0 Tubarão Port, ES, Brazil Vale s Performance in Rio de Janeiro, July 28 th, 2016
1 Disclaimer This presentation may include statements that present Vale's expectations about future events or results. All statements, when based upon expectations about the future and not on historical facts, involve various risks and uncertainties. Vale cannot guarantee that such statements will prove correct. These risks and uncertainties include factors related to the following: (a) the countries where we operate, especially Brazil and Canada; (b) the global economy; (c) the capital markets; (d) the mining and metals prices and their dependence on global industrial production, which is cyclical by nature; and (e) global competition in the markets in which Vale operates. To obtain further information on factors that may lead to results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), and the French Autorité des Marchés Financiers (AMF), and in particular the factors discussed under Forward-Looking Statements and Risk Factors in Vale s annual report on Form 20-F.
2 DOCUMENT CONTENT Operational performance Financial performance Capital expenditures Capital structure
3 DOCUMENT CONTENT Operational performance Financial performance Capital expenditures Capital structure
4 PRODUCTION VOLUMES Iron ore 1 Pellets 2 Nickel Copper 3 Gold Coal Phosphate Rock Mt Mt Kt Kt '000 oz Mt Mt 2Q14 79.4 10.0 61.7 81.0 70.0 2.2 2.1 3Q14 88.7 11.4 72.1 104.8 84.0 2.3 2.2 4Q14 86.3 11.6 73.6 105.4 93.6 2.3 2.2 1Q15 77.4 11.4 69.2 107.2 102.7 1.7 2.0 2Q15 89.3 12.2 67.1 104.9 100.0 2.0 2.1 3Q15 90.7 12.2 71.6 99.3 100.0 2.1 1.9 4Q15 88.4 10.4 82.7 112.5 117.0 1.6 2.1 1Q16 77.5 11.5 73.5 111.9 118.0 1.7 1.6 86.8 10.0 78.5 107.4 109.0 1.5 1.8 1 Includes iron ore fines, lump, ROM, iron ore feed for Vale s pellet plants and third party ore purchases. Excludes Samarco s attributable production. 2 Excludes Samarco's attributable production. 3 Includes Lubambe s attributable production.
5 PRODUCTION VOLUMES YEAR-ON-YEAR Iron Ore 1 Pellets 2 Nickel Copper 3 Gold Mt Mt Kt Kt '000 oz -2.8% -17.9% 17.0% 2.4% 9.0% 89.3 86.8 12.2 78.5 104.9 107.4 100.0 109.0 10.0 67.1 2Q15 2Q15 2Q15 2Q15 2Q15 1 Includes iron ore fines, lump, ROM, iron ore feed for Vale s pellet plants and third party ore purchases. Excludes Samarco s attributable production. 2 Excludes Samarco s attributable production and includes third party purchases. 3 Includes Lubambe s attributable production.
6 SALES VOLUMES Iron ore 1 Pellets Nickel Copper 2 Gold Coal Phosphate Rock Mt Mt Kt Kt '000 oz Mt Mt 2Q14 67.4 9.5 67.0 76.3 68.7 1.9 0.8 3Q14 66.6 11.5 71.0 97.5 106.9 2.1 0.7 4Q14 78.2 12.7 69.0 95.2 96.5 2.1 0.9 1Q15 62.3 11.3 68.0 97.0 96.9 1.6 0.7 2Q15 71.4 12.2 67.0 97.5 109.1 1.7 0.9 3Q15 74.1 12.0 72.0 94.4 104.5 1.7 0.8 4Q15 80.8 10.8 84.0 108.0 114.0 1.6 0.8 1Q16 63.3 11.1 74.0 101.0 115.0 2.7 0.7 73.1 11.4 77.0 107.0 122.0 2.8 0.7 1 figure includes 72.7 Mt of iron ore ex-rom and 0.4 Mt of ROM. Excludes Samarco s attributable production. 2 Excludes Lubambe s attributable production.
7 SALES VOLUMES YEAR-ON-YEAR Iron Ore¹ Pellets Nickel Copper² Gold Mt Mt Kt Kt 000 oz 2.4% -6.9% 14.9% 9.7% 11.8% 71.4 73.1 12.2 11.4 67.0 77.0 97.5 107.0 109.1 122.0 2Q15 2Q15 2Q15 2Q15 2Q15 ¹ figure includes 72.7 Mt of iron ore ex-rom and 0.4 Mt of ROM. Excludes Samarco s attributable production. ² Excludes Lubambe s attributable production.
8 DOCUMENT CONTENT Operational performance Financial performance Capital expenditures Capital structure
9 ADJUSTED EBITDA 1 US$ billion Adjusted EBITDA margin (%) Platts IODEX Iron Ore Price Average (US$/t) 41.4 33.1 24.1 25.7 31.8 28.8 23.6 35.1 36.0 102.6 90.2 74.3 4.1 3.0 2.2 62.4 1.6 58.4 2.2 54.9 1.9 46.7 48.3 1.4 2.0 55.7 2.4 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1 Adjusted EBITDA excludes non-recurring effects.
10 ADJUSTED EBITDA BY BUSINESS SEGMENT 1 US$ million 1Q16 2Q15 Ferrous minerals 2,136 1,738 1,811 Coal (110) (93) (102) Base metals ² ³ 376 329 406 Fertilizer nutrients 32 70 163 Others (51) (39) (65) Total 2,383 2,005 2,213 1 Adjusted EBITDA excludes non-recurring effects. 2 Includes copper and by-products from our nickel operations. 3 Includes by-products from our copper operation.
11 EVOLUTION OF COSTS AND EXPENSES Costs 1 US$ million Expenses 1,2 US$ million -8.7% -31.9% 633 4,304 3,439 3,929 431 276 2Q15 1Q16 2Q15 1Q16 1 Net of depreciation and amortization. 2 Includes SG&A, R&D, Pre-operating and stoppage and other expenses. Does not include gain/loss on sale of assets.
12 EVOLUTION OF EXPENSES US$ million Depreciation SG&A Pre-operating and stoppage expenses 159 34 125 140 119 33 23 96 107 259 72 187 102 114 26 29 76 85 2Q15 1Q16 2Q15 1Q16 R&D Other expenses 118 60 78 203 35 160 2Q15 1Q16 2Q15 1Q16
13 EVOLUTION OF IRON ORE FINES C1 CASH COST 1 R$/t -15.6% -7.8% 54.6 50.0 46.9 47.0 47.5 46.1 1Q15 2Q15 3Q15 4Q15 1Q16 1 2015 figures were adjusted to the new allocation criteria, as reported in the 4Q15, and include acquisition costs and third party purchased ore.
14 EVOLUTION OF IRON ORE FINES CASH COST, FREIGHT AND EXPENSES US$/t C1 Cash Cost FOB Port 1 Freight Expenses 2 & Royalties -18.5% -29.8% 0.0% 16.2 16.8 4.0 4.0 4.0 12.3 13.2 11.3 11.8 2Q15 1Q16 2Q15³ 1Q16 2Q15 1Q16 1 Ex-ROM and ex-royalties. All figures were adjusted according to the new managerial allocation changes, as reported in the 4Q15, and include acquisition costs of third party purchased ore. 2 Net of depreciation. 3 Ex-bunker oil hedge.
15 EVOLUTION OF IRON ORE SUSTAINING CAPITAL US$/dmt 2.4 Last twelve months 3.5 2.7 2.1 2.9 1.8 2Q15 3Q15 4Q15 1Q16
16 BREAKEVEN LANDED IN CHINA FOR IRON ORE AND PELLETS US$/t 4.0 0.6 2.6 1.6 30.7 2.2 2 28.5 1.8 30.3 11.8 13.2 C1 Cash Cost Freight¹ Royalties & Expenses Distribuition Moisture Quality EBITDA Breakeven Iron Ore fines Pellet Adjustment EBITDA Breakeven (pellets & Fines) Sustaining Iron Ore & Pellets Cash Breakeven Cost landed in China 1 Ex-ROM. 2 US$ 0.7/t relates to the dividends received from the pelletizing plants, which are usually paid every six months.
17 PRICE REALIZATION IRON ORE US$/t, + 0.6 US$/t 2.0 1.2 55.7 1.3 0.3 0.6 1.0 56.3 3.7 4.3 48.3 Average Platts (dmt) Quality Premium/Discount and commercial conditions Provisional prices in prior quarter¹ Lagged prices Current Provisional prices in current quarter² CFR reference price (dmt) Adjustment for FOB Sales Moisture Vale CFR/FOB price (wmt)³ Impact of pricing system adjustments 1 Adjustment as a result of provisional prices booked in 1Q16 at US$/t 51.7. 2 Weighted average difference between prices provisionally set at the end of at US$/t 52.7 based on forward curves and US$/t 55.7 from the IODEX. ³ Vale price is net of taxes.
18 IRON ORE PRICING SYSTEMS Pricing System Breakdown % Impact of Pricing Mechanisms US$ / t Lagged Current Provisional - prior quarter 1Q16 Lagged 1Q16 Provisional 2.3 2.0 0.4 43% 34% -1.2 Current Provisional - current quarter 48% 52% 1Q16 0.7 1Q16 1.5 9% 14% -0.6-1.0 1Q16
19 FERROUS MINERALS EBITDA VARIATION US$ million, 2Q15 x US$ 257 M 1,811 264 203 162 68 140 93 142 33 2,136 EBITDA 2Q15 Price FX Bunker Commercial initiatives Volume CFR Freight Sales Cost saving initiatives Others EBITDA
20 DOCUMENT CONTENT Operational performance Financial performance Capital expenditures Capital structure
21 EVOLUTION OF CAPITAL EXPENDITURES US$ million Sustaining Growth Projects -35.4% 2,119 685 1,449 1,368 529 463 1,434 920 905 2Q15 1Q16
22 S11D INVESTMENT GROWTH S11D Plant Screening, crushing and patios S11D Logistics Port offshore S11D project, including mine, plant and associated logistics CLN S11D, achieved combined physical progress of 79% in with 90% progress at the mine site and 70% at the logistic infrastructure sites.
23 PROJECT PROGRESS INDICATORS Project Capacity Mtpy Estimated start-up Executed capex US$ million Estimated capex US$ million Physical progress 2016 Total 2016 Total Carajás Serra Sul S11D 90 2H16 495 4,908 890 6,405 3 90% CLN S11D 230 (80) 2 1H14 to 2H18 682 4,851 1,154 7,850 4 70% Moatize II 11 2H16 66 1,971 134 5 2,068 6 99% 1 - Relative to Vale s stake in the project. 2 - Net additional capacity. 3 - Original Capex budget of US$ 8.089 billion. 4 - Original Capex budget of US$ 11.582 billion. 5 - There was an increase of US$ 29 million in the 2016 budget. 6 - Original Capex of US$ 2.068 billion plus US$ 0.45 billion of rolling stock.
24 DOCUMENT CONTENT Operational performance Financial performance Capital expenditures Capital structure
25 DEBT POSITION US$ million Cash position June 30, 2016 Gross Debt Net Debt 4,306 29,773 31,470 31,814 27,661 27,508 26,509 2Q15 1Q16 2Q15 1Q16
26 FINANCIAL INDICATORS 1 Interest coverage - Ratio Net Debt / LTM 2 EBITDA - Ratio 5.9 5.2 5.1 3.2 3.7 3.6 2Q15 1Q16 2Q15 1Q16 Maturity - years Cost of Debt - % 8.4 7.6 7.6 4.4 4.0 4.2 2Q15 1Q16 2Q15 1Q16 1 Ex-Refis. 2 LTM last twelve months. Excluding non-recurring items.
27 FREE CASH FLOW US$ million 3,115 362 213 353 1,232 117 136 175 761 375 386 - Cash generated from operations Interest on loans Income taxes & Refis settlement program Derivatives Capex Net dividends received/ paid ¹ Net disposal/ acquisition of assets and investments Others ² Free Cash Flow ³ Net additions/ repayments of loans Dividends paid to shareholders Increase in cash & cash equivalents 1 Dividends and interest on capital received from associates and joint ventures and paid to noncontrolling interest. 2 Includes transactions with non-controling stockholders, including dividends related to MBR (US$ 57 million), and interest paid on stockholders debentures (US$ 37 million). ³ Cash flow before debt additions/repayments and distribution of dividends.
28 PERFORMANCE OF VALE S SHARES COMPARED TO PEERS Index, 01/01/2016 = 100 250 200 Price recovery since Jan/2016 Vale US Peer 1 Peer 2 83% 150 17% 100 16% 50 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Source: Bloomberg
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