Vale S.a. · BMFBOVESPA:VALE3
Vale — Investor Day (December 2018)
80 slides from Vale's investor day presentation, Dec 5, 2018
Slide 1: Vale Day New York 2018
Slide 2: Forward-looking statements and cautionary note
2 “This presentation may include statements about Vale's current expectations about future events or results (forward-looking statements). Many of those forward-looking statements can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "pla
Slide 3: Vale will generate more value for shareholders than its global mining peers
3 Vale will generate more value for shareholders than its global mining peers Vale Day 2017 Share price variation (Dec17 = 100), in % Vale Peer Peer Peer 1 3 2 128 113 101 88 100 Dec-18 Dec-17 Mar-18 Jun-18 Sep-18 Source: Bloomberg, last updated on December 3rd, 2018.
Slide 4: Lower steel prices in the short term
4 = Lower winter cuts Lower steel prices in the short term Global average HRC prices, in US$/t 750 • c.30% in 2017 • c.20% in 2018 500 Jan-18 Apr-18 Jul-18 Oct-18 Source: Bloomberg, last updated on December 3rd, 2018.
Slide 5: Iron ore is trading within the expected price range
5 Iron ore is trading within the expected price range 62% Fe reference price, in US$/t 85 80 75 70 65 60 55 50 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Source: Platts, last updated on December 4th, 2018. Max: US$ 80/t Min: US$ 60/t
Slide 6: Agenda
6 Sustainability Leading the future Unlocking value in in Iron Ore Coal Value and optionality in Base Metals Rewards of the strategy
Slide 7: Sustainability
7 Sustainability
Slide 8: Vale: becoming a reference in sustainability
8 Vale: becoming a reference Efficient and in sustainability... Quality products Engagement with society sustainable mining S11D Truckless Dry processing High grade iron ore with less CO2 emissions Positive social legacy Forest reserve reforestation and Mining 4.0 Nickel and cobalt for EV batteries
Slide 9: With recognition for its ongoing commitment
9 ...with recognition for its ongoing commitment 7 consecutive ISE Included in the 2019 Corporate Sustainability Index of the Brazilian Stock Exchange years Top 3 out of 40+ companies in the extractive industry World Corporate Human Rights Benchmark 2018 UN Global Compact LEAD Only ranked company fr
Slide 10: Renova Foundation has invested in environmental and social programs
10 US$ 1.3 billion1 in Renova Foundation has invested environmental and social programs Environment recovery Resettlement Indemnification 113 tributaries rehabilitated 400+ families 25,000 people financial aid 800 hectares reforested US$ 350 million1 compensation 1 Until October 2018, FX BRL/USD of
Slide 11: Ambitious goals to be achieved by 2030
Our vision for the future starts now with ambitious goals to be achieved by 2030 ® Energy 100% self-generation of clean energy in Brazil * Forest Recover 100,000 ha of degraded land beyond our fences © — Water Reduce new water collection by 10% rad Climate change Reduce greenhouse gas emissions by 1
Slide 12: Leading the future in Iron Ore
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Slide 13: Flight to quality is definitive, structural and global
13 Flight to quality is definitive, strvbuctural and global Capacity cuts Pollution control
Slide 14: Vale is the main supplier of green ore
14 Vale is the main supplier of green ore High grade vs. low grade ore¹ High grade vs. low grade ore¹ -17% -17% -16% -16% CO2 emissions CO2 emissions Particulate emissions Particulate emissions -10% -8% -10% -8% NOx emissions SOx emissions NOx emissions SOx emissions ¹ Vale’s high grade ore average
Slide 15: Quality imbalance supports the flight to quality
15 Quality imbalance supports the flight to quality Depletion mines of Credits: left side pictvbure by Dario Zalis/Vale
Slide 16: Strong steel demand along with capacity cuts has required higher productivity
16 Strong steel demand along with capacity cuts has required higher productivity... World capacity utilization, in % 76% 2015 2016 2017 2018 YTD Source: WSA. From August/2018, WSA stopped reporting capacity utilization figures, since then it is based on OECD capacity fi gures. Last updated with Octo
Slide 17: Higher steel prices on a worldwide basis
17 ...also resulting in higher steel prices on Global average HRC prices, in US$/t a worldwide basis 707 Monthly data Yearly average Jan-15 Jan-16 Jan-17 Jan-18 Source: Bloomberg, HRC Prices for China, USA and North Europe. Last updated on December 3rd, 2018. 411 462 595 vb
Slide 18: Pellet demand will grow significantly
18 Pellet Pellet demand will grow significantly, creating value accretive opportunities Main market opportunities demand¹, in Mt Seaborne • • • Middle East and Africa (direct China (blast furnace) reduction) +33% 602 Europe and others (blast furnace and alternative technologies) 2014 - 2017 ¹ Source
Slide 19: Planned replacement of Australian ore amplifies quality supply imbalance
19 Planned replacement of Australian ore amplifies quality-wise supply imbalance... Tonnage depletion until 2025 Additions until 2025 - + 227 Mt¹ 0.075% 0.41% 251 Mt¹ 0.095% 0.51% ¹ Seaborne excluding Brazil. Source: Vale database, info is based on marketing rounds with technical consultants. Al/Si
Slide 20: Increase in alumina differentials over time
20 ...resulting in an increase in alumina differentials over time Alumina differential for 1.0% to 2.5%, in US$ per %¹ Products differential to the 62% Fe, in US$ per ton² BRBF Jimblebar MAC Pilbara 8 6 4 2 0 -2 -4 -6 -8 -10 -12 6.94 2016 1H17 2H17 1H18 2H18 YTD Dec-17 Apr-18 Aug-18 ¹ Source: Platts
Slide 21: Vale has successfully implemented a differentiation strategy
21 Vale has successfully implemented a differentiation strategy IOCJ Pellets BRBF SFLA Market reference for Comprehensive portfolio of pellets Market reference for Ultra low alumina high feed grade sinter low alumina feed sinter high feed grade sinter suited to needs all market Note: Iron Ore Carajá
Slide 22: Vale invested to be where it is today
22 Vale invested US$ 20 billion to be where it is today
Slide 23: S11D consolidated Vale as a premium producer
23 S11D consolidated Vale as a premium producer S11D production volumes, in Mtpy 90 Investments totaling US$ 14.3 bi 2017 2018E 2019E 2020E 70 - 80 ~55 22
Slide 24: Itabiritos projects also improved quality
24 Itabiritos projects also improved quality... Itabiritos projects volume, in Mtpy Sinter feed (65.8% Fe) Pellet feed (68.6% Fe) Investments totaling US$ 4.8 bi Pe lle t fe ed (6 8.6% Fe ) Sinter f eed (6 5.8% Fe ) 52 13
Slide 25: Pellet production increase
25 ...and enabled the pellet production increase Installed pellet capacity, in Mtpy Investments totaling US$ 1.4 bi 2013 Tubarão I / II / VIII São Luís 2020 65 44 14 8
Slide 26: Supply chain: complexity turned into flexibility
26 Supply chain: complexity turned into flexibility 4 integrated production systems in Brazil 3 railroads 4 loading ports 22 mines and 1 waterway 13 pelletizing plants 11 in Brazil 2 in Oman 17 blending sites 16 in China 1 in Malaysia
Slide 27: Partnerships in China: key for flexibility in ports
27 Partnerships in China: key for flexibility 16 in ports China
Slide 28: Vale invested in premium products
28 Vale invested over US$ 20 bi in premium products Share of premium products¹, in % Share of premium products¹, in % 81% 81% 53% 53% 2015 2016 2017 2018E 2015 2016 2017 2018E ¹ Premium products: Pellets, IOCJ, BRBF, pellet feed and SFLA.
Slide 29: High return brownfields and bolt-on acquisition
29 High return brownfields and bolt-on acquisition Share of premium products¹, in % Southeastern System 20 Mt pellet feed Gelado pellet feed recovery Northern System 240 Mt 95% 81% Oman pellets expansion Malaysia DC expansion Bolt-on acquisition 53% 2015 2016 2017 2018E 2019E 2020E 2021E 2022E ¹ Pre
Slide 30: Expanding S11D to 240 Mt and Northern System logistics
30 Vale is building its future by expanding S11D to 100 Mt and Northern System logistics to 240 Mt... Capex of ~US$ 770 million Capex of ~US$ 770 million Start-up 2022 Start-up 2022 Reduction in C1 cost Vale’s average Reduction in Vale’s C1 cost average Increase in price realization Increase in pric
Slide 31: Gelado project: tailings into high Fe content products
31 ...transforming tailings into high Fe content products (Gelado project)... High quality product High quality product Start-up 2H21 Start-up 2H21 Up to 10 Mtpy of pellet feed Up to 10 Mtpy of pellet feed Net investments¹ ~US$ 270 million Net investments¹ ~US$ 270 million C1 cost US$ 3.5/t Northern
Slide 32: Pellet feed production in the Southeastern System
32 ...increasing high grade/low alumina pellet feed production in the Southeastern System... Pellet feed production, in Mtpy Investments US$ 820 million Process optimization 20 Mtpy in 5 years Fe content reduction in tailings Recovery & concentration of tailings 2020 2021 2022 2023 Long term 2 Mtpy
Slide 33: Expanding direct reduction pellets in Oman
33 ...expanding the production of direct reduction pellets in Oman... Capex US$ ~30 million Capex US$ ~30 million Start-up 2H20 Start-up 2H20 + 2 Mtpy + 2 Mtpy Boosting productivity using IOCJ in Boosting productivity using IOCJ in Strengthening Middle East presence in the Strengthening presence in
Slide 34: Expanding Malaysia distribution center
34 ...and expanding Vale’s Malaysia distribution center to reach new markets and reduce costs Additional 10 Mtpy Additional 10 Mtpy Start-up 1H22 Start-up 1H22 Cost reduction Cost reduction Capex of ~US$ 130 million Capex of ~US$ 130 million New markets in Southeast Asia / India New markets in South
Slide 35: Leadership and value over volume approach
35 Vale consolidates its leadership and its value over volume approach Share of premium products¹, in % Iron ore production volumes², in Mtpy Main premium products: Nominal capacity 95% • • • • • Pellets Iron Ore Carajás Fines (IOCJ) Brazilian Blend Fines (BRBF) Pellet feed 81% Sinter Feed Low Alumi
Slide 36: Vale: competitive beyond quality
36 Vale: competitive beyond quality
Slide 37: C1 costs to reduce further
37 C1 costs to reduce further: S11D ramp-up and productivity (technological initiatives & cost management) Gains, in US$/t Gains, in US$/t 2018E 2019E - 2023E Total 2018E 2019E - 2023E Total Note: Based on 2H18 numbers, IODEX 62% Fe of US$ 68.0/t, FX BRL/USD of 3.96 and bunker prices of US$ 466.0/t.
Slide 38: Secured long term contracts support freight competitiveness
38 Secured long term contracts support Vale’s freight competitiveness Volumes, in Mtpy Guaibamax Valemax 1G and 2G 2018E 2019E 2020E 2021E 2022E 2023E 60-65 55-60 50-55 25-30 105-115 105-115 105-115 105-115 90-100 65-70 Valemax 1G 35 operating 2nd Valemax 2G 18/32 operating 47 Guaíbamax under constr
Slide 39: Compliance with new IMO regulation with net freight reduction
39 Vale US$/t is ahead of compliance with ~100% of long-term contracts with scrubbers the new IMO regulation while obtaining US$/t a net freight reduction ~100% of long-term contracts with scrubbers 2.0 2.0 1.8 1.8 0.4 0.4 Scrubbers3 Scrubbers3 Freight cost 2018E Maritime Valemax 2G Other initiative
Slide 40: Commercial initiatives will boost price realization
40 Commercial initiatives will continue to boost price realization on top of a better product mix Positive impact on price realization, in US$/t Positive impact on price realization, in US$/t MB62 LA MB62 LA Launch ~10.0 Launch ~10.0 - 12.0 - 12.5 12.0 12.5 MB65 Launch MB65 Launch 5.4 5.4 3.2 3.2 3.
Slide 41: Competitiveness initiatives will increase Ferrous Minerals EBITDA
41 Competitiveness initiatives will increase Ferrous Minerals EBITDA up to US$ 5.0/t by 2023... EBITDA/t gains by 2023E, in US$/t 2.5 - 3.0 3.5 - 5.0 The US$ 3.5 - 5.0/t gain will come on top of the US$ 3.0/t already captured in 2017 and 2018 C1 (S11D and productivity) Supply chain and price realiza
Slide 42: Ferrous Minerals EBITDA/t of up to US$ 47 by 2023
42 …translating into a total annual Ferrous Minerals EBITDA/t of up to US$ 47 by 2023 Normalized EBITDA/t (price, FX and bunker), in US$/t 44-47 38 36 35 2H14 2H15 2H16 2H17 2H18 E 2H23 E Note: Based on 2H18 numbers: IODEX 62% Fe of US$ 68.0/t, FX BRL/USD of 3.96 and bunker prices of US$ 466.0/t. 39
Slide 43: Unlocking value in Coal
43 Unlocking value in Coal
Slide 44: Moatize ramp-up based on three pillars
44 The conclusion of Moatize ramp-up is based on three pillars... Capacity Mine productivity Yield • • • Infrastructure Mine equipment Development of mining sections • Knowledge transfer local workforce to • • Buffer stockpile Interconnection of the 2 plants Equipment debottlenecking Process control
Slide 45: Sustainable and reliable ramp-up
45 ...which create the basis for a sustainable and reliable ramp-up... Production volume, in Mtpy 2018E 2019E 2020E 2021E 2022E 2023E 20 20 20 18 14 12
Slide 46: Significant cost reduction
46 ...leading to a significant cost reduction Proforma cost, 125 in US$/t Net Nacala tariff 1 operational costs 2 Pro-forma 114 104 94 87 83 2018E 2019E 2020E 2021E 2022E 2023E ¹ Composed of investments, working capital, debt service, amortization, ² Includes mine, plant, railway and port, excluding
Slide 47: Value and optionality in Base Metals
47 Value and optionality in Base Metals
Slide 48: Nickel turnaround before EVs become a reality
48 Challenge Complete reality Nickel turnaround before EVs become a
Slide 49: Batteries for EVs will be a key nickel demand driver
49 Batteries for EVs will be a key nickel demand driver Using NCM 811 chemistry 43 kg over x 12 million EVs Number of EVs, in million Mn Li Ni Co 13.8 Cu 43 kg 6 kg 5 kg 11 kg 60 kWh kt additional high-quality Ni 1.8 demand in 2025 2025E1 2018E 1 Includes Plug-in Hybrid Electric Vehicle (PHEV) and B
Slide 50: Vale supporting VNC based on EV revolution prospects
50 Vale is supporting VNC based on the prospects for the EV revolution
Slide 51: Agreement with Glencore to explore Victor and Nickel Rim South
51 Vale with reached an agreement Glencore to jointly explore Vale’s Victor orebody and Glencore’s Nickel Rim South
Slide 52: Competitiveness
52 Competitiveness
Slide 53: Vale's global nickel footprint offers unique future opportunities
53 Vale’s offers global nickel footprint unique future opportunities in the
Slide 54: Nickel turnaround based on three key pillars
54 Nickel turnaround is based on three key pillars Supply chain Operational excellence Digital transformation integration
Slide 55: Nickel turnaround: Canadian operations
55 Nickel turnaround Canadian operations PTVI VNC
Slide 56: Nickel turnaround: main focus in Sudbury
56 Nickel turnaround – main focus in Sudbury Flowsheet optimization Canadian operations PTVI VNC Cost reduction program Improve underground mine performance Long Harbour ramp-up
Slide 57: Stabilizing and enhancing Canadian operations
57 Stabilizing and enhancing Canadian operations yield opportunities Revision of contracts US$ 80 million with suppliers Process optimization US$ 10 million Potential cost reduction 140 US$ million Matrix cost management US$ 20 million Centralized organizational structure US$ 10 million in 2019 Revi
Slide 58: Nickel turnaround: PTVI
58 Nickel turnaround Truck and mine equipment renewal Canadian operations PTVI VNC Debottlenecking of our furnaces Fuel efficiency – coal conversion US$ 80 million in savings in the medium term
Slide 59: Nickel turnaround: VNC
59 Nickel turnaround Mine plan revision and new equipment Canadian operations PTVI VNC Debottlenecking study of the plant Ramp-up to 50 ktpy in the medium term
Slide 60: Future growth
60 Future growth
Slide 61: The nickel industry will need to keep pace with demand
61 The nickel industry will need to keep pace with demand. Time is running out. Annual supply growth needed, in kt of Ni per year 195 Annual supply growth needed, in kt of Ni per year 195 Forecast1 Forecast1 2011-16 2017-23 2024-30 2011-16 2017-23 2024-30 1 Source: Vale analysis built on Wood Macken
Slide 62: Nickel production in short and medium term
62 Vale is able to reach 313 kt in the short term and produce as much as 400 kt in the medium term Nickel production, in kt 85-120 400 10 313 21 19 19 244 2019E North Atlantic PTVI Onça Puma VNC Short term Pomalaa + Bahodopi Medium term
Slide 63: Vale has potential to increase its copper production
63 Vale has potential to increase its copper production 800 Copper production, in kt 470 436 421 417 203L0oEng-term 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E potential 500
Slide 64: Deep knowledge of the Carajás region copper projects
64 Vale has deep knowledge of the Carajás region, where it holds most of its copper projects • • • • • • • • Paulo Afonso Polo Furnas Sossego UG Visconde Bacaba Mata 118 • • • Salobo III, 30-40 kt Cristalino, ~80 kt Salobo Paulo Afonso Furnas Alemão, ~60-70 kt Polo Alemão Bacaba Visconde 118 Sossego
Slide 65: Copper opportunities: Mini-mines Carajás
65 Opportunities in projects for the medium and long term Mini-mines Carajás 50-100 kt Cu Small deposits operated by third parties Located in Carajás Operation in the short-term Cu
Slide 66: Copper opportunities: Salobo III
66 Opportunities in projects for the medium and long term Mini-mines Carajás 30-40 ktpy of copper Salobo III Wheaton Precious Metals US$ 600-700 mi payment Net capex US$ 400-500 mi Start-up in 2022
Slide 67: Copper opportunities: Cristalino
67 Opportunities in projects for the medium and long term Mini-mines Carajás ~80 ktpy of copper Salobo III Maintain Sossego’s plant operating at full capacity Cristalino Start-up in 2023
Slide 68: Copper opportunities: Alemão
68 Opportunities in projects for the medium and long term Mini-mines Carajás ~60-70 ktpy of copper Salobo III High gold by-product content in the concentrate Cristalino Alemão Start-up in 2024
Slide 69: Copper opportunities: Victor
69 Opportunities in projects for the medium and long term Mini-mines Carajás Best non-developed Salobo III project in Sudbury 30 ktpy 11 ktpy Alemão Cristalino Start-up in 2025 Victor Ni Cu
Slide 70: Copper opportunities: Hu'u
70 Opportunities in projects for the medium and long term Mini-mines Carajás Copper deposit Indonesia in Salobo III 250-300 ktpy 260 koz Alemão Cristalino Potential start-up in 2026 Victor Hu’u Au Cu
Slide 71: Rewards of the strategy
71 Rewards of the strategy
Slide 72: Ferrous Minerals projects will enhance portfolio differentiation
72 Ferrous Minerals projects and initiatives will further enhance portfolio differentiation US$ 240 mi US$ 70 mi US$ 340 mi US$ 60 mi US$ 35 mi US$ 2 bi 1 Considers US$ 160 million of avoided sustaining investment. Carajás Pellet feed Pellet feed Oman Malaysia Competitiveness 240 Mtpy Gelado Southea
Slide 73: Turnaround and EV revolution catalysts for Base Metals growth
73 Turnaround and EV revolution will be catalysts for growth in Base Metals volume price opportunity 80 kt US$ 7,000/t 80 kt 320 kt Current margin: Volume: Current margin: Δ cost/t = 830 mi = = = US$ US$ 510 mi US$ 2.2 bi US$ 310 mi Ni EV revolution Cu growth Δ volume: Volume: Δ price: Δ volume: x x
Slide 74: Other EBITDA and Cash Flow opportunities
74 We have other EBITDA and Cash Flow opportunities Gross debt Liability MBR Samarco ramp-up ramp-up pre-operating 8 Mt 20 Mt US$ 2 bi US$ 13 bi US$ 170 mi Current margin1: = Δ cost: US$ 180 mi US$ 360 mi Δ interest rate: Δ interest rate: in 2018 = = = US$ 120 mi US$ 840 mi US$ 55 mi US$ 65 mi 1 Con
Slide 75: Extra US$ 7.7 billion EBITDA opportunity by 2023
75 Altogether there is an extra US$ 7.7 billion EBITDA opportunity by 2023 US$ 7.7 billion US$ billion 1.1 Analysts' average Ferrous Minerals Base Metals Coal and others Potential EBITDA 2023 EBITDA 2018¹ 1 Source: Bloomberg as of November 27th, 2018. 24.4 16.7 2.7 3.9
Slide 76: Investments required are moderate
76 Investments required are moderate Investment, in US$ billion Investment, in US$ billion 4.5 4.5 4.4 4.4 2018E 2019E Next years¹ 2018E 2019E Next years¹ Sustaining (includes replacement) Growth Sustaining (includes replacement) Growth 1 Average 2020-2023. 3.7 3.7 3.7 2.8 0.9 0.8 0.7 3.7 3.7 3.7 2.
Slide 77: Robust Cash Flow can be generated in any scenario
77 Robust Cash Flow can be generated in any scenario Flow1 Flow1 Free Cash accumulated 2019-21, in US$ bi Free Cash accumulated 2019-21, in US$ bi Nickel price (US$/t) Nickel price (US$/t) 1 Does not consider dividends, buybacks and bolt-on acquisitions. Considers US$ 1.3 bi of cash surplus in 2018
Slide 78: Vale will allocate capital in a disciplined way
78 Vale will allocate capital in a disciplined way Annual average available cash, 2019-21 ~US$ 4 bi minimum remuneration US$ Excess cash will be allocated among extraordinary dividends, buybacks, bolt-on financial flexibility acquisitions and bi To be determined in February and July
Slide 79: Top priorities for value creation
79 Top 3 priorities for value creation Maximize flight to Transform Base Metals into a significant cash generator Capital discipline quality rewards in Iron Ore
Slide 80: Signatures
[LOGO] Table of Contents Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Vale S.A. (Registrant) By: /s/ André Figueiredo Date: December 04, 2018 Direct