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3Q11 Results

October 27, 2011


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.”


Agenda
Agenda

  • Continuing to create value

  • Market fundamentals



An outstanding operational performance

QoQ

YoY

3Q11

  • All-time high production figures

  • Iron ore 87.9 Mt1

  • Pellet 14.2 Mt2

  • Copper 84,300 t

  • Thermal coal 1.2 Mt

+9.5%

+6.4%

+8.3%

+4.3%

+34.3%

+45.6%

+60.4%

+20.0%

¹ Includes 2.9 Mt of Vale’s attributable iron ore production from Samarco

² Includes 2.8 Mt of Vale’s attributable pellets production from Samarco


An outstanding financial performance

QoQ

YoY

3Q11

  • All-time high figures

  • Operating revenues of US$ 16.7 billion +9.1% +15.5%

  • Adjusted EBIT of US$ 8.4 billion +8.1% +6.9%

  • Adjusted EBITDA of US$ 9.6 billion +6.2% +9.3%


Increase in sales volumes was the main driver for ebitda performance
Increase in sales volumes was the main driver for EBITDA performance

Adjusted EBITDA

US$ million

 FX

Price

variation

R&D¹

Dividends²

Costs & expenses ³

Sales volume

2Q11

3Q11

¹ This change relates to the accounting figure, differing from the financial disbursement used for Investments

² Dividends received from affiliated non-consolidated companies.

³ Costs excluding depreciation and amortization. Expenses include SG&A + other operating expenses.


Our cash generation continues to reach record-high levels, allowing us to successfully deal with the trilemma faced by growing companies

LTM Adjusted EBITDA

US$ billion



Powerful cash flow supports a healthy balance sheet with a low risk debt portfolio
Powerful cash flow supports a healthy balance sheet with a low-risk debt portfolio

Total debt

Debt cost and maturity

¹,²

%

Years

10.1

5.5

9.1

4.7

¹ at end of quarter.

² cash and cash equivalent.


Investments grew by 48 5 yoy in 9m11 despite the challenges in project implementation
Investments¹ grew by 48.5% YoY in 9M11, despite the challenges in project implementation

9M10

US$ 7.614 billion

9M11

US$ 11.308 billion

¹ Excluding M&A.


Continuing to create shareholder value: growth and high rates of return on invested capital

ROIC LTM1

Invested capital

US$ billion

¹ ROIC LTM = return on capital invested for the last twelve-month period.


Starting up production rates of return on invested capital

  • Karebbe

Total capacity: 130MW

The Karebbe hydropower plant, in Sorowako, Indonesia, will support expansion plans  and at the same time will have an important role in our efforts to curb the production costs of our Indonesian nickel operations.


Starting up production rates of return on invested capital

Moatize is the first project concluded by Vale in the African continent

  • Moatize I

Total capacity: 11 Mtpy, 8.5 Mtpy metallurgical coal and 2.5 Mtpy of thermal coal.

Moatize I, the first phase of the Moatize coal project, in the province of Tete, Mozambique, started production in 3Q11.


Moatize main branded product rates of return on invested capital

Chipanga prime HCC

Main parameters

CSN 9

CSR 69

Rank (Ro max) 1.32

Volatile matter 228

Ash (% ad) 10.5

Sulphur (% ad) 0.75

Phosphorus 0.085

Vitrinite 80.8

Max dilatation 118

Max fluidity 380 Mt


The Board of Directors approved the expansion of Moatize, leveraging our rich coal resources in Mozambique, and…

  • Moatize II: mine

Additional 11 Mtpy of nominal production capacity at Moatize, which will total 22 Mtpy. Includes duplication of the Coal Handling and Preparation Plant and expanding the infrastructure.

Production is estimated to be composed of 70% HCC  and 30% thermal coal.

Capex: US$ 2.07 billion.

Start up: expected for the second half of 2014.


… creating an integrated coal operation with the Nacala corridor

  • Nacala corridor: 912 km–long railway and maritime terminal

Handling capacity: estimated at 18 Mtpy of coal.

Capex: US$ 4.444 billion, US$ 3.435 billion for the railroad and US$ 1.009 billion for the maritime terminal.

Start up: expected for the second half of 2014.

¹ Vale holds a 67% stake in Sociedade Desenvolvimento Corredor do Norte S.A. (SDCN), the company that controls each of the existing railways in Mozambique (CDN) and Malawi (CEAR)..



Global IP has recovered, driven by the US, Japan and China and supporting the demand for minerals and metals

Global industrial production

% 3mma, saar¹

¹ Seasonally adjusted annualized rate

Source: Vale and J.P. Morgan


The recovery of DM has been running at below-trend rates, being a drag to global growth

GDP growth1

%

Average GDP growth

1997-2007: 2.3%

3Q09-2Q11: 1.9%

Average GDP growth

1997-2007: 3.1%

3Q09-2Q11: 2.6%

¹ Annualized rate, sazonally adjusted.

Source: Haver Analytics


Given being a drag to global growththe fiscal adjustmentunderwayandbankfunding stress, theprobabilityof a recession in the Euro Zone hasincreased

Euro Zone

Recession according the Euro area business cycle dating committee

Sources: Vale, Federal Reserve Bank of Chicago and NBER


China’s growth is more moderate but steady being a drag to global growth

Chinese GDP growth

%

9.1%

8.0%

¹ Seasonally adjusted annualized rate.

Source: Haver Analytics/CEIC


With no signs of weakness in FAI and IP growth being a drag to global growth

IP and FAI growth

FAI

IP

Source: Haver Analytics/CEIC


In a sharp contrast to 2008, the Chinese property market is not in a recession now

Chinese property market

% YoY

Source: Haver Analytics/CEIC and DEGC/DIRI


A collapse of the property market in China is unlikely not in a recession now

  • The social housing program is a key government priority, providing a cushion to private sector.

  • Social housing has the potential to support overall construction in the next 12-18 months.

  • Authorities may ease monetary/credit policies in face of an inflation fall.

  • In the case of a global downturn there is room to ease monetary and fiscal policy.

  • While infrastructure projects were the focus of 2008 stimulus package, social housing can be #1 priority in an eventual attempt to boost growth in 2012.


Out of the 10 million units targeted for 2011, 98.6% were reported to start by September

million units

Construction started


Housing construction still has a high-growth potential, given the estimated deficit

million units

Migrant families

Urban families

“Full” houses

E

Sources: Vale, NBS China and Gavekal.


Iron ore prices dropped under the influence of factors that are likely to be reversed in the short-term

Platts IODEX 62% Fe

US$/dry metric ton

138.5

October 24, 2011

Source: Platts.


Nickel market fundamentals remain strong. Contrasting with 2008, nickel prices and inventories are falling simultaneously

Nickel prices

US$/metric ton

2011

2008

Prices

Inventories

Inventories

Prices

Source: Bloomberg


Copper prices are following a similar pattern 2008, nickel prices and inventories are falling simultaneously

Copper prices

US$/metric ton

2011

2008

Prices

Inventories

Source: Bloomberg


Vale: um líder global 2008, nickel prices and inventories are falling simultaneously


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