We have prepared our financial statements in this annual report in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), which differ in certain respects from accounting practices adopted in Brazil (“Brazilian GAAP”). Brazilian GAAP is determined by the requirements of Brazilian corporate law and the rules and regulations of the Brazilian Securities Commission (Comissão de Valores Mobiliários), or CVM.

We also publish Brazilian GAAP financial statements and use them for reports to Brazilian shareholders, CVM filings, determining the legal minimum dividend under Brazilian law and determining our Brazilian tax liability. Beginning in 2008, significant changes are being made to Brazilian corporate law to permit Brazilian GAAP to converge with International Financial Reporting Standards (“IFRS”). Pursuant to CVM regulations, we are required to report our financial statements in IFRS beginning with the year ending December 31, 2010.

Our financial statements and the other financial information appearing in this annual report have been translated from Brazilian reais into U.S. dollars on the basis explained in Note 3 to our financial statements, unless we indicate otherwise.

References to “real,” “reais” or “R$” are to Brazilian reais (plural) and to the Brazilian real (singular), the official currency of Brazil. References to “U.S. dollars” or “US$” are to United States dollars. References to “CAD” are to Canadian dollars, and references to “A$” are to Australian dollars. Unless otherwise specified, we use metric units. References to “Vale” are to Companhia Vale do Rio Doce. References to “us” or “we” are to Vale and, except where the context otherwise requires, its consolidated subsidiaries. References to our “preferred shares” are to our preferred class A shares. References to our “ADSs” or “American Depositary Shares” include both our common American Depositary Shares (our “common ADSs”), each of which represents one common share of Vale, and our preferred American Depositary Shares (our “preferred ADSs”), each of which represents one preferred share of Vale. American Depositary Shares are represented by American Depositary Receipts (“ADRs”) issued by the depositary.

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 (a) the countries in which we operate, mainly Brazil and Canada, (b) the global economy, (c) capital markets, (d) the mining and metals businesses and their dependence upon global industrial production, which is cyclical by nature, and (e) the high degree of global competition in the markets in which we operate. For additional information on factors that could cause our actual results to differ from expectations reflected in forward-looking statements, see Item 3. Key information—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.

Not applicable.

Not applicable.

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 appearing in this annual report.

The global economy, and in particular global industrial production, is the primary driver of demand for minerals and metals. Global industrial production has been trending downward since the second half of 2008, resulting in a significant and widespread contraction in demand for minerals and metals, including an unprecedented decline in global demand for iron ore, our main product.

There is uncertainty about the depth and duration of the current global economic downturn and its continuing impact on the demand for minerals and metals. To avoid significant inventory accumulation, we have been reducing production of several products, which will have a negative impact on our cash generation and profitability.

China has been the main driver of the global demand for minerals and metals over the last few years. In 2008, Chinese demand represented approximately 53% of global demand for seaborne iron ore, 29% of global demand for nickel, 34% of global demand for aluminum and 27% of global demand for copper. The percentage of our gross revenues attributable to sales to consumers in China was 17.4% in 2008. A contraction of China’s economic growth could result in lower demand for our products, leading to lower revenues, cash flow and profitability.

Chinese economic growth has been decelerating sharply as a result of a tightening domestic credit market and slowing exports. The strong decline in credit growth from the last quarter of 2007 through the third quarter of 2008 significantly impeded growth in the real estate sector, one of the largest consumers of steel in China. Although the Chinese government is increasing expenditure on infrastructure and public housing, launching tax incentives, and taking measures to ease credit tightness, there is uncertainty about the extent and duration of the current growth deceleration.

Demand for our most important products depends on global demand for steel. Iron ore and iron ore pellets, which together accounted for 57.3% of our 2008 gross revenues, are used to produce carbon steel. Nickel, which accounted for 15.5% of our 2008 gross revenues, is used mainly to produce stainless steel. Demand for steel depends heavily on global economic conditions, but it also depends on a variety of regional and sectoral factors. 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 industry could reduce the global seaborne trade of iron ore. The global seaborne trade of iron ore could also suffer from competition from metallics, such as semi-finished steel and scrap. In certain cases, it may be more economical for steelmakers to charge more scrap in basic oxygen furnaces (“BOF”) and electric arc furnaces (“EAF”), instead of producing pig iron. Semi-finished products, such as billets and slabs, may also be available from fully-integrated steel mills at low cost, reducing overall demand for seaborne iron ore.

From 2003 to 2007, growing worldwide demand for carbon steel led to strong demand and rising prices for iron ore and iron ore pellets. However, the acceleration of the global financial crisis and the slowdown in Chinese demand since the second half of 2008 have resulted in sharp cuts in global carbon steel output, negatively affecting demand for iron ore and iron ore pellets. Moreover, the global financial crisis has had a sharp impact on Europe and Brazil, our natural markets for iron ore and iron ore pellets. The European economy may recover more slowly than other regions, which would negatively affect the volume of our

In response to high nickel prices, which reached record highs in the second quarter of 2007 as a result of high demand for stainless steel, producers and consumers of stainless steel started shifting from stainless steel with high nickel content (series 300) to stainless steels with either lower nickel content (series 200) or no nickel content (series 400). It is unclear whether this trend will continue or potentially reverse in the midst of lower nickel prices. Stainless steel production fell 2% in the first half of 2008, and declined 13% in the second half of 2008 relative to 2007, as a result of inventory de-stocking and the global financial crisis. A sustained decline in austenitic stainless steel production would have a material adverse effect on our revenues from nickel.

Nickel, aluminum and copper are sold in an active global market and traded on commodity exchanges, such as the London Metal Exchange and the New York Mercantile Exchange. Prices for these metals are subject to significant fluctuations and are affected by many factors, including actual and expected global macroeconomic and political conditions, levels of supply and demand, the availability and cost of substitutes, inventory, investments by commodity funds and others and actions of participants in the commodity markets. Prices for these metals are more volatile than contractual prices for products such as iron ore, iron ore pellets and metallurgical coal, because they respond more quickly to actual and expected changes in market conditions.

Demand for primary nickel may be negatively affected by the direct substitution of primary nickel with other materials in current applications. Scrap nickel competes directly with primary nickel as a source of nickel for use in the production of stainless steel, and the choice between them is largely driven by their relative prices and availability. In 2008, the stainless steel scrap ratio is estimated to have remained relatively unchanged compared to 2007, at 49%. Nickel pig iron, a product developed by Chinese steel and alloy makers that utilizes low-grade lateritic nickel ores, competes with other nickel sources in the production of stainless steel. In 2008, nickel pig iron production declined approximately 17%, given high production costs and lower nickel prices.

Due to the slowdown in the global economy beginning in the second half of 2008, demand for our products has declined sharply. We have been taking measures to adjust our production volume to the lower demand level, such as shutting down mines, slowing down plant production, and undertaking maintenance ahead of schedule. However, operating at significant idle capacity may expose us to higher unit production costs, because a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of mining operations. In addition, there could be limits to cost cutting due to certain labor regulations or previous labor or government agreements. During periods of high demand, conversely, our ability to rapidly increase production capacity is limited.

Our financial performance may be negatively affected by regulatory, political, economic and social conditions in countries in which we have significant operations or projects, particularly Brazil, Canada, Indonesia, Australia, New Caledonia and Mozambique.

Our operations depend on authorizations from and concessions by governmental regulatory agencies of the countries in which we operate. For details about the authorizations and concessions upon which our operations activities depend, see Item 4. Information on the company—Regulatory matters. 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. For example, a mining law in Indonesia enacted in January 2009 may have important implications for current and future mining operations of PT International Nickel Indonesia Tbk (“PT Inco”). See Item 4. Information on the company—Regulatory matters—Mining regulation.

Actual or potential political changes and changes in economic policy may undermine investor confidence, result in economic slowdowns and otherwise adversely affect the economic and other conditions under which we operate in ways that could have a material adverse effect on our business. Governments in emerging economies such as Brazil, Indonesia and New Caledonia frequently intervene in the economy and occasionally make substantial changes in policy that could adversely affect exchange rates, inflation, interest rates, rates of taxes or royalties and the economic and regulatory environment in which we operate. For example, a planned referendum in 2014 may result in New Caledonia becoming fully independent from France, which may result in political and economic changes that could adversely affect our Goro project.

Protestors have taken actions to disrupt our operations and projects, and they may continue to do so in the future. In New Caledonia, protestors have in the past caused physical damage to our Goro project and have impeded the construction of the marine pipeline. Although we vigorously defend ourselves against illegal acts, while supporting the communities living near our operations, future attempts by protestors to harm our operations could adversely affect our business.

We are investing to further increase our production capacity, logistics capabilities and to expand the scope of minerals we produce. Our expansion and mining projects are subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:

As of March 31, 2009, Valepar S.A. owned 52.7% of our outstanding common stock and 32.4% of our total outstanding capital. As a result of its share ownership, Valepar can control the outcome of some actions

The Brazilian government owns 12 Vale golden shares, 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 Item 10. Additional information—Common shares and preferred shares—General.

We operate in a global environment, and our activities straddle multiple jurisdictions and complex regulatory frameworks with increased enforcement activities worldwide. Our governance and compliance processes, which include the review of internal control over financial reporting, may not prevent future breaches of law, accounting or governance standards. We may be subject to breaches of our Code of Ethical Conduct, business conduct protocols and instances of fraudulent behavior and dishonesty by our employees, contractors or other agents. Our failure to comply with applicable laws and other standards could subject us to fines, loss of operating licenses and reputational harm.

We currently operate important parts of our pelletizing, nickel, bauxite, coal and steel businesses through joint ventures with other companies. Important parts of our electricity business are operated through consortia. 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 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. For more information about our joint ventures, see Item 4. Information on the company—Lines of business.

Our operations often involve the use, handling, disposal and discharge of hazardous materials into the environment or the use of natural resources, and nearly all aspects of our operations and development projects around the world are subject to environmental, health and safety regulation. Such regulation requires us to obtain operating licenses, permits and other approvals and to conduct environmental assessments prior to initiating projects or undertaking significant changes to existing operations. Difficulties in obtaining permits may lead to construction delays or cost increases, and in some cases may lead us to postpone or even abandon a project. Environmental regulation also imposes standards and controls on activities relating to mining, exploration, development, production, reclamation, closure, monitoring and the refining, distribution and marketing of our products. Such regulation may give rise to significant costs and liabilities. In addition, community activist groups and other stakeholders may increase demands for environmentally-sustainable development, which could entail significant costs and reduce our profitability.

Environmental regulation in many countries in which we operate has become stricter in recent years, and it is possible that more regulation or more aggressive enforcement of existing regulations will adversely affect us by imposing restrictions on our activities, creating new requirements for the issuance or renewal of environmental licenses, raising our costs or requiring us to engage in expensive reclamation efforts. For more information on environmental, health and safety regulation applicable to our operations, see Item 4. Information on the company—Regulatory matters—Environmental regulation and Item 8. Financial information—Legal proceedings.

Our reported ore reserves are estimated quantities of ore and minerals that we have determined can be economically mined and processed under present and anticipated conditions to extract their mineral content. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including many factors beyond our control. Reserve engineering 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 and 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. Estimates of different engineers may vary, and results of our mining and production subsequent to the date of an estimate may lead to revision of estimates. Reserve estimates and estimates of mine life may require revision based on actual production experience and other factors. For example, fluctuations in the market prices of minerals and metals, reduced recovery rates or increased operating and capital costs due to inflation, exchange rates or other factors may render proven and probable reserves uneconomic to exploit and may ultimately result in a restatement of reserves.

We engage in mineral exploration, which is highly speculative in nature, involves many risks and frequently is non-productive. Our exploration programs, which involve significant capital 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.

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 write-offs. In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in cost overruns that may render the project not economically feasible.

Reserves are gradually depleted in the ordinary course of a given mining operation. As mining progresses, distances to the primary crusher and to waste deposits become longer, pits become steeper and underground operations become deeper. As a result, over time, we usually experience rising unit extraction costs with respect to each mine. 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.

From 2003 to 2007, the mining industry faced worldwide shortages of mining and construction equipment, spare parts, contractors and other skilled personnel as a result of high demand for minerals and metals and the large number of projects under development. We have experienced longer lead-times for mining equipment and problems with the quality of contracted engineering, construction and maintenance services. We compete with other mining companies for highly skilled executives and staff with relevant industry and technical experience, and we may not be able to attract and retain such people. Shortages during peak periods could negatively impact our operations, resulting in higher production or capital expenditure costs, production interruptions, higher inventory costs, project delays and potentially lower production and revenues. While this risk may be mitigated in the short term by economic conditions, we believe it remains an issue in the medium-term upon the recovery of the global economy.

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. Negotiation may become more difficult in times of higher prices and increased profits in the mining and metals industries, as labor unions may seek wage increases. Strikes or work stoppages have occurred in the past in Canada and Indonesia and could reoccur in connection with negotiations of new labor agreements or during other periods for other reasons, including the risk of layoffs during a downcycle. Moreover, we could be adversely affected by labor disruptions involving unrelated parties that may provide us with goods or services. Strikes and other labor disruptions at any of our operations could adversely affect the operation of facilities and the timing of completion and the cost of our capital projects.

Energy costs are a significant component of our cost of production, representing 16.6% of our total cost of goods sold in 2008. To fulfill our energy needs, we depend on oil by-products, which represented 33.7% of total energy needs in 2008 in TOE (tons of oil equivalent), electricity (40.4% on the same basis), coal (12.4% on the same basis) and natural gas (13.5% on the same basis).

Fuel costs represented 10.4% of our cost of goods sold in 2008. Increases in oil and gas prices adversely affect margins in our logistics, mining, iron ore pellets, nickel and alumina businesses. Due to relatively high international oil prices, which increased by 38% in 2008, and low nickel prices recently, we have announced cuts in nickel production in Indonesia, where we use oil generators.

Electricity costs represented 6.1% of our total cost of goods sold in 2008. If we are unable to secure reliable access to electric energy 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. Due to relatively high electricity prices and low aluminum prices recently, we have announced a production curtailment at one of our aluminum smelters, which pays electricity at spot prices.

Electricity shortages have occurred in Brazil in the past and could reoccur in the future, and there can be no assurance that the Brazilian government’s policies will succeed in encouraging growth in power generation capacity. Future shortages, and government efforts to respond to or prevent shortages, may adversely impact the cost or supply of electricity for our Brazilian aluminum and ferroalloy operations, which are electricity-intensive. Changes in the laws, regulations or governmental policies regarding the power sector or concession requirements could reduce our expected returns from our investments in power generation. See Item 4. Information on the company—Regulatory matters—Electric energy regulation.

Through our subsidiary PT Inco, we process lateritic nickel ores using a pyrometallurgical process, which is energy-intensive. Although PT Inco currently generates a majority of the electricity for its operations from its own hydroelectric power plants, hydrological factors, such as low rainfalls, could adversely affect electricity production at PT Inco’s plants in the future, which could significantly increase the risk of higher costs or

We are affected by fluctuations in the prices of the currencies in which we conduct operations relative to the U.S. dollar. A substantial portion of our revenues and debt is denominated in U.S. dollars, and changes in exchange rates may result in losses or gains on our net U.S. dollar-denominated indebtedness and accounts payable. In 2008, 2007 and 2006, changes in exchange rates produced net foreign exchange gains (loss) of US$(1.011) billion, US$1.639 billion and US$452 million, respectively. In addition, the price volatility of the Brazilian real, the Canadian dollar, the Indonesian rupiah and other currencies against the U.S. dollar affect our results since most of our costs of goods sold are denominated in currencies other than the U.S. dollar, principally the real (62% in 2008) and the Canadian dollar (20% in 2008), while our revenues are mostly U.S. dollar-denominated. Currency fluctuations are expected to continue to affect our financial income, expense and cash flow generation.

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

Our businesses are generally subject to a number of risks and hazards, which could result in damage to, or destruction of, mineral properties, facilities and equipment. 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 pollution or certain hazards or interruption of certain business activities) may not be available at a reasonable cost, or at all. As a result, accidents or other negative developments involving our mining, production or transportation facilities could have a material adverse effect on our operations.

The Brazilian custodian for the shares underlying our ADSs will maintain an electronic registration from the Central Bank of Brazil entitling it 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 electronic registration for only five business days from the date of exchange. Thereafter, an ADR holder may not be able to obtain and remit U.S. dollars abroad upon the disposition of, or distributions relating to, the underlying shares unless it obtains its own electronic registration by registering the investment in the underlying shares under Resolution No. 2,689 of the National Monetary Council, which permits qualifying institutional foreign investors to buy and sell securities on the São Paulo Stock Exchange (the “BOVESPA”). For more information regarding these exchange controls, see Item 10. Additional information—Exchange controls and other limitations affecting security holders. If an ADR holder attempts to obtain its own electronic registration, it may incur expenses or suffer delays in the application process, which could delay the receipt of dividends or distributions relating to the underlying shares or the return of capital in a timely manner.

We cannot assure ADR holders that the custodian’s electronic registration or any certificate of foreign capital registration obtained by them will not be affected by future legislative changes, or that additional restrictions applicable to ADR holders, the disposition of the underlying shares or the repatriation of the proceeds from disposition will not be imposed in the future.

ADR holders may not be able to exercise preemptive rights, or exercise other types of rights, with respect to the underlying shares. 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 with respect to those rights or an exemption be available. We are not obligated to file a registration statement in the United States, or to make any other similar filing in any other jurisdiction, relating to preemptive rights with respect to the underlying shares or to undertake steps that may be needed to make exemptions from registration available, and we cannot assure ADR holders that we will file any registration statement or take such steps. For a more complete description of preemptive rights with respect to the underlying shares, see Item 10. Additional information—Common shares and preferred shares—Preemptive 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 the event that we fail to provide the depositary with voting materials on a timely basis, or the depositary does not provide sufficient time for ADR holders to submit voting instructions, ADR holders will not be able to vote. 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.

ADR holders may be disadvantaged by the fact that the Brazilian securities markets are not as highly regulated and supervised as the securities markets in the United States or in certain other jurisdictions. Rules and policies against self-dealing and regarding the preservation of minority shareholder interests may be less well-developed and enforced in Brazil than in the United States or in certain other jurisdictions. For example, when compared to Delaware corporate law, Brazilian corporate law and practice have less detailed and well-established rules and judicial precedents relating to the review of management decisions against duty of care and duty of loyalty standards in the context of corporate restructurings, transactions with related parties, and sale-of-business transactions. Moreover, shareholders in Brazilian companies ordinarily do not have standing to bring a class-action lawsuit. 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. For more information concerning our corporate governance policies, see Item 16G. Corporate governance.

We are the second-largest metals and mining company in the world and the largest in the Americas, based on market capitalization. We are the world’s largest producer of iron ore and iron ore pellets and the world’s second-largest producer of nickel. We are one of the world’s largest producers of manganese ore, ferroalloys and kaolin. We also produce bauxite, alumina, aluminum, copper, coal, cobalt, precious metals, potash and other products. To support our growth strategy, we are actively engaged in mineral exploration efforts in 22 countries around the globe. We operate large logistics systems in Brazil, including railroads, maritime terminals and a port, which are integrated with our mining operations. Directly and through affiliates and joint ventures, we have investments in the energy and steel businesses.

The following table presents the breakdown of our total gross revenues attributable to each of our main lines of business, each of which is described following the table.

Our mission is to transform mineral resources into prosperity and sustainable development. Our vision is to become the largest mining company in the world and to surpass current standards of excellence in research, development, project implementation and business operations. Given the current economic environment, the following objectives have assumed paramount importance in the short term: cost minimization, operational and financial flexibility and the reconciliation of cash preservation with the pursuit of profitable growth options. However, we maintain our long-term growth strategy, and we aim to increase our geographical and product diversification and logistics capabilities. We continue to review opportunities to make strategic acquisitions,

We continue to consolidate our leadership in the global iron ore market. In 2007 and 2008, we had an estimated market share of 32.5% and 30.2%, respectively, of the total volume traded in the seaborne market. We are committed to maintaining our position in the global iron ore market by strengthening relationships with customers, focusing our product line to capture industry trends, increasing our production capacity in line with demand growth, controlling costs and strengthening our logistics infrastructure of railroads, ports, shipping and distribution centers. We believe that our strong relationships with major customers, reinforced through long-term contracts, high quality products and a strong technical marketing strategy, will help us achieve this goal. We have also encouraged steelmakers to develop steel slab plants in Brazil, through joint ventures in which we may hold minority stakes, in order to create additional demand for our iron ore.

We are the world’s second-largest nickel producer, with large-scale, long-life and low-cost operations, a substantial resource base, advanced technology and a robust growth profile. We are a leading producer of high-quality nickel products for non-stainless steel applications, such as plating, alloy steels, high nickel alloys and batteries, which represented 67% of our nickel sales in 2008. Our long-term goal is to strengthen our leadership in the nickel business. Given the challenges imposed by the near- and medium-term prospects for the balance between nickel supply and demand, we are exercising strong capital discipline while evaluating our growth projects and the ramp-up of our Goro and Onça Puma projects.

We are developing and increasing production capacity in our aluminum operations, focusing on the upstream portion of the production chain by developing low-cost bauxite and alumina projects. We have large, undeveloped high-quality bauxite reserves and opportunities for low-cost expansions in alumina refining. We are working on the development of these opportunities. We are also investing in mineral exploration to increase our bauxite resources.

We believe that our Brazilian copper projects, which are all situated in the Carajás mineral province, in the Brazilian state of Pará, could be among the most competitive in the world in terms of investment cost per metric ton of ore. We are developing the Salobo project, and we are testing new technology that, if successful, could permit the development of other copper projects in this region. We expect these copper mines to benefit from our infrastructure facilities serving the Northern System. We are also engaged in mineral exploration in several countries to increase our reserve base.

We are pursuing various opportunities to become a large global player in coal businesses. We have coal operating assets and a portfolio of exploration projects in Australia and two joint ventures in China. In addition, we recently acquired coal assets in Colombia. We intend to continue pursuing organic growth in the coal business through the development of the Moatize project in Mozambique, development of more advanced coal exploration projects in Australia and mineral exploration initiatives in several countries, including Colombia and Mongolia.

We are pursuing various opportunities to become a large producer of fertilizers in order to benefit from rising global consumption. Per capita income growth correlates with increased use of fertilizers. Recently, biofuels have emerged as another driver of demand for fertilizers. Ethanol is made from sugar cane in Brazil

We are engaged in an active mineral exploration program, with efforts in 22 countries around the globe. We are mainly seeking new deposits of bauxite, coal, copper, diamond, iron ore, manganese ore, nickel, phosphate, platinum group metals, potash and uranium. Mineral exploration is an important part of our organic growth strategy.

We believe that the quality of our railway assets and our many years of experience as a railroad and port operator, together with the lack of efficient transportation for general cargo in Brazil, position us as a leader in the logistics business in Brazil. We have been expanding the capacity of our railroads primarily to meet the needs of our iron ore business.

To support our commercial strategy for our iron ore business, we are investing in a dedicated shuttle service from Brazil to Asia and in the development of distribution centers in Asia and the Middle East in order to minimize the freight-cost differential between Brazil and Australia to Asia and to increase the competitiveness of our iron ore business in these regions.

Energy management and efficient supply have become a priority for us. As a large consumer of electricity, we believe that investing in power generation projects to support our operations will help protect us against volatility in the price of energy, regulatory uncertainties and the risk of energy shortages. Accordingly, we have developed hydroelectric power generation plants in Brazil, Canada and Indonesia, and we are using the electricity from these projects to supply our internal needs. In 2007, we began investing in natural gas exploration in Brazil through consortia. We are seeking to diversify and optimize our energy matrix through increased use of thermal coal, renewable fuels and natural gas.

The scope of our operations has been enlarged by acquisitions, dispositions, the completion of major investment projects and production adjustments. We summarize below the major acquisitions, divestitures, investment projects and other developments having a significant effect on our financial performance since the beginning of 2008.

Since November 2008, we have been taking steps to adjust our production plans given the change in the global economic outlook. We have shut down some mines in the Southern and Southeastern Systems, in the state of Minas Gerais, Brazil. In addition, we have reduced the production pace at other sites to adjust our output to anticipated lower sales volumes. Only three of our 10 pellet plants are currently operating. We have shut down five of the seven pellet plants located at the port of Tubarão, in the state of Espírito Santo, Brazil, a pellet plant in São Luís, in the state of Maranhão, and a pellet plant in Fábrica, in the state of Minas Gerais.

We stopped our manganese ore and ferroalloy operations in Brazil from December 2008 to January 2009. We will keep our Dunkerque ferroalloy plant in France idle until April 2009, and extend furnace maintenance

In December 2008, we shut down one of the two blast furnaces at our pig iron operation in Carajás, which is now operating at 40% of its nominal capacity.

In our nickel operations, we have discontinued the use of higher-cost thermal power generation, which will lead to a reduction of nickel-in-matte output by approximately 17,000 metric tons annually in Indonesia. In January 2009, we shut down the Copper Cliff South mine (“CC South”), located in the mining site of Sudbury, province of Ontario, Canada, for an undetermined period of time. CC South has an annual production capacity of 8,000 metric tons of finished nickel. We plan to shut down our Sudbury operation for a period of eight weeks, from June 1 to July 27, 2009, and our Voisey’s Bay operation during the entire month of July 2009.

In October 2008, we reduced activities at one of our aluminum smelters, Valesul, located in the state of Rio de Janeiro, Brazil, to 40% of its nominal annual capacity of 95,000 metric tons, which was the level required to operate solely with energy produced by Valesul. In April 2009 Valesul shifted from aluminum smelting to being a producer of billets for extrusion using purchased primary ingots and scrap as raw materials.

In response to weak market demand for kaolin, we reduced the production by our subsidiary CADAM S.A., in the state of Amapá, Brazil, by 30% of its nominal production capacity. We reduced the kaolin production of our subsidiary PPSA by 200,000 metric tons per year at its sites in the state of Pará, Brazil, effective January 1, 2009.

We are acquiring the interest of our former joint venture partner Baosteel Group Corporation in Companhia Siderúrgica Vitória (“CSV”), which was established to construct an integrated steel slab plant in the Brazilian state of Espírito Santo.

In the second half of 2008, Vale conducted a global equity offering of 256,926,766 common shares and 189,063,218 preferred shares, including ADSs. The aggregate proceeds of the global offering to Vale, after underwriting discounts and commissions, and including the proceeds from the exercise of the over-allotment option, were approximately US$12.2 billion, which we intend to use for capital expenditures and strategic acquisitions and to maximize our financial flexibility.

In 2008, we leased four pelletizing plants located in Tubarão complex, in Vitória, in the Brazilian state of Espírito Santo, which are owned by joint ventures in which we have a stake. We have consolidated 100% of the sales and related costs of pellets produced by these pelletizing operations in our financial statements, which simplified and increased the transparency of our operational and financial reporting. These operating leases are consistent with our continuous search for opportunities to maximize shareholder value creation. They enabled us to increase our exposure to the iron ore business and capture synergies arising from operations at the Tubarão Port.

As part of our commercial strategy for our iron ore business, we are investing in the development of a maritime shuttle service between Brazil and Asia that is intended to minimize the freight-cost differential between Brazil and Australia to Asia and to enhance our competitiveness in the Asian market, which we expect to account for most of the future growth in the global demand for iron ore. Accordingly, we have ordered the construction of 12 large ore carriers, bought used ships and entered into freight contracts. The

In December 2008, we entered into an agreement with African Rainbow Minerals Limited and its 65%-owned subsidiary, TEAL Exploration & Mining Incorporated (“TEAL”), to acquire a 50% interest in a joint venture company that will own TEAL’s subsidiaries for CAD81 million, enhancing our strategic growth options in the copper business in Africa. The transaction was completed in the first quarter of 2009.

TEAL has three copper projects in the feasibility and approval stages in the African copperbelt, which together could represent a nominal production capacity of 65,000 metric tons of copper per year in the next few years, and an extensive and highly prospective copper exploration portfolio, which indicates a potential for more than 300 million metric tons of high grade ore (greater than 1.5% Cu).

In December 2008, we agreed to acquire 100% of the export coal assets of Cementos Argos S.A. (“Argos”) in Colombia for US$300 million. Argos’s coal assets consist of two mining concessions, a port and a minority stake in a railroad. Since Colombia is the world’s third-largest exporter of high-quality thermal coal, given its low level of sulfur and high calorific value, we are seeking to build a coal asset platform in the country to enhance our growth options in the coal business. The acquisition was completed in the first quarter of 2009.

In the first quarter of 2009, we acquired from Rio Tinto Plc (“Rio Tinto”) 100% of the Rio Colorado project (“Rio Colorado”), in the provinces of Mendoza and Neuquén, Argentina, and 100% of the Regina project (“Regina”), in the province of Saskatchewan, Canada, for US$850 million. Rio Colorado includes the development of a mine with an initial nominal capacity of 2.4 Mtpy of potash, with potential for expansion of up to 4.35 Mtpy, construction of a 350-kilometer railway spur, port facilities and a power plant. Regina is still in the exploration stage, with potential to deliver an annual output of 2.8 Mt of potash. Existing infrastructure near the project will allow transportation of the final product to Vancouver, facilitating access to the fast-growing Asian market.

In January 2009, we agreed to acquire from Rio Tinto 100% of the Corumbá open-pit iron ore mining operations in Brazil, with associated logistics assets, for US$750 million. The Corumbá iron ore mine is a world-class asset, characterized by high grade and rich in direct-reduction lump ores. The logistics assets support 70% of the operations’ transportation needs. The acquisition of the Corumbá assets is subject to certain Brazilian government approvals.

In the second quarter of 2008, we acquired from Mineração Apolo iron ore mining rights located in the Rio Acima and Caeté districts, in the Brazilian state of Minas Gerais. We made payments amounting to US$128 million in 2008, and we will make remaining payments of R$7 million (approximately US$3 million).

We have a challenging program of investments in the organic growth of our businesses. Our main investment projects are summarized under —Capital expenditures, and detailed in the discussion of each of

In line with our strategy, we have continued to reduce our holdings of non-strategic assets. We summarize below our key dispositions and asset sales since the beginning of 2008.

Our principal lines of business consist of mining and logistics. We also invest in energy to supply part of our consumption. Below is an outline of the information provided in this section:

The following map shows the locations of our operations worldwide.

Our ferrous minerals business segment includes:

We conduct our iron ore business in Brazil, primarily at the parent-company level and through our subsidiary Urucum Mineração S.A. (“Urucum”). Our iron ore mining and related operations are concentrated in three systems: the Southeastern System, the Southern System and the Northern System, each with its own transportation capability.

The Southeastern System mines are located in the Iron Quadrangle region of the state of Minas Gerais, where they are divided into three mining complexes (Itabira, Minas Centrais, and Mariana), and in the state of Mato Grosso do Sul, where Urucum’s mine is located.

The ore reserves in the three mining complexes have high ratios of itabirite ore relative to hematite ore. Itabirite ore has iron grade of 35-60% and requires concentration to achieve shipping grade, which is at least 63.5% average iron grade. The Urucum ore reserves have high ratios of hematite ore, which has an average grade of approximately 62.3%.

We conduct open-pit mining operations in the Southeastern System. At the three mining complexes, 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 sites. At Urucum’s mine, we generally process the run-of-mine by means of standard crushing and classification steps, producing only lump ore. In 2008, we produced 99.4% of the electric energy consumed in the Southeastern System at our hydroelectric power plants (Igarapava, Porto Estrela, Funil, Candonga, Aimorés, Capim Branco I and Capim Branco II).

We own and operate integrated railroad and terminal networks in the three mining complexes, which are accessible by road or by spur tracks of our EFVM railroad. The EFVM railroad connects these mines to the Tubarão port in Vitória, in the state of Espírito Santo. For a more detailed description of the networks, see —Logistics, below. We do not own or operate logistics facilities at the site of Urucum’s mine. Urucum iron ore is delivered to customers by barges through the Paraguay River.

The Southern System mines are located in the Iron Quadrangle region of the state of Minas Gerais in Brazil. The mines of Minerações Brasileiras Reunidas (“MBR”) have been incorporated into this system and

We use wet beneficiation processes to convert run-of-mine obtained from open-pit mining operations into sinter feed, lump ore and pellet feed, in addition to hematitinha, a product used primarily by Brazilian pig-iron producers. In 2008, we produced 72% of the electric energy consumed in the Southern System at our hydroelectric power plants (Igarapava, Porto Estrela, Funil, Candonga, Capim Branco I and Capim Branco II).

We enter into freight contracts with our affiliate, MRS, a railway company, to transport our iron ore products at market prices from the mines to our Guaíba Island and Itaguaí maritime terminals in the state of Rio de Janeiro.

The Northern System mines, located in the Carajás mineral province of the Brazilian state of Pará, contain some of the largest iron ore deposits in the world. The reserves are divided into northern and southern ranges situated approximately 35 kilometers apart. Since 1983, we have been conducting mining activities in the northern range, which is divided into four main mining bodies. The Northern System has open-pit mines and an ore-processing plant. The mines are located on public lands for which we hold mining concessions.

Because of the high grade (66.7% on average) of the Northern System deposits, we do not have to operate a concentration plant at Carajás. The beneficiation process consists simply of sizing operations, including screening, hydrocycloning, crushing and filtration. Output from the beneficiation process consists of sinter feed, pellet feed, special fines for direct reduction processes and lump ore. We obtain all of the electrical power for the Northern System at market prices from regional utilities.

We operate an integrated railroad and terminal network in the Northern System. After completion of the beneficiation process, our EFC railroad transports the iron ore to the Ponta da Madeira maritime terminal in the state of Maranhão. To support our Carajás operations, we have housing and other facilities in a nearby township. These operations are accessible by road, air and rail.

We are currently engaged in mineral exploration efforts for iron ore deposits in several states in Brazil. We are also seeking iron ore exploration opportunities in Africa, Australia and India.

Directly and through joint ventures, we produce iron ore pellets in Brazil and in China, as set forth in the following table.

In the Tubarão port area, in the Brazilian state of Espírito Santo, we operate our wholly-owned pelletizing plants, Tubarão I and II, four plants with respect to which we signed operating leases in 2008, and our jointly-owned plant, Hispanobras. We send iron ore from our Southeastern System mines to these plants and use our logistics infrastructure to distribute their final products.

Our São Luís pelletizing plant, located in the Brazilian state of Maranhão, is part of the Northern System. We send Carajás iron ore to this plant and ship its production to customers through our Ponta da Madeira maritime terminal.

The Fábrica and Vargem Grande (formerly Itabiritos) pelletizing plants, located in the Brazilian state of Minas Gerais, are part of the Southern System. We send some of the iron ore from the Fábrica Nova mine to the Fábrica plant, and we send iron ore from the Pico mine to the Vargem Grande plant. We transport pellets from these plants using MRS.

Samarco operates a mine, Germano, and three pelletizing plants in two operating sites. The Germano mine is located in Mariana, Minas Gerais, close to our Southeastern System, and the pelletizing plants are located in the Ponta Ubu unit, in Anchieta, Espírito Santo. Iron ore from Germano and our Southeastern System mine Fábrica Nova is sent to the Samarco pelletizing plants using a 396-kilometer pipeline, the longest pipeline in the world for the conveyance of iron ore. Samarco has its own port facilities to transport its production.

The Zhuhai YPM pelletizing plant, in China, is part of the Yueyufeng Steelmaking Complex. It has port facilities, which we use to send feed from our mines in Brazil. Zhuhai YPM’s main customer is Yueyufeng Iron & Steel (“YYS”), which is also located in the Yueyufeng Steelmaking Complex.

We sell pellet feed to our pelletizing joint ventures at market prices. Historically, we have supplied all of the iron ore requirements of our wholly-owned pelletizing plants and joint ventures, except for Samarco and Zhuhai YPM, to which we supply only a portion of their needs. Of our total 2008 pellet production, 68.3% was blast furnace pellets, and the remaining 31.7% was direct reduction pellets, which are used in steel mills that employ the direct reduction process rather than blast furnace technology.

The following table sets forth information regarding our iron ore sales to our pelletizing joint ventures for the periods indicated.