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12 FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 2019
Financial instruments [Abstract]  
Schedule of financial instruments

Classification of financial instruments

 

                            Consolidated
            12/31/2019       12/31/2018
  Notes   Fair value through profit or loss   Measured at amortized cost   Balances   Fair value through profit or loss   Measured at amortized cost   Balances
             
Assets                            
Current                            
Cash and cash equivalents   3         1,088,955     1,088,955       2,248,004     2,248,004
Financial investments   4         2,633,173     2,633,173         895,713     895,713
Trade receivables   5         2,047,931     2,047,931       2,078,182     2,078,182
Dividends receivable   7       44,554     44,554         46,171     46,171
Derivative financial instruments   7   1,364         1,364   351         351
Trading securities   7   4,034         4,034   4,503         4,503
Loans - related parties   7                   2,675     2,675
Total       5,398     5,814,613     5,820,011   4,854   5,270,745     5,275,599
                             
Non current                            
Financial investments   4       95,719     95,719       7,772     7,772
Other trade receivables   7         7,059     7,059       7,451     7,451
Compulsory loan -  Eletrobrás   7       845,284     845,284         813,428     813,428
Loans - related parties   7       846,300     846,300         706,605     706,605
Investments   8   47,300         47,300   2,279,189         2,279,189
Derivative financial instruments   7   4,203         4,203            
Total       51,503     1,794,362     1,845,865   2,279,189   1,535,256     3,814,445
                             
Total Assets       56,901     7,608,975     7,665,876   2,284,043   6,806,001     9,090,044
                             
Liabilities                            
Current                            
Borrowings and financing     11         5,152,234     5,152,234       5,681,797     5,681,797
Leases    13.a       35,040     35,040            
Trade payables             3,012,654     3,012,654       3,408,056     3,408,056
Trade payables - Drawee risk     13         1,121,312     1,121,312         65,766     65,766
Dividends and interest on equity     13       13,252     13,252         932,005     932,005
Total             9,334,492     9,334,492         10,087,624     10,087,624
                             
Non current                            
Borrowings and financing     11       22,938,469     22,938,469         23,260,944     23,260,944
Leases    13.a       439,350     439,350            
Total           23,377,819     23,377,819         23,260,944     23,260,944
                             

Total

Liabilities

           32,712,311     32,712,311         33,348,568     33,348,568
Schedule of financial instruments at fair value through profit or loss

The following table shows the financial instruments recognized at fair value through profit or loss using a valuation method:

 

Consolidated       12/31/2019       12/31/2018
  Level 1   Level 2   Balances   Level 1   Level 2   Balances
Assets                        
Current                        
Financial assets at fair value through profit or loss                             
Derivative financial instruments          1,364   1,364       351   351
Trading securities   4,034       4,034   4,503       4,503
Non-current                        
Financial assets at fair value through profit or loss                             
Investments   47,300       47,300   2,279,189       2,279,189
Financial derivative instruments       4,203   4,203            
Total Assets   51,334   5,567   56,901   2,283,692   351   2,284,043
Schedule of other Operating Income and Expenses

In accordance with the Company's policy, gains and losses arising from changes in the share price are recorded directly in the statement of income under Other Operating Income and Expenses.

 

Class of shares   12/31/2019   12/31/2018   12/31/2019
  Quantity   Interest (%)   Share price   Closing Balance   Quantity   Interest (%)   Share price   Closing Balance   Fair value
adjustment
recognized in profit
or loss (note 23)
USIM3   107,156,651   15.19%   9.87   1,057,636   107,156,651   15.19%   11.44   1,225,872   (168,236)
USIM5   111,144,456   29.29%   9.51   1,056,984   111,144,456   29.29%   9.22   1,024,751   32,232
                2,114,620               2,250,623   (136,004)
PATI3   2,065,529   11.31%   22.90   47,300   1,997,642   11.33%   14.30   28,566   17,224
                2,161,920               2,279,189   (118,780)
Schedule of foreign exchange exposure

The consolidated net exposure as of December 31, 2019 is as follows: 

 

        12/31/2019
Foreign Exchange Exposure   (Amounts in US$’000)   (Amounts in €’000)
Cash and cash equivalents overseas   105,485   10,937
Trade receivables   346,264   1,179
 Other assets   3,516   5,815
Total Assets   455,265   17,931
Borrowings and financing   (4,096,899)   (24,395)
Trade payables   (69,284)   (10,488)
Other liabilities   (2,680)   (963)
Total Liabilities   (4,168,863)   (35,846)
Foreign exchange exposure   (3,713,598)   (17,915)
Cash flow hedge accounting   2,530,713    
Swap CDI x U.S.Dollar   67,000    
Net Investment hedge accounting       24,000
Net foreign exchange exposure   (1,115,885)   6,085
Perpetual Bonds   1,000,000    
Net foreign exchange exposure excluding perpetual bonds   (115,885)   6,085
Schedule of dollar x Euro swap

The company has derivative operations with Bradesco Bank to hedge its NCE debt raised in September 2019 with maturity in October 2023 in the amount of US$ 67million (equivalent to R$ 278milhões), at a cost consistent with that usually praticed by the Company.

 

       

Consolidated

 

                            12/31/2019
                Appreciation (R$)   Fair value
(market)		   Impact on financial income (expenses) in 2019
Counterparties   Maturity   Functional Currency   Notional amount   Asset
position		   Liability
position		   Amounts receivable / (payable)  
BCP   02/07/2020   Dollar   12,875   51,923   (50,559)   1,364   783
Total Dollar-to-Euro swap           12,875   51,923   (50,559)   1,364   783
                             
Bradesco   10/02/2023   Dollar   67,000   298,385   (294,182)   4,203   4,203
Total Swap CDI x dollar           67,000   298,385   (294,182)   4,203   4,203
                             
        350,308   (344,741)   5,567       4,986
Schedule of balance sheet and statement of income

Classification of the derivatives in the balance sheet and statement of income

 

                12/31/2019
Instruments   Assets   Finance income (expenses), net (note 24)
  Current   Non current   Total  
Dollar to euro swap   1,364       1,364   783
Swap CDI x dollar       4,203   4,203   4,203
    1,364   4,203   5,567   4,986
Schedule of hedging instruments

The table below shows a summary of the hedging relationships as of December 31, 2019:

 

                                    12/31/2019
Designation Date   Hedging Instrument   Hedged item   Type of hedged risk   Hedged period   Exchange rate on designation   Designated amounts (US$’000)   Amortizated part (USD'000)   Effect on Result
(*) (R$'000)		   Impact on
Shareholders'
equity (R$'000)
3/11/2014   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2016 -
September 2019		   2.4442     500,000   (500,000)   (384,346)    
1/12/2014   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate   October 2015 -
February 2019		   2.5601     175,000   (175,000)   (23,184)    
12/18/2014   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    May 2020   2.6805   30,000           (40,506)
12/18/2014   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    May 2020   2.6780   35,000           (47,345)
12/18/2014   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    May 2020   2.6760   35,000           (47,409)
07/21/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    July 2019 - March
2021		   3.1813   60,000   (15,000)   (11,254)   (38,223)
07/23/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    July 2019 - March
2021		   3.2850     100,000   (25,000)   (14,676)   (55,928)
07/23/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2018 -
October 2022		   3.2850   30,000   (12,000)   (4,315)   (13,423)
07/24/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2018 -
October 2022		   3.3254     100,000   (40,000)   (13,574)   (42,318)
07/27/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2018 -
October 2022		   3.3557   25,000   (10,000)   (3,242)   (10,125)
07/27/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2018 -
October 2022		   3.3557   70,000   (28,000)   (9,077)   (28,350)
07/27/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2018 -
October 2022		   3.3557   30,000   (12,000)   (3,890)   (12,150)
07/28/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    October 2018 -
October 2022		   3.3815   30,000   (12,000)   (4,004)   (11,686)
3/8/2015   Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    Outubro de 2018 a Outubro de 2022   3.3940     355,000   (84,091)   (12,990)   (172,488)
4/2/2018   Bonds   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    July 2018 - February 2023   3.3104   1,170,045   (644,000)   (305,801)   (378,915)
7/31/2019   Bonds and Export prepayments in US$   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    January 2020 - April 2026   3.7649   1,342,759           (356,904)
Total                       4,087,804   (1,557,091)   (790,353)     (1,255,770)

 

(*) In 2019, was recognized in other operational, the amount of (R$790,353). On December 31,2018 was (R$370,191).
Schedule of changes in hedge accounting

The movements in the hedge accounting amounts recognized in shareholders’ equity as of December 31, 2019 are as follows:

 

  12/31/2018   Movement   Realization   12/31/2019
Cash flow hedge accounting 1,441,295              604,828             (790,353)           1,255,770
Fair value of cash flow hedge, net of taxes 1,441,295              604,828             (790,353)           1,255,770
Schedule of non-derivative financial liabilities

Non-derivative financial liabilities have been designated represented by loan agreements with financial institutions in the amount of € 120 million. The carrying amounts on December 31, 2019 are:

 

                        12/31/2019
Designation Date   Hedging Instrument   Hedged item   Type of hedged risk   Exchange rate on designation   Designated amounts (EUR'000)   Amortized part (USD’000) Impact on shareholders' equity
09/30/2015   Non-derivative financial liabilities in EUR – Debt contract   Investments in subsidiaries which EUR is the functional currency   Foreign exchange - R$ vs. EUR spot rate   4.0825   120,000   (96,000) 1,469
Total                   120,000   (96,000) 1,469
Schedule of changes in net investment hedge

The changes in the amounts related to net investment hedge recognized in shareholders’ equity as of December 31, 2019 are presented below:

 

           
  12/31/2018      Movement   12/31/2019
Net Investment hedge accounting 3,941   (2,472)   1,469
Fair value of net investment hedge in foreign operations 3,941   (2,472)   1,469
Schedule of currencies used in sensitivity analysis

The currencies used in the sensitivity analysis and its scenarios are shown below:  

 

                12/31/2019
Currency   Exchange rate   Probable scenario   Scenario 1   Scenario 2
USD                       4.0307                4.4946          5.0384              6.0461
EUR                       4.5305                5.0038          5.6631              6.7958
USD x EUR                       1.1234                1.1122          1.4043              1.6851
                 
            12/31/2019    
Interest   Interest rate   Scenario 1   Scenario 2    
CDI   4.40%   5.50%   6.60%    
TJLP   5.57%   6.96%   8.36%    
Libor   1.91%   2.39%   2.87%    
Schedule of sensitivity analysis effects on income statement

The effects on income statement, considering scenarios 1 and 2 are shown below:

 

                    12/31/2019
Instruments   Notional   Risk   Probable scenario (*)   Scenario 1   Scenario 2
                     
Hedge accounting of exports       2,530,713   Dollar  

    1,173,998

 

   2,550,136   5,100,272
                     
Swap CDI x Dollar            67,000   Dollar  

         31,081

 

   67,514   135,028
Currency position                    
(not including exchange derivatives above)      (3,713,598)   Dollar  

  (1,722,738)

 

   (3,742,100)   (7,484,200)
                     
Consolidated exchange position   (1,115,885)   Dollar  

     (517,659)

 

  

     (1,124,450)

 

   (2,248,900)
(including exchange derivatives above)                    
                     
Net Investment hedge accounting   24,000   Euro   11,359   27,183   54,366
                     
 Currency position   (17,915)   Euro   (1,637)   (20,291)   (40,582)
                     
Consolidated exchange position   6,085   Euro   557   6,892   13,784
(including exchange derivatives above)                    
                     
Dollar-to-euro swap   12,875   Dólar   (2,463)   9,021   15,944

 

(*) The probable scenarios were calculated considering the following variations for the risks: Real x Dollar – depreciation of Real by 11.51% / Real x Euro – depreciation of Real by 10.45%. Euro x Dollar – appreciation of Euro by 1.0%. Source: quotations from Central Bank of Brazil and Central Bank of Europe on 02/03/2020.
Schedule of sensitivity analysis of interest rate swaps

The Company considered the scenarios 1, and 2 as 25% and 50% of evolution for volatility of the interest as of December 31, 2019.

 

                        Consolidated
                    Impact on profit or loss
Changes in interest rates   % p.a   Assets   Liabilities   Probable scenario (*)   Scenario 1   Scenario 2
TJLP   5.57       (870,637)   (2,481)   (12,124)   (24,248)
Libor   1.91       (4,275,363)   (57,620)   (20,438)   (40,876)
CDI   4.40   462,831   (10,148,220)   (28,594)   (106,539)   (213,078)

 

(*) The sensitivity analysis is based on the assumption of maintaining as probable scenario the market rates at December 31, 2019 recorded in the Company´s assets and liabilities.
Schedule of contractual maturities of financial liabilities

The following table shows the contractual maturities of financial liabilities and lease liabilities, including accrued interest.

 

                  Consolidated
At December 31, 2019 Less than one year   From one to two years   From two to five years   Over five years   Total
Borrowings, financing and debentures (note 11) 5,152,234   6,888,149   9,087,030   6,963,290   28,090,703
Lease (Note 13a) 35,040   44,873   44,872   349,605   474,390
Trade payables (note 12I) 3,012,654               3,012,654
Trade payables – Drawee risk (note 12I) 1,121,312               1,121,312
Dividends and interest on equity (note 13) 13,252               13,252
Schedule of fair values of assets and liabilities

The estimated fair values for certain consolidated long-term borrowings and financing were calculated at prevailing market rates, taking into consideration the nature, terms and risks similar to those of the recorded contracts, as below: 

 

      12/31/2019       12/31/2018
  Carrying amount   Fair value   Carrying amount   Fair value
Perpetual bonds          4,036,186            3,706,553            3,880,074            2,850,615
Fixed Rate Notes          8,090,297            8,345,471            6,745,132            7,595,765
Schedule of capital Management

The table below shows the evolution of the capital structure of the Company with financing by equity and third-party capital.

 

Thousands of reais   12/31/2019   12/31/2018
Shareholder's equity (equity)   11,361,932   10,013,440
Borrowings and Financing (Third-party capital)   27,967,036   28,827,074
Gross Debit/Shareholder's equity   2.46   2.88