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Vale S.A. – ‘20-F’ for 12/31/18

On:  Thursday, 4/18/19, at 5:28pm ET   ·   For:  12/31/18   ·   Accession #:  1047469-19-2391   ·   File #:  1-15030

Previous ‘20-F’:  ‘20-F’ on 4/13/18 for 12/31/17   ·   Latest ‘20-F’:  This Filing

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/18/19  Vale S.A.                         20-F       12/31/18  205:52M                                    Merrill Corp/New/FA

Annual Report by a Foreign Private Issuer   —   Form 20-F
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 20-F        Annual Report by a Foreign Private Issuer           HTML   4.43M 
 2: EX-8        Opinion re: Tax Matters                             HTML    112K 
 5: EX-13.1     Annual or Quarterly Report to Security Holders      HTML     57K 
 3: EX-12.1     Statement re: Computation of Ratios                 HTML     59K 
 4: EX-12.2     Statement re: Computation of Ratios                 HTML     59K 
 6: EX-15.1     Letter re: Unaudited Interim Financial Information  HTML     56K 
 7: EX-15.2     Letter re: Unaudited Interim Financial Information  HTML     55K 
14: R1          Document and Entity Information                     HTML     84K 
15: R2          Consolidated Income Statement                       HTML    134K 
16: R3          Consolidated Statement of Comprehensive Income      HTML    104K 
17: R4          Consolidated Statement of Cash Flows                HTML    149K 
18: R5          Consolidated Statement of Cash Flows                HTML     55K 
                          (Parenthetical)                                        
19: R6          Consolidated Statement of Financial Position        HTML    172K 
20: R7          Consolidated Statement of Changes in Equity         HTML    119K 
21: R8          Corporate information                               HTML     58K 
22: R9          Basis for preparation of the financial statements   HTML    224K 
23: R10         Brumadinho's dam failure                            HTML    100K 
24: R11         Information by business segment and by geographic   HTML    887K 
                          area                                                   
25: R12         Costs and expenses by nature                        HTML    134K 
26: R13         Financial result                                    HTML    112K 
27: R14         Streaming transactions                              HTML     63K 
28: R15         Income taxes                                        HTML    203K 
29: R16         Basic and diluted earnings per share                HTML     94K 
30: R17         Accounts receivable                                 HTML     83K 
31: R18         Inventories                                         HTML     79K 
32: R19         Recoverable taxes                                   HTML     74K 
33: R20         Other financial assets and liabilities              HTML    105K 
34: R21         Non-current assets and liabilities held for sale    HTML    185K 
                          and discontinued operations                            
35: R22         Subsidiaries                                        HTML    178K 
36: R23         Investments in associates and joint ventures        HTML    539K 
37: R24         Noncontrolling interest                             HTML    270K 
38: R25         Intangibles                                         HTML    146K 
39: R26         Property, plant and equipment                       HTML    241K 
40: R27         Impairment and onerous contracts                    HTML    115K 
41: R28         Loans, borrowings and cash and cash equivalents     HTML    131K 
42: R29         Liabilities related to associates and joint         HTML    104K 
                          ventures                                               
43: R30         Financial instruments classification                HTML    545K 
44: R31         Fair value estimate                                 HTML    169K 
45: R32         Derivative financial instruments                    HTML    315K 
46: R33         Provisions                                          HTML     89K 
47: R34         Asset retirement obligations                        HTML     98K 
48: R35         Litigation                                          HTML    161K 
49: R36         Employee Benefits                                   HTML    991K 
50: R37         Stockholders' equity                                HTML    270K 
51: R38         Related parties                                     HTML    260K 
52: R39         Commitments                                         HTML     85K 
53: R40         Risk management                                     HTML     75K 
54: R41         Additional information about derivatives financial  HTML   1.75M 
                          instruments                                            
55: R42         Basis for preparation of the financial statements   HTML    298K 
                          (Policies)                                             
56: R43         Basis for preparation of the financial statements   HTML    195K 
                          (Tables)                                               
57: R44         Brumadinho's dam failure (Tables)                   HTML     70K 
58: R45         Information by business segment and by geographic   HTML    884K 
                          area (Tables)                                          
59: R46         Costs and expenses by nature (Tables)               HTML    137K 
60: R47         Financial result (Tables)                           HTML    109K 
61: R48         Income taxes (Tables)                               HTML    200K 
62: R49         Basic and diluted earnings per share (Tables)       HTML     93K 
63: R50         Accounts receivable (Tables)                        HTML     95K 
64: R51         Inventories (Tables)                                HTML     79K 
65: R52         Recoverable taxes (Tables)                          HTML     74K 
66: R53         Other Financial Assets And Liabilities (Tables)     HTML    103K 
67: R54         Non-current assets and liabilities held for sale    HTML    181K 
                          and discontinued operations (Tables)                   
68: R55         Subsidiaries (Tables)                               HTML    174K 
69: R56         Investments in associates and joint ventures        HTML    534K 
                          (Tables)                                               
70: R57         Noncontrolling interest (Tables)                    HTML    268K 
71: R58         Intangibles (Tables)                                HTML    145K 
72: R59         Property, plant and equipment (Tables)              HTML    235K 
73: R60         Impairment and onerous contracts (Tables)           HTML    102K 
74: R61         Loans, borrowings and cash and cash equivalents     HTML    130K 
                          (Tables)                                               
75: R62         Liabilities related to associates and joint         HTML    215K 
                          ventures (Tables)                                      
76: R63         Financial instruments classification (Tables)       HTML    543K 
77: R64         Fair value estimate (Tables)                        HTML    163K 
78: R65         Derivative financial instruments (Tables)           HTML    314K 
79: R66         Provisions (Tables)                                 HTML     89K 
80: R67         Asset retirement obligations (Tables)               HTML     95K 
81: R68         Litigation (Tables)                                 HTML    150K 
82: R69         Employee Benefits (Tables)                          HTML    987K 
83: R70         Stockholders' equity (Tables)                       HTML    264K 
84: R71         Related parties (Tables)                            HTML    259K 
85: R72         Commitments (Tables)                                HTML     81K 
86: R73         Additional information about derivatives financial  HTML   1.76M 
                          instruments (Tables)                                   
87: R74         Basis for preparation of the financial statements   HTML     61K 
                          - Presentation currency (Details)                      
88: R75         Basis for preparation of the financial statements   HTML    105K 
                          - IFRS 9 Financial Instrument (Details)                
89: R76         Basis for preparation of the financial statements   HTML     73K 
                          - IFRS 16 Lease (Details)                              
90: R77         Brumadinho's dam failure (Details)                  HTML     64K 
91: R78         Brumadinho's dam failure - Operation stoppages and  HTML     64K 
                          de-characterization of the upstream dams               
                          (Details)                                              
92: R79         Brumadinho's dam failure - Assets write-offs        HTML     58K 
                          (Details)                                              
93: R80         Brumadinho's dam failure - Framework Agreements     HTML     73K 
                          (Details)                                              
94: R81         Brumadinho's dam failure - Donations and other      HTML     83K 
                          incurred expenses (Details)                            
95: R82         Brumadinho's dam failure - Contingencies and other  HTML     98K 
                          legal matters (Details)                                
96: R83         Information by business segment and by geographic   HTML    144K 
                          area - Adjusted EBITDA (Details)                       
97: R84         Information by business segment and by geographic   HTML     86K 
                          area - Adjusted EBITDA reconciled to net               
                          income (Details)                                       
98: R85         Information by business segment and by geographic   HTML     62K 
                          area - Special events occurred during                  
                          the year (Details)                                     
99: R86         Information by business segment and by geographic   HTML     92K 
                          area - Assets (Details)                                
100: R87         Information by business segment and by geographic   HTML     95K  
                          area - Investments in associates and                   
                          joint ventures, intangibles and                        
                          property, plant and equipment by                       
                          geographic area (Details)                              
101: R88         Information by business segment and by geographic   HTML    121K  
                          area - Revenue (Details)                               
102: R89         Information by business segment and by geographic   HTML     67K  
                          area - Commodity price risk (Details)                  
103: R90         Costs and expenses by nature - Cost of goods sold   HTML     79K  
                          and services (Details)                                 
104: R91         Costs and expenses by nature - Selling and          HTML     64K  
                          administrative (Details)                               
105: R92         Costs and expenses by nature - Other (Details)      HTML     64K  
106: R93         Financial result (Details)                          HTML     87K  
107: R94         Streaming transactions - (Details)                  HTML     93K  
108: R95         Income taxes -Deferred tax assets and liabilities   HTML     75K  
                          (Details)                                              
109: R96         Income taxes -Assets and liabilities (Details)      HTML     60K  
110: R97         Income taxes - Changes in deferred tax (Details)    HTML    118K  
111: R98         Income taxes - Income tax reconciliation (Details)  HTML     81K  
112: R99         Income taxes - Tax incentives (Details)             HTML     59K  
113: R100        Income taxes - Settlement program (Details)         HTML     63K  
114: R101        Basic and diluted earnings per share (Details)      HTML     78K  
115: R102        Accounts receivable (Details)                       HTML     69K  
116: R103        Inventories (Details)                               HTML     66K  
117: R104        Recoverable taxes (Details)                         HTML     64K  
118: R105        Other financial assets and liabilities (Details)    HTML     98K  
119: R106        Non-current assets and liabilities held for sale    HTML     92K  
                          and discontinued operations (Details)                  
120: R107        Non-current assets and liabilities held for sale    HTML     84K  
                          and discontinued operations - Sale of                  
                          Fertilizers assets (Details)                           
121: R108        Non-current assets and liabilities held for sale    HTML     88K  
                          and discontinued operations - Results of               
                          discontinued operations (Details)                      
122: R109        Non-current assets and liabilities held for sale    HTML     95K  
                          and discontinued operations - Cash flows               
                          of discontinued operations (Details)                   
123: R110        Subsidiaries (Details)                              HTML    113K  
124: R111        Investments in associates and joint ventures -      HTML    118K  
                          Ownership and voting capital (Details)                 
125: R112        Investments in associates and joint ventures -      HTML     96K  
                          Changes during the year (Details)                      
126: R113        Investments in associates and joint ventures -      HTML    121K  
                          Acquisitions and divestiture (Details)                 
127: R114        Investments in associates and joint ventures        HTML    152K  
                          -Carrying amount, equity in results and                
                          dividend received (Details)                            
128: R115        Investments in associates and joint ventures -      HTML    113K  
                          Financial information (Details)                        
129: R116        Noncontrolling interest - Financial information     HTML    131K  
                          (Details)                                              
130: R117        Intangibles - Changes in Intangibles (Details)      HTML     99K  
131: R118        Intangibles - Estimated useful lives (Details)      HTML     65K  
132: R119        Property, plant and equipment - Changes (Details)   HTML    127K  
133: R120        Property, plant and equipment - Disposal of assets  HTML     68K  
                          (Details)                                              
134: R121        Property, plant and equipment - Estimated useful    HTML     80K  
                          lives (Details)                                        
135: R122        Impairment and onerous contracts (Details)          HTML    104K  
136: R123        Loans, borrowings and cash and cash equivalents -   HTML     56K  
                          Loans and borrowings (Details)                         
137: R124        Loans, borrowings and cash and cash equivalents -   HTML     74K  
                          Total debt (Details)                                   
138: R125        Loans, borrowings and cash and cash equivalents -   HTML     71K  
                          Debt payments (Details)                                
139: R126        Loans, borrowings and cash and cash equivalents -   HTML     87K  
                          Reconciliation of debt to cash flows                   
                          arising from financing activities                      
                          (Details)                                              
140: R127        Loans, borrowings and cash and cash equivalents -   HTML     56K  
                          Policy (Details)                                       
141: R128        Loans, borrowings and cash and cash equivalents -   HTML     59K  
                          Liquidity risk (Details)                               
142: R129        Liabilities related to associates and joint         HTML     66K  
                          ventures - Framework agreement (Details)               
143: R130        Liabilities related to associates and joint         HTML     81K  
                          ventures - Movements of provision                      
                          (Details)                                              
144: R131        Liabilities related to associates and joint         HTML     89K  
                          ventures - Samarco financial information               
                          (Details)                                              
145: R132        Financial instruments classification (Details)      HTML    143K  
146: R133        Financial instruments classification -              HTML    171K  
                          Classification of financial assets and                 
                          liabilities by currencies (Details)                    
147: R134        Fair value estimate - Assets and liabilities        HTML    107K  
                          measured and recognized at fair value                  
                          (Details)                                              
148: R135        Fair value estimate - Changes in assets and         HTML     72K  
                          liabilities (Details)                                  
149: R136        Fair value estimate - Fair value of financial       HTML     68K  
                          instruments not measured at fair value                 
                          (Details)                                              
150: R137        Derivative financial instruments - Effects of       HTML     93K  
                          derivatives on statement of financial                  
                          position (Details)                                     
151: R138        Derivative financial instruments - Effects of       HTML     95K  
                          derivatives on the income statement,                   
                          cash flow and other comprehensive income               
                          (Details)                                              
152: R139        Derivative financial instruments - Hedge in         HTML     65K  
                          foreign operations (Details)                           
153: R140        Provisions (Details)                                HTML     74K  
154: R141        Asset retirement obligations - (Details)            HTML     77K  
155: R142        Asset retirement obligations - Changes in           HTML     64K  
                          long-term interest rates (Details)                     
156: R143        Litigation (Details)                                HTML     89K  
157: R144        Litigation - Contingent liabilities (Details)       HTML     66K  
158: R145        Litigation - Judicial deposits (Details)            HTML     68K  
159: R146        Litigation - Contingencies related to Samarco       HTML     67K  
                          accident (Details)                                     
160: R147        Litigation - Contingencies assets (Details)         HTML     59K  
161: R148        Employee Benefits - Change in benefit obligation    HTML     86K  
                          (Details)                                              
162: R149        Employee Benefits - Evolution of assets fair value  HTML     84K  
                          (Details)                                              
163: R150        Employee benefits - Reconciliation of assets and    HTML    121K  
                          liabilities recognized in the statement                
                          of financial position (Details)                        
164: R151        Employee benefits - Costs recognized in the income  HTML     71K  
                          statement (Details)                                    
165: R152        Employee benefits - Costs recognized in the         HTML     91K  
                          statement of comprehensive income                      
                          (Details)                                              
166: R153        Employee benefits - Actuarial and economic          HTML    116K  
                          assumptions and sensitivity analysis                   
                          (Details)                                              
167: R154        Employee benefits - Assets of pension plans         HTML     64K  
                          (Details)                                              
168: R155        Employee benefits - Overfunded pension plans -      HTML    102K  
                          Assets by category (Details)                           
169: R156        Employee benefits - Overfunded pension plans -      HTML     84K  
                          Measurement of assets at fair value                    
                          (Details)                                              
170: R157        Employee benefits - Underfunded pension plans -     HTML    103K  
                          Assets by category (Details)                           
171: R158        Employee benefits - Underfunded pension plans,      HTML     81K  
                          Measurement of plan assets at fair value               
                          (Details)                                              
172: R159        Employee benefits - Expected benefit payments       HTML     85K  
                          (Details)                                              
173: R160        Employee benefits - Profit sharing program ("Plr")  HTML     56K  
                          (Details)                                              
174: R161        Employee benefits - Long-term compensation plan     HTML     69K  
                          (Details)                                              
175: R162        Stockholders' equity - Share capital (Details)      HTML    108K  
176: R163        Stockholders' equity - Share buyback program        HTML     62K  
                          (Details)                                              
177: R164        Stockholders' equity - Remuneration to the          HTML     84K  
                          Company's stockholders (Details)                       
178: R165        Stockholders' equity - Profit reserves (Details)    HTML     86K  
179: R166        Stockholders' equity - Unrealized fair value gain   HTML     76K  
                          (Losses) (Details)                                     
180: R167        Stockholders' equity - Conversion preferred shares  HTML     60K  
                          (Details)                                              
181: R168        Stockholders' equity - Merger of Valepar S.A        HTML     91K  
                          (Details)                                              
182: R169        Stockholders' equity - Share position (Details)     HTML     81K  
183: R170        Stockholders' equity - Shareholders' Agreement      HTML     58K  
                          (Details)                                              
184: R171        Related parties (Details)                           HTML     98K  
185: R172        Related parties - Coal segment transactions         HTML     69K  
                          (Details)                                              
186: R173        Related parties - Key management personnel          HTML     70K  
                          remuneration (Details)                                 
187: R174        Commitments - Contractual obligations (Details)     HTML     79K  
188: R175        Commitments - Guarantees provided (Details)         HTML     63K  
189: R176        Commitments - Nickel Operations (Details)           HTML     58K  
190: R177        Additional information about derivatives financial  HTML    134K  
                          instruments - Protection programs for                  
                          the R$ denominated debt instruments                    
                          (Details)                                              
191: R178        Additional information about derivatives financial  HTML     82K  
                          instruments - Protection program for EUR               
                          denominated debt instruments (Details)                 
192: R179        Additional information about derivatives financial  HTML     79K  
                          instruments - Bunker Oil purchase cash                 
                          flows protection program (Details)                     
193: R180        Additional information about derivatives financial  HTML     84K  
                          instruments - Protection programs for                  
                          base metals raw materials and products                 
                          (Details)                                              
194: R181        Additional information about derivatives financial  HTML     66K  
                          instruments - Freight derivative                       
                          positions (Details)                                    
195: R182        Additional information about derivatives financial  HTML     69K  
                          instruments - Wheaton Precious Metals                  
                          Corp. warrants (Details)                               
196: R183        Additional information about derivatives financial  HTML     69K  
                          instruments - Debentures convertible                   
                          into shares of Valor da Logstica                       
                          Integrada (Details)                                    
197: R184        Additional information about derivatives financial  HTML     69K  
                          instruments - Options related to MBR                   
                          shares (Details)                                       
198: R185        Additional information about derivatives financial  HTML     93K  
                          instruments - Embedded derivatives in                  
                          contracts (Details)                                    
199: R186        Additional information about derivatives financial  HTML    239K  
                          instruments - Sensitivity analysis of                  
                          derivative financial instruments                       
                          (Details)                                              
200: R187        Additional information about derivatives financial  HTML    143K  
                          instruments - Market curves, Products                  
                          (Details)                                              
201: R188        Additional information about derivatives financial  HTML    270K  
                          instruments - Market curves, Interest                  
                          rates (Details)                                        
202: R189        Additional information about derivatives financial  HTML     57K  
                          instruments - Currency ending rates                    
                          (Details)                                              
204: XML         IDEA XML File -- Filing Summary                      XML    404K  
203: EXCEL       IDEA Workbook of Financial Reports                  XLSX    293K  
 8: EX-101.INS  XBRL Instance -- vale-20181231                       XML  20.74M 
10: EX-101.CAL  XBRL Calculations -- vale-20181231_cal               XML    488K 
11: EX-101.DEF  XBRL Definitions -- vale-20181231_def                XML   2.38M 
12: EX-101.LAB  XBRL Labels -- vale-20181231_lab                     XML   4.09M 
13: EX-101.PRE  XBRL Presentations -- vale-20181231_pre              XML   3.38M 
 9: EX-101.SCH  XBRL Schema -- vale-20181231                         XSD    806K 
205: ZIP         XBRL Zipped Folder -- 0001047469-19-002391-xbrl      Zip    753K  


20-F   —   Annual Report by a Foreign Private Issuer
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Form 20-F cross-reference guide
"I. Overview
"Business overview
"Selected financial data
"Forward-looking statements
"Risk factors
"II. Information on the company
"Lines of business
"1. Ferrous minerals
"2. Base metals
"3. Coal
"4. Infrastructure
"5. Other investments
"Reserves
"Capital expenditures
"Regulatory matters
"III. Operating and financial review and prospects
"Overview
"Results of operations
"Liquidity and capital resources
"110
"Contractual obligations
"113
"Off-balance sheet arrangements
"114
"Critical accounting policies and estimates
"115
"Risk management
"119
"IV. Share ownership and trading
"123
"Major shareholders
"Related party transactions
"126
"Distributions
"128
"Trading markets
"129
"Depositary shares
"130
"Purchases of equity securities by the issuer and affiliated purchasers
"132
"V. Management and employees
"133
"Management
"Management compensation
"146
"Employees
"149
"VI. Additional information
"151
"Legal Proceedings
"Memorandum and articles of association
"163
"Shareholder debentures
"170
"Exchange controls and other limitations affecting security holders
"171
"Taxation
"173
"Evaluation of disclosure controls and procedures
"181
"Management's report on internal control over financial reporting
"Corporate governance
"182
"Code of ethical conduct
"186
"Principal accountant fees and services
"187
"Change in registrant's certifying accountant
"188
"Information filed with securities regulators
"189
"Exhibits
"190
"Glossary
"191
"Signatures
"195
"Vale S.A. Financial Statements
"Report of Independent Registered Public Accounting Firm
"F-3
"F-6
"Consolidated Income Statement
"F-7
"Consolidated Statement of Comprehensive Income
"F-8
"Consolidated Statement of Cash Flows
"F-9
"Consolidated Statement of Financial Position
"F-10
"Consolidated Statement of Changes in Equity
"F-11
"Notes to the Financial Statements
"F-13
"Corporate information
"Basis for preparation of the financial statements
"Brumadinho's dam failure
"F-18
"Information by business segment and by geographic area
"F-25
"Costs and expenses by nature
"F-33
"Financial results
"F-34
"Streaming transactions
"F-35
"Income taxes
"F-36
"Basic and diluted earnings (loss) per share
"F-40
"10
"Accounts receivable
"11
"Inventories
"F-41
"12
"Recoverable taxes
"F-42
"13
"Other financial assets and liabilities
"14
"Non-current assets and liabilities held for sale and discontinued operations
"F-43
"15
"Subsidiaries
"F-46
"16
"Investments in associates and joint ventures
"F-47
"17
"Noncontrolling interest
"F-53
"18
"Intangibles
"F-54
"19
"Property, plant and equipment
"F-56
"20
"Impairment and onerous contracts
"F-58
"21
"Loans, borrowings and cash and cash equivalents
"F-61
"22
"Liabilities related to associates and joint ventures
"F-64
"23
"Financial instruments classification
"F-66
"24
"Fair value estimate
"F-69
"25
"Derivative financial instruments
"F-72
"26
"Provisions
"F-75
"27
"Asset retirement obligations
"F-76
"28
"Litigation
"F-77
"29
"Employee benefits
"F-80
"30
"Stockholders' equity
"F-91
"31
"Related parties
"F-96
"32
"Commitments
"F-99
"33
"F-100
"34
"Additional information about derivatives financial instruments
"F-104

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TABLE OF CONTENTS
Vale S.A. Financial Statements

Table of Contents

As filed with the Securities and Exchange Commission on April 18, 2019

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2018
Commission file number: 001-15030

VALE S.A.
(Exact name of Registrant as specified in its charter)

Federative Republic of Brazil
(Jurisdiction of incorporation or organization)

Luciano Siani Pires, Chief Financial Officer
phone: +55 21 3485 5000

Praia de Botafogo 186 – offices 701 – 1901 – Botafogo
22250-145 Rio de Janeiro, RJ, Brazil

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on
Which Registered

Common shares of Vale, no par value per share

New York Stock Exchange*

American Depositary Shares (evidenced by American Depositary Receipts), each representing one common share of Vale

New York Stock Exchange

5.875% Guaranteed Notes due 2021, issued by Vale Overseas

New York Stock Exchange

4.375% Guaranteed Notes due 2022, issued by Vale Overseas

New York Stock Exchange

6.250% Guaranteed Notes due 2026, issued by Vale Overseas

New York Stock Exchange

8.250% Guaranteed Notes due 2034, issued by Vale Overseas

New York Stock Exchange

6.875% Guaranteed Notes due 2036, issued by Vale Overseas

New York Stock Exchange

6.875% Guaranteed Notes due 2039, issued by Vale Overseas

New York Stock Exchange

5.625% Notes due 2042, issued by Vale S.A.

New York Stock Exchange

*
Shares are not listed for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
The number of outstanding shares of each class of stock of Vale as of December 31, 2018 was:
5,126,258,410 common shares, no par value per share
12 golden shares, no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ    No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o    No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes þ    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ                                       Accelerated filer o                                       Non-accelerated filer o                                        Emerging growth company o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o      International Financial Reporting Standards as issued by the International Accounting Standards Board þOther o
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o    Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No þ

 C: 

Table of Contents

TABLE OF CONTENTS

Page

Form 20-F cross-reference guide ii

I.       Overview


1

Business overview

2

Selected financial data

16

Forward-looking statements

18

Risk factors

19

II.      Information on the company


37

Lines of business

37

1.      Ferrous minerals

39

2.      Base metals

49

3.      Coal

61

4.      Infrastructure

63

5.      Other investments

70

Reserves

72

Capital expenditures

81

Regulatory matters

83

III.     Operating and financial review and prospects


88

Overview

88

Results of operations

96

Liquidity and capital resources

110

Contractual obligations

113

Off-balance sheet arrangements

114

Critical accounting policies and estimates

115

Risk management

119

IV.     Share ownership and trading


123

Major shareholders

123

Related party transactions

126

Distributions

128

Trading markets

129

Depositary shares

130

Purchases of equity securities by the issuer and affiliated purchasers

132

V.      Management and employees


133

Management

133

Management compensation

146

Employees

149

VI.    Additional information


151

Legal Proceedings

151

Memorandum and articles of association

163

Shareholder debentures

170

Exchange controls and other limitations affecting security holders

171

Taxation

173

Evaluation of disclosure controls and procedures

181

Management's report on internal control over financial reporting

181

Corporate governance

182

Code of ethical conduct

186

Principal accountant fees and services

187

Change in registrant's certifying accountant

188

Information filed with securities regulators

189

Exhibits

190

Glossary

191

Signatures

195

i


Table of Contents

FORM 20-F CROSS-REFERENCE GUIDE

Item
Form 20-F caption
Location in this report
Page

1

Identity of directors, senior management and advisers

Not applicable

2

Offer statistics and expected timetable

Not applicable

3

Key information

   

3A Selected financial data

Selected financial data

16

3B Capitalization and indebtedness

Not applicable

3C Reasons for the offer and use of proceeds

Not applicable

3D Risk factors

Risk factors

19

4

Information on the Company

   

4A History and development of the company

Business overview, Capital expenditures; Information filed with securities regulators,

1, 81, 189

4B Business overview

Business overview, Lines of business, Reserves, Regulatory matters

1, 37, 72, 83

4C Organizational structure

Exhibit 8

4D Property, plant and equipment

Lines of business, Capital expenditures, Regulatory matters

37, 81, 83

4A

Unresolved staff comments

None

5

Operating and financial review and prospects

   

5A Operating results

Results of operations

96

5B Liquidity and capital resources

Liquidity and capital resources

110

5C Research and development, patents and licenses, etc.

Capital expenditures

81

5D Trend information

Results of operations

96

5E Off-balance sheet arrangements

Off-balance sheet arrangements

114

 

Critical accounting policies and estimates

115

5F Tabular disclosure of contractual obligations

Contractual obligations

113

5G Safe harbor

Forward-looking statements

18

6

Directors, senior management and employees

 

6A Directors and senior management

Management

133

6B Compensation

Management compensation

146

6C Board practices

Management—Board of directors

133

6D Employees

Employees

149

6E Share ownership

Major shareholders, Employees—Performance-based compensation

123, 150

7

Major shareholders and related party transactions

   

7A Major shareholders

Major shareholders

123

7B Related party transactions

Related party transactions

126

7C Interests of experts and counsel

Not applicable

8

Financial information

   

8A Consolidated statements and other financial information

Financial statements

F-1

 

Distributions

130

 

Legal proceedings

151

8B Significant changes

Not applicable

9

The offer and listing

   

9A Offer and listing details

Not applicable

9B Plan of distribution

Not applicable

9C Markets

Trading markets

129

9D Selling shareholders                                                     

Not applicable

9E Dilution

Not applicable

9F Expenses of the issue

Not applicable

ii


Table of Contents

Form 20-F cross-reference guide

Item
Form 20-F caption
Location in this report
Page

10

Additional information

   

10A Share capital

Memorandum and articles of association—Common shares and golden shares

163

10B Memorandum and articles of association

Memorandum and articles of association

163

10C Material contracts

Lines of business, Results of operations, Related party transactions

37, 96, 126

10D Exchange controls

Exchange controls and other limitations affecting security holders

171

10E Taxation

Taxation

173

10F Dividends and paying agents

Not applicable

10G Statement by experts

Reserves

72

10H Documents on display

Information filed with securities regulators

189

10I Subsidiary information

Not applicable

11

Quantitative and qualitative disclosures about market risk

Risk management

119

12

Description of securities other than equity securities

   

12A Debt securities

Not applicable

12B Warrants and rights

Not applicable

12C Other securities

Not applicable

12D American Depositary Shares

Depositary shares

130

13

Defaults, dividend arrearages and delinquencies

Not applicable

14

Material modifications to the rights of security holders and use of proceeds

Not applicable

15

Controls and procedures

Evaluation of disclosure controls and procedures

181

 

Management's report on internal control over financial reporting

181

16A

Audit Committee financial expert

Management—Fiscal Council

142

16B

Code of ethics

Code of ethical conduct

186

16C

Principal accountant fees and services

Principal accountant fees and services

187

16D

Exemptions from the listing standards for audit committees

Management—Fiscal Council; Corporate governance

142, 182

16E

Purchase of equity securities by the issuer and affiliated purchasers

Purchases of equity securities by the issuer and affiliated purchasers

132

16F

Change in registrant's certifying accountant

Change in registrant's certifying accountant

188

16G

Corporate governance

Corporate governance

182

16H

Mine safety disclosure

Not applicable

17

Financial statements

Not applicable

18

Financial statements

Financial statements

F-1

19

Exhibits

Exhibits

190

iii


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I.  OVERVIEW

We are one of the largest metals and mining companies in the world, based on market capitalization. We are the world's largest producer of iron ore and iron ore pellets and the world's largest producer of nickel. We also produce manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals (PGMs), gold, silver and cobalt. We are presently engaged in greenfield mineral exploration in five countries. We operate large logistics systems in Brazil and other regions of the world, including railroads, maritime terminals and ports, which are integrated with our mining operations. In addition, we have a distribution center to support the delivery of iron ore worldwide. Directly and through affiliates and joint ventures, we also have investments in energy and steel businesses.

In this report, references to "Vale" are to Vale S.A. References to "we," "us" or the "Company" are to Vale and, except where the context otherwise requires, its consolidated subsidiaries. References to our "ADSs" or "American Depositary Shares" are to our common American Depositary Shares (our "common ADSs"), each of which represents one common share of Vale. American Depositary Shares are represented by American Depositary Receipts ("ADRs") issued by the depositary.

Vale S.A. is a stock corporation, or sociedade por ações, that was organized on January 11, 1943 under the laws of the Federative Republic of Brazil for an unlimited period of time. Its head office is located at Praia de Botafogo 186 – offices 701-1901 – Botafogo, 22250-145 Rio de Janeiro, RJ, Brazil, and its telephone number is 55-21-3485-5000.

Unless otherwise specified, we use metric units. References to "real," "reais" or "R$" are to the official currency of Brazil, the real (singular) or reais (plural). References to "U.S. dollars" or "US$" are to United States dollars. References to "€" are to Euros.

    

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BUSINESS OVERVIEW

FAILURE OF THE TAILINGS DAM AT THE CÓRREGO DO FEIJÃO MINE

On January 25, 2019, a tailings dam ("Dam I") failed at our Córrego do Feijão mine, in the city of Brumadinho, state of Minas Gerais. The failure released a flow of tailings debris, which affected our administrative area at the Córrego do Feijão mine and parts of the communities of Córrego do Feijão and Parque da Cachoeira outside of Brumadinho, reaching the nearby Paraopeba River. The dam failure resulted in nearly 300 fatalities or presumed fatalities, and also caused extensive property and environmental damage in the region. Our priority now is to provide support to those affected by the dam failure.

The causes of the accident are still uncertain and are being investigated by us and by several governmental authorities. We are providing our full cooperation to the authorities and to the investigations into the dam failure.

Dam I

The Córrego do Feijão mine is part of the Paraopeba complex, in the Southern System. Dam I was first built in 1976 by Ferteco Mineração, a company we acquired in 2001. Dam I received disposed tailings from the Córrego do Feijão and Jangada mines from 1976 until it became inactive in 2016. Dam I contained approximately 11.7 million cubic meters of iron ore tailings.

The dam was raised by building successive layers (lifts) above the tailings accumulated in the reservoir, a technique known as the "upstream" method. There are two other raising methods, the "downstream" method and the "centerline" method, in which the dam is raised by placing new layers away from the initial dam or on top of it, as opposed to over the accumulated tailings. Each of these methods presents a different risk profile.

Dam VI, another dam located at the Córrego do Feijão mine, was impacted by the tailings debris flow from the failure of Dam I. Due to the ongoing investigation into potential damages from the impact of the tailings debris, it has not received the certification of stability (Stability Condition Statement, or "DCE") required by the rules of the national mining agency, the ANM (Agência Nacional de Mineração). Dam VI is being continuously monitored.

The Jangada mine, also located in the Paraopeba complex, was not affected by the tailings debris flow, but its operations were suspended because of the closure of Feijão processing plant, which processed the run-of-mine of the Jangada mine.

Vale's response

Our senior management has been focused on emergency and long-term initiatives, with three main purposes: (i) providing assistance to victims and remediation of the affected area, (ii) determining the causes of the failure of Dam I, and (iii) preventing further accidents through improved standards and accelerated decommissioning of upstream dams.

Immediately following the failure of Dam I, we contacted the local authorities and activated our Emergency Mining Dam Response Plan (Plano de Ação de Emergência de Barragens de Mineração (PAEBM)) to rescue and provide immediate humanitarian assistance to affected parties, including employees and members of the community. We also mobilized our teams to monitor the Paraopeba River basin, rescue wildlife and domestic animals and support sanitation measures. We mobilized over 400

    

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doctors, nurses, psychologists, social workers and volunteers to set up assistance centers for those affected. These assistance centers provided humanitarian aid, including medical, psychological and social assistance, distributed basic emergency items, including pharmaceuticals, food, potable water and clothing, and provided duplicate records (such as identification cards, marriage certificates, and birth certificates) to those who lost their homes. We also provided 40 ambulances, a support helicopter, shopping vouchers for clothing, accommodation and transportation for over 800 people.

On January 31, 2019, we presented an emergency plan to the Minas Gerais Public Prosecutor's Office, and to the state and federal environmental agencies, including containment, retention, remediation and recovery actions. The plan contemplates removing debris, installing hydraulic barriers and small dams to assist in the tailings control process, establishing water treatment stations, restoring roads and installing membrane barriers downstream to contain ultrafine sediments and protect the water system on the Paraopeba River basin.

On February 6, 2019, we entered into an agreement with various governmental authorities undertaking to gradually replace our professionals who had been providing assistance to the populations affected since the dam failure, with a team to join the health and social service teams of the city of Brumadinho. We will bear for at least six months the costs of employing 142 professionals, including doctors, nurses, psychologists, physical therapists, occupational therapists, social workers and endemic disease control agents, in addition to administrative and operational professionals, as well as logistics costs incurred by these teams.

We have donated resources to the Municipality of Brumadinho, the fire department of Minas Gerais and other entities that provided assistance to the affected parties. For those affected by the dam failure, we established a three-tiered financial assistance program, under which, we have made donations to more than 440 people. We are also providing funeral assistance and contributing to funeral expenses for each affected family. These donations are without prejudice to any right that any person affected by the dam failure may have to claim damages against us.

We are investigating the causes of the failure of Dam I. We engaged a legal advisor and technical experts to conduct an investigation into the causes of the failure of the dam. In addition, our Board of Directors established the Independent Ad Hoc Consulting Committee for Investigation (CIAEA), an independent committee to investigate and advise the Board of Directors in connection with the determination of the causes of the dam failure.

On January 29, 2019, we decided to accelerate our existing plan to decommission our tailings dams built using the upstream method. "Decommissioning" or "decharacterization" means reintegrating the dam and its contents into the local environment, so that the structure is effectively no longer a dam. We will determine the appropriate actions to decommission each dam safely, in accordance with the geotechnical and geographic conditions of each dam. For certain of our upstream dams, we will first convert the dam into a downstream or centerline dam and conclude the decommissioning subsequently. Some of our existing downstream or centerline dams contain smaller dikes or structures that were built using the upstream technique, and we are also planning to remove these upstream dikes or structures. At this point, we cannot predict the costs and timing for decommissioning our upstream tailings dams.

We have been taking steps to decommission upstream dams since late 2015, in response to the failure of Samarco's Fundão dam. In February 2019, we announced our plan to accelerate this process and our

    

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decision to temporarily suspend our operations at mines and concentration plants located in areas where upstream dams are located. Also, based on our initial assessments, we determined that certain dams would not meet the requirements of new safety requirements imposed by ANM, and evacuated certain areas and relocated the population located within the Self-Rescue Zone of these dams. We expect to resume production at these mines and concentration plants in the future.

Independent Committees

Our Board of Directors has created three independent ad hoc advisory committees to support the Board in matters relating to the dam failure. All of these committees are composed of external and independent members appointed by our Board of Directors. These committees are described below.

Impacts of the failure of Dam I on Vale

The impacts of the dam failure on our operations and results of operations will be very significant, but their full scale and scope remains uncertain. Some of major impacts are described below.

Various Brazilian courts have ordered freezes, attachments, deposits and similar measures affecting an aggregate of R$17.6 billion (US$4.5 billion) of our financial assets, including balances in our bank accounts and judicial deposits to secure the payment of damages resulting from the dam failure. This total amount also includes common shares that we hold in treasury and that have been attached. We are also subject to a number of other proceedings and investigations related to the dam failure, which may result in additional attachment of assets and seizure of balances in our bank accounts.

Our potential legal liabilities resulting from the dam failure are significant, and we cannot estimate the total amount at this time. We are already the subject of several investigations and legal proceedings relating to the failure of Dam I, and we expect to face other investigations and proceedings. For additional information regarding the legal proceedings relating to the failure of Dam I, see Additional Information—Legal proceedings. We will continue to cooperate fully with the authorities and to support the investigations into the dam failure. We will also contest any actions that we believe are unjustified.

    

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The proceedings are all in very early stages, and we cannot reasonably estimate the size of potential losses or settlements or the timing for decisions. We estimate that we will recognize provisions in our financial statements for the first quarter of 2019 in the amount of R$850 million (US$220 million) in connection with an ongoing public civil action brought by labor prosecutors and provisions ranging from R$1.0 billion to R$2.0 billion (US$260 million to US$520 million) in connection with our preliminary agreement with the State of Minas Gerais and other authorities. Our potential liabilities resulting from the dam failure are significant, and additional provisions are expected.

Following the dam failure, we have suspended various operations, either voluntarily or as a result of revocation of licenses or court orders. As of April 15, 2019, the estimated impact of the suspension of operations following the dam failure on our production is 92.8 million metric tons per year (including the estimated annual impact of the suspension of the Brucutu mine). Additional operations may be suspended as a result of new laws and regulations relating to the use of dams, or our inability to obtain the required licenses or the stability reports required by applicable regulations, as discussed below.

Below is a summary of operations suspended since the date of the dam failure.

Various governmental authorities have approved or proposed new regulations relating to licensing, use and operations of dams in response to the Dam I failure. Additional rules imposing restrictions on mining operations and ancillary activities are expected. Also, new taxes, contributions or other obligations may be imposed on us as a result of the failure of Dam I or its direct or indirect impacts. These rules may affect not only our iron ore operations, but also our base metals operations in Brazil and other operations that rely on dams.

    

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As a result of new regulations, the licensing process for our operations may become longer and more uncertain, and our costs of monitoring and compliance are expected to increase. These additional laws and regulations may impose restrictions on our operations, require additional investments or eventually require us to suspend additional operations.

We will need to rely on alternative methods to continue operating certain of our mines and plants, particularly those that rely on tailings dams. We have studies in progress, and we have developed a pilot project, to apply a waste disposal technology that consists of filtering and stacking of partially or totally dewatered tailings, which will reduce our reliance on tailings dams in the medium and long term. These alternative technologies will cause an increase in our production costs and require additional investments in our mines and plants.

As a result of the dam failure and our decision to accelerate the decommissioning of our upstream tailings dams, we are not in a position to report reserves for the Feijão, Jangada and Capim Branco mines (in the Paraopeba complex).

We are reviewing the impact on our reported reserves of the ongoing investigations and legal proceedings involving the use of dams in our mining operations and of the new rules relating to licensing, use and operations of dams, which were adopted in response to the Dam I failure. These proceedings and regulations may impact our iron ore reserves and reserves for other products for which the production process involves dams. Because alternative methods are available, particularly the dry stockpiling and dry processing technologies, we currently believe that our iron ore reserves will not be materially impacted by these new rules, but we have not concluded our analysis.

Brazilian state and federal authorities are strengthening regulations on dam safety. Many regulations applicable to our mines require us to obtain independent reports and certificates from external experts on the safety and stability of our dams. External experts may be unwilling to provide these reports and certificates as a result of the uncertainties regarding the causes of the Dam I failure, the increasing risk of liability and uncertainties about interpretation of new regulations. If any of our dams is unable to comply

    

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with safety requirements, we may need to evacuate the area surrounding this dam, relocate communities and take other emergency actions.

We expect the failure of Dam I, and the consequences summarized above, to have extensive impact on our financial performance and results of operations. We have not yet determined the nature and amount of all the consequences. See Operating and financial review and prospects—Impact of the failure of Dam I at the Córrego do Feijão Mine. These will include:

    

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We may also need to incur additional debt to pay for assistance and remediation actions.

Temporary leave of executive officers

On March 1, 2019, our Board of Directors received a formal recommendation from the federal and state (Minas Gerais) public prosecution offices, the federal police and the civil police of Minas Gerais that we suspend certain of our employees and executive officers. In response to this recommendation, our CEO, Fabio Schvartsman, and our executive officer for Ferrous Minerals and Coal, Gerd Peter Poppinga, requested temporary leave from their positions. Our Board of Directors approved these requests on March 2, 2019, and appointed Eduardo de Salles Bartolomeo as interim chief executive officer and Claudio de Oliveira Alves as interim executive officer for Ferrous Minerals and Coal. Mark James Travers has been appointed executive officer for Base Metals, subject to obtaining the requisite visa and relocating to Brazil, as required under Brazilian law.

OPERATIONAL SUMMARY

The following table presents the breakdown of total net operating revenues attributable to each of our lines of business with continuing operations.

Year ended December 31,

2016 2017 2018

(US$ million) (% of total) (US$ million) (% of total) (US$ million) (% of total)

Ferrous minerals:

           

Iron ore

15,784 57.4 % 18,524 54.5 % 20,354 55.7 %

Pellets

3,827 13.9 5,653 16.7 6,651 18.2

Ferroalloys and manganese

302 1.1 469 1.4 454 1.2

Other ferrous products and services

438 1.6 483 1.4 474 1.3

Subtotal

20,351 74.0 25,129 74.0 27,933 76.4

Coal

839 3.1 1,567 4.6 1,643 4.5

Base metals:

           

Nickel and other products(1)

4,472 16.3 4,667 13.7 4,610 12.6

Copper(2)

1,667 6.1 2,204 6.5 2,093 5.7

Subtotal

6,139 22.3 6,871 20.2 6,703 18.3

Other(3)

159 0.6 400 1.2 296 0.8

Total net operating revenues from continuing operations

27,488 100 % 33,967 100 % 36,575 100 %

(1)
Includes nickel coproducts (copper) and byproducts (precious metals, cobalt and others).
(2)
Does not include copper produced in our nickel operations.
(3)
Includes energy.

Ferrous minerals:

    

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Base metals:

Coal:

Logistics infrastructure:

    

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BUSINESS STRATEGY

The year of 2019 has been a very challenging year for us. We know that there is much to be done to address the effects of the failure of the tailings dam at the Córrego do Feijão mine. We are committed to remediating the damages caused to the city of Brumadinho and the surrounding communities. We will manage the liabilities arising from this deeply regretted event, and we are committed to learning and sharing the lessons from the dam failure. With this purpose, we are dedicated to:

Below are the highlights of our major business strategies.

Keeping our people and communities safe and restoring trust from our stakeholders

We are fully committed in addressing the effects of the failure of Dam I at the Feijão mine, with three key initiatives: (i) assistance to victims and recovery of the area affected by the rupture of the dam, (ii) determination of the causes of the dam failure, and (iii) prevention of further accidents through adoption of the highest standards and accelerated decommissioning of all upstream dams. See Business overviewFailure of the tailings dam at the Córrego do Feijão mine. We continue making every effort to provide relief and support to those affected by the dam failure and to restore the trust of our stakeholders on us. We are committed to rebuilding our reputation in Brazil and in the global mining industry.

Capital discipline

We reiterate our strong commitment to a sound balance sheet. In 2018, we completed our deleveraging process and achieved our net debt target of US$10 billion. We will allocate capital in a disciplined way, which will be key to enable us to address the effects of Dam I failure. In January 2019, our Board of Directors approved the suspension of our shareholder remuneration policy, so that no payment of dividends or interest on shareholders' equity will be made pursuant to this policy in excess of mandatory payments required by law, and we will not approve any share buyback for the time being.

Maintaining our value over volume approach for the iron ore business

In the iron ore business, we are committed to delivering the highest possible margins under the current circumstances, by managing our extensive supply chain and flexible product portfolio to cope with production constraints in the short-term. We will constantly seek better price realization, based on adjustments to our product portfolio according to market demand and supply chain optimization. We are focusing our product line to capture industry trends, improving quality and productivity, controlling costs, strengthening our logistics infrastructure of railroads, ports, shipping and distribution centers, and

    

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strengthening relationships with customers. Our diversified portfolio of high-quality products, strong technical marketing strategy, efficient logistics and long-standing relationships with major customers will help us overcome the immediate challenges and achieve this goal.

With the continuous increase of the share of dry processing production, from 45% in 2014 to 60% in 2018, and aimed at 70% by 2023, our reliance on new dams and dam raisings tend to reduce. To treat the tailings from wet processing, we are investing in studies and new technologies with a view to allowing us to operate certain of our mines and plants without having to rely on the use of tailings dams. In particular, we have studies in progress, and we have developed a pilot project, to apply a waste disposal technology that consists of filtering and stacking of partially or totally dewatered tailings, which will reduce our reliance on tailings dams in the medium and long term. These alternative technologies will cause an increase in our production costs and require additional investments in our mines and plants. In line with this goal, we acquired New Steel in January 2019, bringing innovative technologies for the dry beneficiation of iron ore.

We will continue to promote the Brazilian blend fines (BRBF), a product standard with silica (SiO2) content limited to 5% and lower alumina (1.5%), offering strong performance in any kind of sintering operation. We produce BRBF by blending fines from Carajás, which contain a higher concentration of iron and a lower concentration of silica in the ore, with fines from the Southern and Southeastern Systems, which contain a lower concentration of iron in the ore, but also low concentration of alumina. It is produced in our Teluk Rubiah Maritime Terminal in Malaysia and in sixteen ports in China. This process reduces the time needed to reach Asian markets and increases our distribution capillarity by allowing the use of smaller vessels. The blending strategy also permits the use of iron ore with lower concentration from the Southern and Southeastern Systems, allowing more efficient mining plans and increasing the use of dry processing methods, which in turn reduce capital expenditures, extend the life of our mines and reduce the use of water in our operations: a key flexibility to cope with the short-term challenges.

Transforming our base metals business into a significant cash generator

Our strategy for our nickel business is to complete its turnaround, continuing to review our asset utilization and optimize our operations and aiming to increase productivity and improve returns, while preserving capacity for growth based on the prospects for an electric vehicle revolution. We are the world's largest nickel producer, with large-scale, long-life and low-cost operations, a substantial resource base and diversified mining operations that produce nickel from nickel sulfide and laterite sources using advanced technology.

We have transitioned to a smaller footprint in our nickel business by calibrating investments and production to reflect current market conditions, and our nickel turnaround plan is now based on three pillars: supply chain integration, operational excellence and digital transformation. In Canada, we are optimizing the flowsheet, running a cost reduction program and improving underground mine performance at Sudbury and finalizing the ramp-up of operations at Long Harbour. In Indonesia, we are renewing truck and mine equipment, increasing efficiency of the furnaces and increasing fuel efficiency through coal conversion. In New Caledonia, we are developing a mine plan revision and a study to increase efficiency of the VNC plant. In the long term, the battery segment shows important upside potential as electric vehicle production continues to attract significant investments, which could positively affect nickel price and our nickel premiums.

A key aspect of our strategy for our copper assets in the Carajás region is to improve efficiency and asset utilization while we evaluate opportunities to increase copper production. We have plans to develop a multi-year copper expansion plan, with Salobo III being the first approved project in the pipeline.

    

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Concluding the ramp-up of our coal business

We have been working to increase our coal production, mainly through the ramp-up of the Moatize operations and the ramp-up of the Nacala Logistics Corridor (NLC) in Mozambique and Malawi, where we have entered into a strategic partnership with Mitsui. As we complete the ramp-up in Moatize and the NLC, we expect our costs to diminish, enhancing the competitiveness of our coal operations. Key initiatives, such as knowledge transfer from our iron ore operations, opening of new mine sections and preparation of selected mining pits for future disposals are expected to lead to higher capacity utilization, mine productivity and yields.

Enhancing corporate governance

We are committed to continuing to improve our corporate governance. Following the conversion of our class A preferred shares into common shares, in December 2017, we completed our listing on the Novo Mercado segment of the B3 exchange (formerly BM&FBovespa), the special listing segment of B3 for companies committed to the highest standards of corporate governance. In 2018, our Board of Directors revised some of our policies, including our Corporate Integrity Policy, Code of Ethical Conduct, Socio-Environmental Investment Policy, Risk Management Policy, Remuneration to Shareholders Policy and Securities Trading Policy.

In 2018, as required under Brazilian rules, we started reporting our compliance with the Code of Best Practices for Corporate Governance of the Brazilian Corporate Governance Institute (IBGC). The code is based on the "comply or explain" principle, and we currently fully comply with 80% of the practices recommended by the IBGC and partially comply with 17% of practices recommended by the code.

SIGNIFICANT CHANGES IN OUR BUSINESS

We summarize below major events related to our acquisitions, divestitures and other significant developments in our business since the beginning of 2018.

Acquisitions

Dispositions and asset sales

We are always seeking to optimize the structure of our portfolio of businesses in order to achieve the most efficient allocation of capital. We summarize below our most significant dispositions since the beginning of 2018.

    

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Business Overview

Project Financing for the Nacala Logistics Corridor

We have a partnership with Mitsui in coal assets in Mozambique. In February 2018, we concluded the agreements for a project financing for the Nacala Logistics Corridor, which connects the Moatize coal mine to the Nacala-à-Velha maritime terminal, located in Nacala, Mozambique, in the total amount of US$2.730 billion, as follows:

Vale received US$2.6 billion in proceeds, in repayment of certain shareholders loans provided for construction of NLC, net of certain commissions paid by NLC. The project financing will be repaid in 14 years with the proceeds obtained from the tariff charged by NLC in connection with its provision of coal transportation services.

    

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Business Overview

Optimizing our base metals operations in Canada

We have optimized our nickel operations across Canada, as part of an overall strategy to prioritize value over volume, reduce our atmospheric emissions and comply with local regulations. In 2018, we phased out our smelting and refining activities in Thompson, focusing our operations on nickel concentrate production. The concentrate is then shipped to our Sudbury operation to be further processed. In Sudbury, we produce copper concentrate, copper matte, copper cathodes and refined nickel. In Long Harbour, we produce nickel rounds, copper cathodes and cobalt rounds. We successfully blended nickel intermediates from Sudbury and Asia in our refinery in Wales to make higher premium products.

We will now turn our focus to the optimization of the mining assets to ensure a sustainable and value-accretive ore supply to our three concentrators in Canada:

Cobalt streaming transaction

In June 2018, we sold to Wheaton Precious Metals Corp. (Wheaton) and Cobalt 27 Capital Corp. (Cobalt 27) a combined 75% of the cobalt produced as a byproduct at our Voisey's Bay mine from January 1, 2021, which includes the ramp-down of production from the existing mine and the life-of-mine production from our underground mine expansion project. In consideration, we received US$690 million in cash from Wheaton and Cobalt 27 upon closing of the transaction on June 28, 2018, and will receive additional payments of 20%, on average, of cobalt prices upon delivery. We remain exposed to approximately 40% of future cobalt production from Voisey's Bay, through our retained interest in 25% of cobalt production and the additional payments upon delivery. These transactions enabled the development of the Voisey's Bay underground mine extension project, which will extend the mine life of Voisey's Bay.

Resumption of operations of São Luis and Tubarão I and II pellet plants

In 2018, we resumed the operations of our Tubarão I, Tubarão II and São Luis pellet plants. The operations of these plants had been suspended since 2012 due to market conditions.

    

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Business Overview

FAILURE OF SAMARCO'S TAILINGS DAM IN MINAS GERAIS

In November 2015, the Fundão tailings dams owned by Samarco S.A. failed, releasing tailings downstream, flooding certain communities and causing impacts on communities and the environment along the Doce river. The failure resulted in 19 fatalities and caused property and environmental damage to the affected areas. Samarco is a joint venture equally owned by Vale S.A. and BHP Billiton Brasil Ltda. ("BHPB").

In June 2016, Samarco and its shareholders (Vale and BHPB) created the Fundação Renova, a not-for-profit private foundation, to develop and implement (i) social and economic remediation and compensation programs and (ii) environmental remediation and compensation programs in the region affected by the dam failure.

The creation of Fundação Renova was provided for under the agreement for settlement and conduct adjustment (the "Framework Agreement") signed in March 2016 by Vale, BHPB, Samarco, the Brazilian federal government, the two Brazilian states affected by the failure (Minas Gerais and Espírito Santo) and other governmental authorities. The Framework Agreement has a 15-year term, renewable for successive one-year periods until all the obligations under the Framework Agreement have been performed. The Framework Agreement does not provide for admission of civil, criminal or administrative liability for the Fundão dam failure. The Framework Agreement provides that, within three years of the date of the agreement, the parties would review its terms to assessing the effectiveness of the ongoing remediation and compensation activities.

On June 25, 2018, Samarco, Vale and BHPB entered into a comprehensive agreement with the offices of the federal and state (Minas Gerais and Espírito Santo) prosecutors, public defenders and attorney general, among other parties, improving the governance mechanism of Fundação Renova and establishing, among other things, a process for potential revisions to the remediation programs provided under the Framework Agreement based on the findings of experts hired by Samarco to advise the MPF (Federal Prosecutor's Office) over a two-year period (the "June 2018 Agreement"). See Additional information—Legal proceedings.

Under the Framework Agreement and the June 2018 Agreement, Fundação Renova must be funded by Samarco, but to the extent that Samarco is unable to fund, Vale and BHPB must ratably bear the funding requirements under the Framework Agreement. As Samarco is currently unable to resume its activities, we and BHPB have been funding the Fundação Renova and also providing funds directly to Samarco, to preserve its operations and to support Samarco's funding obligations. At this point, we cannot predict when Samarco will resume its operations.

Pursuant to the Framework Agreement, Fundação Renova and Samarco allocated R$2.1 billion to social and economic remediation and compensation programs in 2018 and have allocated R$5.3 billion to these programs since the dam failure. From 2019 to 2021, Samarco, or Vale and BHP, will provide to Fundação Renova funding based on the amounts needed to implement the projects approved for each year, subject to an annual minimum of R$800 million and an annual maximum of R$1.6 billion. Starting in 2022, Samarco will provide the necessary funding in order to complete remaining programs approved for each year.

Additionally, Fundação Renova must allocate a minimum annual amount of R$240 million over 15 years (from 2016) to the implementation of compensation programs. Under the terms of the Framework Agreement, Fundação Renova must spend an additional amount of at least R$500 million on sewage collection and treatment and solid waste disposal.

For a discussion of the legal proceedings resulting from the failure of Samarco's tailings dam, see Additional information—Legal proceedings.

    

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SELECTED FINANCIAL DATA

The tables below present selected consolidated financial information as of and for the periods indicated. You should read this information together with our consolidated financial statements in this annual report.

Consolidated statement of income data

 
For the year ended December 31,
 
2014 2015 2016 2017 2018
 
(US$ million)
Net operating revenues 35,124 23,384 27,488 33,967 36,575
Cost of goods sold and services rendered (22,790 ) (18,751 ) (17,650 ) (21,039 ) (22,109 )
Selling, general, administrative and other operating expenses, net (2,059 ) (819 ) (774 ) (951 ) (968 )
Research and evaluation expenses (662 ) (395 ) (319 ) (340 ) (373 )
Pre-operating and operational stoppage (975 ) (942 ) (453 ) (413 ) (271 )
Impairment and other results on non-current assets (266 ) (8,708 ) (1,240 ) (294 ) (899 )
Operating income (loss) 8,372 (6,231 ) 7,052 10,930 11,955
Non-operating income (expenses):          
Financial income (expenses), net (6,018 ) (10,654 ) 1,843 (3,019 ) (4,957 )
Equity results and other results in associates and joint ventures 440 (794 ) (911 ) (82 ) (182 )
Net income (loss) before income taxes 2,794 (17,679 ) 7,984 7,829 6,816
Income taxes (1,603 ) 5,249 (2,781 ) (1,495 ) 172
Net income (loss) from continuing operations 1,191 (12,430 ) 5,203 6,334 6,988
Net income (loss) attributable to non-controlling interests (308 ) (501 ) (8 ) 21 36
Net income (loss) from continuing operations attributable to Vale's stockholders 1,499 (11,929 ) 5,211 6,313 6,952
Net income (loss) from discontinued operations attributable to Vale's stockholders (842 ) (200 ) (1,229 ) (806 ) (92 )
Net income (loss) attributable to Vale's stockholders 657 (12,129 ) 3,982 5,507 6,860
Net income (loss)attributable to non-controlling interests (304 ) (491 ) (6 ) 14 36
Net income (loss) 353 (12,620 ) 3,976 5,521 6,896
Total cash paid to stockholders(1) 4,200 1,500 250 1,456 3,313

(1)
Consists of total cash paid to stockholders during the period, whether classified as dividends or interest on stockholders' equity.

Earnings (loss) per share

The table below shows our earnings (loss) per share. The earnings (loss) per share for 2014 to 2016 have been retrospectively adjusted to reflect the conversion of our Class A preferred shares into common shares, which was concluded in November 2017, as if the conversion had occurred at the beginning of the earliest year presented.

 
For the year ended December 31,
 
2014 2015 2016 2017 2018
 
(US$, except as noted)
Earnings (loss) per common share from continuing operations 0.29 (2.30 ) 1.00 1.21 1.34
Earnings (loss) per common share from discontinued operations (0.16 ) (0.03 ) (0.23 ) (0.16 ) (0.02 )
Earnings (loss) per common share 0.13 (2.33 ) 0.77 1.05 1.32
Weighted average number of shares outstanding (in thousands)(1)(2) 5,197,432 5,197,432 5,197,432 5,197,432 5,182,445
Distributions to stockholders per share(2)(3)          

Expressed in US$

0.81 0.29 0.05 0.28 0.64

Expressed in R$

1.89 0.98 0.17 0.90 2.39

(1)
Each common ADS represents one common share.
(2)
Restated as if the conversion had occurred at the beginning of the earliest year presented.
(3)
Our distributions to shareholders may be classified as either dividends or interest on shareholders' equity. In many years, part of each distribution has been classified as interest on shareholders' equity and part has been classified as dividends. For information about distributions paid to shareholders, see Share ownership and tradingDistributions.

    

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Selected Financial Data

Balance sheet data

 
                  As of December 31,                   
 
2014 2015 2016 2017 2018
 
(US$ million)
Current assets 16,594 11,429 13,978 15,367 15,292
Non-current assets held for sale 3,640 4,044 8,589 3,587 –  
Property, plant and equipment, net and intangible assets 84,942 59,426 62,290 63,371 56,347
Investments in associated companies and joint ventures 4,133 2,940 3,696 3,568 3,225
Non-current assets 7,180 10,653 10,461 13,291 13,326
Total assets    116,489    88,492    99,014    99,184    88,190
Current liabilities 10,626 10,438 10,142 11,935 9,111
Liabilities associated with non-current assets held for sale 111 107 1,090 1,179 –  
Long-term liabilities(1) 22,043 15,896 19,096 20,512 19,784
Long-term debt(2) 27,388 26,347 27,662 20,786 14,463
Total liabilities 60,168 52,788 57,990 54,412 43,358
Stockholders' equity:          

Capital stock

61,614 61,614 61,614 61,614 61,614
Additional paid-in capital (601 ) (854 ) (851 ) (1,106 ) (1,122 )
Retained earnings and revenue reserves (5,891 ) (27,171 ) (21,721 ) (17,050 ) (16,507 )

Total Vale shareholders' equity

55,122 33,589 39,042 43,458 43,985
Non-controlling interests 1,199 2,115 1,982 1,314 847
Total stockholders' equity 56,321 35,704 41,024 44,772 44,832
Total liabilities and stockholders' equity 116,489 88,492 99,014 99,184 88,190

(1)
Excludes long-term debt.
(2)
Excludes current portion of long-term debt.

    

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FORWARD-LOOKING STATEMENTS

This annual report contains statements that may constitute forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Many of those forward-looking statements can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" and "potential," among others. Those statements appear in a number of places and include statements regarding our intent, belief or current expectations with respect to:

We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in forward-looking statements as a result of various factors. These risks and uncertainties include factors relating to (i) economic, political and social issues in the countries in which we operate, (ii) the global economy, (iii) commodity prices, (iv) financial and capital markets, (v) the mining and metals businesses, which are cyclical in nature, and their dependence upon global industrial production, which is also cyclical, (vi) regulation and taxation, (vii) operational incidents or accidents, and (viii) the high degree of global competition in the markets in which we operate. For additional information on factors that could cause our actual results to differ from expectations reflected in forward-looking statements, see Risk factors. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments. All forward-looking statements attributed to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement, and you should not place undue reliance on any forward-looking statement.

    

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RISK FACTORS

RISKS RELATING TO DAM FAILURE

The failure of Dam I in Minas Gerais has adversely affected our business, financial condition and reputation, and the overall impact of the dam failure on us is still uncertain.

On January 25, 2019, Dam I failed, resulting in nearly 300 fatalities or presumed fatalities, in addition to personal, property and environmental damages. See Business Overview—Failure of the tailings dam at the Córrego do Feijão mine. The causes of the dam failure are uncertain and are being investigated by us and by several governmental authorities. This event has adversely affected our operations, but the overall impact of the dam failure is still uncertain.

    

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Risk Factors

The failure of a tailings dam or similar structure may cause severe damages, and the decommissioning of our upstream tailings dams may be long and costly.

We own a number of tailings dams and similar structures. In addition, we own stakes in companies that own a number of dams or similar structures, including Samarco and Mineração Rio do Norte S.A. (MRN). The failure of any of these structures could cause losses of lives and severe personal, property and environmental damages, and could have adverse effects on our business and reputation, as evidenced by the consequences of the failure of Dam I at Córrego do Feijão. See Business Overview—Failure of the tailings dam at the Córrego do Feijão mine. Some of our dams, and some of the dams owned by our investees, such as Samarco and MRN, were built using the "upstream" method, which presents specific stability risks.

Recently approved laws and regulations require us to decommission all of our upstream dams on a specified timetable. We are still determining the appropriate measures for decommissioning each upstream dam. This process will require significant expenditures, and the decommissioning process may take a long time. At this point, we cannot estimate the costs and timing for conclusion of the decommissioning process. We may not be able to conclude the decommissioning process for all of our upstream dams within the time-frame imposed by the new laws and regulations.

    

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Risk Factors

We are involved in legal proceedings that could have a material adverse effect on our business in the event of unfavorable outcomes.

We are involved in legal proceedings in which adverse parties have sought injunctions to suspend certain of our operations or claimed substantial amounts, including several legal proceedings and investigations relating to the failure of our Dam I and the failure of Samarco's Fundão tailings dam. The outcomes of these proceedings are uncertain and may materially and adversely affect our business, our liquidity and the value of the securities issued by us or our subsidiaries. See Additional information—Legal proceedings.

Our obligations and potential liabilities arising from the failure of a tailings dam owned by Samarco in Minas Gerais could negatively impact our business, our financial conditions and our reputation.

In November 2015, the Fundão tailings dam owned by Samarco failed, causing fatalities and environmental damage in the surrounding area. The failure of Samarco's tailings dam has adversely affected and will continue to affect our business, and the full impact is still uncertain and cannot be estimated. Below is a discussion of the main effects of the dam failure on our business.

    

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Risk Factors

EXTERNAL RISKS

Our business is exposed to the cyclicality of global economic activity and requires significant investments of capital.

As a mining company, we are a supplier of industrial raw materials. Industrial production tends to be the most cyclical and volatile component of global economic activity, which affects demand for minerals and metals. At the same time, investment in mining requires a substantial amount of funds in order to replenish reserves, expand and maintain production capacity, build infrastructure, preserve the environment, prevent fatalities and occupational hazards and minimize social impacts. Sensitivity to industrial production, together with the need for significant long-term capital investments, are important sources of risk for our financial performance and growth prospects.

Also, we may not be able to adjust production volume in a timely or cost-efficient manner in response to changes in demand. Lower utilization of capacity during periods of weak demand may expose us to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the capital intensity of mining operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or previous labor or government agreements. Conversely, during periods of high demand, our ability to rapidly increase production capacity is limited, which could prevent us from meeting demand for our products. Moreover, we may be unable to complete expansions and greenfield projects in time to take advantage of rising demand for iron ore, nickel or other products. When demand exceeds our production capacity, we may meet excess customer demand by purchasing iron ore fines, iron ore pellets or nickel from joint ventures or unrelated parties processing and reselling it, which would increase our costs and narrow our operating margins. If we are unable to satisfy excess customer demand in this way, we may lose customers. In addition, operating close to full capacity may expose us to higher costs, including demurrage fees due to capacity restraints in our logistics systems.

The prices for our products are subject to volatility, which may adversely affect our business.

Global prices for metals are subject to significant fluctuations and are affected by many factors, including actual and expected global macroeconomic and political conditions, regional and sectorial factors, levels of supply and demand, the availability and cost of substitutes, inventory levels, technological developments, regulatory and international trade matters, investments by commodity funds and others and actions of participants in the commodity markets. Sustained low market prices for the products we sell may result in the suspension of certain of our projects and operations, decrease in our mineral reserves, impairment of assets, and may adversely affect our cash flows, financial position and results of operations.

    

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Risk Factors

Demand for our iron ore, coal and nickel products depends on global demand for steel. Iron ore and iron ore pellets, which together accounted for 73.8% of our 2018 net operating revenues, are used to produce carbon steel. Nickel, which accounted for 8.8% of our 2018 net operating revenues, is used mainly to produce stainless and alloy steels. The prices of different steels and the performance of the global steel industry are highly cyclical and volatile, and these business cycles in the steel industry affect demand and prices for our products. In addition, vertical backward integration of the steel and stainless steel industries and the use of scrap could reduce the global seaborne trade of iron ore and primary nickel. The demand for copper is affected by the demand for copper wire, and a sustained decline in the construction industry could have a negative impact on our copper business.

We are mostly affected by movements in iron ore prices. For example, a price reduction of US$1 per dry metric ton unit ("dmt") in the average iron ore price would have reduced our operating income for the year ended December 31, 2018 by approximately US$340 million. Average iron ore prices significantly changed in the last five years, from US$97.0 per dmt in 2014, US$55.5 per dmt in 2015, US$58.5 per dmt in 2016, US$71.3 per dmt in 2017 and US$69.5 per dmt in 2018, according to the average Platts IODEX (62% Fe CFR China). On March 29, 2019, the year-to-date average Platts IODEX iron ore price was US$87.05 per dmt. See Operating and financial review and prospects—Overview—Major factors affecting prices.

Adverse economic developments in China could have a negative impact on our revenues, cash flow and profitability.

China has been the main driver of global demand for minerals and metals over the last few years. In 2018, Chinese demand represented 72% of global demand for seaborne iron ore, 51% of global demand for nickel and 49% of global demand for copper. The percentage of our net operating revenues attributable to sales to customers in China was 41.7% in 2018. Therefore, any contraction of China's economic growth could result in lower demand for our products, leading to lower revenues, cash flow and profitability. Poor performance in the Chinese real estate sector, the largest consumer of carbon steel in China, would also negatively impact our results.

Changes in exchange rates for the currencies in which we conduct operations could adversely affect our financial condition and results of operations.

A substantial portion of our revenues, trade receivables and our debt is denominated in U.S. dollars, and given that our functional currency is the Brazilian real, changes in exchange rates may result in (i) losses or gains on our net U.S. dollar-denominated indebtedness and accounts receivable and (ii) fair value losses or gains on currency derivatives we use to stabilize our cash flow in U.S. dollars. In 2018, we had net foreign exchange losses of US$2.247 million, while we had net foreign exchange losses of US$463 million in 2017 and net foreign exchange gains of US$3.252 billion in 2016. In addition, changing values of the Brazilian real, the Canadian dollar, the Euro, the Indonesian rupiah, the Chinese yuan and other currencies against the U.S. dollar affects our results since most of our costs of goods sold is denominated in currencies other than the U.S. dollar, principally the real (50.9% in 2018) and the Canadian dollar (5.4% in 2018), while our revenues are mostly U.S. dollar-denominated. We expect currency fluctuations to continue to affect our financial income, expense and cash flow generation.

Significant volatility in currency prices may also result in disruption of foreign exchange markets, which could limit our ability to transfer or to convert certain currencies into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our indebtedness. The central banks and governments of the countries in which we operate may institute restrictive exchange rate policies in the future and impose taxes on foreign exchange transactions.

    

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Risk Factors

FINANCIAL RISKS

Lower cash flows, resulting from suspension of operations or decreased prices of our products, may adversely affect our credit ratings and the cost and availability of financing.

The suspension of operations or a decline in the prices of our products may adversely affect our future cash flows, credit ratings and our ability to secure financing at attractive rates. It may also negatively affect our ability to fund our capital investments, including disbursements required to remediate and compensate damages resulting from the failure of Dam I, provide the financial assurances required to obtain licenses in certain jurisdictions, pay dividends and comply with the financial covenants in some of our long-term debt instruments. See Operating and financial review and prospects—Liquidity and capital resources.

POLITICAL, ECONOMIC, SOCIAL AND REGULATORY RISKS

Political, economic and social conditions in the countries in which we have operations or projects could adversely impact our business.

Our financial performance may be negatively affected by regulatory, political, economic and social conditions in countries in which we have significant operations or projects. In many of these jurisdictions, we are exposed to various risks such as political instability, bribery, cyber-attacks, extortion, corruption, robbery, sabotage, kidnapping, civil strife, acts of war, guerilla activities, piracy in international shipping routes and terrorism. These issues may adversely affect the economic and other conditions under which we operate in ways that could have a materially negative effect on our business.

Political, social and economic instability in Brazil could adversely impact our business and the market price of our securities.

The Brazilian federal government's economic policies may have important effects on Brazilian companies, including us, and on market conditions and prices of securities of Brazilian companies. Our financial condition and results of operations may be adversely affected by the following factors and the Brazilian federal government's response to these factors:

    

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Risk Factors

Historically, the country's political situation has influenced the performance of the Brazilian economy, and political crises have affected the confidence of investors and the general public, which resulted in economic deceleration, downgrading of credit ratings of the Brazilian government and Brazilian issuers, and heightened volatility in the securities issued abroad by Brazilian companies. Political instability may aggravate economic uncertainties in Brazil and increase volatility of securities of Brazilian issuers.

Brazil held presidential and federal and state legislative elections in October 2018. We cannot predict whether the new administration will result in changes in Brazilian governmental and economic policies or in the Brazilian mining industry.

In the last years, Brazil faced an economic recession, adverse fiscal developments and political instability. Brazilian GDP grew by 1.1% in 2018 and 1.1% in 2017 but declined by 3.6% in 2016. Unemployment rate was 12.3% in 2018, 12.7% in 2017 and 11.5% in 2016. Inflation, as reported by the consumer price index (IPCA), was 3.75% in 2018, 2.95% in 2017 and 6.29% in 2016. The Brazilian Central Bank's base interest rate (SELIC) was 3.5% on December 31, 2018, 7.00% on December 31, 2017 and 13.75% on December 31, 2016. Future economic, social and political developments in Brazil may impair our business, financial condition or results of operations, or cause the market value of our securities to decline.

Disagreements with local communities could adversely impact our business and reputation.

Disputes with communities where we operate may arise from time to time. Accidents or incidents involving mines, industrial facilities and related infrastructure, such as the failure of Dam I, may significantly impact the communities where we operate. In some instances, our operations and mineral reserves are located on or near lands owned or used by indigenous people or other groups of stakeholders. Some of our mining and other operations are located in territories where title may be subject to disputes or uncertainties, or in areas claimed for agriculture or land reform purposes, which may lead to disagreements with landowners, organized social movements, local communities and the government. In some jurisdictions, we may be required to consult and negotiate with these groups as part of the process to obtain licenses required to operate, to mitigate impact on our operations or to obtain access to their lands. Disagreements or disputes with local communities and groups, including indigenous groups, organized social movements and local communities, could cause delays in obtaining licenses, increases in planned budget, delays or interruptions to our operations. These issues may adversely affect our reputation or otherwise hamper our ability to develop our reserves and conduct our operations. See Information on the CompanyRegulatory matters and Additional information—Legal proceedings.

We could be adversely affected by changes in government policies or by trends such as resource nationalism, including the imposition of new taxes or royalties on mining activities.

Mining is subject to government regulation, including taxes and royalties, which can have a significant financial impact on our operations. In the countries where we are present, we are subject to potential renegotiation, nullification or forced modification of existing contracts and licenses, expropriation or nationalization of property, foreign exchange controls, changes in local laws, regulations and policies and audits and reassessments. We are also subject to new taxes or raising of existing taxes and royalty rates, reduction of tax exemptions and benefits, renegotiation of tax stabilization agreements or changes on the basis on which taxes are calculated in a manner that is unfavorable to us. Governments that have committed to provide a stable taxation or regulatory environment may alter those commitments or shorten their duration. We also face the risk of having to submit to the jurisdiction of a foreign court or arbitration panel or having to enforce a judgment against a sovereign nation within its own territory. See Information on the CompanyRegulatory matters and Additional information—Royalties and other taxes on mining activities.

    

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Risk Factors

We are also required to meet domestic beneficiation requirements in certain countries, such as local processing rules, export taxes or restrictions or charges on unprocessed ores. The imposition of or increase in such requirements, taxes or charges can significantly increase the risk profile and costs of operations in those jurisdictions. We and the mining industry are subject to rising trends of resource nationalism in certain countries in which we operate that can result in constraints on our operations, increased taxation or even expropriations and nationalizations.

As a supplier of iron ore, nickel and other raw materials to the global integrated steel industry, we are subject to additional risk from the imposition of duties, tariffs, import and export controls and other trade barriers impacting our products and the products our customers produce. Global trade is subject to a growing trend of increased trade barriers, which could exacerbate commodities' price volatility and in turn result in instability in the prices of our products.

Concessions, authorizations, licenses and permits are subject to expiration, limitation on renewal and various other risks and uncertainties.

Our operations depend on authorizations and concessions from governmental regulatory agencies in the countries in which we operate. We are subject to laws and regulations in many jurisdictions that can change at any time, and changes in laws and regulations may require modifications to our technologies and operations and result in unanticipated capital expenditures.

Some of our mining concessions are subject to fixed expiration dates and might only be renewed a limited number of times for a limited period of time. Apart from mining concessions, we may need to obtain various authorizations, licenses and permits from governmental or other regulatory bodies in connection with the planning, maintenance, operation and closure of our mines and related logistics infrastructure, which may be subject to fixed expiration dates or periodic review or renewal. There is no assurance that renewals will be granted as and when sought, and there is no assurance that new conditions will not be imposed in connection with renewal. Fees for mining concessions might increase substantially due to the passage of time from the original issuance of each individual exploration license. If so, the costs of holding or renewing our mining concessions may render our business objectives not viable. Accordingly, we need to continually assess the mineral potential of each mining concession, particularly at the time of renewal, to determine if the costs of maintaining the concession are justified by the results of operations to date, and we might elect to let some of our concessions lapse. There can be no assurance that concessions will be obtained on terms favorable to us, or at all, for our future intended mining or exploration targets.

In a number of jurisdictions where we have exploration projects, we may be required to retrocede to the state a certain portion of the area covered by the exploration license as a condition to renewing the license or obtaining a mining concession. This requirement can lead to a substantial loss of part of the mineral deposit originally identified in our feasibility studies. For more information on mining concessions and other similar rights, see Information on the CompanyRegulatory matters.

OPERATIONAL RISKS

Our projects are subject to risks that may result in increased costs or delay in their implementation.

We are investing to maintain and further increase our production capacity and logistics capabilities. We regularly review the economic viability of our projects. As a result of this review, we may decide to

    

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Risk Factors

postpone, suspend or interrupt the implementation of certain projects. Our projects are also subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:

Operational problems could materially and adversely affect our business and financial performance.

Ineffective project management and operational breakdowns might require us to suspend or curtail operations, which could generally reduce our productivity. Operational breakdowns could entail failure of critical plant and machinery. There can be no assurance that ineffective project management or other operational problems will not occur. Any damages to our projects or delays in our operations caused by ineffective project management or operational breakdowns could materially and adversely affect our business and results of operations. Our business is subject to a number of operational risks that may adversely affect our results of operations, such as:

    

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Risk Factors

Our business could be adversely affected by the failure or unavailability of certain critical assets or infrastructure.

We rely on certain critical assets and infrastructure to produce and to transport our products to our customers. These critical assets include mines, industrial facilities, ports, railways, roads and bridges. The failure or unavailability of any critical asset, whether resulting from natural events or operational issues, could have a material adverse effect on our business.

Substantially all of our iron ore production from the Northern system is transported from Carajas, in the Brazilian state of Pará, to the port of Ponta da Madeira, in the Brazilian state of Maranhão, through the Carajás railroad (EFC). Any interruption of the Carajás railroad or of the port of Ponta da Madeira could significantly impact our ability to sell our production from the Northern system. With respect to the Carajás railroad, there is particular risk of interruption at the bridge over the Tocantins river, in which the trains run on a single line railway. In the port of Ponta da Madeira, there is particular risk of interruption at the São Marcos access channel, a deep-water channel that provides access to the port. Also, any failure or interruption of our long distance conveyor belt (TCLD) used to transport our iron ore production from the S11D mine to the beneficiation plant, could adversely impact our operations at the S11D mine.

Our business could be adversely affected by the failure of our counterparties, joint venture partners or joint ventures we do not control to perform their obligations.

Customers, suppliers, contractors, financial institutions, joint venture partners and other counterparties may fail to perform existing contracts and obligations, which may unfavorably impact our operations and financial results. The ability of suppliers and customers to perform their obligations may be adversely affected in times of financial stress and economic downturn.

Important parts of our iron ore, pelletizing, nickel, coal, copper, energy and other businesses are held through joint ventures. This may reduce our degree of control, as well as our ability to identify and manage risks. Our forecasts and plans for these joint ventures and consortia assume that our partners will observe their obligations to make capital contributions, purchase products and, in some cases, provide skilled and competent managerial personnel. If any of our partners fails to observe its commitments, the affected joint venture or consortium may not be able to operate in accordance with its business plans, or we may have to increase the level of our investment to implement these plans.

Some of our investments are controlled by partners or have separate and independent management. These investments may not fully comply with our standards, controls and procedures, including our health, safety, environment and community standards. Failure by any of our partners or joint ventures to adopt adequate standards, controls and procedures could lead to higher costs, reduced production or

    

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environmental, health and safety incidents or accidents, which could adversely affect our results and reputation.

We may not have adequate insurance coverage for some business risks.

Our businesses are generally subject to a number of risks and hazards, which could have impact on people, assets and the environment. The insurance we maintain against risks that are typical in our business may not provide adequate coverage. Insurance against some risks (including liabilities for environmental damages, damages resulting from dams breaches, spills or leakage of hazardous substances and interruption of certain business activities) may not be available at a reasonable cost, or at all. Even when it is available, we may self-insure where we determine that is more cost-effective to do so. As a result, accidents or other negative developments involving our mining, production or transportation facilities may not be covered by insurance, and could have a material adverse effect on our operations.

Labor disputes may disrupt our operations from time to time.

A substantial number of our employees, and some of the employees of our subcontractors, are represented by labor unions and are covered by collective bargaining or other labor agreements, which are subject to periodic negotiation. Strikes and other labor disruptions at any of our operations could adversely affect the operation of facilities and the timing of completion and cost of our capital projects. For more information about labor relations, see Management and employeesEmployees. Moreover, we could be adversely affected by labor disruptions involving unrelated parties that may provide us with goods or services.

Higher energy costs or energy shortages would adversely affect our business.

Costs of fuel oil, gas and electricity are a significant component of our cost of production, representing 11.1% of our total cost of goods sold in 2018. To fulfill our energy needs, we rely on the following sources: oil byproducts, which represented 31% of total energy needs in 2018, electricity (31%), natural gas (17%), coal (17%) and other energy sources (4%).

Electricity costs represented 4.1% of our total cost of goods sold in 2018. If we are unable to secure reliable access to electricity at acceptable prices, we may be forced to curtail production or may experience higher production costs, either of which would adversely affect our results of operations. We face the risk of energy shortages in the countries where we have operations and projects, especially Brazil, due to lack of infrastructure or weather conditions, such as floods or droughts. Future shortages, and government efforts to respond to or prevent shortages, may adversely impact the cost or supply of electricity for our operations.

Failures in our information technology, operational technology, cybersecurity and telecommunications systems may adversely affect our business and reputation.

We rely heavily on information technology, operational technology and telecommunications systems for the operation of many of our business processes. Failures in those systems, whether caused by obsolescence, technical failures, negligence, accident or malicious acts, may result in the disclosure or theft of sensitive information, misappropriation of funds and disruptions to or interruption in our business operations. We may be the target of attempts to gain unauthorized access to information technology and operational technology systems through the internet, including sophisticated and coordinated attempts often referred to as advanced persistent threats. Disruption of critical information technology, operational technology, cybersecurity or telecommunications systems, or breaches of

    

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information security, may harm our reputation and have a material adverse effect on our operational performance, earnings and financial condition.

HEALTH, SAFETY AND ENVIRONMENTAL RISKS

Our business is subject to environmental, health and safety incidents.

Our operations involve the use, handling, storage, discharge and disposal of hazardous substances into the environment and the use of natural resources, resulting in significant risks and hazards, including fire, explosion, toxic gas leaks, spilling of polluting substances or other hazardous materials, rockfalls, incidents involving dams, failure of other operational structures, as well as activities involving mobile equipment, vehicles or machinery and other potentially fatal incidents and accidents. Incidents may occur due to deficiencies in identifying and assessing risks or in implementing sound risk management, and once these risks materialize, they could result in significant environmental and social impacts, damage to or destruction of mines or production facilities, personal injury, illness and fatalities, involving employees, contractors or community members near our operations, as well as delays in production, monetary losses and possible legal liability. Additionally, in remote localities, our employees may be exposed to tropical and contagious diseases that may affect their health and safety. Notwithstanding our standards, policies, controls and monitoring procedures, our operations remain subject to incidents or accidents that could adversely impact our business, stakeholders or reputation.

Our business may be adversely affected by social, environmental and health and safety regulation, including regulations pertaining to climate change.

Nearly all aspects of our activities, products and services associated with capital projects and operations around the world are subject to social, environmental and health and safety regulations, which may expose us to increased liability or increased costs. These regulations require us to have environmental licenses, permits and authorizations for our operations and projects, and to conduct environmental and social impact assessments in order to get approval for our projects and permission for initiating construction and continuing operating. Significant changes to existing operations are also subject to these requirements. Difficulties in obtaining or renewing permits may lead to construction delays, cost increases, and may adversely impact our production volumes. Social, environmental and health and safety regulations also impose standards, procedures and monitoring controls on activities relating to mineral research, mining, beneficiation, pelletizing activities, railway and marine services, ports, decommissioning, distribution and marketing of our products. Such regulation may give rise to significant costs and liabilities. Litigation relating to these or other related matters may adversely affect our financial condition or cause harm to our reputation.

Social, environmental and health and safety regulations in many countries in which we operate have become stricter in recent years, and it is possible that more regulation or more stringent enforcement of existing regulations will adversely affect us by imposing restrictions on our activities and products, creating new requirements for the issuance or renewal of environmental licenses and labor authorizations, resulting in licensing and operation delays, raising our costs or requiring us to engage in expensive reclamation efforts.

In response to the failure of Dam I, additional environmental and health and safety laws and regulations have been approved, and other may be forthcoming, and authorities may impose more stringent conditions in connection with the licensing process of our projects and operations. We will encounter more stringent requirements for and delays in the receipt of environmental operating license for other tailings dams.

    

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National policies and international regulations regarding climate change may affect a number of our businesses in various countries. The ratification of the Paris Agreement in 2016 increased international pressure for the establishment of a global carbon price, and on companies to adopt carbon pricing strategies. The pricing of greenhouse gas emissions may impact our operational costs, mainly through higher price for fossil fuels as mining is an energy intensive industry, and our cost of international freight. In particular, consumption of thermal coal, one of the products we sell, is facing pressure from international institutions due to its carbon intensity.

Regulatory initiatives at the national and international levels that affect our shipping practices could increase our costs or require us to make new capital expenditures. Regulations, mainly from the European Union and China, may impose additional requirements for our products related to the safety of downstream users.

Natural disasters may cause severe damage to our operations and projects in the countries where we operate and may have a negative impact on our sales to countries affected by such disasters.

Natural disasters, such as wind storms, droughts, floods, earthquakes and tsunamis may adversely affect our operations and projects in the countries where we operate, and may cause a contraction in sales to countries adversely affected due to, among other factors, power outages and the destruction of industrial facilities and infrastructure. The physical impact of climate change on our business remains uncertain, but we are likely to experience changes in rainfall patterns, increased temperatures, water shortages, rising sea levels, increased storm frequency and intensity as a result of climate change, which may adversely affect our operations. On some occasions in recent years, we have determined that force majeure events have occurred due to the effect of severe weather on our mining and logistics activities.

RISKS RELATING TO OUR MINING RESERVES

Our reserve estimates may materially differ from mineral quantities that we are actually able to recover; our estimates of mine life may prove inaccurate; more stringent regulations and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine.

Our reported reserves are estimated quantities of ore and minerals that we have determined can be economically and legally mined and processed under present and assumed future conditions. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including factors beyond our control. Reserve reporting involves estimating deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation and judgment. As a result, no assurance can be given that the indicated amount of ore will be recovered or that it will be recovered at the rates we anticipate. Reserve estimates and estimates of mine life may require revisions based on actual production experience, projects, updated exploration drilling data and other factors. Lower market prices of minerals and metals, more stringent regulations, reduced recovery rates or increased operating and capital costs due to inflation, exchange rates, changes in regulatory requirements or other factors may render proven and probable reserves uneconomic to exploit and may ultimately result in a reduction of reserves. Also, our inability to obtain licenses for new operations, supporting structures or activities, or to renew our existing licenses, can cause a reduction of our reserves. Such a reduction could affect depreciation and amortization rates and have an adverse effect on our financial performance.

    

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We may not be able to replenish our reserves, which could adversely affect our mining prospects.

We engage in mineral exploration, which is highly uncertain in nature, involves many risks and frequently is non-productive. Our exploration programs, which involve significant expenditures, may fail to result in the expansion or replacement of reserves depleted by current production. If we do not develop new reserves, we will not be able to sustain our current level of production beyond the remaining lives of our existing mines.

The feasibility of new mineral projects may change over time.

Once mineral deposits are discovered, it can take a number of years from the initial phases of drilling until production is possible, during which the economic feasibility of production may change. Substantial time and expenditures are required to:

If a project proves not to be economically feasible by the time we are able to exploit it, we may incur substantial losses and be obliged to take write-downs. In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in delays and cost overruns that may render the project not economically feasible.

We face rising extraction costs and investment requirements over time as reserves deplete.

Reserves are gradually depleted in the ordinary course of a given open pit or underground mining operation. As mining progresses, distances to the primary crusher and to waste deposits become longer, pits become steeper, mines may move from being open pit to underground, and underground operations become deeper. In addition, for some types of reserves, mineralization grade decreases and hardness increases at greater depths. As a result, over time, we usually experience rising unit extraction costs with respect to each mine, or we may need to make additional investments, including adaptation or construction of processing plants and expansion or construction of tailings dams. Several of our mines have been operating for long periods, and we will likely experience rising extraction costs per unit in the future at these operations in particular.

    

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RISKS RELATING TO OUR CORPORATE STRUCTURE

The shareholders that are party to our shareholders' agreement have significant power over Vale.

On August 14, 2017, Litel Participações S.A. ("Litel"), Bradespar S.A. ("Bradespar"), Mitsui & Co., Ltd. ("Mitsui") and BNDES Participações S.A. ("BNDESPAR") entered into a shareholders' agreement pursuant to which they undertook to vote jointly on certain key matters (the "Shareholders' Agreement"). The Shareholders' Agreement is expected to expire on November 9, 2020. See Share ownership and trading—Major shareholders. On December 31, 2018, Litel, Bradespar, Mitsui and BNDESPAR together held 39.03% of our total capital stock. As long as no other shareholder or group of shareholders owns more shares than the parties to the Shareholders' Agreement, these major shareholders may elect a majority of the members of our Board of Directors and control the outcome of certain actions requiring shareholder approval.

The Brazilian Government has certain veto rights.

The Brazilian government owns 12 golden shares of Vale, granting it limited veto power over certain company actions, such as changes to our name, the location of our headquarters and our corporate purpose as it relates to mining activities. For a detailed description of the Brazilian government's veto powers, see Additional information—Memorandum and articles of association—Common shares and golden shares.

Our governance and compliance processes may fail to prevent breaches of legal, accounting or governance standards.

We operate in a global environment, and our activities extend over multiple jurisdictions and complex regulatory frameworks, with increasing enforcement activities worldwide. Our governance and compliance processes, which include the review of internal control over financial reporting, may not timely identify or prevent future breaches of legal, accounting or governance standards. We may be subject to breaches of our code of ethical conduct, anti-corruption policies and business conduct protocols and to instances of fraudulent behavior, corrupt practices and dishonesty by our employees, contractors or other agents. Our failure to comply with applicable laws and other standards could subject us to investigations by authorities, litigation, fines, loss of operating licenses, disgorgement of profits, involuntary dissolution and reputational harm.

It could be difficult for investors to enforce any judgment obtained outside Brazil against us or any of our associates.

Our investors may be located in jurisdictions outside Brazil and could seek to bring actions against us or our directors or officers in the courts of their home jurisdictions. We are a Brazilian company, and the majority of our officers and directors are residents of Brazil. The vast majority of our assets and the assets of our officers and directors are likely to be located in jurisdictions other than the home jurisdictions of our foreign investors. It might not be possible for investors outside Brazil to effect service of process within their home jurisdictions on us or on our officers or directors who reside outside their home jurisdictions. In addition, a final conclusive foreign judgment will be enforceable in the courts of Brazil without a re-examination of the merits only if previously confirmed by the Brazilian Superior Court of Justice (STJ—Superior Tribunal de Justiça), and confirmation will only be granted if the foreign judgment: (i) fulfills all formalities required for its enforceability under the laws of the country where it was issued; (ii) was issued by a competent court after due service of process on the defendant, as required under

    

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applicable law; (iii) is not subject to appeal; (iv) does not conflict with a final and unappealable decision issued by a Brazilian court; (v) was authenticated by a Brazilian consulate in the country in which it was issued or is duly apostilled in accordance with the Convention for Abolishing the Requirement of Legalization for Foreign Public Documents and is accompanied by a sworn translation into Portuguese, unless this procedure was exempted by an international treaty entered into by Brazil; (vi) it does not cover matters subject to the exclusive jurisdiction of the Brazilian courts; and (vii) is not contrary to Brazilian national sovereignty, public policy or good morals. Therefore, investors might not be able to recover against us or our directors and officers on judgments of the courts of their home jurisdictions predicated upon the laws of such jurisdictions.

RISKS RELATING TO OUR DEPOSITARY SHARES

If ADR holders exchange ADSs for the underlying shares, they risk losing the ability to remit foreign currency abroad.

The custodian for the shares underlying our ADSs maintains a registration with the Central Bank of Brazil permitting qualifying institutional foreign investors to buy and sell securities on the B3 and entitling the custodian to remit U.S. dollars outside Brazil for payments of dividends and other distributions relating to the shares underlying our ADSs or upon the disposition of the underlying shares. If an ADR holder exchanges its ADSs for the underlying shares, it will be entitled to rely on the custodian's registration for only five business days from the date of exchange. Thereafter, an ADR holder may not be able to obtain and remit foreign currency abroad upon the disposition of, or distributions relating to, the underlying shares unless it obtains its own registration under applicable regulation. See Additional informationExchange controls and other limitations affecting security holders. If an ADR holder attempts to obtain its own registration, it may incur expenses or suffer delays in the application process, which could delay the receipt of dividends or other distributions relating to the underlying shares or the return of capital in a timely manner.

The custodian's registration or any registration obtained could be affected by future legislative changes, and additional restrictions applicable to ADR holders, the disposition of the underlying shares or the repatriation of the proceeds from disposition could be imposed in the future.

ADR holders may not have all the rights of our shareholders, and may be unable to exercise preemptive rights relating to the shares underlying their ADSs.

ADR holders may not have the same rights that are attributed to our shareholders by Brazilian law or our bylaws, and the rights of ADR holders may be subject to certain limitations provided in the deposit agreement or by the securities intermediaries through which ADR holders hold their securities. Also, the ability of ADR holders to exercise preemptive rights is not assured, particularly if the applicable law in the holder's jurisdiction (for example, the Securities Act in the United States) requires that either a registration statement be effective or an exemption from registration be available with respect to those rights, as is in the case in the United States. We are not obligated to extend the offer of preemptive rights to holders of ADRs, to file a registration statement in the United States, or to make any other similar filing in any other jurisdiction, relating to preemptive rights or to undertake steps that may be needed to make exemptions from registration available, and we cannot assure holders that we will file any registration statement or take such steps.

    

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ADR holders may encounter difficulties in the exercise of voting rights.

ADR holders do not have the rights of shareholders. They have only the contractual rights set forth for their benefit under the deposit agreements. ADR holders are not permitted to attend shareholders' meetings, and they may only vote by providing instructions to the depositary. In practice, the ability of a holder of ADRs to instruct the depositary as to voting will depend on the timing and procedures for providing instructions to the depositary either directly or through the holder's custodian and clearing system. With respect to ADSs for which instructions are not received, the depositary may, subject to certain limitations, grant a proxy to a person designated by us.

The legal protections for holders of our securities differ from one jurisdiction to another and may be inconsistent, unfamiliar or less effective than investors anticipate.

We are a global company with securities traded in several different markets and investors located in many different countries. The legal regime for the protection of investors varies around the world, sometimes in important ways, and investors in our securities should recognize that the protections and remedies available to them may be different from those to which they are accustomed in their home markets. We are subject to securities legislation in several countries, which have different rules, supervision and enforcement practices. The only corporate law applicable to our parent company is the law of Brazil, with its specific substantive rules and judicial procedures. We are subject to corporate governance rules in several jurisdictions where our securities are listed, but as a foreign private issuer, we are not required to follow many of the corporate governance rules that apply to U.S. domestic issuers with securities listed on the New York Stock Exchange, and we are not subject to the U.S. proxy rules.

    

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II.    INFORMATION ON THE COMPANY

LINES OF BUSINESS

Our principal lines of business consist of mining and related logistics. This section presents information about operations, production, sales and competition and is organized as follows.

1.   Ferrous minerals

    1.1   Iron ore and iron ore pellets
            1.1.1   Iron ore operations
            1.1.2   Iron ore production
            1.1.3   Iron ore pellets operations
            1.1.4   Iron ore pellets production
            1.1.5   Customers, sales and marketing
            1.1.6   Competition

    1.2   Manganese ore and ferroalloys
            1.2.1   Manganese ore operations and production
            1.2.2   Ferroalloys operations and production
            1.2.3   Manganese ore and ferroalloys: sales and competition

2.   Base metals

    2.1   Nickel
            2.1.1   Operations
            2.1.2   Production
            2.1.3   Customers and sales
            2.1.4   Competition

    2.2   Copper
            2.2.1   Operations
            2.2.2   Production
            2.2.3   Customers and sales
            2.2.4   Competition

    2.3   PGMs and other precious metals
    2.4   Cobalt
3.   Coal

    3.1   Operations
    3.2   Production
    3.3   Customers and sales
    3.4   Competition

4.   Infrastructure

    4.1   Logistics
            4.1.1   Railroads
            4.1.2   Ports and maritime
            terminals
            4.1.3   Shipping

    4.2   Energy

5.   Other investments

    

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MAP

    

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1.           FERROUS MINERALS

Our ferrous minerals business includes iron ore mining, iron ore pellet production, manganese ore mining and ferroalloy production. Each of these activities is described below.

1.1         Iron ore and iron ore pellets

1.1.1      Iron ore operations

We conduct our iron ore business in Brazil primarily at the parent-company level, and through our subsidiaries Mineração Corumbaense Reunida S.A. ("MCR") and Minerações Brasileiras Reunidas S.A.—MBR ("MBR"). Our mines, all of which are open pit, and their related operations are mainly concentrated in three systems: the Southeastern, Southern and Northern Systems, each with its own transportation and shipping capabilities. We also conduct mining operations in the Midwestern System and we have a 50% stake in Samarco. Samarco's operations have been suspended following the failure of one of its tailings dams located in Minas Gerais in November 2015 (see Business overview—Failure of Samarco's tailings dam in Minas Gerais). We conduct each of our iron ore operations in Brazil under concessions from the federal government granted for an indefinite period, subject to the life of the mines.

Company/Mining System Location Description/History Mineralization Operations Power source Access/Transportation

Vale

           

Northern System

Carajás, state of Pará Divided into Serra Norte, Serra Sul and Serra Leste (Northern, Southern and Eastern ranges). Since 1984, we have been conducting mining activities in the northern range, which is divided into three main mining areas (N4W, N4E and N5) and two major beneficiation plants. In 2014, we started a mine and beneficiation plant in Serra Leste. Our operations in Serra Sul, where our S11D mine is located, started in 2016. High-grade hematite ore type (iron grade of more than 65% on average). Open-pit mining operations. In Serra Norte, one of the major plants applies the natural moisture beneficiation process, consisting of crushing and screening, and the other applies both the natural moisture and the wet beneficiation process in distinct lines. The wet beneficiation process consists simply of sizing operations, including screening, hydrocycloning, crushing and filtration. Output from this site consists of sinter feed, pellet feed and lump ore. Serra Leste and Serra Sul natural moisture beneficiation process consists of crushing and screening. Serra Sul produces only sinter feed and Serra Leste produces mainly sinter feed. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. Carajás railroad (EFC) transports the iron ore to the Ponta da Madeira maritime terminal in the Brazilian state of Maranhão. Serra Leste iron ore is transported by trucks from the mine site to EFC railroad. The Serra Sul ore is shipped via the new 101-kilometers long railroad spur to the EFC railroad.

Southeastern System

Iron Quadrangle, state of Minas Gerais Three mining complexes: Itabira (two mines, with three major beneficiation plants), Minas Centrais (two mines, with two major beneficiation plants and one secondary plant) and Mariana (three mines, with two major beneficiation plants). Ore reserves with high ratios of itabirite ore relative to hematite ore type. Itabirite ore type has iron grade of 35-60%. Part of the ore is concentrated to achieve shipping grade and part is shipped and blended in Asia with the high-grade ore from our Northern System. Open-pit mining operations. We generally process the run-of-mine by means of standard crushing, classification and concentration steps, producing sinter feed, lump ore and pellet feed in the beneficiation plants located at the mining complexes. For status of halted operations see Business overview—Failure of the tailings dam at the Córrego do Feijão mine. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. EFVM railroad connects these mines to the Tubarão port.

    

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Company/Mining System Location Description/History Mineralization Operations Power source Access/Transportation

Southern System

Iron Quadrangle, state of Minas Gerais Three major mining complexes: Minas Itabirito (four mines and three major beneficiation plants); Vargem Grande (three mines and two major beneficiation plants); and Paraopeba (five mines and two major beneficiation plants). Ore reserves with high ratios of itabirite ore type relative to hematite ore type. Itabirite ore has iron grade of 35-60%. Part of the ore is concentrated to achieve shipping grade and part is shipped and blended in Asia with the high-grade ore from our Northern System. Open-pit mining operations. We generally process the run-of-mine by means of standard crushing, classification and concentration steps, producing sinter feed, lump ore and pellet feed in the beneficiation plants located at the mining complexes. For status of halted operations see Business overview—Failure of the tailings dam at the Córrego do Feijão mine. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. MRS transports our iron ore products from the mines to our Guaíba Island and Itaguaí maritime terminals in the Brazilian state of Rio de Janeiro. EFVM railroad connects certain mines to the Tubarão port.

Midwestern System

State of Mato Grosso do Sul

Two mines and two plants located in the city of Corumbá.

Hematite ore type, which generates lump ore predominantly. Iron grade of 62% on average.

Open-pit mining operations. The beneficiation process for the run-of-mine consists of standard crushing and classification steps, producing lump ore and sinter feed.

Supplied through the national electricity grid. Acquired through power purchase agreements.

Transported by barges traveling along the Paraguay and Paraná rivers to transhippers at the Nueva Palmira port in Uruguay, or delivered to customers at Corumbá.

    

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1.1.2      Iron ore production

The following table sets forth information about our iron ore production.

 
 
Production for the year ended December 31,  
 
 
2018
process
recovery(2)
Mine/Plant Type 2016 2017 2018(1)
 
 
(million metric tons)
(%)

Southeastern System

         

Itabira

Open pit 33.4 37.8 41.7 50

Minas Centrais

Open pit 40.9 37.6 36.0 64

Mariana

Open pit 28.4 33.1 26.7 81

Total Southeastern System

  102.7 108.6 104.4  

Southern System

         

Minas Itabirito

Open pit 40.1 36.8 35.5 82

Vargem Grande

Open pit 29.2 23.3 21.4 68

Paraopeba

Open pit 26.4 26.3 27.3 98

Total Southern System

  95.7 86.4 84.1  

Northern System

         

Serra Norte

Open pit 143.6 142.7 131.5 95

Serra Leste

Open pit 4.2 4.3 4.1 100

Serra Sul

Open pit 0.4 22.2 58.0 100

Total Northern System

  148.1 169.2 193.6  

Midwestern System

         

Corumbà

Open pit 1.9 2.4 2.5 72

Urucum

Open pit 0.4 0.0 0.0  

Total Midwestern System

  2.3 2.4 2.5  

Total

  348.8 366.5 384.6  

(1)
Production figures include third-party ore purchases, run of mine and feed for pelletizing plants.
(2)
Percentage of the run-of-mine recovered in the beneficiation process. Process recovery figures do not include third-party ore purchases.

    

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1.1.3      Iron ore pellet operations

We produce iron ore pellets in Brazil and Oman, directly and through joint ventures, as set forth in the table below. We also have a 25% interest in two iron ore pelletizing plants in China, Zhuhai YPM Pellet Co., Ltd. ("Zhuhai YPM") and Anyang Yu Vale Yongtong Pellet Co., Ltd. ("Anyang"). Our total estimated nominal capacity is 64.7 Mtpy, including the full capacity of our pelletizing plants in Oman, but not including our joint ventures Samarco, Zhuhai YPM and Anyang. We supply all of the iron ore requirements of our wholly owned pellet plants and part of the iron ore requirements for Zhuhai YPM. In 2018, we sold 102 thousand metric tons of pellet feed to Zhuhai YPM.

    

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Company/Plant   Description/History   Nominal capacity
(Mtpy)
  Power source   Other information   Vale's equity
interest (%)
  Partners
Brazil:                                                         

Vale

 

 

 

 

 

 

 

 

 

 

 

 
Tubarão (state of Espírito Santo)   Three wholly owned pellet plants (Tubarão I, II and VIII) and five leased plants (Itabrasco, Hispanobras, Kobrasco and two Nibrasco plants). These plants receive iron ore primarily from our Southeastern System mines and use our logistics infrastructure for distribution.   36.7(1)   Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.   Operations at the Tubarão I and Tubarão II pellet plants started up in the first half of 2018 in response to market conditions. Operations at these plants had been suspended since 2012.   100.0  

Fábrica (state of Minas Gerais)

 

Part of the Southern System. Receives iron ore from the Minas Itabirito mining complex, more specifically from João Pereira and Segredo mines. Production is mostly transported by MRS and EFVM.

 

  4.5    

 

Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.

 

Operations at the Fábrica plant have been suspended since February 2019, following a determination of the ANM (see Business overview—Failure of the tailings dam at the Córrego do Feijão mine).

 

100.0

 


Vargem Grande (state of Minas Gerais)

 

Part of the Southern System. Receives iron ore from the Minas Itabirito and Vargem Grande mining complexes, more specifically from Sapecado, Galinheiro, Capitão do Mato and Tamanduá mines. Production is mostly transported by MRS.

 

  7.0    

 

Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.

 

Operations at the Vargem Grande plant have been suspended since February 2019, following a determination of the ANM (see Business overview—Failure of the tailings dam at the Córrego do Feijão mine).

 

100.0

 


São Luís (state of Maranhão)

 

Part of the Northern System. Receives iron ore from the Carajás mines. Production is shipped to customers through our Ponta da Madeira maritime terminal.

 

  7.5    

 

Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.

 

Operation at the São Luís plant restarted in the second half of 2018 in response to market conditions. Operations at this plant had been suspended since 2012.

 

100.0

 

Oman:                                                         

Vale Oman Pelletizing Company LLC

 

Vale's industrial complex. Two pellet plants with a total nominal capacity of 9.0 Mtpy. The pelletizing plants are integrated with our distribution center that has a nominal capacity of 40.0 Mtpy.

 

  9.0    

 

Supplied through the national electricity grid.

 

Oman plants are supplied by iron ore from the Iron Quadrangle state of Minas Gerais through the Tubarão port and by iron ore from Carajás through the Ponta da Madeira maritime terminal.

 

70.0

 

Oman Oil Company S.A.O.C.

(1)
Our environmental operating licenses for the Tubarão pellet plants provide for a capacity of 36.2 Mtpy.

    

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1.1.4      Iron ore pellets production

The following table sets forth information about our main iron ore pellet production.

 
Production for the year ended December 31,
Company 2016 2017 2018

(million metric tons)

Vale(1)

46.2 50.3 55.3

Total

46.2 50.3 55.3

(1)
Figure indicates actual production, including full production from our pellet plants in Oman and the five pellet plants we lease in Brazil. The operating leases for the Itabrasco, Nibrasco and Hispanobras pellet plants expire in 2019, and the operating leases for the Kobrasco pellet plant expire in 2033.

1.1.5      Customers, sales and marketing

We supply all of our iron ore and iron ore pellets to the steel industry. Prevailing and expected levels of demand for steel products affect demand for our iron ore and iron ore pellets. Demand for steel products is influenced by many factors, such as global manufacturing production, civil construction and infrastructure spending. For further information about demand and prices, see Operating and financial review and prospects—Major factors affecting prices.

In 2018, China accounted for 56% of our iron ore and iron ore pellet shipments, and Asia as a whole accounted for 70%. Europe accounted for 22%, followed by Brazil with 8%. Our ten largest customers collectively purchased 146 million metric tons of iron ore and iron ore pellets from us, representing 40% of our 2018 iron ore and iron ore pellet sales volumes and 39% of our total iron ore and iron ore pellet revenues. In 2018, no individual customer accounted for more than 7% of our iron ore and iron ore pellet shipments.

Of our 2018 pellet production, 54% was blast furnace pellets and 46% was direct reduction pellets. Blast furnace and direct reduction are different technologies employed by steel mills to produce steels, each using different types of pellets. In 2018, the Asian market (mainly Japan), the European market and the Brazilian market were the primary markets for our blast furnace pellets, while the Middle East and North America were the primary markets for our direct reduction pellets.

We invest in customer service in order to improve our competitiveness. We work with our customers to understand their objectives and to provide them with iron ore solutions to meet specific customer needs. Using our expertise in mining, agglomeration and iron-making processes, we search for technical solutions that will balance the best use of our world-class mining assets and the satisfaction of our customers. We believe that our ability to provide customers with a total iron ore solution and the quality of our products are both very important advantages helping us improve our competitiveness in relation to competitors that may be more conveniently located geographically. In addition to offering technical assistance to our customers, we have offices in St. Prex (Switzerland), Tokyo (Japan), Singapore, Dubai (UAE) and Shanghai (China), which support global sales by Vale International, and an office in Brazil, which supports sales to South America. These offices also allow us to stay in close contact with our customers, monitor their requirements and our contract performance, and ensure that our customers receive timely deliveries.

We sell iron ore and iron ore pellets under different arrangements, including long-term contracts with customers and on a spot basis through tenders and trading platforms. Our pricing is generally linked to market price indexes and uses a variety of mechanisms, including current spot prices and average prices over specified

    

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periods. In cases where the products are priced before the final price is determinable at delivery, we recognize the sale based on a provisional price with a subsequent adjustment reflecting the final price.

In 2018, we hedged part of our total exposure to bunker oil prices relating to our owned fleet and long-term contracts of affreightment connected to our FOB and CFR international and domestic sales. The 2018 hedge program was settled in 2018.

1.1.6      Competition

The global iron ore and iron ore pellet markets are highly competitive. The main factors affecting competition are price, quality and range of products offered, reliability, operating costs and shipping costs.

    

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With respect to pellets, our major competitors are LKAB, Iron Ore Company of Canada, Ferrexpo Plc, Arcelor Mittal Mines Canada (former Quebec Cartier Mining Co.) and Bahrain Steel (former Gulf Industrial Investment Co.).

1.2         Manganese ore and ferroalloys

1.2.1      Manganese ore operations and production

We conduct our manganese mining operations in Brazil through Vale S.A. and our wholly owned subsidiaries Vale Manganês S.A. ("Vale Manganês") and MCR. Our mining operations are carried out under concessions from the federal government granted for an indefinite period. Our mines produce metallurgical ore, used primarily for the production of manganese ferroalloys, a raw material used to produce carbon and stainless steel.

Mining
complex
  Company   Location   Description/History   Mineralization   Operations   Power source   Access/ Transportation

Azul

  Vale S.A.   State of Pará   Open-pit mining operations and on-site beneficiation plant.   High- and medium-grade oxide-ores (24-46% manganese grade).   Crushing, scrubbing and classification steps, producing lumps and fines.   Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.   Manganese ore is transported by truck and EFC railroad to the Ponta da Madeira maritime terminal.

Morro da Mina

  Vale Manganês   State of Minas Gerais   Open-pit mining operations and concentration plant.   Medium- and low-grade silicocarbonate ores (an average content of 30% manganese grade).   Crushing, screening and dense-heavy medium separation DMS / HMS process producing lumps to the Barbacena and Ouro Preto ferroalloy plants.   Supplied through the national electricity grid. Acquired from regional utility companies.   Manganese ore is transported by truck to the Barbacena and Ouro Preto ferroalloy plants.

Urucum

  MCR   State of Mato Grosso do Sul   Underground mining operations and on-site beneficiation plant.   High-and medium-grade oxide ores (an average content of 46% manganese grade).   Crushing, scrubbing and classification steps, producing lumps and fines.   Supplied through the national electricity grid. Acquired through power purchase agreements.   Manganese ore is transported by barge traveling along the Paraguay and Paraná rivers to transhippers at the Nueva Palmira port in Uruguay.

    

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The following table sets forth information about our manganese ore production, obtained after beneficiation process, and mass recovery.

 
   
  Production for the year ended December 31,    
 
   
  2018 process
recovery(1)
Mine   Type   2016   2017   2018

      (million metric tons)   (%)

Azul

  Open pit   1.7   1.4   1.0   43

Morro da Mina

  Open pit   0.0   0.1   0.1   82

Urucum

  Underground   0.7   0.7   0.7   79

    Total

      2.4   2.2   1.8    

(1)
Percentage of the run-of-mine recovered in the beneficiation process.

1.2.2      Manganese ferroalloys operations and production

We conduct our manganese ferroalloys business through our wholly owned subsidiary Vale Manganês. The production of manganese ferroalloys consumes significant amounts of electricity, which is provided through power purchase agreements.

We produce several types of manganese ferroalloys, such as high carbon and medium carbon ferro-manganese and ferro-silicon manganese.

Plant   Location   Description/History   Nominal capacity   Power source

Minas Gerais Plants

  Cities of Barbacena and Ouro Preto   Barbacena has seven furnaces, two of which are refining furnaces and a briquetting plant. Ouro Preto has three furnaces, two of which are currently not operating due to market conditions.   Barbacena: 66,000 metric tons per year (54,000 metric tons per year of ferro-silicon manganese and 12,000 metric tons per year of ferro-manganese medium carbon). Ouro Preto: 64,000 metric tons per year of ferro-silicon manganese.   Supplied through the national electricity grid. Acquired from Furnas—Centrais Elétricas S.A. or through power purchase agreements.

Bahia Plant

  City of Simões Filho   Four furnaces, two converters and a sintering plant.   135,000 metric tons per year (42,000 metric tons per year of ferro-silicon manganese and 93,000 metric tons per year of high carbon ferro-manganese). The plant has a capacity to refine until 40,000 metric tons per year of ferro-manganese high carbon to produce ferro-manganese medium carbon alloy, according to market demand.   Supplied through the national electricity grid. Acquired from Companhia Hidrelétrica do São Francisco (CHESF) or through power purchase agreements.

    

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The following table sets forth information about our manganese ferroalloys production.

 
Production for the year ended December 31(1),
Plant 2016 2017 2018

(thousand metric tons)

Barbacena

    48     58     55

Ouro Preto

       3     10

Simões Filho

    77     88   103

Total

  124   149   168

(1)
Production figures reflect hot metal, which is further processed by a crushing and screening facility. Average mass recovery in this process is 85%.

1.2.3      Manganese ore and ferroalloys: sales and competition

The markets for manganese ore and ferroalloys are highly competitive. Competition in the manganese ore market takes place in two segments. High- and medium-grade manganese ore competes on a global seaborne basis, while low-grade ore competes on a regional basis. For some manganese ferroalloys, especially ferromanganese, higher-grade manganese ores are required to achieve competitive quality and cost, while medium- to lower-grade ores may be used in silicomanganese production. The main suppliers of high-grade ores are located in South Africa, Gabon, Australia and Brazil. The main producers of low-grade ores are located in the Ukraine, China, South Africa, Ghana, Kazakhstan, India and Mexico.

We compete in the seaborne market with both high- and medium-grade ores from the Azul and Urucum mines, where we benefit from extensive synergies with our iron ore operations, from mine to rail to port to vessel operations. Our main competitors in this segment are South32 (Australia and South Africa) and Eramet (Gabon). Our lower-grade ores, especially those from Morro da Mina, are consumed internally in our ferroalloy smelters.

The manganese ferroalloy market is characterized by a large number of participants who compete primarily on the basis of price. Our competitors are located principally in countries that produce manganese ore or carbon steel. Potential entrants and substitutes come from silicon or chrome ferroalloys, which can occasionally shift their furnaces to manganese alloys, and from electrolytic manganese producers. Competitors may be either integrated smelters like us, who feed manganese ore from their own mines, or non-integrated smelters. The principal competitive factors in this market are the costs of manganese ore, electricity, logistics and reductants such as coke, coal and charcoal. We compete with both stand-alone and integrated producers.

Focusing mainly in the Brazilian, South and North American steelmaking customers, our ferroalloys operations also benefit from synergies with our iron ore sales, marketing, procurement and logistics activities. We buy our energy and coke supplies at reasonable market prices both though medium-and long-term contracts. Competitors in the Brazilian market are about a dozen smelters with capacities from five to 90 thousand metric tons per year, most of which are not integrated and some of which are customers of our manganese ores. We have a distinctive advantage in comparison to them in producing ferroalloys with higher manganese content.

    

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2.           BASE METALS

2.1         Nickel

2.1.1      Operations

We conduct our nickel operations primarily through our wholly owned subsidiary Vale Canada Limited, which operates two nickel production systems, one in the North Atlantic region and the other in the Asia Pacific region. We also produce copper as a coproduct in our nickel operations in Canada and, through Vale S.A., operate a third nickel production system, Onça Puma, in the South Atlantic region. Our nickel operations are set forth in the following table.

Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/
Transportation
North Atlantic:                        
Vale Canada   Canada —Sudbury, Ontario   Integrated mining, milling, smelting and refining operations to process ore into finished nickel with a nominal capacity of 66,000 metric tons of refined nickel per year and additional nickel oxide feed for the refinery in Wales. Mining operations in Sudbury began in 1885. We acquired the Sudbury operations in 2006.   Nickel. Primarily underground mining operations with nickel sulfide ore bodies, which also contain some copper, cobalt, PGMs, gold and silver. We also process external feeds from third parties and from our Thompson operation. By the end of 2017, we ceased receiving Voisey's Bay feed in Sudbury. In addition to producing finished nickel in Sudbury, we ship a nickel oxide intermediate product to our nickel refinery in Wales for processing to final products. In 2018, as part of our efforts to reduce sulfur dioxide and other air emissions to meet regulatory changes in Ontario and Manitoba, and to rationalize our smelting and refining assets across Canada, we modified our processes to capture SO2 emissions from the converters as the final major milestone of the emissions reduction project.

Copper. We produce two intermediate copper products, copper concentrate and copper matte, and we also produce a finished electrowon copper cathode product. In September 2017, we switched to a single flash furnace in Sudbury, and as a result, we ceased copper anode production resulting in increased production of copper concentrate and copper matte.

  Patented mineral rights with no expiration date; mineral leases expiring between 2018 and 2038; and mining licenses of occupation with indefinite expiration date(1).   Supplied by Ontario's provincial electricity grid and produced directly by Vale via hydro generation.   Located by the Trans-Canada highway and the two major railways that pass through the Sudbury area. Finished products are delivered to the North American market by truck. For overseas customers, the products are loaded into containers and travel intermodally (truck/rail/containership) through both east and west coast Canadian ports.

    

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Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/
Transportation
Vale Canada   Canada —Thompson, Manitoba   Mining and milling operations to process ore into nickel concentrate. We phased out smelting and refining activities in Thompson during 2018. Thompson mineralization was discovered in 1956, and Thompson operations were acquired by us in 2006.   Nickel. Primarily underground mining operations with nickel sulfide ore bodies, which also contain some copper and cobalt. In 2017, we permanently shut down one of the two furnaces in Thompson and the other was shut down in 2018, permanently shutting down smelting and refining operations. By the end of 2017, we had ceased processing Voisey's Bay feed in Thompson, and since the second half of 2018, we have started sending the majority of the nickel concentrate from Thompson to be refined in Sudbury.                Order in Council leases expiring between 2020 and 2025; mineral leases expiring in 2034.   Supplied by Manitoba's provincial utility company.   Intermediate concentrates are delivered in Ontario.
Vale Newfoundland & Labrador Limited   Canada —Voisey's Bay and Long Harbour, Newfoundland and Labrador   Integrated open-pit mining and milling operation at Voisey's Bay producing nickel and copper concentrates with refining of nickel concentrate at Long Harbour into finished metal products with an expected nominal capacity of approximately 50,000 metric tons of refined nickel per year upon ramp-up. Voisey's Bay's operations started in 2005 and was purchased by us in 2006.   Comprised of the Ovoid open pit mine, and deposits for underground operations at a later stage. We mine nickel sulfide ore bodies, which also contain copper and cobalt. The Long Harbour facility continued to ramp up in 2018 while processing feed from Voisey's Bay concentrate exclusively. Copper concentrate from the open pit mine is sold directly to the market.   Mining lease expiring in 2027, with a right of further renewals for 10-year periods.   Power at Voisey's Bay is 100% supplied through Vale owned diesel generators. Power at the Long Harbour refinery is supplied by the Newfoundland and Labrador provincial utility company.   The nickel and copper concentrates from Voisey's Bay are transported to the port by haulage trucks and then shipped by dry bulk vessels to either overseas markets or to our Long Harbour operations for further refining.
Vale Europe Limited   U.K.— Clydach, Wales   Stand-alone nickel refinery (producer of finished nickel), with nominal capacity of 40,000 metric tons per year. The Clydach refinery commenced operations in 1902 and was acquired by us in 2006.   Processes a nickel intermediate product, nickel oxide, supplied from our Sudbury and Matsuzaka operations to produce finished nickel in the form of powders and pellets.     Supplied through the national electricity grid.   Transported to final customer in the UK and continental Europe by truck. Products for overseas customers are trucked to the ports of Southampton and Liverpool and shipped by ocean container.
Asia/Pacific                        

PT Vale Indonesia Tbk ("PTVI")

 

Indonesia —Sorowako, Sulawesi

 

Open cast mining area and related processing facility (producer of nickel matte, an intermediate product) with a nominal capacity of approximately 80,000 metric tons of nickel in matte per year. PTVI's shares are traded on the Indonesia Stock Exchange. We indirectly hold 59.28% of PTVI's share capital, Sumitomo Metal Mining Co., Ltd ("Sumitomo") holds 20.09%, Sumitomo Corporation holds 0.14% and the public holds 20.49%.(2) PTVI was established in 1968, commenced its commercial operations in 1978, was listed on the Indonesian stock exchange in 1990 and was acquired by us in 2006.

 

PTVI mines nickel laterite ore and produces nickel matte, which is shipped primarily to our nickel refinery in Japan. Pursuant to life-of-mine off-take agreements, PTVI sells 80% of its production to our wholly owned subsidiary Vale Canada and 20% of its production to Sumitomo.

 

Contract of work expiring in 2025, entitled to two consecutive ten-year extensions, in the form of a business license, subject to approval of the Indonesian government.(2)

 

Produced primarily by PTVI's low-cost hydroelectric power plants on the Larona River (there are currently three facilities). PTVI has thermal generating facilities in order to supplement its hydroelectric power supply with a source of energy that is not subject to hydrological factors.

 

Trucked approximately 55 km to the river port at Malili and then loaded onto barges in order to load break-bulk vessels for onward shipment.

    

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Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/
Transportation
Vale Nouvelle-Calédonie S.A.S. ("VNC")   New Caledonia —Southern Province   Mining and processing operations (producer of nickel oxide, nickel hydroxide and cobalt carbonate). We hold 95% of VNC's shares and the remaining 5% is held by Société de Participation Minière du Sud Calédonien S.A.S. ("SPMSC"). SPMSC has an obligation to increase its stake in VNC to 10% within two years after the startup of commercial production.   The ongoing ramp-up of our nickel operation in New Caledonia is expected to continue in the coming years. VNC utilizes a high-pressure acid leach process to treat limonitic and saprolitic laterite ores. As part of the ramp-up, VNC is undertaking a review of the capacity of different units of the plant to identify and eliminate bottlenecks. We expect to continue to ramp up VNC over the next five to six years to reach nominal production capacity of 50,000 metric tons per year of nickel contained in nickel oxide, which is further processed in our refineries in Asia, and hydroxide in cake form (IPNM) and cobalt in carbonate form.   Mining concessions expiring between 2022 and 2051(3).   Supplied through the national electricity grid and by independent producers.   Products are packed into containers and are trucked approximately 4 km to Prony port and shipped by ocean container.

Vale Japan Limited

 

Japan —Matsuzaka

 

Stand-alone nickel refinery (producer of intermediate and finished nickel), with a nominal capacity of 60,000 metric tons per year. We own 87.2% of the shares, and Sumitomo owns the remaining shares. The refinery was built in 1965 and was acquired by us in 2006.

 

Produces intermediate products for further processing in our refineries in Asia and the UK, and finished nickel products using nickel matte sourced from PTVI.

 


 

Supplied through the national electricity grid. Acquired from regional utility companies.

 

Products trucked over public roads to customers in Japan. For overseas customers, the product is loaded into containers at the plant and shipped from the ports of Yokkaichi and Nagoya.

Vale Taiwan Limited

 

Taiwan —Kaoshiung

 

Stand-alone nickel refinery (producer of finished nickel), with nominal capacity of 18,000 metric tons per year. The refinery commenced production in 1983 and was acquired by us in 2006.

 

Produced finished nickel for the stainless steel industry, primarily using intermediate products from our Matsuzaka and New Caledonian operations. We suspended operations at this plant in 2017 due to market conditions and it currently remains under care and maintenance.

 


 

Supplied through the national electricity grid. Acquired from regional utility companies.

 

Trucked over public roads to customers in Taiwan. For overseas customers, the product is loaded into containers at the plant and shipped from the port of Kaoshiung.

Vale Nickel (Dalian) Co., Ltd

 

China —Dalian, Liaoning

 

Stand-alone nickel refinery (producer of finished nickel), with nominal capacity of 32,000 metric tons per year. We own 98.3% of the equity interest and Ningbo Sunhu Chemical Products Co., Ltd. owns the remaining 1.7%. The refinery commenced production in 2008.

 

Produces finished nickel for the stainless steel industry, primarily using intermediate products from our Matsuzaka and New Caledonian operations.

 


 

Supplied through the national electricity grid. Acquired from regional utility companies.

 

Product transported over public roads by truck and by railway to customers in China. It is also shipped in ocean containers to overseas and some domestic customers.

    

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Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/
Transportation
South Atlantic                        
Vale/Onça Puma   Brazil —Ourilândia do Norte, Pará   Mining and smelting operation producing a high-quality ferronickel for application within the stainless steel industry.   The Onça Puma mine is built to recover nickel from saprolitic ore deposit. The operation produces ferronickel via the rotary kiln-electric furnace process. We are currently operating a single line with one electric furnace and two lines of calcine and rotary kilns, with nominal capacity estimated at 27,000 metric tons per year. We will evaluate opportunities to restart the second line operations in light of market conditions and the associated business case. Operations at Onça Puma have been suspended since September 2017 due a public civil action. See Additional information—Legal proceedings—Onça Puma Litigation.   Mining concession for indefinite period.   Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.   The ferro-nickel is transported by truck to the Vila do Conde maritime terminal in the Brazilian state of Pará, and exported in ocean containers.

(1)
We submitted applications for renewal of leases in Sudbury in 2017 and 2018 and the approval process is ongoing. All conditions required for the renewal have been fulfilled. This process usually takes a number of years, and we can continue to operate while the approval process is ongoing.
(2)
The contract of work between PTVI and the Indonesian government will expire in 2025, after which date PTVI will continue its operationin the form of a 10-year business license provided certain obligations are satisfied (and PTVI can apply for a further 10 year extension provided that PTVI is in compliance with predefined requirements). The contract of work also provides that PTVI agrees to further divest an additional 20% of its shares to Indonesian participants within five years of the issuance of a regulation dated October 2014 (approximately 20% of PTVI's shares are already publicly traded and listed on the Indonesian stock exchange).
(3)
VNC has requested the renewal of some concessions that were scheduled to expire before 2018. All conditions required for the renewal have been fulfilled. This process usually takes a number of years and we can continue to operate while the approval process is ongoing.

    

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2.1.2      Production

The following table sets forth our annual mine production by operating mine (or, on an aggregate basis in the case of the Sulawesi operating areas operated by PTVI in Indonesia, because it is organized by mining areas rather than individual mines) and the average percentage grades of nickel and copper. The mine production at Sulawesi represents the product from PTVI's screening station delivered to PTVI's processing plant and does not include nickel losses due to drying and smelting. For our Sudbury, Thompson and Voisey's Bay operations, the production and average grades represent the mine product delivered to those operations' respective processing plants and do not include adjustments due to beneficiation, smelting or refining. For our Onça Puma operation in Brazil and VNC operation in New Caledonia the production and average grade represents in-place ore production and does not include losses due to processing.

 
2016(1) 2017(1) 2018(1)
 
 
Grade  
Grade  
Grade
 
Production Copper Nickel Production Copper Nickel Production Copper Nickel

Ontario operating mines

                 

Copper Cliff North

979 1.44 1.26 814 1.40 1.30 746 1.30 1.29

Creighton

832 2.17 2.76 595 2.91 3.17 608 2.77 2.55

Stobie

1,373 0.57 0.64 448 0.53 0.62

Garson

711 1.34 1.91 635 1.48 1.93 655 1.35 2.00

Coleman

1,209 3.76 1.47 1,007 3.76 1.53 618 3.31 1.40

Ellen

75 0.42 0.88

Totten

671 1.86 1.43 710 1.90 1.33 710 2.02 1.39

Total Ontario operations

5,850 1.84 1.47 4,210 2.18 1.65 3,337 2.10 1.70

Manitoba operating mines

                 

Thompson

1,140 1.97 1,229 1.94 1,034 2.05

Birchtree

503 1.36 329 1.30

Total Manitoba operations

1,643 1.78 1,557 1.81 1,034 2.05

Voisey's Bay operating mines

                 

Ovoid

2,392 1.44 2.62 2,378 1.44 2.56 1,895 1.32 2.37

Sulawesi operating mines

                 

Sorowako

4,708 1.93 4,569 1.89 4,469 1.90

New Caledonia operating mines

                 

VNC

2,919 1.53 3,030   1.47 2,620 1.46

Brazil operating mines

                 

Onça Puma(2)

1,710 2.04 964 2.05

(1)
Production is stated in thousands of metric tons. Grade is % of copper or nickel, respectively.
(2)
Mining activities in Onça Puma have been suspended since September 2017, as a result of an injunction granted in a public civil action.

    

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The following table sets forth information about our nickel production, including: nickel refined through our facilities and intermediates designated for sale. The numbers below are reported on a contained nickel ore-source basis.

 
 
Finished production by ore source for the year
ended December 31,
Mine Type 2016 2017 2018
 
 
(thousand metric tons contained nickel)

Sudbury

Underground 80.4 61.9 50.6

Thompson

Underground 26.5 23.0 14.8

Voisey's Bay(1)

Open pit 49.0 51.8 38.6

Sorowako(2)

Open cast 81.1 73.1 72.1

Onça Puma

Open pit 24.1 24.7 22.9

New Caledonia(3)

Open pit 34.3 40.3 32.5

External(4)

15.6 13.1 13.1

Total(5)

311.0 288.2 244.6

(1)
Includes finished nickel produced at Long Harbour, Sudbury and Thompson.
(2)
These figures have not been adjusted to reflect our ownership. We have a 59.27% interest in PTVI, which owns the Sorowako mines.
(3)
These figures have not been adjusted to reflect our ownership. We have a 95.0% interest in VNC.
(4)
Finished nickel processed at our facilities using feeds purchased from unrelated parties.
(5)
These figures do not include tolling of feeds for unrelated parties.

2.1.3      Customers and sales

Our nickel customers are broadly distributed on a global basis. In 2018, 46% of our refined nickel sales were delivered to customers in Asia, 24% to Europe, 28% to North America and 2% to other markets. We have short-term fixed-volume contracts with customers for the majority of our expected annual nickel sales. These contracts generally provide stable demand for a significant portion of our annual production.

Nickel is an exchange-traded metal, listed on the London Metal Exchange ("LME") and Shanghai Futures Exchange ("SHFE"), and most nickel products are priced according to a discount or premium to the LME price, depending primarily on the nickel product's physical and technical characteristics. Our finished nickel products represent what is known in the industry as "primary" nickel, meaning nickel produced principally from nickel ores (as opposed to "secondary" nickel, which is recovered from recycled nickel-containing material). Finished primary nickel products are distinguishable in terms of the following characteristics, which determine the product price level and the suitability for various end-use applications:

    

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In 2018, the principal first-use applications for primary nickel were:

In 2018, 67% of our refined nickel sales were made into non-stainless steel applications, compared to the industry average for primary nickel producers of 30%. This brings more diversification and sales volume stability to our nickel revenues. As a result of our focus on higher-value segments, our average realized nickel prices for refined nickel have typically exceeded LME cash nickel prices.

We offer sales and technical support to our customers on a global basis through an established marketing network headquartered at our head office in Toronto (Canada). We have a well-established global marketing network for finished nickel, based at our head office in Toronto (Canada). We also have sales and technical support distributed around the world with primary back offices in Singapore and Toronto (Canada) and have sales managers located in St.Prex (Switzerland), Paramus, New Jersey (United States) and at several sites throughout Asia. For information about demand and prices, see Operating and financial review and prospects—Major factors affecting prices.

2.1.4      Competition

The global nickel market is highly competitive. Our key competitive strengths include our long-life mines, our low cash costs of production relative to other nickel producers, sophisticated exploration and processing technologies, and a diversified portfolio of products. Our global marketing reach, diverse product mix, and customer technical support direct our products into applications and geographic regions that offer the highest margins for our products.

Our nickel deliveries represented 11% of global consumption for primary nickel in 2018. In addition to us, the largest mine-to-market integrated suppliers in the nickel industry (each with its own integrated facilities, including nickel mining, processing, refining and marketing operations) are Nornickel, Glencore, Jinchuan Nonferrous Metals Corporation and BHP Billiton. Together with us, these companies accounted for about 37% of global refined primary nickel production in 2018.

The nickel market is based on the quality of the nickel products. Class I products, which have higher nickel content and lower levels of deleterious elements, are more suitable for high-end nickel applications, such as utilization in the specialties industries (e.g.: aircraft and spacecraft) and in batteries for electric vehicles. Class II products, which present lower nickel content and higher levels of deleterious elements, are mostly absorbed into the stainless steel market. The majority of the world nickel production is composed of Class II nickel products (57% of the global market in 2018), which include the increasingly relevant nickel pig iron (NPI, with nickel content under 15%). Most of our products are high quality nickel products, which makes Vale the producer of choice for specialty nickel applications. In 2018, 58% of our nickel products were Class I and 26% were battery-suitable Class II products, a product that does not fully satisfy the specifications of Class I, but has potential for use in electric vehicles. Looking forward, as a result of the worldwide lower availability of nickel sulfide reserves (the specific kind of orebodies that source Class I nickel) when compared to nickel laterite reserves (mainly producing Class II products), we expect the

    

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market for Class I nickel to be further tightened, creating more opportunities for our premium product portfolio.

While stainless steel production is a major driver of global nickel demand, stainless steel producers can obtain nickel with a wide range of nickel content, including secondary nickel (scrap). The choice between primary and secondary nickel is largely based on their relative prices and availability. See Operating and Financial Review and Prospects—Major factors affecting prices—Nickel.

Competition in the nickel market is based primarily on quality and reliability of supply and price. We believe our operations are competitive in the nickel market because of the high quality of our nickel products and our relatively low production costs.

    

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2.2         COPPER

2.2.1      Operations

We conduct our copper operations at the parent-company level in Brazil and through our subsidiaries in Canada.

Mining complex/Location Location Description/History Mineralization/Operations Mining title Power source Access/Transportation
Brazil:            
Vale/Sossego Carajás, state of Pará. Two main copper ore bodies, Sossego and Sequeirinho, and a processing facility to concentrate the ore. Sossego was developed by Vale. Production started in 2004 and has a nominal capacity of approximately 93,000 tpy of copper in concentrates. The copper ore is mined using the open-pit method, and the run-of-mine is processed by means of standard primary crushing and conveying, SAG milling (a semi-autogenous mill that uses a large rotating drum filled with ore, water and steel grinding balls to transform the ore into a fine slurry), ball milling, copper concentrate flotation, tailings disposal, concentrate thickening, filtration and load out. Mining concession for an indefinite period. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. We truck the concentrate to a storage terminal in Parauapebas and then transport it via the EFC railroad to the Itaqui Port in São Luís, state of Maranhão. We constructed an 85-kilometer road to link Sossego to Parauapebas.
Vale/Salobo Carajás, state of Pará. Salobo I processing plant started production in 2012 and has a total capacity of 12 Mtpy of ore processed. The open pit mine and mill concluded their ramp up in the fourth quarter of 2016 to a capacity of 24 Mtpy of ore processed with the full implementation of Salobo II expansion. Salobo I and II have a total capacity of approximately 197,000 tpy of copper in concentrates. Our Salobo copper mine is mined using the open-pit method, and the run-of-mine is processed by means of standard primary and secondary crushing, conveying, roller press grinding, ball milling, copper concentrate flotation, tailings disposal, concentrate thickening, filtration and load out. Mining concession for an indefinite period. Supplied through the national electricity grid. Acquired through power purchase agreements. We truck the concentrate to a storage terminal in Parauapebas and then transport it via the EFC railroad to the Itaqui Port in São Luís, state of Maranhão. We constructed a 90-kilometer road to link Salobo to Parauapebas.
Canada:            
Vale Canada Canada—Sudbury, Ontario   See —Base metals—Nickel—Operations    
Vale Canada/ Voisey's Bay Canada—Voisey's Bay, Newfoundland and Labrador   See —Base metals—Nickel—Operations    

    

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2.2.2      Production

The following table sets forth our annual mine production in our Salobo and Sossego mines and the average percentage grades of copper. The production and average grade represents in-place ore production and does not include losses due to processing. For the annual production of copper as a coproduct in our nickel operations, see—Base metals—Nickel—Production.

 
2016(1) 2017(1) 2018(1)
 
Production Grade Production Grade Production Grade

Brazil

           

Sossego

12,687 0.82 12,380 0.81 15,664 0.72

Salobo

57,279 0.62 61,573 0.63 50,963 0.69

Total

69,966 0.66 73,953 0.66 66,627 0.70

(1)
Production is stated in thousands of metric tons. Grade is % of copper.

The following table sets forth information on our copper production.

 
 
Finished production by ore source for the year
ended December 31,
Mine Type 2016 2017 2018
 
 
(thousand metric tons)

Brazil:

       

Salobo

Open pit 176 193 193

Sossego

Open pit 93 100 92

Canada: (as coproduct of nickel operations)

       

Sudbury

Underground 122 98 72

Voisey's Bay

Open pit 32 34 26

Thompson

Underground 3 2 1

External(1)

21 12 11

Zambia:

       

Lubambe(2)

Underground 8 7

Total

  453 446 395

(1)
We process copper at our facilities using feed purchased from unrelated parties.
(2)
For financial reporting purposes, Lubambe is accounted for under the equity method. We have included production numbers from Lubambe, adjusted to reflect our 40% equity interest, as the level of production and operating performance from entities accounted for under the equity method impacts our Adjusted EBITDA. Our use of Adjusted EBITDA is explained in—Results of operations—Results of operations by segment—Adjusted EBITDA by segment. Vale sold its stake in the Lubambe mine in December 2017.

2.2.3      Customers and sales

We sell copper concentrates from Sossego and Salobo under medium- and long-term contracts to copper smelters in Europe, India and Asia. We have medium-term copper supply agreements with domestic customer for part of the copper concentrates and copper matte produced in Sudbury, which are also sold under long-term contracts in Europe and Asia. We sell copper concentrates from Voisey's Bay under long-term contracts to customers in Europe and electrowon copper cathodes from Sudbury and Long Harbour in North America under short-term sales agreements.

    

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2.2.4      Competition

The global refined copper market is highly competitive. Producers are integrated mining companies and custom smelters, covering all regions of the world, while consumers are principally wire rod and copper-alloy producers. Competition occurs mainly on a regional level and is based primarily on production costs, quality, reliability of supply and logistics costs. The world's largest copper cathode producers are Corporación Nacional del Cobre de Chile ("Codelco"), Aurubis AG, Jiangxi Copper Corporation Ltd., Glencore, Tongling Non-Ferrous Metals Group Co. and Freeport McMoRan Copper & Gold Inc., each operating at the parent-company level or through subsidiaries. Our participation in the global refined copper cathodes market is marginal as we position ourselves more competitively in the copper concentrate market.

Copper concentrate and copper matte are intermediate products in the copper production chain. Both the concentrate and matte markets are competitive, having numerous producers but fewer participants and smaller volumes than in the copper cathode market due to the high levels of integration by the major copper producers.

In the copper concentrate market, mining occurs on a global basis with a predominant share from South America, while consumers are custom smelters located mainly in Europe and Asia. Competition in the custom copper concentrate market occurs mainly on a global level and is based on production costs, quality, logistics costs and reliability of supply. The largest competitors in the copper concentrate market are Freeport McMoRan, Glencore, BHP Billiton, Codelco, Anglo American, Antofagasta plc, Rio Tinto and First Quantum; each operating at the parent-company level or through subsidiaries. Our market share in 2018 was about 2% of the total copper concentrate market.

2.3         PGMs and other precious metals

As byproducts of our Sudbury nickel operations in Canada, we recover significant quantities of PGMs, as well as small quantities of gold and silver. We operate a processing facility in Port Colborne, Ontario, which produces PGMs, gold and silver intermediate products using feed from our Sudbury operation. The refinery in Acton, England, where our PGM intermediates and PGM feeds purchased from third parties were processed was closed in 2018 as part of business optimization, and the PGM concentrates from our Port Colborne operation are being sold to third parties. Gold and silver intermediates are also sold to third parties. Our copper concentrates from our Salobo and Sossego mines in Carajás, in the Brazilian state of Pará, also contain gold, the value of which we realize in the sale of those products.

In February 2013, we sold to Wheaton Precious Metals Corp. (formerly Silver Wheaton) ("Wheaton") 25% of the gold produced as a byproduct at our Salobo copper mine, in Brazil, for the life of that mine, and 70% of the gold produced as a byproduct at our Sudbury nickel mines, in Canada, for 20 years. In each of March 2015 and August 2016, we sold to Wheaton an additional 25% of the gold produced as a byproduct at our Salobo copper mine. In consideration for the August 2016 sale, we received an initial cash payment of US$800 million, an option value of approximately US$23 million from a reduction of the exercise price of the warrants of Wheaton held by Vale since 2013, and ongoing payments of the lesser of US$400 per ounce (subject to a 1% annual inflation adjustment starting January 1, 2019) and the prevailing market price, for each ounce of gold that we deliver under the agreement. We may receive an additional cash payment if we expand our capacity to process Salobo copper ores to more than 28 Mtpy before 2036. The additional cash payment may range from US$113 million to US$953 million, depending on ore grade, timing and size of the expansion. See Business overview—Significant changes in our business. Pursuant to the gold stream contract, Wheaton received 282,879 oz. of gold in 2018.

    

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The following table sets forth information on the contained volume of precious metals and platinum group metals (PGMs) as a byproduct of our production of nickel and copper concentrates.

Mine Type 2016 2017 2018
 
 
(thousand troy ounces of contained metal)

Sudbury(1):

       

Platinum

Underground 166 144 135

Palladium

Underground 322 214 218

Gold(2)

Underground 98 74 57

Salobo:

       

Gold(2)

Open pit 317 346 361

Sossego:

       

Gold

Open pit 67 65 59

(1)
Includes metal produced from unrelated parties feed purchases. Includes production out of Ontario (Canada) and Acton (England) production. Excludes tolling from unrelated parties.
(2)
Figures represent 100% of Salobo and Sudbury contained volume of gold as a byproduct of our production of nickel and copper concentrates and do not deduct the portion of the gold sold to Wheaton.

2.4         Cobalt

We recover significant quantities of cobalt as a byproduct of our nickel operations. In 2018, we produced 1,288 metric tons of refined cobalt metal (in the form of cobalt rounds) at our Port Colborne refinery, 1,630 metric tons of cobalt rounds at our Long Harbour refinery, 2,105 metric tons of cobalt in a cobalt-based intermediate product in New Caledonia, and our remaining cobalt production consisted of 70 metric tons of cobalt contained in other intermediate products (such as nickel concentrates). As a result of the ramp-up of VNC operations in New Caledonia, our production of cobalt intermediate as a byproduct of our nickel production will increase in the coming years. We sell cobalt on a global basis. The cobalt metal and the Long-Harbour cobalt rounds are electro-refined at our Port Colborne refinery and have very high purity levels (99.8%), meeting the LME contract specification. Cobalt metal is used in the production of various alloys, particularly for aerospace applications, as well as the manufacture of cobalt-based chemicals.

In June 2018, we sold to Wheaton and Cobalt 27 Capital Corp. ("Cobalt 27") a combined 75% of the cobalt produced as a byproduct at our Voisey's Bay mine from January 1, 2021, which includes the ramp-down of production from the existing mine and the life-of-mine production from our underground mine expansion project. In consideration, we received US$690 million in cash from Wheaton and Cobalt 27 upon closing of the transaction on June 28, 2018, and will receive additional payments of 20%, on average, of cobalt prices upon delivery. Vale remains exposed to approximately 40% of future cobalt production from Voisey's Bay, through Vale's retained interest in 25% of cobalt production and the additional payments upon delivery. See Business overview—Significant changes in our business. The following table sets forth information on our cobalt production.

 
 
Finished production by ore source for the year
ended December 31,
Mine Type 2016 2017 2018
 
 
(contained metric tons)

Sudbury

Underground 882 840 520

Thompson

Underground 700 138 198

Voisey's Bay

Open pit 887 1,829 1,902

New Caledonia

Open pit 3,188 2,780 2,104

Others(1)

143 224 371

Total

  5,799 5,811 5,093

(1)
These figures do not include tolling of feeds for unrelated parties. Includes cobalt processed at our facilities using feeds purchased from unrelated parties and PTVI ore source 24 metric tons in 2016, 6 metric tons in 2017 and 173 metric tons in 2018.

    

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3.  COAL

3.1         Operations

We produce metallurgical and thermal coal through our subsidiary Vale Moçambique, which operates the Moatize mine. We also have a minority interest in a Chinese company, Henan Longyu Energy Resources Co., Ltd. ("Longyu").

Company/ Mining complex Location Description/History Mineralization/ Operations Mining title Power source Access/ Transportation
Vale Moçambique            
Moatize Tete, Mozambique Open-cut mine, which was developed directly by Vale. Operations started in August 2011 and are expected to reach a nominal production capacity of 22 Mtpy, considering the Moatize expansion, comprised of metallurgical and thermal coal and the Nacala Logistics Corridor ramp-up. Vale has an indirect 80.75% stake, Mitsui has an indirect 14.25% stake and the remaining is owned by Empresa Moçambicana de Exploração Mineira, S.A. Produces metallurgical and thermal coal. Moatize's main branded products are the Chipanga premium hard coking coal and Moatize Low Vol Premium hard coking coal, but there is operational flexibility for multiple products. The optimal product portfolio will come as a result of market trials. Coal from the mines is currently processed at a CHPP with a capacity of 4,000 metric tons per hour. An additional CHPP began production in August 2016, which increased feed capacity by additional 4,000 metric tons per hour. Mining concession expiring in 2032, renewable thereafter. Supplied by local utility company. Back up supply on site. The coal is transported from the mine to the port at Nacala-à-Velha via the Nacala Logistics Corridor.

    

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3.2         Production

The following table sets forth information on our marketable coal production.

 
 
Production for the year ended December 31,
Operation Mine type 2016 2017 2018
 
 
(thousand metric tons)

Metallurgical coal:

       

Moatize(1)

Open-cut 3,480 6,953 6,161

Thermal coal:

       

Moatize(1)

Open-cut 2,012 4,307 5,444

(1)
These figures correspond to 100% production at Moatize, and are not adjusted to reflect our ownership.

3.3         Customers and sales

Coal sales from our Moatize operations, in Mozambique, target global steel and energy markets, including Asia, Africa, Europe and the Americas. Our Chinese coal joint venture directs its sales into the Chinese domestic market.

3.4         Competition

The global coal industry comprises markets for metallurgical and thermal coal and is highly competitive.

The demand for steel, especially in Asia, underpins demand for metallurgical coal, while demand for electricity underpins demand for thermal coal. Competitiveness in the coal industry is primarily based on the economics of production costs, coal quality, transportation costs and proximity to the market. Our key competitive strengths are a new and competitive transportation corridor and the size and quality of our reserves. The logistics facilities in Mozambique help us ensure that our products are delivered on time and at a relatively low cost in comparison to lengthy waits at the ports in Queensland, Australia and on the east coast of the United States.

Our main competitors in the metallurgical coal business are located in Australia and Canada and include subsidiaries, affiliates and joint ventures of BHP Billiton, Glencore, Anglo American, Peabody, Jellinbah Resources, among others. In the thermal coal business, our main competitors are located in Indonesia, South Africa, Australia, Colombia, USA, Russia and include subsidiaries affiliates and joint ventures of Glencore, Anglo American, Drummond Co, Pt Bumi Resources and PT Adaro, among others.

    

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4.           INFRASTRUCTURE

4.1         Logistics

We have developed our logistics business based on the transportation needs of our mining operations and we also provide transportation services for other customers. We conduct our logistics businesses at the parent-company level and through subsidiaries and joint ventures, as set forth in the table below.

 
 
 
Our share of capital  
Company Business Location Voting Total Partners
 
 
 
(%)
 

Vale

Railroad (EFVM and EFC), port and maritime terminal operations Brazil

VLI(1)

Railroad, port, inland terminal and maritime terminal operations. Holding of certain general cargo logistics assets Brazil 37.6 37.6 FI-FGTS, Mitsui and Brookfield

MRS

Railroad operations Brazil 47.1 48.2 CSN, Congonhas Minérios, Usiminas Participações e Logísticas, Gerdau, Railvest Investments and public investors.

CPBS

Port and maritime terminal operations Brazil 100 100

PTVI

Port and maritime terminal operations Indonesia 59.2 59.2 Sumitomo, public investors

Vale Logística Argentina(2)

Port operations Argentina 100 100

Vale Logística Uruguay

Port operations Uruguay 100 100

Central East African Railways ("CEAR")(3)

Railroad Malawi 46.2 46.2 Mitsui, investors

Corredor de Desenvolvimento do Norte ("CDN")(3)

Railroad Mozambique 46.2 46.2 Mitsui, investors

Corredor de Desenvolvimento do Norte—Porto ("CDN Porto")(3)

Port and maritime terminal operations Mozambique 46.2 46.2 Mitsui, investors

Corredor Logístico Integrado de Nacala S.A. ("CLN")(4)

Railroad and port operations Mozambique 50.0 50.0 Mitsui

Vale Logistics Limited ("VLL")(4)

Railroad operations Malawi 50.0 50.0 Mitsui

Transbarge Navegación

Paraná and Paraguay Waterway System (Convoys) Paraguay 100 100

VNC

Port and maritime terminal operations New Caledonia 95.0 95.0 SPMSC

VMM

Port and maritime terminal operations Malaysia 100 100

Vale Newfoundland & Labrador Limited

Port operations Voisey's Bay and Long Harbour, in Newfoundland and Labrador 100 100

Vale Oman Distribution Center LLC

Port and maritime terminal operations Oman 100 100

(1)
BNDES holds debentures issued by Vale that are exchangeable into part of Vale's stake in VLI. Vale's equity interests in VLI may be reduced by up to 6.88% if BNDES exercises its rights under those debentures.
(2)
Vale Logística Argentina is no longer operational.
(3)
Vale holds its interest in CEAR, CDN and CDN Porto through a 50.0% interest in Nacala Corridor Holding Netherlands B.V., which indirectly owns 92.4% of these operating companies that comprise the NLC.
(4)
Vale holds its interest in CLN and VLL through a 50.0% interest in Nacala Corridor Holding Netherlands B.V., which indirectly owns 100% of these operating companies that comprise the NLC.

    

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4.1.1      Railroads

Vitória a Minas railroad ("EFVM").    The EFVM railroad links our Southeastern System mines in the Iron Quadrangle region in the Brazilian state of Minas Gerais to the Tubarão port, in Vitória, in the Brazilian state of Espírito Santo. We operate this 888-kilometer railroad under a 30-year renewable concession, which expires in 2027. The EFVM railroad consists of two lines of track extending for a distance of 584 kilometers to permit continuous railroad travel in opposite directions, and single-track branches of 304 kilometers. Industrial manufacturers are located in this area and major agricultural regions are also accessible to it. VLI has rights to purchase railroad transportation capacity on our EFVM railroad. In 2018, the EFVM railroad transported a daily average of 334.5 thousand metric tons of iron ore and 60.2 thousand metric tons of other cargo. The EFVM railroad also carried 1,135 million passengers in 2018. In 2018, we had a fleet of 322 locomotives and 19,413 wagons at EFVM, which were operated by Vale and third parties.

Carajás railroad ("EFC").    The EFC railroad links our Northern System mines in the Carajás region in the Brazilian state of Pará to the Ponta da Madeira maritime terminal, in São Luis, in the Brazilian state of Maranhão. We operate the EFC railroad under a 30-year renewable concession, which expires in 2027. EFC extends for 997 kilometers from our Carajás mines to our Ponta da Madeira maritime terminal complex facilities. Its main cargo is iron ore, principally carried for us. VLI has rights to purchase railroad transportation capacity on our EFC railroad. In 2018, the EFC railroad transported a daily average of 559.8 thousand metric tons of iron ore and 31.1 thousand metric tons of other cargo. EFC also carried 317.9 thousand passengers in 2018. EFC supports the largest train, in terms of capacity, in Latin America, which measures 3.5 kilometers, weighs 41.67 thousand gross metric tons when loaded and has 330 cars. In 2018, EFC had a fleet of 282 locomotives and 21,087 wagons, which were operated by Vale and third parties.

The principal items of cargo of the EFVM and EFC railroads are:

We charge market prices for customer freight, including iron ore pellets originating from joint ventures and other enterprises in which we do not have a 100% equity interest. Market prices vary based on the distance traveled, the type of product transported and other criteria, subject to price caps set forth in the relevant concession agreements, and are regulated by the Brazilian transportation regulatory agency, ANTT (Agência Nacional de Transportes Terrestres).

VLI.    VLI provides integrated logistics solutions through 7,940 kilometers of railroads in Brazil (FCA and FNS), eight inland terminals with a total storage capacity of 795,000 metric tons and three maritime

    

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terminals and ports operations. We hold a 37.6% stake in VLI, and are party to a shareholders' agreement with FI-FGTS, Mitsui and Brookfield, which hold the remaining equity interests in VLI. VLI's main assets are:

In 2018, VLI transported a total of 38.4 billion ntk of general cargo, including 18.4 billion ntk from FCA and FNS and 8.0 billion ntk through operational agreements with Vale.

MRS Logística S.A. ("MRS").    The MRS railroad, in which we have a 48.2% equity interest, is 1,643 kilometers long and links the Brazilian states of Rio de Janeiro, São Paulo and Minas Gerais. The MRS railroad transports our iron ore products from the Southern System mines to our maritime terminals. In 2018, it transported a daily average of 317.4 thousand metric tons of iron ore and 160.0 thousand metric tons of other cargo.

The Nacala Logistics Corridor (NLC) connects the Moatize mine to the Nacala-à-Velha maritime terminal, located in Nacala, Mozambique, and crosses into the Republic of Malawi. The NLC consists of railway and port infrastructure, including greenfield and rehabilitation of existing railways in Mozambique and Malawi and a new coal port terminal in Mozambique. The NLC transports our coal products from the Moatize mine to our maritime terminal and supports our operations in Southeastern Africa. In Mozambique, we are operating under two concession agreements, one related to the Mozambican greenfield railway and another related to the newly constructed coal port, both held by our subsidiary Corredor Logístico Integrado de Nacala S.A. ("CLN"), which will expire in 2043, subject to renewal. We have also rehabilitated existing railroads under a concession held by our subsidiary, CDN, which will expire in 2035. In Malawi, we are operating under a concession held by our subsidiary, VLL, which will expire in 2046, subject to renewal, and we have also rehabilitated existing railroads under a concession held by our subsidiary, CEAR, which will expire in 2046. In 2018, the NLC transported a daily average of 32.42 thousand metric tons of coal and 1.48 thousand metric tons of other cargo. The NLC also carried 800,883 passengers in 2018. In 2018, we had a fleet of 101 locomotives and 2,677 wagons at NLC, which were operated by CLN.

In November 2017, the NLC companies obtained project financing in the total amount of US$2.730 billion. The transaction closed in March 2018. Vale received US$2.6 billion in proceeds, in repayment of certain shareholders loans provided for construction of NLC, net of certain commissions paid by NLC. The project financing will be repaid in 14 years with the proceeds obtained from the tariff charged by NLC in connection with the provision of coal transportation.

    

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4.1.2      Ports and maritime terminals

We operate ports and maritime terminals principally as a means to complete the delivery of our iron ore and iron ore pellets to bulk carrier vessels serving the seaborne market. See Ferrous minerals—Iron ore and iron ore pelletsIron ore operations. We also use our ports and terminals to handle customers' cargo.

Tubarão and Praia Mole Ports.    The Tubarão port, which covers an area of 18 square kilometers, is located in the Brazilian state of Espírito Santo and contains the iron ore maritime terminal and the general cargo terminals (Terminal de Granéis Líquidos and the Terminal de Produtos Diversos). The Praia Mole port is also located in the Brazilian state of Espírito Santo.

Ponta da Madeira maritime terminal.    Our Ponta da Madeira maritime terminal is located in the Brazilian state of Maranhão. Pier I can accommodate vessels of up to 420,000 DWT and has a maximum loading rate of 16,000 metric tons per hour. Pier III, which has two berths and three shiploaders, can accommodate vessels of up to 210,000 DWT at the south berth and 180,000 DWT at the north berth (or two vessels of 180,000 DWT simultaneously), subject to tide conditions, and has a maximum loading rate of 8,000 metric tons per hour in each shiploader. Pier IV (south berth) is able to accommodate vessels of up to 420,000 DWT and have two ship loaders that work alternately with a maximum loading rate of 16,000 metric tons per hour. Pier IV (north berth) is able to accommodate vessels of up to 420,000 DWT and have two ship loaders that work alternately with a maximum loading rate of 16,000 metric tons per hour. In 2018, Vale received from the Brazilian tax authorities, the customs authorization for the operations of Pier IV (north berth). Cargo shipped through our Ponta da Madeira maritime terminal consists of the Northern system production of iron ore, pellets and manganese. In 2018, 198 million metric tons of iron ore were shipped through the terminal. The Ponta da Madeira maritime terminal has a storage yard with a static capacity of 7.2 million metric tons.

Itaguaí maritime terminal—Cia. Portuária Baía de Sepetiba ("CPBS").    From this terminal we mostly export iron ore from our Southern system. CPBS is a wholly owned subsidiary that operates the Itaguaí

    

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terminal, at the Itaguaí Port, in Sepetiba in the Brazilian state of Rio de Janeiro, which is leased from Companhia Docas do Rio de Janeiro (CDRJ). The Itaguaí port terminal has a pier with one berth that allows the loading of ships up to 17.8 meters of draft and approximately 200,000 DWT of capacity. In 2018, the terminal loaded 19.2 million metric tons of iron ore.

Guaíba Island maritime terminal.    From this terminal we export mostly iron ore from our Southern system. We operate a maritime terminal on Guaíba Island in the Sepetiba Bay, in the Brazilian state of Rio de Janeiro. The iron ore terminal has a pier with two berths that allows the loading of ships of up to 350,000 DWT. In 2018, the terminal loaded 41.2 million metric tons of iron ore.

VLI also operates Inácio Barbosa maritime terminal (TMIB), owned by Petrobras, in the Brazilian state of Sergipe; Santos maritime terminal (TIPLAM), in the Brazilian state of São Paulo, which is jointly owned by VLI and Vale Fertilizantes; and Pier II in the Itaqui Port, which can accommodate vessels of up to 155,000 DWT and has a maximum loading rate of 3,800 metric tons per hour for pig iron and of 3,000 metric tons per hour for grains.

Since October 2017, our subsidiary Vale Logística Uruguay S.A. ("VLU") contracts third-party services to operate the Corporación Navios port terminal in the Nueva Palmira Free Zone in Uruguay. The port terminal provides facilities for the unloading, storing, weighing and loading of bulk materials from Corumbá, Brazil, by river barge for transshipment to ocean-going vessels destined for Brazilian, Asian and European markets. In 2018, we handled 1.058 thousand metric tons of iron and manganese ore through the Corporación Navios port.

Vale Newfoundland & Labrador Limited operates a port as part of our mining operation at Voisey's Bay, Labrador and a port as part of our processing operation at Long Harbour, Newfoundland. The port at Voisey's Bay is used for shipping nickel, copper and re-supply. The port at Long Harbour is used to receive nickel concentrate from Voisey's Bay along with goods and materials required for the Long Harbour operation.

Vale Oman Distribution Center LLC operates a distribution center in Liwa, Sultanate of Oman. The maritime terminal has a large deep-water jetty, a 600-meter long platform connected to the shore by means of a 700-meter long trestle, and is integrated with a storage yard that has throughput capacity to handle 40 Mtpy of iron ore and iron ore pellets per year. The loading nominal capacity is 10,000 metric tons per hour and the nominal unloading capacity is 9,000 metric tons per hour.

PTVI owns and operates two ports in Indonesia to support its nickel mining activities.

    

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We own and operate a port in Prony Bay, Province Sud, New Caledonia. This port has three terminals, including a passenger ferry terminal able to berth two ships up to 50m long, a dry bulk wharf where vessels of up to 58,000 DWT can unload at a rate of 8,000 metric tons per day and a general cargo wharf where vessels up to 200m long can berth. The general cargo wharf can move containers at a rate of seven per hour and liquid fuels (LPG, HFO, diesel) at a rate of 350 cubic meters per hour, and break-bulk. The port's container yard, covering an area of approximately 13,000 square meters, can receive up to 1,000 units. A bulk storage yard is linked to the port by a conveyor and has a storage capacity of 94,000 metric tons of limestone, 95,000 metric tons of sulfur, and 60,000 metric tons of coal.

Teluk Rubiah Maritime Terminal ("TRMT"). TRMT is located in the Malaysian state of Perak and has a pier with two berths that allows the unloading of vessels of approximately 400,000 DWT of capacity and the loading of vessels up to 220,000 DWT of capacity. In 2018, the terminal unloaded 24 million metric tons of iron ore and loaded 24 million metric tons of iron ore.

4.1.3      Shipping

In 2018, we shipped approximately 248 million metric tons of iron ore and pellets in transactions in which we were responsible for transportation. We ship a large amount of our iron ore products from Brazil to Asia through long-term contracts of affreightment with owners of very large ore carriers (VLOCs). These vessels reduce energy consumption and greenhouse emissions by carrying an increased amount of cargo in a single trip, offering lower shipping costs. In 2018, approximately 64 million metric tons of iron ore products were transported under long term contracts of affreightment on vessels of 400,000 DWT.

We also own three capesize vessels with capacities ranging from 150,000 to 180,000 DWT.

We have changed our strategy with respect to maritime shipping. In the past, we owned and operated a low-cost fleet of vessels to carry our cargoes from Brazil to our markets, especially in Asia. We now focus on securing long-term shipping capacity and protecting against volatility in freight pricing through long-term contracts of affreightment, without incurring the costs relating to building, owning and operating the vessels. Since 2014, we have sold 19 of our VLOCs of 400,000 DWT for an aggregate amount of US$1.940 billion. In 2018, Vale concluded negotiations of long-term contracts of affreightment with shipowners to employ 47 new VLOCs of 325,000 DWT. These shipowners plan to build the new vessels in China, South Korea and Japan, with deliveries estimated to take place between 2019 and 2023. Vessels will be equipped with similar engines to the ones that are currently being used in the second generation of Valemax vessels, and which are much more fuel-efficient.

    

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Through our subsidiary, Transbarge Navegación, and other chartered convoys, we transport iron ore and manganese ores through the Paraná and Paraguay waterway system. The barges are unloaded in our local customers' terminals in Argentina or in a contracted terminal in the Nueva Palmira Free Zone in Uruguay, where we load the ore into ocean going vessels. We transported 2.1 million metric tons through the waterway system in 2018, including 1.046 thousand metric tons of ore through our local customers' terminals and 1.058 thousand metric tons of ore through a port in Uruguay.

We manage a fleet of 15 owned tugboats. We directly operate nine tugboats in the ports of Vitória and Mangaratiba, in the Brazilian states of Espírito Santo and Rio de Janeiro, respectively. We have a 50% stake in a consortium that operates five tugboats in the port of São Luís in the Brazilian states of Maranhão. One additional tugboat is hired to and operated by third parties, under their responsibility, in other ports in Brazil. We also own two tugboats in New Caledonia.

4.2         Energy

We have developed our energy assets based on the current and projected energy needs of our operations, with the goal of reducing our energy costs and minimizing the risk of energy shortages.

Energy management and efficient supply in Brazil are priorities for us, given the uncertainties associated with changes in the regulatory environment and the risk of rising electricity prices. In 2018, our installed capacity in Brazil was 1.6 GW, sourced from both directly and indirectly owned power plants. We use the electricity produced by these plants for our internal consumption needs. We currently own direct stakes in three hydroelectric power plants and three small hydroelectric power plants in operation. The hydroelectric power plant of Candonga, the operations of which remain suspended since November 2015 as a result of the failure of the Samarco Dam, is located in the Southeastern region, Machadinho is located in the Southern region, and Estreito is located in the Northern region. The small hydroelectric power plants of Mello, Glória and Nova Maurício are located in the Southeastern region. In 2018, we sold the Ituerê hydroelectric power plant, located in the Southeastern region, due to its high required investments, low capacity and high cash cost when compared to our other assets. Through our 55% participation in Aliança Geração de Energia S.A. ("Aliança Geração"), we also have indirect stakes in the hydroelectric power plants of Igarapava, Porto Estrela, Funil, Candonga, Aimorés, Capim Branco I, Capim Branco II, , located in the Southeastern Region and, additionally, we have indirect stake in Santo Inácio, a Wind Complex located in Ceará State, which started operations in December 2017. Part of the electricity generated by these assets is supplied to our operations through power purchase agreements with Aliança Geração.

In order to achieve electricity self-sufficiency in Brazil by 2030 and increase renewable energy sources, we signed a long-term energy supply contract for 20 years, which will be supplied by the Folha Larga Sul wind farm, a 151.2 MW project in Campo Formoso, Bahia, Brazil. This project is expected to begin commercial operation by the first half of 2020. The agreement also includes a future asset call option held by Vale.

We also have a 4.59% indirect stake in Norte Energia S.A. ("Norte Energia"), the company established to develop and operate the Belo Monte hydroelectric plant in the Brazilian state of Pará, which started operations in April 2016. Our participation in the Belo Monte project gives us the right to purchase 9% of

    

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the electricity generated by the plant, which has already been contracted through a long-term power purchase agreement entered into with Norte Energia.

We also produce, through our subsidiary Biopalma da Amazônia S.A. ("Biopalma"), palm oil in the Brazilian state of Pará.

In 2018, our wholly owned and operated hydroelectric power plants in Sudbury generated 19% of the electricity requirements of our Sudbury operations. The power plants consist of five separate generation stations with an installed generator nameplate capacity of 55 MW. The output of the plants is limited by water availability, as well as by constraints imposed by a water management plan regulated by the provincial government of Ontario. Over the course of 2018, average demand for electrical energy was 162 MW to all surface plants and mines in the Sudbury area.

In 2018, diesel generation provided 100% of the electric requirements of our Voisey's Bay operations. We have six diesel generators on-site, with output ranging from 12 to 14 MW, in order to meet seasonal demands.

Energy costs are a significant component of our nickel production costs for the processing of lateritic ore at our PTVI operations in Indonesia. A major portion of PTVI's electric furnace power requirements is supplied at a low cost by its three hydroelectric power plants on the Larona River: (i) the Larona plant, which has an average generating capacity of 165 MW, (ii) the Balambano plant, which has an average capacity of 110 MW and (iii) the Karebbe plant, with 90 MW of average generating capacity. These plants help reduce production costs by substituting oil used for power generation with hydroelectric power, reduce CO2 emissions by replacing non-renewable power generation, and enable us to increase our current nickel production capacity in Indonesia.

5.  Other investments

Below is a list of our main investments:

    

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RESERVES

PRESENTATION OF INFORMATION CONCERNING RESERVES

The estimates of proven and probable ore reserves at our mines and projects and the estimates of mine life included in this annual report have been prepared by our staff of experienced geologists and engineers, unless otherwise stated, and in accordance with the technical definitions established by the SEC. Under the SEC's Industry Guide 7:

We periodically revise our reserve estimates when we have new geological data, economic assumptions or mining plans. During 2018, we performed an analysis of our reserve estimates for certain projects and operations, which is presented in this report. Reserve estimates for each operation assume that we either have or expect to obtain all the necessary rights and permits to mine, extract and process mineral reserves at each mine. For some of our operations, the projected exhaustion date includes stockpile reclamation. Where we own less than 100% of the operation, reserve estimates have not been adjusted to reflect our proportional ownership interest. Certain figures in the tables, discussions and notes have been rounded. For a description of risks relating to reserves and reserve estimates, see Risk factors.

As a part of Vale internal governance process, we have a Mineral Resources and Mineral Reserves Global Committee coordinated by our exploration and projects department and composed of representatives of all business units (Ferrous, Coal and Base Metals) and the accounting, investor relations and capital projects departments. The purpose of these committee is ensuring the transparency, consistency, professional competence and reliability of all information prepared for internal purposes and public reporting. It is also responsible for overseeing the governance of our estimation and reporting of mineral reserves, which include external audit when applicable.

We report our reserves in accordance with the SEC's Industry Guide 7, as summarized above. In 2018, the SEC adopted new rules governing disclosures on mining properties, including reporting of reserves and resources, which will take effect for our 2021 fiscal year (although earlier adoption is permitted). The new SEC rules will align SEC disclosure requirements more closely with global regulatory practices and standards, as embodied in standards developed by CRIRSCO (Committee for Mineral Reserves International Reporting Standards). We already estimate our reserves under CRIRSCO standards, therefore we do not expect material changes when the new SEC standards become effective.

Our reserve estimates are based on certain assumptions about prices. We have determined that our reported reserves could be economically produced if prices for the products identified in the following

    

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table were equal to the three-year average historical prices through December 31, 2018. For this purpose, we used the three-year historical average prices set forth in the following table.

Commodity Three-year average historical price Pricing source

Iron ore:

   

Vale(1)

US$66.4 per dry metric ton Average Platts IODEX (62% Fe CFR China)

Coal:(2)

   

Metallurgical – Moatize

US$179.4 per metric ton Platts PHCC (PLV)

Thermal – Moatize

US$82.3 per metric ton Richards Bay FOB

Base metals:

   

Nickel(3)

US$11,037 per metric ton LME Ni

Copper

US$5,850 per metric ton LME Cu

Nickel and copper byproducts:

   

Platinum

US$938 per oz Average realized price

Palladium

US$838 per oz Average realized price

Gold

US$1,258 per oz Average realized price

Cobalt(3)

US$54,423 per metric ton 99.3% low cobalt metal (source: Metal Bulletin)

Manganese ore(4):

   

Manganese

US$5.81 per dry metric ton Average CRU (44% Mn CFR China)

(1)
The economic assessment of our iron ore reserves is based on the average of 62% Fe iron ore prices, as adjusted to reflect the effects of freight, moisture and the quality premium for our iron ore.
(2)
As received basis (8% moisture).
(3)
Premiums (or discounts) are applied to the nickel and cobalt spot prices at certain operations to derive realized prices. These premiums (or discounts) are based on product form, long-term contracts, packaging and market conditions.
(4)
The economic assessment of our manganese ore reserves is based on the average CRU prices, adjusted to reflect the effects of freight, moisture and the quality premium for our manganese ore prices on a CFR China basis.

IRON ORE RESERVES

The tables below set forth our iron ore reserves and other information about our iron ore mines. Our reserve table reflects our production and operational plans, which are based on the facilities (consisting of both mines and processing plants) within each system, rather than the individual mines.

We classify our iron ore reserves as proven reserves to the extent that they satisfy the requirements of the definition of proven (measured) reserves, as described above, and that we have obtained the environmental licenses for the corresponding pit operation and have at least a reasonable expectation of obtaining on a timely basis any additional licenses necessary to conduct the operations.

We periodically review the economic viability of our iron ore reserves in light of changes in the iron ore industry. We have determined that the Urucum and Corumbá mines, although at production stage, are not economically viable based on three-year average historical prices. Accordingly, we are not reporting reserves at those facilities since 2015.

Variations in iron ore reserves from 2017 to 2018 reflect depletion resulting from mine production for all mines. Our reserves for Fazendão, Fábrica Nova and Capanema (located at the Mariana complex in our Southeastern System), João Pereira, Galinheiro and Sapecado (located at the Minas Itabirito complex in our Southern System) and Capitão do Mato (located at the Vargem Grande complex in our Southern System) have been positively affected by new geological information and estimates. Also, we are no longer reporting reserves for the Conta História project, located at the Mariana complex in our Southeastern System, because we are reviewing our long term plan for Mariana complex.

    

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Following the failure of Dam I tailing dam in January 2019 and the shutdown of the Feijão and Jangada mines and related infrastructure, all located in the Paraopeba Complex (Southern System), we are reviewing these operations and Capim Branco project. Under these circumstances, we are currently not in a position to report these reserves. For more information about the failure of Feijão tailing dam, see Business overviewFailure of the tailings dam at the Córrego do Feijão mine.

On January 29, 2019, we announced our decision to accelerate the decommissioning of our upstream tailings dams. In order to proceed with the accelerated decommissioning of these upstream tailings dams, we will temporarily halt production at the units where the structures are located, namely: Abóboras, Capitão do Mato and Tamanduá (located at the Vargem Grande complex); Segredo and João Pereira (located at the Fábrica sub-complex in the Minas Itabirito complex). We will also suspend production at Fábrica and Vargem Grande pelletizing plants. The temporary halt of these operations does not impact our mineral reserves, because the upstream dams being decommissioned were no longer in use and are not necessary for these operations. We expect to resume these operations once the decommissioning work is completed.

Iron ore reserves(1)
(As of December 31, 2018)

Proven – 2018
Probable – 2018
Total – 2018
Total – 2017

Tonnage
Grade
Tonnage
Grade
​Tonnage



​Grade
Tonnage
Grade

Southeastern System(2)

               

Itabira(3)

687.5 45.7 173.9 45.8 861.4 45.7 920.2 45.6

Minas Centrais(4)

163.6 48.5 570.7 57.4 734.4 55.4 776.5 55.1

Mariana(5)

366.6 46.9 3,507.9 44.5 3,874.5 44.7 4,100.4 44.3

Total Southeastern System

1,217.7 46.4 4,252.6 46.3 5,470.4 46.3 5,797.1 45.9

Southern System(6)

               

Minas Itabirito(7)

436.9 54.8 3,243.7 43.7 3,680.5 45.0 3,658.2 45.0

Vargem Grande(8)

368.9 44.0 1,170.5 47.9 1,539.3 47.0 1,462.5 48.3

Paraopeba(9)

42.9 63.2 123.2 60.6 166.1 61.3 308.5 60.4

Total Southern System

848.6 50.5 4,537.3 45.3 5,385.9 46.1 5,429.2 46.7

Northern System(10)

               

Serra Norte(11)

576.2 66.3 1,443.6 65.7 2,019.9 65.9 2,169.2 66.0

Serra Sul(12)

1,969.0 66.1 2,319.1 66.4 4,288.1 66.3 4,195.3 65.5

Serra Leste

6.9 66.7 249.3 65.4 256.2 65.4 258.1 65.4

Total Northern System

2,552.1 66.2 4,012.0 66.1 6,564.1 66.1 6,622.6 65.6

Total Vale Systems

4,618.4 58.1 12,802.0 52.1 17,420.4 53.7 17,848.9 53.5

(1)
Iron Ore Reserve estimates stated as metric million tonnes inclusive moisture and dry %Fe grade; following moisture contents: Itabira 1.66%; Minas Centrais 7,46%; Mariana 3.66%; Minas Itabirito 4.74%; Vargem Grande 5.17%; Paraopeba 6.29%; Serra Norte 6.39%; Serra Sul 4.47%; Serra Leste 3.18%.
(2)
Approximate drill hole spacing used to classify the Reserves were: 100m × 100m to Proven Reserves and 200m × 200m to Probable Reserves. Average product recovery (tonnage basis) of the iron ore reserves are: 53% for Itabira, 78% for Minas Centrais and 62% for Mariana.
(3)
Includes reserves for Conceição and Minas do Meio mines.
(4)
Includes reserves for Brucutu mine and Apolo project. Our operations at the Brucutu mine have been suspended since February 4, 2019. On April 15, 2019, the court of appeals of the State of Minas Gerais reversed the last injunction that prevented us from operating the Brucutu mine. We expect to resume operations at Brucutu soon, but the proceedings challenging our right to use the dams supporting our operations at Brucutu are still ongoing.
(5)
Includes reserves for Alegria, Fábrica Nova and Fazendão mines and Capanema. For 2017, we also reported reserves for Conta Histórica project.
(6)
Approximate drill hole spacing used to classify the Reserves were: 100m × 100m to Proven Reserves and 200m × 200m to Probable Reserves. Average product recovery (tonnage basis) of the iron ore reserves are: 59% for Minas Itabirito, 58% for Vargem Grande and 96% for Paraopeba.
(7)
Includes reserves for Sapecado, Galinheiro, João Pereira and Segredo mines.
(8)
Includes reserves for Tamanduá, Capitão do Mato and Abóboras mines.

    

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(9)
Paraopeba integrated operation includes Jangada, Córrego do Feijão, Mar Azul and Capão Xavier mines and the Capim Branco project. For 2018, we only report reserves for Mar Azul and Capão Xavier mines. We are not in a position to report reserves for the Jangada and Córrego do Feijão mines and the Capim Branco project, which are under review following the failure of Dam I at the Feijão mine.
(10)
Approximate drill hole spacing used to classify the reserves were: 150m × 100m to proven reserves and 300m × 200m to probable reserves, except Serra Leste which is 100m × 100m to proven reserves and 200m × 200m to probable reserves. Average product recovery (tonnage basis) of the iron ore reserves are: 100% for Serra Norte, 100% for Serra Leste and 100% for Serra Sul.
(11)
Includes reserves for N1, N2, N3, N4W, N4E and N5 mines.
(12)
Includes reserves for S11C and S11D deposits.

The mine exhaustion schedule has been adjusted due to our new production plan and our revision of project capacity.

 
Iron ore integrated operations
 
Type Operating since Projected
exhaustion date(1)
Vale interest
 
 
 
 
(%)

Southeastern System

       

Itabira

Open pit 1957 2028 100.0

Minas Centrais

Open pit 1994 2054 100.0

Mariana

Open pit 1976 2106 100.0

Southern System

       

Minas Itabirito

Open pit 1942 2120 100.0

Vargem Grande

Open pit 1993 2059 100.0

Paraopeba

Open pit 2001 2036 100.0

Northern System

       

Serra Norte

Open pit 1984 2042 100.0

Serra Sul

Open pit 2016 2062 100.0

Serra Leste

Open pit 2014 2062 100.0

(1)
Indicates the life-of-mine for the operating mine with the longest projected exhaustion date in the complex.

Manganese ore reserves

The following tables set forth manganese ore reserves and other information about our mines. The variation in the mine's ore reserves from 2017 to 2018 predominantly reflects depletion through mine production and update due to new geological information and estimates of ore reserves for Azul and Morro da Mina. Our manganese ore reserves information for Urucum are currently being reviewed to consider new economic assumptions and ongoing geotechnical studies, which are expected to be completed by 2020. Although the Urucum mine continues to operate, we are not in a position to report reserves for the Urucum mine until these studies are concluded.

Manganese ore reserves(1)(2)
(As of December 31, 2018)

Proven – 2018
Probable – 2018
Total – 2018
Total – 2017

Tonnage
Grade
Tonnage
Grade
Tonnage
Grade

Azul

10.3 26.5 4.4 27.5 14.7 26.8 15.0 26.6

Urucum

9.3 46.5

Morro da Mina

4.8 28.4 3.7 24.5 8.5 26.7 8.5 30.4

Total

15.1 27.1 8.1 26.1 23.2 26.7 32.7 33.2

(1)
Manganese Ore Reserve estimates stated as metric million tonnes inclusive moisture and dry %Mn grade; following moisture contents: Morro da Mina (3.4%) and Mina do Azul (18.0%).
(2)
Approximate drill hole spacing used to classify the reserves was: 100m × 100m for Proven Reserves and 200m × 200m for Probable Reserves. Average product recovery (tonnage basis) of the iron ore reserves are: Azul (40%) and Morro da Mina (70%).

    

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The mine exhaustion schedule has been adjusted to reflect our new production plan.

 
Manganese ore mines
 
Type Operating since Projected
exhaustion date
Vale interest
 
 
 
 
(%)

Azul

Open pit 1985 2026 100.0

Urucum

Underground 1976 100.0

Morro da Mina

Open pit 1902 2049 100.0

COAL RESERVES

Our coal reserve estimates have been provided on an in-place material basis after adjustments for depletion through mine production, anticipated mining losses and dilution. Marketable reserves include adjustments for losses associated with beneficiation of raw coal mined to meet saleable product requirements.

We continue our exploration program in Moatize, targeting areas within the current mine plan and the extension of it, with the purpose of aggregating more reserves in the future. In 2018, we drilled 52% (approximately 92,000 meters) of the total 177,000 meter exploration drill campaign, which will continue in 2019. The results of this campaign are still under analysis and have not been reflected in our mineral reserve disclosure.

 
Coal ore reserves(1)
(As of December 31, 2018)
 
ROM(2)  
 
 
Marketable reserves(3)
 
 
Proven –
2018
Probable –
2018
 
 
 
 
 
Coal type Total – 2018 Total – 2017 2018 2017

Tonnage Tonnage
CV Tonnage
CV Tonnage Tonnage

Moatize

Metallurgical & thermal 194.8 791.0 985.7 26.0 1,022.5 26.0 (thermal) 403.0 415.0

(1)
The reserve stated above is on a 100% shareholding basis. Vale's ownership interest in accordance with the table below should be used to calculate the portion of reserves directly attributable to Vale.
(2)
Tonnage is stated in millions of metric tons and is reported on an in situ 4.0% moisture basis. Calorific Value (CV) for thermal coal is stated as the Gross Calorific Value (Mj/Kg) on air-dried basis.
(3)
Tonnage is stated in millions of metric tons.
 
Coal mines
 
Type Operating since Projected
exhaustion date
Vale interest
 
 
 
 
(%)

Moatize

Open pit 2011 2039 80.75

    

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NICKEL ORE RESERVES

Our nickel mineral reserve estimates are of in-place material after adjustments for depletion and mining losses (or screening and drying in the case of PTVI) and recoveries, with no adjustments made for metal losses due to processing.

Nickel ore reserves(1)
(As of December 31, 2018)

Proven – 2018
Probable – 2018
Total – 2018
Total – 2017
Recovery

Tonnage
Grade
Tonnage
Grade
Tonnage
Grade
Tonnage
Grade
range

                (%)

Canada

                 

Sudbury

20.9 1.65 40.8 1.27 61.7 1.40 64.9 1.43 75 – 85

Thompson

85 – 90

Voisey's Bay

15.5 2.24 15.5 2.00 31.0 2.12 32.4 2.13 80 – 90

Indonesia

                 

PTVI

101.8 1.76 14.7 1.64 116.4 1.74 95.1 1.79 85 – 90

New Caledonia

                 

VNC

Brazil