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1Q11 Results

1Q11 Results. May 6, 2011. Disclaimer.

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1Q11 Results

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  1. 1Q11 Results May 6, 2011

  2. 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.”

  3. Agenda • Another outstanding quarter • Continued growth ahead

  4. Another outstanding quarter

  5. Despite very adverse weather conditions, a good operational performance ∆ 1Q11/1Q10in % • Iron ore +3.9 • Pellets +26.5 • Manganese +25.5 • Ferroalloys +3.5 • Nickel +79.7 • Copper +107.9 • Coal +0.2

  6. An outstanding financial performance The best first quarter ever 1Q11US$ billion 1Q10US$ billion ∆% Operating income 13.543 6.848 97.8 Adjusted EBIT¹ 6.456 2.062 213.1 Adjusted EBIT margin¹ 48.9% 31.2% +1,770 bps Adjusted EBITDA¹ 7.663 2.855 168.6 Net earnings 6.826 1.604 325.6 1 figures excluding the gain from the sale of assets of US$ 1.513 billion, a non-recurring event.

  7. We have been dealing with seasonal and cyclical cost pressures Main cost pressures 1Q11 vs. 4Q10 Source  US$ million¹ • Maintenance materials • Fuel and gases • Purchases of products Seasonal 93 Cyclical / political 79 Cyclical 78 ¹ Net of volume and FX impacts

  8. However, in addition to price increases, cost reduction was important to adjusted EBITDA performance Adjusted EBITDA US$ million R&D  FX Cost and expenses¹ Dividends² Price variation Sales volume Gain on sale of assets 4Q10 1Q11 1 SG&A + COGS + other operating expenses ² Dividends received from affiliated non-consolidated companies

  9. Cash generation is already well above the pre-crisis peak LTM Adjusted EBITDA US$ billion

  10. Powerful cash flow helps to keep 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.

  11. Continued growth ahead

  12. Global IP boomed since the end of 2010, adding strength to the global demand for minerals and metals Global industrial production % 3mma, saar¹ ¹ Seasonally adjusted annualized rate Source: Vale and J.P. Morgan

  13. Given the change in the inventory cycle, global IP growth is expected to moderate New orders/inventories ratio, sa¹ Global manufacturing PMI, sa¹ ¹ Seasonally adjusted Sources: Vale and JP Morgan

  14. China remains on the fast growth path driven by domestic demand Chinese GDP growth % ¹ Saar Source: CEIC

  15. Both fixed asset investment and industrial production are showing signs of reacceleration in China FAI and IP growth FAI IP ¹ Seasonally adjusted annualized rate Source: Haver Analytics

  16. China’s 12th FYP 2011-2015 – priorities are supportive of the demand for Vale’s iron ore • Average annual GDP growth of 7%. • Housing: 36 million units of social housing. • Reduction of 16% in energy consumption per unit of GDP. • 17% less carbon emissions per unit of GDP. • Proportion of urban residents to reach 51.5% vs 47.5% at the end of 2010. • Creation of 45 million urban jobs.

  17. Targeted affordable housing starts in China million units 72.4%

  18. Global carbon steel output is running at 1.5 billion metric tons per year, expanding by 7.6% over 4Q10. Although China is the main growth driver with 50%, expansion has broadened. China 1 Global 1 1 monthly data, on a seasonally adjusted basis. Sources: Vale and World Steel. 3-month moving average

  19. Iron ore prices continue to hover around a high level in face of strong global demand growth and supply constraints Platts IODEX 62% Fe US$/dry metric ton 183 May 3, 2011 Source: Platts.

  20. Global SS production reached an all-time high at 8.6 Mt in 1Q11. Fast expansion in consumption expenditures in EM countries will drive long-term demand growth Global stainless steel output 1 SA quarterly rate of change. 1 seasonally adjusted.

  21. Despite the expansion of NPI/FeNi production, the nickel market remains tight due to the broad based global demand growth Nickel prices US$/metric ton Inventories Prices Source: Bloomberg

  22. According to analyst estimates, Vale has the highest growth potential among large mining companies Copper equivalent volume growth (C2010-20, rebased) Vale Vale Peer1 Peer2 Peer3 Peer4 Source: J.P. Morgan

  23. Iron ore & pellets Nickel Coal Copper Fertilizers Logistics Energy Steel From 2011 to 2015, 34 additional major projects will be delivered, contributing to shareholder value creation CSU Greenfield CSP Biodiesel Rio Colorado Salitre Cristalino Serra Leste Teluk Rubiah Karebbe Long-Harbour Nacala ALPA Belo Monte Simandou I Salobo Apolo Konkola North Tubarão VIII Moatize Serra Sul (S11D) Ellensfield 2011 2012 2013 2014 2015 Carajás 40 Mtpy Conceição Itabiritos Conceição Itabiritos II Vargem Grande Itabiritos CLN S11D Totten Cauê Itabiritos Simandou II Moatize II Bayovar II Salobo II Brownfield Samarco IV CLN 150 Mtpy

  24. Discipline in capital allocation: return on invested capital has returned to the pre-crisis level and it is far above the cost of capital ROIC LTM1 Invested capital US$ billion 1 ROIC LTM = return on invested capital for last twelve-month periods.

  25. Strengthening infrastructure • Estreito hydro power plant => delivered • Vale Brasil, first Valemax 400,000 dwt => delivered

  26. Ramping up production • Tres Valles copper • Onça Puma nickel • Oman pellets

  27. Global leadership in iron ore pellets: capacity to reach 80.0 million metric tons by 2014¹ 19 pellet plants around the world Anyang Oman 2 plants Zhuhai São Luís Vargem Grande Tubarão 7 plants Fábrica Samarco 3 plants Tubarão VIII Samarco IV To come on stream ¹ 61.8 Mt from wholly-owned and leased plants and 18.2 Mt from affiliated companies (attributable share).

  28. Acquisition of 9% of the Belo Monte hydropower plant project • Adds an average of 400 MW to Vale’s own generation capacity. • Narrows the expected increasing disequilibrium between Vale’s power consumption and generation capacity in Brazil. • Reduces the cost of energy¹ as cost of self generation is well below market prices. • Mitigates risk exposure to price and supply risks. • Expected rate of return higher than our cost of capital. ¹ cost with electric energy in 2010 was US$ 1.2 billion.

  29. Vale: a global leader

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