Taking steps to maximize value creation Murilo Ferreira, CEO - PowerPoint PPT Presentation

Taking steps to maximize value creation Murilo Ferreira, CEO Carajás, Brazil Hong Kong March 2013

Disclaimer “This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct. These risks and uncertainties include factors related to the following: (a) the countries where we operate, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF) and The Stock Exchange of Hong Kong Limited, and in particular the factors discussed under “Forward -Looking Statements” and “Risk Factors” in Vale‟s annual report on Form 20-F. ” 2

Agenda Voisey's Bay, Canadá 1 2 Delivering on the A better outlook commitments

1 PDM, Brazil Delivering on the commitments 4

Our goal is to maximize shareholder return through the cycles. We are actively pursuing many ways to achieve it  Removal of uncertainties. – Enormous progress in environmental permitting and gradual resolution of tax issues.  Strong discipline in capital allocation – Focus on world-class assets: towards a smaller and higher return project portfolio. – Divestiture of non-core assets. – A lot of value to be unlocked from existing operations and projects ramping up. – Deploying capital to our highest return business: iron ore projects coming on stream in 2013-2016 to add substantial value.  Building a lean organization , with a greater focus on a lower cost structure.  Meeting the growth trilemma: capex and dividends aligned with expected cash flow, with a minimal use of the balance sheet. 5

New platforms of value creation are beginning to ramp up as planned  Salobo: copper & gold.  Lubambe: copper.  VNC: nickel & cobalt. 6

Salobo - a world-class asset in the first quartile of the industry cost curve - is delivering copper and gold  Salobo I, the first plant, throughput of 12Mtpa¹, is operating.  Ongoing construction of Salobo II 12 Mtpa¹ - 68% physical progress - start-up 1H14.  Total capacity - Salobo I&II - 200,000 t of copper in concentrates plus about 320,000 ozpy of gold by- product. 7 ¹ Run-of-mine (ROM).

VNC is proving to be technically feasible  Dec 2012 - 812 t of Ni in NiO.  Jan 2013 - 1,380 t of Ni in NiO (87%) and NHC (13%) and 100 t of cobalt (IPCM).  Feb 2013 - second production line starting to operate. Product quality has been very good and meets design expectations Ni = nickel NiO = nickel oxide NHC = nickel hydroxide cake IPCM = intermediate product of cobalt methodology 8

Existing base metals operations - nickel & copper - are showing a good performance. The successful ramp-up of projects – Salobo, Lubambe and VNC - is a major source of upside to current performance Adjusted EBITDA¹ Adjusted EBITDA margin¹ US$ million 613 33.9 446 25.3 3Q12 4Q12 3Q12 4Q12 9 ¹ Excluding pre-operating, idling expenses and R&D.

SG&A spending is being reigned in SG&A¹ US$ million 1,994 727 1,914 -5% 1,500 -31% 1,287 904 501 2008 2009 2010 2011 2012 4Q11 4Q12 10 1 Excludes depreciation and nickel, copper and iron ore adjustment for provisional prices.

Expenses with materials and outsourced services, responsible for almost 40% of COGS, are starting to be curbed Materials Outsourced services US$ million US$ million 1,163 1,285 1,236 -6.7% -14.4% 1,091 1,153 1,096 1,014 995 1Q12 2Q12 3Q12 4Q12 1Q12 2Q12 3Q12 4Q12 11

R&D expenditures are being focused on fewer projects with higher value creation potential: 12% less than 2011 and 36% less than budgeted for 2012 R&D US$ million -12.0% 1,742 1,533 1,136 1,063 1,010 2008 2009 2010 2011 2012 12

Walking the talk: improving working capital management despite the impact of higher iron ore prices in 4Q12 Working capital Days receivables outstanding US$ billion 62.3 8.545 56.2 7.825 53.2 52.7 7.312 7.213 1Q12 2Q12 3Q12 4Q12 1Q12 2Q12 3Q12 4Q12 13

The divestment program is creating value: improves capital allocation, generates cash and simplifies the portfolio, focusing on what is really important  April 2012: Kaolin - US$ 30 million.  May 2012: Thermal coal in Colombia - US$ 407 million.  July 2012: Manganese ferroalloys in Europe - US$ 160 million.  August 2012: 10 large ore carriers - US$ 600 million.  December 2012: – Araucaria nitrogen - US$ 234 million. – Oil & gas exploration assets - US$ 40 million. Total divestiture: US$ 1.471 billion 14

Unlocking value from existing assets: sale of gold flows, extracted as a by-product, at a very attractive premium  25% of the Salobo stream for mine life and 70% of Sudbury for 20 years.  US$ 1.9 billion upfront payment plus SLW warrants valued at US$ 100 million plus US$ 400 per oz upon gold delivery.  Unlocks substantial value still hidden in our base metals operations. – Salobo payable gold by-product valued at US$ 5.32 billion plus NPV of US$ 400 payment flows for each oz of gold delivered. – Estimated capex of Salobo I&II of US$ 4.2 billion with nominal capacity of 200,000 metric tons of copper and the gold by- product. 15

Four major projects - involving total capital expenditures of US$ 13.0 billion¹ - are starting up in 2013 to boost value over the next few years Iron ore & logistics  Carajás Additional 40 Mtpy.  CLN 150 Mtpy.  Conceição Itabiritos. Nickel & copper & cobalt  Long Harbour. 16 ¹ Total capex estimated for the four projects to be concluded this year.

Carajás Additional 40 Mtpy: expanding capacity with high quality and low costs  Finalizing plant assembly.  85% of physical progress for mine and plant.  Total capex: US$ 3.475 billion.  Operation license expected for 2H13. 17

CLN 150 Mtpy: the efficient logistics support to Additional 40 Mtpy PDM maritime terminal  First ship berthed at Pier IV South berth. Car dumpers, reclaimers and stacker tested.  Rail access to car dumpers concluded.  Operation licenses for port facilities expected for 1H13. Carajás railway  Double tracking of 125 km underway. Total capex: US$ 4.114 billion. 18

Conceição Itabiritos: counteracting the effects of resources ageing with technology  Construction of new plant allowing for mine life extension.  Adds 12 Mtpy of capacity @67.7% Fe content.  95% of physical progress, final phase of electromechanical assembly.  Total capex: US$1.174 billion. 19

Long Harbour: using new technology to increase efficiency and to reduce costs in base metals  Fully integrated hydrometallurgical flowsheet.  50,000 tpy of finished nickel, 4,500 tpy of copper cathodes and 2,500 tpy of cobalt.  Lowers costs, increases metal recovery and eliminates SO 2 and particular emission.  Infrastructure and civil works substantially complete.  Moving towards commissioning, 84% of physical progress.  Total capex: US$4.250 billion. 20

Carajás S11D: a transformational project, the largest in Vale’s history and in the iron ore industry  Nominal capacity: 90 Mtpy.  Start-up: 2H16.  Physical progress: 37%.  Total capex: US$ 8.04 billion.  Capex 2013: US$ 658 million. Modules‟ equipment stockyard  Stripping ratio: 0.27.  Mass recovery: 100%.  Truckless mining, dry ore processing, no need for tailing dams and 50% cut in the emission of greenhouse gases.  Low cost, 4.2 billion metric tons of proven & probable reserves @ 66.7% Fe. Processing plants 3D Design 21

Carajás S11D 22

CLN S11D 1 – logistics to support S11D  Enlargement of the existing logistics infrastructure.  Start-ups: from 1H15 to 2H18.  Estimated capex of US$ 11.4 billion.  Five sub-projects: rail spur with 101 km, new railway sections with dual tracks, rail terminal and onshore and offshore investments.  Increase Northern System logistics capacity to 230 Mtpy. 23 1 This project is subject to the Board of Directors approval

PDM Pier IV 24

2 Clydach, UK A better outlook 25

After a downtrend in 2011/2012, global IP is resuming growth with a positive impact on the demand for minerals and metals Global industrial output Global manufacturing PMI 2 56 %mm, sa¹ Index, sa¹ 55 54 1 53 52 51 0 50 49 -1 48 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 ¹ Seasonally adjusted annualized rates 26 Sources: Vale and J.P. Morgan

There is a trend reversal in steel production as well Global steel output Mt, saar¹ 1,600 3mma as² 1,550 1,500 1,450 1,400 1,350 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 ¹ Seasonally adjusted annualized rates ² 3-month moving average. 27 Sources: Vale and World Steel Association