Stockholders' equity

3 Months Ended

Mar. 31, 2011

Stockholders' equity [Abstract]

Stockholders' equity

13 Stockholders’ equity

Each holder of common and preferred class A stock is entitled to one vote for each share on all matters brought before stockholders’ meetings, except for the election of the Board of Directors, which is restricted to the holders of common stock. The Brazilian Government holds twelve preferred special shares which confer permanent veto rights over certain matters.

Both common and preferred stockholders are entitled to receive a mandatory minimum dividend of 25% of annual adjusted net income under Brazilian GAAP, once declared at the annual stockholders’ meeting. In the case of preferred stockholders, this dividend cannot be less than 6% of the preferred capital as stated in the statutory accounting records or, if greater, 3% of the Brazilian GAAP equity value per share.

In April 2011 (subsequent event), the Board of Directors approved the extraordinary payment on April 29, 2011, regarding the first installment of interest on capital, in the amount of US$ 2 billion, corresponding to US$ 0.383268113 per outstanding share, common or preferred shares, of Vale issuance.

In January 2011, the Board of Directors approved the extraordinary payment which was paid on January 31, 2011, through interest attributed to Company Stockholders capital, in the total gross amount of US$ 1 billion, which corresponds to approximately US$0.191634056 per outstanding share, common or preferred, of Vale issuance. This value is subject to the incidence of income tax withheld at the rate in force.

On October 14, 2010, the Board of Directors approved the following proposals: (i) payment of the second tranche of the minimum dividend of US$1,250 billion and (ii) payment of an additional dividend of US$500. The payments were made on October 29, 2010.

On September 23, 2010, the Board of Directors approved a share buy-back program. The shares are to be held in treasury for subsequent sale or cancellation, amounting up to US$2 billion and involving up to 64,810,513 common shares and up to 98,367,748 preferred shares. As of December 31, 2010 we had acquired 21,682,700 common shares and 48,197,700 preferred shares. The share buy-back program was completely executed in October 2010.

In April 2010, we paid US$1,250 as a first installment of the dividend to stockholders. The distribution was made in the form of interest on stockholders’ equity.

In June 2010, the notes series Rio and Rio P were converted into ADS and represent an aggregate of 49,305,205 common shares and 26,130,033 preferred class A shares respectively. The conversion was made using 75,435,238 treasury stocks held by the Company. The difference between the conversion amount and the book value of the treasury stocks of US$ 1,379 was accounted for in additional paid-in capital in the stockholder’s equity.

The outstanding issued mandatory convertible notes as of March 31, 2011, are as follows:

	Date		Value
Headings	Emission	Expiration	Gross		Net of charges		Coupon
Tranches Vale and Vale P - 2012	July/2009	June/2012		942		934		6,75% p.a.

The notes pay a coupon quarterly and are entitled to an additional remuneration equivalent to the cash distribution paid to ADS holders. These notes were classified as a capital instrument, mainly due to the fact that neither the Company nor the holders have the option to settle the operation, whether fully or partially, with cash, and the conversion is mandatory, consequently, they were recognized as a specific component of shareholders’ equity, net of financial charges.

The funds linked to future mandatory conversion, net of charges are equivalent to the maximum of common shares and preferred shares, as follows. All the shares are currently held in treasury.

	Maximum amount of action				Value
Headings	Common		Preferred		Common		Preferred
Tranches Vale and Vale P - 2012		18,415,859		47,284,800		293		649

In April 2011 (subsequent event), Vale will pay additional remuneration to holders of mandatorily convertible notes, series VALE-2012 and VALE P-2012, in the amount of R$ 1.627851 e R$ 1.882788 per note, respectively. These amounts in reais will be converted in US$ by the exchange rate prevaling in April 29, 2011.

In January 2011, Vale paid additional remuneration to holders of mandatorily convertible notes, series VALE-2012 and VAPE P-2012, R$0.7776700 and R$0.8994610, respectively, and in October 2010, VALE-2012 and VAPE P-2012, R$1.381517 and R$1.597876 per note, respectively.

In April, 2010, we paid additional interest to holders of mandatorily convertible notes: series RIO and RIO P, US$0.417690 and US$0.495742 per note, respectively, and series VALE-2012 and VALE P-2012, US$0.602336 and US$0.696668 per note, respectively.

Basic and diluted earnings per share

Basic and diluted earnings per share amounts have been calculated as follows:

	Three-month period ended (unaudited)
	March 31,			December 31,			March 31,
	2011			2010			2010
Net income from continuing operations attributable to Company’s stockholders		6,826			5,917			1,749
Discontinued operations, net of tax		—			—			(145	)
Net income attributable to Company’s stockholders		6,826			5,917			1,604
Interest attributed to preferred convertible notes		(18	)		(23	)		(19	)
Interest attributed to common convertible notes		(8	)		(10	)		(23	)
Net income for the period adjusted		6,800			5,884			1,562
Basic and diluted earnings per share
Income available to preferred stockholders		2,585			2,231			591
Income available to common stockholders		4,130			3,579			926
Income available to convertible notes linked to preferred shares		61			53			23
Income available to convertible notes linked to common shares		24			21			22
Weighted average number of shares outstanding (thousands of shares) — preferred shares		2,008,930			1,997,276			2,030,998
Weighted average number of shares outstanding (thousands of shares) — common shares		3,209,349			3,204,203			3,181,727
Treasury preferred shares linked to mandatorily convertible notes		47,285			47,285			77,580
Treasury common shares linked to mandatorily convertible notes		18,416			18,416			74,998
Total		5,283,980			5,267,180			5,365,303
Earnings per preferred share		1.29			1.12			0.29
Earnings per common share		1.29			1.12			0.29
Earnings per convertible notes linked to preferred share (*)		1.67			1.61			0.54
Earnings per convertible notes linked to common share (*)		1.74			1.68			0.60
Continuous operations
Earnings per preferred share		1.29			1.12			0.32
Earnings per common share		1.29			1.12			0.32
Earnings per convertible notes linked to preferred share (*)		1.67			1.61			0.57
Earnings per convertible notes linked to common share (*)		1.74			1.68			0.63
Discontinued operations
Earnings per preferred share		—			—			(0.03	)
Earnings per common share		—			—			(0.03	)
Earnings per convertible notes linked to preferred share (*)		—			—			(0.03	)
Earnings per convertible notes linked to common share (*)		—			—			(0.03	)

(*) Basic earnings per share only, as dilution assumes conversion

If the conversion of the convertible notes had been included in the calculation of diluted earnings per share they would have generated the following dilutive effect as shown below:

	Three-month period ended (unaudited)
	March 31,		December 31,		March 31,
	2011		2010		2010
Income available to preferred stockholders		2,664		2,307		633
Income available to common stockholders		4,162		3,610		971
Weighted average number of shares outstanding (thousands of shares) — preferred shares		2,056,215		2,044,561		2,108,578
Weighted average number of shares outstanding (thousands of shares) — common shares		3,227,765		3,222,619		3,256,725
Earnings per preferred share		1.29		1.13		0.30
Earnings per common share		1.29		1.12		0.30
Continuous operations
Earnings per preferred share		1.29		1.13		(0.33	)
Earnings per common share		1.29		1.12		(0.33	)
Discontinued operations
Earnings per preferred share		—		—		(0.03	)
Earnings per common share		—		—		(0.03	)