CHAPTER 10 Vale: Constructing a Brand

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1 CHAPTER 10 : Constructing a Brand 10.1 An international brand For 65 years, the CVRD logo was spread out across the four corners of the world: on train cars, on ships, on train stations, on calendars, on appointment books and pens, on the doors of offices and in trade contracts. However, when joining together those letters, everyone whether engineers, geologists, the company CEO, office assistants, secretaries, mine workers, locomotive engineers, shareholders, or passengers at a station saw only one thing:. Popularly, CVRD was always. On November 29, 2007, at Copacabana Fort in Rio de Janeiro, CEO Roger Agnelli brought together around 500 employees to announce one of the biggest changes in the company s history. 1 The reasons for the modification may be summed up in just one word: globalization. The word is easily read throughout the world and, as of 2006, when it acquired Canadian company Inco, was expanding across the globe. From that point onward, changed its name and logo. The logo shows a stylized letter V that can represent either a mining pit or a heart. The easy-to-read brand reinforced s image as a global company. No longer were different brands and images used in different areas. 2 modern and plural was unified. As it changed its brand, was a company that would end 2007 with net income of US$11.8 billion up 62.9% from the previous year and new records in all sectors. 3 was now present in more than 30 countries and was developing an extensive mineral prospecting program, with projects in 21 countries around the world. The company was mainly looking for new deposits of 1 - Simplesmente, IstoÉ Dinheiro, December 5, Available at <http://www.>. 2 - Idem. 3 - US GAAP 4Q07 Results. Available at < res/resultadose-informacoes-financeiras/resultados-trimestrais/documents/2007/4%c2%b0%20trimestre/ Press%20Releases/vale_usgaap_4t07p.pdf>. copper, manganese ore, iron ore, nickel, bauxite, phosphate, potash, coal, uranium, diamonds and platinum group metals. 4 The sum of all the results obtained in the year made the company the world s second largest miner A global company and Brazil entered 2007 with good growth prospects. At the start of the year, the United Nations issued its annual report, in which the United Nations Conference on Trade and Development (UNCTAD) 6 ranked the country the 12th largest foreign investor in the world in That year, a total of US$28 billion was invested by Brazilian companies. 7 Brazil had left behind companies in important powers, such as Australia, China and Russia, which invested US$22 billion, US$16 billion and US$18 billion, respectively. 8 played a major role in Brazil s high position in the UN ranking, as the company accounted for more than 50% of that year s investment. This was largely due to the acquisition of Canadian company Inco, the world s fifth biggest takeover in It was also the largest transaction ever made by a Latin American company. 9 The UN report diagnosed the new times being experienced by Brazil. The economy had not been dynamic in the 1980s and 1990s, with growth rates below the world average, but this had now 4 - See s 2007 Sustainability Report Press Book, produced by s Press Office. 6 - The United Nation s annual investment report is published by the United Nations Conference on Trade and Development (UNCTAD), the UN s economic development arm. 7 - See s 2006 and 2007 Form 20-F Reports. 8 - See Brasil é o 12 o maior investidor no mundo, aponta ONU, O Estado de S.Paulo, October 16, Available at <,brasil-e-o-12-maiorinvestidor-no-mundo-aponta-onu,65706,0.htm>. 9 - Idem. 335

2 Photo at start of Chapter 10: s global headquarters in Rio de Janeiro, changed. In the 2000s, Brazil s annual GDP growth rate increased of Inco, which was very strong, with revenue from nickel from 1.7% to around 4% in The rise in GDP that year was activities reaching US$11.78 billion. This amount was four times 337 a foretaste of what was to come in 2007, when growth hit 6.1%. 11 higher than the previous year s figure of US$2.8 billion, due to s share of the total volume traded by Brazil on the seaborne the fact that Inco s results were only incorporated in the last market in 2007 reached approximately 32.5%. 12 The company quarter of In 2007, 60.3% of total nickel sales were delivered confirmed its vocation as a growth driver of the Brazilian economy, to customers in Asia, 26.5% in North America, 11.6% in Europe and and this would become even more palpable with the results it 1.6% in other locations. 15 would achieve year after year. Over the course of 2007, s shares were the most traded among In 2007, s gross operating revenues increased by 62.6% all foreign companies on the New York Stock Exchange, surpassing to US$33.11 billion. Segmented investments, the pursuit of even those of BHP Billiton, the global leader in the mining sector. 16 excellence in work methods and the good moment the country was Average daily trading volumes were around US$725.5 million. This experiencing made it possible to predict an even better future for was partly related to the company s strong performance in iron the company. ore production in Brazil and its sales arrangements with Asian The former country of the future, as Brazil had been described steelmakers, which in February 2008 agreed to an average price by Austrian writer Stefan Zweig, was now joining the list of increase of 68%. 17 emerging countries that were leading global growth. As declared As a consequence of its expansion program, in April 2008 by the UN report, external investment by Brazilian companies is announced a partnership with Columbia University to establish a to some extent part of an expansion and consolidation process research and technical training center. 18 A program for training that is also occurring at home. Brazilian companies are looking to young geologists and engineers developed professionals to conduct consolidate their industries, such as mining and steel, by buying work in locations such as Kazakhstan. 19 foreign competitors in order not to lose markets or become s presence outside Brazil was not restricted to commercial targets themselves. 13 investments. In May 2008, an earthquake measuring 7.9 on the The investment made by purchasing the Canadian company Richter scale hit southwest China, killing around 90,000 people. 20 marked s entry into the international nickel market, making Hundreds of houses, schools and hospitals collapsed in less than it the world s second biggest producer of the metal. 14 For the first a minute. That same month, donated US$1.4 million to the time, the 2007 figures encompassed the annual performance O Brasil Batizou:! advertising campaign (2007) See Brazil, Finance Ministry. Economia brasileira em perspectiva. Special year 2010 edition. Available at <> Idem See s 2007 Form 20-F Report The document was translated by BBC Brazil in Brasil bate recorde de investimentos no exterior, diz UNCTAD, October 16, Available at < reporterbbc/story/2007/10/071016_unctadwir07_pu.shtml> See <> See s 2007 Form 20-F Report é a ação estrangeira mais negociada na Bolsa de Nova York, Folha de S.Paulo, Mercado Aberto, January 30, O gol de placa da, Carta Capital, February 20, faz parceria com Columbia para criar centro de pesquisa, Valor Econômico, April 30, lançará três programas para contratação de recém-formados, O Globo, May 4, A tragédia das crianças, Veja, May 21, Available at < br/210508/p_078.shtml>.

3 Right: Cateme Elementary School in Moatize, International Red Cross to help the victims of the tragedy. In strategic objectives and reward performance, among various other addition to this direct donation, undertook to build three improvements implemented. 339 Hope Schools in Sichuan Province, through a contribution of US$400,000. On June 4, 2010, s Executive Director of Ferrous Metals, José Carlos Martins and China Country Manager, Michael Zhu, leading a group of company employees, attended the opening ceremony of the Hope School in Yongxing Town, the last of the three schools handed over in Sichuan. The 6,500-m² elementary school has ten classrooms on three floors and is designed for 200 students. 21 Strike in Canada By 2008, had more than 62,000 employees across the world. The Human Resources Department, with the support of the Legal Department, faced the challenge of administrating and conciliating various types of labor relations existing in different countries. Relations between employees and companies differ from one country to another, and multinationals are subject to the rules of the countries where they operate. A significant number of employees at s Canadian nickel operations in Sudbury and Port Colborne, Ontario went on strike from July 2009 to July Some mining operation employees in Voisey s Bay, Newfoundland and Labrador also went on strike, from August 2009 to January Collective agreements lasting five years were made with the unions representing the striking employees, offering incentives to improve these operations long-term productivity and competitiveness, as well as their capacity to continue generating value. These agreements include a defined-contribution pension plan for new employees and adjustments to variable pay programs to enable to achieve African expansion: Moatize, Mozambique Mozambique was the first place outside Brazil to receive a branch of the Foundation, whose purpose is to contribute to integrated development in the regions where operates. The Foundation s investments in the African country have prioritized projects in the areas of health, farming, infrastructure, sport and education. In addition, an initial 1,108 families were resettled in Moatize, Tete Province, the coal-rich central region of Mozambique. 22 This process was finalized in 2010 with the resettling of 1,365 families. Seeking better results for the local community, s investment in the resettlement involved building schools, health centers and police stations, enabling the creation of functional neighborhoods for the new residents. The projects included the refurbishment of Tete Provincial Hospital, Moatize Health Center and the Moatize Intermediate Institute of Geology and Mines, as well as the development of local farming. 23 The company worked in a range of areas to integrate the social, cultural and economic life of the region. For example, organized a training course in Moatize for Mozambican teachers and school principals, which was completed by around 1,000 participants. To enable the coal mine to be developed in Moatize, families were moved from the communities of Malabwe, Chipanga, Bagamoio and Mithete. Based on various studies and a socioeconomic census conducted to identify the people to be resettled, two areas were selected to receive the families: the rural area of Cateme, and the urban neighborhood of 25 de Setembro. The process of producing 21 - entrega a terceira Escola da Esperança na China. Available at <http://www.> See press release realiza primeira exportação da Mina Carvão Moatize, September 13, Available at < asp?id=21027> Idem. View of Inco site in Sudbury, Ontario, Canada.

4 Left: a train at sunset in Moatize, a Resettlement Action Plan involved extensive public engagement In Tete, has participated in meetings held at the foot of a 341 and participation. Before resettlement began, three public baobab tree locally considered the tree of life due its water storage hearings were conducted, as well as 20 theater performances in capacity. The tree is found in various parts of Africa and many the predominant local language (Nyungwe), 110 meetings with specimens reach 40 meters in height and 10 meters in diameter. communities and their leaders using illustrated materials, 4,927 In a tradition arising in ancient African tribes, many community home visits to families and leaders for mobilization and social decisions are taken around this tree. When the Foundation assistance purposes, and 639 social consultations. During the arrived in Mozambique, this traditional custom became part of the process, alternative solutions were considered to avoid or minimize company s community relationship practices. 24 Knowing how to physical or economic displacement. incorporate local culture into its operating methods was essential The following infrastructure was built or modernized for the to a company seeking to expand around the world. communities in both the new Cateme and 25 de Setembro areas: In March 2008, laid the foundation stone of the Moatize houses, an elementary school, a high school, a library, houses for Project. A little over two years later, in September 2010, it bought school principals and teachers, information technology rooms, a 51% stake in Sociedade de Desenvolvimento do Corredor do laboratories, a health and maternity center, a police station, streets, Norte S.A. (SDCN), a company controlling two railroad systems and electric power facilities along main roads. on the east coast of Africa. The amount paid was US$21 million. Equipped with 18 classrooms and a library, Cateme Elementary Through two subsidiaries, SDCN participated in two railroad School is designed for around 1,200 students. Armando Emílio systems in Africa, extending for a total of approximately 1,600 Guebuza High School, in the same neighborhood, is designed for kilometers, in Mozambique and Malawi. It will also be necessary 650 students. It has 12 classrooms, a library, accommodations to construct some additional stretches of track, as well as a new for 270 boarding students, an information technology room and port in the Nacala region. 25 The acquisition of SDCN was designed one hectare for practical classes on horticulture, composting and to permit expansion in Moatize and the creation of logistics processing of cassava flour. Both schools are administered by the infrastructure, supporting the company s operations in central Mozambican government s District Education Department. and eastern Africa. 26 After constructing these new stretches, the Improvements are made regularly to the infrastructure in the two systems will be interconnected at a point near the Moatize resettled people s communities and is taking measures to mineral province. support families, together with the government authorities, to The first batch of coal from Moatize Mine left Mozambique on meet their demands. Examples of such improvements include September 14, 2011, on board the ship Orion Express, which sailed house repairs, maintenance of drainage systems, public roads and the water supply system, expansion of the electricity network, the construction of sports facilities, investment in health and farming, 24 - See Foundation, Atuação Internacional. Available at <http://www.fundacaovale. and the development of solutions to support public transport. org/pt-br/a-fundacao-vale/atuacao-internacional/paginas/default.aspx>. Actions are also being implemented to establish alternative ways of 25 - compra ferrovias no leste da África, O Estado de S.Paulo, September 22, Available at <ócios,vale-compra-ferroviasno-leste-da-africa,36152,0.htm/>. generating income, such as poultry farming, beekeeping, agricultural training, and vocational courses Idem.

5 Ceremony to open s distribution center and pelletizing plant in Oman, Left to right: Marco Beluco, s Country Manager in Oman; Marcelo Figueiredo, s Director of Projects in Oman and Malaysia; Ahmed Al Wahaibi, CEO of the Oman Oil Company; José Carlos Martins, s Executive Director of Ferrous Metals and Strategy; Nasser Al Jashmi, the Omani Sub-Secretary of Oil and Gas; Murilo Ferreira, s CEO; and Ahmed Al Futaisi, the Minister of Transport and Communications of Oman. 342 to Lebanon. The shipment of 35,000 metric tons of thermal coal was taken for 575 kilometers along the Sena-Beira Railroad, which links Moatize to the Port of Beira in Sofala, central Mozambique. 27 The railroad had previously been closed for 28 years due to the civil war. Mining operations began in May 2011 and the project s implementation has contributed to the dynamism of the Mozambican economy, generating jobs and income. Oman At the same time that it was laying the foundation stone in Moatize, in 2008 also began constructing a pelletizing plant and distribution center in the Middle East, at the Port of Sohar Industrial Complex in Oman, a country on the Arabian Peninsula. The facility was opened in March The Middle East as a whole was a growing purchaser of the company s products, especially pellets, due to the type of furnace predominantly used by steel plants in the region. In May 2008, announced a strategic partnership with the government of Oman through the sale of a 30% stake in Oman Pelletizing Company LLC (VOPC) for US$125 million. 29 Oman covers slightly more than 300,000 square kilometers and it has a vast coastline, enormous oil reserves and frontiers with Saudi Arabia and the United Arab Emirates, two major commercial powers in the region. Under the plans drawn up by, ore processed in two pelletizing plants (each capable of producing 4.5 million metric tons of pellets per year) 30 would be transported from an iron ore and pellet distribution center in Oman (able to store 40 million metric tons) to customers in Asia and the Middle East. For the strategy to succeed, ideal conditions would be needed in order for the products to be ready for export at a reasonable cost. Part of the response to this need was provided in September 2011, when an iron terminal at the Port of Sohar was completed, for use by. Sohar s favorable location, next to deep waters outside the Persian Gulf, enabled to take max vessels, capable of transporting 400,000 metric tons, from Brazil to the Omani port. From there, the iron ore would be transferred onto smaller ships and taken to nearby locations. In addition to Sohar, only nine ports across the world are currently capable of receiving bulk carriers of max size. 31 Together with direct actions for exporting its products, offered a series of reciprocal benefits to Omani society. One example is an agreement forged by, between the government of Oman and the Federal University of Viçosa in Minas Gerais, Brazil, to attempt to solve pest problems affecting fruit crops. Signed in October 2010, the agreement provided for an investment of around R$10 million over four years. brokered the agreement through the Institute of Technology (Instituto Tecnológico, or ITV). 32 Created in 2009, ITV has the objective of coordinating science and technology actions, with an emphasis on long-term research carried out in partnership with scientific communities on a national and international scale. 33 Within a short period of activity, ITV had signed 97 research and development agreements and provided more than 50 research scholarships. ITV s participation in foreign initiatives has not been restricted to Oman. The Institute has also established partnerships with 36 institutions in Brazil and other Primeira exportação de carvão de Moatize parte hoje para Dubai, O País, September 14, Available at < primeira-exportacao-de-car-vao-de-moatize-parte-hoje-para-dubai.html> See s 2009 Form 20-F Report Idem See no mundo, Available at < mundo-afora/paginas/default.aspx> Available at <> Interview with Luiz Mello, CEO of the Institute of Technology, given to on October 25, 2011; and the text Combate a pragas em Omã, (Home - Sustentabilidade - Destaques - Combate a pragas em Omã). Available at <http://www.vale. com/pt-br/sustentabilidade/destaques/paginas/combate-a-pragas-em-oma.aspx> See < paginas/default.aspx>. Ship unloader at s industrial complex in Oman, 2011.

6 countries, such as Brazilian agricultural research agency Embrapa, Australia 344 the National Council for Scientific and Technological Development also expanded into Australia and, as in Mozambique, coal 345 (CNPq), the Massachusetts Institute of Technology (MIT), and École Polytechnique Fédérale de Lausanne (EPFL) in Switzerland. 34 Mount Simandou in Guinea, home to iron ore reserves. Guinea and Zambia In Guinea, West Africa, is investing in an iron mining project. In 2010, the company unveiled the Simandou Project, which will involve developing one of the best untapped world-class iron ore deposits on the planet. Simandou is also the biggest integrated iron ore mining and infrastructure project in the whole of Africa, and it also involves education and human and economic development programs. The first phase of the project involves developing Zogota mine in southern Simandou. Its planned total production capacity is 15 million metric tons per year and total investment will be US$1.260 billion. The aim of the Simandou Project is to replicate in Africa the successful mine-railroad-port model developed in Brazil for iron ore operations. In 2010, launched the Konkola North copper project in the Zambian Copper Belt, through a joint venture with African Rainbow Minerals (ARM). The project s estimated nominal production capacity is 45,000 metric tons per year of copper in concentrate. Start-up is planned for 2013 and maximum capacity should be reached in Construction work began in August At first, the South and East Limb mines will be developed, and then the deeper, larger layers of higher grade ore will be mined. has a 50% interest in the joint venture that controls the project. At the end of the 2000s, was also present on the African continent conducting prospecting in Congo (copper, cobalt and manganese), Angola (copper and nickel) and South Africa (coal and manganese) See press release investe em ciência e tecnologia para garantir a mineração do futuro, October 18, Available at < interna.asp?id=21139>. was once more the point of entry. In April 2007, paid US$656 million to acquire 100% of AMCI Holdings Australia Pty. The company, which operated assets and possessed projects in the area of coal exploration, was renamed Australia. 35 The acquisition of AMCI, which had nominal production capacity of 8 million metric tons per year and reserves of 103 million metric tons, was another step in s new mining policy. It also confirmed the company s efforts to become a global player in coal especially metallurgical coal, which is fundamental to steel production. 36 Once the AMCI deal and the creation of Australia had been finalized, in 2007 the company was capable of producing 10 million metric tons of coal per year, including its joint ventures in China (which contributed up to 2 million metric tons per year). Around 80% of the coal produced by s new Australian operations was of the metallurgical type, the remainder being thermal coal. At that time, of global annual coal production of 5 billion metric tons, just 15% was metallurgical coal. 37 Two years later, in September 2009, mining began using the longwall method (in which the machinery itself functions as excavation tunnels) 38 at Carborough Downs coal mine. Using this method significantly reduced the work accident risk and enabled higher output it was estimated that the project would increase the nominal annual production capacity considerably to 4.8 million metric tons in See s 2007 Form 20-F Report See s 2006 and 2007 Form 20-F Reports See compra produtora australiana de carvão, O Globo, February 27, Available at <> See <> See s 2009 Form 20-F Report.

7 Previous page: Integra coal mine, Australia. Above: Tres Valles copper plant, Chile. Left: Carborough Downs coal mine, Australia.

8 Employee handling copper plates at Tres Valles, Chile, Chile and Colombia In the fourth quarter of 2010, production began at the Tres Valles copper unit. 40 Located in Salamanca in the Coquimbo region of Chile, the operation includes mines and a plant producing copper cathode (metal plate). There are two copper oxide mines: the Don Gabriel open-pit mine and the Papomono underground mine. In all, the company invested US$140 million in the project. 41 In December 2008, acquired 100% of the coal assets of Cementos Argos S.A. (Argos), in Colombia, for a total sum of US$306 million. 42 In 2012, in line with its continuous efforts to optimize its portfolio of assets, sold its coal operations in Colombia to CPC SAS, an affiliate of Colombian Natural Resources SAS, for US$407 million in cash. China: international challenge By the start of 2008, China had become the world s main consumer of mineral resources. In 2007, the country alone was responsible for approximately 49% of global demand for seaborne iron ore, 24.2% of global nickel demand, 33% of aluminum demand, and 26.3% of copper demand. 43 The percentage of s total gross revenue arising from sales to Chinese customers was 17.7% in Adding in the percentage of total gross revenue from Asian countries other than China, which was 23.3% in the same year, Asia therefore accounted for 41% of s sales. Good performance in Asia boosted by sales in China was repeated, though to a lesser extent, in the rest of the world. European customers, for example, accounted for 22.1% of the company s sales in s commercial relationship with China grew even closer with the completion of the Dalian nickel processing plant in northeast China. Operations at the plant, capable of producing 35,000 metric tons of refined nickel per year, started up in April Presence on five continents Growing trade with China contributed to the expansion in s international transactions. At the start of 2008, the company had operations, offices and joint ventures spread across five continents. By 2011, the company had a presence in more than 35 countries and had 136,000 employees and long-term contractors. After 70 years, was now present in Angola, Argentina, Australia, Austria, Barbados, Canada, Chile, China, the Democratic Republic of Congo, France, Gabon, Guinea, India, Indonesia, Japan, Kazakhstan, Liberia, Malawi, Malaysia, Mongolia, Mozambique, New Caledonia, Oman, Paraguay, Peru, the Philippines, Singapore, South Africa, South Korea, Switzerland, Taiwan, Thailand, the United Arab Emirates, the United Kingdom, the United States and Zambia. Notwithstanding its numerous achievements as its international trade expanded, the company also faced occasional difficulties and surprises. The main setback was triggered in the second half of Idem, p inaugura projeto de cobre no Chile e amplia meta de produção, O Globo, December 2, See s 2009 Form 20-F Report Idem Idem.

9 Iron ore processing at Carajás Mine, Pará, 2008.

10 Results of the recession of In 2008, the global economy was shaken by a crisis rated by specialists as on a par with the crash of In an ever more globalized world in which businesses are interconnected, crossing frontiers, crises spread like waves. A crisis that began in the real estate market in the United States expanded in a relatively steady manner over the course of 2007 and became a global problem the following year. Before experiencing the effects of the recession, had been growing rapidly. In 2007, all of the company s business areas performed strongly. Gross revenue from iron ore sales grew by 18.8% in relation to 2006, thanks to an average rise of 13.3% in sales prices and a 4.8% increase in the volume sold. The same occurred in the iron ore pellet area, where gross revenue rose by 38.4%, largely due to a 32.8% increase in the volume sold. 45 In January 2007, in Carajás, Pará, work on expanding the operation s annual iron ore production capacity to 100 million metric tons was finalized. After this, the Board of Directors approved a new project to increase output to 130 million metric tons per year. In 2007, iron ore production in Carajás reached 91.7 million metric tons, up from 81.8 million the previous year. Brucutu Mine in Minas Gerais, opened in September 2006, produced 22 million metric tons of iron ore in the year following its inauguration. 46 Potash, kaolin, copper and aluminum grew at a similar pace in Gross potash revenue rose by 24.5%, driven by a 35.4% rise in average sales prices. Kaolin sales expanded by 9.2%, thanks to an 18.9% increase in average prices. Meanwhile, profits from copper concentrate rose by 3% between 2006 and 2007, from US$779 million to US$802 million, due to a 4.7% rise in average sales prices. Aluminum revenues expanded by 14.3%. 47 Manganese sales rose by 40% in 2007, reflecting a 52% leap in average sales prices and a 9.1% decline in volume. This reduction was caused by a temporary shutdown at Azul Mine in Carajás between July and December s ferroalloy business saw revenue growth of 40%, due to a 47.9% increase in average sales prices and a 6.5% fall in volumes, which was largely the result of a shutdown at the company s ferroalloy plant in France between August and September 2007, due to technical problems. 48 The excellent results obtained in 2007 continued into 2008, despite the sudden slowdown in the economy, particularly in the fourth quarter of the year. The global crisis took some time to affect s performance. In 2008, the good results attained in previous years were maintained, and indeed s revenues, operating profit and net profit all rose for a sixth consecutive year. 49 Gross annual operating revenue rose by 16.3% to US$38.5 billion, while net operating revenue grew by 16.1%. The following sales records were also set in 2008: 264 million metric tons of iron ore; 276,000 metric tons of nickel; 320,000 metric tons of copper; 4.2 million metric tons of alumina; 3,000 metric tons of cobalt; 2.4 million troy ounces (unit of measurement used for precious metals, equivalent to 31.1 grams) of precious metals; 411,000 troy ounces of platinum group metals; and 4.1 million metric tons of coal. New markets made a fundamental contribution to these results, enabling to minimize the effects of the crisis. China accounted for 28.7% of iron ore and pellet shipments in 2008, and the figure for Asia as a whole was 47.8%. After this came Europe (24.4%) and Brazil (19%). During the year, 56.2% of total 45 - See s 2007 Form 20-F Report Idem Idem Idem See s 2008 Form 20-F Report. Stockyard and embarkation facilities at Brucutu Mine, São Gonçalo do Rio Abaixo, Minas Gerais, 2009.

11 In 2008, the good results attained in previous years were maintained, and indeed s revenues, operating profit and net profit all rose for a sixth consecutive year Right: s CEO, Murilo Ferreira, in nickel sales went to Asia, 27.2% to North America, 11.6% to Europe and 5% to other destinations. 50 Achieving these results, however, was no easy task. The deterioration of the international financial crisis in the fourth quarter reduced demand for iron ore and pellets, and also led to large falls in the prices of non-ferrous minerals. 51 China s economic growth slowed after 10 years of continuous expansion in its steel production and iron ore imports. This slowdown was the result of strict internal credit controls and a reduction in the country s exports. 52 To stay competitive and retain healthy cash levels, needed to restructure. In line with changes in global economic conditions, the company adjusted its production plans as of November, shutting down some iron ore mines in the South and Southeast systems in Minas Gerais. 53 Just three of s 10 pelletizing plants remained in operation during the crisis: the company closed five of its seven plants at Tubarão Complex in Vitória (Espírito Santo), one in São Luís (Maranhão) and another in Fábrica (Minas Gerais). Four pelletizing plants at Tubarão Complex belonging to s joint ventures were also closed. 54 Also due to the crisis, the company shut down its manganese ore and ferroalloy operations in Brazil between December 2008 and January Its ferroalloy plant in Dunkirk, France, was closed until April 2009, and in Mo i Rana, Norway, a planned stoppage to do maintenance work on the plant s furnace was extended until June of the same year. 55 In the nickel area, stopped using its thermal power plants in Indonesia for a time. In January 2009, Copper Cliff South Mine in the Sudbury mining area of Ontario, Canada, whose annual refined nickel production capacity was 8,000 metric tons, was shut down for an indefinite period. 56 As a further effect of the crisis, in April 2008 the sul plant in Rio de Janeiro was reconfigured from an aluminum smelter producing metal through primary reduction of alumina to a plate mill using primary aluminum bars and scrap metal as raw materials. In October of the same year, its production was reduced to 40% of its annual nominal capacity of 95,000 metric tons. 57 Due to weak demand for kaolin, subsidiary Caulim da Amazônia S.A. (Cadam), in Pará, cut its output by around 30%. The kaolin production of another subsidiary, Pará Pigmentos S.A. (PPSA), was also reduced by 200,000 metric tons per year. 58 These drastic measures to bring production into line with demand were necessary in 2008, and the situation grew even worse the next year. In 2009, like everyone else experienced difficult times. in the challenging year of 2009 The year 2009 began with concern for the brutal fall in demand in 2008 and the need to make adjustments, and it ended with a rare annual decline in global GDP. 59 The Brazilian economy shrank by 0.6%, according to IBGE figures, while the USA, Japan and the European Union contracted by 2.4%, 5% and 4.2%, respectively Idem Idem Idem See s 2009 Form 20-F Report See Fiesp, A política de desenvolvimento produtivo, Competitiveness and Technology Department, Decomtec, November Available at <http:// desenvolvimento%20proditivo%20-%20pdp%20ap%c3%b3s%20a%20crise.pdf>; and BBC Brasil, Desempenho do PIB brasileiro foi 6 o melhor do G20 em Published on March 11, 2010, available at < noticias/2010/03/100311_pib_brasil_g20_daniela_rw.shtml>. was not immune from the crisis. Its share of the seaborne iron ore market fell from 30.2% to 24.9%, reflecting the strong impact of the global recession on the European steel industry, one of the company s major iron ore markets. 61 That wasn t all: the recession hit practically all areas of. The company s gross operating revenue fell by 37.8%, from US$38.5 billion in 2008 to US$23.9 billion in Net income declined from US$13.2 billion to US$5.3 billion. Likewise, the benchmark prices of iron ore fines and pellets fell by 28.2% and 44.5%, respectively. 62 In 2009, gross iron ore revenue shrank by 27.8%, due to a 13.2% decline in sales volumes and a reduction in average prices. Gross revenue from iron ore pellets fell by 68.6% as a result of price reductions caused by lower demand. 63 A 45.5% fall in gross manganese ore revenue mainly occurred due to price declines in 2009, although this was partially offset by a rise in sales volumes due to strong Chinese demand. 64 Gross revenue from ferroalloy operations fell by 69.3%, thanks to a 48.5% decrease in average sales prices and a 36.1% drop in sales volumes. There was a 49.6% decline in gross nickel product revenue and a 32.6% fall in gross revenue in the aluminum sector. 65 Kaolin and copper also registered declines in Sales of kaolin fell by 17.2%, mainly due to a 25.8% decrease in volumes, partially offset by an 11.6% rise in average sale prices. Sales of copper concentrate were down 23.6%, due to a 5.3% decline in volumes and a 19.3% drop in the average sales price. 66 Over the course of the year, China accounted for approximately 68% of global demand for seaborne iron ore, 44% of global demand Murilo Ferreira When Murilo Pinto de Oliveira Ferreira (Uberaba, Minas Gerais, 1953) was appointed s CEO in May 2011, people in the mining industry knew exactly who he was: before reaching the top job, Ferreira had built up nearly 30 years of experience in the sector, having joined the company in 1988 as Director of do Rio Doce Alumínio (Aluvale). After then, he held various management positions before being appointed CEO of Inco (now Canada), where he remained until Murilo Ferreira has an undergraduate degree in Business Administration from Fundação Getulio Vargas in São Paulo, a postgraduate diploma in Administration and Finance from Fundação Getulio Vargas in Rio de Janeiro, and a specialist diploma in M&A from the International Institute for Management and Development (IMD) in Lausanne, Switzerland. 2 Since taking over as s CEO, he has prioritized the responsible execution of the company s investments, employee training, and health and safety initiatives Idem Idem Idem Idem Idem Idem See s 2009 Form 20-F Report Idem Idem Idem Idem Idem. 1 - anuncia Murilo Ferreira como diretor-presidente,, May 19, Available at < vale-anuncia-murilo-ferreira-como-diretor-presidente.aspx>. 2 - apresenta novo diretor-presidente, Murilo Ferreira,, May 20, Available at <>.

12 356 for nickel, 39% of global aluminum demand, and 40% of global copper demand. The percentage of s operating revenues generated by 10.4 The art of overcoming crises: investments and disinvestments 357 sales to Chinese customers was 38%. China bought 56.8% of the company s iron ore and pellet shipments, while Asia as a whole After selling a stake in Usiminas in 2008, continued with received 72.7%. After this came Europe (13.4%) and Brazil (10.2%). 67 its restructuring policy, disposing of its remaining 2.93% interest As of the second half of 2009, the figures showed a gradual in the company in the second quarter of The US$273 recovery in the global economy and an upturn in demand for million transaction made a positive contribution in As a minerals. As a result, resumed operations at its iron ore result of a strategic review of its nickel refining and distribution mines in the South System and increased the pace of production operations, in December 2009 sold its American subsidiary, in Carajás. The pelletizing plants at Tubarão Complex in Vitória the International Metals Reclamation Company (INMETCO), for (Espírito Santo) belonging to Itabrasco and Hispanobras were US$38.6 million. 70 Also in the nickel sector, disposed of its started up once more in July and August 2009, respectively. s 65% interest in Chinese company Jinco Nonferrous Metals Co. Fábrica plant in Congonhas (Minas Gerais) and the plant in São Ltd. (Jinco) for US$6.5 million. The same month, entered into Luís (Maranhão) resumed operations in the first quarter of an agreement to sell its 76.7% stake in Inco Advanced Technology By the start of that year, all the company s pelletizing plants were Materials (Dalian) and its 77% interest in Inco Advanced operating once more. 68 Technology Materials (Shenyang), which operates nickel foam In the third quarter of 2009, also restarted part of its plants in China, for US$7 million, to affiliate companies of other manganese and ferroalloy operations. In general, the figures show shareholders. 71 a return to growth by the end of the year, but the company s In January of that year, reached an agreement to sell its full-year results were poor in almost all sectors, in line with the manganese and iron ore exploration rights (as well as related weak Brazilian economy. An exception was potash, used to make properties) in Bahia for a total sum of US$16 million. It also sold fertilizers, which performed excellently in s gross potash three small hydroelectric plants, used to supply some of the revenues expanded by 40% as a result of the strong performance of power consumed by the company s ferroalloy plants in Minas the agriculture sector in Brazil. 69 Gerais, for US$20 million. 72 At the same time, wholly owned subsidiary sul made an agreement to sell its aluminum assets to Alumínio Nordeste S.A., a Metalis group company. Among the assets included in the deal were an anode plant, a reduction facility, industrial and administrative service areas, a foundry and inventories. 73 Ore reclaimer in stockyard at Ponta da Madeira Maritime Terminal in São Luís, Maranhão See s 2009 Form 20-F Report Idem Idem Idem Idem Idem vende US$ 31,2 milhões em ativos da sul para a Alumínio Nordeste S.A., O Globo, January 22, Available at < asp>.

13 Left: alumina being shipped from Alunorte in Barcarena, Pará, The disinvestment program continued in July 2010, when The company made an important acquisition in September the Santa Cruz neighborhood in the West Zone of Rio de Janeiro. sold its 86.2% stake in Pará Pigmentos S.A. (PPSA), as well as other 2009, when it completed its purchase of 100% of Rio Tinto s iron ore As a strategic partner of ThyssenKrupp, was TKCSA s sole and kaolin mining rights in Pará, to Imerys S.A. for US$74 million. 74 operations in Corumbá, Mato Grosso do Sul. The US$750 million exclusive iron ore supplier. 82 Finally, in February 2011, all of the aluminum operations of deal included associated logistics assets. 79 In 2009, defined In November 2007, signed a memorandum of understanding Albras, Alunorte and Companhia de Alumina do Pará (CAP) were Corumbá iron ore mine as a world-class asset characterized by with Dongkuk Steel, one of South Korea s largest steel producers, transferred to Norwegian company Norsk Hydro. 75 According its high grade reserves, rich in lump ore, convertible by a direct to build a steel plate mill in the Brazilian state of Ceará, at the to the terms of the agreement,, through its wholly owned reduction process. Its logistics assets meet 70% of the operation s Pecém Industrial and Port Complex in São Gonçalo do Amarante. subsidiaries, transferred to Hydro a 51% stake in Albras, a 57% transportation needs. 80 In 2008, Corumbá Mine produced 2 million Called the Pecém Steel Company (Companhia Siderúrgica do interest in Alunorte and 61% of CAP. 76 Through this transaction, metric tons of iron ore. 81 Pecém), the operation will have an initial production capacity of received US$503 million in cash and 22% of Norsk Hydro s The purchase of these assets in Corumbá brought yet another 2.5 million metric tons per year. 83 outstanding common shares. 77 country onto s map: Paraguay. In the logistics area, the acquisition Elsewhere in Brazil, invested in expanding the production included a contract for transporting goods along a 42-kilometer capacity of Carajás Complex in Pará. As of the first quarter of 2010, Investments: new equity stakes and operations railroad whose concession belongs to América Latina Logística (ALL) the company began operating new facilities there that added 20 While it was willing to dispose of businesses that were no longer and an iron ore loading port to ship products down the Paraná and million metric tons to the site s annual iron ore production capacity. 84 priorities, also perceived that, to resume its growth, it could Paraguay rivers to Paraguayan and Argentinean customers. Two more not give up on its diversification and investment drive. In 2009, the river ports were leased and, through a port in Buenos Aires Province, and MBR company began to see the results of its investment in constructing the ore reaches the seaborne market. In May 2007, increased its stake in Minas Gerais-based subsidiary the Carajás Hydrometallurgical Plant. Located at the Sossego In 2010, the iron and manganese mines of Corumbá under s Minerações Brasileiras Reunidas S.A. (MBR). The company, whose mining unit in Pará and completed in December 2008, the plant control as of 1994, when it acquired a 100% stake in Urucum Mineração direct stake in MBR was 49%, considered the subsidiary s iron was designed to test industrial-scale processing of complex copper S.A. were transformed into the Center-West System. The company ore assets among the best in the world. 85 The other 51% of the ores to produce copper cathode. now has four integrated mine-railroad-port systems in Brazil: South, company belonged to Empreendimentos Brasileiros de Mineração s Vargem Grande pelletizing plant in Nova Lima, Minas Southeast, North and Center-West. S.A. (EBM). As of May 2007, had an 80% interest in EBM s Gerais was completed in the first half of This plant, built with In the third quarter of 2009, entered into an agreement capital. Through new transactions, the company acquired a further the capacity to produce 7 million metric tons of iron ore per year, with German group ThyssenKrupp Steel Europe AG in order to 6.25% of EBM s equity and signed an agreement guaranteeing now operates with an annual production capacity of 10 million raise its stake in ThyssenKrupp CSA Siderúrgica do Atlântico Ltda. it the use of the remaining 13.75% stake for the next 30 years. 86 metric tons. 78 (TKCSA) from 10% to 26.87%, for an investment of US$1.42 billion. TKCSA was building an integrated steel plate mill, with nominal 74 - See s 2010 Form 20-F Report. production capacity of 5 million metric tons of plate per year, in 75 - Idem See s 2009 and 2010 Form 20-F Reports See press release conclui gestão de portfólio de ativos de alumínio, February 79 - Idem. 28, Available at <> See s 2007 Form 20-F Report See s 2009 Form 20-F Report Idem See <> See also prevê investir US$ 2 bilhões em Corumbá, O Estado de S.Paulo, September 19, Available at <,vale-preve-investir-us-2- bilhoes-em-corumba,437597,0.htm> See s 2010 Form 20-F Report See s 2007 Form 20-F Report Idem.

14 Previous page: convoy of 16 barges transporting iron ore on the Paraguay River in 2011; and itabirite ore processing facility in Itabirito, Minas Gerais. Left: train on the Carajás Railroad (EFC) in MBR was the second largest iron ore producer and exporter in, as a large Brazilian exporter, played a major role in TABLE 1 Brazil, with a strong presence in the seaborne market. It sold to improving the country s solvency and sustainability indicators, VALE S ExportS compared WITH OTHER SELECTED products (US$ million) 361 practically all iron ore consuming markets in the world, exporting particularly in terms of international reserves and the external around 90% of its output. 87 It had been growing steadily, and its debt. Brazil s large trade surpluses and ample liquidity in reserves exceeded 1.4 billion metric tons of hematite and 4.4 international financial markets helped the country to improve its VALE S billion metric tons of high-grade itabirite. Operating in the Iron external debt indicators, and allowed the Central Bank to dispense EXPORTS SoYBEANS* SUGAr* MEAT* AutomOBILES* COFfEE* AIRCRAFT Quadrangle region of Minas Gerais, MBR exported its goods from with International Monetary Fund (IMF) support in its own maritime terminal on Guaíba Island in Sepetiba Bay, Rio ,297 5,206 2,279 2,629 4,239 1,393 2,839 de Janeiro State ,173 5,906 2,094 2,879 4,510 1,362 2, The boom of 2010 s commercial leap forward in 2010, a year in which the company attained its best ever results, can be summed up by its export volumes. That year, s net Brazilian exports (its total exports from the country minus its total imports) were around US$29 billion. For comparison, during the same year, Brazil s total soybean exports (including grains, bran and other byproducts) were less than US$17 billion. The difference is even greater when s net exports are compared with those of products such as automobiles (including passenger vehicles, tractors, engines, parts and components) and aircraft, which together amounted to less than US$15 billion. 89 s 2010 exports were therefore almost twice as large as automobile and aircraft exports combined. Although 2010 was a record year, s importance as a major Brazilian exporter was apparent throughout the decade (Table 1) See press release about Caemi Mineração e Metalurgia S.A., October 8, Available at <http:// /saladeimprensa/pt/releases/release.asp?id=11161> Idem In this comparison, imports are not subtracted, as before, but instead total export data are analyzed According to Cintra, Marco Antonio Macedo, Suave fracasso: a política macroeconômica brasileira entre 1999 e Novos Estudos Cebrap, no. 73, ,229 7,935 2,140 3,729 5,827 1,516 1, ,534 9,822 2,640 5,648 7,307 2,025 3, ,021 9,232 3,919 7,391 9,189 2,879 3, ,656 8,911 6,167 7,701 10,366 3,311 3, ,492 10,888 5,100 9,559 10,396 3,829 4, ,606 17,300 5,483 12,046 11,109 4,697 5, ,719 17,058 8,378 9,602 7,122 4,222 3, ,090 16,953 12,762 11,375 10,348 5,717 3,972 * Soybeans include grains, crushed soy, bran, oil, and oil extraction residues; sugar includes cane, raw and refined sugar; meat includes various processed forms of chicken, pork and beef; automobiles include passenger cars, tractors, components, parts and engines; and coffee includes raw beans and instant coffee. Source: (Results, financial information and press releases), Central Bank of Brazil and MDIC/Secex.

15 GRAPH 1 BRAZILIAN INTERNATIONAL RESERVES (US$ billions) In 2010, experienced its best ever annual results, with record operating revenue, operating margin and net income. Operating revenue reached US$46.5 billion, while operating profit measured by EBIT (earnings before interest and taxes) amounted to US$21.7 billion Source: Central Bank of Brazil. Brazil was experiencing a new situation, as it cut its total external debt and expanded its international reserves (Graph 1) in a context of growing exports. The result was an overall improvement in indicators. The direct effect of this was strengthened solvency in the face of external financial commitments and greater credibility in international markets, reflected by the country s investment grade rating. 91 By analyzing Brazil s main external economic data, one can perceive that at the end of the millennium s first decade, was a fundamental company for the development of the country, capable of harnessing favorable international circumstances, with higher demand and prices, to consolidate its contribution to domestic growth. End of the storm Driven by strong results in emerging economies major generators of demand for minerals and metals the global economy saw fast growth in 2010, rising above the low levels recorded in late 2008 and early The Brazilian economy followed the same path, ending 2010 with annual growth of 7.5%, according to IBGE data. In current values, the sum of all income produced in the country came to R$3.67 trillion. Per capita GDP reached R$19, It was a firm response to the crisis experienced since mid Brazil s rate of expansion was surpassed by China (which experienced growth of 10.3%) and India (8.6%), but it exceeded the growth seen in South Korea (6.1%), Japan (3.9%), the USA (2.8%) and the euro zone region (1.7%). 94 In the light of the emerging economies strong performance, alongside the continued economic crisis in rich countries, the IMF decided to reassign more than 6% of its voting quotas from developed to developing countries, increasing their influence in the institution s decision making. China then became the third largest member of the Fund, whose executive committee has 24 member countries. 95 The overheating Brazilian economy then began to present side effects, and in May 2010, public spending cuts of R$10 billion were announced by the Brazilian government. The idea was to contain inflation and respect the domestic economy s production capacity. Two months previously, the federal government had already announced a R$21.8 billion reduction in the 2010 budget. 96 In December of the same year, the Central Bank announced new measures, this time to reduce credit, further slowing down the economy in order to control inflation. These measures included an increase in banks compulsory deposits (with the Central Bank) to remove R$61 billion from the economy, restrictions on longterm loans to individuals, and removal of support from the Credit Guarantee Fund (Fundo Garantidor de Crédito, or FGC) to small banks. 97 By the end of the year, the Brazilian economy had created 2.86 million formal jobs, according to the Ministry of Work. This was a new record, surpassing the previous record of 1.6 million new jobs set in As attested to by ratings agencies Moody s Investors Service and Standard & Poor s See IBGE, Em 2010, PIB varia 7,5% e fica em R$ 3,675 trilhões, published on March 3, Available at < noticia=1830&id_pagina=1> Idem Idem See Países emergentes ganham influência e FMI duplica cotas, Folha de S.Paulo, October 23, Available at < paisesemergentes-ganham-influencia-e-fmi-duplica-cotas.shtml> See Governo vai cortar gastos em R$ 10 bi para conter inflação, diz Mantega, Folha de S.Paulo, May 13, Available at < ult91u shtml> See BC anuncia medidas para segurar crédito e tira R$ 61 bi da economia, Folha de S.Paulo, December 3, Available at < bc-anuncia-medidas-para-segurar-credito-e-tira-r-61-bi-da-economia.shtml> See Brasil criou 2,86 milhões de vagas formais em 2010, O Estado de S. Paulo, May 11, Available at <,brasilcriou-286-milhoes-de-vagas-formais-em-2010,66460,0.htm>.

16 The biggest net profit in the history of mining In 2010, experienced its best ever annual results, with record operating revenue, operating margin and net income. Operating revenue reached US$46.5 billion, while operating profit measured by EBIT (earnings before interest and taxes) amounted to US$21.7 billion. The company s operating margin, measured as operating profit as a proportion of net operating revenue, was 47.9%. The year s net profit came to US$17.3 billion. also allocated more resources than any other mining company to fund the construction of new platforms for growth and value creation. The company invested US$12.7 billion in new growth opportunities and the maintenance of existing assets. Another US$6.7 billion financed acquisitions, mainly of fertilizer assets in Brazil. 99 Less than a year after facing the biggest crisis in its history, overcame its problems and had enough power to continue growing. Due to strong demand and economic recovery across the world, the company s gross revenue from iron ore sales rose by 105.6% in This growth in revenue was mainly caused by an 84.9% increase in average sales prices, as well as an 11.2% rise in the volume sold. 100 Making greater use of its production capacity, the company s gross revenue from pellets rose even more in 2010, by 373.5%, thanks to a 118.5% rise in sales volumes and an increase of 118.7% in average sales prices, also caused by strong demand. 101 In 2010, China purchased 42.9% of the company s shipments of iron ore and pellets, while Asia as a whole bought 60.7%. Europe s share was 20.7%, followed by Brazil, with 13.7%. 102 In terms of diversification, also enjoyed results that consolidated its position following its major resumption of investment. Gross manganese revenue grew by 77.9%, due to a 56.5% rise in the average price and a 13.3% increase in sales volumes. Ferroalloy revenues expanded by 78.5%, due to a 60.7% increase in volumes and a 10.9% rise in average sales price. 103 In the coal sector, revenues increased by 52.5%, mainly due to the consolidation of s sales in Colombia. The average selling price also rose in line with better market conditions. 104 Nickel production, which had been weak since the workers strike in Canada beginning in July 2009, also started to grow again. In July 2010, a new five-year collective agreement was signed by representatives of production and maintenance employees at the striking mines, bringing an end to the dispute. 105 Gross nickel revenue rose by 19.4% during the year. Gross revenue from copper increased by 37%, caused by a 40.5% increase in the average sales price. Gross revenues from sales of aluminum and related products rose by 24.6%. On the other hand, potash revenues fell by 32.2%, caused by a 21.2% fall in average sales prices and a 13.9% decline in the volume sold in See s 2010 Sustainability Report - Investors Summary See s 2010 Form 20-F Report Idem Idem Idem Idem Idem Idem. Aerial view of iron ore processing plant at Carajás Mine in Pará, in 2010.

17 Energy in 2010 operations in Voisey s Bay were completely supplied using diesel In 2010, produced 65.3% of the electric power consumed in generators. 115 In Brazil, s main electricity suppliers are its operations in the Brazilian Southeast System and 63.3% of the Eletronorte, Centrais Elétricas de Minas Gerais (Cemig) and Espírito 366 power used in the South System. Through stakes in hydroelectric Santo Centrais Elétricas (Escelsa). Together, these companies 367 Aerial view of Amador Aguiar II Hydroelectric Plant in Minas Gerais. plants currently Igarapava, Porto Estrela, Funil, Candonga, Eliezer Batista, Amador Aguiar I, Amador Aguiar II, Estreito, Machadinho, Glória, Ituerê, Mello and Nova Maurício, the latter four small hydro plants the company had implemented its plan to produce and use a cheaper and cleaner energy form. As in previous years, all of the electric power consumed by the North System was obtained at market prices from regional electricity companies. In all, hydroelectric power plants supplied 23% of the electricity demand of s Brazilian operations. 107 Over the course of 2010, the company s total electric power usage was 22 TWh. 108 Its activities in Brazil accounted for 73.3% of this total, 109 corresponding to 3.9% of the electricity consumed in the country. 110 This is more than the amount used by the city of Rio de Janeiro in the same year. 111 In Canada, s power plants in Sudbury met 9% of local operations electricity needs, while in Indonesia, selfgeneration supplied 90% of the company s demand. 112 The remainder of s electricity demand in Sudbury was met through purchases from utility companies in the province of Ontario, 113 while the Thompson operations bought low-cost power from the local hydroelectric power plant. 114 Finally, the company s See s 2010 Annual Report Idem Idem According to the EPE s Energy Bulletin for the fourth quarter of 2010, total electricity consumption in Brazil in 2010 was 415 TWh (p. 7). Available at < mercado/documents/s%c3%a9rie%20estudos%20de%20energia/ _1.pdf> Table no Total, average, annual, monthly and daily electricity consumption per inhabitant Municipality of Rio de Janeiro ( ). Available at <http://portalgeo.>. In 2010, the city of Rio de Janeiro consumed 14.5 TWh See s 2010 Form 20-F Report Idem Idem. supplied 36% of s electricity purchases in In April of the same year, Energia Limpa S.A. was established to operate in the field of clean synthetic fuels, which emit less greenhouse gas emissions. 117 In December, received an operating license for the Estreito Hydroelectric Plant in Maranhão, the company s first hydro project in Brazil s North region. This plant began generating power in March and the capital markets A major step forward was taken in terms of s position in the global markets when the company listed its shares on the Hong Kong Stock Exchange. 118 By listing on one of the most important stock exchanges in Asia, investors across the world were now able to trade in the company nearly 24 hours a day, in the Americas, Europe and Asia, strengthening s position as a global company. 119 Between 2000 and 2010, produced US$154.5 billion of value for its shareholders and distributed US$17.4 billion in dividends. Total shareholder returns were 38.2% per year between 2001 and 2010 the highest rate among the largest mining companies. 120 In 2010 alone, returned US$5 billion of capital to shareholders, through the distribution of US$3 billion in dividends, equivalent to US$0.57 per share, and a US$2 billion share buyback. Consequently, had resumed its long-term upward trend in the prices of its shares, which began at the start of 2000 and accelerated significantly over the past ten years Idem See s 2010 CVM Reference Form Idem See s 2010 Form 20-F Report Idem Idem Idem.

18 Following page: pile of potash at Taquari-Vassouras Mine in Rosário do Catete, Sergipe, Brazil, in the fertilizer market In 2010, acquired the phosphate operations of Fosfertil and Bunge Participações e Investimentos for US$5.82 billion. In nature, fertilizers are distributed into three groups of Subsequently, on February 1, 2011, Fosfatados merged with 368 nutrients: nitrogen (used by plants in photosynthesis, contributing Fertilizantes. 125 to fast plant growth), phosphorus (which helps the development of In Brazil, now has fertilizer operations in five states. In the 369 roots) and potassium (fundamental to the quality of fruits and the state of São Paulo, in Cajati the company produces phosphate rock internal circulation of liquids in plants). and dicalcium phosphate, used to make animal food; in Guará it In the late 2000s, after a period of retraction arising from the produces phosphate fertilizers, used to enrich the soil for farming; crisis of 2008, s investment strategy in the fertilizer sector in Cubatão it produces phosphate and nitrogen fertilizers; and in represented a new stage in the diversification of the company, Santos it operates a maritime terminal that handles ammonia, which now served the food production market. sulfur and bulk fertilizers, with the capacity to process 2.3 million s investment in fertilizers was based on the belief that metric tons per year. 126 In Minas Gerais, the company s facilities Brazilians growing per capita income and demand for biofuels in Tapira, Uberaba, Patos de Minas and Araxá produce phosphate would raise fertilizer demand in the country. Brazil would play an rock and phosphate fertilizers. Also in Minas Gerais, the company important role in this market because of its position as a leading is implementing the Salitre Project, which consists of developing a agricultural producer and its growth potential, especially due to mine capable of producing an estimated 2.2 million metric tons of its access to water and arable land. The country is currently the phosphate concentrates per year. In the state of Goiás, the Catalão world s fifth largest importer of fertilizers. 122 unit was created to produce phosphate rock and phosphate The Rio Colorado fertilizer production project, located in the fertilizers. In Paraná, the company produces nitrogen fertilizers Argentinean province of Mendoza, originally belonged to the Anglo- in Araucária, while in Sergipe, the Carnalita potash project in the Australian company Rio Tinto, which sold it to. The project municipality of Rosário do Catete has been initiated. 127 entails developing a mine with an initial nominal potash production Outside Brazil, besides Argentina and Canada, the company capacity of 2.4 million metric tons per year and the potential to also operates in Peru and is developing a project in Mozambique. expand output to as much as 4.35 million metric tons per year. A In Peru, in 2010 operations began at Bayóvar Mine, which sits 350-kilometer railroad, port facilities and a power plant will also be on one of the largest phosphate rock deposits in South America built. 123 Elsewhere in Argentina, the Neuquén Project, designed to and is capable of producing 3.9 million metric tons per year. 128 In produce 1 million metric tons of potash per year, entered the final Mozambique, the Evate Project is designed to produce phosphate study phase in rock in the province of Nampula. Together with Rio Colorado, also acquired 100% of the Regina Project, in the province of Saskatchewan, Canada. The project, now called Kronau, could potentially yield around 2.8 million metric tons of potash per year. In 2009, infrastructure was already in place to transport the output to Vancouver, facilitating access to Asian markets See s 2010 Form 20-F Report Available at <> See s 2010 Form 20-F Report See press release pretende investir US$ 15 bilhões em fertilizantes até 2020, September 29, Available at < See s 2009 Form 20-F Report. interna.asp?id=21085> Idem See s 2010 Form 20-F Report.

19 Previous page: iron ore being loaded onto a train on the North-South Railroad (FNS) in Guaraí, Tocantins, in Left: Brasil, a max-class ship, the biggest class of ore carriers in the world, in Logistics their enormous transport capacity cut the number of trips that The North-South Railroad: for its customers; 143 the following year, using the same fleet, the need to be made. 133 a new general freight transport corridor company transported 1.16 billion metric ton-kilometers for its 371 The crisis of 2008, when s goods arrived at ports but also invested US$74 million 134 in the purchase of four used Continuing with its plans to expand its railroad network in Brazil, customers. 144 there were not enough ships for them, led to a radical change Capesize ships and entered into a number of long-term shipping in October 2007 won a bid for a sub-concession to operate a in the company s shipping strategy. To become free from supply contracts. 135 Three Capesize ships that were already being operated 720-kilometer stretch of the North-South Railroad (Ferrovia Norte- Logistics figures in 2010 reductions and rising shipping prices caused by market volatility, by continued to sail on the Brazil-China route, exclusively Sul, or FNS) between Açailândia in the state of Maranhão and sought to develop initiatives to permit economies of scale decided to buy and build its own vessels. In August of the carrying iron ore. We have 35 ships in our portfolio and we want Palmas, Tocantins. thereby became responsible for operating, and logistics solutions for its customers. Log-In, in which same year, it signed a contract with Rongsheng Shipbuilding and to have long-term shipping contracts. We bought these ships at conserving, maintaining, monitoring, upgrading and adjusting this has a 31.3% stake, is a logistics company established in order to Heavy Industries in China to construct 12 Very Large Ore Carriers the time because we could not find competitive shipping prices stretch of the FNS for the following 30 years. 139 provide intermodal services based on integrated door-to-door (VLOCs), each one capable of transporting 400,000 metric tons, in the market, explained José Carlos Martins, s Executive These tracks were already well known to. Since the railroad solutions for port, shipping and railroad container transportation, making them the largest ore carriers in the world. The company s Director of Iron Ore and Strategy. 136 The company s decision to was founded in 1996, had been operating a 225-kilometer complemented by short-distance road freight transportation and total investment in this was US$1.6 billion. 129 The era of the build its own ships also lay in the growing shift in market growth stretch of it between the municipalities of Açailândia and Estreito, the storage of containers at land freight terminals. 145 max had begun. toward Asia. Until the year 2000, 50% of the company s output both in Maranhão. In the city of Açailândia, the FNS connects to the Part of the general cargo transportation industry, intermodal Seven VLOCs were also ordered from South Korean shipyard had been sold in the West, but 10 years later this figure was just Carajás Railroad (EFC), giving access to Ponta da Madeira Maritime logistics specializes in the transport, handling and storage of Daewoo Shipbuilding & Marine Engineering Co. received the 30%. In the long term, we will depend increasingly on the Asian Terminal in São Luís. 140 goods stored in containers. Log-In does not transport ore, but first one in May 2011 and christened the world s biggest ore carrier market, so we have to be efficient in shipping. To give you an idea The purpose of this new operation was to create and utilize a new just general cargo. Its activities are not therefore part of s Brasil. s total investment in the seven South Korean of the figures, the cost of delivering one metric ton of ore to Asia corridor for transporting general freight produced in the Center- main logistics businesses, which involve the transport, handling ships was US$748 million. 130 Measuring 362 meters in length and is about US$50. Of this sum, less than US$10 is the mining cost, North region, in particular stimulating exports of soybeans, rice and storage of its products, especially iron ore, and bulk goods for 65 meters in width, and able to carry up to 400,000 metric tons, and the rest is the logistics cost. If you do not have an appropriate and corn. Costing approximately R$1.47 billion, the sub-concession third parties. 146 Brasil was more efficient than smaller ships at transporting logistics strategy, you lose the competitiveness of your business, strengthened s portfolio of logistics services. 141 The new Between 2009 and 2010, s gross logistics service revenues ore from Brazil to Asia and had 35% lower carbon emissions per said Martins. 137 operation was in line with the company s strategy of participating grew by 32.7%. Railroad revenues expanded by 32.1% (due to ton transported. 131 In 2009, long-term shipping contracts were also signed to effectively in general freight transportation in Brazil. 142 higher volumes of agricultural goods, steelmaking inputs and steel In September and October 2011, two more maxes were transport pellet feed from Brazil to Oman, where was building The figures show the success of the strategy of using the products), and revenues from port operations increased by 33.7%. 147 delivered: Rio de Janeiro and Itália. 132 The design of these a direct reduction pelletizing plant with a nominal production North-South Railroad corridor efficiently to carry general freight. vessels received a Nor-Shipping Clean Ship Award, for significantly capacity of 9 million metric tons per year and a distribution center In 2008, operated a fleet of six locomotives and 370 cars on reducing carbon emissions per ton of ore transported, given that able to store 40 million metric tons of iron ore or pellets. 138 the FNS, transporting 0.9 billion metric ton-kilometers of freight See press release estabelece linha de transporte dedicada à rota Brasil- Ásia. Available at <> See press release recebe o maior mineraleiro do mundo. Available at <htp://> Available at < paginas/default.aspx> See press release realiza cerimônia de batismo de dois novos navios VLOC. Available at <> See press release Brasil, o maior navio mineraleiro do mundo, realiza primeiro descarregamento em Taranto. Available at < release/interna.asp?id=20854> See s 2008 Form 20-F Report, p Idem, p press conference with José Carlos Martins in Idem See s 2009 Form 20-F Report See s 2007 Form 20-F Report. The other railroad concession contracts also have a 30-year term and are renewable. The FCA and MRS concessions expire in 2026, while the EFC and EFVM concessions expire in See arremata trecho da Ferrovia Norte-Sul, Folha de S.Paulo, October 4, Available at <> See CVRD vai operar a FNS,, October 3, Available at <http://www.vale.> Idem See s 2008 Form 20-F Report See s 2009 Form 20-F Report See fará oferta de ações de subsidiária de logística,, February 16, 2007, available at <> Idem See s 2010 Form 20-F Report.

20 Intense port activity was one indication of a very successful year for. What happened at Tubarão Complex was repeated in other parts of Brazil 372 In 2010, the EFVM transported 78.9 billion metric tonkilometers of iron ore and other freight 16.8 billion metric successful year for. of bulk liquids. 151 Intense port activity was one indication of a very 373 ton-kilometers (21.3%), including iron ore, exclusively for What happened at the Tubarão terminals was repeated in other Brazilian third parties. The EFVM, whose fleet consisted of 331 parts of Brazil. Ponta da Madeira Maritime Terminal in Maranhão locomotives and 18,967 cars, also carried 1 million passengers handled 94.2 million metric tons of iron ore for and 5.4 million in The EFC transported 90.4 billion metric ton-kilometers metric tons of goods for third parties. At the Sepetiba Bay Port of iron ore and other goods, of which 3 billion metric tonkilometers Company Terminal in Itaguaí, Rio de Janeiro, operated by subsidiary were for external customers. The EFC also CPBS, 22.6 million metric tons of iron ore were shipped out. 152 transported 341,583 passengers in 2010, using its fleet of 220 Guaíba Island Terminal in Rio de Janeiro exported 37.9 million locomotives and 10,701 cars. 149 metric tons of iron ore in Meanwhile, at Inácio Barbosa The FNS carried 1.52 billion metric ton-kilometers of goods Maritime Terminal in Sergipe, belonging to Petrobras and operated for third parties, using its fleet of six locomotives and 440 cars, by, 600,000 metric tons of fuels, agricultural products and while the Centro-Atlântica Railroad (Ferrovia Centro-Atlântica, or steel were handled. 153 To the south, Santos Maritime Terminal FCA) transported 11.4 billion metric ton-kilometers of freight for on the coast of São Paulo State, operated by subsidiary customers, using its fleet of 500 locomotives and 12,000 cars. The Fertilizantes, handled 2.1 million metric tons of ammonia and bulk FCA, an important logistics corridor for general freight, extending solids, up 10.2% from 2009, reflecting s growing investments for 8,023 kilometers, passes through 316 municipalities in seven in fertilizers. 154 Brazilian states (Minas Gerais, Espírito Santo, Rio de Janeiro, The good results achieved in 2010 spurred on even more Sergipe, Goiás, Bahia and São Paulo) and the Federal District. investment the following year. In 2011, the company announced Finally, MRS carried a total of million metric ton-kilometers more than US$5 billion of investments in logistics, with the aim of goods, including 60.8 million metric ton-kilometers of iron ore of reaching 522 million metric tons of products shipped in and other products. 150 Ports and terminals Over the course of 2010, million metric tons of iron ore and pellets were exported from the iron ore terminal at Tubarão Complex. Elsewhere at the Complex, Praia Mole Terminal handled a total of 10.7 million metric tons that year. The Diverse Products Terminal handled 6.6 million metric tons of grains and fertilizers, while the Bulk Liquid Terminal shipped out 1 million metric tons Tubarão Complex in Vitória, Espírito Santo, Idem Idem Idem Idem Idem Idem Idem See Especial Logística, published by.

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