| Property, plant, and equipment |
13. Property, plant, and equipment
For more details regarding right
of use and lease liability see note 22.
Water overflow at Fabrica and Viga
In January 2026 (subsequent event),
there was an overflow of water mixed with sediments at the Fábrica and Viga mines, located in the municipalities of Ouro Preto
and Congonhas, Minas Gerais, respectively. The Municipality of Congonhas suspended the operating permits, resulting in the
shutdown of the Fábrica and Viga operations.
In February 2026 (subsequent event),
the Company became aware of four legal proceedings related to the event, which seek the adoption of different interim measures, including
asset freezes, and were filed by the following authorities: (i) the Federal Prosecutor’s Office (MPF), which, in two separate actions,
requested asset freezes of US$182 and US$36 in connection with the overflows at Fábrica and Viga, respectively; (ii) the State
of Minas Gerais, in relation to the overflow at the Viga unit, requesting an asset freeze of US$182; and (iii) the State Prosecutor’s
Office of Minas Gerais (MPMG) together with the State of Minas Gerais, in relation to the overflow at the Fábrica unit, requesting
an asset freeze of US$154, alleging the need to prevent the worsening of supposed environmental damages.
All legal proceedings filed by the
authorities have already been promptly addressed by the Company, resulting in the dismissal of three out of the four requests for asset
freezes. At this time, it remains pending the action related to Viga, filed by the Federal Prosecutor’s Office.
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Accounting policy
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Property, plant, and equipment are recorded
at the cost of acquisition or construction, net of accumulated depreciation and impairment charges.
Mineral properties developed internally
are determined by (i) direct and indirect costs attributed to build the mining facilities, (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 during the development phase (phase when the project demonstrates its economic benefit
to the Company, and the Company 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: |
| Schedule
of estimated useful lives of property, plant and equipment |
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Useful life |
| Buildings |
10 to 50 years |
| Facilities |
18 to 40 years |
| Equipment |
3 to 40 years |
| Railway equipment |
5 to 45 years |
| Mineral properties |
1 to 120 years |
| Right of use assets |
1 to 18 years |
| Other |
2 to 50 years |
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The residual values and useful lives of assets are reviewed at the end of each reporting period and adjusted if necessary.
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Expenditures and stripping costs
(i) Exploration and
evaluation expenditures - Expenditures on mining research are accounted for as operating expenses
until the effective proof of economic feasibility and commercial viability of a given field can be demonstrated. From then on, the expenditures
incurred are capitalized as mineral properties.
(ii) Expenditures
on feasibility studies, new technologies and others research - The Company also conducts feasibility
studies for many businesses which it operates including researching new technologies to optimize the mining process. After these costs
are proven to generate future benefits to the Company, the expenditures incurred are capitalized.
(iii) Maintenance
costs - 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.
(iv) Stripping Costs
– After the effective proof of economic feasibility and commercial viability of the field,
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 deposit. 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. |
Critical accounting estimates and judgments
Mineral reserves |
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Mineral reserves - The estimates of proven
and probable reserves are regularly evaluated and updated. These reserves are determined using generally accepted geological estimates.
The calculation of reserves requires the Company to make assumptions about expected future conditions that are uncertain, including future
ore prices, exchange rates, inflation rates, mining technology, availability of permits and production costs. Changes in assumptions could
have a significant impact on the proven and probable reserves of the Company.
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.
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