Vale Nickel business Roberto Moretzsohn Rio de Janeiro Executive - - PowerPoint PPT Presentation

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Roberto Moretzsohn Executive Vice President, Marketing Vale Inco

Vale Nickel business

Rio de Janeiro September 2009

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Vale has a strong platform to grow the nickel business

Current

Sudbury Voisey’s Bay Thompson Indonesia

Growth

Onca Puma Goro

A balance of sulphide and laterite properties

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Vale nickel business is located…

Carbonyl Electro

Thompson Thompson Sudbury Sudbury Clydach Clydach Matsusaka Matsusaka KNC KNC TNRC TNRC Dalian Dalian

Tonimet Utility

Voisey Voisey’ ’s s Bay Bay PTI PTI Onca Puma Onca Puma Goro Goro

Refinery Mines Development Properties

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Nickel reserves (100% Basis)1 million metric tons of contained nickel

¹ P&P reserves Sources: BrookHunt 2008 edition Nickel Industry Cost Study and Vale annual report 2008 Note: Xstrata includes 100% Koniambo

We continue to develop and build our leading position in the nickel market

2.0 2.6 4.1 4.5 5.8 8.9 Eramet Xstrata BHPB Jinchuan Norilsk Nickel Vale

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Continued focus on employee health and safety

Canadian mines have won the John T. Ryan award for “Safest Metal Mine in Canada” for a record 5 years in a row.

• Birchtree Mine (Thompson) – 2004.
• Garson Mine (Sudbury) – 2005.
• North Mine (Sudbury)– 2006, 2007 &

2008 . In January 2009, Copper Cliff North Mine celebrated 3 years disabling injury (DI) free – a milestone virtually unprecedented in the industry. Indonesian Operations lead Vale Nickel business in safety performance.

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We continue to grow our production capability to leverage our resource base

220 235 248 275

2005 2006 2007 2008

kt of Nickel

Source: Vale

Increases with the addition of Voisey's Bay, additional mine development and processing improvements in Canada, as well as increased thermal power in Indonesia. 2008 production curtailed in Q4 due to market conditions. With the commissioning of Goro and Onca Puma, production will increase by ~ 45% when fully ramped up.

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Managed the near term impacts of the market downturn with focus on sustainable improvements

Production Flexing the production capacity in PTI utilizing the fuel fired power sources. Optimizing product mix to meet changing market demands. Review of mine design and processing configurations to allow for more efficient operations. Operating Costs Workforce efficiency improvements. Reorganization – corporate functions and operations. Cost reduction targets in all operations and corporate office. Capital and Sustaining Investments Prioritization of key projects to deliver long term growth while maintaining the sustainability of the asset base.

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Nickel laterite operation in the state of Para to produce ferronickel. Annual capacity: 58 kt of nickel in ferronickel. Estimated investment: US $ 2.297 billion.

Onca Puma

Construction progressing again. Operational readiness assessment underway . Operations training taking place. First line is expected to be commissioned in 2H10.

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Goro Project

Project construction complete. Commissioning underway. Recovered from the impact of the acid plant incident. Operations fully staffed. First production late 2009. High Pressure Acid Leach (HPAL). Process for laterite ores in the Southern Province of New Caledonia. Annual capacity: 60 kt nickel oxide and 4,600 t cobalt intermediate. Estimated investment: US $4.083 billion.

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Voisey’s Bay processing plant

Project released from further Environmental Assessment, 2008. Hydromet technology selected in November 2008. Feasibility level of engineering completed. Early works started in April 2009. Detailed engineering, procurement and construction activities in progress. Hydrometallurgical plant to process sulphide concentrates. Annual capacity:

• 50 kt electronickel.
• 5,000 t copper.
• 2,500 t cobalt.

Scheduled completion by Feb 2013.

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Nickel prices have recovered from their 2009 lows

LME Stocks

(tonnes)

LME Cash Price

(US$/ tonne) Source: LME

20,000 40,000 60,000 80,000 100,000 120,000 140,000 2005 2006 2007 2008 2009 10,000 20,000 30,000 40,000 50,000

LME cash nickel price and stocks

January 2 0 0 5 to Sept 2 5 2 0 0 9

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Robust Chinese nickel demand drove the market in H1 2009. Stainless production continues improvements.

• China setting production records in Q2/Q3 – potential Q4

moderation.

• Recovery outside China gathering pace in Q3 – representing 70%+
• f world SS market in 2008.
• Declining scrap availability and higher austenitic ratio to drive

primary nickel demand growth.

• Potential remains for stainless re-stocking outside China .

Non-stainless remains mixed – improvements in a number of sectors. Nickel supply declining in first half of 2009.

Market update

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In the first half of 2009, China and Taiwan drove stainless production – improvements have broadened to all markets into Q3

Index Q1 2006 = 100

Quarterly stainless production trends Q1 2006 – Q2 2009 (f)

* Source: Vale estimates

25 75 125 175 225 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2e

2006 2007 2008 2009

China/ Taiw an Rest of W orld

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We have a strong presence in the growing Asian market

World nickel demand by geography versus Vale sales 53% 5% 9% 33%

Rest of World Europe North America Asia

60% 1% 27% 12%

2008 World nickel use Vale 2008 sales

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Quarterly stainless steel production 1970 to 2009Q2 (f)

Selling nickel to the stainless steel industry can be challenging given the inherent volatility

Source: 1970-2000 Macquarie Bank, 2001-2009 Vale

• 35%
• 25%
• 15%
• 5%

5% 15% 25% 35% 1Q70 4Q70 3Q71 2Q72 1Q73 4Q73 3Q74 2Q75 1Q76 4Q76 3Q77 2Q78 1Q79 4Q79 3Q80 2Q81 1Q82 4Q82 3Q83 2Q84 1Q85 4Q85 3Q86 2Q87 1Q88 4Q88 3Q89 2Q90 1Q91 4Q91 3Q92 2Q93 1Q94 4Q94 3Q95 2Q96 1Q97 4Q97 3Q98 2Q99 1Q00 4Q00 3Q01 2Q02 1Q03 4Q03 3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09E

Y-O-Y Change Q-O-Q Change

• 25%
• 20%
• 1

5%

• 1

0%

• 5%

0% 5% 1 0% 1 5% 20% 25% 1 Q7 4 Q7 3 Q7 1 2 Q7 2 1 Q7 3 4 Q7 3 3 Q7 4 2 Q7 5 1 Q7 6 4 Q7 6 3 Q7 7 2 Q7 8 1 Q7 9 4 Q7 9 3 Q8 2 Q8 1 1 Q8 2 4 Q8 2 3 Q8 3 2 Q8 4 1 Q8 5 4 Q8 5 3 Q8 6 2 Q8 7 1 Q8 8 4 Q8 8 3 Q8 9 2 Q9 1 Q9 1 4 Q9 1 3 Q9 2 2 Q9 3 1 Q9 4 4 Q9 4 3 Q9 5 2 Q9 6 1 Q9 7 4 Q9 7 3 Q9 8 2 Q9 9 1 Q0 4 Q0 3 Q0 1 2 Q0 2 1 Q0 3 4 Q0 3 3 Q0 4 2 Q0 5 1 Q0 6 4 Q0 6 3 Q0 7 2 Q0 8 1 Q0 9E

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We have a strong position in Non-Stainless sectors providing flexibility to shift nickel in and out of the Stainless sector to manage demand variability

World Nickel demand by application versus Vale sales

58% 42%

Stainless Non-Stainless

33% 67%

43% 57%

Vale 2009 H1 sales 2008 World nickel use Vale 2008 sales

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Nickel demand poised to rebound with global economic recovery. Vale has the best in-ground nickel assets with cost structure improvements underway to maximize value. Flexibility in our nickel production, both in terms of product mix and volume, to meet the market needs. Excellent growth potential to continue to provide nickel as one of the essential ingredients of people’s everyday lives far into the future.

In summary, Vale is positioned to remain a global nickel leader for many years to come

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Pedro Gutemberg Director of Iron Ore Marketing and R&D

Iron ore market outlook

Rio de Janeiro September 2009

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Disclaimer

“This presentation may include declarations about Vale's expectations regarding future events or results. All declarations based upon future expectations, rather than historical facts, are subject to various risks and

• uncertainties. Vale cannot guarantee that such declarations will prove to be
• correct. These risks and uncertainties include factors related to the following:

(a) the countries where Vale operates, mainly Brazil and Canada; (b) the global economy; (c) capital markets; (d) the mining and metals businesses and their dependence upon global industrial production, which is cyclical by nature; and (e) the high degree of global competition in the markets in which Vale

• perates. To obtain further information on factors that may give rise to results

different from those forecast by Vale, please consult the reports filed with the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF), and with the U.S. Securities and Exchange Commission (SEC), including Vale’s most recent Annual Report on Form 20F and its reports on Form 6K.”

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Agenda Company overview Steel market outlook Iron ore market outlook Final comments

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Company Overview

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Vale has the largest reserve base in the iron

• re industry

¹ Proven and probable reserves, as of Dec, 2008.

6 mines

Northern System

7.2 Bi 13 mines 3.7 Bi

Southeastern System

10 mines 3.5 Bi

Southern System

Reserves (t)1

14.3 Bi

TOTAL VALE 96.5 116.4 80.5 2008 Production (Mt)

293.4

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Vale: products for the steel industry

Vale can deliver all the major inputs of the steel industry, with outstanding quality and reliability.

BF

I ron Ore Products Coal

Coke plant

Coke

SM

Sinter Sinter Feed BF Pellets Lum p Crude steel Pig iron

BOF

Manganese & Mn Alloys

DR R

DRI Crude steel Nickel DR Pellets

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Steel market outlook

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Crude steel production has significantly recovered in recent months

Source: WSA

Crude steel production by region

Reasons for steel production

improvement:

Better than expected economic indicators Government incentives:

• In the US the program “cash for clunkers”

have boosted the auto sector;

• European countries adopted some programs

to stimulate auto sector;

• Chinese stimulus package for infrastructure

and construction sectors;

• Brazil: IPI (Tax on industrialized products)

reduction and improvement of credit conditions

End of de-stocking process in several

markets

40 50 60 70 80 90 100 110 120 130 D e c

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EU 27 Americas China Asia Ex-China

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Chinese steel production

Chinese crude steel production

(Mt) (YoY)

Steel production is running at record levels, driven by domestic consumption in the absence of large export volumes in 2009.

YTD: ´09 - 370Mt ´08 - 351Mt

Source: WSA

30 35 40 45 50 55 60 65 70 J a n F e b M a r A p r M a y J u n J u l A u g S e p O c t N

• v

D e c

• 5%

0% 5% 10% 15% 20% 25%

2008 2009 Var YoY

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20 40 60 80 100 120 140 160 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 China Japan Europe USA Korea 20 40 60 80 100 120 140 160 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 5 10 15 20 25 30 35 40 Japan Europe USA Korea China

Auto Sales Construction

Sources: NBS, JAMA, ACEA, FED Sources: CEIC, METI, EUROSTAT, FED

Index –Sep / 07 = 100

Steel consumption

¹ Construction in China as a percentage of last period (YoY)

Index –Sep / 07 = 100

Stimulated by government incentives, end- users are showing signs of recovery

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¹

(%YoY)

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Source: NBS, Macquarie

Chinese fixed asset investment - % change yoy

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Jan-2007 Jul-2007 Jan-2008 Jul-2008 Jan-2009 % change yoy Total urban Real estate Infrastructure

Chinese fixed asset investment (% YoY)

Chinese fixed asset investment is rising strongly because of massive credit expansion

Monetary/fiscal stimulus resulted in strong growth in construction FAI in

• China. Further expansion is now occurring in the property construction

sector, which should provide further steam for steel consumption in coming years.

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Chinese steel consumption

Chinese Apparent finished steel consumption

(Mt) (YoY)

The recovery has been strong, driven by massive government infrastructure spending, in a sustainable recovery process.

YTD: ´09 - 393Mt ´08 - 325Mt

30 35 40 45 50 55 60 65 70 J a n F e b M a r A p r M a y J u n J u l A u g S e p O c t N

• v

D e c 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

2008 2009 Var YoY

Source: WSA, Mysteel

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Billet – European Source: Vale, SBB and Bloomberg

Steel price

Hot rolled coils Billet

Steel prices have recovered from bottom levels in recent months

400 450 500 550 600 650 700 J a n

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US$ /ton Europe USA

250 300 350 400 450

US$ /ton Jan-09 Mar-09 May-09 Jul-09 Sep-09

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Iron ore market outlook

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European seaborne imports expected to rebound in 2H09

20 30 40 50 60 70 80 90 100 110

2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Seaborne Imports Pig Iron Production Real steel consumption

Steel & iron ore de-stocking development in 2009

2 3 4 5 6 7 8 9 10 11 12 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09

Iron Ore Inventories (weeks)

Index - base 2Q08 = 100

Quarterly evolution IO inventory trend

forecast forecast

Positioned in the upstream of the supply chain, iron ore performs as a late cycle. In order to promote

stock adjustments to new steel production levels, the swings of iron ore imports are much stronger than the variation of both steel consumption and pig iron production.

As a result, the severe importing contraction of 1H09 should be followed by relatively strong reaction in

the 2H09, when some stock formation is expected.

Expected beginning

• f stock

build up

Source: Eurofer, Eurostat and Vale estimates

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Chinese iron ore imports have been very strong in 2009

In the first eight months of 2009 Chinese iron ore imports reached 405Mt, increasing 32% YoY, partially compensating the weaker demand in other regions. Chinese iron ore imports

Source: Mysteel

20 30 40 50 60

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec (Mt)

2007 2008 2009

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Share of iron ore consumption in China

Share of imported ore is increasing in China

The share of imported ore in China has reached more than 70% of total consumption year to date in 2009.

2) Jan-Aug annualized figures Source: Mysteel 1) Domestic concentrates adjusted to 65% Fe equivalent ore

100 200 300 400 500 600 700 2001 2002 2003 2004 2005 2006 2007 2008 2009* (Mt) 30% 45% 60% 75% imported ore domestic concentrates share of imported ore

1 2

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In spite of the increase in absolute terms, iron ore stocks in China remain relatively tight

According to August pig iron production, stock levels at the ports can only meet steel mill's demand for around 40 days. Chinese iron ore stocks

Source: Mysteel

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• On the supply side:

large downward capacity adjustments were implemented by seaborne suppliers in 1H09; Lead times and monsoon period in India compromise quick pick up in production volumes for the short term; Additionally, higher domestic demand in regions such as Brazil, CIS and USA may negatively affect seaborne ore availability.

• On the demand side:

recovery of steel consumption is currently observed in several regions; Additional volumes to meet restocking requirements in world ex-China; Maintenance of solid demand in China.

A tight market situation is expected for 2H09

392

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Iron ore prices

Premium for higher VIU of Vale´s iron ore has been recognized by the market, especially in periods when high productivity is required, such as today.

Source: Vale

Spot iron ore prices in China

50 75 100 125 150 175 200 J u n

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US$/dmt SFCJ Spot CFR China Platts 62% Index

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Final comments

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We continue to believe in the strong long term

fundamentals for global iron ore demand;

We continue strongly committed to long term

relationship with our clients;

We continue developing our projects; We are implementing several logistic initiatives to

reduce landed costs and increase our competitiveness in Asia:

• Investments in shipbuilding – creating a shuttle

service to Asia.

• Further initiatives under analysis

Our long term market overview and strategy remains unchanged

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Conclusion

Global economy is performing better than previously expected and steel

production is accelerating in several regions, also helped by government stimulus packages.

Chinese steel consumption is on a sustainable growth path, and production

should follow the trend accordingly.

Seaborne iron ore supply suffered large downward capacity adjustments in early

2009.

On the other hand, recovery in global demand for iron ore is broadening due to

gradual acceleration of steel consumption combined with restocking requirements in several regions.

As a result, seaborne market is more balanced among the different demanding

regions, leading to a tight situation in 2H09.

After the adjustments during worst part of the downturn, Vale is currently

reaccelerating production to meet increasing seaborne demand in 2H09.

Vale´s strategy of long term commitment to its clients remains unchanged.

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www.vale.com

rio@vale.com

2

DEJM /DIOF / DIPF Ferrous Minerals Planning and Development Department

Vale’siron ore systems

Rio de Janeiro September 2009

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Outline

Current iron ore production structure

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Vale’s iron ore systems at a glance

27 18 Pellets 293 296 Iron Ore 2008 2007 Production (Mt)¹

¹ USGAAP

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Reserves base

¹ Proven and probable reserves, as of December 2008.

VALE has the largest reserves base in the iron

• re industry

6 mines

Northern System

7.2 Bi 13 mines 3.7 Bi

Southeastern System

10 mines 3.5 Bi

Southern System

Reserves (t)1 14.3 Bi

TOTAL VALE Our proven reserves are capable of meeting the present demand for more than 40 years.

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Vale’s iron ore logistics

1 port and 3 maritime terminals for seagoing vessels: Tubarão, Ponta da Madeira, Guaíba and Itaguai. 2 world-class railroads – EFC and EFVM

Guaíba Itaguaí

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Northern System

Current iron ore production structure Iron ore production systems

96.5 91.7 Iron Ore 2008 2007 Production (Mt)¹

¹ USGAAP

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Serra Sul

Serra Norte

Serra Leste

• The Northern System is composed by 3 major iron ore deposits, called Serra

Norte, Serra Sul and Serra Leste;

• Presently, mining operations are carried out only at Serra Norte.

Northern System

Iron Ore Formation

Key:

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Carajás mining complex

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Iron Ore: production doubled from 48 (2000) to 97 Mtpy (2008).

1 Billion tons in Oct/07

Northern System - historical production

48 52 54 59 69 72 82 92 97 2000 2001 2002 2003 2004 2005 2006 2007 2008 million metric tons

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General Information:

. Length: 892 km (single track) . 56 crossing yards . 62 bridges and overpasses . Train-type (2008): 4 locomotives and 330 cars . Net cargo: 33,000 t (SF) . Cars (total): 10,670 . Locomotives (total): 216 . Cycle time: 90 h CONTROL ROOM

Carajás railroad

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Ships up to 155,000 dwt Maximum draft: 18m Loading rate: 8,000 t/h PIER III 1 Vessel up to 250,000 dwt 2 Vessels up to 180,000 dwt Draft: 21 m

Northern System - Ponta da Madeira maritime terminal

Vessels up to 420,000 dwt Draft: 23 m Vessels up to 155,000 dwt Draft: 18 m PIER I PIER II Ships up to 420,000 dwt Maximum draft: 23m Loading rate: 16,000 t/h

92 2008

Mt Shipping

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Northern System - São Luis pelletizing plant

PRODUCTION CAPACITY: 7.0 Mtpy

Production (Mt) ¹ 7.0 2008 7.1 2007

¹ USGAAP

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MG

Current iron ore production structure Iron ore production systems

Southeastern System: 116.4 114.9 Iron Ore 6.1 6.4 Pelletizing Plants 2008 2007 Production (Mt)¹ Southern System: 80.5 89.3 Iron Ore 4.2 4.1 Pelletizing Plants 2008 2007 Production (Mt)¹

¹ USGAAP

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Southern & Southeastern Systems

To Guaíba and Itaguaí maritime terminals

ATLANTIC OCEAN

Tubarao Port Guaíba & Itaguaí Ports

Minas Gerais

ES RJ

Belo Horizonte

To Tubarao Port

EFVM FCA MRS Iron Ore Formation

BELO HORI ZONTE ITABIRA OURO PRETO BRUMADI NHO ITABIRITO CONGONHAS

N

BAÚ FAZENDÃO ALEGRIA TIMBOPEBA ÁGUA LIMPA DOIS IRMÃOS GONGO SOCO CÓRREGO DO MEIO FÁBRICA FEIJÃO CONCEIÇÃO FÁBRICA NOVA MINAS DO MEIO ANDRADE CAUÊ CAPÃO XAVIER MAR AZUL ABÓBORAS PICO JANGADA

City or Town

Iron Ore Mine, Production Site or Vale’s Mining Rights

KEY

APOLO TAMANDUÁ

• CAP. DO MATO

VARGEM GRANDE BRUCUTU

Iron ore quadrangle overview

Italic Font Normal Font

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Iron Ore: production increased from 71 (2000) to 116 Mtpy (2008).

71 70 73 76 81 91 98 115 116 2000 2001 2002 2003 2004 2005 2006 2007 2008 million metric tons

Southeastern System - historical production

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Itabira complex

ROM

Minas do Meio

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Minas Centrais complex

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Mariana complex

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Urucum mine

Southeastern System

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North Berth Vessels up to 200,000 dwt Draft = 17 m

PIER 2

Vessels up to 365,000 dwt Draft = 20 m

PIER 1

South Berth Vessels up to 170,000 dwt Draft = 15.5 m

Tubarão port

Southeastern System

94

2008

Mt

Shipping

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Southeastern System - Pelletizing at Tubarão complex

JV with Posco

NIBRASCO

JV with JSM JV with ArcelorMittal JV with Ilva 100% Vale

I & II

15.4² 6.4 Pellets 2008 2007 Production (Mt)¹

¹ USGAAP ² Figures includes actual production, including production from four pellet plants we leased in 2008.

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Iron Ore: production increased from 27 (2000) to 81 Mtpy (2008).

Southern System - historical production

27 46 47 53 61 70 84 89 81 2000 2001 2002 2003 2004 2005 2006 2007 2008

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Itabirito complex

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Vargem Grande complex

ROM

27

Paraopeba complex

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Vale`s pipeline of iron ore projects iron ore and pellets

1 The project is still subject to approval by the Board of Directors. 2 Start-up is subject to market conditions.

Projects Capacity Expected Total capex Mtpy start-up US$ million Iron ore

• Carajás - additional 10 Mtpy

+10 1H10 290

• Carajás 130 Mtpy

+30 1H12 2,478

• Carajás Serra Sul (mine S11D)¹

+90 1H13 11,297

• Apolo¹

+24 1H13 2,509 Pellets

• Oman

+9.0 2H10 1,356

• Tubarão VIII

+7.5 1H11² 636

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Ferrous minerals product portfolio - iron ore and pellets

• Non-agglomerated iron ore products:
• Sinter Feed;
• Pellet Feed;
• Lump Ore.
• Agglomerated iron ore products:
• Pellets for blast furnaces;
• Pellets for direct reduction.
• Product Specifications:
• Chemical assays (such as Fe, SiO2, Al2O3, P, Mn and LOI);
• Moisture (% H2O);
• Size distribution (such as +31.5 mm; -6.3 mm; -0.15 mm; -0.045 mm);
• Specific parameters (such as tumbler indexes ISO 3271).

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Iron ore and pellets portfolio

Examples of products

• Sinter Feed
• SFCJ - Sinter Feed Carajás
• SSFT - Standard Sinter Feed Tubarão
• SSFG - Standard Sinter Feed Guaíba
• Pellet Feed
• PFCJ - Pellet Feed Carajás
• PFIT - Pellet Feed Iron Tubarão
• PFFT - Pellet Feed Fines Tubarão
• PFFG - Pellet Feed Guaíba
• Lump Ore
• LOBG - Lump Ore Blast Furnace Guaíba
• LOBT - Lump Ore Blast Furnace Tubarão
• Pellets
• AF08 - Blast Furnace Standard Pellet
• AF70 - Carajás Blast Furnace Pellet
• AF40 - Blast Furnace Pellet Vargem Grande

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Distribution by port

Iron ore - current portfolio

Examples of products

11 4 5 2 Total 1 LOBG Lump ore (1) 3 PFFG PFFT PFCJ 1 PFIT Pellet feed (4) 2 SFOG SFOT 1 SFXT 2 SSFG SSFT 1 SFCJ Sinter feed (6)

Number of products Guaíba + Itaguaí Tubarão Ponta da Madeira Ore type (number)

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Expected quality (2009-2012)

Iron ore - current portfolio

Examples of products

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www.vale.com

rio@vale.com