The Carajás expansion: low opex, high quality and opportunities for future low capex brownfield projects Capacity Capex Estimated Mpty US$ billion start-up Serra Leste 6 0.5 1H13 Additional 40 Mtpy¹ 40 3.0 2H13 Serra Sul S11D¹ 90 8.0 2H16 ¹ Only mine and plant. 24 24
Managing capital to create value 25 25
Picking winners Focus on iron ore projects and other world-class assets such as Moatize. Conclusion of projects already under construction such as Tubarão VIII, Salobo II, Konkola North and Long Harbor. Streamlining of R&D expenditures will imply a future pipeline with fewer projects and real high returns. 26 26
The upside in base metals Living within its own means. Resuming pre-strike productivity levels at Sudbury. Ramp-up of VNC already resumed. Salobo - 200,000 tpy of copper and 322,000 ozpy of gold. First phase of Salobo already ramping up. Nickel remains as a core business but it is non-core for capacity expansion. Non value-adding assets will be divested. 27 27
Our best days are still ahead of us Our goal is to be the best natural resources company by return to shareholders, not the largest. Capex in line with expected cash flow. The preservation of our investment-grade rating¹ is a key priority. Stronger discipline in capital allocation. Focus on organic growth and stricter criteria for project approval. Continuation of the non-core asset divestiture program, unlocking capital to finance core asset development. Exploration of opportunities for partnerships where appropriate. ¹ Vale is rated investment grade since July 2005. Current credit ratings: A- S&P, BBB+ Fitch, BBB (High) DBRS and Baa2 Moody’s. According to Moody’s KMV EDF implied rating is A1. 28 28
Vale’s Northern System: Enriching iron ore production Lucio Cavalli September 19, 2012
Vale’s richest reserves are in the Northern System with an average grade of 66.7% Fe Reserves¹ Mt % Fe Southern System 4,210 47.8 Southeastern System 3,508 49.4 Midwestern System 35 62.2 Average without Northern System 7,753 48.6 S11 4,240 66.7 N5 1,025 67.1 Northern System – other mines 2,118 66.5 Northern System 7,383 66.7 Total 15,136 57.4 ¹ Tonnage is stated in millions of metric tons of wet run-of-mine. 1
In 1H12, Vale achieved two environmental milestones: N5S operation license and S11D preliminary license N5 South S11D 2
The N5S mine is essential for the Northern System to ensure the supply of high quality iron ore Mill Northern System’s ROM Carajás current 100% operations 75% 50% 25% 0% 2012 2013 2014 2015 2016 N5S 3
N5S pit’s pre-stripping started in 1H12 4
S11D was customized to minimize environmental impact, receiving the preliminary license in June/2012 Pit Plant Waste Waste rock Rock piles Piles All of S11D’s industrial facilities will be built on previously deforested areas. 5
The S11D reserves have a large potential in terms of quality and size Billion Illustrative Operational tons Flexibility Significant reserves can be added by decreasing Fe cut-off grade. Cut-off 67% 66% 65% 64% 63% 62% (%Fe) Annual production of 90 Mt Fe (%) Si0 2 (%) Al 2 0 3 (%) P (%) Mn (%) LOI (%) 66.4 1.2 0.48 0.042 0.055 3.17 6
The project is simple, functional and low cost Truckless system 77% less fuel consumption. Dry processing 93% reduction in water consumption. 18,000 MW of electricity saved every year. No need of tailing dams. Operational costs ~ 50% lower Vale (without S11D) S11D 7
The Carajás S11D iron ore project: A major change in the iron ore landscape Katsuo Homma September 19, 2012
Agenda The Northern System expansion Data, challenges, execution – S11D – CLN 150 – CLN S11D
Vale’s Northern System is composed by the Carajás mining site, the railroad and the Ponta da Madeira maritime terminal São Luis Ponta da Madeira PA Carajás MA Carajás mining site Existing railway - 892 km Railway - 892 km 2
Carajás S11D project will deliver a major change to Vale’s iron ore production S11D will supply additional 90 million metric tons of iron ore per year. When it reaches full capacity, Vale’s total iron ore production in Carajás should reach 230 million metric tons per year. 230 230 Northern System 109.8 million metric tons 110 1 0 S11D operating 2011 1985 at full capacity 3
Carajás S11D leverages Serra Sul’s massive ore reserves, targeting its S11 ore body, block D Huge mining potential of ore body S11… SERRA NORTE (IRON BODY) S11D SERRA LESTE Extension: 9.5 km (IRON BODY) Area: 1,400 ha Carajás National Forest (IRON BODY) SERRA SUL Extension: 120 km Area: 48,000 ha S11 BODY …Block D : 3.48 billion metric tons of reserves. 4
Vale is also investing in the Carajás railroad and PM rail terminal expansion to support S11D, keeping its strategic mine-to-port integrated system Integrated Logistics – Competitiveness The CLN S11D logistics expansion builds on CLN 150’ s infrastructure 5
Carajás S11D associated logistics will require US$19.5 billion in investments Mine and plant US$ 8.04 billion Logistics infrastructure US$ 11.45 billion Total US$ 19.49 billion Executed capex – Mine and plant 1 Executed capex – Logistics infrastructure 1 US$ 1.3 billion US$ 344 million 6 1 Executed capex as of 30 June 2012
Carajás S11D iron ore 7
S11D project – key data ■ Nominal production: 90 Mtpy. ■ Capex: US$ 8.04 billion. ■ Stripping ratio: 0.27 ton/ton (current Northern System: 1.4). ■ Mass recovery: 100% (current Northern System: 93%). ■ Power capacity: 150 MW. ■ High productivity – goal 50,000 t/H/year. ■ Low operating cost of mine and mill. ■ Workers for construction: 9,129 (peak); 4,050 (average). ■ Processes: truckless mining, crushing and dry screening. 8
Mine Overland belt Conveyor system Beneficiation plant 9 Project Layout
59% of S11D project’s purchasing packages have already been contracted, covering about 41% of the project’s capex Number of packages Value of capex 29% 27% 41% 59% 14% 30% In progress To start Contracted 10
Secondary Stock yard crushing Product yard Tertiary crushing Secondary screening Load bins 11 Beneficiation Plant
Licensing is an increasingly key challenge for mining projects around the world Licensing of Carajás S11D S11D project has already obtained its preliminary license and the license for the Southeast Pará site. Operation license Preliminary license Installation license ISSUED 1H13 1H16 Start-up of processing Execution of Start-up of mine and plant construction infrastructure works processing plant and equipment purchase 12
Key to the licensing strategy was the location of both the beneficiation plant and canga and waste dump, allowing for the preservation of the natural forest Pit Plant Canga dump Waste dump 13
S11D’s truckless system also brings meaningful benefits for the environment, increasing productivity Belt-wagon use for top bench mining Final position Belt-wagon use for bottom bench mining 14
Planning, engineering and site access are challenges faced to gain speed and meet the earliest possible start-up date Project schedule – from engineering to start-up Mine and plant Detailed engineering Access road Pre-assembly Civil Works Assembly Commissioning 2H16 2H17 Start-up Conclusion Start-up Conclusão 15
S11D project was developed with 3D technology allowing for engineering improvements and detailed planning Beneficiation plant 16
Carajás S11D developed an off-site modularization engineering process to expedite implementation M odules 3D design M odules assembling at yard M odules assembling at site M odules transportation to site 17
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Secondary crushing
Innovation and technology Secondary crushing module – 3D CURRENT STATUS
The site was designed to allow for early purchase, receipt and assembly of large structures 33
The modules are being built to be later transported to the final plant site, gaining valuable time on the overall schedule 34
The 47 km access road is being built to allow for the transportation of future modules and other equipment 35
The two bridges and road required to access S11D’s site are already in advanced stage of construction Araras river bridge Access road Jun/2012 Sep/2012 36
S11D physical completion is advancing in line with its construction plan 100.00% 98.11% 91.45% 80.32% Monthly progress 59.18% 41.14% 25.33% 1st line startup Accumulated Accumulated estimated performed 37
Labor is a critical resource to meet the construction schedule. Vale is working on several initiatives to overcome this challenge # of workers 9,129 6,564 5,363 4,760 3,429 2,220 954 499 Pico 2010 Pico 2011 Pico 2012 PICO 2013 PICO 2014 PICO 2015 PICO 2016 PICO 2017 Peak 2015 Peak 2016 Peak 2017 Peak 2013 Peak 2014 Peak 2010 Peak 2011 Peak 2012 Vale has specific initiatives to meet that challenge. Professional training Specific project career 38
In just 3 years after initial production, S11D will reach the same level of production Carajás took three decades to achieve Projected production ramp-up Mtpy 100 90 80 70 60 50 40 30 20 10 0 2016 2017 2018 2019 2020 39
Iron ore logistics expansion 40
Northern logistics capacity expansion (CLN) projects allow for transportation of current expansions and S11D volume Ponta da Madeira Northern logistics capacity expansion CLN 150 Mtpa maritime terminal Northern logistics capacity expansion CLN S11D São Luís Carajás Railway Rosário Santa Rita Alto Alegre do Pindaré PA Santa Inês 2 CDs 2 Yards 2 CDs 2 Rec 11 duplicated railway section 4 Yards 1 Stacker Serra 42 duplicated railway section Serra 2 Rec Pier IV - SB Leste Bom Jesus Norte 1 Stacker da Selva 2 SRs Açailândia Pier IV - NB MA Marabá Cidelândia Carajás TO CD: car dumper M ine Curionópolis Rec: reclaimer Parauapebas SR: stacker reclaimer SB: South berth NB: North berth S11D PI
CLN 150 project 42
CLN 150 project – key data Investment: US$ 4.1 billion¹. Capacity target: 150 Mtpy (rail and port). Duplicated railway: 125 km. Bridges and overpass: 9. Railway track: 197 km. 98% of CLN 150 project’s equipment and service suppliers have been contracted. ¹Including wagons and locomotives 43
CLN 150 project was split into four sub-projects for implementation purposes • US$ 4.1 billion¹ CLN 150 Mtpy • 79% physical completion • 43% physical completion CLN 150 Mtpy railway • Start-up: 2013 to 2014 • 81% physical completion CLN 150 Mtpy PM rail terminal • Start-up: 2H12 CLN 150 Mtpy • 90% physical completion onshore • Start-up: 2H12 CLN 150 Mtpy • 91% physical completion offshore • Start-up: 2H12 ¹Including wagons and locomotives 44
Key licenses for CLN 150 project were already granted Installation license Operation license CLN 150 Mtpy Package 1 2H10 2013 - 2014 railway Package 2 1H13 CLN 150 Mtpy ISSUED 1H13 PM rail terminal Sep/2009 CLN 150 Mtpy ISSUED 1H13 Oct/2009 onshore ISSUED 1H13 CLN 150 Mtpy Jul/2009 offshore 45
CLN 150 project’s railway is scheduled to start up from 2013 to 2014 Double tracking of 11 sections (125 km railway). 5 new bridges. 2 road bridges and 1 railway overpass. 1 underpass. Construction of new machine shop in Açailândia (MA) and empowerment of the machine shop in Maraba (PA). 46
CLN 150 project railway: final concreting of upper slab in Marabá/PA 47
CLN 150 project – Ponta da Madeira rail terminal is scheduled to start up in 2H12 Construction of 73.9 km new lines. Construction of rail loop to passenger train. Access line to the car dumpers (5 and 6). New facility buildings. Line and rail spur - earthmoving of loading yard 48
CLN 150 project – Mapaúra lagoon and classification yard, lines 6,7,8 49
CLN 150 project onshore is scheduled to start up in 2H12 2 car dumpers. 2 stock yards. 1 stacker. 2 iron ore reclaimers. Conveyor belts. 50
CLN 150 project onshore: car dumpers first loaded tests were conducted with success Aerial view of construction of car dumpers 51
CLN 150 offshore is on time, scheduled to start up in 2H12 Construction of South berth. Access bridge (1,600 m). Loading line (16,000 t/h). Ship loader (16,000 t/h). Berthing and mooring system and environmental monitoring. Tugboat pier. 52
CLN 150 project offshore: South berth overview 53
CLN 150 project schedule 2010 2011 2012 2013 2014 2015 2009 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H CLN 150 Start-up Project approval First start-up EEFC RAILWAY IL EEFC Last start-up IL EEFC (5 sections) (6 sections) PM rail terminal Start-up ‘ ONSHORE Start-up PORT Start-up OFFSHORE 54
CLN S11D project 55
CLN S11D project - key data (1/2) Investment: US$ 11.4 billion¹. Capacity target: 80 Mtpy. Workers for construction: 19,472 (peak), 10,555 (average). Railway track: 937 km. Bridges and overpasses: 81. Power transmission lines: 918 km. ¹ Including wagons and locomotives 56
CLN S11D project - key data (2/2) Project was split in five sub-projects for implementation purposes • Capex US$ 11.4 billion¹ CLN S11D CLN S11D • Start-up: 1H16 rail spur CLN S11D • Start-up: 2014 to 2018 railway CLN S11D • Start-up: 1H15 PM rail terminal CLN S11D • Start-up: 1H16 onshore CLN S11D • Start-up: 2H15 offshore ¹ Including wagons and locomotives 57
CLN S11D project has completed its basic engineering and has nearly finished detailed project engineering 120% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 80% 72% 60% 44% 40% 21% 18% 20% 5% 5% 1% 0% Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Basic Detailed Lines and Fixes Inst. Signlalization Lines and Special art Signlalization Lines and Special art Signlalization Civil works Civil works Spurs Spurs works Spurs works TFPM EEFC Rail Spur On Shore Off Shore 58
New technologies will be applied in the CLN S11D project, such as the NTC – New Track Construction… Construção de novas linhas, totalizando 120 km. Construção de pera ferroviária exclusiva para Trem de Passageiros. Novas oficinas e estruturas de apoio. Obras já licenciadas, iniciadas em 2010. 59
…and the usage of a sleeper layer to increase safety and productivity in building the railway infrastructure Construção de novas linhas, totalizando 120 km. Construção de pera ferroviária exclusiva para Trem de Passageiros. Novas oficinas e estruturas de apoio. Obras já licenciadas, iniciadas em 2010. 60
Key licenses for CLN S11D project were already obtained Licensing of CLN S11D project Installation license 1 Operation license 1 Preliminary license CLN S11D ISSUED 1H16 1H13 rail spur May/2012 CLN S11D NA 2014 - 2018 1H13 railway CLN S11D NA ISSUED 1H15 PM rail Dec/2009 terminal CLN S11D NA ISSUED 2H16 onshore Dec/2009 CLN S11D NA ISSUED 2H15 offshore Dec/2009 61 1 Expected.
CLN S11D project – rail spur is forecasted to start up in 1H16 Rail spur with 101 km from S11D stock yard to EFC railway. Loading yard. 2 intersection yards. 1 maintenance yard. 9 bridges and overpasses. 4 tunnels. 8 facility buildings. 62
CLN S11D project – New railway sections will be delivered from 2014 until 2018 42 double trackings (504 km). Northern System: mine, railway and port 55 remodelings (226 km). 43 bridges (railway). 31 overpasses (roads). 68 facility buildings. 17 overpasses (community). Replacement and expansion: signaling system electrical energy telecommunication 63
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