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Vale - A Global Strategic Partner


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

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Vale - A Global Strategic Partner

  1. 1. Vale: A Global Strategic Partner Comitê de Cooperação Econômica Brasil - JapãoDiretoria de Estratégia August 09th, 2011
  2. 2. March ,11th March ,17th Vale expresses condolences for the country and people who have lost members of their families and friends in the Tohoku earthquake that claimed 15.645 lives and left 10.682 others missing and injured, and trusts Japanese people strength and determination to rebuild their country.2 1 Japan National police agency as of July 29, 2011
  3. 3. Disclaimer “This presentation may include declarations about Vales 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 operates. 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.”3
  4. 4. 1 Brazil: A mineral powerhouse 2 Brazil and Japan: A case of success 3 Vale and Japan: A long term partnership4
  5. 5. 1 Brazil: A mineral powerhouse 2 Brazil and Japan: A case of success 3 Vale and Japan: A long term partnership5
  6. 6. Brazil has a consolidated institutional framework that encourages investment Rule of law and Stable political and Strong democracy commitment to economic institutions property rights6 Sources: Vale and Banco Central do Brasil
  7. 7. After two decades of slow growth, Brazil has resumed a faster growthpath and is a major destination for foreign direct investments 4,0% 3,5% 2,3% Brazil’s GDP growth 1980-2002 2003-2009 2010-2012E 2000 32,8 FDI inflow into 2001 22,5 2002 16,6 Brazil 2003 10,1 US$ 292 bi of FDI US$ billion 2004 18,1 inflows along the 2005 15,1 last decade 2006 18,8 2007 34,6 2008 45,1 2009 25,9 2010 52,6 1 2011E 65,0 1Unctad (Conferência das Nações Unidas para o Desenvolvimento e Comércio) report – Estimates for 2011 – First Semester US$ 30 billion7 Sources: IBGE and IMF
  8. 8. Brazil is one of the richest countries in natural resources … Bauxite Lead Copper Tin Iron Ore Beryllium Manganese Niobium Diamond Nickel Fluorine Gold Phosphorious Titanium Limestone Tungstenio Coal Uranium Salt Zinc Oil& Gas8 Sources: Vale Exploration department
  9. 9. … as well as one of the global leaders in minerals and other products Iron Ore Niobium Manganese Tantalita Bauxite Ornamental Rock #1 #1 #2 #2 #3 #3 Orange Coffee Chicken Sugar Soybeans Ethanol juice meat #1 #1 #1 #1 #2 #2 Sources: Vale and Banco Central do Brasil, Plano Nacional de Mineração 2030 (MME): Sumário Mineral, 2009, DNPM e Sinopse 2010, SGM-DNPM.9
  10. 10. Mining has been contributing to the Brazilian GDP growth… Mining sector value added US$ bn CAGR 11% 18,2 7,1 3,9 0,3 1,9 2,8 1970 1980 1990 2000 2005 200810 Sources: MME - Plano Nacional de Mineração 2030 (MME), World Bank , Vale internal data and Ministério do Desenvolvimento, Indústria e Comércio Exterior website
  11. 11. …and should remain as a lever for Brazilian development due to forecasted future investments and job creation Forecasted investments US$ bn 36,8 27,4 26,1 US$ 98 Bn forecasted in investments in mineral research and mining until 2030, almost exclusively originated by the private sector 2,3 3,6 1,5 – not counting an additional 30% for infrastructure and logistics 2010-2015 2016-2022 2023-2030 Mineral research Mining People employed Thousands 2.747 1.894 1.323 Due to the rise in production, a 903 sound of employment is 419 590 expected, more than tripling during 187 297 the next two decades 2008 2015 2022 2030 Mineral exploration Mining11 Source: MME - Plano Nacional de Mineração 2030
  12. 12. Brazil is also concerned over a more sustainable mining growthspecially in the Amazon region – Brazilian new frontier Mining Projects versus protected areas Carajás Area is an Example Vale protects this area since 80’s Vale mining area: Less than 4% of interference on the protected area12 Source: MME - Plano Nacional de Mineração 2030, Vale environment report
  13. 13. Vale has also been investing a substantial amount of resources in Corporate Social Responsibility… Investments in CSR¹ Carajás mineral complex is an example US$ million Average 736 2007-2009 2010 1.136 2011E 1.194 Vale has broad based selection of pioneering initiatives In Carajas, in the North of Pará, where Vale  Responsible operations operates the largest open pit iron ore mine in  Reforestation and flora renovation the world, we help protect around 8,000 km² of  Use of clean fuels native forest  Responsible residue management E=Planned ¹ Social and environmental investments13 Source: Vale environment report GRI
  14. 14. … And in technology development in Brazil to improve efficiency since mining is a complex business MINE LOADING RAILROAD UNLOADING SHIPPING TRANSPORT DC DISTRIBUTION CLIENTS 15 days 1-2 days 9 days 75 days 100 days  Synchronism across the entire chain demands absolute precision in the operation, to ensure the continuous flow of the product  Advanced control technologies and specific skills are required Control Center of FCA14
  15. 15. 1 Brazil: A mineral powerhouse 2 Brazil and Japan: A case of success 3 Vale and Japan: A long term partnership15
  16. 16. Over the decades Brazil and Japan relationship grew strongerunderpinning a series of new ventures and a mutual investment relation The 50’s and the 60’s The 70’s The 80’s The 90’s onwards… Japan implemented the  Japan’s direct  Brazilian share on  New course of trade Usiminas Steel Complex in investment in the total FDI from relations was Brazil (1958) petrochemical, steel, established, with the Japan reduced due opening up of the soybean and paper&pulp sectors to macroeconomic Brazilian economy A great number of Japanese instability and companies started  Japanese companies operations in Brazil:  Brazil became the Japanese attraction invested US$1.4 Ishikawajima, Toyota, Sharp, 3rd main receiver of by the new billion in Brazil in Toshiba, Matsushita, Honda, FDI from Japan telecommunications, industrialized Yamaha, etc capital countries in Asia goods, mining, and  In 1974 JFE invests Bilateral trade surged from in CST (Cia metallurgy US$ 57 million to US$1.7 Siderúgica Tubarão) billion16
  17. 17. Brazil and Japan maintain a significant trade, strengthening this partnership in different areas in recent years Brazil- Japan trade flow Japanese FDI inflows to Brazil US$ million US$ million 1996 192 1997 342 Total 2000 – 2010 2001 5.053 1998 278 US$ 13.5 bn 2002 4.450 1999 274 2003 4.836 2000 385 2001 827 2004 5.643 2002 504 2005 6.888 2003 1.368 2004 243 2006 7.734 2005 779 2007 8.931 2006 660 2008 12.922 2007 501 2008 4.099 2009 9.637 2009 1.673 2010 14.122 2010 2.497 “Itochu Japanese trading company is “Sumitomo Rubber Industries “Dow Chemical announced investing with Bunge in 2 ethanol plants in Ltd is planning to invest in a yesterday a joint-venture with Minas Gerais and Tocantins” tire factory in Paraná…” Japanese Mitsui (…) to produce Valor Econômico Folha de São Paulo polyethylene from ethanol” Valor Econômico “Japanese AGC will own a Glass factory in São Paulo” Brasil Econômico17 Source: IMF/Haver Analytics, Brazilian Central Bank
  18. 18. 1 Brazil: A mineral powerhouse 2 Brazil and Japan: A case of success 3 Vale and Japan: A long term partnership18
  19. 19. Japan is present in Vale’s shareholders controlling group Non-Brazilian investors Bradespar BNDESPar 38,6% 22% 11% VALEPAR* 32,4% , Brazilian pension funds Mitsui 49% 18% Brazilian investors 29,0% **As of June 30, 201119 Source: Vale monthly relation investors report
  20. 20. Japan played a crucial role for Vale development and expansion Carajas complex The 50’s and 60’s The 70’s The 80’s The 90’s  Vale starts to sell  In 1978 was founded  Albrás starts operation  Alunorte starts iron ore to Alunorte and Albrás in operation  VALE, JFE Steel and Japanese steel partnership with NAAC other Japanese steel companies  Mitsui acquires makers start a joint CAEMI,sharing with venture to develop Vale the control of  Japanese Steel Mills mines in Minas Gerais the company and Vale invest in two – Capanema complex pelletizing plants in (MSG)  Vale established a Espírito Santo state - partnership with Nibrasco  Support to Carajás Mitsui to develop funding as a corporate Vale’s intermodal  Mitsui finances MBR iron guarantee transportation ore project business20
  21. 21. And still has ongoing successful partnerships with Vale Business / company Japanese Partner Ferrous – Nibrasco Japanese Steel Mills (49%)1 – California Steel JFE Steel (50%) Nickel – Vale Japan (Matsuzaka) Sumitomo Metal Mining Co (12,8%), Mitsui (6,8%) and others2 PT Inco (Indonesia) – Sumitomo Metal Mining Co (20,1%)3 – Goro Nickel S.A. (New Caledonia) Sumic -Sumitomo Metals and Mitsui (21%) Aluminum4 – Albras Nippon Amazon Aluminum Co. (NAAC) (13,8%) – Alunorte NAAC, JAIC, Mitsui and Mitsubishi (5,3%) Logistics – Log-In Mitsui (3,8%) Phosphate Rock – Bayovar Mitsui (25%) ¹ Nippon steel- NSC (25 ,4%), JFE steel corporation (12%), Sumitomo Metal Industries (6%), Kobe steel (3%), Nisshin Steel (1,6%),Sojitz Corporation (1%) 2 Others- Sumitomo Corporation (2.6%) and Sojitz Corporation (1.7%) 3 Others 20,1% publicly held and 0.6% held by others21 4 Vale stake in Norsk Hydro Source: 20F and Vale’s reports
  22. 22. Over the last 10 years Vale has shipped 240 Mt of iron ore and pellets toJapan Vale iron ore sales to Japan Mt 2001 17,1 2002 16,3 2003 18,1 2004 20,8 2005 24,8 2006 27,9 2007 27,5 2008 34,1 2009 22,5 2010 30,822
  23. 23. Vale is investing heavily in shipping capabilities to be closer to its Asian clients Implementation of distribution centers nearby Japanese steel makers and Asian market, decreasing the freight differential between Brazil and Australians in the Asian basin Reducing 35% of CO2 emission in Brazil- Asia route Maximizing competitive advantages: boosting production of high-quality iron ore Minimizing competitive disadvantages: building a low-cost portfolio of maritime Capacity = 400,000 mt freight and distribution centers Speed = 14.8 Knots Lower costs mitigating freight price Fuel consumption = 96,7 tons / day HFO (heavy fuel oil) volatility for clients VLOCs will promote a permanent cut in the costs of Atlantic-Pacific dry bulk shipping23
  24. 24. Vale is also investing in distribution centers adding flexibility to operations and strengthening competitiveness in Asia Low seaborne transit time, VLOCs inventories synergy and blending flexibility are among the unique advantages of Vale’s Distribution Centers Oman PDM Malaysia Tubarã o Guaíba & Itaguaí San Nicolas24
  25. 25. Vale has other partnerships with Japan, such as the JV Vale Japan Nickel Refinery in Matsuzaka  Operations began in 1965,currently supplied with nickel matte from PT Inco in Indonesia  Tonimet produced is sold to Japanese stainless and specialty steel manufacturers, e.g. JFE, Sumitomo Metal, Nisshin, Nippon Steel, Hitachi, etc.  About 50% of the production is exported to Taiwan and Korea, as sinter, tonimet granules/briquette25
  26. 26. There could be some other opportunities for Vale and Japan in the future  Foster and strengthen external and internal Science & Technology Vale Institute of communities Technology (ITV)  Develop R&D outside lines of business scope TechnologyDevelopment  Motogenerators: Ethanol-fueled motor-generator to produce electric energy Vale Energy  Combcycle: Steam turbine which uses salty water to generate Solutions (VSE) energy, purifying and making it drinkable (used in oil platforms) 1  Turbines: Gas turbines for the oil industry to generate energy Biodiesel Project  Palm Oil production, biodiesel raw material in Brazil and Indonesia Renewable and Cleaner Energy  Synthetic diesel (without sulphur) that contributes to carbon capture: Synthetic Diesel – Coal-to-Liquids in Mozambique – Biomass to Liquids in Brazil 2 Japan  Building of new ports in Japan that could handle Valemax fleet (400kt of capacity)Infrastructure  General Cargo Brazil  Steel projects 3 Rare Earths  Exploration of Rare Earths in Brazil Mining 426
  27. 27. Reinforcing and strengthening mutual cooperation established in manyfields, even in the national passion for Brazilians: Soccer! Congratulations!27
  28. 28. EFVM – Vitoria Minas Tubarao Complex 1979 Ponta da Madeira Vitoria Port 1959 Albras 1990 Itabira 1978 Mitsui & Vale Alunorte exchange program Obrigado! Thank you! ありがとう Vale:28 グローバル リーダー