Holding B.V
Netherlands
 
Holding
 
100.0%
 
100.0%
Potasio Rio Colorado S.A.
Argentina
 
Potash project
 
100.0%
 
100.0%
Vale Potash Canada Limited
Canada
 
Potash project
 
100.0%
 
100.0%
Vale Exploracion Argentina S.A.
Argentina
 
Potash project
 
90.0%
 
90.0%
Ferteco Europa Sarl
Luxembourg
 
Holding
 
100.0%
 
100.0%
MVM Resources Intenational B.V (i)
Netherlands
 
Holding
 
40.0%
 
40.0%
Compañia Minera Miski Mayo S.R.L (ii)
Peru
 
Fertilizer
 
40.0%
 
40.0%
Prairie Potash Mines Limited
Canada
 
Potash project
 
66.7%
 
66.7%
Cubatão Nitrogenados S.A.
Brazil
 
Holding
 
100.0%
 
100.0%
Industria de Fosfatados Catarinense Ltda.
Brazil
 
Phosphate project
 
99.9%
 
99.9%

(i)
As of September 30, 2017 and 2016 the percentages for each shareholder are Ferteco Europa Sarl (40.0%), Mitsui Bussan Fertilizer Resources B.V. (25.0%) and Bayovar Holdings S.A.R.L. (35.0%). The voting rights in the MVM Resources International B.V. are held by Ferteco Europa Sarl (51.0%), Mitsui Bussan Fertilizer Resources B.V. (25.0%) and Bayovar Holdings S.A.R.L. (24.0%).
(ii)
As of September 30, 2017 and 2016 MVM Resources International B.V holds 99.88% of shares in the Compañia Minera Miski Mayo S.R.L.

The financial position and statement of operations of the companies included in the carve-out combined consolidated financial statements as at September 30, 2017 and 2016 are detailed below:

 
Total assets
 
Net assets
 
Results of operations
 
September 30, 2017

 
December 31, 2016

 
September 30, 2017

 
December 31, 2016

 
September 30, 2017

 
September 30, 2016

 
 

 
 
 
 

 
 
 
 

 
 

Vale Fertilizantes S.A.
890,359

 
5,223,545

 
3,592,518

 
4,043,612

 
(132,040
)
 
(52,652
)
Vale International

 

 
666

 
6,283

 
666

 
7,489

Vale S.A. (SG&A)

 

 
(453
)
 
(1,498
)
 
(453
)
 
(1,123
)

c.
Functional currency and presentation currency

The carve-out combined consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which in the case of the Company is the Brazilian real (“BRL” or “R$”). For presentation purposes, these financial statements are presented in United States dollar (“USD” or “US$”). All amounts have been rounded to the nearest thousand, unless otherwise indicated.

Transactions in foreign currencies are translated into the respective functional currencies of the Group at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-

9

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss.

The assets and liabilities of operations which functional currency is different from the presentation currency, including goodwill and fair value adjustments arising on acquisition, are translated into USD at the exchange rates at the reporting date. The income and expenses of operations which functional currency is different from the presentation currency are translated into USD at the exchange rates at the dates of the transactions.

Presentation currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

d.
Recently issued accounting pronouncements

The Group has not early adopted any standards and interpretations that have been issued or amended but which are not yet in force. The accounting policies of subsidiaries, affiliates and joint ventures are adjusted to ensure consistency with the policies adopted by the Group.

Significant and relevant accounting policies for the understanding of the financial statements were included in the respective notes, with a summary of the recognition and measurement basis used by the Group.

The brief description of the recent accounting pronouncements issued by the IASB, which are not yet in force, and the current assessment performed by the Group of the impacts on its financial statements, subject to changes based on continuing evaluation and analysis, are detailed below:

IFRS 9 Financial instrument-In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement. This standard brings new approaches about: (i) classification and measurement of financial assets and liabilities, (ii) impairment and (iii) hedge accounting. This standard shall apply for annual periods beginning on or after January 1, 2018.

The Group does not plan the early adoption of this new standard. Based on the history of financial instruments traded by the Group, significant impacts are not expected on financial statements by applying the IFRS 9 requirements.

IFRS 15 Revenue from Contracts with Customers-In May 2014, the IASB issued IFRS 15, which replaces IAS 18 Revenues and the related interpretations. IFRS 15 introduces the five-step model for revenue recognition from contract with a customer. The new standard is based on the principle that revenue is recognized when the control of a good or service to be transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard shall apply for annual periods beginning on or after January 1, 2018.

The Group does not plan the early adoption of this new standard. Based on the history of Contracts with Customers traded by the Group, significant impacts are not expected on financial statements by applying the IFRS 15 requirements.

IFRS 16 Lease-In January 2016, the IASB issued IFRS 16, which replaces IAS 17 Leases and related interpretations. IFRS 16 set forth that in all leases with a maturity of more than 12 months, with limited

10

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


exceptions, the lessee must recognize the lease liability in the financial position at the present value of the payments, plus costs directly allocated and at the same time that it recognizes a right of use corresponding to the asset. During the term of the lease, the lease liability is adjusted to reflect interest and payment made and the right to use is amortized, similar to the financial lease settled up in accordance with IAS 17. This standard shall apply for annual periods beginning on or after January 1, 2019.

The Group has not yet quantified the impact of adopting IFRS 16 on its assets and liabilities. The quantitative effect of the adoption of IFRS 16 will depend specifically on the Group´s decision related to the method of transition, the use of practical expedients approach and exemptions for recognition, and any additional leases that Group will hold. The Group expects to disclose its transition approach and quantitative information prior to adoption, planned for January 1, 2019.

IAS 7 Amendments (Disclosure Initiative)-The amendments to IAS 7 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate cash flows and non-cash changes in liabilities arising from financing activities. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. Application of the amendments will result in additional disclosures provided by the Group. The Group has adopted these amendments as of January 1, 2017. This adoption did not have a material impact on the financial statements.

e.
Use of judgement and estimates

The preparation of financial statements requires the use of certain critical accounting estimates, assumptions and judgments by the management of the Group. These estimates are based on the best knowledge and information existing at the financial position date. Changes in facts and circumstances may lead to the revision of these estimates. Actual future results may differ from the estimates.

The significant estimates, assumptions and judgments used by Group are described in these notes as follows:
 
 
 
Note
 
Significant estimates, assumptions and judgments
2 a
 
Allocation of expenses from Vale S.A.
7 a.
 
Deferred income taxes
9
 
Impairment test of non-current assets
11
 
Mineral reserves and life cycle of the mines
14 a.
 
Litigation
14 b.
 
Asset retirement obligation
15
 
Post-retirement benefits

3 Cash and cash equivalents

Accounting policy

The amounts recognized as cash and cash equivalents correspond to the values available in cash, bank deposits and highly liquid short-term investments, with original maturities less than 90 days, and with insignificant risk of changing value.


11

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
September 30, 2017

 
December 31, 2016

Cash
 
19,142

 
23,411

Cash equivalents
 
43,840

 
81,008

 
 
62,982

 
104,419


Cash equivalents includes immediately redeemable deposits and short-term investments indexed to the Brazilian Interbank Interest rate (“DI Rate” or “CDI”).

Cash and cash equivalents includes US$25,630 (2016: US$40,963) denominated in US$, US$36,383 (2016: US$61,710) denominated in R$ and US$969 (2016: US$1,746) denominated in other currencies.

4 Trade and other receivables, net

Accounting policy

Trade and other receivables are financial instruments classified in the category loan and receivables and represent the total amount due from sale of products and services rendered by the Group. The receivables are initially recognized at fair value and subsequently measured at amortized cost, net of impairment losses, when applicable.

Trade receivables related to sales of phosphate rocks of the Peruvian operation are initially invoiced according to the provisional price. Subsequently, trade accounts receivable are adjusted with price provisional adjustment to month-end or the final settlement (Trued-up Transfer Pricing).

 
 
September 30,

 
December 31,

 
 
2017

 
2016

Trade receivables
 
90,952

 
80,868

Trade receivables due from related parties 
 
27,174

 
24,748

Other receivables (i)
 
253,763

 
237,433

 
 
371,889

 
343,049

Impairment of trade receivables
 
(15,842
)
 
(15,953
)
 
 
356,047

 
327,096

 
 
 

 
 

Current
 
119,304

 
106,333

Non-current
 
236,743

 
220,763

 
 
356,047

 
327,096


(i)
The Group sold in 2013 the subsidiary Araucária Nitrogenados S.A. to the Petróleo Brasileiro S.A. (Petrobras”). The account receivable, which is indexed to 100% of the Certificate of Interbank Deposit (CDI), is being paid by Petrobras in a quarterly basis in the amounts equivalent to the royalties of the potassium assets and mining rights of Taquari-Vassouras and Carnallite projects which are owed by the Group to Petrobras. In case of Taquari-Vassouras closes its mine before Petrobras settle this amount, Petrobras will pay cash of the remaining amount until 2030. As at September 30, 2017 the receivable related to the aforementioned transaction amounted to US$218,746 (2016: $201,988). The remaining amount relates to several other receivables.

Trade receivables are non-interest-bearing and are generally on terms of 1 to 60 days.

As at 30 September 2017, trade receivables with a nominal value of US$15,842 (2016: US$15,953) were impaired and fully provided for. Movements in the allowance for impairment of receivables were as follows:


12

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
September 30, 2017

 
December 31, 2016

  At 1 January
(15,953
)
 
(8,220
)
  Charge for the year
(28
)
 
(6,082
)
  Amounts written off
108

 
111

  Transfer to non-current assets held for sale

 
7

  Translation adjustment
31

 
(1,769
)
 
(15,842
)
 
(15,953
)

As at 30 September 2017, the analysis of trade receivables that were past due, but not impaired, is, as follows:

 
Total

Neither past due nor impaired

Past due but not impaired
< 30 days

30-60 days

> 60 days

2017
90,952

73,258

520



2016
80,868

73,897

6,891


80

In determining the recoverability of a trade or other receivable, the Group performs a risk analysis considering the type and age of the outstanding receivable and the creditworthiness of the counterparty.

5 Inventories

Accounting policy

Inventories are stated at the lower of cost or the net realizable value. The inventory production cost is determined on the basis of variable and fixed costs, direct and indirect costs of production, using the average cost method.

 
September 30, 2017

 
December 31, 2016

   Finished goods
278,509

 
254,829

   Raw materials
30,539

 
26,419

   Spare parts
73,867

 
73,548

   Imports in transit
9,357

 
8,211

 
392,272

 
363,007

   Net realizable value
(4,190
)
 
(6,960
)
   Impairment
(16,648
)
 
(15,691
)
 
371,434

 
340,356

 
 
 
 
   Current
349,877

 
318,447

   Non-current
21,557

 
21,909

 
371,434

 
340,356

 
 
 
 

6 Recoverable taxes


13

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
September 30, 2017

 
December 31, 2016

   Brazilian federal contributions (i)
 
199,775

 
181,296

   Value-added tax (VAT)
 
41,250

 
41,246

   Income tax and social contribution
 
38,126

 
29,833

   Others
 
10

 
1,784

 
 
279,161

 
254,159

   Impairment of value-added tax (VAT)
 
(20,352
)
 
(19,663
)
 
 
258,809

 
234,496

 
 
 
 
 
(i)
Relates to Brazilian Federal Contributions (PIS and COFINS) credits which will be used to settle other taxes administered by the Federal Tax Authority.
   Current
 
81,107

 
62,020

   Non-current
 
177,702

 
172,476

 
 
258,809

 
234,496


7 Income taxes

Accounting policy

The recognition of income taxes and social contribution as deferred taxes is based on temporary differences between carrying value and the tax basis of assets and liabilities as well as taxes losses carryforwards. The deferred income taxes assets and liabilities are offset when there is a legally enforceable right on the same taxable entity.

The deferred taxes assets arising from taxes losses and temporary differences are not recognized when their recovery amount are not probable.

Income taxes are recognized in the statement of operations, except for items recognized directly in Other Comprehensive Income (loss). The provision for income taxes is calculated individually for each entity and Group based on local taxes rates, on and accrual basis.

Tax charges in the Combined Carve-out Consolidated Financial Statements have been determined based on the tax charges recorded by Vale Fertilizantes companies in their statutory accounts, adjusted for the impact of the adjustments made for carve-out combined financial statements purposes.

Critical accounting estimates and judgments

Deferred tax assets arising from tax losses carryforward and temporary differences are recognized taking into account the analysis of future performance, considering economic and financial projections, prepared based on internal assumptions and macroeconomic, trade and tax scenarios that may be subject to changes in the future. The assumptions of future profits are based on production and sales planning, commodity prices, operational costs, restructuring plans, reclamation and planned capital costs.

a.
Deferred income tax assets and liabilities


14

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
September 30, 2017

 
December 31, 2016

 
 
 
 
 
Tax losses carryforward
 
94,508

 
24,320

Temporary differences:
 
 

 
 

Employee benefits
 
77,150

 
64,052

Provision for litigation
 
22,980

 
24,031

Provision for assets retirement obligations
 
60,965

 
75,578

Impairment
 
332,412

 
304,157

Finance lease
 
2,301

 
2,014

Depreciation and depletion
 
8,749

 
6,231

Others
 
5,889

 
4,233

 
 
510,446

 
480,296

Total
 
604,954

 
504,616

 
 
 
 
 
Assets
 
626,776

 
525,849

Liabilities
 
(21,822
)
 
(21,233
)
 
 
604,954

 
504,616


Changes in deferred tax are as follows:
 
 
Assets

 
Liabilities

 
Total

 
 
 
 
 
 
 
Balance at December 31, 2015 (Unaudited)
 
116,964

 
13,198

 
103,766

  Taxes losses carryforward
 
19,865

 

 
19,865

  Impairment of non-financial assets
 
303,274

 

 
303,274

  Others
 
15,273

 
6,221

 
9,052

Effect in statement of profit or loss
 
338,412

 
6,221

 
332,191

Employee benefits - Defined benefit plans
 
70,473

 
1,814

 
68,659

Balance at December 31, 2016
 
525,849

 
21,233

 
504,616

  Taxes losses carryforward
 
55,679

 

 
55,679

  Impairment of non-financial assets
 
(4,512
)
 

 
(4,512
)
  Others
 
28,408

 
589

 
27,819

Effect in statement of profit or loss
 
79,575

 
589

 
78,986

Employee benefits - Defined benefit plans
 
21,352

 

 
21,352

Balance at September 30, 2017
 
626,776

 
21,822

 
604,954


The Group projections shows deferred tax assets substantially being realized in the next five years. The tax loss carryforward do not expire and in the Brazilian jurisdiction the compensation is limited to 30% of the taxable income for the year. For local results there is no restriction to compensated profits from foreign subsidiaries against previously recorded deferred tax assets.

b.
Income taxes reconciliation
The total amount presented as income taxes in the statement of operations is reconciled to the rate established by law, as follows:


15

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 September 30, 2017

 
December 31, 2016

 
 
 
 
Net Income (losses) before income taxes
(239,679
)
 
(1,134,222
)
Income taxes at statutory rates - 34%
81,491

 
385,635

 
 
 
 
Adjustments that effect the basis of taxes
 
 
 
Share of profit of equity accounting investees, net of tax
160

 
1,144

Nondeductible effect of impairment

 
(10,386
)
Unrecognized tax losses of the year
(2,163
)
 
(44,658
)
Others
(537
)
 
3,371

Income taxes
78,951

 
335,106

Brazilian income taxes are subject to review for a five-year period, during which the tax authorities might audit and assess the Group for additional taxes and penalties. The subsidiaries located abroad are taxed in their respective jurisdictions, according to local regulations.

8 Non-current assets and liabilities held for sale

Accounting policy

A non-current asset is classified as held for sale if its carrying amount will be recovered mainly through a sale transaction rather than through continuing use.

The criteria for recognition the non-current assets as held for sale are only considered satisfied when the sale is highly probable and the asset (or disposal group of assets) is available for immediate sale in its present condition. The Group measures the assets held for sale (or group of assets) at the lower of its carrying amount and fair value less costs to sell. If the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized against income. Any subsequent reversal of impairment is recognized only to the extent of the loss previously recognized.

The assets and liabilities of a disposal group classified as held for sale are presented separately in the statement of financial position.


16

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
2017

Assets
 
Cash and cash equivalents
8,774

Trade and other receivables, net
30,898

Inventories
44,960

Recoverable taxes
7,148

Judicial deposits
519

Other assets
10,434

Property, plant and equipment, net
424,943

Intangibles
34,622

 
562,298

 Liabilities
 

Trade and other payables
30,881

Supply chain finance
32,277

Advance from customers
14,274

Other liabilities
2,798

Taxes payable
1,421

Payroll and related charges
7,633

Profit sharing
4,833

Employee benefits
14,282

Provisions
76,031

 
184,430

Net non-current assets held for sale 
377,868


The Group is actively trying to identify potential buyers to its assets located in Cubatão, which are mainly dedicated to the nitrogenous operation (“Cubatão business”). As such, Cubatão business’ assets and liabilities were classified as assets and liabilities held for sale according to IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations.

The Group did not identify any decrease in the recoverable value in Cubatão’s assets.

9 Investments in associates

a.
The material non-consolidated entities for the Group are as follows:

 
 
Ownership and
voting capital %
 
Investment
 
Equity results in the
statement of profit or loss
Entities
 
September 30, 2017
 
December 31, 2016

 
September 30, 2017

 
December 31, 2016

 
September 30, 2017

 
September 30, 2016

 
 
 
 
 
 
 

 
 
 
 

 
 

TUF Empreendimentos e Participações S.A.
 
18,99
 
18,99

 
93,922

 
90,092

 
470

 
2,275

Others
 
0
 

 
47

 
46

 

 

 
 
 
 
 

 
93,969

 
90,138

 
470

 
2,275


TUF Emprendimentos e Participações S.A. “TUF” is a holding company that has interest in Ultrafertil S.A., maritime terminal located in Santos. TUF recognizes in its results share of profit of equity-accounted of investee (Ultrafertil).

The Company has interest in TUF since 2013 and the interest are accounted for using the equity method. 
b.
Investee information

17

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
September 30, 2017
 Entities
 
Assets

 
Liabilities

 
Equity

 
Net income

 
 
 

 
 

 
 

 
 

TUF Empreendimentos e Participações S.A.
 
529,553

 
37,897

 
491,656

 
(447
)
 
 
529,553

 
37,897

 
491,656

 
(447
)
 
 
 

 
 

 
 

 
 

 
 
December 31, 2016
 Entities
 
Assets

 
Liabilities

 
Equity

 
Net income

 
 
 

 
 

 
 

 
 

TUF Empreendimentos e Participações S.A.
 
478,329

 
3,911

 
474,418

 
15,480

 
 
478,329

 
3,911

 
474,418

 
15,480


c.
Non-controlling interest

The summarized financial information, prior to the eliminations of the intercompany balances and transactions, about subsidiaries with non-controlling interest are as follows:
 
 
September 30, 2017
 
 
MVM Resources International B.V. (Consolidated)

 
Vale Exploration Argentina S.A.

 
Total

Current assets
 
87,589

   
2,136

   
89,725

Non-current assets
 
402,336

   
1,129

   
403,465

Total assets
 
489,925

   
3,265

   
493,190

 
 
   

   
   

   
   

Current liabilities
 
36,445

   
14

   
36,459

Non-current liabilities
 
96,418

   

   
96,418

Total liabilities
 
132,863

   
14

   
132,877

 
 
   

   
   

   
   

Stockholders' equity
 
357,062

   
3,251

   
360,313

Equity attributable to non-controlling interests
 
214,237

   
325

   
214,562

 
 
   

   
   

   
   

Net income (loss)
 
(33,997
)
   
(5
)
   
(34,002
)
Income (loss) attributable to non-controlling interests
 
(20,398
)
   

   
(20,398
)
 
 
 

 
 

 
 

Dividends paid
 

 

 

Dividends attributable to non-controlling interests
 

 

 



18

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
 December 31, 2016
 
 
MVM Resources International B.V. (Consolidated)

 
Vale Exploration Argentina S.A.

 
Total

Current assets
 
114,627

 
1,421

 
116,048

Non-current assets
 
419,079

 
1,884

 
420,963

Total assets
 
533,706

 
3,305

 
537,011

 
 
 
 
 
 
 
Current liabilities
 
43,611

 
49

 
43,660

Non-current liabilities
 
99,021

 

 
99,021

Total liabilities
 
142,632

 
49

 
142,681

 
 
 
 
 
 
 
Stockholders' equity
 
391,074

 
3,256

 
394,330

Equity attributable to non-controlling interests
 
234,644

 
326

 
234,970

 
 
 
 
 
 
 
Net income (loss)
 
3,130

 
426

 
3,556

Income (loss) attributable to non-controlling interests
 
1,878

 
43

 
1,921

 
 
 
 
 
 
 
Dividends paid
 
46,652

 

 
46,652

Dividends attributable to non-controlling interests
 
27,991

 

 
27,991


10 Property, plant and equipment, net

Accounting policy

Property, plant and equipment are evaluated at the cost of acquisition or construction, net of
amortization and impairment.

Mineral properties developed internally are determined by (i) direct and indirect costs attributed to build the mine site and plant, (ii) financial charges incurred during the construction period, (iii) depreciation of other fixed assets used during construction, (iv) estimated decommissioning and site restoration expenses, and (v) other capitalized expenditures occurred during the development phase (phase when the project demonstrates its economic benefit to the Group, and the Group has ability and intention to complete the project).
 
The depletion of mineral properties is determined based on the ratio between production and total proven and probable mineral reserves.

Property, plant and equipment, other than mineral properties are depreciated using the straight-line method based on the estimated useful lives, from the date on which the assets become available for their intended use and are capitalized, except for land which is not depreciated.

The estimated useful lives are as follows:
 
Useful life in years
 
 
Building and improvement
25-40
Equipment and facilities
10-27
Vehicles
3-8
Mining assets
Production
Others:
 
  Furniture, utensils and equipment
3-10

The residual values and useful lives of assets are reviewed at the end of each fiscal year and adjusted if necessary.


19

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


Gains and losses on disposals of property, plant and equipment items are calculated by comparing the proceeds of the disposals with their net book values and recognized in other operating expenses, net in the statement of operations at the disposal date.

Maintenance Cost
Significant industrial maintenance costs, including spare parts, assembly services, and others, are recorded in property, plant and equipment and depreciated through the next programmed maintenance overhaul.

Stripping costs
The cost associated with the removal of overburden and other waste materials (“stripping costs”) incurred during the development of mines, before production takes place, are capitalized as part of the depreciable cost of the mineral properties. These costs are subsequently amortized over the useful life of the mine.
 
Post-production stripping costs are included in the cost of inventory, except when a new project is developed to permit access to a significant ore deposits. In such cases, the cost is capitalized as a non-current asset and is amortized during the extraction of the ore deposits, over the useful life of the ore deposits.
 
Stripping costs are measured at fixed and variable costs directly and indirectly attributable to its removal and, when applicable, net of any impairment losses measured in the same basis adopted for the cash generating unit of which it belongs.

Critical accounting estimates and judgments

The estimations of proven and probable reserves are periodically assessed and updated. These reserves are determined using techniques of generally accepted geological estimations. The calculation of the reserves required the Group to takes positions on future conditions which are uncertain, including future prices of the mineral, exchange and inflation rates, mining technology, licenses availability and production costs. Alterations in some of these positions assumed can significantly impact in the proven reserves and probable reserves of the Group.

The estimated volume of mineral reserves is used as basis for the calculation of depletion of the mineral properties, and also for the estimated useful life which is a major factor to quantify the provision for asset retirement obligation, environmental recovery of mines and impairment of long lived asset. Any changes to the estimates of the volume of mine reserves and the useful lives of assets may have a significant impact on the depreciation, depletion and amortization charges and assessments of impairment.


20

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
Land

 
Building

 
Equipment

 
Vehicles

 
Construction in progress

 
Mineral properties

 
Others

 
Total

 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Balance at January 1, 2017
 
96,810

 
656,119

 
1,916,928

 
97,671

 
302,863

 
1,500,050

 
218,310

 
4,788,751

Additions
 

 

 
2,051

 

 
156,648

 
738

 
63,137

 
222,574

Disposal
 

 
(1,648
)
 
(56,461
)
 

 

 

 
(89
)
 
(58,198
)
Transfer to non-current assets held for sale
 
(2,165
)
 
(357
)
 
(40,608
)
 
(4
)
 
21,704

 

 
4,717

 
(16,713
)
Transfer to current assets
 

 

 

 
(1,073
)
 

 

 
(63
)
 
(1,136
)
Transfers
 
3,676

 
32,141

 
113,699

 

 
(136,408
)
 
33,135

 
(46,243
)
 

Translation adjustment
 
3,174

 
17,719

 
51,488

 
3,395

 
3,674

 
39,371

 
3,477

 
122,298

Balance at September 30, 2017
 
101,495

 
703,974

 
1,987,097

 
99,989

 
348,481

 
1,573,294

 
243,246

 
5,057,576

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Depreciation / Depletion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
 

 
(299,975
)
 
(1,111,989
)
 
(66,449
)
 

 
(169,845
)
 
(138,734
)
 
(1,786,992
)
Additions
 

 
(21,093
)
 
(147,765
)
 
(9,402
)
 

 
(38,281
)
 
(3,957
)
 
(220,498
)
Disposal
 

 
827

 
56,258

 
(3
)
 

 

 
76

 
57,158

Transfer to non-current assets held for sale
 

 
(282
)
 
3,930

 
3

 

 

 
(1,087
)
 
2,564

Transfer to current assets
 

 

 

 
1,029

 

 

 
62

 
1,091

Translation adjustment
 

 
(8,207
)
 
(27,878
)
 
(2,389
)
 

 
(4,193
)
 
(553
)
 
(43,220
)
Balance at September 30, 2017
 

 
(328,730
)
 
(1,227,444
)
 
(77,211
)
 

 
(212,319
)
 
(144,193
)
 
(1,989,897
)
Net Balance at September 30, 2017
 
101,495

 
375,244

 
759,653

 
22,778

 
348,481

 
1,360,975

 
99,053

 
3,067,679












21

Vale Fertilizantes S.A.
Carve-out Combined Consolidated Financial Statements on
September 30, 2017 and 2016


 
 
Land

 
Building

 
Equipment

 
Vehicles

 
Construction in progress

 
Mineral properties

 
Others

 
Total

 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Balance at January 1, 2016
 
134,233

 
625,829

 
2,100,698

 
66,438

 
177,388

 
2,200,356

 
165,548

 
5,470,490

Additions (i)
 
7,303

 
673

 
21,790

 
50

 
256,603

 
(46,174
)
 
36,467

 
276,712

Asset retirement obligation
 

 

 

 

 

 
27,391

 
22,699

 
50,090

Disposal
 
(115
)
 
(415
)
 
(55,378
)
 
(28
)
 

 
(12,466
)
 
(4,203
)
 
(72,605
)
Transfer to non-current assets held for sale
 
(27,001
)
 
(85,528
)
 
(560,247
)
 
(246
)
 
(13,944
)
 

 
(37,623
)
 
(724,589
)
Impairment
 
(51,983
)
 

 

 

 

 
(1,026,512
)
 

 
(1,078,495
)
Transfer to current assets
 

 
(569
)
 
77

 
(4,433
)
 

 

 
(1,637
)
 
(6,562
)
Transfers
 
16,401

 
13,073

 
94,331

 
22,399

 
(153,875
)
 
2,145

 
5,526

 

Translation adjustment
 
17,972

 
103,056

 
315,657

 
13,491

 
36,691

 
355,310

 
31,533

 
873,710

Balance at December 31, 2016
 
96,810

 
656,119

 
1,916,928

 
97,671

 
302,863

 
1,500,050

 
218,310

 
4,788,751

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Depreciation / Depletion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2016
 

 
(250,066
)
 
(1,054,026
)
 
(44,090
)
 

 
(230,816
)
 
(94,936
)
 
(1,673,934
)
Additions
 

 
(33,071
)
 
(229,582
)
 
(16,156
)
 

 
(5,239
)
 
(39,955
)