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FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 2021
Schedule of financial instruments

 

                            Consolidated
Consolidated           12/31/2021       12/31/2020
  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     5         16,646,480   16,646,480        9,944,586     9,944,586
Short-term investments     6    2,383,059    261,673     2,644,732    3,305,109    478,253     3,783,362
Trade receivables     7        2,597,838     2,597,838        2,867,352     2,867,352
Dividends and interest on equity   10       76,878   76,878       38,088   38,088
Trading securities   10   12,028       12,028    5,065         5,065
Loans - related parties   10        4,511     4,511             
Total        2,395,087     19,587,380   21,982,467    3,310,174     13,328,279   16,638,453
                             
Non-current                            
Investments     6        147,671    147,671        123,409    123,409
Other trade receivables   10        2,345     2,345        2,445     2,445
Eletrobrás compulsory loan   10        859,607    859,607        852,532    852,532
Receivables by indemnity   10        534,896    534,896        517,183    517,183
Loans - related parties   10        1,143,228     1,143,228        966,050    966,050
Investments   11    190,321        190,321   59,879       59,879
Total        190,321    2,687,747     2,878,068   59,879    2,461,619     2,521,498
                             
Total Assets        2,585,408     22,275,127   24,860,535    3,370,053     15,789,898   19,159,951
                             
Liabilities                              
Current                            
Borrowings and financing    14        5,532,736     5,532,736        4,155,483     4,155,483
Trade payables   18        6,446,999     6,446,999        4,819,539     4,819,539
Trade payables -  drawee risk   16        4,439,967     4,439,967        623,861    623,861
Dividends and interest on capital   16        1,206,870     1,206,870        946,133    946,133
Leases   17        119,047    119,047       93,626   93,626
Derivative financial instruments                     8,722         8,722
Total             17,745,619   17,745,619    8,722     10,638,642   10,647,364
                             
Non-current                            
Borrowings and financing    14         27,221,914   27,221,914         31,215,128   31,215,128
Trade payables   18       98,625   98,625        543,527    543,527
Derivative financial instruments        101,822        101,822   97,535       97,535
Leases   17        492,504    492,504        436,505    436,505
Total        101,822     27,813,043   27,914,865   97,535     32,195,160   32,292,695
                             
Total Liabilities        101,822     45,558,662   45,660,484    106,257     42,833,802   42,940,059
Schedule of financial instruments at fair value through profit or loss

 

The table below shows the financial instruments recorded at fair value through profit or loss, classifying them according to the fair value hierarchy:

 

Consolidated           12/31/2021           12/31/2020
  Level 1   Level 2   Balances   Level 1   Level 2   Balances
Assets                        
Current                        
Financial investments      2,383,059          2,383,059      3,305,109          3,305,109
Trading securities           12,028                              12,028             5,065                                 5,065
Non-current                        
Investments         190,321                             190,321           59,879                               59,879
Total Assets      2,585,408                            2,585,408      3,370,053                            3,370,053
                         
Liabilities                        
Current                        
Derivative financial instruments                                                                                                  8,722            8,722
Non-current                        
Derivative financial instruments                              101,822        101,822                                97,535          97,535
Total Liabilities             101,822        101,822                              106,257        106,257
Schedule of other Operating Income and Expenses

 

In accordance with the Company’s policy, the gains and losses arising from the variation in the share price are recorded directly in the income statement as financial result in the case of financial investments, or as other operating income and expenses in the case of long-term investments.

 

Class of shares   12/31/2021   Sales of shares   12/31/2020   12/31/2021   12/31/2020   12/31/2019
  Quantity   Equity interest (%)   Share price   Closing Balance   Quantity   Share price   Net cash received   Net gain from the transaction   Quantity   Equity interest (%)   Share price   Closing Balance   Profit or loss for the period in 2021 (notes 28 and 29)
USIM3   106,620,851   15.12%    14.51   1,547,069     (535,800)    23.57    12,627     3,569   107,156,651   15.19%     15.69    1,681,288    (121,593)     623,652     (168,236)
USIM5     55,144,456   10.07%    15.16   835,990    (56,000,000)    23.12     1,294,720    502,275   111,144,456   20.29%     14.61    1,623,821     506,890     566,837    32,232
                2,383,059             1,307,347    505,844                3,305,109     385,297   1,190,489     (136,004)
PATI3    2,705,726   11.31%    70.34   190,321                    2,065,529   11.31%     28.99     59,879     109,254    12,579    17,224
                2,573,380             1,307,347    505,844                3,364,988     494,551   1,203,068     (118,780)
The consolidated net exposure as of December 31, 2021, is shown below:

The consolidated net exposure as of December 31, 2021, is shown below:

 

        12/31/2021
Foreign Exchange Exposure   (Amounts in US$’000)   (Amounts in €’000)
Cash and cash equivalents overseas    1,656,271    74,652
Trade receivables    212,424    5,004
Financial investments    23,748    
 Other assets     57,424    
Total Assets    1,949,867    79,656
Borrowings and financing    (3,866,290)    
Trade payables   (613,961)   (2,455)
Advances from customer   (197,325)    
Other liabilities   (9,631)    
Total Liabilities   (4,687,207)   (2,455)
Foreign exchange exposure   (2,737,340)    77,201
Cash flow hedge accounting    2,655,350    
Exchange rate swap CDI x Dollar    (67,000)    
Net foreign exchange exposure   (148,990)    77,201
The currencies used in the sensitivity analysis and their respective scenarios are shown below:

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

 

                12/31/2021
Currency   Exchange rate   Probable scenario   Scenario 1   Scenario 2
USD                        5.5805                 5.0611           6.9756               8.3708
EUR                        6.3210                 5.7378           7.9013               9.4815
USD x EUR                        1.1327                 1.1337           1.4159               1.6991
The effects on the result, considering scenarios 1 and 2 are shown below:

The effects on the result, considering scenarios 1 and 2 are shown below:

 

                    12/31/2021
Instruments   Notional   Risk   Probable scenario (*) R$
   Scenario 1 R$   Scenario 2 R$
                     
Gross exchange position    (2,737,340)   Dollar    1,421,774    (3,818,931)   (7,637,863)
                     
Cash flow hedge accounting   2,655,350   Dollar   (1,379,189)   3,704,545    7,409,090
                     
Exchange rate swap CDI x Dollar     (67,000)   Dollar    34,800    (93,473)    (186,947)
                     
Net exchange position    (148,990)   Dollar    77,385    (207,859)    (415,720)
                     
Net exchange position   77,201   Euro   (45,024)   121,997   243,994

 

(*) The probable scenarios were calculated considering the following variations for risks: Real x Dollar – valuation of the Real by 9.31% / Real x Euro - valuation of the Real by 9.23% / Euro x Dollar - devaluation of Euro by 0.09%. Source: Central Bank of Brazil and European Central Bank quotations on 2/22/2022.
The effects on the result, considering the probable scenarios, 1 and 2 are shown below:

The effects on the result, considering the probable scenarios, 1 and 2 are shown below:

 

        12/31/2021
Class of shares   Probable scenario   Scenario 1   Scenario 2
    5%   25%   50%
 USIM3           (77,353)        (386,767)         (773,534)
 USIM5           (41,799)        (208,997)         (417,995)
 PATI3             (9,516)          (47,580)           (95,160)
The interest rates used in the sensitivity analysis and their respective scenarios are shown below:

The interest rates used in the sensitivity analysis and their respective scenarios are shown below:

 

            12/31/2021
Interest   Interest rate   Scenario 1   Scenario 2
CDI   9.15%   11.44%   13.73%
TJLP   5.32%   6.65%   7.98%
LIBOR   0.34%   0.42%   0.51%
The effects on the result, considering scenarios 1 and 2 are shown below:

The effects on the result, considering scenarios 1 and 2 are shown below:

 

                        Consolidated
                    Impact on profit or loss
Changes in interest rates   % p.a   Assets   Liabilities   Probable scenario (*)
   Scenario 1   Scenario 2
CDI      9.15           3,908,490           (5,778,965)        (2,041,623)         (2,084,411)         (2,127,198)
TJLP      5.32                  (800,884)           (843,491)            (854,143)            (864,794)
LIBOR      0.34               (5,449,749)        (5,468,210)         (5,472,825)         (5,477,440)
(*)The sensitivity analysis is based on the premise of maintaining the market values as of December 31, 2021 as a probable scenario recorded in the company’s assets and liabilities.
Schedule of dollar x Euro swap

 

                            12/31/2021   12/31/2020   12/31/2019
                Appreciation (R$)   Fair value (market)   Impact on financial income (expenses) (note 29)
Counterparties   Maturity   Functional Currency   Notional amount   Asset position   Liability position   Amounts receivable / (payable)  
Exchange rate swap Dollar x Real   Settled   Dollar                  37,322        
Total dollar x real swap (NDF)                          37,322        
                                     
Exchange rate swap Dollar x Euro    Settled   Dollar                     1,784    (4,749)     783
Exchange rate swap Dollar x Euro    Settled   Dollar                    5,335    (4,321)    
Total dollar-to-euro swap                            7,119    (9,070)     783
                                     
Exchange rate swap GBP x Euro    Settled   GBP                         (602)    
Total Swap GBP x Euro                            (602)     
                                     
Exchange rate swap CDI x Dollar    10/02/2023   Dollar   (67,000)   298,408   (400,230)     (101,822)    (9,960)   (106,143)     4,203
Total Swap CDI x dollar           (67,000)   298,408   (400,230)     (101,822)    (9,960)   (106,143)     4,203
                                     
Interest rate (Debentures) CDI x IPCA   07/15/2036   Real     576,448   616,912   (634,400)    (17,488)     (17,488)        
Interest rate (Debentures) CDI x IPCA   07/15/2031   Real     423,552   464,380   (481,812)    (17,432)     (17,432)        
Total interest rate (Debentures) CDI x IPCA             1,000,000   1,081,292    (1,116,212)    (34,920)     (34,920)          
                                     
        1,379,700    (1,516,442)     (136,742)    (439)   (115,815)     4,986
Schedule of hedging instruments

The table below presents a summary of the relations of hedge as of December 31, 2021:

 

 

                                    12/31/2021
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$'000)
07/21/2015   Export prepayments in US$ 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     (60,000)     (33,016)     
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   (100,000)     (52,436)     
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    August 2018 - October 2022      3.2850    30,000     (24,000)     (12,057)     (13,773)
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    August 2018 - October 2022      3.3254   100,000   (100,000)     (39,382)     (39,382)
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    August 2018 - October 2022      3.3557    25,000     (24,150)   (9,694)    (1,891)
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    August 2018 - October 2022      3.3557    70,000     (56,000)     (27,143)     (31,147)
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    August 2018 - October 2022      3.3557    30,000     (24,000)     (11,633)     (13,349)
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    August 2018 - October 2022      3.3815    30,000     (24,000)     (11,478)     (13,194)
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    July 2018 - October 2022      3.3940   355,000   (343,000)   (131,680)     (26,238)
2/4/2018   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   (820,045)        (794,535)
07/31/2019   Bonds and Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    January 2020 - April 2026      3.7649   1,342,761   (261,261)     (21,781)    (1,949,731)
10/1/2020   Bonds with no maturity date and Export prepayments in US$ to third parties   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    March 2020 - December 2050      4.0745   1,416,000   (1,237,000)   (174,990)    (1,506,060)
01/28/2020   Bonds   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    March 2017 - January 2028      4.2064   1,000,000            (1,374,101)
Total                       5,728,806   (3,073,456)   (525,290)    (5,763,401)
(*)On December 31, 2021, the amount of (R$525,290) was recorded in Other Operating Expenses. As of December 31, 2020, (R$ 1,667,886).

The changes in the hedge accounting amounts recognized in shareholders’ equity as of December 31, 2021 are as follows:

The changes in the hedge accounting amounts recognized in shareholders’ equity as of December 31, 2021 are as follows:

 

              Consolidated
  12/31/2020   Movement   Realization   12/31/2021
Cash flow hedge accounting          5,125,058            1,163,633               (525,290)            5,763,401
Schedule of reclassified to other operating income and expenses

The table below shows the result of the derivative instrument on December 31, 2021:

 

      12/31/2021   12/31/2020   12/31/2021   12/31/2020   12/31/2021   12/31/2020
      Other income and expenses (note 28)   Other comprehensive income   Exchange variation
 Maturity     Notional     
09/02/2020 (Settled)    Platts    (31,678)           (136)
10/02/2020 (Settled)    Platts     (132,997)           (9,051)
11/04/2020 (Settled)    Platts    (85,164)           (7,301)
12/02/2020 (Settled)    Platts    (33,310)          52
02/02/2021 (Settled)    Platts  (36,405)         (6,888)     (2,690)     (185)
03/02/2021 (Settled)    Platts  (34,116)       6,063     (2,870)   117
04/02/2021 (Settled)    Platts   11,961          59  
05/04/2021 (Settled)    Platts  (30,226)         1,133  
05/12/2021 (Settled)    Platts  (37,594)         2,308  
06/02/2021 (Settled)    Platts   (134,768)          10,880  
07/02/2021 (Settled)    Platts  (76,330)         5,638  
08/02/2021 (Settled)    Platts  7,088           (305)  
09/02/2021 (Settled)    Platts    233,546           (182)  
10/02/2021 (Settled)    Platts   69,116         2,819  
      (27,728)    (283,149)       (825)    16,790   (16,504)
The change in the amounts related to cash flow hedge accounting - “Platts” index recorded in shareholders’ equity on December 31, 2021, is shown as follows:

The change in the amounts related to cash flow hedge accounting - “Platts” index recorded in shareholders’ equity on December 31, 2021, is shown as follows:

 

  12/31/2020   Movement   Realization   12/31/2021
Cash flow hedge accounting - “Platts”  825    26,903   (27,728)    
Income tax and social contribution on cash flow hedge accounting (280)   (9,148)    9,428    
Fair Value of cash flow accounting - Platts, net  545    17,755   (18,300)    
Schedule of balance sheet and statement of income

 

·Classification of derivatives in the balance sheet and income

 

                  12/31/2021   12/31/2020   12/31/2021   12/31/2020   12/31/2021   12/31/2020   12/31/2019
Instruments     Liabilities   Other operating income expenses (note 28)   Other comprehensive income   Financial income (expenses), net (note 29)
    Current   Non-current   Total      
Exchange rate swap Dollar x Real                            37,322       783
Exchange rate swap Dollar x Euro                             7,119   (9,070)  
Exchange rate swap GBP x Euro                               (602)  
Exchange rate swap CDI x Dollar           (101,822)    (101,822)             (9,960)     (106,143)   4,203
Iron ore derivative                (27,728)   (283,149)       (825)     16,790    (16,504)  
Interest rate swap CDI x IPCA      (34,920)        (34,920)              (34,920)      
       (34,920)    (101,822)    (136,742)   (27,728)   (283,149)       (825)     16,351     (132,319)   4,986
The following are the contractual maturities of financial liabilities including interest.

The following are the contractual maturities of financial liabilities including interest.

 

                  Consolidated
At December 31, 2021 Less than one year   From one to two years   From two to five years   Over five years   Total
Borrowings, financing and debentures (note 14)          5,532,736            5,293,830            6,645,074          15,283,010          32,754,650
Lease Liabilities (note 17)             119,047               161,417               134,040               197,047               611,551
Derivative financial instruments (note 15 I)                                        101,822                                                                     101,822
Trade payables (note 18)          6,446,999                44,340                54,285                                       6,545,624
Trade payables - Drawee Risk (note 16)          4,439,967                                                                                             4,439,967
Dividends and interest on equity (note 16)          1,206,870                                                                                             1,206,870
         17,745,619            5,601,409            6,833,399          15,480,057          45,660,484
The estimated fair value for certain consolidated long-term borrowings and financing was calculated at current market rates, considering the nature, term and risks similar to those of the registered contracts, as follows:

The estimated fair value for certain consolidated long-term borrowings and financing was calculated at current market rates, considering the nature, term and risks similar to those of the registered contracts, as follows:

 

      12/31/2021       12/31/2020
  Closing Balance   Fair value   Closing Balance   Fair value
Perpetual bonds (1)                                                                          5,203,773             5,157,465
Fixed Rate Notes            15,617,091            15,700,276              15,067,341            15,744,067

(1) The Perpetual Bond was settled on September 23, 2021
Schedule of capital Management

The Company seeks to optimize its capital structure in order to reduce its financial costs and maximize the return to its shareholders. The table below shows the evolution of the Company’s consolidated capital structure, with financing by equity and third-party capital:

 

Thousands of reais   12/31/2021   12/31/2020
Shareholder's equity (equity)          23,374,389          11,251,505
Borrowings and Financing (Third-party capital)          32,507,522          35,270,653
Gross Debit/Shareholder's equity                    1.39                    3.13