Vale S A : Transcript Conference Call

Local Conference Call

Vale S/A(VALE3) 1Q22 Earnings Results

April 28th, 2022

Operator: Good morning, ladies, and gentlemen. Welcome to Vale's conference call to discuss 1Q22 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. This call is being simultaneously translated to Portuguese.

If you should require assistance during the call, please press the star followed by zero. As a reminder, this conference is being recorded and the recording will be available on the Company's website at:VALE.COM at the Investors link.

This conference call is accompanied by a slide presentation, also available at the

Investors link at the Company's website and is transmitted via internet as well.

The broadcasting via internet - both the audio and the slides changes - has a few seconds delay in relation to the audio transmitted via phone.

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks and other factors.

With us today are:

• • Mr. Eduardo de Salles Bartolomeo - Chief Executive Officer;

• • Mr. Gustavo Pimenta - Executive Vice-President, Finance, and Investor Relations;

• • Mr. Marcello Spinelli - Executive Vice President Iron Ore;

• • Mrs. Deshnee Naidoo - Executive Vice President Base Metals

First, Mr. Eduardo Bartolomeo will proceed to the presentation Vale's 1Q22 performance, and after that he will be available for Questions and Answers.

It is now my pleasure to turn the call over to Mr. Eduardo Bartolomeo. Sir, you may now begin.

Eduardo Bartolomeo: Thank you. Good morning, everyone, I hope you are all well.

Let me start our conversation with a familiar slide to you and reinforce that we remain focused on re-rating Vale by de-risking and reshaping our company. On the reparation front, actions provided in the Brumadinho reparation agreement are progressing well. Payment obligations are in full swing, and we are now detailing social economic projects in Brumadinho and other 25 municipalities in the Paraopeba basin. These projects were selected based on popularconsultation and they cover health, social development, infrastructure, and agriculture within a fast responsive package. In dam safety, we began the decharacterization of Dique Auxiliar, one of the five upstream structures to be eliminated in 2022, which will total 12 by the end of this year. The decharacterization program has its schedule agreed with the Brazilian authorities in February this year through a Term of Commitment; this brings more legal and technical certainty to the elimination of our 23 remaining upstream dams in Brazil. On production resumption, despite a few challenges, we are on plan to deliver the two most important milestones for this year: Torto dam and Itabiruçu dam heightening.

As we have been saying, we are building a better Vale with capital discipline and creating value for all of our stakeholders.

This first quarter is seasonally the lowest in production, in addition, we had further operational challenges. Despite that, we managed to reach some important milestones towards increase production stability and value creation. In iron ore, we achieved a solid premium of USUS$9 per ton, the highest since the second quarter of 2019. That's evidence of our high-quality portfolio in a tight market for high-quality products.

On the other hand, production was down year-on-year, a result of operational constraints which will be covered in detail by Spinelli later. But we are overcoming those obstacles. In the Southeastern System, performance increased by 11% year-on-year despite the strong rainfall in January. With that, I'm confident that production levels will increase as planned in the coming quarters to meet our annual production guidance.

In base metals, we gave another important step reinforcing Vale's position as a supplier of choice by the EV markets, a multi-year agreement with Northvolt to supply low-carbon nickel products for batteries. On production, the Sudbury mines achieved pre-strike run rates supported of a recovery in production for the upcoming quarters. Deshnee will provide more details later.

Finally, in capital allocation we paid US$3.5 billion in dividends and advanced very well with the execution of our buyback program.

Talking now about the integration between business and ESG strategy, as you know, our product portfolio is shaped to foster the development and diffusion of environmentally friendly technologies by our clients. One example of that is the start of construction of Tecnored first commercial plant in the state of Pará. Tecnored technology is innovative, enabling the production of green pig iron from the substitution of metallurgical coal by biomass. This means up to 100% reduction in CO2 emission and 10 to 15% lower operating cost and Capex intensity. This in line with our strategy to provide steelmakers with viable solutions for their decarbonization investments, also contributing to Vale's net emissions reduction target of 15% by 2035. This is one of the initiatives that d Vale portfolio and strategically positions the company to face the climate challenge.

On our roadmap to build a better Vale, reshaping means optimizing portfolio, solving cash drains, and focusing on our core businesses. In this sense, we have made substantial progress this quarter by completing the divestment from our coal business and also closing the sale of our stake at CSI. Finally, we reached a bidding agreement for the sale of our Midwestern System for US$150 million in addition to transferring take-or-pay obligations, which price the transaction at US$1.2 billion in enterprise value. Those were major steps that create value for the company and drive us towards a much more focused and leaner portfolio of assets.

Speaking of creating and sharing value, based on the successful progress of our two share buyback programs, we announced the launching of a third one for up to 500 million shares to be repurchased within 18 months. Combined, the two first programs comprise almost 10% of Vale's outstanding shares. After the completion of the third buyback program, we will have repurchased almost 20% of the company's outstanding shares. This means that for our shareholders with positions since before our first program without spending any additional dollar their participation in future earnings would have increased by almost 25% when we have completed this program. This is one of the results of our commitment to create value and share it with our shareholders.

I now turn the floor over to Deshnee for her remarks on the quarter results for base metals. Thank you.

Deshnee Naidoo: Thank you, Eduardo. Good morning, everyone. I would like to start by talking about the progress we have made towards our strategic agenda.

During this quarter, we signed a multi-year agreement to supply our low-carbon nickel to Northvolt, a partner who values producing batteries from low-carbon sources. We have also successfully added further carbon certification for some of our other nickel products in Sudbury and Clydach, as well as for our copper concentrates produced in Salobo. This in addition to the certification we have previously received for Long Harbour nickel rounds.

This an important achievement that reinforces our position to supplying low-carbon products to support energy transition, especially for the growing EV market. Secondly, we have just announced locally in Indonesia the signing of a framework agreement with Huayou Cobalt to jointly develop our Pomalaa HPAL project to produce up to 120,000 tons of nickel in MHP. Huayou's technical experience, expertise, and track record is a perfect complement to our world-class Pomalaa deposit and our multi-decade operational experience in Indonesia. This a significant milestone that reflects our long-standing commitment to developing this world-class resource in Indonesia to further deliver into a growing nickel demand.

Next slide. In nickel, the year-on-year lower volumes were largely explained by the pace of the ramp-up of Sudbury mines and the ramp-up of the VBME project. However, our Sudbury mines for the end of quarter one achieved pre-labor disruption mining rates and Onça Puma operation had a stable productionperformance. In copper, we had planned for a lower production quarter as a result of a scheduled Sossego SAG mill maintenance and the lower mine grade from

Salobo in H1. We were impacted by the decision we took to extend the Sossego planned maintenance to bring forward the replacement of the mold discharge trunnion due to the extensive where we uncovered when we commenced with the maintenance.

We are on track to restart the Sossego plant by mid-May. We were also impacted by the increased seismicity at our Coleman mine in Sudbury, which impacted mining a high-grade copper section in the quarter. This can still be accessed.

There are several initiatives underway that will continue to derisk our copper production going forward. Sossego mining performance for the quarter is slightly ahead of plan, which enables the plant to run at maximum capacity after the restart. We achieved 25,000 tons run rate in quarter three and quarter four last year, and I am certain that we can achieve similar - if not slightly higher - run rates once the maintenance is completed.

Salobo mining is on plan. As we are seeing the benefit of the mine and maintenance work from last year and are on track to deliver 30% more mine movement this year, the Salobo plant has just completed a planned maintenance too and will assist with improved reliability. The Salobo plant has previously achieved the required 48,000 to 50,000 ton quarterly run rates. Finally, in North

Atlantic with the increasing production rates and the additional opportunities being worked on, we are confident that we can offset some of the losses from quarter one.

The next slide, finally, moving to the nickel prices, which has attracted a lot of attention recently, our nickel price realization was up 16% in the quarter. This price realization can be split into three main factors: first, the aggregate premium and discount for nickel, that is, taking into account our entire product portfolio. In this quarter we've achieved strong price realization from our class-one products, however, the product mix was impacted by the higher sales of the intermediates, mostly nickel matte, which is typically sold at a 20 to 25% discount to LME; the second factor is the market pricing, that is, how sales are distributed along the quarter and the quotation of price for the contracts. So, despite the high LME price in March and in the quarter, the lower previous period prices affected the quarter's price.

Our typical monthly QP is split about half in the current month and half in the past month. This explains the US$2,000 difference between LME and the realized price; and lastly, we have some fixed pricing, we typically hedge a smaller portion of ourselves, our hedge contracts are not subject to margin calls, as we apply hedge accounting to those contracts, the only effect we see is the equivalent to a fixed price sale at about US$20,000 with no issues and liquidity or mark-to-market for those contracts. Given the soaring prices in the quarter, we have had a negative impact on our hedge results.

I now hand over to Marcello to take us through the iron ore performance.

Marcello Spinelli: Thank you, Deshnee. Well, in our last conference call, I finished my presentation talking about the flight-to-quality trend, we highlighted that in decarbonization path, the optimization of the blast furnace in the short-term, and the massive use of direct reduction in the future will support a strong demand for high-quality ores. On the other hand, there's a limited supply of the low silica ores and we said that we have many signs that this trend is becoming a reality, so we can see this chart that we have a gap and between this 58 index and the 65 index now over US$70. That's the class one iron ore that we've been talking about.

Vale performed a great price realization in the first quarter driven by four main reasons: the first one, the cost of the coke we have a necessity to optimize the cost of energy in the blast furnace; second, the lack of quality that is coming from our competitors. We have high silica alumina, high alumina, less concentrate coming from CIS, and even the domestic market we have a lower production for the concentrate; third, pellet premiums; and finally, we are taking advantage of our portfolio, we've been improving the quality through the filtration plants, the BRBF, and now we are reducing the high silica ores also concentrated in China.

Moving to next slide, let's talk about the production plan for 2022. I want to reinforce our production guidance for this year, it's a range between 320 and 335 million tons. As we mentioned in our production report comparing to last year, we had some one-off events due to the heavy rainy season in the South and in the North, almost offset by the full operation that are coming from the assets that were ramping up last year coming from the South and coming from the Southern System. We are also facing the reflect of the delays of what we call the rolling license process in the North Range that made our strip ratio increase in the North Range.

In spite of many challenges, we can say that we have some good news here. We improved more than 12% the waste movement in the Northern Range, and we could plan and execute the major maintenance activity in S11-D in the first quarter, there are others in the second quarter, so on the first half we can say that we have less impact in the production, annual production due to the seasonality. As an example, we are installing the Abon crushers in the first half and we already replaced the very important conveyor belt in S11-D. In April we are adding more than 2 million tons compared to last year, we can say that we prepared the Northern Range for more availability in the second half, and we will have the same effect of the annualized production coming from the South and the Southeastern System that we resumed last year. Finally, we're going to have the Gelado project in the second half and we are expecting some licenses for small pits in the North Range.

Now moving to the third slide, we want to track our plan to bring over the 50 million tons in midterm to support, to supply the market if the market needs, so following system by system. In the Northern Range we want to also track the new ore bodies that are under license, the N3 and N2/N1. S11-D keeps the evolution of the learning curve of the OBK, we have also to install in two years the new waste crusher, but we also have the +10 and the +20 projects, big projects that