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Vale: A Global Strategic Partner Comitê de Cooperação Econômica Brasil - Japão August 09 th , 2011 Diretoria de Estratégia

Vale - A Global Strategic Partner

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Presented during the XIV Brazil-Japan Joint Economic Committee Meeting, that took place in the city of Salvador, in Brazil, during august 9th and 10th of 2011.

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Page 1: Vale  - A Global Strategic Partner

Vale: A Global Strategic Partner

Comitê de Cooperação Econômica Brasil - Japão

August 09th, 2011

Dire

toria

de

Est

raté

gia

Page 2: Vale  - A Global Strategic Partner

2

Vale expresses condolences for the country and people who have lost members of their families and friends in the Tohoku earthquake that claimed 15.645 lives and left 10.682 others missing and injured, and trusts Japanese people strength and determination to rebuild their country.

March ,11th March ,17th

1 Japan National police agency as of July 29, 2011

Page 3: Vale  - A Global Strategic Partner

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“This presentation may include declarations about Vale's expectations regardingfuture events or results. All declarations based upon future expectations, ratherthan historical facts, are subject to various risks and uncertainties. Vale cannotguarantee that such declarations will prove to be correct. These risks anduncertainties include factors related to the following: (a) the countries where Valeoperates, mainly Brazil and Canada; (b) the global economy; (c) capital markets;(d) the mining and metals businesses and their dependence upon globalindustrial production, which is cyclical by nature; and (e) the high degree ofglobal competition in the markets in which Vale operates. To obtain furtherinformation on factors that may give rise to results different from those forecastby Vale, please consult the reports filed with the Brazilian Comissão de ValoresMobiliários (CVM), the French Autorité des Marchés Financiers (AMF), and withthe U.S. Securities and Exchange Commission (SEC), including Vale’s mostrecent Annual Report on Form 20F and its reports on Form 6K.”

Disclaimer

Page 4: Vale  - A Global Strategic Partner

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1

2

Brazil: A mineral powerhouse

Brazil and Japan: A case of success

3 Vale and Japan: A long term partnership

Page 5: Vale  - A Global Strategic Partner

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1

2

Brazil: A mineral powerhouse

Brazil and Japan: A case of success

3 Vale and Japan: A long term partnership

Page 6: Vale  - A Global Strategic Partner

6 Sources: Vale and Banco Central do Brasil

Brazil has a consolidated institutional framework that encourages investment

Stable political and economic institutions

Rule of law and commitment to property rights

Strong democracy

Page 7: Vale  - A Global Strategic Partner

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2,3%

3,5%4,0%

1980-2002 2003-2009 2010-2012E

1 Unctad (Conferência das Nações Unidas para o Desenvolvimento e Comércio) report – Estimates for 2011 – First Semester US$ 30 billionSources: IBGE and IMF

After two decades of slow growth, Brazil has resumed a faster growth path and is a major destination for foreign direct investments

Brazil’s GDP growth

FDI inflow into Brazil

US$ billion

65,052,6

25,945,1

34,618,8

15,118,1

10,116,6

22,532,8

2011E20102009200820072006200520042003200220012000

US$ 292 bi of FDI inflows along the last decade

1

Page 8: Vale  - A Global Strategic Partner

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Brazil is one of the richest countries in natural resources …

Zinc

Uranium

Titanium

Tungstenio

Gold

Nickel

Niobium

Manganese

Iron Ore

Tin

Copper

Lead

Bauxite

Beryllium

Diamond

Fluorine

Phosphorious

LimestoneCoal

Salt

Oil& Gas

Sources: Vale Exploration department

Page 9: Vale  - A Global Strategic Partner

9 Sources: Vale and Banco Central do Brasil, Plano Nacional de Mineração 2030 (MME): Sumário Mineral, 2009, DNPM e Sinopse 2010, SGM-DNPM.

#1

Iron Ore Manganese

#2

… as well as one of the global leaders in minerals and other products

#1

Orange juice

Coffee

#1

Chickenmeat

#1

Ethanol

#2#2

SoybeansSugar

#1

Bauxite

#3

Niobium

#1

Tantalita

#2 #3

Ornamental Rock

Page 10: Vale  - A Global Strategic Partner

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Mining has been contributing to the Brazilian GDP growth…

Sources: MME - Plano Nacional de Mineração 2030 (MME), World Bank , Vale internal data and Ministério do Desenvolvimento, Indústria e Comércio Exterior website

Mining sector value addedUS$ bn

0,3 1,9 2,8 3,97,1

18,2

1970 1980 1990 2000 2005 2008

CAGR11%

Page 11: Vale  - A Global Strategic Partner

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…and should remain as a lever for Brazilian development due to forecasted future investments and job creation

Source: MME - Plano Nacional de Mineração 2030

1,5 2,3 3,6

27,4 26,1

36,8

2010-2015 2016-2022 2023-2030

Mineral research Mining

Forecasted investmentsUS$ bn

187 297 419 590903

1.323

1.894

2.747

2008 2015 2022 2030

Mineral exploration Mining

People employedThousands

US$ 98 Bn forecasted in investments in mineral research and mining until 2030, almost exclusively originated by the private sector– not counting an additional 30% for infrastructure and logistics

Due to the rise in production, a sound of employment is expected, more than tripling during the next two decades

Page 12: Vale  - A Global Strategic Partner

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Brazil is also concerned over a more sustainable mining growth specially in the Amazon region – Brazilian new frontier

Mining Projects versus protected areas

Vale mining area: Less than 4% of interference on the protected area

Vale protects this area since 80’s

Carajás Area is an Example

Source: MME - Plano Nacional de Mineração 2030, Vale environment report

Page 13: Vale  - A Global Strategic Partner

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Vale has also been investing a substantial amount of resources in Corporate Social Responsibility…

In Carajas, in the North of Pará, where Vale operates the largest open pit iron ore mine in the world, we help protect around 8,000 km² of native forest

Carajás mineral complex is an example

736

1.136

1.194

Average 2007-2009

2010

2011E

Investments in CSR¹ US$ million

E=Planned¹ Social and environmental investments

Vale has broad based selection of pioneering initiatives Responsible operations Reforestation and flora renovation Use of clean fuels Responsible residue management

Source: Vale environment report GRI

Page 14: Vale  - A Global Strategic Partner

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… And in technology development in Brazil to improve efficiency since mining is a complex business

MINE LOADING UNLOADING SHIPPING TRANSPORT DC DISTRIBUTION CLIENTSRAILROAD

15 days 1-2 days 9 days 75 days 100 days

Synchronism across the entire chain demands absolute precision in the operation, to ensure the continuous flow of the product

Advanced control technologies and specific skills are required

Control Center of FCA

Page 15: Vale  - A Global Strategic Partner

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1

2

Brazil: A mineral powerhouse

Brazil and Japan: A case of success

3 Vale and Japan: A long term partnership

Page 16: Vale  - A Global Strategic Partner

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Japan’s direct investment in petrochemical, steel, soybean and paper&pulp sectors

Brazil became the 3rd main receiver of FDI from Japan

In 1974 JFE invests in CST (Cia Siderúgica Tubarão)

The 50’s and the 60’s The 70’s

Japan implemented the Usiminas Steel Complex in Brazil (1958)

A great number of Japanese companies started operations in Brazil: Ishikawajima, Toyota, Sharp, Toshiba, Matsushita, Honda, Yamaha, etc

Bilateral trade surged from US$ 57 million to US$1.7 billion

The 90’s onwards…The 80’s

Brazilian share on the total FDI from Japan reduced due to macroeconomic instability and Japanese attraction by the new industrialized countries in Asia

New course of trade relations was established, with the opening up of the Brazilian economy

Japanese companies invested US$1.4 billion in Brazil in telecommunications, capital goods, mining, and metallurgy

Over the decades Brazil and Japan relationship grew stronger underpinning a series of new ventures and a mutual investment relation

Page 17: Vale  - A Global Strategic Partner

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Brazil- Japan trade flowUS$ million

5.053

4.450

4.836

5.643

7.734

8.931

12.922

9.637

14.122

6.888

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: IMF/Haver Analytics, Brazilian Central Bank

Brazil and Japan maintain a significant trade, strengthening this partnership in different areas in recent years

Japanese FDI inflows to BrazilUS$ million

Total 2000 – 2010 US$ 13.5 bn

2.4971.673

4.099501

660779

2431.368

504827

385274278342

192

201020092008200720062005200420032002200120001999199819971996

“Dow Chemical announced yesterday a joint-venture with Japanese Mitsui (…) to produce polyethylene from ethanol”

Valor Econômico

“Sumitomo Rubber Industries Ltd is planning to invest in a tire factory in Paraná…”

Folha de São Paulo

“Japanese AGC will own a Glass factory in São Paulo”

Brasil Econômico

“Itochu Japanese trading company is investing with Bunge in 2 ethanol plants in Minas Gerais and Tocantins”

Valor Econômico

Page 18: Vale  - A Global Strategic Partner

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1

2

Brazil: A mineral powerhouse

Brazil and Japan: A case of success

3 Vale and Japan: A long term partnership

Page 19: Vale  - A Global Strategic Partner

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Japan is present in Vale’s shareholders controlling group

Brazilian investors

29,0%

Non-Brazilian investors

38,6%

VALEPAR*32,4%

,

**As of June 30, 2011

BNDESPar11%

Bradespar22%

Mitsui18%

Brazilian pension funds49%

Source: Vale monthly relation investors report

Page 20: Vale  - A Global Strategic Partner

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Japan played a crucial role for Vale development and expansion

The 50’s and 60’s The 70’s The 80’s The 90’s

Vale starts to sell iron ore to Japanese steel companies

Albrás starts operation

VALE, JFE Steel and other Japanese steel makers start a joint venture to develop mines in Minas Gerais– Capanema complex (MSG)

Support to Carajásfunding as a corporate guarantee

Alunorte starts operation

Mitsui acquires CAEMI,sharing with Vale the control of the company

Vale established a partnership with Mitsui to develop Vale’s intermodal transportation business

Carajas complex

In 1978 was founded Alunorte and Albrás in partnership with NAAC

Mitsui finances MBR iron ore project

Japanese Steel Mills and Vale invest in two pelletizing plants in Espírito Santo state -Nibrasco

Page 21: Vale  - A Global Strategic Partner

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Ferrous– Nibrasco Japanese Steel Mills (49%)1

– California Steel JFE Steel (50%) Nickel

– Vale Japan (Matsuzaka) Sumitomo Metal Mining Co (12,8%), Mitsui (6,8%) and others2

– PT Inco (Indonesia) Sumitomo Metal Mining Co (20,1%)3

– Goro Nickel S.A.(New Caledonia) Sumic -Sumitomo Metals and Mitsui (21%)

Aluminum4

– Albras Nippon Amazon Aluminum Co. (NAAC) (13,8%)– Alunorte NAAC, JAIC, Mitsui and Mitsubishi (5,3%)

Logistics– Log-In Mitsui (3,8%)

Phosphate Rock– Bayovar Mitsui (25%)

Business / company Japanese Partner

And still has ongoing successful partnerships with Vale

¹ Nippon steel- NSC (25 ,4%), JFE steel corporation (12%), Sumitomo Metal Industries (6%), Kobe steel (3%), Nisshin Steel (1,6%),Sojitz Corporation (1%)

4 Vale stake in Norsk Hydro Source: 20F and Vale’s reports3 Others 20,1% publicly held and 0.6% held by others

2 Others- Sumitomo Corporation (2.6%) and Sojitz Corporation (1.7%)

Page 22: Vale  - A Global Strategic Partner

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17,1

16,3

18,1

20,8

27,9

27,5

34,1

22,5

30,8

24,8

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Vale iron ore sales to JapanMt

Over the last 10 years Vale has shipped 240 Mt of iron ore and pellets to Japan

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Implementation of distribution centers nearby Japanese steel makers and Asian market, decreasing the freight differential between Brazil and Australians in the Asian basin

Reducing 35% of CO2 emission in Brazil-Asia route

Maximizing competitive advantages: boosting production of high-quality iron ore

Minimizing competitive disadvantages: building a low-cost portfolio of maritime freight and distribution centers

Lower costs mitigating freight price volatility for clients

VLOCs will promote a permanent cut in the costs of Atlantic-Pacific dry bulk shipping

Vale is investing heavily in shipping capabilities to be closer to its Asian clients

Capacity = 400,000 mt

Speed = 14.8 Knots

Fuel consumption = 96,7 tons / day HFO (heavy fuel oil)

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Vale is also investing in distribution centers adding flexibility to operations and strengthening competitiveness in Asia

Tubarão

San Nicolas

PDM Malaysia

Oman

Guaíba & Itaguaí

Low seaborne transit time, inventories synergy and blending flexibility are among the unique advantages of Vale’s Distribution Centers

VLOCs

Page 25: Vale  - A Global Strategic Partner

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Vale has other partnerships with Japan, such as the JV Vale Japan Nickel Refinery in Matsuzaka

Operations began in 1965,currently supplied with nickel matte from PT Inco in Indonesia Tonimet produced is sold to Japanese stainless and specialty steel manufacturers, e.g.

JFE, Sumitomo Metal, Nisshin, Nippon Steel, Hitachi, etc. About 50% of the production is exported to Taiwan and Korea, as sinter, tonimet

granules/briquette

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There could be some other opportunities for Vale and Japan in the future

Infrastructure

Japan Building of new ports in Japan that could handle Valemax fleet (400kt of capacity)

Technology Development

1

Vale Institute of Technology (ITV)

Vale Energy Solutions (VSE)

Foster and strengthen external and internal Science & Technology communities

Develop R&D outside lines of business scope

Motogenerators: Ethanol-fueled motor-generator to produce electric energy Combcycle: Steam turbine which uses salty water to generate

energy, purifying and making it drinkable (used in oil platforms) Turbines: Gas turbines for the oil industry to generate energy

Renewable and Cleaner

Energy

Biodiesel Project

Synthetic Diesel

Palm Oil production, biodiesel raw material in Brazil and Indonesia

Synthetic diesel (without sulphur) that contributes to carbon capture:– Coal-to-Liquids in Mozambique– Biomass to Liquids in Brazil2

Brazil General Cargo

Steel projects3

Mining

4

Rare Earths Exploration of Rare Earths in Brazil

Page 27: Vale  - A Global Strategic Partner

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Reinforcing and strengthening mutual cooperation established in many fields, even in the national passion for Brazilians: Soccer!

Congratulations!

Page 28: Vale  - A Global Strategic Partner

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Vitoria Port 1959 Albras 1990 Itabira 1978

EFVM – Vitoria Minas Tubarao Complex 1979 Ponta da Madeira

Mitsui & Vale exchange program

Alunorte

Vale: グローバルリーダー

Obrigado!

Thank you!

ありがとう