3Q11 Results
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3Q11 Results

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3q11 results

3Q11 Results

October 27, 2011


3q11 results

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


3q11 results

  • Continuing to create value


3q11 results

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


3q11 results

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.


3q11 results

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


Dividend distribution in 2011 will reach us 9 0 billion a record figure

Dividend distribution in 2011 will reach US$ 9.0 billion, a record figure

Dividends

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.


3q11 results

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.


3q11 results

Starting up production

  • 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.


3q11 results

Starting up production

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.


3q11 results

Moatize main branded product

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


3q11 results

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.


3q11 results

… 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)..


3q11 results

  • Market fundamentals


3q11 results

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


3q11 results

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


3q11 results

Giventhe 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


3q11 results

China’s growth is more moderate but steady

Chinese GDP growth

%

9.1%

8.0%

¹ Seasonally adjusted annualized rate.

Source: Haver Analytics/CEIC


3q11 results

With no signs of weakness in FAI and IP growth

IP and FAI growth

FAI

IP

Source: Haver Analytics/CEIC


3q11 results

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


3q11 results

A collapse of the property market in China is unlikely

  • 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.


3q11 results

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

million units

Construction started


3q11 results

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.


3q11 results

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.


3q11 results

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


3q11 results

Copper prices are following a similar pattern

Copper prices

US$/metric ton

2011

2008

Prices

Inventories

Source: Bloomberg


3q11 results

Vale: um líder global


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