Fitch Ratings upgraded the foreign and local currency long-term issuer default ratings of Vale SA to BBB from BBB-, with a stable outlook.

Fitch also affirmed Vale's national long-term rating at AAA(bra), it said Sept. 1.

The ratings action reflects steps the company took over the past 18 months that lowered the risk of future dam failures and the ensuing implications on the environment and people in the surrounding communities.

The rating agency said Vale's low leverage and strong free cash flow can allow it to withstand any sharp downturn in iron ore prices or unexpected legal liabilities that relate to the Brumadinho dam failure at the Feijao iron ore mine in January 2019.

Vale had US$3.4 billion of provisions outstanding as of June 30 related to the Brumadinho disaster. It paid US$1.4 billion in 2019 and the first half of 2020.

Fitch said it expects EBITDA of US$18.5 billion in 2020 and year-end net debt of US$2 billion for Vale after distributing over US$2 billion of dividends.

Free cash flow, before dividend distribution, is expected at about US$3 billion in 2021, provided that iron ore prices average US$75 per ton and that the company generates US$15.5 billion of EBITDA, pays US$1.6 billion for expenses related to Brumadinho and spends US$6 billion on capital expenditures.

The Public Prosecution Office of Minas Gerais, Brazil, recently requested the freezing of 26.7 billion reais in Vale's assets, to be used as compensation for the economic losses of the state associated with the dam burst at Feijao.

As of Sept. 1, US$1 was equivalent to 5.37 Brazilian reais.