Strong fundamentals and value creation Strong fundamentals and value creation New York February 2008 1
Disclaimer ”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and Vale cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian and Canadian economies and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore and nickel businesses and their dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which Vale operates. For additional information on factors that could cause Vale’s actual results to differ from expectations reflected in forward-looking statements, please see Vale’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.” 2
Agenda • The strength of long-term market fundamentals • A successful investment performance 3
The strength of long-term market fundamentals 4
The subprime crisis heightened financial asset price volatility Equity and metals price volatility January 2007 = 100 700 600 500 400 300 200 100 0 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 MSCI World MSCI Financials MSCI Metals & Mining LMEX 5
Despite their sensitivity to cyclical fluctuations, mining equity prices have been resilient to recessionary expectations Equity prices July 1, 2007 = 100 180 160 140 120 100 80 Jul-07 Sep-07 Nov-07 Jan-08 RIO MSCI World MSCI Metals & Mining 6
Metal prices use to fall in anticipation of a global growth deceleration LMEX index Monthly average 4,300 Global growth below 3% 3,800 3,300 2,800 2,300 1,800 1,300 800 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 Source: Reuters Ecowinx 7
Despite signals of a sharp slowdown of the US economy, base metals prices have been resilient Aluminum price Copper price Nickel price US$/metric ton US$/metric ton US$/metric ton 37,000 2,800 8,500 35,000 2,700 8,000 33,000 2,600 7,500 31,000 2,500 29,000 7,000 2,400 27,000 6,500 2,300 25,000 2,200 6,000 23,000 Jul-07 Sep-07 Nov-07 Jan-08 Jul-07 Sep-07 Nov-07 Jan-08 Jul-07 Sep-07 Nov-07 Jan-08 Source: LME 8
Prices of steelmaking raw materials are under massive pressure. Iron ore spot prices remained stable amidst decreasing freight prices Spot iron ore prices Spot freight prices US$/metric ton Brazil-China US$/metric ton Chinese iron ore spot Indian iron ore C&F 250 120 203.1 100 200 189.2 80 150 61.8 60 100 40 50 20 0 0 Jan-07 Mar-07 Jun-07 Sep-07 Dec-07 Jan-07 Mar-07 Jun-07 Sep-07 Dec-07 Sources: Mysteel, Clarksons 9
Strong demand growth and supply constraints produced soaring met coal prices ... Metallurgical coal prices 200 Australian contract HCC fob Australian Spot HCC fob 180 US$/metric ton, fob Australia 160 140 120 100 80 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Source: CRU 10
…as well manganese alloy prices FeMnMc prices 3,500 3,000 2,500 US$ per ton 2,000 1,500 1,000 500 0 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 11 Source: CRU
Prices of thermal coal, precious metals and minor metals are following the same trend, reflecting market tightness Thermal coal¹ Platinum Cobalt US$/metric ton US$/troy oz US$/metric ton 55 95 1,900 1,800 90 50 1,700 85 45 1,600 80 40 1,500 1,400 75 35 1,300 70 30 1,200 65 25 1,100 60 1,000 20 Jul-07 Sep-07 Nov-07 Jan-08 Jul-07 Sep-07 Nov-07 Jan-08 Jul-07 Sep-07 Nov-07 Jan-08 ¹ FOB Newcastle 12 Source: Nymex Source: Reuters EcoWin Source: Coal Portal and Global Coal
We expect the global economy to remain on an above- average historical growth path driven by globalization, productivity growth and low real interest rates Global GDP growth 7% CAGR 1970–2006: 3.7% 6% 2003-2007E: 5.0% 2008E-2012E: 4.0% 4.9% 5% 4.5% 4.0% 4.0% 4% 3.7% 3% 2% 1% 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008E 2010E Sources: IMF and Vale 13
Emerging market economies are in the forefront of structural change with important implications on the demand for metals � Urbanization – Housing – Infrastructure – Consumer durables � Industrialization 14
China is much less sensitive to US cyclical gyrations than small export-oriented Asian economies GDP growth ¹ 12% 10% 8% 6% 4% 2% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -2% -4% -6% China Hong Kong Singapore Taiwan USA ¹ Shaded area represents a recession period as defined by the NBER 15 Sources: FMI, NBER and Vale
External demand has been a minor contributor to China`s economic growth Chinese GDP growth composition 11.4% 9.9% 1.7% 9.7% 9.6% 0.5% 1.1% 1.0% 3.0% 5.2% 3.4% 4.3% 6.2% 5.4% 4.5% 4.3% 1980-89 1990-99 2000-06 2007¹ Consumption Investment Net exports ¹Vale estimates Sources: CEIC and Vale 16
China is still in the middle of a long-term economic development process. It is expected to stay in the fast growth track… Chinese GDP growth CAGR 15% 1990–2006: 9.8% 2003-2007E: 10.7% 12% 2008-2012E: 9.0% 11.4% 10.0% 9.5% 9% 8.7% 8.5% 8.5% 6% 3% 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008E 2010E 2012E Sources: IMF and Vale 17
… and will remain as the main driver of global materials demand Chinese share in global consumption % 2000 2007 2011E Iron ore¹ 15.4 49.0 54.0 Nickel² 4.9 24.2 31.0 Aluminum² 14.0 33.0 41.0 Copper² 12.7 26.3 30.0 ¹ share of Chinese imports in seaborne trade ² ending November 2007 Sources: WBMS and Vale 18
On the other hand, several challenges constrain an adequate mining supply response to price incentives � Lack of large scale projects � “Easy discoveries” are gone � Natural resources nationalism � Environmental permitting � Higher capex costs and shortages � Technological challenges 19
A successful investment performance 20
A strong track record of project delivery, providing new value-creation vehicles Carajás 100 Mtpy Capão Taquari- São Luís Mo I Rana Xavier Vassouras Brucutu Pier III Fábrica Capim Trombetas PDM Nova Branco I 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 Carajás 85 Mtpy Alunorte 3 Sossego Aimorés Alunorte 4&5 Carajás Funil Candonga Capim 70 Mtpy Branco II Paragominas I 21
A proven track record of successful acquisitions - US$ 25 billion over the last years Consolidation Growth Consolidation Growth of iron ore of iron ore plataform in plataform in leadership coal leadership coal Becoming a Becoming a global leader global leader in nickel in nickel 22
As a result of investment growth and operational excellence, our production grew at 11.6% per year over the last five years. It is expected to maintain the high growth path over the next five years Vale aggregate production growth 1 300 CAGR 2008E-2012E: 10.9% 250 Equivalent iron ore production unit base Greenfield 200 CAGR 2003-2007: 11.6% index base 2003 = 100 Brownfield 150 Existing Operations 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ¹ index encompassing the production of all products produced by Vale, base 2003 = 100. 23
The growth process has been firmly anchored on a rigorous discipline on capital allocation Return on capital invested 43.3 Capital invested US$ billion 1 64.4% 54.3% ROIC % 2 54.7% 52.1% 31.2 46.8% 11.1 7.5 5.4 2003 2004 2005 2006³ LTM 3Q07³ ¹ PP&E + working capital + R&D 2 before income taxes 3 excludes effect of extraordinary inventory adjustments 24
# 1 in the globe in shareholder value creation among large-caps 1 The large-cap Top Ten Total shareholder return 2 (TSR) 2002-2006 Vale 54.6% América Móvil 53.3% Apple 50.6% British American Tobacco 25.8% Genentech 24.5% Anglo American 23.2% BHP Billiton 23.2% Endesa 20.8% Toyota 20.7% Boeing 20.1% 1 Boston Consulting Group “The 2007 Value Creators report”. Large cap = companies with market cap above US$ 50 billion 2 TSR average between 2002 and 2006 25
The best performance among large mining companies Total shareholder return 1 (TSR) 2003-2007 Vale 73.7% Xstrata 65.4% BHP Billiton 46.3% Rio Tinto 43.4% Anglo American 36.3% ¹TSR average between 2003 and 2007 Source: Bloomberg 26
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