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Table of Contents

As filed with the Securities and Exchange Commission on March 31, 2016


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, 2015
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 3814 8888
fax: +55 21 3814 8820

Avenida das Américas, 700 – Bloco 8 – Loja 318
22640-100 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

Preferred class A shares of Vale, no par value per share

New York Stock Exchange*

American Depositary Shares (evidenced by American Depositary Receipts), each representing one preferred class A share of Vale

New York Stock Exchange

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

6.250% Guaranteed Notes due 2017, issued by Vale Overseas

New York Stock Exchange

5.625% Guaranteed Notes due 2019, issued by Vale Overseas

New York Stock Exchange

4.625% Guaranteed Notes due 2020, issued by Vale Overseas

New York Stock Exchange

4.375% Guaranteed Notes due 2022, issued by Vale Overseas

New York Stock Exchange

8.25% 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, 2015 was:
3,185,653,000 common shares, no par value per share
1,967,721,914 preferred class A 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 ý    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 ý
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 ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý                                            Accelerated filer o                                             Non-accelerated filer 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 ý      Other 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 ý

   


Table of Contents


TABLE OF CONTENTS

 
Page
Form 20-F cross reference guide ii
Forward-looking statements iv
Risk factors 1
Selected financial data 14

I.     Information on the company


 
Business overview 16
Lines of business 25

1.     Ferrous minerals

27

2.     Base metals

37

3.     Coal

50

4.     Fertilizer nutrients

52

5.     Infrastructure

54

6.     Other investments

62
Reserves 63
Capital expenditures 74
Regulatory matters 77

II.    Operating and financial review and prospects


 
Overview 81
Results of operations 87
Liquidity and capital resources 101
Contractual obligations 104
Off-balance sheet arrangements 104
Critical accounting policies and estimates 104
Risk management 109


III.  Share ownership and trading




 
Major shareholders 111
Related party transactions 114
Distributions 116
Trading markets 117
Share price history 118
Depositary shares 118

Purchases of equity securities by the issuer and affiliated purchasers

120

IV.    Management and employees


 
Management 120
Management compensation 132
Employees 134

V.     Additional information


 
Legal proceedings 135
Memorandum and articles of association 142
Shareholder debentures 149

Exchange controls and other limitations affecting security holders

150
Taxation 152

Evaluation of disclosure controls and procedures

160

Management's report on internal control over financial reporting

160
Corporate governance 161
Code of ethics and conduct 163
Principal accountant fees and services 164
Information filed with securities regulators 165
Exhibits 166
Glossary 167
Signatures 174

Index to consolidated financial statements


F-1

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

14

3B Capitalization and indebtedness

Not applicable

3C Reasons for the offer and use of proceeds

Not applicable

3D Risk factors

Risk factors

1

4

Information on the Company

   

4A History and development of the company

Business overview, Capital expenditures

16, 74

4B Business overview

Business overview, Lines of business, Reserves, Regulatory matters

16, 25, 63, 77

4C Organizational structure

Exhibit 8

4D Property, plant and equipment

Lines of business, Capital expenditures, Regulatory matters

25, 74, 77

4A

Unresolved staff comments

None

5

Operating and financial review and prospects

   

5A Operating results

Results of operations

87

5B Liquidity and capital resources

Liquidity and capital resources

101

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

Capital expenditures

74

5D Trend information

Results of operations

87

5E Off-balance sheet arrangements

Off-balance sheet arrangements

104

 

Critical accounting policies and estimates

104

5F Tabular disclosure of contractual obligations

Contractual obligations

104

5G Safe harbor

Forward-looking statements

iv

6

Directors, senior management and employees

 

6A Directors and senior management

Management

120

6B Compensation

Management compensation

132

6C Board practices

Management—Board of directors

120

6D Employees

Employees

134

6E Share ownership

Major shareholders, Employees—Performance-based compensation

135

7

Major shareholders and related party transactions

   

7A Major shareholders

Major shareholders

111

7B Related party transactions

Related party transactions

114

7C Interests of experts and counsel

Not applicable

8

Financial information

   

8A Consolidated statements and other financial information

Financial statements

F-1

 

Distributions

116

 

Legal proceedings

135

8B Significant changes

Not applicable

9

The offer and listing

   

9A Offer and listing details

Share price history

118

9B Plan of distribution

Not applicable

9C Markets

Trading markets

117

9D Selling shareholders                                                    

Not applicable

9E Dilution

Not applicable

9F Expenses of the issue

Not applicable

ii


Table of Contents

Item
Form 20-F caption
Location in this report
Page

10

Additional information

   

10A Share capital

Memorandum and articles of association—Common shares and preferred shares

142

10B Memorandum and articles of association

Memorandum and articles of association

142

10C Material contracts

Lines of business, Results of operations, Related party transactions

25, 87, 114

10D Exchange controls

Exchange controls and other limitations affecting security holders

150

10E Taxation

Taxation

152

10F Dividends and paying agents

Not applicable

10G Statement by experts

Reserves

63

10H Documents on display

Information filed with securities regulators

165

10I Subsidiary information

Not applicable

11

Quantitative and qualitative disclosures about market risk

Risk management

109

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

118

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

160

 

Management's report on internal control over financial reporting

160

16

16A Audit Committee financial expert

Management—Fiscal Council

129

16B Code of ethics

Code of ethics and conduct

163

16C Principal accountant fees and services

Principal accountant fees and services

164

16D Exemptions from the listing standards for audit committees

Management—Fiscal Council; Corporate governance

129, 161

16E Purchase of equity securities by the issuer and affiliated purchasers

Purchases of equity securities by the issuer and affiliated purchasers

120

16F Change in registrant's certifying accountant

Not applicable

16G Corporate governance

Corporate governance

161

16H Mine safety disclosure

Not applicable

17

Financial statements

Not applicable

18

Financial statements

Financial statements

F-1

19

Exhibits

Exhibits

166

iii


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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:

    ·
    our direction and future operation;

    ·
    the implementation of our principal operating strategies, including our potential participation in acquisition, divestiture or joint venture transactions or other investment opportunities;

    ·
    the implementation of our financing strategy and capital expenditure plans;

    ·
    the exploration of mineral reserves and development of mining facilities;

    ·
    the depletion and exhaustion of mines and mineral reserves;

    ·
    trends in commodity prices, supply and demand for commodities;

    ·
    the future impact of competition and regulation;

    ·
    the payment of dividends or interest on shareholders' equity;

    ·
    compliance with financial covenants;

    ·
    industry trends, including the direction of prices and expected levels of supply and demand;

    ·
    the outcome of the various regulatory, governmental and legal proceedings in which we are involved;

    ·
    other factors or trends affecting our financial condition or results of operations; and

    ·
    the factors discussed under Risk factors.

          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) economic, political and social issues in the countries in which we operate, (b) the global economy, (c) commodity prices, (d) financial and capital markets, (e) the mining and metals businesses, which are cyclical in nature, and their dependence upon global industrial production, which is also cyclical, (f) regulation and taxation, (g) operational incidents or accidents, and (h) 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.



          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 Avenida das Américas, 700 – bloco 8 – loja 318 – Barra da Tijuca, Rio de Janeiro, RJ, Brazil, and its telephone number is 55-21-3485-5000.

          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 "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 class A American Depositary Shares (our "preferred ADSs"), each of which represents one class A preferred share of Vale. American Depositary Shares are represented by American Depositary Receipts ("ADRs") issued by the depositary. References to our "HDSs" or "Hong Kong Depositary Shares" include both our common Hong Kong Depositary Shares (our "common HDSs"), each of which represents one common share of Vale, and our class A preferred Hong Kong Depositary Shares (our "preferred HDSs"), each of which represents one preferred Class A share of Vale. Hong Kong Depositary Shares are represented by Hong Kong Depositary Receipts ("HDRs") issued by the depositary.

          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 "CAD" are to Canadian dollars, and references to "A$" are to Australian dollars.

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RISK FACTORS

Risks relating to our business

    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 and preserve the environment. 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.

    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 2015, Chinese demand represented 69% of global demand for seaborne iron ore, 51% of global demand for nickel and 46% of global demand for copper. The percentage of our net operating revenues attributable to sales to customers in China was 35.5% in 2015. 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.

    Our business may be adversely affected by declines in demand for and prices of the products our customers produce, including steel (for our iron ore and coal business), stainless steel (for our nickel business), copper wire (for copper) and agricultural commodities (for our fertilizer nutrients business).

          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 62.2% of our 2015 net operating revenues, are used to produce carbon steel. Nickel, which accounted for 18.3% of our 2015 net operating revenues, is used mainly to produce stainless and alloy steels. Demand for steel depends heavily on global economic conditions, but it also depends on a variety of regional and sectorial 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 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. The demand for fertilizers is affected by prices of agricultural commodities in the international and Brazilian markets, and a sustained decline in the price of one or more agricultural commodities could negatively impact our fertilizer nutrients business.

    The prices we charge, including prices for iron ore, nickel, copper, coal and fertilizers, are subject to volatility.

          Our iron ore prices are based on a variety of pricing options, which generally use spot price indices as a basis for determining the customer price. Our prices for nickel and copper are based on reported prices for these metals on commodity exchanges such as the London Metal Exchange ("LME") and the New York Mercantile Exchange ("NYMEX"). Our prices and revenues for these products are consequently volatile, which may adversely affect our cash flow. Global prices for 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 levels, investments by commodity funds and others and actions of participants in the commodity markets. A continuous decrease in the market prices for the products we sell may result in the suspension of certain of our projects and operations, decrease in our mineral reserves and the impairment of assets, and it would adversely affect our financial position and results of operations.

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Table of Contents

          In 2015, prices of steelmaking raw materials, such as iron ore, coal and nickel, decreased as supply grew more than demand. Additionally, copper prices dropped as a result of lower demand, in spite of some disruptions in supply.

          We are most exposed to 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, 2015 by approximately US$320 million. Average iron ore prices decreased 59% in the last two years, from US$135 per dmt in 2013 to US$97 per dmt in 2014 and US$55.5 per dmt in 2015, according to the average Platts IODEX (62% Fe CFR China). On February 29, 2016 the year to date average Platts IODEX iron ore price was US$44.10 per dmt. In addition to reduced demand for iron ore, an excess in supply has adversely affected our prices since 2014 and may grow with the expected conclusion of certain iron ore projects in coming years.

          World nickel prices have also been adversely affected by lower demand and by strong supply growth in the nickel industry, especially in China. Nickel refining in China, primarily using imported nickel ores and related raw materials, increased by an estimated 417,000 metric tons from 2006 to 2015, with Chinese nickel pig iron production representing 19% of global nickel output. Chinese nickel pig iron production has been adversely affected by export restrictions in feed-producing countries, and prices could be further affected if these restrictions are revoked.

          For additional information about the average realized prices for the products we sell, see Operating and financial review and prospects—Overview—Major factors affecting prices.

          The financial performance and economic viability of certain of our operations may be significantly impacted by a continuing decline in the demand for and prices of our products. For instance, in 2015, we suspended certain iron ore and manganese operations, and other operations may be suspended in the future. Also, in the case of our nickel operations in New Caledonia, the impact of lower prices and demand for nickel is heightened due to the stage of the ramp up of that facility. We are considering various options to ensure the continuation of the operations in New Caledonia as it continues to ramp up. If those options are not available and current conditions continue to be adverse, we may consider a reduction or stoppage of production for a period of time.

    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 high 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, iron ore pellets or nickel from joint ventures or unrelated parties 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.

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    Lower cash flows, resulting from decreased prices of our products, have adversely affected our credit ratings and the cost and availability of financing.

          A continuous decrease in the prices of our products and the volatility in the global economy may adversely affect our future cash flows, credit ratings and ability to secure financing at attractive rates. Decreased prices have resulted in lower cash flows, which have also adversely affected our credit rating and our costs to access the capital markets. This may negatively affect our ability to fund our capital investments, pay dividends and comply with the financial covenants in some of our long-term debt instruments.

          Also, certain Canadian provinces where we operate require us to provide financial assurances, such as letters of credit, surety bonds or cash collateral, to cover certain closure and remediation costs after we conclude our operations. We may be required to increase the amount of these financial assurances if our credit ratings are downgraded below certain levels. If we are unable to provide these financial assurances, we would need to have discussions with the relevant jurisdictions about other options and ultimately it could impact our ability to operate in these jurisdictions.

    The failure of a tailings dam of Samarco Mineração S.A. ("Samarco") in Minas Gerais could negatively impact our business.

          On November 5, 2015, one of Samarco's tailings dams (Fundão) failed unexpectedly, releasing muddy tailings downstream, reaching and flooding certain communities and causing environmental damage to the surrounding area. As a result of the failure of the Fundão tailings dam, our Alegria mine, located near the dam, is operating with a dry beneficiation process at a lower mine productivity, and a conveyor belt connecting our Fábrica Nova mine to our Timbopeba beneficiation plant was damaged, decreasing production at the Mariana mining complex in the Brazilian state of Minas Gerais. In addition, we have interrupted the sale of run of mine (ROM) from our Fazendão mine to Samarco. We are still exploring alternatives for these mines; however if we are unable to find adequate alternatives, this may negatively affect our overall production. See Information on the Company—Business overview—Significant changes in our business—Failure of Samarco's tailings dam in Minas Gerais.

    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 claimed substantial amounts. These include several legal proceedings and investigations relating to the failure of Samarco's Fundão tailings dam. For additional information, see Additional information—Legal proceedings. Although we are vigorously contesting them, the outcomes of these proceedings are uncertain and may result in obligations that could materially adversely affect our business and the value of our securities.

    Our obligations under a settlement agreement arising from the failure of Samarco's tailings dam could have a material impact on our financial condition.

          Samarco and its shareholders, Vale and BHPB Brasil Ltda. ("BHPB"), a Brazilian subsidiary of BHP Billiton plc ("BHP Billiton"), entered into a settlement agreement on March 2, 2016 with governmental authorities, including the federal Attorney General of Brazil and the two Brazilian states affected by the failure (Espírito Santo and Minas Gerais). Under the agreement, Samarco, Vale and BHPB will create a foundation to develop and implement remediation and compensation programs in substantial amounts over many years. See Information on the Company—Business overview—Significant changes in our business—Failure of Samarco's tailings dam in Minas Gerais.

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          Samarco is currently unable to conduct ordinary mining and processing. Samarco's management is working on a plan that would permit it to resume operations, but the feasibility, timing and scope of restarting remain uncertain. If Samarco does not meet its funding obligations, each of Vale and BHPB is obligated to provide funding to the foundation in proportion to its 50% interest in Samarco. Vale does not currently expect to record a provision in its financial statements in respect of these obligations, but if Samarco is eventually unable to resume operations or to meet its funding obligations, Vale could determine that it should recognize a provision.

    Regulatory, political, economic and social conditions in the countries in which we have operations or projects could adversely impact our business and the market price of our securities.

          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 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, political instability, bribery, extortion, corruption, civil strife, acts of war, guerilla activities, piracy in international shipping lanes and terrorism. 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.

          Actual or potential political or social changes and changes in economic policy may undermine investor confidence, which may hamper investment and thereby reduce economic growth, and otherwise 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 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 Brazilian securities. 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:

    ·
    exchange rate movements and volatility;

    ·
    inflation and high interest rates;

    ·
    financing of the current account deficit;

    ·
    liquidity of domestic capital and lending markets;

    ·
    tax policy;

    ·
    political instability resulting from allegations of corruption involving political parties, elected officials or other public officials; and

    ·
    other political, diplomatic, social and economic developments in or affecting Brazil.

          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 and heightened volatility in the securities issued abroad by Brazilian companies. Ongoing corruption investigations have led to charges against public officials and members of several political parties. Political instability may aggravate economic uncertainties in Brazil and increase volatility in the Brazilian securities markets and securities issued by Brazilian issuers.

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          In 2015, Brazil faced an economic recession, adverse fiscal developments and political instability, which have continued in 2016. Brazilian GDP declined by 3.85% in 2015 and unemployment increased to 6.9% in 2015 from 4.3% 2014. Inflation for the year of 2015 was 10.67% (as reported by IBGE, the Brazilian Institute of Geography and Statistics), as compared to 6.41% in 2014. The Brazilian Central Bank's base interest rate (SELIC) increased to 14.25% in December 31, 2015 from 11.75% in December 31, 2014. 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 in which we operate could adversely impact our business and reputation.

          Disputes with communities where we operate may arise from time to time. 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 these indigenous peoples may have rights to review or participate in natural resource management. 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, local communities and the government. 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 groups, including indigenous groups, could cause delays or interruptions to our operations, adversely affect our reputation or otherwise hamper our ability to develop our reserves and conduct our operations. Protesters have taken actions to disrupt our operations and projects, and they may continue to do so in the future, which may harm our operations and could adversely affect our business. As one of Samarco's shareholders, our reputation, particularly in the affected communities, has been adversely affected by the failure of Samarco's tailings dam in 2015. See Information on the Company—Business overview—Significant changes in our business—Failure of Samarco's tailings dam in Minas Gerais.

    We could be adversely affected by changes in government policies or 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, governments may impose new taxes, raise existing taxes and royalty rates, reduce tax exemptions and benefits, request or force renegotiation of tax stabilization agreements or change 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 are also required to meet domestic beneficiation requirements in certain countries in which we operate, 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.

    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.

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          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. While we anticipate that renewals will be given as and when sought, there is no assurance that such renewals will be granted as a matter of course and on a timely basis, 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 might impede our business objectives. 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 Company—Regulatory matters.

          After the failure of Samarco's Fundão tailings dam at its iron ore operations in the Brazilian state of Minas Gerais, Brazilian authorities ordered the suspension of its operations in Minas Gerais and other measures. See Information on the Company—Business overview—Significant changes in our business—Failure of Samarco's tailings dam in Minas Gerais.

    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 and to expand the scope of the minerals we produce. We regularly review the economic viability of our projects. As a result of this review, we may decide to 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:

    ·
    We may encounter delays or higher than expected costs in obtaining the necessary equipment or services and in implementing new technologies to build and operate a project.

    ·
    Our efforts to develop projects on schedule may be hampered by a lack of infrastructure, including reliable telecommunications services and power supply.

    ·
    Suppliers and contractors may fail to meet their contractual obligations to us.

    ·
    We may face unexpected weather conditions or other force majeure events.

    ·
    We may fail to obtain the required permits and licenses to build a project, or we may experience delays or higher than expected costs in obtaining them.

    ·
    Changes in market conditions or regulations may make a project less profitable than expected at the time we initiated work on it.

    ·
    There may be accidents or incidents during project implementation.

    ·
    We may face shortages of skilled personnel.

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    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:

    ·
    Unexpected weather conditions or other force majeure events.

    ·
    Adverse mining conditions delaying or hampering our ability to produce the expected quantity of minerals and to meet specifications required by customers, which can trigger price adjustments.

    ·
    Accidents or incidents involving our mines and related infrastructure, such as dams, plants, railroads, ports and ships.

    ·
    Delays or interruptions in the transportation of our products, including with railroads, ports and ships.

    ·
    Tropical diseases, HIV/AIDS and other contagious diseases in regions where some of our operations or projects are located, which pose health and safety risks to our employees.

    ·
    Labor disputes that may disrupt our operations from time to time.

    ·
    Changes in market conditions or regulations may affect the economic prospects of an operation and make it inconsistent with our business strategy.

    ·
    Disruptions to or unavailability of critical information technology systems or services resulting from accidents or malicious acts.

    Our business could be adversely affected by the failure of our counterparties 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.

          We currently operate important parts of our iron ore, pelletizing, bauxite, nickel, coal, copper, fertilizers and steel businesses through joint ventures. Important parts of our electricity investments and projects are operated through consortia or joint ventures. 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 joint venture 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 environmental, health and safety incidents or accidents, which could adversely affect our results and reputation.

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    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, and the mining industry is generally subject to significant risks and hazards, including fire, explosion, toxic gas leaks, spilling of polluting substances or other hazardous materials, rockfall incidents in mining operations and incidents involving mobile equipment or machinery. This could occur by accident or by breach of operating and maintenance standards, and could result in a significant environmental impact, damage to or destruction of mineral properties or production facilities, personal injury or death, environmental damage, delays in production, monetary losses and possible legal liability. Notwithstanding our standards, policies and controls, our operations remain subject to incidents or accidents that could adversely affect our business or reputation.

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

          Nearly all aspects of our activities, products, services and projects around the world are subject to environmental regulations and health and safety regulations, which may expose us to increased liability or increased costs. These regulations require us to obtain environmental licenses, permits and authorizations for our operations, and to conduct environmental and social impact assessments in order to get approval for our projects and permission for initiating construction. Significant changes to existing operations are also subject to these requirements. Difficulties in obtaining permits may lead to construction delays, cost increases, and may adversely impact our production volumes. Environmental and health and safety regulations also impose standards and controls on activities relating to mineral research, mining, pelletizing activities, railway and marine services, ports, decommissioning, refining, distribution and marketing of our products. Such regulation may give rise to significant costs and liabilities.

          In addition, communities and other stakeholders may increase demands for socially responsible and environmentally sustainable practices, and their efforts may lead to the creation or revision of government regulations and policies, which could entail significant costs and reduce our profitability. Private litigation relating to these or other matters may adversely affect our financial condition or cause harm to our reputation.

          Environmental and health and safety 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 and products, creating new requirements for the issuance or renewal of environmental licenses, raising our costs or requiring us to engage in expensive reclamation efforts. For example, changes in Brazilian legislation for the protection of caves have required us to conduct extensive technical studies and to negotiate compensatory measures with Brazilian environmental regulators in order to continue to operate in certain sites. It is possible that in certain of our iron ore mining operations or projects, we may be required to limit or modify our mining plans or to incur additional costs to preserve caves or to compensate for the impact on them, with potential consequences for production volumes, costs or reserves in our iron ore business. For more information about Brazilian environmental regulations related to caves, see Information on the CompanyRegulatory mattersEnvironmental regulations.

          In response to the failure of Samarco's tailings dam in Minas Gerais, additional environmental and health and safety laws and regulations may be forthcoming in Brazil and authorities may impose more stringent conditions in connection with the licensing process of our projects and operations. Also, we may encounter delays in the receipt of environmental operating license for other tailings dams.

          National policies and international regulations regarding climate change may affect a number of our businesses in different countries, because we operate worldwide. For example, there is legislation in many countries where we operate that limits greenhouse gas emissions from the mining industry. There is increased pressure from international organizations for establishing a global carbon price, and for companies and governments to adopt carbon pricing strategies, which may adversely affect the coal business.

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          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.

    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 adversely 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 highly uncertain, but we may experience changes in rainfall patterns, water shortages, rising sea levels, increased storm intensity and flooding 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 effect of severe weather on our mining and logistics activities.

    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 result in damage to, or destruction of, 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. 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 could have a material adverse effect on our operations.

    Our reserve estimates may materially differ from mineral quantities that we are actually able to recover; our estimates of mine life may prove inaccurate; 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 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 and other factors. For example, lower market prices of minerals and metals, 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 restatement of reserves. Such a restatement could affect depreciation and amortization rates and have an adverse effect on our financial performance.

    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.

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    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:

    ·
    establish mineral reserves through drilling;

    ·
    determine appropriate mining and metallurgical processes for optimizing the recovery of metal contained in ore;

    ·
    obtain environmental and other licenses;

    ·
    construct mining, processing facilities and infrastructure required for greenfield properties; and

    ·
    obtain the ore or extract the minerals from the ore.

          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 or 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.

    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.

          Energy costs are a significant component of our cost of production, representing 9.1% of our total cost of goods sold in 2015. To fulfill our energy needs, we depend on the following sources: oil by-products, which represented 43% of total energy needs in 2015, electricity (26%), natural gas (16%), coal (13%) and other energy sources (2%).

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          Electricity costs represented 2.8% of our total cost of goods sold in 2015. 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.

    Price volatility—relative to the U.S. dollar—of the currencies in which we conduct operations could adversely affect our financial condition and results of operations.

          A substantial portion of our revenues and our debt is denominated in U.S. dollars, and 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 2015, 2014 and 2013 we had foreign exchange losses of US$7.2 billion, US$2.1 billion and US$2.8 billion, respectively. In addition, the price volatility of the Brazilian real, the Canadian dollar, the Australian dollar, the Indonesian rupiah and other currencies against the U.S. dollar affects our results since most of our costs of goods sold are denominated in currencies other than the U.S. dollar, principally the real (49% in 2015) and the Canadian dollar (13% in 2015), 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.

    Failures in our information technology systems or difficulties in integrating new enterprise resource planning software may interfere with the normal functioning of our business.

          We rely on information technology ("IT") systems for the operation of many of our business processes. Failures in our IT systems, whether caused by accident or malicious acts, may result in the disclosure or theft of sensible information, misappropriation of funds and disruptions to our business operations.

Risks relating to our corporate structure

    Our controlling shareholder has significant influence over Vale, and the Brazilian government has certain veto rights.

          As of February 29, 2016, Valepar S.A. ("Valepar") owned 53.9% of our outstanding common stock and 33.7% of our total outstanding capital. As a result of its share ownership, Valepar can elect the majority of our board of directors and control the outcome of some actions that require shareholder approval. For a description of our ownership structure and of the Valepar shareholders' agreement, see Share ownership and tradingMajor shareholders.

          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 informationMemorandum and articles of associationCommon shares and preferred shares.

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    Our governance and compliance processes may fail to prevent regulatory penalties and reputational harm.

          We operate in a global environment, and our activities extend over 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 legal, accounting or governance standards. We may be subject to breaches of our Code of Ethics and 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 fines, loss of operating licenses 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. The Company is 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 investors. It might not be possible for investors 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 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 (Superior Tribunal de Justiça), and confirmation will only be granted if the judgment: (a) fulfills all formalities required for its enforceability under the laws of the country where it was issued; (b) was issued by a competent court after due service of process on the defendant, as required under applicable law; (c) was authenticated by a Brazilian consulate in the country in which it was issued and is accompanied by a sworn translation into the Portuguese language; and (d) 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 or HDR holders exchange ADSs or HDSs, respectively, for the underlying shares, they risk losing the ability to remit foreign currency abroad.

          The custodian for the shares underlying our ADSs and HDSs maintains a registration with 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 and HDSs or upon the disposition of the underlying shares. If an ADR holder or HDR holder exchanges its ADSs or HDSs 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 or HDR 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, which permits qualifying institutional foreign investors to buy and sell securities on the BM&FBOVESPA. For more information regarding these exchange controls, see Additional informationExchange controls and other limitations affecting security holders. If an ADR holder or HDR 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 or HDR holders, the disposition of the underlying shares or the repatriation of the proceeds from disposition could be imposed in the future.

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    ADR holders and HDR holders may be unable to exercise preemptive rights relating to the shares underlying their ADSs and HDSs.

          The ability of ADR holders and HDR 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 or the Companies Ordinance in Hong Kong) 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, or that any document offering preemptive rights be registered as a prospectus, as is the case in Hong Kong. We are not obligated to extend the offer of preemptive rights to holders of ADRs or HDRs, 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.

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

          ADR holders and HDR 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 and HDR 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 or HDRs 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. Similarly, we have been granted waivers and exemptions from certain requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("HKEx Listing Rules"), the Codes on Takeovers and Mergers and Share Repurchases and the Securities and Futures Ordinance of Hong Kong that are generally applicable to issuers listed in Hong Kong.

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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,
 
2011 2012 2013 2014 2015
 
(US$ million)

Net operating revenues

60,075 46,553 46,767 37,539 25,609

Cost of products and services

(24,528 ) (25,390 ) (24,245 ) (25,064 ) (20,513 )

Selling, general and administrative expenses

(2,271 ) (2,172 ) (1,302 ) (1,099 ) (652 )

Research and evaluation expenses

(1,671 ) (1,465 ) (801 ) (734 ) (477 )

Pre-operating and operational stoppage and other operating expenses, net

(2,775 ) (3,588 ) (2,843 ) (2,145 ) (1,233 )

Impairment of non-current assets and onerous contracts

–   (4,023 ) (2,298 ) (1,152 ) (8,926 )

Gain (loss) on measurement or sales of non-current assets

1,494 (506 ) (215 ) (167 ) 61

Operating income

     30,324        9,409      15,063        7,178      (6,131 )

Non-operating income (expenses):

         

Financial income (expenses), net

(3,549 ) (4,022 ) (8,332 ) (6,069 ) (10,801 )

Equity results in associates and joint controlled entities

1,138 645 469 505 (439 )

Results on sale of investments from associates and joint ventures

–   –   41 (30 ) 97

Impairment on investments

–   (1,941 ) –   (31 ) (446 )

Income (loss) before income taxes

27,913 4,091 7,241 1,553 (17,720 )

Income taxes

(5,265 ) 1,174 (6,833 ) (1,200 ) 5,100

Income (loss) from continuing operations

22,648 5,265 408 353 (12,620 )

Income (loss) attributable to non-controlling interests

(233 ) (257 ) (178 ) (304 ) (491 )

Net income (loss) attributable to Company's shareholders, from continuing operations

22,881 5,522 586 657 (12,129 )

Loss from discontinued operations, net of tax

(86 ) (68 ) (2 ) –   –  

Net income (loss) attributable to Company's shareholders

22,795 5,454 584 657 (12,129 )

Income (loss) attributable to non-controlling interests

(233 ) (257 ) (178 ) (304 ) (491 )

Net income (loss)

22,562 5,197 406 353 (12,620 )

Total cash paid to shareholders(1)

9,000 6,000 4,500 4,200 1,500

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

Earnings per share

 
For the year ended December 31,
 
2011 2012 2013 2014 2015
 
(US$, except as noted)

Earnings (loss) per share:

         

Per common share

4.34 1.06 0.11 0.13 (2.35 )

Per preferred share

4.34 1.06 0.11 0.13 (2.35 )

Weighted average number of shares outstanding (in thousands)(1):

         

Common shares

3,197,063 3,172,179 3,185,653 3,185,653 3,185,653

Preferred shares

1,984,030 1,933,491 1,967,722 1,967,722 1,967,722

Treasury common shares underlying convertible notes

18,416 –   –   –   –  

Treasury preferred shares underlying convertible notes

47,285 –   –   –   –  

Total

5,246,794 5,105,670 5,153,375 5,153,375 5,153,375

Distributions to shareholders per share(2):

         

Expressed in US$

1.74 1.17 0.87 0.81 0.29

Expressed in R$

2.89 2.26 1.81 1.89 0.98

(1)
Each common ADS represents one common share and each preferred ADS represents one preferred share.
(2)
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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Balance sheet data

 
                At December 31,                 
 
2011 2012 2013 2014 2015
 
(US$ million)

Current assets

21,538 22,069 20,611 16,594 11,429

Property, plant and equipment, net and intangible assets

91,863 94,093 88,536 84,942 59,426

Investments in associated companies and joint ventures

8,013 6,384 3,584 4,133 2,940

Other assets

5,502 8,031 11,866 10,820 14,697

Total assets

   126,916    130,577    124,597    116,489    88,492

Current liabilities

11,093 12,402 9,164 10,626 10,438

Liabilities associated with assets held for sale and discontinued operations

–   169 448 111 107

Long-term liabilities(1)

16,470 16,380 22,379 22,043 15,896

Long-term debt(2)

21,538 26,799 27,670 27,388 26,347

Total liabilities

49,101 55,750 59,661 60,168 52,788

Shareholders' equity:

         

Capital stock

60,578 60,578 60,578 61,614 61,614

Additional paid-in capital

7 (552 ) (552 ) (601 ) (854 )

Mandatorily convertible notes—common ADSs

191 –   –   –   –  

Mandatorily convertible notes—preferred ADSs

422 –   –   –   –  

Retained earnings and revenue reserves

14,902 13,213 3,299 (5,891 ) (27,171 )

Total Company shareholders' equity

76,100 73,239 63,325 55,122 33,589

Non-controlling interests

1,715 1,588 1,611 1,199 2,115

Total shareholders' equity

77,815 74,827 64,936 56,321 35,704

Total liabilities and shareholders' equity

126,916 130,577 124,597 116,489 88,492

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

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I.  INFORMATION ON THE COMPANY

BUSINESS OVERVIEW

Summary

          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, cobalt, potash, phosphates and other fertilizer nutrients. We are engaged in greenfield mineral exploration in six countries around the globe. 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 portfolio of maritime freight assets, floating transfer stations and distribution centers to support the distribution of iron ore worldwide. Directly and through affiliates and joint ventures, we also have investments in energy and steel businesses.

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

 
Year ended December 31,
 
2013 2014 2015
 
US$ million
% of total
US$ million
% of total
US$ million
% of total

Ferrous minerals:

           

Iron ore

27,844 59.6% 19,301 51.4% 12,330 48.2%

Iron ore pellets

6,000 12.8 5,263 14.0 3,600 14.1

Manganese and ferroalloys

523 1.1 392 1.0 162 0.6

Other ferrous products and services

425 0.9 741 2.0 470 1.8

Subtotal—ferrous minerals

34,792 74.4 25,697 68.4 16,562 64.7

Coal

1,010 2.2 739 2.0 526 2.0

Base metals:

           

Nickel and other products(1)

5,839 12.5 6,241 16.6 4,693 18.3

Copper(2)

1,447 3.1 1,451 3.9 1,470 5.8

Subtotal—base metals

7,286 15.6 7,692 20.5 6,163 24.1

Fertilizer nutrients

2,814 6.0 2,415 6.4 2,225 8.7

Other(3)

865 1.8 996 2.7 133 0.5

Total net operating revenues from continued operations

46,767 100.0% 37,539 100.0% 25,609 100.0%

(1)
Includes nickel co-products (copper) and by-products (precious metals, cobalt and others).
(2)
Does not include copper produced as a nickel co-product.
(3)
Includes pig iron and energy.

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    ·
    Ferrous minerals:

    o
    Iron ore and iron ore pellets.    We operate four systems in Brazil for producing and distributing iron ore, which we refer to as the Northern, Southeastern, Southern and Midwestern Systems. The Northern and the Southeastern Systems are fully integrated, consisting of mines, railroads, maritime terminals and a port. The Southern System consists of three mining complexes and two maritime terminals. We also have iron ore pellet operations in several locations, some of which are conducted through joint ventures. We operate 11 pellet plants in Brazil and two in Oman. The operations of three of our pellet plants in Brazil have been suspended since the fourth quarter of 2012 in response to market conditions, and their capacity was partially replaced by Tubarão VIII, a more efficient plant. Additionally, we have a 50% stake in Samarco, which operates an integrated system in the Brazilian states of Minas Gerais and Espírito Santo. Samarco's operations have been suspended following the failure of its tailings dam in November 2015 (see —Significant Changes in Our Business—Failure of Samarco's tailings dam in Minas Gerais). We also have 25% stakes in two pellet companies in China.

    o
    Manganese ore and ferroalloys.    We conduct our manganese mining operations through Vale S.A. and subsidiaries in Brazil, and we produce several types of manganese ferroalloys through a wholly-owned subsidiary in Brazil.

    ·
    Base metals:

    o
    Nickel.    Our principal nickel mines and processing operations are conducted by our wholly-owned subsidiary Vale Canada Limited ("Vale Canada"), which has operations in Canada and Indonesia. We also have nickel operations in Onça Puma, in the Brazilian state of Pará. We also own and operate, or have interests in, nickel refining facilities in the United Kingdom, Japan, Taiwan, China and South Korea. We are currently ramping up nickel operations in New Caledonia.

    o
    Copper.    In Brazil, we produce copper concentrates at Sossego and Salobo, in Carajás, in the Brazilian state of Pará. We are concluding the ramp-up of Salobo operations. In Canada, we produce copper concentrates, copper anodes and copper cathodes in conjunction with our nickel mining operations at Sudbury and Voisey's Bay. In Zambia, our joint venture produces copper concentrates at Lubambe, located in the Zambian Copperbelt.

    o
    Cobalt, PGMs and other precious metals.    We produce cobalt as a by-product of our nickel mining and processing operations in Canada and refine the majority of it at our Port Colborne facilities, in the Province of Ontario, Canada. We also produce cobalt as a by-product of our nickel operations in New Caledonia, which we are currently ramping up. We produce PGMs as by-products of our nickel mining and processing operations in Canada. The PGMs are concentrated at our Port Colborne facilities and refined at our precious metals refinery in Acton, England. We produce gold and silver as by-products of our nickel mining and processing operations in Canada, and gold as a by-product of our copper mining in Brazil.

    ·
    Coal:

    o
    We conduct our coal operations primarily in Mozambique, through Vale Moçambique, S.A. ("Vale Moçambique"), where we are ramping up our metallurgical and thermal coal operations. We also have a coal operation in Australia through Rio Doce Australia Pty Ltd ("Vale Australia"), where we produce metallurgical coal in Carborough Downs. We also have minority interests in a Chinese coal and coke producer.

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    ·
    Fertilizer nutrients:

    o
    We conduct our potash operations in Rosario do Catete, in the Brazilian state of Sergipe. We conduct our main phosphate operations through our subsidiary Vale Fertilizantes S.A. ("Vale Fertilizantes"), which holds most of our fertilizer assets in Brazil. Vale Fertilizantes is the largest Brazilian producer of phosphate rock and phosphate fertilizers and the second-largest Brazilian producer of nitrogen fertilizers. We also have a phosphate rock mine operation in Peru.

    ·
    Logistics infrastructure:

    o
    We are a leading operator of logistics services in Brazil and other regions of the world, with railroads, maritime terminals, distribution centers and ports. Two of our four iron ore systems include an integrated railroad network linked to port and terminal facilities. We also have an interest in MRS Logística S.A. ("MRS"), which transports our iron ore products from the Southern System mines to our maritime terminals, and VLI S.A. ("VLI"), which provides integrated logistics solutions to general cargo through railroads, inland and maritime terminals in Brazil. We are ramping up the logistics infrastructure to support our operations in Southeastern Africa. We own and charter dry bulk vessels to transport the products that we sell on a cost and freight ("CFR") basis to customers.

Business strategy

          Our mission is to transform natural resources into prosperity and sustainable development. Our vision is to be the number one global natural resources company in creating long-term value through excellence and passion for people and the planet. We are committed to investing mainly in world-class assets, with long life, low cost, potential to expand and high quality output, capable of creating value through different economic cycles. A lean management organization, with teamwork and accountability, excellence in project execution and firm commitment to transparency and shareholder value creation, are principles of paramount importance that guide us towards the achievement of our goals. Health and safety, investment in human capital, a positive work environment and sustainability are also critical to our long-term competitiveness.

          We aim to maintain our competitive position in the global iron ore market and to grow through world-class assets while exercising disciplined capital management and maintaining a low cost structure. Iron ore and nickel will continue to be our main businesses while we work to maximize the value of our copper, coal and fertilizer nutrients businesses. To enhance our competitiveness, we will continue to improve our railroads and our global distribution network. We seek opportunities to make strategic partnerships focusing on disciplined capital management. We have also suspended operations of assets in response to market conditions, and disposed of assets that we have determined to be non-strategic or in order to optimize the structure of our business portfolio. The divestiture of assets improves capital allocation and unlocks funds to finance the execution of top priority projects. The preservation of our credit ratings is one of our basic commitments. Below are the highlights of our major business strategies.

    Maintaining our competitiveness in the global iron ore market

          We are committed to maintaining our competitiveness in the global iron ore market, by 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 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 achieve this goal.

    Enhancing our logistics capacity to support our iron ore and coal businesses

          We believe that the quality of our railway assets, our extensive experience as a railroad and port operator, and our stakes in MRS and VLI position us as a leader in the logistics business in Brazil. We have been expanding the capacity of our railroads and ports primarily to meet the needs of our iron ore business.

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          We continue to satisfy our transportation needs through a fleet of capesize vessels and very large ore carriers of 400,000 deadweight tons ("DWT"), primarily used to transport iron ore from Brazil to Asia, which is owned partly by us and partly by ship owners with which we have contracts of affreightment. To support our commercial strategy for our iron ore business, we operate two distribution centers in Malaysia and Oman, and two floating transfer stations ("FTS") in the Philippines.

          In order to position ourselves for the future expansion of our coal production in Mozambique and leverage our presence in Africa, we are currently ramping up the expansion of the local railroad capacity by rehabilitating the existing network and building new railroad tracks to develop the logistics corridor from our mine to the newly constructed port at Nacala-à-Velha, in Mozambique.

    Maximizing value in the nickel and copper businesses

          We are the world's largest nickel producer, with large-scale, long-life and low-cost operations, a substantial resource base, diversified mining operations producing nickel from nickel sulfides and laterites and advanced technology. We have refineries in North America, Europe and Asia, which produce an array of products for use in most nickel applications. 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 58% of our refined nickel sales in 2015. Our long-term goal is to strengthen our competitiveness in the nickel business. We continue to optimize our operations and to review our asset utilization aiming to increase productivity and improve returns.

          We produce copper concentrates from our Sossego and Salobo facilities located in the Carajás region. These copper mines benefit from our infrastructure facilities serving the Northern System. The gold we produce at Sossego and Salobo increases the total aggregated value of those operations. Our strategy for our copper assets in the Carajás region is to develop new mines in order to maintain supply for our existing processing facilities. We also have copper operations at Lubambe, in Zambia, through a joint venture. Copper is recovered as a co-product from our nickel operations, principally at Sudbury and Voisey's Bay, in Canada.

    Optimizing the coal business

          We have coal operations in Moatize (Mozambique) and Australia, and we hold a minority interest in a joint venture in China. We intend to continue pursuing organic growth in the coal business mainly through the expansion of the Moatize operations in Mozambique, where we have entered into a strategic partnership with Mitsui.

    Maintaining growth options in fertilizer nutrients business

          We have potash and phosphate rock operations as well as potential investments in greenfield and brownfield projects that we believe will allow us to benefit from certain demographic trends: the growing world population, an increase in per capita income in emerging economies and higher global consumption of proteins. We also take advantage of our strategic position to provide goods to the fertilizer-driven agricultural expansion in Brazil.

    Developing our resource base

          We are taking advantage of our global presence to develop mineral exploration initiatives. We conduct brownfield exploration to maximize results from existing mining areas and to support both projects and operations. We conduct our greenfield exploration activities in six countries, which are Brazil, Peru, Chile, Canada, Australia and Indonesia. In particular, we seek to identify opportunities and develop deposits with the potential for large scale production at low cost. Our exploration activities include iron ore, nickel, copper, coal, potash and phosphates.

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    Optimizing our energy matrix

          As a large consumer of electricity, we have invested in power generation projects to support our operations and to reduce our exposure to the volatility of energy prices and regulatory uncertainties. Accordingly, we have developed hydroelectric power generation plants in Brazil, Canada and Indonesia, and we currently generate 51% of our worldwide electricity needs from our own plants. We are seeking to develop a clean energy mix by investing to develop low carbon energy sources such as biofuels and focusing on reducing our carbon footprint.

    Integrating sustainability into our business

          We are committed to sustainability, as we cannot grow without taking into account the physical limits of our planet or the well-being of communities in which we operate. Since 2013, we have incorporated environmental and social actions directly into our strategic planning, moving away from a stand-alone investment model. We practice sustainable mining by dedicating resources to education and researching the application of technologies to use natural resources efficiently. We are also committed to reducing the consumption of water in our activities and to use it more efficiently, especially through reuse and recirculation of water. We actively support an open dialogue with our main stakeholders (governments, communities, customers, suppliers, employees and others), because we recognize that only by acting together we can achieve sustainable growth and contribute to social welfare. We follow standards for social action and principles on business and human rights, which are based on the guidelines of the United Nations Human Rights Council. We are also committed to reducing greenhouse gas emissions.

Significant changes in our business

          We summarize below major events related to our organic growth, divestitures, acquisitions and other significant developments in our business since the beginning of 2015.

    Organic growth

          We have an extensive program of investments in the organic growth of our businesses. Our main investment projects are summarized under —Capital expenditures. The most significant projects that have come on stream since the beginning of 2015 are summarized below:

    ·
    Conceição Itabiritos II.  In the second quarter of 2015, we completed the adaptation of the existing plant to process lower grade itabirites from the Conceição mine, located in the Southeastern System in Minas Gerais, Brazil. The nominal capacity is 13 Mtpy of pellet feed and 6 Mtpy of sinter feed.

    ·
    Cauê Itabiritos.  In the fourth quarter of 2015, we concluded the adaptation of the plant to process low-grade itabirites from the Itabira mining complex, located in the Southeastern System in Minas Gerais, Brazil. The nominal capacity is 16.5 Mtpy of pellet feed and 7.2 Mtpy of sinter feed.

    ·
    Nacala Logistics Corridor.  In the fourth quarter of 2014, we began the upgrade of brownfield sections of the railway, which was completed in the fourth quarter of 2015. The project, which consists of a railway and port infrastructure connecting the Moatize site to the Nacala-à-Velha maritime terminal, located in Nacala, Mozambique, successfully transported and discharged 523,000 tons of thermal coal at the Nacala port, having completed four shipments of coal as of January 2016.

    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 2015.

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    ·
    Sale of gold stream from Salobo copper mine—In March 2015, we sold to Silver Wheaton (Caymans) Ltd. ("Silver Wheaton") an additional 25% of the gold produced as a by-product at our Salobo copper mine, in Brazil, for the life of that mine. We had previously sold 25% of such gold in 2013. In consideration for the March 2015 sale, we received an initial cash payment of US$900 million and ongoing payments of the lesser of US$400 per ounce (subject to a 1% annual inflation adjustment after 2017) and the prevailing market price, for each ounce of gold that we deliver under the agreement. We may receive an additional cash payment, ranging from US$88 million to US$720 million, if we expand our capacity to process Salobo copper ores to more than 28 Mtpy before 2036.

    ·
    Sale of minority interest in Minerações Brasileiras Reunidas S.A.—In September 2015, we sold preferred shares representing 36.4% of the total capital of our subsidiary Minerações Brasileiras Reunidas S.A. ("MBR") to an affiliate of Banco Bradesco S.A. for R$4.0 billion, or US$1.089 billion. After the sale, Vale holds 61.9% of the total capital and 98.3% of its voting capital. Vale has an option to repurchase the shares after an initial period.

    ·
    Sale of Isaac Plains Coal mine—In November 2015, we completed the sale of our 50% stake in the Isaac Plains joint venture and all associated assets to Stanmore Coal Limited ("Stanmore"). Under this agreement, we will pay A$21.6 million in 12 installments to Stanmore, which will assume our liabilities under the joint venture agreement. Stanmore has agreed to pay us royalties of A$2.0 per ton on the coal produced and sold at the Isaac Plains coal mine for a period of ten years, subject to a certain price thresholds, up to an aggregate amount of A$21.6 million.

    ·
    Sale of Integra coal operations—In December 2015, we completed the sale of our 68.4% stake in the Integra Coal Joint Venture ("ICJV") and all the associated assets to Glencore Plc ("Glencore"). As consideration, Glencore has agreed to pay us royalties of A$1.50 per ton on the coal produced and sold by ICJV, based on mineral rights currently held by ICJV, proportional to our stake in ICJV prior to the sale and limited to an annual volume of two million metric tons for ten years. As part of the transaction, Glencore has assumed some, but not all, ICJV liabilities, including certain "take or pay" logistics agreements.

    ·
    Sale of very large ore carriers—In 2015, we concluded the sale of 12 very large ore carriers of 400,000 DWT for an aggregate amount of US$1.316 billion. See —Restructuring our investments in iron ore shipping.

    Partnership in coal assets in Mozambique

          In December 2014, we entered into an investment agreement with Mitsui, pursuant to which Mitsui will acquire 15% of our stake in Vale Moçambique, which owns 95% of Moatize mine, and half of our equity stake in the companies holding the railroad and port concessions in the Nacala Corridor, in Mozambique and Malawi. The Mitsui investment is subject to conditions precedent, and is expected to close in 2016.

    ·
    Moatize—Mitsui has agreed to acquire a 15% stake in Vale Moçambique, partly in a capital increase and partly from Vale. Mitsui has agreed to pay US$450 million, which may be increased by up to US$30 million or reduced by up to US$120 million, based on certain yield and production targets, through 2021. Mitsui will also provide additional funding, proportional to its 15% stake, to replace part of the funding of capital expenditures for the expansion of the Moatize mine provided by Vale since July 2014. Upon completion of the transaction, we will indirectly own 81% of the Moatize mine.

    ·
    Nacala Corridor—Our equity stake in the companies holding the concessions in the Nacala Corridor will be transferred to a holding company jointly owned (50% each) and controlled by Vale and Mitsui. Mitsui will invest US$313 million in equity and quasi-equity instruments of this holding company. Vale and Mitsui are currently negotiating project financing that would meet one of the conditions to Mitsui's investment and replace part of the financing provided by Vale. See Lines of Business—Infrastructure—Railroads.

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    Restructuring our investments in iron ore shipping

          Our strategy with respect to maritime shipping for our iron ore includes securing long-term access to shipping capacity for the transportation of our iron ore from Brazil to Asia and protecting against volatility in freight pricing, without incurring the costs relating to building and owning the ships. In 2014, we entered into framework agreements for strategic cooperation in iron ore transportation with three shipping companies and financial institutions based in China and Hong Kong. Pursuant to these framework agreements, we (i) sold a total of 12 of our very large ore carriers of 400,000 DWT for an aggregate amount of US$1.316 billion and (ii) entered into long-term contracts of affreightment with the Chinese ship owners, to secure the long-term transportation capacity to ship our iron ore from Brazil to Asia and to protect against volatility in freight costs. We also sold three of our capesize vessels for approximately US$23 million in 2015.

    Obtaining environmental licenses for expansion of N5S ore body in Carajás

          In May 2015, we obtained the environmental license for the expansion of our N5S mine pit located in Carajás, Brazil. This license supports our iron ore production growth process, especially the production plan for 2016.

    Restructuring our investments in power generation

          In 2015, we concluded transactions with CEMIG Geração e Transmissão S.A. ("CEMIG GT") to (i) sell 49% of our 9% 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, to CEMIG GT, for approximately R$310 million; and (ii) create two distinct joint ventures: Aliança Geração de Energia S.A. ("Aliança Geração"), which holds the participations previously held by us and CEMIG GT in power generation assets and projects, and Aliança Norte Energia Participações S.A. ("Aliança Norte"), which holds our and CEMIG GT's interests in Norte Energia. Our interests in these joint ventures are 55% and 51%, respectively.

    Suspension of certain iron ore operations in the Southern System

          In July 2015, we temporarily suspended operations at certain iron ore processing plants with higher beneficiation costs and lower quality products in the Paraopeba mining complex and reduced production of lower quality products at certain mines at the Minas Itabiritos mining complex, both in the Southern System. We have resumed some of these operations, although at lower productivity. The decision is consistent with our strategy to improve product quality and increase profit margins.

    Failure of Samarco's tailings dam in Minas Gerais

          On November 5, 2015, one of Samarco's tailings dams (Fundão) failed unexpectedly, releasing tailings downstream, reaching and flooding certain communities, including Bento Rodrigues, a small district of 600 people. The failure resulted in 18 fatalities, with one person still missing, and caused property and environmental damage to the affected areas, primarily in the state of Minas Gerais.

          Immediately after the dam failure, Samarco, together with the Civil Defense, Fire Department, Military Police and other authorities, provided first aid, food, water, housing, social assistance and financial aid to the affected families and individuals, and both Vale and BHPB, Samarco's shareholders, have been actively involved in supporting Samarco during this crisis.

          In addition to these emergency actions, Samarco has been monitoring the affected area, performing emergency work to contain any movement of tailings, reinforcing the structures of its dams and dikes to ensure the safety of the region and mitigating the environmental and social impacts of the event.

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          Samarco has been cooperating with the investigations being conducted by the Civil Police. Samarco, together with Vale and BHPB hired an external firm to conduct an independent investigation. In order to assess the environmental and socio-economic impacts of the dam failure and assist with the development of a remediation plan, Samarco has also engaged international consulting specialists in engineering, environment and environmental emergencies, health and safety, social and security services.

          The dam failure resulted in the immediate stoppage of Samarco's mining operations in the state of Minas Gerais pursuant to order of government authorities. With the exception of two of its dams (the Fundão tailings dam and the Santarém water dam, which was impacted by the overflow of tailings from the Fundão dam), all other Samarco production assets were undamaged.

          Vale's operation in the Mariana mining complex, near Samarco's mining area, was also negatively impacted by the failure of Samarco's tailings dam. A major conveyor belt connecting our Fábrica Nova mine to our Timbopeba beneficiation plant was damaged and the Alegria mine is operating with a dry beneficiation process, at lower productivity. These factors caused a decrease in production at the Mariana mining complex in Minas Gerais by 3.0 Mt in 2015, which was offset by increased production from our other mines. The expected impact in 2016 is a decrease of 9 Mt in production at the Mariana mining complex, which we expect to be partially offset by increased production at our other mines. In addition, we have interrupted the sale of run of mine (ROM) from our Fazendão mine to Samarco. We are still exploring alternatives for these mines.

          As a consequence of the Fundão dam failure, Samarco incurred expenses, wrote off assets and recognized provisions for remediation, which affected its balance sheet and income statement. Because Samarco is a joint venture, these impacts are reflected on Vale's financial statements under the equity method, limited to its interest in Samarco's capital. Vale's investment in Samarco was reduced to zero and no liability was recognized in Vale's financial statements.

          The dam failure had no effect on Vale's cash flow for the year ended December 31, 2015.

          Samarco and its shareholders, Vale and BHPB, entered into a settlement agreement on March 2, 2016 with the federal Attorney General of Brazil, the two Brazilian states affected by the failure (Espírito Santo and Minas Gerais) and certain other parties. The settlement agreement, which includes no admission of civil, criminal or administrative liability for the Fundão dam failure, is expected to resolve the lawsuit brought in Brazilian courts by several Brazilian governmental authorities. The settlement agreement is already effective, though the resolution of claims pursuant to the agreement remains subject to judicial approval. See Additional information—Legal proceedings—Legal proceedings related to failure of Samarco's tailings dam in Minas Gerais—Public civil action by the Brazilian government and others. There is no assurance as to whether and when the court will approve the resolution of claims. The term of the agreement is 15 years, renewable for successive one-year periods until all obligations under the agreement have been performed.

          Under the settlement agreement, Samarco, Vale and BHPB will establish a foundation to develop and implement remediation programs to restore the environment, local communities and the social condition of the affected areas and compensation programs to provide compensation where remediation is not feasible and, in some cases, beyond strictly compensatory measures.

          Samarco has agreed to provide funding to the foundation in the amount of R$2.0 billion in 2016, R$1.2 billion in 2017 and R$1.2 billion in 2018. Amounts Samarco has already spent on remediation and compensation will be applied towards its funding obligations. From 2019 to 2021, Samarco has agreed to provide funding based on the amounts needed to complete remaining remediation and compensation projects, subject to an annual minimum of R$800 million and an annual maximum of R$1.6 billion. The foundation will allocate an annual amount of R$240 million over 15 years to the implementation of compensation programs, and these annual amounts are included in the annual contributions described above for the first six years. Through the end of 2018, the foundation will also set aside R$500 million for basic sanitation in the affected areas.

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          Samarco is currently unable to conduct ordinary mining and processing. Samarco's management is working on a plan that would permit it to resume operations, but the feasibility, timing and scope of restarting remain uncertain. If Samarco is able to resume operations, we expect that it will be able to generate all or a substantial part of the funding required under the agreement.

          To the extent Samarco does not meet its funding obligations, each of Vale and BHPB is obligated to provide funding to the foundation in proportion to its 50% interest in Samarco. Vale does not currently expect to record a provision in its financial statements in respect of these obligations, but if Samarco is eventually unable to resume operations or to meet its funding obligations, Vale could determine that it should recognize a provision.

          To comply with the settlement agreement, Samarco will continue to conduct and fund the humanitarian and environmental remediation and compensation works until the foundation is operational, which is likely to occur before the end of 2016.

          Vale is subject to a number of other legal and administrative proceedings in connection with the Fundão dam's failure. See Additional information—Legal proceedings—Legal proceedings related to failure of Samarco's tailings dam in Minas Gerais.

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LINES OF BUSINESS

          Our principal lines of business consist of mining and related logistics. We also have energy assets to supply part of our consumption. 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.   Fertilizer nutrients


    4.1   Phosphates and nitrogen
    4.2   Potash
    4.3   Customers and sales
    4.4   Competition

5.   Infrastructure

    5.1   Logistics
            5.1.1   Railroads
            5.1.2   Ports and maritime terminals
            5.1.3   Shipping

    5.2   Energy

6.   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, through our wholly-owned subsidiary Mineração Corumbaense Reunida S.A. ("MCR") and through our subsidiary 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 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—Significant changes in our business—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. For more information about these concessions, see Regulatory mattersMining rights and regulation of mining activities.

Company/Mining System   Location   Description/History   Mineralization   Operations   Power source   Access/Transportation
Vale                        
Northern System   Carajás, state of Pará   Open-pit mines and ore-processing plants. Divided into Serra Norte, Serra Sul and Serra Leste (northern, southern and eastern ranges). Since 1985, 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 new mine and beneficiation plant in Serra Leste. We expect our operations in Serra Sul, where we are implementing our S11D project, to start in 2016.   High-grade hematite ore type (iron grade of more than 66% on average).   Open-pit mining operations. Beneficiation process consists simply of sizing operations, including screening, hydrocycloning, crushing and filtration. Output from the beneficiation process consists of sinter feed, pellet feed and lump ore.   Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.   EFC railroad 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.
Southeastern System   Iron Quadrangle, state of Minas Gerais   Three mining complexes: Itabira (two mines, with three major beneficiation plants), Minas Centrais (three mines, with three 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% and requires concentration to achieve shipping grade.   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.   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 (four mines and two major beneficiation plants). Part of these operations is conducted through our subsidiary MBR.   Ore reserves with high ratios of itabirite ore type relative to hematite ore type. Itabirite ore has iron grade of 35-60% and requires concentration to achieve shipping grade.   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.   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   Open-pit mining operations. Two mines and two plants located in the city of Corumbá.   Hematite ore type, which generates lump ore predominantly.   Open-pit mining operations. The beneficiation process for the run of mine consists of standard crushing and classification steps, producing lump and fines.   Supplied through the national electricity grid. Acquired from regional utility companies.   Part of the sales are transported through barges traveling along the Paraguay river to the ports in Argentina, moving to Europe and Asia markets from there. Another part of the sales is delivered to customers in the ports of Corumbá.
Samarco   Iron Quadrangle, state of Minas Gerais   Integrated system comprised of two mines, three beneficiation plants, three pipelines, four pellet plants and a port.   Itabirite ore type.   Open-pit mining operations. The three beneficiation plants, located at the site, process the run-of-mine by means of standard crushing, milling and concentration steps, producing pellet feed and sinter feed. Samarco's mining operations have been suspended following the failure of one of its tailings dams located in Minas Gerais in November 2015 (see Business overview—Significant changes in our business—Failure of Samarco's tailings dam in Minas Gerais)   Supplied through the national electricity grid. Acquired from regional utility companies or produced directly by Samarco.   Samarco mines supply Samarco pellet plants using three pipelines extending approximately 400 kilometers. These pipelines transport the iron ore from the beneficiation plants to the pelletizing plants, and from the pelletizing plants to the port in the Brazilian state of Espírito Santo.

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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,  
 
 
2015
process
recovery
Mine/Plant Type 2013 2014 2015
 
 
(million metric tons)
(%)

Southeastern System

         

Itabira

Open pit 34.0 35.5 35.5 55.2

Minas Centrais(1)

Open pit 37.8 33.0 41.2 67.7

Mariana

Open pit 37.6 38.9 35.9 81.8

Total Southeastern System

109.4 107.4 112.6  

Southern System

         

Minas Itabirito

Open pit 31.0 33.0 31.6 72.3

Vargem Grande

Open pit 22.0 25.0 29.3 70.7

Paraopeba

Open pit 26.0 28.2 25.8 95.1

Total Southern System

79.0 86.2 86.7  

Northern System

         

Serra Norte

Open pit 104.9 117.4 127.6 98.2

Serra Leste

Open pit 2.2 2.0 98.7

Total Northern System

104.9 119.6 129.6  

Midwestern System

         

Corumba

Open pit 4.5 3.8 2.8 64.1

Urucum

Open pit 2.0 2.1 1.7 82.6

Total Midwestern System

6.5 5.8 4.5  

Total Vale Systems(2)

  299.8 319.0 333.4  

Samarco(3)

Open pit 10.9 13.1 12.7 53.6

Total

310.7 332.1 346.1  

(1)
Agua Limpa mine and plants are part of the Minas Centrais operations and are owned by Baovale Mineração S.A. ("Baovale"). We own 100% of the voting shares and 50% of the total shares of Baovale. Production figures for Água Limpa have not been adjusted to reflect our ownership interest.
(2)
Production figures do not include third-party ore purchases of 12.5 Mt in 2015, 12.3 Mt in 2014 and 10.6 Mt in 2013.
(3)
Production figures for Samarco, in which we have a 50% interest, have been adjusted to reflect our ownership interest.

    1.1.3    Iron ore pellets operations

          We produce iron ore pellets in Brazil and Oman, directly and through joint ventures, as set forth in the following table. 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. Of our total 2015 pellet production, including the production of our joint ventures, 68.6% was blast furnace pellets and 31.4% was direct reduction pellets, which are used in steel mills that employ the direct reduction process rather than blast furnace technology. We supply all of the iron ore requirements of our wholly-owned pellet plants and part of the iron ore requirements for Samarco and Zhuhai YPM. In 2015, we sold 9.8 million metric tons of run of mine to Samarco and 0.9 million metric tons of pellet feed to Zhuhai YPM. We suspended our sales of run of mine to Samarco following the failure of Samarco's tailings dam in November 2015.

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Company/Plant   Description/History   Nominal
capacity
(Mtpy)
  Power source   Other information   Vale's
share
(%)
  Partners

Brazil:

                                                        

Vale

                         

Tubarão (state of Espírito Santo)

  Three wholly owned pellet plants (Tubarão I, II and VIII) and five leased plants. Receives iron ore from our Southeastern System mines and distribution is made though our logistics infrastructure. Tubarão VIII plant started up in the first half of 2014.   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 II pellet plants have been suspended since November 13, 2012 in response to changes in steel industry demand for raw materials, and replaced by Tubarão VIII, a newer and more efficient plant.     100.0     –  

Fábrica (state of Minas Gerais)

  Part of the Southern System. Receives iron ore from the 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.     –       100.0     –  

Vargem Grande (state of Minas Gerais)

  Part of the Southern System. Receives iron ore from the Sapecado, Galinheiro, Capitão do Mato and Tamanduá mines and the production is mostly transported by MRS.     7.0       Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements.     –       100.0     –  

São Luís (state of Maranhão)

  Part of the Northern System. Receives iron ore from the Carajás mines and production is shipped to customers through our Ponta da Madeira maritime terminal.     7.5       Supplied through the national electricity grid. Produced directly by Vale.   On October 8, 2012, we suspended operations at the São Luís pellet plant for reasons similar to those supporting our suspension of operations at the Tubarão I and II plants.     100.0     –  

Samarco

  Four pellet plants with nominal capacity of 30.5 Mtpy. The pellet plants are located in the Ponta Ubu unit, in Anchieta, state of Espírito Santo. The fourth pellet plant started up in the first half of 2014.   30.5       Supplied through the national electricity grid. Acquired from regional utility companies or produced directly by Samarco.   In 2014, we started up the fourth pellet plant with a capacity of 8.3 Mtpy, increasing Samarco's total nominal pellet capacity to 30.5 Mtpy. In January 2016, Samarco suspended its pelletizing operations as pelletizing feed became unavailable as a result of the suspension of its mining operations in November 2015.     50.0   BHP Billiton Brasil Ltda.

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Company/Plant   Description/History   Nominal
capacity
(Mtpy)
  Power source   Other information   Vale's
share
(%)
  Partners

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 to handle 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.     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 2013 2014 2015
 
(million metric tons)

Vale(1)

39.0 43.0 46.2

Samarco(2)

10.6 12.1 12.3

Total

49.6 55.1 58.5

(1)
Figure indicates actual production, including full production from our pellet plants in Oman, from the four pellet plants we leased in Brazil in 2008 and from the one pellet plant we leased in Brazil in 2012. We signed a 10-year operating lease contract for Itabrasco's pellet plant in October 2008. We signed a five-year operating lease contract for Kobrasco's pellet plant in June 2008, renewed for additional five years in 2013. We signed a 30-year operating lease contract for Nibrasco's two pellet plants in May 2008. On July 1, 2012, we signed a three-year operating lease for Hispanobras' pellet plant, which was renewed for three additional years in 2015, and started to consolidate its output with our production.
(2)
Production figures for Samarco have been adjusted to reflect our ownership interest.

    1.1.5 Customers, sales and marketing

          We supply all of our iron ore and iron ore pellets (including our share of joint-venture pellet production) 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 2015 China accounted for 54% of our iron ore and iron ore pellet shipments, and Asia as a whole accounted for 69%. Europe accounted for 15%, followed by Brazil with 11%. Our 10 largest customers collectively purchased 126 million metric tons of iron ore and iron ore pellets from us, representing 38% of our 2015 iron ore and iron ore pellet sales volumes and 35% of our total iron ore and iron ore pellet revenues. In 2015, no individual customer accounted for more than 10.0% of our iron ore and iron ore pellet shipments.

          In 2015, the Asian market (mainly Japan, South Korea and Taiwan), the European market and the Brazilian market were the primary markets for our blast furnace pellets, while the Middle East, North America and North Africa were the primary markets for our direct reduction pellets.

          We strongly emphasize 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 to improve our competitiveness in relation to competitors that may be more conveniently located geographically. In addition to offering technical assistance to our customers, we operate sales support offices in St. Prex (Switzerland), Tokyo (Japan), Seoul (South Korea), Singapore, Dubai (UAE) and Shanghai (China), which support the sales made by Vale International. 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.

          In 2015, we launched a new iron ore fines blended product to better meet market needs. The Brazilian Blend Fines is a mix of fines from Carajás and the Southern System, and has good metallurgical and sintering performance. It is sold from our Teluk Rubiah Maritime Terminal in Malaysia, which reduces the time to reach Asian markets and increases our distribution capillarity by using smaller vessels.

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          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 such as IODEX, and uses a variety of mechanisms, including current spot prices and average prices over specified periods. In cases where the products are delivered before the final price is determinable, we recognize the sale based on a provisional price with a subsequent adjustment reflecting the final price.

          In 2015, we hedged part of our total exposure to bunker oil prices relating to our owned fleet and long-term contracts of affreightment (used in connection with our CFR sales) under our hedge accounting program and relating to our FOB and domestic sales. Beginning in 2016, we are no longer entering in new bunker oil hedge transactions. Our bunker oil hedge transactions relating to our owned fleet and long-term contracts of affreightment were all settled in 2015, but we still have open hedge positions relating to our FOB and domestic sales.

    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.

          Our biggest competitors in the Asian market are located in Australia and include subsidiaries and affiliates of BHP Billiton, Rio Tinto Ltd ("Rio Tinto") and Fortescue Metals Group Ltd ("FMG"). We are competitive in the Asian market for two main reasons. First, steel companies generally seek to obtain the types (or blends) of iron ore and iron ore pellets that can produce the intended final product in the most economic and efficient manner. Our iron ore has low impurity levels and other properties that generally lead to lower processing costs. For example, in addition to its high grade, the alumina content of our iron ore is very low compared to Australian ores, reducing consumption of coke and increasing productivity in blast furnaces, which is particularly important during periods of high demand. When market demand is strong, our quality differential generally becomes more valuable to customers. Second, steel companies often develop sales relationships based on a reliable supply of a specific mix of iron ore and iron ore pellets.

          Our ownership and operation of logistics facilities in the Northern and Southeastern Systems help us ensure that our products are delivered on time and at a relatively low cost. In addition, we continue to develop a low-cost freight portfolio aimed at enhancing our ability to offer our products in the Asian market at competitive prices on a CFR basis, despite higher transportation costs compared to Australian producers. To support this strategy, we have built two distribution centers, one in Oman and another in Malaysia, and operate two floating transshipment stations ("FTS") in the Philippines. We are party to medium- and long-term freight contracts, and we own or charter vessels, including very large ore carriers. They reduce energy consumption and greenhouse emissions by carrying an increased amount of cargo in a single trip, offering lower shipping costs. These investments improve speed and flexibility for customization, and they shorten the time to market required for our products.

          Our principal competitors in the European market are Kumba Iron Ore Limited, Luossavaara Kiirunavaara AB ("LKAB"), Société Nationale Industrielle et Minière ("SNIM") and Iron Ore Company of Canada ("IOC"), a subsidiary of Rio Tinto. We are competitive in the European market for the same reasons as in Asia, but also due to the proximity of our port facilities to European customers.

          The Brazilian iron ore market is also competitive, and includes several small iron ore producers. Anglo American is ramping up the Minas-Rio project. Some steel companies, including Gerdau S.A. ("Gerdau"), Companhia Siderúrgica Nacional ("CSN"), Vallourec Tubos do Brasil S.A., Usiminas and Arcelor Mittal, also have iron ore mining operations. Although pricing is relevant, quality and reliability are important competitive factors as well. We believe that our integrated transportation systems, high-quality ore and technical services make us a strong competitor in the Brazilian market.

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          With respect to pellets, our major competitors are LKAB, Arcelor Mittal Mines Canada (former Quebec Cartier Mining Co.), Iron Ore Company of Canada (IOC) 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 mines produce three types of manganese ore products:

    ·
    metallurgical ore, used primarily for the production of manganese ferroalloys, raw material to produce carbon and stainless steel;

    ·
    natural manganese dioxide, suitable for the manufacture of electrolytic batteries; and

    ·
    chemical ore, used in several industries for the production of fertilizer, water treatment, pesticides and animal feed, and used as a pigment in the ceramics industry.

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-grade ores (at least 40% manganese grade).   Crushing and classification steps, producing lumps and fines.   Supplied through the national electricity grid. Acquired from regional utility companies.   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 one major beneficiation plant. In January 2015, we suspended operations due to market conditions.   Low-grade ores (24% manganese grade).   Crushing and screening/dense medium classification steps, producing lumps and fines to the Barbacena and Ouro Preto ferroalloy plants.   Supplied through the national electricity grid. Acquired from regional utility companies.   Manganese ore is transported by trucks to the Ouro Preto and Barbacena ferroalloy plants.

Urucum

  MCR   State of Mato Grosso do Sul   Underground mining operations and on-site beneficiation plant.   High-grade ores (at least 40% manganese grade).   Crushing and classification steps, producing lumps and fines.   Supplied through the national electricity grid. Acquired from regional utility companies.   Manganese ore is transported to the port of Rosario (Argentina) by barges traveling along the Paraguay and Paraná rivers.

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

 
   
  Production for the year ended December 31,    
 
   
  2015 process
recovery
Mine   Type   2013   2014   2015
 
   
  (million metric tons)
  (%)

Azul

  Open pit   1.9   1.7   1.7   54.0

Morro da Mina(1)

  Open pit   0.1   0.1    

Urucum

  Underground   0.4   0.6   0.7   83.0

    Total

  2.4   2.4   2.4    

(1)
We suspended operations at Morro da Mina Mine in 2015 due to market conditions.

    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, representing 2.7% of our total consumption in Brazil in 2015. The electricity supply to our ferroalloy plants is provided through power purchase agreements. For information on the risks associated with potential energy shortages, see Risk factors.

          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 six furnaces, two refining stations and a briquetting plant. Ouro Preto has three furnaces.   74,000 tons per year at Barbacena plant and 65,000 tons per year at Ouro Preto plant.   Supplied through the national electricity grid. Acquired from independent producer through power purchase agreements.

Bahia Plant

  City of Simões Filho   Four furnaces, two converters and a sintering plant.   150,000 tons per year.   Supplied through the national electricity grid. Energy acquired from CHESF or through power purchase agreements.

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

 
Production for the year ended December 31,
Plant 2013 2014 2015
 
(thousand metric tons)

Barbacena

    45     50       6

Ouro Preto

    48       8       1

Simões Filho

    82   113     92

Total

  175   171     99

          We suspended operations at the Ouro Preto plant in February 2014, due to market conditions. In January 2015, the power purchase agreement pursuant to which we acquire energy for our Barbacena and Ouro Preto plants expired, and we also suspended operations in our Barbacena plant. We are considering alternatives for power supply to these plants, taking into consideration the energy prices and current market conditions for manganese ferroalloys.

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Table of Contents

    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-grade manganese ore competes on a global seaborne basis, while low-grade ore competes on a regional basis. For some manganese ferroalloys, high-grade ore is mandatory, while for others high- and low-grade ores are complementary. 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, Ghana, Kazakhstan, India and Mexico.

          The manganese ferroalloy market is characterized by a large number of participants who compete primarily on the basis of price. 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 producers and integrated producers that also mine their own ore. Our competitors are located principally in countries that produce manganese ore or carbon steel. For further information about demand and prices, see Operating and financial review and prospects—Major factors affecting prices.

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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, which operates two nickel production systems, one in the North Atlantic region and the other in the Asia Pacific region. We 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. Vale acquired the Sudbury operations in 2006.   Primarily underground mining operations with nickel sulfide ore bodies, which also contain some copper, cobalt, PGMs, gold and silver. We also smelt and refine an intermediate product, nickel concentrate, from our Voisey's Bay operations. 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. We also have capabilities to ship nickel oxide to our Asian refineries. 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 will modify our processes including switching to a single flash furnace in Sudbury in 2017.   Patented mineral rights with no expiration date; mineral leases expiring between 2016 and 2035; and mining license of occupation with indefinite expiration date(1).   Supplied by Ontario's provincial electricity grid and produced directly by Vale.   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.
Vale Canada   Canada—Thompson, Manitoba   Integrated mining, milling, smelting and refining operations to process ore into finished nickel with a nominal capacity of 50,000 metric tons of refined nickel per year. Thompson mineralization was discovered in 1956 and Thompson operations were acquired by Vale in 2006.   Primarily underground mining operations with nickel sulfide ore bodies, which also contain some copper and cobalt. Local concentrate is combined with nickel concentrate from our Voisey's Bay operations for smelting and refining to high quality nickel plate product. Smelting and refining are being

considered for phase out in Thompson, due to federal sulfur dioxide emission standards that came into effect in 2015. Vale has secured an extension for implementation of its current Pollution Prevention Plan under the Canadian Environmental Protection Act with Environment Canada, which permits smelting and refining through 2018, subject to negotiated emission limits.

  Order in Council leases expiring between 2020 and 2025; mineral leases expiring in 2034.   Supplied by the Provincial utility company.   Finished products are delivered to market by truck in North America. For overseas customers, the products are loaded into containers and travel intermodally (truck/rail/containership) to final destination through both west coast and east coast Canadian ports.

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Table of Contents

Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/Transportation
Vale Newfoundland & Labrador Limited   Canada—Voisey's Bay and Long Harbour, Newfoundland and Labrador   Integrated open-pit mining, milling, refining of ore into intermediate and finished nickel products and copper concentrates with an expected nominal capacity of approximately 50,000 metric tons of refined nickel per year upon ramp-up of the Long Harbour facility. Voisey's Bay's operations started in 2005 and were purchased by Vale 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. Most nickel concentrates are currently shipped to our Sudbury and Thompson operations for final processing (smelting and refining) while copper concentrate is sold to the market. The Long Harbour facility continued to ramp up in 2015. During commissioning in 2015, Long Harbour processed a blend of Voisey's Bay high-grade nickel concentrates with nickel in matte from PTVI and will transition to Voisey's Bay concentrates in 2016.   Mining lease expiring in 2027, with a right of further renewals for ten 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 provincial utility company.   The nickel and copper concentrates from Voisey's Bay are transported to the port by haulage trucks and then shipped by drybulk vessels to either overseas markets or to our Long Harbour and other Canadian 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. Clydach's refinery commenced operations in 1902 and was acquired by Vale in 2006.   Processes a nickel intermediate product, nickel oxide, supplied from either our Sudbury or Matsuzaka operation 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. Product for overseas customers are trucked to the ports of Southampton and Liverpool and shipped by ocean container.

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Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/Transportation
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 59.2% of PTVI's share capital, Sumitomo Metal Mining Co., Ltd ("Sumitomo") holds 20.2%, Sumitomo Corporation holds 0.1% and the public holds 20.5%. PTVI was established in 1968, commenced its commercial operations in 1978 and was acquired by Vale in 2006.

 

PTVI mines nickel laterite ore and produces nickel matte, which is shipped primarily to nickel refineries 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, subject to approval of the Indonesian government. See Regulatory matters—Mining rights and regulation of mining activities.

 

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.
Vale Nouvelle- Calédonie S.A.S ("VNC")   New Caledonia—Southern Province   Mining and processing operations (producer of nickel oxide, nickel hydroxide and cobalt carbonate). VNC's shares are held by Vale (80.5%), Sumic (14.5%) and Société de Participation Minière du Sud Caledonien SAS ("SPMSC") (5%).(2)   We are currently ramping up our nickel operation in New Caledonia. VNC utilizes a High Pressure Acid Leach ("HPAL") process to treat limonitic laterite and saprolitic laterite ores. We expect to continue to ramp-up VNC over the next two years to reach nominal production capacity of 57,000 metric tons per year of nickel contained in nickel oxide, which will be further processed in our refineries in Asia, and hydroxide cake form (IPNM), and 4,500 metric tons of cobalt in carbonate form.   Mining concessions expiring between 2016 and 2051. VNC has requested a renewal of the only concession that was scheduled to expire in 2015.   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.

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Company/Mining System   Location   Description/History   Operations   Mining title   Power source   Access/Transportation
Vale Japan Limited   Japan—Matsuzaka   Stand-alone nickel refinery (producer of intermediate and finished nickel), with nominal capacity of 60,000 metric tons per year. Vale owns 87.2% of the shares, and Sumitomo owns the remaining shares. The refinery was built in 1965 and was acquired by Vale 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 Vale in 2006.   Produces finished nickel primarily for the stainless steel industry, using intermediate products from our Matsuzaka and New Caledonian operations.     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. Vale owns 98.3% of the shares 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, 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 on lateritic nickel deposits of saprolitic laterite ore. The operation produces ferronickel via the rotary kiln-electric furnace process. We are currently operating with a single line, with nominal capacity estimated at 25,000 metric tons per year. We will evaluate opportunities to restart the second line operations in light of market outlook and single line furnace performance considerations.   Mining concession for indefinite period.   Supplied through the national electricity grid. Produced directly by Vale or Aliança Geração, or acquired through power purchase agreements.   The ferro-nickel is transported by railroad to the Vila do Conde maritime terminal in the Brazilian state of Pará.

It is exported in ocean containers.


(1)
In Sudbury, eight leases will expire in 2016. We have submitted applications for renewal of these leases, but the approval process will take a number of years. We can continue to operate while the approval process is ongoing.
(2)
Sumic is a joint venture between Sumitomo and Mitsui. Because VNC did not achieve a certain production target by December 2015, Vale Canada will purchase Sumic's entire equity interest in VNC pursuant to the provisions of the VNC shareholders' agreement. The share purchase price is US$135 million and Vale Canada will repay a total amount of US$218 million in debt funding provided by Sumic to VNC. The transaction will conclude in March 2016, but Vale Canada's payment of the share purchase price and repayment of Sumic's debt funding are due in March 2017. After conclusion of the transaction in March 2016, Vale will hold 95% of the shares of VNC. The other shareholder, SPMSC, has an obligation to increase its stake in VNC to 10% within two years after the startup of commercial production.

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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 VNC's operation, in New Caledonia, the production and average grade represents in-place ore production and does not include losses due to processing.

 
2013 2014 2015
 
(thousands of metric tons, except percentages)
 
 
Grade  
Grade  
Grade
 
Production %
Copper
%
Nickel
Production %
Copper
%
Nickel
Production %
Copper
%
Nickel

Ontario operating mines

                 

Copper Cliff North

913 1.32 1.28 1,053 1.45 1.34 1,138 1.42 1.38

Creighton

915 2.01 2.19 903 1.81 2.47 774 2.00 2.33

Stobie

1,887 0.59 0.65 2,089 0.58 0.66 1,471 0.63 0.73

Garson

815 1.42 1.75 678 1.39 1.75 778 1.39 1.94

Coleman

1,515 3.15 1.52 1,385 3.10 1.52 1,309 2.95 1.56

Ellen

109 0.49 1.00 181 0.62 1.07 165 0.70 0.95

Totten

64 1.84 1.92 303 1.98 1.50 528 1.88 1.62

Gertrude

196 0.32 0.89

Total Ontario operations

6,414 1.61% 1.3% 6,591 1.57% 1.36% 6,164 1.64% 1.46%

Manitoba operating mines

                 

Thompson

1,175 2.07 1,184 1.95 1,163 1.82

Birchtree

613 1.39 545 1.39 564 1.47

Total Manitoba operations              

1,788 1.84% 1,729 1.78% 1,727 1.71%

Voisey's Bay operating mines

                 

Ovoid

2,318 1.68% 2.89% 2,243 1.54% 2.58% 2,328 1.51% 2.57%

Sulawesi operating mining areas

                 

Sorowako

4,369 2.00% 4,391 1.99% 4,694 1.99%

New Caledonia operating mines

                 

VNC

1,860 1.36% 2,134 1.44% 2,561 1.41%

Brazil operating mines

                 

Onça Puma

263 2.28% 1,358 2.19% 1,024 2.13%

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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 an ore-source basis.

 
 
Production for the year ended December 31,
Mine Type 2013 2014 2015
 
 
(thousand metric tons)

Sudbury(1)

Underground 69.4 64.3 54.4

Thompson(1)

Underground 24.5 26.1 24.8

Voisey's Bay(2)

Open pit 63.0 48.3 53.0

Sorowako(3)

Open cast 78.8 78.7 79.5

Onça Puma(4)

Open pit 1.9 21.4 24.4

New Caledonia(5)

Open pit 16.3 18.7 26.9

External(6)

6.4 17.5 27.6

Total(7)

260.2 274.9 290.6

(1)
Primary nickel production only (i.e., does not include secondary nickel from unrelated parties).
(2)
Includes finished nickel produced at our Sudbury and Thompson operations but reported on an ore-source basis at Voisey's Bay.
(3)
These figures have not been adjusted to reflect our ownership. We have a 59.2% interest in PTVI, which owns the Sorowako mines.
(4)
Primary production only. Nickel contained in ferro-nickel.
(5)
Nickel contained in nickel hydroxide ("NHC") and nickel oxide ("NiO"). These figures have not been adjusted to reflect our ownership. We have an 80.5% interest in VNC.
(6)
Finished nickel processed at our facilities using feeds purchased from unrelated parties.
(7)
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 2015, 48% of our refined nickel sales were delivered to customers in Asia, 24% to North America, 27% to Europe and 1% 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 LME, 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:

    ·
    nickel content and purity level: (i) intermediates have various levels of nickel content, (ii) nickel pig iron has 1.5-6% nickel, (iii) ferro-nickel has 10-40% nickel, (iv) refined nickel with less than 99.8% nickel, including products such as Tonimet™ and Utility™ nickel, (v) standard LME grade nickel has a minimum of 99.8% nickel, and (vi) high purity nickel has a minimum of 99.9% nickel and does not contain specific elemental impurities;

    ·
    shape (such as pellets, discs, squares, and strips); and

    ·
    size (which varies with the type of product and range from spherical products such as sub-micron sized powders or 5mm in diameter granules to rectangular shapes such as cathode sheets that are 1,000mm by 750mm by 15 mm).

          In 2015, the principal end-use applications for nickel were:

    ·
    stainless steel (67% of global nickel consumption);

    ·
    non-ferrous alloys, alloy steels and foundry applications (17% of global nickel consumption);

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    ·
    nickel plating (7% of global nickel consumption); and

    ·
    specialty applications, such as batteries, chemicals and powder metallurgy (9% of global nickel consumption).

          In 2015, 58% of our refined nickel sales were made into non-stainless steel applications, compared to the industry average for primary nickel producers of 33%, which brings more stability to our sales volumes. As a result of our focus on such 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. 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 offices in St. Prex (Switzerland), Saddle Brook, New Jersey (United States), Tokyo (Japan), Shanghai (China), Singapore and Kaohsiung (Taiwan). 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 technical support direct our products into applications and geographic regions that offer the highest margins for our products.

          Our nickel deliveries represented 15% of global consumption for primary nickel in 2015. In addition to us, the largest suppliers in the nickel industry (each with its own integrated facilities, including nickel mining, processing, refining and marketing operations) are Mining and Metallurgical Company Norilsk Nickel, Jinchuan Nonferrous Metals Corporation, Glencore and South 32. Together with us, these companies accounted for about 46% of global refined primary nickel production in 2015.

          While stainless steel production is a major driver of global nickel demand, stainless steel producers can use nickel products 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. Between 2012 and 2015, secondary nickel has accounted for about 40-43% of total nickel used for stainless steels, and primary nickel has accounted for about 57-60%. Nickel pig iron, a low-grade nickel product made primarily in China from imported lateritic ores, is suitable for use in stainless steel production. In recent years, Chinese domestic production of nickel pig iron accounted for the majority of world nickel supply growth. From January 2014 onwards, Chinese nickel pig iron production was adversely affected by export restriction of unprocessed ores from Indonesia. As a result, nickel pig iron production is estimated to have declined 20% year-over-year to approximately 360,000 metric tons, representing 19% of world primary nickel supply. Significant stockpiles of Indonesian ores within China, as well as increased ore exports from the Philippines, mitigated the effect of this decrease in nickel pig iron production in 2015. We anticipate that Chinese nickel pig iron production will decline further in 2016 and 2017, with the depletion of high-grade ore stockpiles in China.

          Competition in the nickel market is based primarily on quality, 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, started production in 2004 and has a nominal capacity of 100,000 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 indefinite period. Supplied through the national electricity grid. Produced directly by Vale or Aliança Geração, 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, in the Brazilian 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 100,000 tpy of copper in concentrates. The open pit mine and mill are concluding their ramp up to a capacity of 200,000 tpy of copper in concentrates with the full implementation of Salobo II expansion. Our Salobo copper and gold 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 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, in the Brazilian state of Maranhão. We constructed a 90-kilometer road to link Salobo to Parauapebas.

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Mining complex/Location Location Description/History Mineralization/Operations Mining title Power source Access/Transportation
Canada            
Vale Canada Canada—Sudbury, Ontario See —Base metals—Nickel—Operations We produce two intermediate copper products, copper concentrates and copper anodes, and we also produce final copper product, electrowon copper cathode as a by-product of our nickel refining operations. 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 will modify our processes including switching to a single flash furnace in Sudbury in 2017. To prepare for this change, we will shut down our Sudbury copper anode production facility in 2016 resulting in increased production of copper concentrate and copper intermediate. See —Base metals—Nickel—Operations
Vale Canada/ Voisey's Bay Canada—Voisey's Bay, Newfoundland and Labrador See —Base metals—Nickel—Operations At Voisey's Bay, we produce copper concentrates. See —Base metals—Nickel—Operations
Zambia            
Lubambe Zambian Copperbelt Lubambe copper mine, which includes an underground mine, plant and related infrastructure. Teal Minerals ("TEAL") (our 50/50 joint venture with African Rainbow Minerals ("ARM")) has an 80% indirect stake in Lubambe. ZCCM Investments Holdings PLC holds the remaining (20%) stake. Nominal production capacity of 45,000 metric tons per year of copper in concentrates. Production started in October 2012. Mining concessions expiring in 2033. Long-term energy supply contract with Zesco (Zambian state owned power supplier). Copper concentrates are transported by truck to local smelters.

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    2.2.2 Production

          The following table sets forth information on our copper production.

 
 
Production for the year ended December 31,
Mine Type 2013 2014 2015
 
 
(thousand metric tons)

Brazil:

       

Salobo

Open pit 65 98 155

Sossego

Open pit 119 110 104

Canada:

       

Sudbury

Underground 103 98 98

Voisey's Bay

Open pit 36 33 32

Thompson

Underground 2 2 1

External(1)

24 29 23

Chile:

       

Tres Valles(2)

Open pit and underground 11

Zambia:

       

Lubambe(3)

Underground 9 10 10

Total

  370 380 424

(1)
We process copper at our facilities using feed purchased from unrelated parties.
(2)
We sold the Tres Valles mine in December 2013. The 2013 production level in the table is through the end of October.
(3)
Vale's attributable production capacity of 40%, which represents 80% of indirect interest through our 50% participation.

    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 Glencore Canada Corporation for the sale of copper anodes and most of the copper concentrates produced in Sudbury. We sell copper concentrates from Voisey's Bay under medium-term contracts to customers in Europe. We sell electrowon copper from Sudbury in North America under short-term sales agreements.

    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"), Freeport McMoRan Copper & Gold Inc. ("Freeport-McMoRan"), Aurubis AG, Jiangxi Copper Corporation Ltd. and Glencore, 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 anode are intermediate products in the copper production chain. Both the concentrate and anode 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 world 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 BHP Billiton, Glencore, Freeport McMoRan, Codelco and Antofagasta plc operating at the parent-company level or through subsidiaries. Our market share in 2015 was about 4% of the total custom copper concentrate market.

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          The copper anode/blister market is very limited; generally, anodes are produced to supply each company's integrated refinery. The trade in anodes/blister is limited to those facilities that have more smelting capacity than refining capacity or to those situations where logistics cost savings provide an incentive to source anodes from outside smelters. The largest competitors in the copper anode market in 2015 included Glencore, Codelco, and China Nonferrous Metals, operating at the parent-company level or through subsidiaries.

    2.3 PGMs and other precious metals

          As by-products 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. We have a refinery in Acton, England, where we process our intermediate products, as well as feeds purchased from unrelated parties and toll-refined materials. In 2015, PGM concentrates from our Canadian operations supplied about 60% of our PGM production, which also includes metals purchased from unrelated parties. Our base metals marketing department sells our own PGMs and other precious metals, as well as products from unrelated parties and toll-refined products, on a sales agency basis. 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 Silver Wheaton 25% of the gold produced as a by-product at our Salobo copper mine, in Brazil, for the life of that mine, and 70% of the gold produced as a by-product at our Sudbury nickel mines, in Canada, for 20 years. In March 2015, we sold to Silver Wheaton an additional 25% of the gold produced as a by-product at our Salobo copper mine. See Business overview—Significant changes in our business. Pursuant to the gold stream contract, Silver Wheaton received 141,879 oz. of gold in 2015.

          The following table sets forth information on our precious metals production.

Mine Type 2013 2014 2015
 
 
(thousand troy ounces)

Sudbury:

       

Platinum

Underground 145 182 154

Palladium

Underground 352 398 341

Gold(1)

Underground 91 83 89

Salobo:

       

Gold(1)

Open pit 117 160 251

Sossego:

       

Gold

Open pit 78 78 80

(1)
Figures represent 100% of Salobo and Sudbury gold production and do not deduct the portion of the gold sold to Silver Wheaton.

    2.4 Cobalt

          We recover significant quantities of cobalt as a by-product of our nickel operations. In 2015, we produced 1,448 metric tons of refined cobalt metal at our Port Colborne refinery, 2,926 metric tons of cobalt in a cobalt-based intermediate product at our nickel operations in Canada and New Caledonia, and our remaining cobalt production consisted of 159 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 by-product of our nickel production is increasing. We sell cobalt on a global basis. Our cobalt metal is electro-refined at our Port Colborne refinery and has very high purity levels (99.8%), which is superior to 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.

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          The following table sets forth information on our cobalt production.

 
 
Production for the year ended December 31,
Mine Type 2013 2014 2015
 
 
(metric tons)

Sudbury

Underground 853 833 751

Thompson

Underground 292 489 365

Voisey's Bay

Open pit 1,256 952 849

New Caledonia

Open pit 1,117 1,384 2,391

External sources(1)

13 84 177

Total

  3,532 3,743 4,533

(1)
These figures do not include tolling of feeds for unrelated parties.

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3. Coal

          3.1 Operations

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

          In December 2014, we entered into an investment agreement providing for Mitsui to acquire 15% of our stake in Vale Moçambique. Our equity stake in Vale Moçambique will be transferred to a holding company controlled by Vale (85%) and Mitsui (15%). The value attributed to Mitsui's 15% stake in Vale Moçambique is US$450 million, and Mitsui will be responsible for 15% of the capital expenditures incurred since the signing of the agreement. The transaction is subject to certain conditions precedent, and closing is expected for 2016.

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 95.0% stake, and the remaining is owned by Empresa Moçambicana de Exploração Mineira, S.A. Upon conclusion of the agreement signed in December 2014, Mitsui will acquire 15% of Vale's stake in Vale Moçambique. Produces metallurgical and thermal coal. Moatize's main branded product is the Chipanga 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 coal handling and processing plant ("CHPP") with a capacity of 4,000 metric tons per hour. An additional CHPP is under construction, which will increase 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 Beira Port by the Linha do Sena railway and, starting in January 2016, to the port at Nacala-à-velha via the Nacala Corridor.
Vale Australia            
Carborough Downs Bowen Basin, Queensland Acquired from AMCI in 2007. Carborough Downs mining leases overlie the Rangal Coal Measures of the Bowen Basin with the seams of Leichardt and Vermont. Both seams have coking properties and can be beneficiated to produce coking coal and pulverized coal injection ("PCI") products. Vale has a 90.0% stake and the remaining is owned by JFE and Posco. Metallurgical coal mined by longwall methods. The Leichardt seam is currently our main target for development and constitutes 100% of the current reserve and resource base. Carborough Downs coal is processed at the Carborough Downs CHPP, which is capable of processing 1,000 metric tons per hour. Mining tenements expiring in 2035 and 2039. Supplied through the national electricity grid. Acquired from local utility companies. The product is loaded onto trains at a rail loadout facility and transported 163 kilometers to the Dalrymple Bay Coal Terminal, Queensland, Australia.

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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 2013 2014 2015
 
 
(thousand metric tons)

Metallurgical coal:

       

Vale Australia

       

Integra Coal(1)(4)

Underground and open-cut 1,410    715

Isaac Plains(2)(4)

Open-cut    656    746

Carborough Downs(3)

Underground 2,447 1,857 2,383

Vale Moçambique

       

Moatize(5)

Open-cut 2,373 3,124 3,401

Total metallurgical coal

6,885 6,443 5,784

Thermal coal:

       

Vale Australia

       

Integra Coal(1)

Open-cut      87      92

Isaac Plains(2)

Open-cut    347    326

Vale Moçambique

       

Moatize(5)

Open-cut 1,444 1,784 1,560

Total thermal coal

1,878 2,202 1,560

(1)
These figures correspond to our 64.8% equity interest in Integra Coal, as of the sale of our equity interest in December 2015.
(2)
These figures correspond to our 50.0% equity interest in Isaac Plains, as of the sale of our equity interest in November 2015.
(3)
The figures for 2013 and 2014 correspond to our 85.0% equity interest in Carborough Downs. Our equity interest in Carborough Downs increased to 90% in December 2014 ; the figures for 2015 correspond to our 90% equity interest in Carborough Downs.
(4)
Operations at Integra Coal and Isaac Plains have been suspended since May and November 2014, respectively, and our stake in each mine, as well as associated assets was sold in December and November 2015, respectively.
(5)
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 Australian operations are primarily focused on Asia. 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 black (metallurgical and thermal) and brown (lignite) 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. We expect robust supply and low prices for metallurgical coal in the next few years, which will reduce investments in new greenfield projects and may result in supply imbalances in the long term. Port and rail constraints in certain supply regions, which cannot be solved without significant capital expenditures, could lead only to limited availability of incremental metallurgical coal production.

          Competition in the coal industry is based primarily on the economics of production costs, coal quality and transportation costs. Our key competitive strengths are completion of a new and competitive transportation corridor, the proximity to the Atlantic and Indian markets (as compared to our main competitors) and the size and quality of our reserves.

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          Major participants in the seaborne coal market are subsidiaries, affiliates and joint ventures of BHP Billiton, Glencore Xstrata, Anglo American, Rio Tinto, Teck Cominco, Peabody, Walter Energy and the Shenhua Group, among others.

4. Fertilizer nutrients

    4.1 Phosphates and nitrogen

          We operate our phosphates business through subsidiaries and joint ventures, as set forth in the following table.

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

Vale Fertilizantes

Uberaba, Brazil 100.0 100.0

Compañia Minera Miski Mayo S.R.L., located in Bayóvar, Peru. 

Bayóvar, Peru(1) 51.0 40.0 Mosaic, Mitsui

(1)
Our participation in Compañia Minera Miski Mayo S.R.L is held through MVM Resources International, B.V.

          Vale Fertilizantes is a producer of phosphate rock, phosphate ("P") fertilizers (e.g., monoammonium phosphate ("MAP"), triple superphosphate ("TSP") and single superphosphate ("SSP")), dicalcium phosphate ("DCP") and nitrogen ("N") fertilizers (e.g., ammonia and ammonium nitrate). It is the largest producer of phosphate and nitrogen crop nutrients in Brazil. Vale Fertilizantes operates the following phosphate rock mines, through concessions for indefinite period: Catalão, in the Brazilian state of Goiás, Tapira, Patos de Minas and Araxá, all in the Brazilian state of Minas Gerais, and Cajati, in the Brazilian state of São Paulo. In addition, Vale Fertilizantes has nine processing plants for the production of phosphate and nitrogen nutrients, located in Catalão in the Brazilian state of Goiás; Araxá, Patos de Minas and Uberaba, which are all in the Brazilian state of Minas Gerais; and Guará, Cajati and three plants in Cubatão, which are all in the Brazilian state of São Paulo.

          Since 2010 we have also operated the Bayóvar phosphate rock mine in Peru, with nominal capacity of 3.9 Mtpy, through a concession for indefinite period.

          The following table sets forth information about our phosphate rock production.

 
 
Production for the year ended December 31,
Mine Type 2013 2014 2015
 
 
(thousand metric tons)

Bayóvar

Open pit 3,546 3,801 3,881

Catalão

Open pit 1,057 1,055 1,000

Tapira

Open pit 1,869 2,005 1,970

Patos de Minas(1)

Open pit      53      73      23

Araxá

Open pit 1,111    883    707

Cajati

Open pit    640    605    581

Total

8,277 8,421 8,163

(1)
Patos de Minas operation was suspended in the third quarter of 2015 due to market conditions.

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          The following table sets forth information about our phosphate and nitrogen nutrients production.

 
Production for the year ended December 31,
Product 2013 2014 2015
 
(thousand metric tons)

Monoammonium phosphate (MAP)

1,128 1,065 1,097

Triple superphosphate (TSP)

   905    910    866

Single superphosphate (SSP)

2,102 1,854 1,953

Dicalcium phosphate (DCP)

   444    502    480

Ammonia(1)

   347    178    138

Urea(2)

   219

Nitric acid

   416    469    475

Ammonium nitrate

   419    485    515

(1)
After the sale of Araucária in June 2013, we only produce ammonia in our Cubatão plant.
(2)
After the sale of Araucária in June 2013, we no longer produce urea.

    4.2 Potash

          We conduct potash operations in Brazil at the parent-company level, with mining concessions of indefinite duration. We have leased Taquari-Vassouras, the only potash mine in Brazil (in Rosario do Catete, in the Brazilian state of Sergipe), from Petrobras since 1992. In April 2012, we extended the lease for 30 more years. The following table sets forth information on our potash production.

 
 
Production for the year ended December 31,  
 
 
2015 process
recovery
Mine Type 2013 2014 2015
 
 
(thousand metric tons)
(%)

Taquari-Vassouras

Underground 492 492 481 82.9

    4.3 Customers and sales

          All potash sales from the Taquari-Vassouras mine are to the Brazilian market. In 2015, our sales represented approximately 5% of total potash delivered in Brazil. We have a strong presence and long-standing relationships with the major market participants in Brazil, with more than 50% of our sales in 2015 generated from four long-term customers.

          Our phosphate products (MAP, TSP, SSP) are mainly sold to fertilizer blenders. In 2015, our sales represented approximately 31% of total phosphate delivered in Brazil. In the high-concentration segment, our production represented 86% of total Brazilian production. In the low-concentration phosphate nutrients segment our production represented 38% of total Brazilian production, with products like SSP.

          Our nitrogen segment produces 100% of the ammonium nitrate produced in Brazil. Additionally we are a leading supplier of explosive-grade ammonium nitrate in the Brazilian market.

    4.4 Competition

          The industry is divided into three major nutrients: potash, phosphate and nitrogen. There are limited resources of potash around the world, with Canada, Russia and Belarus being the most important sources, each of them having only a few producers. The industry requires a high level of investment and a long time for a project to mature. In addition, the potash industry is highly concentrated, with the five major producers accounting for 69% of total world production capacity.

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          Phosphate rock is more available, but the major exporters are located in Morocco, Algeria, Jordan, Egypt and Peru. The top five phosphate rock producing countries (China, Morocco, United States, Russia and Jordan) accounted for 78% of global production in 2015, of which roughly 10% was exported. However, higher value-added products such as MAP and DAP are usually traded instead of phosphate rock due to cost efficiency.

          Brazil is one of the largest agribusiness markets in the world due to its high production, exports and consumption of grains and biofuels. It is the fourth-largest consumer of fertilizers in the world and one of the largest importers of potash, phosphates and nitrogen. Brazil imports 95% of its potash consumption, which amounted to approximately 5.1 Mtpy of equivalent K2O (potassium oxide) in 2015, 8% lower than in 2014, from Canadian, Belarusian, Russian, German, Chilean and Israeli producers, in descending order. In terms of global consumption, China, the United States, Brazil and India represented 58% of the total, with Brazil alone representing 14% of total global consumption. Our potash operation and projects are highly competitive in terms of cost and logistics to supply the Brazilian market.

          Most phosphate rock concentrate is consumed locally by downstream integrated producers, with the seaborne market corresponding to 14% of total phosphate rock production. Major phosphate rock exporters are concentrated in North Africa, mainly through state-owned companies, with Moroccan OCP Group holding 29% of the total seaborne market. The seaborne trade of phosphate rock supplies non-integrated producers of phosphate fertilizer products such as SSP, TSP and MAP. Brazil imports 54% of its phosphate consumption, which amounted to approximately 2.6 Mtpy of equivalent P2O5 (phosphorus pentoxide) in 2015, 17% lower than in 2014, being the main sources: Morocco, Russia, USA and China, in descending order. Our phosphate operations are highly competitive in terms of cost and logistics to supply the Brazilian market.

          Nitrogen-based fertilizers are derived primarily from ammonia (NH3), which, in turn, is made from nitrogen present in the air and natural gas, making this an energy-intensive nutrient. Ammonia is the main component of nitrogen-based fertilizers like ammonium nitrate and urea. Production of nitrogen-based fertilizers has a regional profile due to the high cost associated with transportation and storage of ammonia, which requires refrigerated and pressurized facilities. As a result, only 10% of the ammonia produced worldwide is traded in global markets. Asia receives the largest volume of imports, accounting for 34% of global trade. The main exporting countries are Russia, Trinidad and Canada. Our nitrogen operation is highly competitive in terms of cost and logistics to supply the Brazilian market.

5. Infrastructure

    5.1 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.

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          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, Usiminas Participações e Logísticas and Gerdau

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

Port operations

Argentina 100 100

CEAR(2)(4)

Railroad

Malawi 43.4 43.4 Portos e Caminhos de Ferro de Moçambique, E.P.

CDN(3)(4)

Railroad and maritime terminal operations

Mozambique 43.4 43.4 Portos e Caminhos de Ferro de Moçambique, E.P.

CLN(4)

Railroad and port operations

Mozambique 80.0 80.0 Portos e Caminhos de Ferro de Moçambique, E.P.

Vale Logistics Limited(4)

Railroad operations

Malawi 100 100

Transbarge Navegación

Paraná and Paraguay Waterway System (Convoys)

Paraguay 100 100

VNC(5)

Port and maritime terminal operations

New Caledonia 80.5 80.5 Sumic, 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 8% if BNDES exercises its rights under those debentures.
(2)
Vale controls its interest in CEAR through an 85% interest in SDCN, which owns 51% of CEAR.
(3)
Vale controls its interest in CDN through an 85% interest in SDCN, which owns 51% of CDN.
(4)
Upon completion of the transaction with Mitsui, we will hold indirectly 21.7% of the voting and total capital of CEAR, 21.7% of the voting and total capital of CDN, 40% of the voting and total capital of CLN and 50% of the voting and total capital of VLL.
(5)
After the conclusion of the sale of Sumic's 10.5% stake in VNC to Vale in March 2016, Vale will hold 95% of the shares of VNC.

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    5.1.1 Railroads

    Brazil

          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 905-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 601 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 use railroad transportation capacity on our EFVM railroad. In 2015, the EFVM railroad transported a daily average of 341.6 metric tons of iron ore, or a total of 80.2 billion ntk of iron ore and other cargo. The EFVM railroad also carried 967 thousand passengers in 2015. In 2015, we had a fleet of 333 locomotives and 15,263 wagons at EFVM.

          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 892 kilometers from our Carajás mines to our Ponta da Madeira maritime terminal complex facilities located near the Itaqui Port. Its main cargo is iron ore, principally carried for us. VLI has rights to use railroad transportation capacity on our EFC railroad. In 2015, the EFC railroad transported a daily average of 357.9 metric tons of iron ore. In 2015, the EFC railroad carried a total of 120.3 billion ntk of iron ore and other cargo. EFC also carried 301 thousand passengers in 2015. EFC supports the largest train, in terms of capacity, in Latin America, which measures 3.5 kilometers, weighs 42.01 gross metric tons when loaded and has 330 cars. In 2015, EFC had a fleet of 284 locomotives and 17,125 wagons.

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

    ·
    iron ore and iron ore pellets and manganese ore, carried for us and customers;

    ·
    steel, coal, pig iron, limestone and other raw materials carried for customers with steel mills located along the railroad;

    ·
    agricultural products, such as soybeans, soybean meal and fertilizers; and

    ·
    other general cargo, such as pulp, fuel and chemical products.

          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 the weight of the freight in question, and are regulated by the Brazilian transportation regulatory agency, ANTT (Agência Nacional de Transportes Terrestres).

          VLI.    VLI provides integrated logistics solutions through 7,920 kilometers of railroads in Brazil (FCA and FNS), eight inland terminals with a total storage capacity of 730,000 tons and three maritime 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:

    ·
    Ferrovia Centro-Atlântica ("FCA").  Central-east regional railway network of the Brazilian national railway system, held under a 30-year renewable concession, which expires in 2026. The central east network has 7,220 kilometers of track, extending into the states of Sergipe, Bahia, Espírito Santo, Minas Gerais, Rio de Janeiro, Goiás and the Federal District of Brazil;

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    ·
    Ferrovia Norte-Sul railroad ("FNS").  A 30-year renewable subconcession for the commercial operation of a 720-kilometer stretch of the North-South railroad in Brazil, between the cities Açailandia, in the Brazilian state of Maranhão, and Porto Nacional, in the Brazilian state of Tocantins. This railway is connected to EFC railroad, and creates a new corridor for the transportation of general cargo, mainly for the export of soybeans, rice and corn produced in the center-northern region of Brazil; and

    ·
    Right to use capacity of our EFVM and EFC railroads for general cargo.

    ·
    Right to use capacity of our Tubarão e Praia Mole terminals for general cargo.

          In 2015, VLI transported a total of 34.8 billion ntk of general cargo, including 21.3 billion ntk from FCA and FNS and 13.5 billion ntk through operational agreements with Vale.

          MRS Logística S.A.    ("MRS"). The MRS railroad is 1,643 kilometers long and links the Brazilian states of Rio de Janeiro, São Paulo and Minas Gerais. In 2015, the MRS railroad carried a total of 167 million metric tons of cargo, including 80.7 million metric tons of iron ore and other cargo from Vale.

    Africa

          We are ramping up the Nacala Corridor, which connects the Moatize mine to the Nacala-à-velha maritime terminal, located in Nacala, Mozambique, and which crosses into the Republic of Malawi. The Nacala Corridor 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 Nacala Corridor will allow for the expansion of the Moatize mine and support 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 2042, subject to renewal. We are also rehabilitating existing railroads under a concession held by our subsidiary Corredor de Desenvolvimento do Norte S.A. ("CDN"), which will expire in 2035. In Malawi, we are operating under a concession held by our subsidiary Vale Logistics Limited ("VLL"), which will expire in 2044, subject to renewal, and we are rehabilitating existing railroads under a concession held by our subsidiary, Central East African Railway Company Limited ("CEAR"), which was extended in 2013 for a 30-year period from the commencement of rail services under VLL's greenfield railway concession.

          In December 2014, we entered into an investment agreement providing for Mitsui to acquire half of our stake in the Nacala Corridor. Our equity stake in CLN, CDN, VLL and CEAR will be transferred to a holding company jointly owned (50% each) and controlled by Vale and Mitsui. Mitsui will invest US$313 million in this holding company, in equity and quasi-equity instruments. Vale and Mitsui are seeking project financing to replace part of the financing provided by Vale. The transaction is subject to certain conditions precedent, and closing is expected for 2016.

    5.1.2 Ports and maritime terminals

    Brazil

          We operate a port 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 pelletsIron ore operations. We also use our port and terminals to handle customers' cargo.

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          Tubarão and Praia Mole Ports.    The Tubarão Port, which covers an area of 18 square kilometers, is located near the Vitória Port 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 iron ore maritime terminal has two piers. Pier I can accommodate two vessels at a time, one of up to 170,000 DWT on the southern side and one of up to 210,000 DWT on the northern side. Pier II can accommodate one vessel of up to 405,000 DWT at a time, limited at 23 meters draft. In Pier I there are two ship loaders, which can load up to 13,500 metric tons per hour each. In Pier II there are two ship loaders that work alternately and can each load up to 16,000 metric tons per hour continuously. In 2015, 105.4 million metric tons of iron ore and iron ore pellets were shipped through the terminal for us. The iron ore maritime terminal has a storage yard with a capacity of 3.4 million metric tons.

    ·
    The Terminal de Produtos Diversos handled 8.1 million metric tons of grains and fertilizers in 2015. VLI has the right to use the capacity of the Terminal de Produtos Diversos.

    ·
    The Terminal de Granéis Líquidos handled 614.6 thousand metric tons of fuel in 2015. VLI has the right to use the capacity of the Terminal de Granéis Líquidos.

    ·
    The Praia Mole terminal is principally a coal terminal and handled 12.3 million metric tons of coal in 2015. VLI has the right to use the capacity of the Praia Mole terminal.

          Ponta da Madeira maritime terminal.    Our Ponta da Madeira maritime terminal is located near the Itaqui Port, 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 tons per hour. Pier III, which has two berths and three shiploaders, can accommodate vessels of up to 200,000 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 tons per hour. Cargo shipped through our Ponta da Madeira maritime terminal consists of our own iron ore and manganese production. In 2015, 124.7 million metric tons of iron ore were handled through the terminal. The Ponta da Madeira maritime terminal has a storage yard with a static capacity of 8.9 million tons, which will be expanded to 10.7 million tons. VLI currently handles and stores fertilizers, grain, pig iron and manganese ore, which are then shipped through the Itaqui Port.

          Itaguaí maritime terminal—Cia. Portuária Baía de Sepetiba ("CPBS"). CPBS is a wholly-owned subsidiary that operates the Itaguaí 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 2015, the terminal loaded 22.0 million metric tons of iron ore.

          Guaíba Island maritime terminal.    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 2015, the terminal loaded 47.3 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 8,000 tons per hour.

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    Argentina

          Vale Logística Argentina S.A. ("Vale Logística Argentina") operates a terminal at the San Nicolas port located in the province of Buenos Aires, Argentina, where Vale Logística Argentina has a permit to use a storage yard covering 20,000 square meters until October 2016 and an agreement with third parties for an extra storage yard of 15,000 square meters. We handled 2.7 million metric tons of iron and manganese ore through this port in 2015, which came from Corumbá, Brazil, via the Paraguay and Paraná rivers, for shipment to Brazilian, Asian and European markets. The loading rate of this port is 24,000 tons per day and the unloading rate is 13,200 tons per day.

    Canada

          Vale Newfoundland and 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 receiving nickel concentrate from Voisey's Bay along with goods and materials required for the Long Harbour operation.

    Oman

          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 a throughput capacity to handle 40 Mtpy of iron ore and pellets per year. The loading nominal capacity is 10,000 tons per hour and the nominal unloading capacity is 9,000 tons per hour.

    Indonesia

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

    ·
    The Balantang Special Port is located in Balantang Village, South Sulawesi, and has two types of piers, with total capacity of 10,000 DWT, two barge slips for barges with capacity of up to 4,000 DWT each for dry bulk cargo, and a general cargo wharf for vessels of up to 2,000 DWT.

    ·
    The Tanjung Mangkasa Special Port is located in Lampia Village, South Sulawesi, with mooring buoys that can accommodate vessels with capacity of up to 20,000 DWT, and a terminal that can accommodate fuel tanker vessels with capacity of up to 2,000 DWT, totaling capacity of 22,000 DWT. Recently the jetty terminal of 2,000 DWT has been expanded to increase its capacity by 5,000 DWT and the commissioning is expected to occur in June 2016. By July 2016, Tanjung Mangkasa is expected to have a total capacity of 25,000 DWT.

    New Caledonia

          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 55,000 DWT can unload at a rate of 8,000 tons per day and a general cargo wharf where vessels up to 215m long can berth. The general cargo wharf can move containers at a rate of 10 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 tons of limestone, 95,000 tons of sulfur, and 60,000 tons of coal.

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    Malaysia

          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 2015, the terminal unloaded 15.2 million metric tons of iron ore and loaded 14.2 million metric tons of iron ore.

    5.1.3 Shipping

          We operate a low-cost fleet of vessels, comprised of our own ships and ships chartered pursuant to medium and long-term contracts to transport our cargoes from Brazil to our markets. We have 18 vessels in operation, including seven very large ore carriers, with a capacity of 400,000 DWT each, and 11 capesize vessels with capacities ranging from 150,000 to 250,000 DWT. We have 27 very large ore carriers under long-term contracts. To support our iron ore delivery strategy, Vale owns and operates two floating transfer stations in Subic Bay, Philippines that transfer iron ore from very large ore carriers to smaller vessels that deliver the cargo to its destinations. We expect this service to enhance our ability to offer our iron ore products in the Asian market at competitive prices. In 2015, we shipped approximately 188 million metric tons of iron ore and pellets on a CFR and Cost, Insurance & Freight (CIF) basis.

          In 2014, we entered into framework agreements for strategic cooperation in iron ore transportation with shipping companies and financial institutions based in China and Hong Kong. Pursuant to these framework agreements, we (i) sold 12 of our very large ore carriers of 400,000 for an aggregate amount of US$1.316 billion in December 2015 and (ii) negotiated long-term contracts of affreightment with Chinese ship owners to secure the long-term transportation capacity to ship our iron ore from Brazil to Asia and to protect against volatility in freight costs. In addition, we sold three of our capesize vessels for approximately US$23 million in 2015.

          In the Paraná and Paraguay waterway system, we transport iron ore and manganese ores through our subsidiary Transbarge Navegación, which transported 3.86 million tons through the waterway system in 2015, and other chartered convoys. The barges are discharged in our local customers' terminals, in contracted terminals in Argentina or in the facilities of our subsidiary Vale Logística Argentina, which load the ore into ocean-going vessels. Vale Logística Argentina loaded 2.1 million tons of ore, of a total loading capacity of 3 million tons, at San Nicolas port into ocean-going vessels in 2015.

          We manage a fleet of 25 tugboats in total, of which we own. We directly operate nine tugboats, which are operated in the ports of Vitória and Mangaratiba, in the Brazilian states of Espírito Santo and Rio de Janeiro, respectively. Four tug boats, operated in the ports of São Luís and Aracaju, in the Brazilian states of Maranhão and Sergipe respectively, are operated by consortium companies, in which we have a 50% stake. Twelve other tug boats are freighted to and operated by third parties, under their responsibility, in other ports in Brazil.

    5.2 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.

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